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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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IMPAC MORTGAGE HOLDINGS, INC. | ||||||
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(Name of | ||||||
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IMPAC MORTGAGE HOLDINGS, INC.
19500 Jamboree Road
Irvine, California 92612
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on July 25, 2017June 23, 2020
9:00 A.M. (Pacific Daylight Time)
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders (the "Meeting"“Meeting”) of IMPAC MORTGAGE HOLDINGS, INC. ("(“IMH," "we," "our," "us,"” “we,” “our,” “us,” or the "Company"“Company”), a Maryland corporation, to be held at 19500 Jamboree Road, Irvine, California 92612 on July 25, 2017,June 23, 2020, at 9:00 a.m. (Pacific Daylight Time).
The annual meeting of stockholders is being held for the following purposes:
1.
- To elect a Board of Directors to serve for the ensuing year;
2.
- To
consider andapprove the Impac Mortgage Holdings, Inc. 2020 Equity Incentive Plan;3. To approve, on an
amendment toadvisory basis, theCompany's 2010 Omnibus Incentive Plan to increasecompensation of our named executive officers;4. To approve the
number of shares of common stock subject to the plan by 500,000 shares; 3.- Company’s Tax Benefits Preservation Rights Agreement;
5.To ratify the appointment of Squar Milner LLP as the independent registered public accounting firm of the Company for the year ending December 31,
2017;2020; and 4.6.To transact such other business as may properly come before the Meeting or any adjournments or postponements thereof.
Only holders of our common stock of record at the close of business on April 27, 201720, 2020 will be entitled to vote and participate at the Meeting and any postponements, adjournments or continuations thereof.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on July 25, 2017.June 23, 2020. The 20162020 Proxy Statement and the Annual Report to Stockholders for the year ended December 31, 20172019 are also available at http://www.viewproxy.com/impaccompanies/20172020.
In accordance with the rules of the Securities and Exchange Commission, we are sending a Notice of Internet Availability of Proxy Materials to the holders of record and beneficial owners of our capital stock as of the close of business on the record date.date (April 20, 2020). The Notice of Internet Availability contains instructions on how to access our materials on the Internet, as well as instructions on obtaining a paper copy of the proxy materials.
You are cordially invited to attend the Meeting. However, if you do not expect to attend or if you plan to attend but desire the proxy holders to vote your shares, please promptly date and sign your proxy card and return it in the enclosed postage paid envelope or you may also instruct the voting of your shares over the Internet or by telephone by following the instructions on your proxy card. Voting by written proxy, over the Internet, or by telephone will not affect your right to vote in person in the event you find it convenient to attend.
By order of the Board of Directors | ||
| ||
Dated: May , 2020 | Nima J. Vahdat, General Counsel & Secretary |
Dated: June 2, 2017
IMPAC MORTGAGE HOLDINGS, INC.
19500 Jamboree Road, Irvine, CA. 92612
(949) 475-3722
PROXY STATEMENT
FOR ANNUAL STOCKHOLDERS MEETING TO BE HELD ONJULY 25, 2017JUNE 23, 2020 AT 9:00 A.M. (PACIFIC DAYLIGHT TIME)
This proxy statement is being furnished by Impac Mortgage Holdings, Inc., a Maryland corporation (the "Company"“Company”), in connection with the annual meeting of stockholders to be held on July 25, 2017June 23, 2020 at 9:00 a.m. (Pacific Daylight Time) at 19500 Jamboree Road, Irvine, California 92612 (the "Meeting"“Meeting” or the “Annual Meeting”). We anticipate that the Notice of Internet Availability of Proxy Materials will be sent, and this proxy statement and the form of proxy relating to our Meeting will be made available, to our stockholders commencing on or about June 8, 2017.May 1, 2020.
The purpose of the Meeting is to seek stockholder approval of the following proposals: (1) electing a Board of Directors (the “Board” or “Board of Directors”) to serve for the ensuing year; (2) approving the Impac Mortgage Holdings, Inc. 2020 Equity Incentive Plan; (3) approving, on an amendment toadvisory basis, the Company's 2010 Omnibus Incentive Plan to increasecompensation of our named executive officers; (4) approving the number of shares of common stock subject to the plan by 500,000 shares;Company’s Tax Benefits Preservation Rights Agreement; and (3)(5) ratifying the appointment of Squar Milner LLP as the Company'sCompany’s independent registered public accounting firm for the year ending December 31, 2017.2020.
Notice of Internet Availability of Proxy Materials
Pursuant to rules adopted by the Securities and Exchange Commission ("SEC"(“SEC”), we are providing access to our proxy materials over the Internet. We are sending a Notice of Internet Availability of Proxy Materials to our stockholders of record and our beneficial owners. All stockholders will have the option to access the proxy materials on the website referred to in the Notice of Internet Availability or to request a printed set of the proxy materials. The Notice of Internet Availability will provide you with instructions on how to access the proxy materials over the Internet or to request printed copies of the proxy materials and on how to vote on the proposals.
Solicitation of Proxies
Our Board of Directors is soliciting the enclosed proxy.proxy. We will bear the cost of this solicitation of proxies. Solicitations will be made by mail and over the Internet based on our Notice of Internet Availability of Proxy Materials. We may also solicit proxies personally or by telephone. We will reimburse banks, brokerage firms, other custodians, nominees and fiduciaries for reasonable expenses incurred in sending proxy materials to beneficial owners of our common stock.
Annual Report
Our annual report to stockholders for the year ended December 31, 20162019 will be concurrently provided to each stockholder at the time we send this proxy statement and the enclosed proxy and is not to be considered a part of the proxy-soliciting material.proxy.
Stockholders may also request a free copy of our Form 10-K for the year ended December 31, 20162019 by writing to Corporate Secretary, Impac Mortgage Holdings, Inc., 19500 Jamboree Road, Irvine, California 92612. Alternatively, stockholders may access our 20162019 Form 10-K on the Company'sCompany’s website located at www.impaccompanies.com. We will also furnish any exhibit to our 20162019 Form 10-K if specifically requested.
Voting Requirements & Procedures
Your vote is important. If you hold your shares as a record holder, your shares can be voted at the Meeting only if you are present in person at the Meeting or your shares are represented by proxy. Even if you plan to attend the Meeting, we urge you to vote by proxy in advance. You may vote your shares when you view the proxy materials on the Internet following the instructions in the Notice of Internet Availability, or if you request a paper copy of the proxy materials as instructed on the Notice of Internet Availability, by using one of the following three methods:
(1)
- you may vote by mail, by marking your proxy card, and then date, sign and return it in the postage-paid envelope provided;
(2)
- you may direct your vote electronically by accessing the website located at www.cesvote.com and following the on-screen instructions; or
(3)
- you may vote by calling the toll-free number listed on your proxy card.
Please have your Notice of Internet Availability or proxy card in hand when going online or calling. If you instruct the voting of your shares electronically or telephonically, you do not need to return your proxy card.
If you hold your shares beneficially in "street name"“street name” through a nominee (such as a bank or stock broker), then the proxy materials are being forwarded to you by the nominee and you may be able to vote by telephone, orover the Internet as well as by mail based on the instructions you receive from your nominee. You should follow the instructions you receive from your nominee to vote these shares in accordance with the voting instructions you receive from your broker, bank or other nominee. If you are a stockholder who owns shares through a broker and you intend to vote at the Meeting, you must obtain a legal proxy from the bank, broker or other holder of record of your shares to be entitled to vote those shares in person at the Meeting.
Quorum; Voting Rights
Holders of our common stock of record at the close of business on April 27, 201720, 2020 (the "Record Date"“Record Date”) will be entitled to vote at the Meeting or any adjournment or postponement of the Meeting. There were 20,448,94721,264,926 shares of common stock, $0.01 par value per share, outstanding as of the Record Date. Each share of our common stock is entitled to one vote and the presence, in person or by proxy, of holders of a majority of the outstanding shares of our common stock is necessary to constitute a quorum for the Meeting. Abstentions and broker non-votes will be considered present and entitled to vote for the purpose of determining the presence of a quorum. Stockholders may not cumulate their votes.
Counting of Votes
If a proxy in the accompanying form is duly executed and returned, the shares represented by the proxy will be voted as directed. All properly executed proxies delivered pursuant to this solicitation, and not revoked, will be voted at the Meeting in accordance with the directions given. If you sign and return your proxy card without giving specific voting instructions, your shares will be voted as follows:
(1)
- FOR the nominees to our Board of Directors;
(2)
- FOR the approval of the Impac Mortgage Holdings, Inc. 2020 Equity Incentive Plan;
(3) FOR the approval, on an
amendment toadvisory basis, of theCompany's 2010 Omnibus Incentive Plan to increasecompensation of our named executive officers;(4) FOR the
numberapproval ofshares of common stock subject totheplan by 500,000 shares;Company’s Tax Benefits Preservation Rights Agreement; and (3)(5)FOR the ratification of Squar Milner LLP as the
Company'sCompany’s independent registered public accounting firm for the year ending December 31,2017.
Representatives of our transfer agent will assist us in the tabulation of the votes.
Abstentions and Broker Non-Votes
An abstention is the voluntary act of not voting by a stockholder who is present at a meeting and entitled to vote.
A broker "non-vote"“non-vote” is a proxy submitted by a broker that does not indicate a vote for some or all of the proposals because the broker does not have discretionary voting authority on certain types of proposals that are non-routine matters and has not received instructions from its customer regarding how to vote on a particular proposal. Brokers that hold shares of common stock in "street name"“street name” for customers that are the beneficial owners of those shares may generally vote on routine matters. However, brokers generally do not have discretionary voting power (i.e., they cannot vote) on non-routine matters without specific instructions from their customers. Proposals are determined to be routine or non-routine matters based on the rules of the various regional and national exchanges of which the brokerage firm is a member.
Refer to each proposal for a discussion of the effect of abstentions and broker non-votes. Without instructions, brokers will not be able to vote on Proposals 1, 2, 3, or 4.
Revocability of Proxy
Any proxy given may be revoked at any time prior to its exercise by notifying the Secretary of Impac Mortgage Holdings, Inc. in writing of such revocation, by duly executing and delivering another proxy bearing a later date (including an Internet or telephone vote), or by attending the Meeting and voting in person.
Interest of Executive Officers and Directors
None of the Company'sCompany’s executive officers or directors has any interest in any of the matters to be acted upon at the Annual Meeting, except to the extent that the executive officers and directors are eligible to receive awards under the 2010 OmnibusImpac Mortgage Holdings, Inc. 2020 Equity Incentive Plan, the incentive compensation that may be earned by Joseph R. Tomkinson and William S. Ashmore, who are executive officers and directors, and, with respect to each director, to the extent that a director is named as a nominee for election to the Board of Directors.
Householding
"Householding"
“Householding” is a program, approved by the SEC, which allows companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports by delivering only one package of stockholder proxy materials to any household at which two or more stockholders reside. If you and other residents at your mailing address own shares of our common stock in street“street name,” your broker or bank may have notified you that your household will receive only one copy of our proxy materials. Once you have received notice from your broker that they will be "householding"“householding” materials to your address, "householding"“householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in "householding"“householding” and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of the proxy statement and wish to receive only one, please notify your broker if your shares are held in a brokerage account. If you hold shares of our common stock in your own name as a holder of record, "householding"“householding” will not apply to your shares.
Postponement or Adjournment of Meeting
If a quorum is not present or represented, our bylaws permit the stockholders entitled to vote at the Meeting, present in person or represented by proxy, to adjourn the Meeting from time to time to a date not more than 120 days after the original record date without notice other than the announcement at the Meeting.
ELECTION OF DIRECTORS
Our directors are elected annually to serve until the next annual meeting of stockholders and thereafter until their successors are elected and qualify. Our charter and bylaws currently provide for a variable number of directors with a range between one and fifteen members. The size of our Board of Directors is currently set at six but will be fixed at five directors prior to the Annual Meeting as Mr. Richard H. Pickup has decided not to stand for reelection. No proxy may vote for more than five nominees for director. Accordingly, a Board of sevenfive directors is to be elected at the Meeting, all of whom have been recommended for nomination by the members of the Corporate Governance and Nomination Committee of the Board. Our charter and bylaws currently provide for a variable number of directors with a range of between one and fifteen members. The size of our Board of Directors is set at seven. No proxy may vote for more than seven nominees for director.
Unless otherwise directed by stockholders within the limits set forth in the bylaws, the proxy holders will vote all shares represented by proxies held by them for the election of the maximum number of the following nominees, all of whom are now members of and constitute our Board of Directors, Joseph R. Tomkinson, William S. Ashmore, James Walsh,nominees:
· Thomas B. Akin,
· Katherine J. Blair,
· Frank P. Filipps, Stephan R. Peers, Leigh J. Abrams
· Stewart B. Koenigsberg, and Thomas B. Akin.
· George A. Mangiaracina.
We have been advised that all of the nominees have indicated their availability and willingness to serve if elected. If elected, each such nominee will serve for a term expiring at our annual meeting of stockholders in 2018.2021. You can find information about Messrs. Tomkinson, Ashmore, Walsh, Filipps, Peers, Abrams and Akindirector nominees below under the section "Board“Board of Directors and Executive Officers."”
In the event that any nominee becomes unavailable or unable to serve as a director, prior to the voting, the proxy holders will refrain from voting for the unavailable nominee, will vote for a substitute nominee in the exercise of their best judgment or the Board may determine to reduce the size of the Board.
Vote Required
You may vote in favor of any or all of the nominees or you may also withhold your vote as to any or all of the nominees. In order to elect a nominee, the affirmative vote of a plurality of all of the votes cast at the Meeting is necessary for the election of the nominee for director assuming a quorum is present. "Plurality"“Plurality” means that the nominees receiving the largest number of votes cast are elected as directors up to the maximum number of directors to be elected at the meeting.Meeting. If stockholders do not specify the manner in which their shares represented by a validly executed proxy solicited by the Board of Directors are to be voted on this proposal, such shares will be voted in favor of the nominees. If you hold your shares in "street name"“street name” and you do not instruct your broker how to vote in the election of directors, a broker non-vote will occur and no votes will be cast on your behalf. It is therefore critical that you cast your vote if you want it to count in the election of directors. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote although they will be considered present for the purpose of determining the presence of a quorum.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"“FOR” ALL NOMINEES.
APPROVAL OF AMENDMENT TO 2010 OMNIBUS2020 EQUITY INCENTIVE PLANTO INCREASE THE SHARES SUBJECT TO THE PLAN BY 500,000 SHARES
On April 25, 2017, our
The Board of Directors approved an amendmentis asking our stockholders to approve the Company'sImpac Mortgage Holdings, Inc. 2020 Equity Incentive Plan (the “2020 Plan”). The 2020 Plan is designed to replace our 2010 Omnibus Incentive Plan as amended (the "2010 Plan"“2010 Plan”), subjectwhich is scheduled to stockholder approval,expire on July 19, 2020.
The Board believes that the 2020 Plan is important for attracting and retaining well-qualified employees and directors in a competitive labor market and that the 2020 Plan will provide a significant incentive for our employees, directors and consultants to increase the value of the Company for all stockholders, which is essential to our long-term growth and success. The Board believes that the number of shares availableauthorized under the 2020 Plan by 500,000 shares. As of May 30, 2017, there were 1,361,828 outstanding shares underlying optionsreflects an appropriate balance between providing us with the flexibility to offer an equity award program over a multi-year period and 85,750 deferred stock units, which are counted two times against the share reserve, and the total number of shares of common stock available for futurestockholder dilution considerations.
No new awards may be granted under the 2010 Plan was 41,963 shares, whichafter the date of adoption of the 2020 Plan by the Board, believes is inadequate for the purpose of providing future equity incentives. Set forth below are the outstanding options and related exercise prices:
| | Outstanding Options | Exercise Price Per Share | | |||||
|---|---|---|---|---|---|---|---|---|
| 21,321 | $ | 0.53 | ||||||
| 90,000 | $ | 2.73 | ||||||
| 11,642 | $ | 2.80 | ||||||
| 249,150 | $ | 5.39 | ||||||
| 35,000 | $ | 10.00 | ||||||
| 123,666 | $ | 10.65 | ||||||
| 148,499 | $ | 13.81 | ||||||
| 2,000 | $ | 16.43 | ||||||
| 337,750 | $ | 17.40 | ||||||
| 329,800 | $ | 20.50 | ||||||
| 8,000 | $ | 20.75 | ||||||
| 5,000 | $ | 21.50 | ||||||
which occurred on April 8, 2020. The 2010 Plan addresseswill remain in place only for the development of innovative compensation practices involving several alternative forms of equity-based incentives by permitting the grant of stock appreciation rights, restricted stock units, performance shares and other stock- and cash-based incentive awards. The Board believes the 2010 Plan provides the Company with a flexible and dynamic long-term incentive compensation structure and is in the best interests of the Company. This amendment is designed to enhance the flexibility of the Compensation Committee in granting stock options and other awards to our officers, employees, non-employee directors and other key persons and to ensure that the Company can continue to grant stock options and other awards to such persons at levels determined to be appropriate by the Compensation Committee.
In approving the amendment to the 2010 Plan that is the subject of this Proposal No. 2, the Board noted the numberissuance of shares currently availableof our common stock pursuant to equity compensation awards granted prior to April 8, 2020 and outstanding under the 2010 Plan, which awards will continue to be governed by the numberterms of shares availablethe 2010 Plan. Although the 2020 Plan already has been adopted by the Board, no equity awards are permitted to be granted under the 20102020 Plan upon its adoption in 2010,unless and the increase in the number of shares available under the 2010 Plan approved by stockholders in 2013, 2014, 2015 and 2016. The Company did not engage a consultant to assist in the determinationuntil stockholder approval is received within 12 months of the proposed increase inBoard adoption. The 2020 Plan authorizes the numbergrant of awards relating to up to 2,000,000 shares available underof our common stock.
Summary of the 20102020 Plan in this Proposal No. 2.
Certain materialThe principal features of the plan2020 Plan are discussed below, however,described below. However, this summary of the description2020 Plan does not purport to be exhaustive and is subjectexpressly qualified in its entirety by reference to and qualified by the full text of the 20102020 Plan document, which is attached to this proxy statement asAppendix AA.
, and is incorporated herein by reference, which includes the proposed amendment to Section 4.01 as underlined. The closing price for our common stock on June 1, 2017, as reported on the NYSE MKT, was $16.76 per share. If thisAdministration
proposal is approved, we anticipate filing a Form S-8 registration statement with the SEC shortly after the annual meeting to register the additional shares.
Administration
The 2010Unless assumed by the Board, in its sole discretion, the 2020 Plan iswill be administered and interpreted by the Compensation Committee of our Board, which is comprised of three of our non-employee directors, each of whom is a “nonemployee director” within the Company's Boardmeaning of Directors, with participationapplicable federal securities laws and approval“independent” within the meaning of applicable stock exchange listing requirements. Subject to the provisions of the Board2020 Plan, the Compensation Committee has full power and authority (a) to select the participants to whom awards are to be granted, (b) to set the terms and conditions of Directors. Thethe awards at initial grant and any subsequent revisions or changes to the terms and conditions of awards, including, but not limited to, changes to, or removal of restrictions on, outstanding awards relating to vesting, restriction periods and exercise periods, (c) to interpret the 2020 Plan, (d) to adopt, amend and revoke rules for the administration, interpretation and application of the 2020 Plan, (e) to adopt, amend and revoke sub-plans or supplements to the 2020 Plan, including to comply with the laws of, or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions in which the Company or any subsidiary of the Company operates or whose citizens or residents may be granted awards, and (f) to interpret any rules, guidelines and policies relating to the 2020 Plan and any sub-plans and supplements to the 2020 Plan.
Types of Awards
Our 2020 Plan provides the Compensation Committee haswith the authority to determine, within the limitsgrant a variety of the express provisionstypes of the 2010 Plan, the individuals to whomequity awards, will be granted, the nature, amount and terms of such awards and the objectives and conditions for earning such awards. The Committee generally has discretion to delegate its authority under the 2010 Plan to another committee of the Board or a subcommittee, or to such other party or parties, including officers of the Company, as the Committee deems appropriate. In addition, the Board of Directors may exercise any of the powers and authority of the Committee.
Types of Awards
Awards under the 2010 Plan maywhich include incentive stock options, nonqualified stock options, stock appreciation rights ("SARs")(SARs), restricted shares of common stock, restricted stock units performance share or unit awards,(RSUs), and other stock-based awards, and cash-based incentive awards.briefly summarized as follows:
Incentive Stock Options.Options or Nonqualified Stock Options The Committee may grant to a. Options entitle the participant options to purchase Companyshares of our common stock that qualify as incentive stock options ("incentive stock options")over time for purposes of Section 422an exercise price fixed on the date of the Internal Revenue Code (the "Code"), options that do not qualify as incentive stock options ("non-qualified stock options") or a combination thereof. The terms and conditions of stock option grants, including the quantity, price, vesting periods, and other conditions on exercise will be determined by the Committee.
grant. The exercise price for stock options are determined by the Committee in its discretion, but may not be less than 100% of the fair market value of one share of the Company'sour common stock on the date when the stock option is granted. Additionally, in the case of incentive stock options granted to a holder of more than 10% of the total combined voting power of all classes of stock of the Company on the date of grant, thegrant. The exercise price may not be less than 110%paid in cash, by the transfer of shares of our common stock meeting certain criteria, by the sale through a broker of a portion of the shares acquired upon exercise, by applying the value of a portion of the shares acquired upon exercise and issuing only the net balance of the shares, or by a combination of these methods. The participant has no rights as a stockholder with respect to any shares covered by the option until the option vests and is exercised by the participant and shares are issued by us.
Stock Appreciation Rights. SARs entitle the participant to receive the appreciation in the fair market value of one share ofour common stock on the date the stock option is granted.
Stock options must be exercised within a period fixed by the Committee that may not exceed ten years frombetween the date of grant and the exercise date either in cash or in the form of shares of our common stock. For cash-settled SARs, the participant will have no rights as a stockholder. For stock-settled SARs, the participant will have no rights as a stockholder with respect to any shares covered by the SAR until the award vests and is exercised by the participant and we issue the shares.
Restricted Stock and Restricted Stock Units. Restricted stock awards are shares of our common stock that vest in accordance with terms and conditions established by the Compensation Committee. Restricted stock units provide for the issuance of shares of our common stock at a later date or event upon vesting in accordance with terms and conditions established by the Compensation Committee. Shares of restricted stock and RSUs that do not satisfy vesting conditions are subject to forfeiture. In either case, the vesting conditions may be based on continued employment (or other service) with us and our affiliates and/or achievement of performance goals. Unless otherwise provided in the applicable award agreement, a participant granted restricted stock will have the rights of a stockholder for the common stock subject to restrictions, including voting and dividend rights, but not the right to sell or transfer the shares. A participant granted RSUs does not have stockholder rights until shares are issued, if at all, but may be granted dividend equivalent rights prior to the issuance of shares.
Other Stock-Based Awards. Other stock-based awards permitted under our 2020 Plan include awards that may be settled in cash or in shares of our common stock and are valued in whole or in part by reference to shares of our common stock.
Eligibility
All of our employees, officers, directors and consultants are eligible to participate in the 2020 Plan. All participants may receive all types of awards under the 2020 Plan, except that in the case of incentive stock options granted to a holder of more than 10% of the total combined voting power of all classes of stock of the Company on the date of grant, the exercise period may not exceed five years. The 2010 Plan provides for earlier termination of stock options upon the participant's termination of service, unless extended by the Committee, but in no event may the options be exercised after the scheduled expiration date of the options.
At the Committee's discretion, payment for shares of common stock on the exercise of stock options may be granted only to employees (including officers and directors who are also employees). The Compensation Committee determines which persons eligible to participate will receive awards and the terms of their individual awards.
On March 31, 2020, we had approximately 578 employees (including officers and directors who are also employees), five non-employee directors and approximately 63 consultants who were then eligible to participate in the 2020 Plan. The actual number of persons who will receive awards from time to time cannot be determined in advance because the Compensation Committee has the discretion to select the award recipients. As of the date of this proxy statement, the Compensation Committee has not made in cash,any grants of awards to any of our directors or executive officers under the 2020 Plan.
Maximum Shares Reserved
The maximum number of shares of the Company'sour common stock held byavailable for issuance under the participant or in any other form2020 Plan is 2,000,000 shares. This includes the maximum number of consideration acceptable to the Committee (including one or more forms of "cashless" or "net" exercise). The holder is responsible for the payment and withholdings of any federal, state, or local taxesshares that may arisebe granted as incentive stock options under the 2020 Plan, which also is 2,000,000 shares.
Shares issued with respect to restricted stock awards, RSUs and other “full value” awards granted under the 2020 Plan are counted against the 2020 Plan’s maximum share limit as two shares for every one share actually issued in connection with the award. Shares issued with respect to stock options and stock appreciation rights are counted as one share against the maximum share limit. For example, if 100 shares of restricted stock are granted under the 2020 Plan, 200 shares will be counted against the 2020 Plan’s maximum share limit for that award.
The following additional rules apply for counting shares against the maximum share limit under the 2020 Plan:
· Shares of stock underlying any awards that are forfeited, canceled or otherwise terminated (other than by exercise) and shares that are forfeited or repurchased by the Company for an amount not greater than the participant’s exercise or purchase price will be added back to the shares of stock available for issuance under the 2020 Plan on the same basis (either two-for-one or one-for-one) as such shares were charged against the maximum share limit upon grant.
· Shares tendered or held back upon exercise of an option or settlement of a stock appreciation right to cover the exercise price or tax withholding will count against the limit and will not be available for future issuance under the 2020 Plan.
· Shares tendered or held back upon the vesting or settlement of any restricted stock, RSUs, and other full value stock-based awards to cover tax withholding will not be added back to the shares available for grant under the 2020 Plan.
· Upon exercise of stock options.appreciation rights, the gross number of shares exercised will be deducted from the total number of shares remaining available for issuance under the 2020 Plan.
Stock Appreciation Rights.Limitation on Non-Employee Director Compensation The Committee
In order to provide a meaningful and specific limit on the compensation that may grantbe provided to a participant an awardnon-employee directors under the 2020 Plan, the maximum aggregate value of SARs, which entitlesawards granted under the participant2020 Plan and cash compensation payable to receive, upon its exercise, a payment equal to (i) the excessany non-employee director in any one calendar year may not exceed $500,000 (other than for extraordinary services), as determined for our financial accounting purposes as of the fair market valuedate of a sharegrant.
Terms of common stock onAwards
The Compensation Committee will determine the exercise date overtypes of awards to be granted from among those provided under the SAR exercise price, times (ii)2020 Plan and the terms of such awards, including the number of shares of our common stock with respect toor other securities underlying the awards; restrictions and vesting requirements, which may be time-based vesting or vesting upon satisfaction of performance goals and/or other conditions; the SAR is exercised.
The exercise price for a SAR will be determined by the Committee in its discretion, butoptions and SARs, which may not be less than 100% of the fair market value of a share on the grant date; and, where applicable, the expiration date of awards, which for options and SARs may not be more than ten years after the grant date.
Minimum Vesting of Awards
No stock option or SAR may become vested or exercisable and no restricted stock, RSUs or stock-based awards may become vested less than one shareyear following the grant date of such award; provided, however, that the Compensation Committee may provide for earlier exercisability or vesting in the event a participant’s service terminates due to death or disability or following a Change in Control (defined below), and the Compensation Committee may provide for earlier exercisability and vesting of awards that in the aggregate do not exceed 5% of the Company's common stock on the date when the SAR is granted. Upon exercisetotal number of a SAR, payment may be made in cash, shares of the Company's common stock held by the participant or in any other form of consideration acceptable to the Committee (including one or more forms of "cashless" exercise). SARs must be exercised within a period fixed by the Committee that may not exceed ten years from the date of grant.
Restricted Shares and Restricted Units. The Committee may award to a participant shares of common stock subjectauthorized to specified restrictions ("restricted shares"). Restricted shares are subject to forfeiture ifbe issued under the participant does not meet certain conditions such as continued employment over a specified forfeiture period2020 Plan.
Performance-Based Awards
Vesting and/or exercise of awards under the attainment of specified performance targets over the forfeiture period.
The Committee also2020 Plan may award to a participant units representing the right to receive shares of common stock in the futurebe made subject to the achievementsatisfaction of one or more goals relating to the completion of service by the participant and/or the achievement of performancefinancial criteria or other objectives ("restricted units"). The terms and conditions of restricted share and restricted unit awards are determined by the Committee.
For participants who are subject to Section 162(m) of the Code, as further described under "Tax Deductibility of Certain Performance-Based Awards Under the 2010 Plan," theobjective performance targets described in the preceding two paragraphs may bemeasures. As established by the Compensation Committee, in its discretion, based on one or more of the following measures (the "Performance Goals"):
•operating income•operating profit (earnings from continuing operations before interest and taxes)•earnings per share•return on investment or working capital•return on stockholders' equity•economic value added (the amount, if any, by which net operating profit after tax exceeds a reference cost of capital)•Adjusted Net Earnings (as defined below)•Net earnings (loss) attributable to common stockholders•stock price
"Adjusted Net Earnings" means net earnings (loss) attributable to common stockholders as reported in the Company's periodic reports filed with the Securities and Exchange Commission, provided that such amount shall be adjusted by reversing the following, to the extent such adjustments were made in calculating such net earnings (loss) attributable to common stockholders:
(a)any accrual already made with respect to the annual bonus, special bonus, or incentive bonus applicable to such person;(b)any adjustment relating to change in fair value of net trust assets;(c)any adjustment relating to change in fair value of long-term debt;(d)any adjustment relating to noncash level yield long-term debt;(e)any charge relating to amortization of deferred charges; and(f)any adjustment relating to the following items within earnings of discontinued operations: (1) lower of cost or market and (2) repurchase liability provision.
The Performance Goalsperformance criteria may be measured with respect to the Company or any one or more of its subsidiaries, divisions, units or affiliates, either in absolute terms or as compared to another companyresults of a peer group and may be measured at a business unit level or companies, or an index established or designatedother Company-specific basis specified by the Compensation Committee. The above terms generally haveDifferent performance criteria and performance goals may be used for different participants or for different awards to the same meaningparticipant.
No Repricing
Without the prior approval of our stockholders, options and SARs granted under the 2020 Plan may not be repriced, replaced, regranted or amended to reduce the exercise price, and any options and SARs with exercise prices greater than current fair market value may not be canceled in exchange for cash or any other award under the Plan.
Transferability of Awards
Awards under the 2020 Plan generally are not transferable by the participant other than by will or the laws of descent and distribution and are generally exercisable, during the participant’s lifetime, only by the participant. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the participant or the participant’s estate or legal representative or guardian. The Compensation Committee has discretion, however, to permit the transfer by gift of awards other than incentive stock options to a participant’s immediate family members or to trusts or partnerships for their benefit or to foundations that they control.
Adjustments and Substitute Awards
The share limits and the number and kind of shares available under the 2020 Plan, and the shares subject to any outstanding awards, as well as the exercise or purchase prices of such awards, are subject to adjustment in the Company's financial statements,event of certain reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, spin-off, combination or ifother similar change in our capital stock or the terms arenumber or kind of shares outstanding.
In the event we acquire another entity, the 2020 Plan provides for the issuance of substitute equity awards for existing equity compensation of the acquired company, which do not usedcount against the 2020 Plan aggregate share limit.
Change in Control
If the
Company's financial statements, Company undergoes a change in control, which includes certain corporate transactions such as applied pursuant to generally accepted accounting principles,a merger, reorganization or as usedconsolidation resulting in a change in majority ownership, a sale of substantially all of our assets, a sale of more than 50% of our stock, or a change in the industry, as applicable.
Sincemajority of directors on our Board during a 12-month period (each, a “Change in Control”), then awards outstanding under the adoption of the 20102020 Plan the Committee has not granted any awards based upon such Performance Goals.
Performance Awards. The Committee may grant performance awards to participants under such terms and conditions as the Committee deems appropriate. A performance award entitles a participant to receive a payment from the Company, the amount of which isbe assumed, substituted or otherwise continued or may be cashed out or exchanged for other property based upon the attainmentfair market value of predetermined performance targets over a specified award period. Performance awards may be paid in cash, shares ofour common stock or the consideration paid per share in a combination thereof, as determined by the Committee.
Award periods will be established at the discretion of the Committee. The performance targets will also be determined by the Committee. With respect to participants subject to Section 162(m) of the Code, the applicable performance targets will be established,Change in the Committee's discretion, based on one or more of the Performance Goals described under the section titled "Restricted Shares and Restricted Units." To the extentControl. Awards that a participant is not subject to Section 162(m) of the Code, when circumstances occur that cause predetermined performance targets to be an inappropriate measure of achievement, the Committee, at its discretion, may adjust the performance targets or the amount or value of the performance award.
Other Stock-Based Awards. The Committee may grant equity-based or equity-related awards, referred to as "other stock-based awards," other than options, SARs, restricted shares, restricted units, or performance awards. The terms and conditions of each other stock-based award will be determined by the Committee. Payment under any other stock-based awards will be made in common stock or cash, as determined by the Committee.
Cash-Based Incentive Awards. The Committee may grant cash-based incentive compensation awards, which would include performance-based annual cash incentive compensation to be paid to covered employees subject to Section 162(m) of the Code. The terms and conditions of each cash-based award will be determined by the Committee, provided that for performance-based cash awards granted to covered executives subject to Section 162(m). The targets must consist only of one or more of the Performance Goals discussed under the section titled "Restricted Shares and Restricted Units "above and the Committee cannot elect to pay more than the incentive amount indicated by the level of attainment of the performance target. The Committee does have the flexibility, based on its business judgment, to reduce this amount.
The cash incentive compensation feature of the 2010 Plan does not preclude the Board or the Committee from approving other incentive compensation arrangements for covered employees.
Dividend Equivalents. The Committee may provide for the payment of dividends or dividend equivalents with respect to any shares of common stock subject to an award under the 2010 Plan.
Eligibility and Limitation on Awards
The Committee may grant awards to any employee, director, consultant or other person providing services to the Company or its affiliates. It is presently contemplated that approximately 615 persons will be eligible to receive awards.
The maximum awards that can be granted under the 2010 Plan to a single participant in any calendar year is an aggregate number of 450,000 shares of common stock, whether in the form of options, SARs, restricted shares, restricted units, performance unit or share awards and other stock-based awards, and $5,000,000 in the form of cash-based incentive awards. These amount limitations are solely for
purposes of compliance with Section 162(m) of the Code as further discussed below under "Federal Income Tax Consequences" and are not indicativeassumed, substituted, or otherwise continued upon such an event will terminate if not exercised. Vesting and exercisability of the award amounts that wouldawards outstanding upon a Change in Control may be granted to any participant.
Future Awards under the 2010 Plan
Because future awards under the 2010 Plan are withinaccelerated at the discretion of the Compensation Committee, which may include circumstances in which a participant’s employment is terminated in connection with the Change in Control or in which the acquirer fails to assume, continue or substitute for such awards.
Clawback of Awards
Awards granted to an executive officer of the Company cannot determine the type, dollar value, number, participant, or other terms that will in the future be received by or allocated to any participant in the 2010 Plan. Information regarding our recent practices with respect to stock-based compensation is presented in "Board of Directors and Executive Officers" and "Executive Compensation" including the "Summary Compensation Table" and these related tables: "Option Grants During 2016," "Outstanding Equity Awards at December 31, 2016," and in "Compensation of Board Members" and elsewhere in this Proxy Statement, and in our financial statements for the fiscal year ended December 31, 2016 in the Annual Report that accompanies this Proxy Statement.
While the Company does not have a specific intention for the use of the currently reserved or additional proposed shares of common stock available for grants under the 20102020 Plan will be subject to recovery or clawback if the Compensation Committee later determines either (i) that financial results used to determine the amount of that award must be materially restated and that the executive officer engaged in its discretion, and consistent withfraud or intentional misconduct related thereto or (ii) that recovery or repayment of the Company's overall compensation program as described inaward is required by the Proxy Statement,Sarbanes-Oxley Act or other applicable law. In addition, the Compensation Committee may provide that any award, including any shares subject to or issued under an award, is subject to any other recovery, recoupment, clawback and/or other forfeiture policy maintained by the Company from time to time makes awards to employees, directors, consultantstime.
Amendment and other persons providing services to the Company and its affiliates, and the Board has considered the past grants of awards in adopting the proposed increase. In 2014, 2015 and 2016 the Company made option awards representing a total of 409,250, 405,800 and 342,000 shares, respectively, and DSU awards representing a total of approximately 3,750, 5,000 and 5,000 shares, respectively. The average rate at which shares were granted over the past three years as a percentage of average shares outstanding in those same years was 3.6%. On that basis, the total number of shares available for grant following the proposed increase is consistent with prior years' practices and would meet the Company's needs for approximately one year.Termination
Shares Subject to the 2010 Plan
The Board of Directors has reviewedmay amend or terminate the shares currently available under2020 Plan at any time, provided that any such amendment or termination may not adversely affect any awards then outstanding without the 2010 Plan and has determined that it is appropriateparticipant’s consent. Amendments to increase the maximum number of shares authorized for issuance under the 2010 Plan. As of May 30, 2017, the awards granted and the shares reserved under the 2010 Plan are as follows:
•1,361,828 shares underlying outstanding options, which amount consists of (i) 1,340,507 options that were granted under the 2010 Plan, and (ii) 21,321 options that were outstanding under prior plans and assumed by the 2010 Plan upon its effectiveness (the "Assumed Options"); to the extent any of the Assumed Options are forfeited or canceled, shares of common stock underlying those options will not be available for new grants under the 2010 Plan;•85,750 shares of deferred stock units were outstanding under the 2010 Plan, which amount represents 171,500 shares charged against the number of shares available for the grant of awards under the 2010 Plan; shares of common stock awarded as restricted shares, restricted units, performance awards or other stock-based awards will be charged as two shares against the number of shares of common stock available for the grant of awards under the 2010 Plan; and•41,963 shares reserved for issuance under the 2010 Plan.
As of May 30, 2017, the total number of shares of common stock available for awards under the 20102020 Plan, amendments to alter or delete the stockholder approval requirement for repricing options and SARs, and any other amendments for which stockholder approval is 41,963,required by applicable laws, regulations or stock exchange rules may not be adopted without stockholder approval. No awards will be granted under the 2020 Plan after April 8, 2030.
Federal Tax Aspects
The following is a general discussion of certain U.S. federal income tax consequences relating to certain of the awards that may be issued under the 2020 Plan, based on U.S. federal income tax laws in effect on the date of this proxy statement. This discussion is general in nature only, and is not intended to be specific income tax advice on which we or any participant will rely. This summary does not describe all of the Board believespossible federal income tax consequences that could result from the acquisition, holding, exercise or disposition of any award or of any shares of common stock received pursuant to any award granted under the 2020 Plan. This summary does not describe any state, local or foreign tax consequences or any gift, estate or excise tax consequences.
Tax Consequences to Participants
Incentive Stock Options. A participant will not recognize income upon the grant of an incentive stock option. Furthermore, a participant will not recognize ordinary income upon the exercise of an incentive stock option if he or she satisfies certain employment and holding period requirements, although the exercise may be subject to alternative minimum tax. To satisfy the employment requirement, a participant must exercise the option not later than three months after he or she ceases to be our employee (one year if he or she is inadequatedisabled). To satisfy the holding period requirement, a participant must hold the shares acquired upon exercise of the incentive stock option for more than two years from the grant of the option and more than one year after the shares are transferred to him or her. If these requirements are satisfied, a participant will be taxed on the difference between his or her basis in the shares (which is typically the option exercise price) and the net proceeds of the sale at capital gain rates on the sale of the shares.
If the employment requirement is not met, the option will be taxed as a nonqualified stock option at the time of exercise. If a participant disposes of shares of our common stock acquired upon the exercise of an incentive stock option without satisfying the holding period requirement, that participant generally will recognize ordinary income as of the date of disposition equal
to the lesser of (i) the difference between the fair market value of the shares on the date of exercise and the exercise price, or (ii) the difference between the selling price and the exercise price; and additional gain on disposition generally will be long-term or short-term capital gain.
Nonqualified Stock Options. In general, a participant will not recognize income at the time a nonqualified stock option is granted. At the time of exercise of the option, the participant will recognize ordinary income if the shares are not then subject to a substantial risk of forfeiture. The amount of such income will be equal to the difference between the option exercise price and the fair market value of the shares of our common stock on the date of exercise. At the time of the sale of the shares of our common stock acquired pursuant to the exercise of an option, appreciation in value of the shares after the date of exercise will be treated as either short-term or long-term capital gain, and depreciation in value will be treated as short-term or long-term capital loss, depending on how long the shares have been held. Long-term capital gains may be eligible for reduced tax rates if the participant has satisfied applicable holding period requirements.
Stock Appreciation Rights. In general, a participant will not recognize income at the time a stock appreciation right is granted. Upon exercise of the right, the participant will recognize ordinary income in an amount equal to the excess of the fair market value of the underlying shares on the exercise date over the exercise price, whether such amount is payable in cash or in shares of common stock. If the participant receives such excess value in common stock, any additional gain or any loss recognized upon later disposition of any shares received on exercise will be capital gain or loss.
Restricted Stock. In general, a participant will not have taxable income upon the grant of restricted stock. Instead, at the time the participant holds stock free of any substantial risk of forfeiture, the participant will recognize ordinary income equal to the fair market value (on that date) of the shares or other property less any amount paid. Alternatively, the participant may elect under Section 83(b) of the Internal Revenue Code (the “Code”) to include as ordinary income in the year of grant of restricted stock, an amount equal to the fair market value (on the grant date) of the restricted stock less any amount paid. Any disposition of shares after restrictions lapse will be subject to the regular rules governing long-term and short-term capital gains and losses with the basis for this purpose equal to the fair market value of the shares at the end of the restriction period (or on the date of receipt of the restricted stock, if the participant elects to be taxed upon grant). To the extent dividends are payable during the restricted period under the applicable award agreement, any such dividends will be taxable to the participant at ordinary income tax rates and will be deductible by the Company unless the participant has elected to be taxed on the fair market value of the restricted stock upon transfer, in which case they will be taxable to the participant as dividends and will not be deductible by the Company.
Restricted Stock Units. A participant normally will not recognize taxable income upon an award of restricted stock units. Upon the lapse of the restrictions and the issuance of the earned shares, the participant will recognize ordinary taxable income in an amount equal to the fair market value of the common stock received.
Other Stock-Based Awards. Normally, a participant will not recognize taxable income upon the grant of performance awards or other stock-based awards. Subsequently, when the conditions and requirements for the purposegrants have been satisfied and the payment determined, any cash received and the fair market value of providing future equityany common stock received will be taxed as ordinary income to the participant.
Tax Withholding. Ordinary income recognized on exercise of nonqualified stock options and stock appreciation rights and on vesting of restricted stock, restricted stock units and other similar awards is subject to income and employment tax wage withholding, unless the participant is a non-employee director or consultant. The Compensation Committee may allow a participant to satisfy his or her tax withholding requirements under federal and state tax laws in connection with the exercise or receipt of an award by payment in cash, withholding from the participant’s other compensation, electing to have shares withheld, and/or delivering to us already-owned shares of our common stock.
Section 409A. A participant receiving an award that is subject to, but fails to comply with, the deferred compensation requirements of Section 409A of the Code (“Section 409A”) may be subject to a penalty tax of 20% of the income from such award plus interest charges, in addition to ordinary income tax. Failure to comply with Section 409A also may result in an acceleration of the timing of income taxation of such awards. Awards granted under the 2020 Plan are intended to be exempt from or to comply with the rules of Section 409A.
incentives.Tax Consequences to the Company.
To the extent that a participant recognizes ordinary income as described above, we will generally be entitled to a corresponding deduction provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code and is not disallowed by the $1,000,000 limitation on certain executive compensation under Section 162(m) of the Code.
Section 162(m) Limitation. Section 162(m) of the Code and the regulations thereunder contain special rules regarding the income tax deductibility of compensation paid to our chief executive officer, our chief financial officer and to certain of our other executive officers, or to any person who previously was such an officer at any time on or after January 1, 2017. The Boardgeneral rule is that compensation paid to any of these specified executives is deductible only to the extent that it does not exceed $1,000,000 in any tax year. Prior to 2020, certain “performance-based compensation” was exempt from this $1,000,000 limitation on deductibility, but this exemption from the limitation has determined that increasingbeen removed from Section 162(m) of the amountCode and is no longer applicable for income tax deductibility purposes.
Stockholder Dilution Considerations
The following table reflects the number of shares of our common stock that will be available for awards under the 2020 Plan in combination with awards outstanding under the 2010 Plan:
Number of shares that will be authorized for future grant after stockholder approval of the 2020 Plan(1) |
| 2,000,000 |
| |
Number of shares relating to outstanding stock options at 3/31/2020 |
| 881,886 |
| |
Number of shares outstanding relating to full-value awards at 3/31/2020 |
| 422,530 |
| |
Weighted average remaining term of outstanding options at 3/31/2020 |
| 7.84 years |
| |
Weighted average exercise price of outstanding options at 3/31/2020 |
| $ | 8.00 |
|
(1) Grants of stock-based awards other than options or SARs will count against the authorization as 2.00 shares.
To protect stockholder interests from the potential dilutive impact of equity awards, we actively manage our equity plan resources as effectively as possible, as indicated by the table below. The “unadjusted burn rate” for any particular fiscal year is the total number of shares of our common stock issuable under the 2010 Plan is necessaryequity-based awards granted in order to be able to grant additional equity awards to continue to attract, retain and motivate key employees. As a result, the Board is asking the stockholders to approve the amendment to the 2010 Plan to increase the number of shares available under the 2010 Planthat fiscal year divided by 500,000 shares.
With respect to awards made under the 2010 Plan (excluding Assumed Options), shares of common stock underlying awards that are forfeited or canceled (as a result, for example, of the lapse of an option or a forfeiture of restricted stock) will be available for additional grants under the 2010 Plan. Shares to be issued or purchased under the 2010 Plan will be authorized but unissued shares of common stock.
Anti-Dilution Protection
In the event of any corporate event or transaction that results in a change in the capital structure of the Company, including a change resulting from a stock dividend or stock split, or combination or reclassification of shares, the Committee is empowered to make such equitable adjustments with respect to awards or any provisions of the 2010 Plan as it deems necessary and appropriate, including, if necessary, any adjustments in the maximumour weighted average total number of shares of common stock subjectissued and outstanding during that fiscal year.
Our unadjusted burn rates for the past three fiscal years are set forth in the following table:
Year |
| Stock Options |
| Restricted |
| Total Granted |
| Weighted |
| Burn Rate |
|
2019 |
| 592,500 |
| 280,138 |
| 872,638 |
| 21,189,119 |
| 4.12 |
|
2018 |
| 90,000 |
| — |
| 90,000 |
| 21,026,200 |
| 0.43 |
|
2017 |
| 388,450 |
| 30,000 |
| 418,450 |
| 19,437,532 |
| 2.15 |
|
3-Year Average |
| 356,983 |
| 103,379 |
| 460,363 |
| 20,550,950 |
| 2.23 |
|
We anticipate that the 2,000,000 shares under the 2020 Plan will give us flexibility to grant equity awards for three or four years, accommodating anticipated grants relating to the 2010 Plan,hiring, retention and promotion of employees and for the compensation of non-employee directors and consultants for such period. However, the total number of shares available
under the 2020 Plan could be exhausted sooner based on any number of variables, including, without limitation, the value of our common stock, subject to andchanges in competitors’ compensation practices or changes in compensation practices in the exercise price of an outstanding award, or the maximum number of shares that may be subject to one or more awards granted to any one recipient during a calendar year.
Dilution Analysis
As of May 30, 2017, the Company had outstanding 20,882,544 shares of common stock. If the 500,000 share increasemarket generally, changes in the number of shares available for issuance under the 2010 Plan is approved by stockholders as requested, approximately 541,963 shares will be available for issuance under the 2010 Plan. The requested increase represents approximately 2.4% of the issued and outstanding shares of the Company. The total number of shares available for future issuance under the 2010 Plan and the total amount available including shares underlying outstanding awards would be approximately 2.6% and 9.1%, respectively, of the issued and outstanding shares of the Company.
The percentage of the issued and outstanding shares of the Company that will be available for award grants under the 2010 Plan following the proposed increase is consistent with the corresponding percentages at the time of the initial approval of the 2010 Plan and its amendmentsemployees, changes in 2013through 2016. Stockholders initially approved the 2010 Plan in July 2010, authorizing 450,000 shares, representing approximately 5.8% of the then issued and outstanding shares of the Company. In each of 2013, 2014, 2015 and 2016, stockholders approved an increase of 500,000 shares under the 2010 Plan. The number of shares available under the 2010 Plan prior to each increase in 2013, 2014, 2015 and 2016 was 21,033, 113,579, 96,834 and 88,214 shares, respectively. Following each increase in 2013, 2014, 2015 and 2016, the 321,033, 413,579, 396,834 and 388,214 shares available for future issuance under the 2010 Plan represented approximately 3.7%, 4.4%, 3.9%, and 3.1% respectively, of the then issued and outstanding shares of the Company and the total amount available including shares underlying outstanding awards (using actual shares underlying deferred stock units as opposed to the number of shares charged againstdirectors and officers, the numberextent to which vesting conditions applicable to equity-based awards are satisfied, the need to attract, retain and incentivize key talent, the type of shares available forawards we grant, under the plan) represented approximately 11.1%, 13.1%, 13.4%, and 12.5% respectively, of the then issuedhow we choose to balance total compensation between cash and outstanding shares of the Company.equity-based awards.
The inclusion of this information in this Proxy Statementproxy statement should not be regarded as an indication that the assumptions used to determine the number of shares will be predictive of actual future equity grants. These assumptions are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.amended (the “Exchange Act”). These
statements involve risks and uncertainties that could cause actual outcomes to differ materially from those in the forward-looking statements, including our ability to attract and retain talent, achievement of performance metrics with respect to certain equity-based awards, the extent of option exercise activity, and others described in our Form 10-K for the year ended December 31, 2016.2019.
Amendment and TerminationPlan Benefits
The Board of Directors may at any time amendfuture benefits or terminate the 2010 Plan, providedamounts that the Board may not, without the approval of the Company's shareholders, make any amendment that requires shareholder approvalwould be received under the Code2020 Plan are discretionary and are therefore not determinable at this time. Similarly, the benefits or under anyamounts which would have been received by or allocated to executive officers and our other applicable law or rule of any stock exchange or listing serviceemployees for the last completed fiscal year if the 2020 Plan had been in effect cannot be determined. However, we expect that lists the Company's stock. Additionally, no such action may be taken that adversely affects any rights or obligations with respect to anyfuture awards theretofore made under the 20102020 Plan withoutwill be granted in a manner substantially consistent with the consent of the recipient. No awards may be made under the 2010 Plan after the tenth anniversary of its effective date.
Federal Income Tax Consequences
The federal income tax consequences of the issuance and exercisehistorical grant of awards under the 2010 Plan are as described below. The followingPlan. For information is only a summary of the tax consequences of the awards, and participants should consult with their own tax advisors with respect to the tax consequences inherentabout grants made in the ownership or exercise of the awards, and the ownership and disposition of any underlying securities.
Incentive Stock Options. A participant who is granted an incentive stock option will not recognize any taxable income for federal income tax purposes either on the grant or exercise of the incentive stock option. If the participant disposes of the shares purchased pursuant to the incentive stock option more than two years after the date of grant and more than one year after the exercise of the option (the required statutory "holding period"), (a) the participant will recognize long-term capital gain or loss, as the case may be, equal to the difference between the selling price and the option price; and (b) the Company will not be entitled to a deduction with respect to the shares of stock so issued. If the holding period requirements are not met, any gain realized upon disposition will be taxed as ordinary income to the extent of the lesser of (i) the excess of the fair market value of the shares at the time of exercise over the option price, and (ii) the gain on the sale. Also in that case, the Company will be entitled to a deduction in the year of disposition in an amount equal to the ordinary income recognized by the participant. Any additional gain will be taxed as short-term or long-term capital gain depending upon the holding period for the stock. A sale for less than the option price results in a capital loss.
The excess of the fair market value of the shares on the date of exercise over the option price is, however, includable in the option holder's income for alternative minimum tax purposes.
Nonqualified Stock Options. A participant who is granted a nonqualified stock option2019 under the 2010 Plan will not recognize any income for federal income tax purposes onto our named executive officers, see the grant“Summary Compensation Table” herein. For information regarding the size and structure of awards made in the past, please see the disclosures in this proxy statement under “Outstanding Option Awards at December 31, 2019” and “Equity Compensation Plan Information.”
Market Value of Underlying Securities
Our common stock underlies all of the option. Generally, onoptions and other awards to be made under the exercise of the option, the participant will recognize taxable ordinary income equal to the excess of the fair2020 Plan. The market value of our common stock at the sharesclose of trading on the exercise date over the option price for the shares.
The Company generally will be entitled to a tax deductionNYSE American on the date of exercise in an amount equal to the ordinary income recognized by the participant. Upon disposition of the shares purchased pursuant to the stock option, the participant will recognize long-term or short-term capital gain or loss, as the case may be, equal to the difference between the amount realized on such disposition and the basis for such shares, which basis includes the option price and the amount previously recognized by the participant as ordinary income.
Stock Appreciation Rights.Record Date was $[ A participant who is granted stock appreciation rights will normally not recognize any taxable income on the receipt of the SARs. Upon the exercise of a SAR, (a) the participant will recognize ordinary income equal to the amount received (the increase in the fair market value of one share of the Company's common stock from the date of grant of the SAR to the date of exercise); and (b) the Company will be entitled to a deduction on the date of exercise in an amount equal to the ordinary income recognized by the participant.·] per share.
Restricted Shares. A participant will not be taxed at the date of an award of restricted shares but will be taxed at ordinary income rates on the fair market value of any restricted shares as of the date that the restrictions lapse, unless the participant within 30 days after transfer of such restricted shares to the participant elects under Section 83(b) of the Code to include in income the fair market value of the restricted shares as of the date of such transfer. The Company normally will be entitled to a corresponding deduction. Any disposition of shares after restrictions lapse will be subject to the regular rules governing long-term and short-term capital gains and losses with the basis for this purpose equal to the fair market value of the shares at the end of the restricted period (or on the date of the transfer of the restricted shares, if the employee elects to be taxed on the fair market value upon such transfer). To the extent dividends are payable during the restricted period under the applicable award agreement, any such dividends will be taxable to the participant at ordinary income tax rates and will be deductible by the Company unless the participant has elected to be taxed on the fair market value of the restricted shares upon transfer, in which case they will thereafter be taxable to the employee as dividends and will not be deductible by the Company.
Restricted Units. A participant will normally not recognize taxable income upon an award of restricted units, and the Company will not be entitled to a deduction until the lapse of the applicable restrictions. Upon the lapse of the restrictions and the issuance of the earned shares, the participant will recognize ordinary taxable income in an amount equal to the fair market value of the common stock received and the Company normally will be entitled to a deduction in the same amount.
Performance Awards, Other Stock-Based Awards and Cash-Based Awards. Normally, a participant will not recognize taxable income upon the grant of performance awards, other stock-based awards and cash-based awards. Subsequently, when the conditions and requirements for the grants have been satisfied and the payment determined, any cash received and the fair market value of any common stock received will constitute ordinary income to the participant. The Company normally will then be entitled to a deduction in the same amount.
Tax Deductibility of Certain Performance-Based Awards Under the 2010 Plan. Section 162(m) of the Code limits the deductibility for federal income tax purposes of certain compensation paid to any "covered employee" in excess of $1 million. For purposes of Section 162(m), the term "covered employee" includes the Company's chief executive officer and the three other most highly compensated executive officers (other than the Company's principal financial officer) who are required to be disclosed in the Company's proxy statement as "named executive officers" based on the amounts of their total compensation. Certain compensation, including compensation paid based on the achievement of pre-established performance goals, is excluded from this deduction limit if the material terms under which the compensation is to be paid, including the performance goals to be used, are approved by our stockholders. Any taxable income from the exercise of stock options granted to covered employees under the 2010 Plan is expected to be performance-based compensation, which may be deducted by the Company for federal income tax purposes without regard to the Section 162(m) limitation. Income from other types of awards under the 2010 Plan also will be excluded from the Section 162(m) limitation if based upon Performance Goals in the 2010 Plan. Income from awards under the 2010 Plan other than from exercise of stock options and SARs will not be excluded from the Section 162(m) limitation if they are not based or attaining Performance Goals.
Effective Date
The 2010 Plan initially became effective on July 20, 2010.
Vote Required
You may vote in favor of or against this proposal or you may abstain from voting. Approval of the amendment to the 20102020 Plan will require the affirmative vote of a majority of the votes cast in person or represented by proxy at the Meeting assumingat which a quorum is present. Abstentions and broker non-votes, if any, will not be counted as votes cast and will have no effect on the result of the vote, although they will be considered present for the purpose of determining the presence of a quorum. If the stockholders do not approve the 2020 Plan, it will not be implemented, but the Company reserves the right to adopt such other compensation plans and programs as it deems appropriate and in the best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL
OF THE 2020 EQUITY INCENTIVE PLAN.
PROPOSAL NO. 3
ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
Section 14A of the Exchange Act enables our stockholders to vote to approve, on an advisory, non-binding basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the SEC’s rules. At our 2019 annual meeting, the stockholders approved, on an advisory, non-binding basis, a one-year frequency for the advisory vote on executive compensation. Accordingly, this proposal seeks stockholder approval of, on an advisory basis, the compensation of the named executive officers, as disclosed in this proxy statement.
Our named executive officer compensation is designed to attract, motivate and retain our named executive officers, who are critical to our success. The Compensation Committee believes an effective compensation program is one that is designed to align the interests of executive officers with those of our stockholders by tying long-term incentive compensation to financial performance and ultimately to the creation of stockholder value. The Compensation Committee believes that it has taken a responsible approach to compensating our named executive officers.
Please read the “Executive Compensation” section of this proxy statement for additional details about our executive compensation.
We are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement.
Accordingly, we will ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s proxy statement for the 2020 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission.”
The “say-on-pay” vote is advisory, and therefore not binding on the Company, the Compensation Committee or our Board of Directors. Although the vote we are asking you to cast is non-binding, the Compensation Committee and the Board of Directors value the views of our stockholders and will consider the outcome of the vote when determining future compensation arrangements for our named executive officers.
Vote Required
This vote is an advisory vote and is therefore not binding on the Company or the Board of Directors. The affirmative vote of a majority of all of the votes cast at the Meeting at which a quorum is present is required to approve this proposal. If stockholders do not specify the manner in which their shares represented by a validly executed proxy solicited by the Board of Directors are to be voted on this proposal, such shares will be voted in favor of this proposal. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the vote outcome.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE
APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC.
PROPOSAL NO. 4
APPROVAL OF THE TAX BENEFITS PRESERVATION RIGHTS AGREEMENT
Our Board of Directors requests your approval of the 2010 Plan.Company’s Tax Benefits Preservation Rights Agreement, dated October 23, 2019, between us and American Stock Transfer & Trust Company, LLC as rights agent (the “Rights Agent”), which we refer to as the “Rights Agreement.” The Rights Agreement is designed to preserve our substantial tax assets. The Board of the Company has authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock, par value $0.01 per share, of the Company to stockholders of record as of the close of business on November 5, 2019 (the “Rights Plan Record Date”). Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A-1 Participating Preferred Stock, par value $0.01 per share (the “Preferred Stock”), of the Company at an exercise price of $45.00 per one one-thousandth of a share of Preferred Stock (“Preferred Share”), subject to adjustment (the “Purchase Price”). Each Right is governed by the terms of the Rights Agreement. A vote “FOR” the Proposal will constitute approval of the Rights Agreement in accordance with its terms.
Background and Reasons for Proposal
The Rights Agreement is intended to preserve the value of certain deferred tax benefits, including those generated by net operating losses (collectively, the “Tax Benefits”). In general, we may “carry forward” net operating losses in certain circumstances to offset current and future taxable income, which will reduce federal and state income tax liability, subject to certain requirements and restrictions. The Rights Agreement also has certain ancillary anti-takeover effects.
The Tax Benefits can be valuable to the Company. However, the Company’s ability to use these Tax Benefits would be substantially limited and impaired if it were to experience an “ownership change” for purposes of Section 382 of the Code and the Treasury Regulations promulgated thereunder. Generally, the Company will experience an “ownership change” if the percentage of the shares of common stock owned by one or more “five-percent shareholders” increases by more than 50 percentage points over the lowest percentage of shares of common stock owned by such stockholder at any time during the prior three years on a rolling basis. The Rights Agreement reduces the likelihood that changes in the Company’s investor base have the unintended effect of limiting the Company’s use of its Tax Benefits. As such, the Rights Agreement has a 4.99% “trigger” threshold that is intended to act as a deterrent to any person or entity seeking to acquire 4.99% or more of the outstanding common stock without the prior approval of the Board. This would protect the Tax Benefits because changes in ownership by a person owning less than 4.99% of the Company’s stock are not included in the calculation of “ownership change” for purposes of Section 382 of the Code.
The Board believes it is in the best interest of the Company and its stockholders that the Company provide for the protection of the Tax Benefits by adopting the Rights Agreement. The Board has established procedures to consider requests to exempt certain acquisitions of the Company’s securities from the Rights Agreement if the Board determines that doing so would not limit or impair the availability of the Tax Benefits or is otherwise in the best interests of the Company.
The description of the Rights Agreement contained in this Proposal 4 is qualified in its entirety by reference to the text of the Rights Agreement that is attached to this proxy statement as Appendix B. You are urged to read carefully the Rights Agreement in its entirety as the discussion herein is only a summary.
The Rights. On October 23, 2019, our Board of Directors authorized and declared a dividend distribution of one Right for each outstanding share of common stock, par value $0.01 per share, of the Company to stockholders of record as of the close of business on the Rights Plan Record Date. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A-1 Participating Preferred Stock, par value $0.01 per share, referred to as the “Preferred Stock”, at an exercise price of $45.00 per one one-thousandth of a share of Preferred Stock, subject to adjustment. Such price is referred to as the “Purchase Price”. The description and terms of the Rights are set forth in the Rights Agreement.
Issuance and Transfer of Rights; Rights Certificates. Until the Distribution Date (as defined below):
· the Rights will be evidenced by and trade with the certificates for shares of common stock (or, with respect to any uncertificated shares of common stock registered in book entry form, by notation in book entry), and no separate rights certificates will be distributed;
· new common stock certificates issued after the Rights Plan Record Date will contain a legend incorporating the Rights Agreement by reference (for uncertificated shares of common stock registered in book entry form, this legend will be contained in a notation in book entry); and
· the surrender for transfer of any certificates for shares of common stock (or the surrender for transfer of any uncertificated common stock registered in book entry form) will also constitute the transfer of the Rights associated with such common stock.
Distribution Date; Acquiring Person; Separation of Rights. Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from our common stock and become separately tradable and exercisable only upon the earlier of (i) ten business days (or such later day as the Board may determine) following a public announcement that a person or group of affiliated or associated persons, collectively referred to as an “Acquiring Person”, has acquired beneficial ownership of 4.99% or more of our outstanding common stock or (ii) ten business days (or such later day as our Board may determine) following the announcement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person. Such earlier date is referred to as the “Distribution Date”. As soon as practicable after the Distribution Date, we will mail Rights certificates to our stockholders as of the close of business on the Distribution Date and the Rights will become transferable apart from the common stock. Thereafter, such Rights certificates alone will represent the Rights.
The definition of “Acquiring Person” contained in the Rights Agreement contains several exemptions, including for (i) the Company or any subsidiary of the Company, (ii) any employee benefit plan of the Company or any subsidiary of the Company, or any person organized, appointed or established by the Company for or pursuant to the terms of any such plan, (iii) any person who becomes the beneficial owner of 4.99% or more of the shares of the common stock then outstanding as a result of a reduction in the number of shares of common stock by the Company or a stock dividend, stock split, reverse stock split or similar transaction, (iv) any person who becomes the beneficial owner of 4.99% or more of the shares of common stock of the Company then outstanding solely as a result of the initial grant or vesting of any options, warrants, rights or similar interest, (v) any Existing Holder (as defined below), (vi) any person who becomes the beneficial owner of 4.99% or more of the outstanding shares of common stock as a result of the acquisition of shares of common stock directly from the Company, as long as, prior to the acquisition of shares of common stock directly from the Company, the Company has been apprised in writing by such person of the number of shares of common stock beneficially owned by such person immediately prior to any such acquisition, and (vii) any person that the Board has affirmatively determined shall not be deemed an Acquiring Person.
The Rights Agreement also includes a procedure whereby the Board will consider requests to exempt certain acquisitions of common stock from the applicable ownership trigger if the Board determines that the requested acquisition will not adversely impact in any material respect the time period in which the Company could use the Tax Benefits or limit or impair the availability to the Company of the Tax Benefits, or is in the best interests of the Company despite the fact it may adversely impact in a material respect the time period in which the Company could use the Tax Benefits or limit or impair the availability of the Tax Benefits.
Rights Holders Have No Rights as a Stockholder Until a Right Is Exercised. Until a Right is exercised, the holder of such Right will have no rights as a stockholder of the Company (beyond those possessed as an existing stockholder), including, without limitation, the right to vote or to receive dividends with respect to the Right.
Existing Holders. The Rights Agreement provides that any person or entity who otherwise would be an Acquiring Person on the date the Rights Agreement was adopted, each referred to as an “Existing Holder”, will not be deemed to be an “Acquiring Person” for purposes of the Rights Agreement unless such Existing Holder increases its beneficial ownership over such Existing Holder’s lowest percentage of ownership of the common stock after the adoption of the Rights Agreement, subject to specified exceptions.
Preferred Shares Purchasable Upon Exercise of Right. After the Distribution Date, each Right will entitle the holder to purchase, for $45.00, known as the “Purchase Price”, one one-thousandth of a Preferred Share having economic and other terms similar to that of one share of common stock. This portion of a Preferred Share is intended to give the stockholder approximately the same dividend, voting and liquidation rights as would one share of common stock, and should approximate the value of one share of common stock. More specifically, each one one-thousandth of a Preferred Share, if issued, will:
· not be redeemable;
· entitle holders to quarterly dividend payments of $0.00001 per share, or an amount equal to the dividend paid on one share of common stock, whichever is greater;
· entitle holders upon liquidation either to receive $1.00 per share or an amount equal to the payment made on one share of common stock, whichever is greater;
· have the same voting power as one share of common stock; and
· entitle holders to a per share payment equal to the payment made on one share of common stock if the common stock is exchanged via merger, consolidation or similar transaction.
“Flip-in” Rights. At any time after a Distribution Date has occurred, each holder of a Right, other than the Acquiring Person, will thereafter have the right to receive, upon paying the Purchase Price and in lieu of a number of one one-thousandths of a share of Preferred Stock, our common stock (or, in certain circumstances, cash or other of our securities) having a market value equal to two times the Purchase Price of the Right. For example, assuming a $30.00 market price for our common stock and the current Purchase Price of $45.00, after the Distribution Date each Right would entitle its holder to purchase three shares of our common stock with a market value of $90.00 for an aggregate purchase price of $45.00. However, the Rights are not exercisable following the occurrence of the foregoing event until such time as the Rights are no longer redeemable by the Company, as further described below. Following the occurrence of an event set forth above, all Rights that are or, under certain circumstances specified in the Rights Agreement, were beneficially owned by an Acquiring Person or certain of its transferees will be null and void.
“Flip-over” Rights. In the event any person or group becomes an Acquiring Person and we merge into or engage in certain other business combinations with an Acquiring Person, or 50% or more of our consolidated assets or earning power are sold to an Acquiring Person, each holder of a Right (other than void Rights owned by an Acquiring Person) will thereafter have the right to receive, upon payment of the Purchase Price, common stock of the acquiring company that at the time of such transaction will have a market value equal to two times the Purchase Price of the Right.
Exchange of Rights. At any time after a person becomes an Acquiring Person, in lieu of allowing the “flip-in” to occur, our Board of Directors may exchange the Rights (other than void Rights owned by an Acquiring Person), in whole or in part, at an exchange ratio of one share of our common stock, (or, under certain circumstances, cash, property or other of our securities, including fractions of a share of preferred stock) per Right (subject to adjustment). Notwithstanding the foregoing, our Board may not conduct such an exchange at any time any person (other than with us or certain entities affiliated with us) together with such person’s affiliates or associates becomes the beneficial owner of 50% or more of our common stock.
Redemption of Rights. At any time prior to a Distribution Date, our Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right and on such terms and conditions as our Board of Directors may establish. Immediately upon the action of our Board ordering redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the redemption price. The redemption price will be adjusted if the Company undertakes a stock dividend or a stock split.
Expiration Date of the Rights. The Rights will expire on the earliest of:
· 11:59 P.M. (New York City time) on October 22, 2022, the three-year anniversary of the adoption of the Rights Agreement;
· the time at which the Rights are redeemed or exchanged under the Rights Agreement by our Board of Directors;
· the final adjournment of the Meeting if our stockholders fail to approve the Rights Agreement with a majority of the votes cast by holders of shares of common stock at the Meeting;
· the repeal of Section 382 or any successor statute, if our Board determines that the Rights Agreement is no longer necessary for the preservation of Tax Benefits;
· the beginning of a taxable year with respect to which our Board determines that no Tax Benefits may be carried forward; or
· such time when our Board determines that a limitation on the use of Tax Benefits under Section 382 would no longer be material to us.
Anti-Dilution Provisions. The Board may adjust the Purchase Price, the number of shares of Preferred Stock issuable and the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split or a reclassification of the Preferred Stock or common stock. With certain exceptions, no adjustments to the Purchase Price will be made until the cumulative adjustments amount to at least 1% of the Purchase Price. No fractional shares of Preferred Stock will be issued
and, in lieu thereof, an adjustment in cash will be made based on the current market price of the Preferred Stock.
Tax Consequences. The Company believes that the distribution of Rights should not be taxable for federal income tax purposes. However, following an event that renders the Rights exercisable or upon redemption of the Rights, stockholders may recognize taxable income.
Amendments. The terms of the Rights may be amended by a resolution of our Board of Directors without the consent of the holders of the Rights prior to the Distribution Date. Thereafter, the terms of the Rights and the Rights Agreement may be amended without the consent of the holders of Rights in order to (i) cure any ambiguities, (ii) shorten or lengthen any time period pursuant to the Rights Agreement or (iii) make changes that do not adversely affect the interests of holders of the Rights.
Terms of the Preferred Stock. 2,500,000 shares of Preferred Stock have been designated as Series A-1 Junior Participating Preferred Stock, as set forth in the Articles Supplementary, filed with the State Department of Assessments and Taxation of Maryland on September 4, 2013. A copy of the Articles Supplementary has been filed with the SEC as an exhibit to a Form 8-K dated September 4, 2013.
Certain Considerations Relating to the Rights Agreement
The Board believes that attempting to protect the Tax Benefits described above is in our and the stockholders’ best interests. Nonetheless, we cannot eliminate the possibility that an “ownership change” will occur even if the Rights Agreement is approved. You should consider the factors below when making your decision.
Future Use and Amount of the Tax Benefits is Uncertain. Our use of the Tax Benefits depends on our ability to generate taxable income in the future. We cannot assure you whether we will have taxable income in any applicable period or, if we do, whether such income or the Tax Benefits at such time will exceed any potential Section 382 limitation.
Potential Challenge to the Tax Benefits. The amount of the Tax Benefits has not been audited or otherwise validated by the Internal Revenue Service (the “IRS”). The IRS could challenge the amount of the Tax Benefits, which could result in an increase in our liability in the future for income taxes. In addition, determining whether an “ownership change” has occurred is subject to uncertainty, both because of the complexity and ambiguity of the Section 382 provisions and because of limitations on the knowledge that any publicly traded company can have about the ownership of, and transactions in, its securities on a timely basis. Therefore, we cannot assure you that the IRS or other taxing authority will not claim that we experienced an “ownership change” and attempt to reduce the benefit of the Tax Benefits even if the Rights Agreement is in place.
Continued Risk of Ownership Change. Although the Rights Agreement is intended to diminish the likelihood of an “ownership change,” we cannot assure you that it will be effective. The amount by which an ownership interest may change in the future could, for example, be affected by purchases and sales of shares by stockholders holding 5% or more of our outstanding common stock, over which we have no control, and new issuances of shares by us, should we choose to do so.
Potential Effects on Liquidity. The Rights Agreement is intended to deter persons or groups of persons from acquiring beneficial ownership of our common shares in excess of the specified limitations. A stockholder’s ability to dispose of our common shares may be limited if the Rights Agreement reduces the number of persons willing to acquire our common shares or the amount they are willing to acquire. A stockholder may become an Acquiring Person upon actions taken by persons related to, or affiliated with, them. Stockholders are advised to carefully monitor their ownership of our common shares and consult their own legal advisors and/or us to determine whether their ownership of the shares approaches the proscribed level.
Potential Impact on Value. The Rights Agreement could negatively impact the value of our common shares by deterring persons or groups of persons from acquiring our common shares, including in acquisitions for which some stockholders might receive a premium above market value.
Anti-Takeover Effect. The Board adopted the Rights Agreement to diminish the risk that our ability to use the Tax Benefits to reduce potential federal income tax obligations becomes limited. Nonetheless, the Rights Agreement may have an “anti-takeover effect” because it may deter a person or group of persons from acquiring beneficial ownership of 4.99% or more of our common shares or, in the case of a person or group of persons that already own 4.99% or more of our common shares, from acquiring any additional common shares. The Rights Agreement could discourage or prevent a merger, tender offer, proxy contest or accumulations of substantial blocks of shares.
Vote Required
You may vote in favor or against this proposal or you may abstain from voting. Approval of the Tax Benefits Preservation Rights Agreement will require the affirmative vote of a majority of the votes cast at the Meeting at which a quorum is present. If stockholders do not approve the Tax Benefits Preservation Rights Agreement, it will expire in accordance with its terms. If stockholders do not specify the manner in which their shares represented by a validly executed proxy solicited by the Board of Directors are to be voted on this proposal, such shares will be voted in favor of this proposal. Abstentions and broker non-votes, if any, will not be counted as votes cast and will have no effect on the result of the vote, although abstentions and broker non-votesthey will be considered present for the purpose of determining the presence of a quorum. If the stockholders do not approve the amendment to the 2010 Plan, the increase in shares under the 2010 Plan will not be implemented, but the Company reserves the right to adopt such other compensation plans and programs as it deems appropriate and in the best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE APPROVAL OF THE AMENDMENT TO THE 2010 PLAN
TAX BENEFITS PRESERVATION RIGHTS AGREEMENT.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has recommended the reappointment of Squar Milner LLP ("(“Squar Milner"Milner”) as the Company'sCompany’s independent registered public accounting firm for the fiscal year ending December 31, 2017.2020. Squar Milner became our auditors in 2008. The Company anticipates, and has experienced, costs savings in connection with its engagement of Squar Milner compared to previous auditor engagements. The stockholders are being requested to ratify the reappointment of Squar Milner at the Annual Meeting. If the selection is not ratified, it is contemplated that the appointment of Squar Milner for 20172020 may be permitted to stand in view of the difficulty and the expense involved in changing independent auditors on short notice, unless the Audit Committee finds other compelling reasons for making a change. Even if the selection is ratified, the Audit Committee and the Board of Directors may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of the Company and its stockholders. The Company anticipates that a representative of Squar Milner will attend the Annual Meeting. The representative will have an opportunity to make a statement and to respond to appropriate stockholder questions.
Vote Required
You may vote in favor of or against this proposal or you may abstain from voting. The affirmative vote of a majority of all votes cast at the Meeting at which a quorum is present is required to ratify the appointment of Squar Milner as the Company'sCompany’s independent registered public accounting firm. If stockholders do not specify the manner in which their shares represented by a validly executed proxy solicited by the Board of Directors are to be voted on this proposal, such shares will be voted in favor of the appointment of Squar Milner as the Company'sCompany’s independent registered public accounting firm.
Abstentions will not be counted as votes cast and will have no effect on the result of the vote, although they will be considered present for the purpose of determining the presence of a quorum. Brokers and other nominees that do not receive instructions are generally entitled to vote on the ratification of the appointment of our independent registered public accounting firm.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO RATIFY
THE REAPPOINTMENT OF SQUAR MILNER LLP.
Principal Accountant Fees and Services
During the year ended December 31, 2016,2019, Squar Milner LLP served as our independent registered public accounting firm and provided certain tax and other services. The following table sets forth the aggregate fees billed to us by Squar Milner LLP for the years ended December 31, 20162019 and 2015.2018.
|
| For the Year Ended |
| ||||
|
| 2019 |
| 2018 |
| ||
Audit fees |
| $ | 955,800 |
| $ | 1,057,320 |
|
Audit-related fees (1) |
| 52,920 |
| 43,956 |
| ||
Tax fees (2) |
| 5,764 |
| 8,480 |
| ||
All other fees (3) |
| — |
| — |
| ||
Total |
| $ | 1,014,484 |
| $ | 1,109,756 |
|
| | For the Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|---|
| | 2016 | 2015 | |||||
Audit fees | $ | 1,015,200 | $ | 889,920 | |||
Audit-related fees (1) | 102,600 | 154,136 | |||||
Tax fees (2) | 43,916 | 8,523 | |||||
All other fees (3) | — | — | |||||
| | | | | | | | |
Total | $ | 1,161,716 | $ | 1,052,579 | |||
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
(1)
- Audit-related fees include fees for an examination under section 1122 of Regulation AB for loan servicing, a separate examination of certain requirements of our master servicing policies and
procedure as well as costs related to our acquisition of CashCall Mortgage,procedures, and registration and offering of securities. (2)
- Tax fees relate to tax planning and consultation services.
(3)
- All other fees relate to non-tax related advisory and consulting services.
Pre-Approval Policies and Procedures for Audit and Non-Audit Services
The Audit Committee pre-approves all auditing services and permitted non-audit services, including the fees and terms thereof, to be performed by our independent registered public accounting firm, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act which are approved by the Audit Committee prior to the completion of the audit. The Audit Committee may form and delegate authority to subcommittees consisting of one or more members of the Audit Committee when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting. In pre-approving the services in 20162019 and 20152018 under audit related fees, tax fees or all other fees, the Audit Committee did not rely on the de minimis exception to the SEC pre-approval requirements.
The Audit Committee of our Board of Directors is responsible for providing independent, objective oversight of our accounting functions and internal control over financial reporting. The Audit Committee is currently comprised of fourtwo directors. The Audit Committee operates under a written audit committee charter, which was amended and restated by the Board of Directors on February 7, 2012.July 17, 2018.
Management is responsible for our internal control over financial reporting and financial reporting process. Squar Milner LLP, or Squar Milner, the independent registered public accounting firm, is responsible for performing an independent audit of our consolidated financial statements, as well as the effectiveness of our internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and to issuefor issuing separate reports thereon. The Audit Committee'sCommittee’s responsibility is to monitor and oversee these management processes and related independent audits.
In connection with these responsibilities, the Audit Committee met with management and Squar Milner to review and discuss the December 31, 20162019 financial statements. The Audit Committee also (i) discussed with Squar Milner the matters required to be discussed by Statement on Auditing Standards ("SAS") No. 61 (Communication with Audit Committees) as may be modified or supplemented.
In addition, the Audit Committee alsoapplicable requirements of the PCAOB and the SEC, and (ii) received the written disclosures and the letter from Squar Milner required by the applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding Squar Milner'sMilner’s communications with the Audit Committee concerning its independence, and has discussed with Squar Milner theirits independence from the Company.
Based on the Audit Committee'sCommittee’s discussions with management, review of Squar Milner'sMilner’s letter and discussions with Squar Milner, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in our annual report on Form 10-K for the fiscal year ended December 31, 2016,2019, for filing with the SEC.
Audit Committee | ||
Frank P. Filipps | ||
Stewart B. Koenigsberg |
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Information Concerning Director Nominees
The persons listed below have been nominated for election to the Company’s Board of Directors. Unless otherwise directed by stockholders within the limits set forth in the bylaws, the proxy holders will vote all shares represented by proxies held by them for the election of the maximum number of the following nominees:
NAME | AGE | POSITION | ||||||
|---|---|---|---|---|---|---|---|---|
| 55 | Chief Executive Officer, Chairman of the Board | ||||||
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| ||||||
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| Director | ||||||
Frank P. Filipps |
| Director | ||||||
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| Director | ||||||
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| Director | ||||||
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Joseph R. TomkinsonGeorge A. Mangiaracina has been was elected as a director of IMH in July 2018 and was appointed as Chairman of the Board since April 1998 andin August 2018. He has served as Chief Executive Officer since August 2018, and aprior to that, he was President in March 2018. Previously, Mr. Mangiaracina had been Executive Vice President and Managing Director of IMH since January 2015, reporting directly to the Company since its formationCEO and playing a key role in August 1995.the 2015 acquisition, integration and on-going management of IMH’s CashCall Mortgage platform. He serves on the IMH Executive, Risk and Capital Markets Committees and has assisted in capital raise activities, strategic initiatives and relationship management of IMH’s capital markets counterparties. Prior to joining IMH, Mr. TomkinsonMangiaracina spent over 20 years in the securities and mortgage banking industries. From 1992 to 2008 and from 2009 to December 2013, he served as a Managing Director of UBS and Deutsche Bank, respectively. While at UBS, Mr. Mangiaracina was also an officerresponsible for the proprietary trading and directorfinancing of a real estate investment trust investingportfolio of residential whole loans, and structured warehouse and term facilities across an array of asset classes; including aircraft, auto, franchise receivables and manufactured housing. While at Deutsche Bank, Mr. Mangiaracina successfully managed and liquidated residential legacy loan portfolios and managed related risk and counterparty exposures. During 2014, he advised financial institutions regarding treasury and capital markets activities and structuring. Prior to 1992, Mr. Mangiaracina was a Manager with Arthur Andersen & Co. and practiced as a Certified Public Accountant in commercial mortgage assetsthe State of New York. Mr. Mangiaracina earned his Bachelor of Science in Accounting and a specialty finance company until its sale. Mr. Tomkinson brings over 35 yearsFinance from Fordham University, College of combined experience in real estate, real estate financing and mortgage banking.Business Administration. The Company believes that Mr. Tomkinson'sMangiaracina’s financial and business expertise,experience, including his past senior executive positions and operating experience with real estate and finance companies, give him the qualifications and skills to serve as a director.
William S. Ashmore has been President of the Company since August 1995 and a Director since July 1997. Mr. Ashmore also served as the Chief Operating Officer from August 1995 to May 2006. Mr. Ashmore has over 35 years of combined experience in real estate, asset liability management, risk management, and mortgage banking. Mr. Ashmore received a B.S. degree in Psychology from the University of California at Los Angeles in 1971 and a Master's degree in Social Psychology from California State University at Northridge in 1974. The Company believes that Mr. Ashmore's real estate, financial and business expertise give him the qualifications and skills to serve as a director.
James Walsh has been a Director of IMH since August 1995. Since January 2000, he has been Managing Director of Sherwood Trading and Consulting Corporation. The Company believes that Mr. Walsh's financial and business expertise, including his past senior executive positions and operating experience with large, complex organizations give him the qualifications and skills to serve as a director.
Frank P. Filipps has been a Director of IMH since August 1995. From April 2005 to July 2008, Mr. Filipps was Chairman and Chief Executive Officer of Clayton Holdings, Inc., a mortgage services company. From June 1999 to April 2005, Mr. Filipps was Chairman and Chief Executive Officer of Radian Group, Inc. (NYSE: RDN) and its principal subsidiary, Radian Guaranty, Inc., which were formed through a merger of Amerin and Commonwealth Mortgage Assurance Company. Mr. Filipps has been a director of Orchid Island Capital (NYSE: ORC), a specialty finance company that invests in residential mortgage-backed securities, since February 2013 and was a director of Primus Guaranty, Ltd. (NYSE: PRS), a holding company primarily engaged in selling credit protection against investment grade credit obligations of corporate and sovereign entities, from September 2004 to December 2014, and a director of Fortegra Financial Corp (NYSE: FRF), an insurance services company, from December 2010 to December 2014. Mr. Filipps received a B.A. in Economics in 1969 from Rutgers University and a Master's degree in Corporate Finance and International Business in 1972 from New York University. The Company believes that Mr. Filipps's financial and business expertise, including a diversified background of managing companies and his past senior executive positions and operating experience with real
estate-related and mortgage services companies, give him the qualifications and skills to serve as a director.
Stephan R. Peers has been a Director of IMH since October 1995. Since January 2005, Mr. Peers has been an independent financial advisor. From September 2001 to January 2005, Mr. Peers was a Managing Director of Sandler O'Neill & Partners, LP practicing corporate finance covering financial institutions. Mr. Peers received a B.S. in Civil Engineering from Manhattan College in 1974, a M.S. in Industrial Engineering from Stanford University in 1975 and an M.B.A. from Stanford University in 1979. The Company believes that Mr. Peers' financial and business expertise, including his past senior executive positions and operating experience with corporate finance companies, gives him the qualifications and skills to serve as a director.
Leigh J. Abrams has been a Director of IMH since April 2001 and lead independent director since June 2004. Mr. Abrams is currently a director and Chairman Emeritus of LCI Industries (formerly, Drew Industries Incorporated) (NYSE: LCII), which manufactures a wide variety of components for recreational vehicles and manufactured homes, and was the Chairman of the Board from January 2009 until May 2014. Prior to that, since August 1979, Mr. Abrams previously served as the President and Chief Executive Officer of Drew, from which he resigned in May 2008 and December 2008, respectively, to become Chairman of the Board of Drew. Mr. Abrams has served as a director of Drew Industries since August 1979. Mr. Abrams, a CPA, has over 35 years of experience in corporate finance, mergers and acquisitions, and operations. Mr. Abrams received a B.A in Accounting from Baruch College in 1964. The Company believes that Mr. Abrams' financial and business expertise, including his past senior executive positions and operating experience with large, complex organizations, gives him the qualifications and skills to serve as a director.
Thomas B. Akin was appointed as a director of IMH on May 23, 2017. He is currently the managing general partner of Talkot Capital LLC, a position he has held since 1996. Talkot Capital is the general partner for various limited partnerships (including the Talkot Fund, L.P.) investing in both private and public companies. From February 2008 to 2014, Mr. Akin served as the Chief Executive Officer of Dynex Capital, Inc. (NYSE: DX) and was a director from May 2003, serving as chairperson since 2005, until May 2017. From 1991 to 1994, Mr. Akin was the managing director of the Western United States for Merrill Lynch Institutional Services and was the Regional Director of the San Francisco and Los Angeles regions for Merrill Lynch Institutional Services from 1981 to 1991. Prior to Merrill Lynch, Mr. Akin had been with Salomon Brothers from 1978 to 1981. Mr. Akin currently serves on the board of directors for Mobivity Holdings Corp. (OTC: MFON). Mr. Akin holds a Master of Business Administration from the Anderson School at the University of California Los Angeles (UCLA) and a Bachelor of Science in Marine Biology from the University of California at Santa Cruz. The Company believes that Mr. Akin'sAkin’s previous positions as an executive officer and director at several large financial institutions, his position as managing member at Talkot Capital and the resulting experience and expertise in investing in the financial and investment industries gives him the qualifications and skills to serve as a director.
Katherine J. Blair was appointed to the Board in December 2019. She is currently a partner at Manatt, Phelps & Phillips, LLP in Los Angeles and has practiced law for over 20 years specializing in corporate, securities and transactional matters and advising executive officers, general counsel and directors on corporate governance, SEC reporting and compliance, public and private securities offerings, as well as mergers and acquisitions. Ms. Blair is also a member of the board of directors of Skechers, U.S.A., Inc. (NYSE: SKX), which designs, develops and markets a diverse range of lifestyle footwear for men, women and children, as well as performance footwear for men and women. Ms. Blair currently serves as Chair of the Business Law Section of the Los Angeles County Bar Association, she is an officer of the Corporations Committee of the
Business Law Section of the California Lawyers Association and she is a member of the Board of Governors of the USC Institute of Corporate Counsel. Ms. Blair holds an undergraduate degree from the University of California, San Diego and a J.D., cum laude from Pepperdine University School of Law. The Company believes that Ms. Blair’s experience working with and advising public companies, including corporate, governance and transactional matters, provides her with the qualifications and skills to serve as a director of Impac.
Frank P. Filipps has been a director of IMH since August 1995. From April 2005 to July 2008, Mr. Filipps was Chairman and Chief Executive Officer of Clayton Holdings, Inc., a mortgage services company. From June 1999 to April 2005, Mr. Filipps was Chairman and Chief Executive Officer of Radian Group, Inc. (NYSE: RDN) and its principal subsidiary, Radian Guaranty, Inc., which were formed through a merger of Amerin and Commonwealth Mortgage Assurance Company. Since February 2013, Mr. Filipps has served as a director of Orchid Island Capital (NYSE: ORC), a specialty finance company that invests in residential mortgage-backed securities, and since 2014, he has served as a director of Ready Capital Corporation (formerly, Sutherland Asset Management) (NYSE: RC). Mr. Filipps was previously, from September 2004 to December 2014, a director of Primus Guaranty, Ltd. (NYSE: PRS), a holding company primarily engaged in selling credit protection against investment grade credit obligations of corporate and sovereign entities, and, from December 2010 to December 2014, a director of Fortegra Financial Corp (NYSE: FRF), an insurance services company. Mr. Filipps received a B.A. in Economics in 1969 from Rutgers University and a Master’s degree in Corporate Finance and International Business in 1972 from New York University. The Company believes that Mr. Filipps’s financial and business expertise, including a diversified background of managing companies and his past senior executive positions and operating experience with real estate-related and mortgage services companies, give him the qualifications and skills to serve as a director.
Stewart B. Koenigsberg was elected as a director of IMH on July 17, 2018. Mr. Koenigsberg is an advisor with Impala Partners, a boutique private equity firm, since July 2015. He served as a senior advisor to Kimberlite Advisors, a NYC investment banking firm from March 2017 through February 2020. From 1989 to 2015, Mr. Koenigsberg served in various positions at GE, last serving as President and CEO of GE Capital Markets, where he managed all capital markets activities worldwide. At the time, GE Capital was one of the world’s largest financial institutions. Mr. Koenigsberg was named a GE Company Officer in 2006. In his previous positions at GE, he was Chief Financial Officer for GE Real Estate, one of the world’s largest real estate lending and investing businesses with over $85 billion in assets. Other roles at GE Capital included Head of Financial Planning and Strategic Planning, Chief Investment Officer for GE’s Mortgage businesses, Chief Financial Officer for GE Capital Lending and Leasing businesses, and President of GE Mortgage’s conduit and capital markets activities. Mr. Koenigsberg also managed GE Mortgage’s $100+ billion residential mortgage servicing portfolio and hedging activities. Before joining GE in 1989, Mr. Koenigsberg was a Senior Manager with Arthur Andersen & Co., where he served clients in financial services. Mr. Koenigsberg has previously served on a number of boards of directors. He has extensive experience with running complex organizations, financial operations and SEC regulations. Mr. Koenigsberg earned his B.S. in Accounting and Economics from the City University of New York, Brooklyn College. He is a Certified Public Accountant and has held several securities industry licenses. The Company believes that Mr. Koenigsberg’s financial and business expertise, including his past senior management positions and operating experience with large, complex organizations gives him the qualifications and skills to serve as a director.
Information Concerning Director Who Is Not Standing for Reelection
Richard H. Pickup was elected as a director on July 17, 2018. Mr. Pickup has decided not to stand for reelection. Mr. Pickup has been a director of various public and private organizations over the past 30 years. Mr. Pickup is one of the largest holders of the Company’s common stock. He received his Bachelor of Arts degree in Finance and Economics from Whittier College in 1955. From 1960 until the present, he has been an analyst/manager of an investment portfolio of assets for his family, including RHP Trust and Gamebusters, Inc. Over the past 50 years he has been a major stockholder in various companies and for the past 20 years has been an owner/operator of high profile hotels and resorts. Mr. Pickup dedicates a great deal of his time on philanthropic work through time and donations. We believe that Mr. Pickup’s extensive experience and knowledge as an investor in many companies, as well as his experience as one of the Company’s largest long-term shareholders, has given him the qualifications and skills to serve as a director.
Executive Officers
The following table provides certain information regarding theour executive officers of IMH, but who doare not currently (and are not nominated to serve asas) directors of IMH:the Company:
NAME | AGE | POSITION | ||||||
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Brian Kuelbs | 56 | Executive Vice President and Chief Financial Officer | ||||||
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| General Counsel, |
Information about George A. Mangiaracina, our Chief Executive Officer, is set forth above under “Information Concerning Director Nominees.”
Todd R. TaylorBrian Kuelbs has been was appointed Executive Vice President and Chief Financial Officer of the Company on May 21, 2018. From August 2015 to December 2017, Mr. Kuelbs was Executive Vice President and Chief Investment Officer of Banc of California, Inc. Prior to that, from January 2014 to July 2015, Mr. Kuelbs served as Executive Managing Director, Chief Financial Officer and Head of Capital Markets for Home Point Financial Corporation, where he led acquisition due diligence, transaction structuring and pricing, post-settlement integration, and business strategy. Mr. Kuelbs has held various senior management positions throughout his more than 25 years in capital management including: Chief Investment Officer and Chief Financial Officer of Aurora Bank FSB; Managing Director of Capital Markets at Countrywide Financial; Executive Vice President since November 2008. From February 2008 until November 2008, Mr. Taylor was the Interim Chief Financial Officer. Mr. Taylor joined IMH in October 2004 as the Senior Vice President, Controller and served in this position until he was promoted to Senior Vice President and Director of Accounting in June 2006. Mr. Taylor served as the Senior Vice President and Director of Accounting until he was promoted to Chief Accounting Officer in October 2007 in which he served until he was appointed to the Interim Chief Financial Officer in February 2008. Prior to joining IMH, Mr. Taylor served as theof GMAC Bank; and Founder, Chief FinancialExecutive Officer and Secretary for Primal Solutions,President of GMAC Mortgage Asset Management Inc. from August 2003 until October 2004.and Core Cap, Inc. Mr. Taylor earned his B.A. degreeKuelbs has focused on enterprise risk modeling, institutional investor business development, and transaction execution in Business from California State University at Fullertonaddition to having launched start-up financial services companies, and is a certified public accountant.
Ronald M. Morrison became General Counsel in July 1998managed scale and was promoted to Executive Vice President in August 2001. In July 1998 he was also elected Secretary of IMH and in August 1998 he was elected Secretary of our mortgage operations and our warehouse lending operations.complex organizations. Mr. MorrisonKuelbs received his B.A. degree in History in 1973Masters with honors from the University of California Los AngelesNotre Dame and his Juris Doctor degreeBachelors with a focus on Mathematics, Quantitative Analysis and Finance from the University of Wisconsin.
Nima J. Vahdat was appointed General Counsel of the Company on August 9, 2019. Mr. Vahdat joined the Company in 1976June 2018 as Senior Vice President, Chief Compliance Officer and Associate General Counsel. He will remain as Chief Compliance Officer in addition to his role as General Counsel. Prior to joining Impac, since March 2015, Mr. Vahdat was Senior Vice President, Associate General Counsel, Fair & Responsible Lending Officer at loanDepot.com, LLC and from Pepperdine University.October 2010 until 2015, he was at Discover Financial Services last serving as Vice President & Senior Counsel, Regulatory Center of Excellence.
Family Relationships
There are no family relationships between any of the directors or executive officers of IMH.
Corporate Governance and Board Matters
Vacancies
All directors are elected at each annual meeting of stockholders for a term of one year and hold office until their successors are elected and qualify. Any vacancy on the Board of Directors for any cause, other than an increase in the number of directors, may be filled by a majority vote of the remaining directors, although such majority is less than a quorum. Replacements for vacancies occurring among the unaffiliated directors will be elected by a majority vote of the remaining directors, including a majority of the unaffiliated directors. Any vacancy in the number of directors created by an increase in the number of directors may be filled by a majority vote of the entire Board of Directors.
Board Member Independence
We are listed on the NYSE MKTAmerican and accordingly, we have applied the listing standards of the NYSE MKTAmerican in determining the "independence"“independence” of the members of our Board of Directors. Based on the listing standards of the NYSE MKTAmerican and after reviewing the relationships with members of our Board, our Board of Directors has determined, with the assistance of the Corporate Governance and Nomination Committee, that James Walsh, Frank P. Filipps, Stephan R. Peers, Leigh J. Abrams and Thomas B. Akin, Stewart B. Koenigsberg, Katherine J. Blair and Richard H. Pickup qualify as independent members of the Board of Directors.directors. The Governance and Nomination Committee
reviews with the Board at least annually the qualifications of new and existing Board members, considering the level of independence of individual members, together with such other factors as the Board may deem appropriate, including overall skills and experience. The Governance and Nomination Committee also evaluates the composition of the Board as a whole and each of its committees to ensure the Company'sCompany’s on-going compliance with the independence standards of the NYSE MKT.American.
Attendance at Board and Committee Meetings
Our Board of Directors met 13nine times during 2016. Each2019. During the period for which a person served as a director, each director attended at least 75% of the aggregate of the total number of meetings held by the Board of Directors and the total number of meetings held by those committees of the Board of Directors on which such director served.
We encourage all directors to attend the annual meetingAnnual Meeting of stockholders. In 2016,2019, all of our directors attended the annual meeting of stockholders.
Committees and Corporate Governance
The current standing committees of our Board of Directors are the Audit Committee, the Compensation Committee, and the Corporate Governance and Nomination Committee. Each of these committees has a written charter approved by our Board of Directors. The members of the committees and a description of the principal responsibilities of each committee are described below.
Our Board of Directors has adopted Corporate Governance Guidelines. The Corporate Governance Guidelines include items such as criteria for director qualifications, director responsibilities, committees of the Board, director access to officers and employees, director compensation, evaluation of the CEO, annual performance evaluation and management succession. The Board of Directors has chosen not to impose term limits or mandatory retirement age with regard to service on the Board in the belief that continuity of service and the past contributions of the Board members who have developed an in-depth understanding of the Company and its business over time bring a seasoned approach to IMH'sIMH’s governance. Each director is to act on a good faith basis and informed business judgment in a manner such director reasonably believes to be in the best interest of the Company.
A copy of each committee charter and our Corporate Governance Guidelines can be found on our website at www.impaccompanies.com by clicking "Investor—“Investor—Corporate Governance—Governance Documents,"” and is available in print upon request to the Secretary of Impac Mortgage Holdings, Inc., 19500 Jamboree Road, Irvine, California 92612.
The Audit Committee
The Audit Committee of the Board of Directors consists of fourtwo directors, all of whomwho are independent pursuant to the Director Independence Standards of the NYSE MKTAmerican and other SEC rules and regulations applicable to audit committees. The following directors are currently members of the Audit Committee: Frank P. Filipps, who serves as the chairman, Leigh J. Abrams, Stephan R. Peers and James Walsh.Stewart B. Koenigsberg. The Board of Directors has determined that Stewart Koeningsberg and Frank P. Filipps qualifieseach qualify as an audit committee financial expert, as such term is defined by Item 407(d)(5)(ii) of Regulation S-K of the Securities Exchange Act of 1934, as amended.Act. During 2016,2019, the Audit Committee met 13 times.held nine meetings.
The purpose of the Audit Committee is to assist the Board in fulfilling its oversight responsibility relating to: (i) the integrity of the Company'sCompany’s financial statements and financial reporting process and its system of internal accounting and financial controls, (ii) the performance of the independent auditors, which would include an evaluation of the independent auditor'sauditor’s qualifications and independence, (iii) the Company'sCompany’s compliance with legal and regulatory requirements, including disclosure controls and procedures, and (iv) the preparation of an Audit Committee report to be included in the Company'sCompany’s annual proxy statement. The Audit Committee is authorized to retain independent legal, accounting or other advisors.
The Compensation Committee
The Compensation Committee is responsible for (1) reviewing and approving corporate goals and objectives relevant to the compensation of the Company’s Chief Executive Officer, evaluating the Chief Executive Officer’s performance in light of those goals and objectives and determining and approving the Chief Executive Officer’s compensation level, (2) recommending to our Board of Directors the cash and non-cash compensation of our executive officers as defined in the rules promulgated under Section 16 of the Exchange Act, (2)(3) evaluating the performance of our executive officers, (3) (4)
recommending to our Board of Directors the cash and non-cash compensation policies for our non-employee directors, (4)(5) making recommendations to our Board of Directors with respect to incentive compensation and equity-based plans that are subject to Board approval, (5)(6) recommending
to the Board of Directors on whether the compensation discussion and analysis should be included in the proxy or Form 10-K, and (6)(7) assisting our Board of Directors in evaluating potential candidates for executive officer positions with the Company. The Committee may consult with the Chief Executive Officer in determining the executive compensation for any executive officer other than the Chief Executive Officer. The Compensation Committee is authorized to retain or to obtain the advice of independent counsel or other advisors. The Compensation Committee consists of James WalshThomas B. Akin (Chairman), Leigh J. AbramsStewart B. Koenigsberg and Stephan R. Peers.Richard H. Pickup. The Compensation Committee met three timesheld seven meetings during 2016.2019.
In July 2019 the Compensation Committee engaged Korn Ferry as an independent compensation consultant to develop a comparator peer group of publicly traded companies, which will be used as the primary source of data in the Company’s market analysis. The peer group will be based on selected factors (industry size/sector, business model, customer base, etc.). Korn Ferry will provide the compensation committee with recommendations regarding the Company’s peer group for review and consideration and, based on the Company’s feedback, will finalize the peer group to use in assessing competitiveness of the CEO pay.
Korn Ferry will also provide Chief Executive Officer data based on the agreed upon peer group to inform the Compensation Committee with respect to Chief Executive Officer pay positioning and to aid in the determination of the go forward incentive plan design. Compensation data will be provided for each element of total direct compensation at the 25th, 50th and 75th percentiles of the competitive market. Korn Ferry will also assess the mix of compensation provided to the Company’s Chief Executive Officer against the mix of executive pay within the comparator market and will provide ideas around the Chief Executive Officer’s forward incentive plan design framework — including annual and long-term incentive opportunities, performance metrics and vehicles.
Compensation Committee Interlocks and Insider Participation
The
None of the members of the Compensation Committee currently consists of three directors, James Walsh (Chairman), Leigh J. Abrams and Stephan R. Peers. None of these individuals was one of ourwere officers or employees of the Company during 2016 or had2019 nor did they have any relationship with us requiring disclosure under Item 404 of Regulation S-K. None of our current executive officers served as a member of the board of directors or the compensation committee of any other entity that has or has had one or more executive officers serving as a member of our Board or Compensation Committee.
The Corporate Governance and Nomination Committee
The Corporate Governance and Nomination Committee assists the Board of Directors in (1) identifying qualified individuals to become members of the Board of Directors, (2) determining the composition of the Board of Directors and its committees, (3) selecting, or recommending that the Board select, the director nominees for the next annual meeting of stockholders, (4) monitoring a process to assess board, committee and management effectiveness, (5) aiding and monitoring management succession planning and (6) developing, recommending to the Board, implementing and monitoring policies and processes related to our corporate governance. The Committee has the authority to retain any search firm engaged to assist in identifying director candidates, and to retain outside counsel and any other advisors. The Corporate Governance and Nomination Committee consists of Stephan R. PeersStewart B. Koenigsberg (Chairman) and James Walsh.Richard H. Pickup. The committee met eight timesheld six meetings during 2016.2019.
Board Leadership Structure and Role in Risk Oversight
The Board does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board as the Board of Directors believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board. TheHistorically, the Board has determined that having the Company'sCompany’s Chief Executive Officer serve as Chairman is in the best interest of the Company'sCompany’s stockholders at this time. This structure makeshas made the best use of the Chief Executive Officer'sOfficer’s extensive knowledge of the Company and its industry, as well as fostering greater communication between the Company'sCompany’s management and the Board.
Leigh J. Abrams
Frank Filipps serves as the Company'sCompany’s Lead Independent Director. The Lead Independent Director advises the Chairman of the Board or otherwise undertakes the following:
(a)
- assesses the quality, quantity and timeliness of the flow of information from management as necessary for the independent directors to perform their duties effectively and responsibly, including requesting that certain material be included in materials prepared for the Board by management; and
(b)
- moderates executive sessions of the
Board'sBoard’s independent directors and acts as a liaison between the independent directors and the Chairman of the Board and/or Chief Executive Officer on appropriate issues.
Risk Management
The Company faces a variety
Cyber security incidents compromising non-public personal financial information may produce material adverse effects to the Company’s business, including but not limited to, reputational harm, loss of operationalintellectual property, disruption of key business operations, governmental fines/penalties, and market risks, including interest rate risk, credit risk, liquidity risk and prepayment risk. The Boardlitigation/remediation costs. Under the direction of Directors believes an effective risk management system will (1) timely identify the material risks thatits Chief Information Security Officer (“CISO”), the Company faces, (2) communicate necessarymaintains a formal information security management program to address cyber security risks. The program leverages industry frameworks and standards with respect to material risks to senior executivesthe goal of ensuring appropriate controls are established and as appropriate, toare frequently assessed for adequacy. Major components of the Board or Audit Committee, (3) implement appropriateprogram include safeguarding customer information, third party vendor oversight and responsive risk management strategies consistent with Company's risk profile, and (4) integrate risk management into Company decision-making.incident response.
The Board receives reports and briefings from the CISO via its Chief Information Officer (“CIO”) relating to a full range of cyber security issues, the Company’s risk posture to protect against cyber security threats, and policies that are intended to adequately implement the program. The CIO and CISO periodically keep the Board abreast of efforts relating to compliance, risk assessments, results of audits, examinations, penetration and vulnerability testing, security breaches or violations and recommended changes to the Company’s information security program. The Company has designatedalso increased its cyber security insurance policy coverage three-fold in an attempt to adequately protect the Audit Committee to takeCompany from exposure in the lead in overseeing risk management. The Audit Committee discusses with management the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company's risk assessment and risk management policies. The Audit Committee also reviews the significant reports to management, including assessmentevent of the Company's risk management processes and systems of internal controls.a cyber security breach.
The Board of Directors encourages management to promote a corporate culture that incorporates risk management into the Company's corporate strategy and day-to-day business operations. The Board of Directors also continually works, with the input of the Company's executive officers, to assess and analyze the most likely areas of future risk for the Company.
The Director Nomination Process
The Governance and Nomination Committee considers nominees from all sources, including stockholders. The Committee has the authority to lead the search for individuals qualified to become members of the Company'sCompany’s Board of Directors and to select or recommend to the Board of Directors director nominees to be presented for stockholder approval. The committee may use its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm.
The boardBoard of directorsDirectors will consist of a majority of directors who (i) qualify as "independent"“independent” directors within the meaning of the listing standards of the NYSE MKT,American, as the same may be amended from time to time; (ii) meet the applicable requirements to be "unaffiliated"“unaffiliated” as defined in the Company's Bylaws,Company’s bylaws, as may be amended from time to time; and (iii) are affirmatively determined by the Board to have no material relationship with the Company, its parents or its subsidiaries (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company, its parents or its subsidiaries). The committeeGovernance and Nomination Committee reviews with the Board at least annually the qualifications of new and existing Board members, considering the level of independence of individual members, together with such other factors as the Board may deem appropriate, including overall skills and experience. Our Board has determined not to establish term limits with regard to service on the Board in the belief that continuity of service and the past contributions of Board members who have developed an in-depth understanding of the Company and its business over time bring a seasoned approach to the Company’s governance. The Committee will select individuals who have high personal and professional integrity, have demonstrated ability and sound judgment, and are effective, in conjunction with other director nominees, in collectively serving the long-term interests of our stockholders, together with such other factors as the boardBoard may deem appropriate, including overall skills and experience.
Although the Company does not have a policy regarding diversity, the value of diversity on the Board of Directors is considered and the particular or unique needs of the Company shall be taken into account at the time a nominee is being considered. The Corporate Governance and Nomination Committee seeks a broad range of perspectives and considers both the personal characteristics (gender, ethnicity, age) and experience (industry, professional, public service) of directors and prospective nominees to the Board. The Governance and Nomination Committee will recommend to the Board nominees as appropriate based on these principles.
Director Nominees by Stockholders. Director nominees provided by stockholders to the Corporate Governance and Nomination Committee are evaluated by the same criteria used to evaluate potential nominees from other sources. When making a recommendation for a Board nominee to be evaluated by
the Committee, stockholders should include all information about the candidate that is required to be disclosed in a solicitation of proxies for election of directors pursuant to Regulation 14A under the Exchange Act. The written recommendation should be sent to the Secretary of the Company accompanied by the candidate's
candidate’s written consent to be named in a proxy statement as a nominee, if recommended by the Committee and nominated by the Board, and to serve as a director if appointed or elected. Additional information about the candidate may be requested by the Committee from time to time, either from the recommended person or from the recommending shareholder.
Submission for Consideration at Annual Meeting. The Company'sCompany’s bylaws provide that stockholders may nominate directors for consideration at an annual meeting provided they comply with the notice procedures set forth in the bylaws, which are further described in this proxy statement under "Stockholder“Stockholder Proposals—Proposals to be Submitted for Annual Meeting"Meeting” and "Mailing“Mailing Instructions."” The stockholder nominating a director must be a stockholder of record at the time of giving the notice and is entitled to vote at the meeting. If the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by us at least 70 days prior to the first anniversary of the preceding year'syear’s annual meeting, a stockholder'sstockholder’s nomination will be deemed timely, but only with respect to nominees for any new positions created by such increase, if it is delivered to our Secretary not later than the close of business on the 10th day following the day on which public announcement is first made by us. Any notice shall include the information regarding the stockholder making the nomination and the nominee as required by the Company'sCompany’s bylaws. Nominations made by stockholders in this manner are eligible to be presented by the stockholder at the meeting, but such nominees will not have been considered by the Nominating Committee as a nominee to be potentially supported by the Company.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics. This code of ethics applies to our directors, executive officers and employees. This code of ethics is publicly available in the corporate governance section of the stockholder relations page of our website located at www.impaccompanies.com and in print upon request to the Secretary at Impac Mortgage Holdings, Inc., 19500 Jamboree Road, Irvine, California, 92612. If we make amendments to the code of ethics or grant any waiver that the SEC requires us to disclose, we will disclose the nature of such amendment or waiver on our website.
Stockholder Communication with Our Board of Directors
Stockholders who wish to contact any of our directors either individually or as a group may do so by writing them c/o Ronald M. Morrison,Corporate Secretary, Impac Mortgage Holdings, Inc., 19500 Jamboree Road, Irvine, California 92612, by telephone at (949) 475-3942475-3935 or by email to rmorrison@impaccompanies.comgeneralcounsel@impacmail.com, specifying whether the communication is directed to the entire boardBoard or to a particular director. Stockholder letters are screened, which includes filtering out improper or irrelevant topics.
Compensation of Board Members
The compensation of the Company'sCompany’s non-employee directors is described below.
Board Fees. Beginning with the third quarter of 2016, the non-employee Non-employee directors are paid $30,000 per quarter, which includes up to 35 meetings per year and constitutes all fees for board and committee meetings, chairmanships, lead director roles and any other special meetings. If there are more than 35 meetings during a year, then additional compensation will be awarded as determined by the Compensation Committee. Prior to the third quarter of 2016, the Company's non-employee directors were paid the following fees: (i) an annual fee of $40,000; (ii) a meeting fee of $2,500; (iii) for services on the Audit Committee, the Compensation Committee and the Corporate Governance Committee, fees of
$2,500, $1,000 and $1,000, respectively, per meeting; (iv) an annual fee payable to the chairperson of each of the Audit Committee, the Compensation Committee and the Corporate Governance Committee of $20,000, $5,000 and $5,000, respectively; and (v) an annual fee payable to the lead independent director of $10,000.
Equity Awards. Non-employee directors typically receive an annual equity award of options to purchase shares of the Company'sCompany’s common stock (the "Director“Director Stock Options"Options”), or instead, at the election of the individual director, a number of shares of restricted Company common stock units (which may be taken as deferred stock units, as described below) equal in value to the number of Director Stock Options (based on the binomial value of the Director Stock Options) not taken by such director. Director Stock Options and any substitute shares of restricted Company common stockunits typically vest in three (3) equal annual installments beginning on the first anniversary of the date of grant.
Deferred Stock Unit Awards. The Company maintains a Non-Employee Director Deferred Stock Unit Award Program (the "DSU Program"“DSU Program”), which provides for the grant of deferred stock units ("DSUs"(“DSUs”) to non-employee directors pursuant to the 2010 Plan. Each DSU grant vests in substantially equal annual installments over three (3) years, commencing with the first anniversary of the date of grant, subject to the director'sdirector’s continued service on the Board. Upon vesting, the DSUs continue to be held in the director'sdirector’s stock account until payment becomes due after termination of service on the Board. When a director ceases to be a member of the Board, all DSUs that remain unvested terminate and are forfeited. Dividends and other distributions on DSUs are credited to the director'sdirector’s stock account as if such DSUs were actual shares of common stock issued and outstanding. No interest is credited on stock amounts. Dividends and distributions are converted, based on fair market
value of the common stock, into DSUs and credited to the director'sdirector’s stock account. The Board, in its sole discretion, may waive vesting and forfeiture of DSUs. In the event of a change in control, all outstanding DSUs are fully vested. Directors receive a distribution of stock within thirty (30)30 days after the date the director no longer serves on the Board. The distribution will consist of one share of common stock for each DSU. Any shares of common stock issued are issued under the 2010 Plan.
Special Services. From time to time, the Company'sCompany’s non-employee directors may be asked to engage in special director services, whether or not a committee of the Board has been formed for such purpose. Such services have included and may include strategic reviews, strategic transaction oversight, independent major litigation oversight and like matters involving substantially greater commitments of time from the relevant directors. In such circumstances, the directors engaged in such efforts may receive additional fees for the duration of such service. Fees related to a special committee may be paid whether or not the matter concludes in a transaction or other specific result and may be adjusted upward or downward based on the amount of work required and any other criteria the committee and Board deem appropriate.
Set forth below is the compensation earned by our non-employee directors during 2016. Compensation of Messrs. Tomkinson and Ashmore is reported under "Executive Compensation"; they received no additional compensation for their services as directors.2019.
Director Compensation For 2016
2019
Name |
| Fees Earned or |
| Stock |
| Option |
| Total |
| ||
Thomas B. Akin |
| $ | 120,000 |
| — |
| 55,500 |
| $ | 175,500 |
|
Katherine J. Blair |
| $ | 10,000 |
| — |
| — |
| $ | 10,000 |
|
Frank P. Filipps |
| $ | 120,000 |
| 56,250 |
| — |
| $ | 176,250 |
|
Stewart B. Koenigsberg |
| $ | 120,000 |
| 56,250 |
| — |
| $ | 176,250 |
|
Richard H. Pickup |
| $ | 120,000 |
| — |
| 55,500 |
| $ | 175,500 |
|
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | Option Awards ($)(1)(3) | Total ($) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
James Walsh | $ | 117,500 | 87,000 | — | 204,500 | ||||||||
Frank P. Filipps | $ | 122,000 | — | 79,480 | 201,480 | ||||||||
Stephan R. Peers | $ | 113,500 | — | 79,480 | 192,980 | ||||||||
Leigh J. Abrams | $ | 114,000 | — | 79,480 | 193,480 | ||||||||
| | | | | | | | | | | | | | |
(1)
- The table below sets forth the number of option and stock awards held by each current director as of December 31, 2019. The amounts disclosed above reflect the full grant date fair values in accordance with FASB ASC Topic 718.
For assumptions used in calculation of the awards, see "NoteSee “Note 17—Share Based Payments and Employee BenefitPlans"Plans” to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31,2016. (2)- 2019.
Name
Option Awards:
Number of
Securities
Underlying
Options (#)Stock Awards: Number of Securities
Underlying Stock Awards (#)Thomas B Akin
40,000
—
Katherine J. Blair
—
—
Frank P. Filipps
33,500
39,500
Stewart B. Koenigsberg
—
15,000
Richard H. Pickup
30,000
—
On
July 19, 2016, James WalshFebruary 12, 2020, Mr. Akin was granted5,000 deferredDSUs representing 15,000 shares of common stockunits pursuant tounder the Non-Employee Director Deferred Stock Unit Award Program. Thedeferred stock unitsDSUs vestinone-third per year for threeequal annual installments, commencing withyears beginning on February 12, 2021; however, thefirst anniversaryshares are distributed only upon termination of thedate of grant, subject to the director's continued service on the Board. The settlementperson’s services as a director of thedeferred stock units and distribution of shares are further described above. As of December 31, 2016, the following deferred stock units were outstanding:
| Name | Vested DSUs | Unvested DSUs | |||||
|---|---|---|---|---|---|---|---|
James Walsh | 28,250 | 5,000 | |||||
Frank P. Filipps | 19,500 | — | |||||
Stephan R. Peers | 19,500 | — | |||||
Leigh J. Abrams | 13,500 | — | |||||
| | | | | | | | |
(3)- Company. On
July 19, 2016, each director, except James Walsh who received 5,000 deferred stock units,February 12, 2020, Mr. Pickup was grantedan optionoptions to purchase10,00030,000 shares of common stock with an exercise price per share of$17.40 per share.$5.34. The options vestinone-third per year for three(3) equal annual installmentsyears beginning onthe first anniversary of the date of grant. As of December 31, 2016, the directors held the following options:
| Name | Option Awards: Number of Securities Underlying Options (#) | Exercise Price of Option Awards ($) | Expiration Date | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
Frank P. Filipps | 6,000 | 2.73 | 12/3/2020 | |||||||
7,500 | 5.39 | 7/22/2024 | ||||||||
10,000 | 20.50 | 7/21/2025 | ||||||||
10,000 | 17.40 | 7/19/2026 | ||||||||
Stephan R. Peers | 4,000 | 2.73 | 12/3/2020 | |||||||
7,500 | 5.39 | 7/22/2024 | ||||||||
10,000 | 20.50 | 7/21/2025 | ||||||||
10,000 | 17.40 | 7/19/2026 | ||||||||
Leigh J. Abrams | 6,000 | 2.73 | 12/3/2020 | |||||||
12,000 | 13.81 | 11/27/2022 | ||||||||
7,500 | 5.39 | 7/22/2024 | ||||||||
10,000 | 20.50 | 7/21/2025 | ||||||||
10,000 | 17.40 | 7/19/2026 | ||||||||
| | | | | | | | | | | |
COMPENSATION DISCUSSION AND ANALYSIS
Overview of Compensation PoliciesFebruary 12, 2021. On February 12, 2020, Mr. Filipps, Mr. Koenigsberg and Objectives
The Compensation Committee of our Board of Directors administers the policies governing our executive compensation program. All issues pertaining to executive compensation are reviewed and approved by the Compensation Committee and, where appropriate, approved by our Board of Directors. The Committee focuses on designing our executive compensation program to achieve the following objectives in a market competitive manner:
•Align the interests of executive officers with those of our shareholders by tying long-term incentive compensation to financial and operations performance and ultimately to the creation of shareholder value.•Attract and retain high caliber executives by offering total compensation that is competitive with that offered by similarly situated companies and rewarding outstanding personal performance.•Reflect our corporate goals and objectives.
Over the past several years, as the U.S economy has slowly improved, and at times experienced challenges, the Company's business and operations have also fluctuated. To address the economic and industry trends, the Company has endeavored to be opportunistic in its mortgage business adding new loan products, developing a mortgage servicing portfolio, maintaining the long-term mortgage portfolio and seeking potential acquisitions to grow its business. The incentive compensation received by the named executive officers during 2016, which is based on existing programs, reflects the Company's growth. The Compensation Committee's goal is to provide executive management incentive compensation that will motivate them to successfully implement the Company's strategies, maintain its business and seek opportunities that will grow and strengthen the Company's mortgage business.
Compensation Decision-Making
General Background. We rely upon our judgment in making compensation decisions, after reviewing the performance of the Company, including its short- and long-term strategies, current economic and market conditions, and carefully evaluating an executive's performance during the year against established goals, leadership qualities, operational performance, business responsibilities, and career with the Company, current compensation arrangements and long-term potential to enhance stockholder value. Our main objective in establishing compensation arrangements is to set criteria that are consistent with the Company's business strategies. Generally, in evaluating performance, we review the following criteria:
•strategic goals and objectives, such as acquisitions, dispositions or joint ventures;•individual management objectives for some executives that relate to the Company's strategies;•achieving specific operational goals for the Company or particular business led by the executive officer, including portfolio management and portfolio earnings; and•supporting our corporate values by promoting compliance with internal ethics policies and legal obligations.
Our executive compensation program and policies depends on the position and responsibilities forMs. Blair were each executive officer but remain consistent with our objectives. We seek to achieve an appropriate mix between guaranteed and at-risk compensation, as well as a balance between cash and equity compensation. Our mix of compensation elements is designed not only to reward past performance, but also to proactively encourage long-term future performance through a combination of cash and equity incentive awards.
Role of Management, Consultants and Peers Groups
In reviewing and making compensation decisions of other executive officers, the Committee has in the past and may in the future consult with the Company's Chief Executive Officer, Joseph R. Tomkinson, President, William S. Ashmore and other executive officers. These officers review the performance of the other executive officers, provide annual recommendations for individual management objectives, and provide input on strategic initiatives. Mr. Tomkinson has also been given authority to negotiate employment terms for executive officers that report to him within certain parameters as approved by the Compensation Committee.
Although the Compensation Committee has explored the use of compensation consultants, and has used compensation consultants in the past, it did not use or rely on reports of compensation consultants during 2016 in connection with determining appropriate compensation and arrangements for the named executive officers.
Elements of our Executive Compensation Program
Historically and for 2016, our executive compensation program consisted of the following elements:
(1)base salary;(2)quarterly and annual cash-based incentive compensation;(3)discretionary bonuses;(4)stock- based plans and equity awards;(5)fringe benefitsincluding standard employee health, welfare and retirement benefits; and(6)severance benefits.
We do not have formal policies relating to the allocation of total compensation among the various elements. However, both management and the Committee believe that executives holding more senior positions have substantial influence over our financial performance, and, therefore, should have a greater amount of their compensation at-risk based on the Company's financial performance.
Because the mortgage lending market has continued to change and evolve since 2008, we generally enter into short term (1 to 2 year) employment agreements with our executive officers. The employment agreements with Joe Tomkinson and Bill Ashmore, which were originally entered into in 2013, were extended in 2015 and expire at the end of 2017. In September 2016, we amended the employment agreements with Todd Taylor and Ron Morrison, which were originally entered into in 2014 and now also expire at the end of 2017. These employment agreements are described below under "Employment Agreements."
Base Salary
The Committee typically sets an executive's base salary with the objective of attracting and retaining highly qualified individuals for the relevant position and rewarding individual performance. When setting and adjusting individual executive salary levels, the Committee considers the relevant established salary range, the executive officer's responsibilities, experience, potential, individual performance, and contribution to the Company. The Committee also considers other factors such as our overall corporate budget for annual merit increases, unique skills, demand in the labor market and succession planning.
The base salaries for our named executive officers have essentially remained unchanged since 2010. This is consistent with our philosophy that an increase in an executive's compensation should be related to the Company's performance.
Quarterly and Annual Cash-Based Incentive Compensation
We have used cash-based incentive compensation to emphasize and reward the attainment of certain annual or quarterly financial goals and corporate or individual performance metrics. The objective is to select performance metrics that provide a meaningful measure of our success in implementing our short-term business strategies that yield long-term benefits, such as maintaining and growing the Company's mortgage business and maintaining the amount of mortgage loans in the Company's long-term mortgage portfolio, credit quality and portfolio earnings.
As the Company is focusing on long-term success through a slowly improving market, the Compensation Committee believes that cash-based incentive compensation based on financial performance is appropriate. Messrs. Tomkinson and Ashmore receive annual bonuses based on adjusted net earnings, while Messrs. Taylor and Morrison each receives a quarterly incentive bonus based on the achievement of mutually agreed upon management objectives.
Performance Metrics. Historically, cash incentive awards were typically driven by a combination of taxable net income, return on equity, and production goals. Based on these performance metrics, contractual incentive compensation was directly tied to the Company's financial performance. We believe that the performance metrics for the CEO and President contribute to our success in meeting our strategic objectives of maintaining and growing our overall business and that the management objectives for the CFO and GC provide a strong corporate environment.
Currently, incentive bonuses for Tomkinson and Ashmore are currently based on a percentage of the Company's adjusted net earnings, subject to a cap provided that there is no cap on the Annual Bonus if the officer pre-elects on or before December 31 of the prior year to receive 5.0% of adjusted net earnings during a year. For 2016, Messrs. Tomkinson and Ashmore each elected to receive 5.0% of adjusted net earnings with no cap.
The incentive compensation for Taylor and Morrison is based on management objectives. Mr. Taylor's incentive compensation may be up to 65% of his base salary, while Mr. Morrison's incentive compensation may be up to 50% of his base salary. Their incentive compensation is determined and paid on a quarterly basis. Mr. Taylor's management objectives for his quarterly incentive compensation during 2016 included the hiring accounting personnel, completing internal controls for a recent acquisition, completing public offerings and new warehouse financing, and improvements to financing reporting and technology. Mr. Morrison's management objectives for his quarterly incentive compensation during 2016 were based on corporate actions, such as the Company's office lease, legal aspects of equity and debt financing and staffing.
Stock-Based Plans and Equity Awards
We believe that long-term performance is aided by the use of stock-based awards which create an ownership culture amongst our executive officers that fosters beneficial, long-term performance by the Company. We have established an equity incentive plan to provide our employees, including our executive officers, as well as our directors and consultants, with incentives to help align their interests with the interests of stockholders. The Compensation Committee believes that the use of stock-based awards promotes our overall executive compensation objectives and expects that stock options will continue to be a significant source of potential compensation for our executives. All of our awards are nonqualified stock option grants with time-based vesting.
The Committee believes granting stock options to our executive officers encourages the creation of long-term value for our stockholders and promotes employee retention and stock ownership, all of which serve our overall compensation objectives. The number ofgranted Restricted Stock Units representing 15,000 shares of our common stock under astock. The Restricted Stock Units vest one-third per year for three years beginning on February 12, 2021.
stock option that is granted to an officer is determined by taking into consideration the officer's position with the Company, overall individual performance, our performance and an estimate of the long-term value of the award considering current base salary and any cash bonus awarded. Other than the individual limit of 450,000 shares that may be awarded during any fiscal year, we do not have any limit on the amount of options or awards that may be granted to any executive officer. The Compensation Committee determines the appropriate criteria for granting awards to executive officers, which generally include individual performance, our strategic goals and our financial condition. The exercise price of any stock option issued by us is the [closing price per share of common stock on the stock exchange on the grant date. The Compensation Committee generally has issued awards under the Company's equity incentive plan once a year and the number of shares under options granted to each named executive officer is based on position and seniority.EXECUTIVE COMPENSATION
Fringe Benefits
Health Benefits
During 2016, we provided the following benefits to all of our U.S. salaried employees, including the named executive officers: medical, dental and prescription coverage, company-paid short- and long- term disability insurance, and paid vacation and holidays.
Retirement Benefits
We maintain the Impac Companies 401(k) Savings Plan for all full time employees, including the executive officers, with at least six months of service. The 401(k) Plan provides that each participant may contribute up to 25% of salary pursuant to certain restrictions. The Company contributes to the participant's plan account at the end of each plan year 50% of the first 4% of salary contributed by a participant. Subject to the rules for maintaining the tax status of the 401(k) Plan, an additional company contribution may be made at our discretion, as determined by the Board of Directors. Contributions made by us to the plan for the year ended December 31, 2016 was approximately $895,000. There were no discretionary matching contributions recorded during the year ended December 31, 2016.
Severance
Currently, all the executive officers are entitled to certain severance benefits under the terms of each officer's respective employment agreement, which are on file with the SEC. Severance benefits are intended to ease the consequences of an unexpected or involuntary termination of employment and give the executive an opportunity to find new employment. The severance payments for Messrs. Tomkinson and Ashmore are currently the lesser of 18 months or the balance payable through the contract term of base salary and incentive compensation earned through the termination date. Messers Taylor and Morrison each are entitled to severance compensation equal to the lesser of 12 months or the balance payable through the contract term of base salary and earned incentive compensation. The Committee believes that the different severance payments periods are reasonable in light of each officer's position, value to the Company and length of service. We do not provide for change of control payments. Please see the discussion below entitled "Potential Payments upon Termination and Change-in Control" for a further description of severance payments for each Named Executive Officer.
Perquisites
The Committee typically prefers to compensate our executive officers in cash and equity rather than with perquisites and does not view perquisites as a significant element of our total compensation structure. Executive officers usually receive a car allowance.
Tax and Accounting Implications
Deductibility of Executive Compensation
Under Section 162(m) of the Internal Revenue Code, publicly-held corporations may not take a tax deduction for compensation in excess of $1 million paid to any of the executive officers named in the Summary Compensation Table during any fiscal year. There is an exception to the $1 million limitation for performance-based compensation meeting certain requirements, including compensation based upon performance goals determined by a compensation committee consisting solely of two or more outside directors, the material terms of which are approved by a majority vote of the stockholders prior to the payment of such remuneration. Plus, performance objectives must be established no later than within the first 90 days of the performance period. To maintain flexibility in compensating executives in a manner designed to promote varying corporate goals, the Compensation Committee has not adopted a policy requiring all compensation to be deductible under Section 162(m). However, the Compensation Committee considers deductibility under Section 162(m) with respect to compensation arrangements for executives, and to the extent applicable, intends to qualify for the exception under Section 162(m). The incentive compensation under the Employment Agreements with each of Messrs. Tomkinson and Ashmore and our 2010 Stock Plan are currently structured with the intent to meet the compensation deduction under Section 162(m).
The Compensation Committee regularly reviews our compensation programs to determine the deductibility of the future compensation paid or awarded pursuant thereto and will seek guidance with respect to changes to our existing compensation program that will enable the Company to continue to attract and retain key individuals while optimizing the deductibility to the Company of amounts paid as compensation. However, this policy does not rule out the possibility that compensation may be approved that may not qualify for the compensation deduction if, in light of all applicable circumstances, it would be in the best interests of the Company for such compensation to be paid.
Compensation Risk Management
As part of its annual review of our executive compensation program, the Compensation Committee reviews with management the design and operation of our incentive compensation arrangements for senior management, including executive officers, to determine if such programs might encourage inappropriate risk-taking that could have a material adverse effect on the Company. The Compensation Committee considered, among other things, the features of the Company's compensation program that are designed to mitigate compensation-related risk, such as the performance objectives and target levels for incentive awards (which are based on overall Company performance), and its compensation recoupment policy. The Compensation Committee also considered our internal control structure which, among other things, limits the number of persons authorized to execute material agreements, requires approval of our board of directors for matters outside of the ordinary course and its whistle blower program. Based upon the above, the Compensation Committee concluded that any risks arising from the Company's compensation plans, policies and practices are not reasonably likely to have a material adverse effect on the Company.
Impact of Shareholder Advisory Vote
At our 2016 annual meeting, our shareholders approved, in a non-binding advisory vote, our current executive compensation with approximately 92% of the votes cast on the proposal at the annual meeting affirmatively giving their approval (with broker non-votes and abstentions having no effect on the vote). Accordingly, we believe that this vote ratifies our executive compensation philosophy and policies, as currently adopted and implemented, and we intend to continue such philosophy and policies.
The information contained in this Compensation Committee Report shall not be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing (except to the extent that we specifically incorporate this information by reference) and shall not otherwise be deemed "soliciting material" or "filed" with the Securities and Exchange Commission or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934 (except to the extent that we specifically request that this information be treated as soliciting material or specifically incorporate this information by reference).
The Compensation Committee has reviewed and discussed the "Compensation Discussion and Analysis" section of this proxy statement with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the "Compensation Discussion and Analysis" section be included in this proxy statement.
|
Summary Compensation Table
The following table presents compensation earned by our executive officers for the years ended December 31, 2016, 20152019 and 20142018 (the "Named“Named Executive Officers"Officers”). The compensation of Messrs. Tomkinson and Ashmore
SUMMARY COMPENSATION TABLE
Name and |
| Year |
| Salary |
| Bonus |
| Stock |
| Option |
| Non-Equity |
| All Other |
| Total |
|
George A. Mangiaracina |
| 2019 |
| 750,000 |
| — |
| 187,500 |
| 369,800 |
| 750,000 |
| 5,758 |
| 2,063,058 |
|
Chief Executive Officer and Chairman |
| 2018 |
| 750,000 |
| — |
| — |
| — |
| 750,000 |
| 5,500 |
| 1,505,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian Kuelbs |
| 2019 |
| 450,000 |
| — |
| 218,753 |
| 92,450 |
| 125,000 |
| 5,600 |
| 891,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nima J. Vahdat, |
| 2019 |
| 360,000 |
| — |
| — |
| 35,280 |
| 105,000 |
| 5,600 |
| 505,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rian Furey(4) |
| 2019
2018 |
| 354,003
500,000 |
| 500,000
500,000 |
| —
— |
| 46,225
— |
| 187,500
750,000 |
| 250,228
5,500 |
| 1,337,956
1,755,500 |
|
(1) Salary is based on each of their employment agreements which are further described below under "Employment Agreements."or arrangements for each Named Executive Officer.
| Name and Principal Position | Year | Salary ($) | Bonus ($)(3) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(6) | Total ($) | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Joseph R. Tomkinson | 2016 | 600,000 | — | 254,335 | 5,720,869 | (4) | 37,200 | 6,612,404 | ||||||||||||||
Chairman of the Board and | 2015 | 600,000 | 600,000 | 326,610 | 1,500,000 | (4) | 20,100 | 3,046,710 | ||||||||||||||
Chief Executive | 2014 | 600,000 | 200,000 | 132,825 | — | (4) | 14,400 | 947,225 | ||||||||||||||
William S. Ashmore | 2016 | 600,000 | — | 254,335 | 5,720,869 | (4) | 37,200 | 6,612,404 | ||||||||||||||
President | 2015 | 600,000 | 600,000 | 326,610 | 1,500,000 | (4) | 20,100 | 3,046,710 | ||||||||||||||
| 2014 | 600,000 | 200,000 | 132,825 | — | (4) | 14,400 | 947,225 | |||||||||||||||
Todd R. Taylor | 2016 | 360,000 | — | 190,751 | 234,000 | (5) | 6,000 | 790,751 | ||||||||||||||
Chief Financial Officer | 2015 | 360,000 | — | 245,435 | 230,500 | (5) | 6,000 | 841,935 | ||||||||||||||
| 2014 | 360,000 | — | 100,050 | 234,000 | (5) | 6,000 | 700,050 | |||||||||||||||
Ron Morrison | 2016 | 390,000 | 190,751 | 195,000 | (7) | 6,000 | 781,751 | |||||||||||||||
Executive Vice President and General Counsel | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
(1)- The amounts disclosed reflect the full grant date fair values in accordance with FASB ASC Topic 718. For assumptions used in calculation of the option awards, see
"Note 19—“Note 17—Share Based Payments and Employee BenefitPlans"Plans” to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31,2016.2019.(3) Payments to Mr. Kuelbs and Mr. Vahdat are in accordance with their employment arrangements.
(4) Mr. Furey’s term as Chief Operating Officer and President of Direct Lending ended on August 16, 2019. He received a severance payment of $250,000 in connection with termination of his employment. See
"Option Grants During 2016"“Employment Agreements” below for afurtherdescription ofthe terms of the options. (2)Amounts set forth in this column are based on the terms of the incentive bonuses set forth in the employment agreements as described below under "Employment Agreements."(3)In 2015, the Board of Directors granted Messrs. Tomkinson and Ashmore a one-time discretionary bonus related to the acquisition of CashCall Mortgage. In 2014, the Board of Directors granted Mr. Tomkinson and Mr. Ashmore a one-time bonus for various actions taken over the past several years, including but not limited to the raising of operating funds, and the settlement of various lawsuits, as well as the negotiation and acquisition of CashCall Mortgage.(4)Mr. Tomkinson's and Mr. Ashmore's annual incentive bonus payments for 2014 and 2015 were based on 7.5% of the Company's adjusted net earnings, subject to certain limitations. For 2016, pursuant to the terms of their employment agreements, each officer elected to receive 5.0% of adjusted net earnings.(5)Mr. Taylor received a quarterly incentive bonus of up to 65% ofhisbase salary based upon the achievement of mutually agreed management objectives.(6)Consists of (i) an annual car allowance of $14,400severance arrangement. All other compensation for each ofTomkinson and Ashmore, and $6,000 for each of Taylor and Morrison, (ii) a fixed expense reimbursement of $22,800 with respect to Tomkinson and Ashmore, and (iii) a fringe benefit associated with an executive retention plan by which the Company pledges a portion of the collateral needed to finance premiums from a third party lender for life insurance policies in the amount of $6 million, $5 million and $4 million for trusts of which the family members of Mr. Ashmore, Mr. Morrison and Mr. Taylor, respectively, are the beneficiaries. As of December 31, 2016, the Company posted collateral of $700,000, $583,333 and $466,667 for each trust, respectively. The executive is responsible for taxes on the imputed value of the life insurance benefit. The Company also provides a small amount of additional life insurance coverage tothe named executive officers includes matching contributions underits group term life insurance program, which is provided to all employees.(7)- the Company’s 401(k) plan.
In February 2020, in lieu of receiving an additional 2019 cash bonus payment and as an incentive for future services, Mr.
MorrisonMangiaracina was also granted a discretionary grant of Restricted Stock Units (RSUs) representing 140,397 shares of common stock In addition, Mr. Vahdat received aquarterly incentive bonusdiscretionary grant ofup to 50%RSUs representing 9,360 shares ofhis base salary based upon the achievement of mutually agreed management objectives.
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2019GRANTS OF PLAN-BASED AWARDS
The following table provides information with respect to grants of plan-basedequity awards made during 2016 toheld by the Named Executive Officers.
| | | Estimated Possible Payouts Under Non-Equity Incentive Plan Award | All Other Option Awards: Number of Securities Underlying Option (#)(4) | | | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards($)(5) | |||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||
Joseph R. Tomkinson | 7/19/2016 | — | — | — | 34,200 | 17.40 | 254,335 | |||||||||||||||
| — | 5,720,869 | (1) | — | — | — | — | ||||||||||||||||
William S. Ashmore | 7/19/2016 | — | — | — | 32,000 | 17.40 | 254,335 | |||||||||||||||
| — | 5,720,869 | (1) | — | — | — | — | ||||||||||||||||
Todd R. Taylor | 7/19/2016 | 25,700 | 17.40 | 190,751 | ||||||||||||||||||
| — | 234,000 | (2) | 234,000 | (2) | — | — | — | |||||||||||||||
Ron Morrison | 7/19/2016 | — | — | — | 24,000 | 17.40 | 190,751 | |||||||||||||||
| — | 195,000 | 195,000 | (3) | — | — | — | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |
(1)Mr. Tomkinson's and Mr. Ashmore's annual incentive bonus payments for 2016 were based on 5.0% of the Company's adjusted net earnings for that year. There are no threshold or maximum levels for these awards.(2)Mr. Taylor is eligible to receive a quarterly incentive bonus of up to 65% of his base salary based upon the achievement of mutually agreed management objectives.(3)Mr. Morrison is eligible to receive a quarterly incentive bonus of up to 50% of his base salary based upon the achievement of mutually agreed management objectives.(4)Option awards vest in three equal annual installments beginning on the first anniversary of the date of grant.(5)The amounts in this column represent the aggregate grant date fair value of option awards granted during 2016 computed in accordance with ASC 718. The assumptions for these amounts are included in Note 17—Share Based Payments and Employee Benefit Plans, to our audited financial statements included in our Annual Report on Form 10-K for 2016.
Outstanding Equity Awards at December 31, 2016
The following table sets forth the outstanding stock options for each of our Named Executive Officers as of December 31, 2016.2019.
|
| OPTION AWARDS |
| STOCK AWARDS |
| ||||||||
Name |
| Number of |
| Number of |
| Option |
| Option |
| Equity units or |
| Equity units or |
|
George A. Mangiaracina |
| 35,000 |
| — |
| 10.00 |
| 2/25/2025 |
| 50,000 |
| 263,000 |
|
|
| 25,000 |
| — |
| 20.50 |
| 7/21/2025 |
|
|
|
|
|
|
| 25,000 |
| — |
| 17.40 |
| 7/19/2026 |
|
|
|
|
|
|
| 16,000 |
| 8,000 |
| 13.72 |
| 8/30/2027 |
|
|
|
|
|
|
| — |
| 200,000 |
| 3.75 |
| 2/26/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian Kuelbs |
| 10,000 |
| 20,000 |
| 8.85 |
| 5/30/2028 |
| 35,069 |
| 184,463 |
|
|
| — |
| 50,000 |
| 3.75 |
| 2/26/2029 |
| 25,000 |
| 131,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nima J. Vahdat |
| 6,667 |
| 13,333 |
| 9.85 |
| 7/17/2028 |
|
|
|
|
|
|
| — |
| 20,000 |
| 3.59 |
| 2/1/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rian Furey |
| — |
| — |
| — |
| — |
|
|
|
|
|
OUTSTANDING OPTION AWARDS AT DECEMBER 31, 2016
| | OPTION AWARDS | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | |||||||||
Joseph R. Tomkinson | 11,321 | — | 0.53 | 06/09/2019 | |||||||||
| 48,000 | — | 2.73 | 12/3/2020 | ||||||||||
| 29,250 | — | 13.81 | 11/27/2022 | ||||||||||
| 25,000 | — | 10.65 | 7/23/2023 | ||||||||||
| 25,667 | 12,833 | 5.39 | 72/2/2024 | ||||||||||
| 11,400 | 22,800 | 20.50 | 7/21/2025 | ||||||||||
| — | 32,000 | 17.40 | 7/19/2026 | ||||||||||
William S. Ashmore | 16,000 | — | 2.73 | 12/3/2020 | |||||||||
| 29,250 | — | 13.81 | 11/27/2022 | ||||||||||
| 25,000 | — | 10.65 | 7/23/2023 | ||||||||||
| 25,667 | 12,833 | 5.39 | 7/22/2024 | ||||||||||
| 11,400 | 22,800 | 20.50 | 7/21/2025 | ||||||||||
| — | 32,000 | 17.40 | 7/19/2026 | ||||||||||
Todd R. Taylor | 10,000 | — | 0.53 | 6/9/2019 | |||||||||
| 24,000 | — | 13.81 | 11/27/2022 | ||||||||||
| 22,000 | — | 10.65 | 7/23/2023 | ||||||||||
| 19,334 | 9,666 | 5.39 | 7/22/2024 | ||||||||||
| 8,567 | 17,133 | 20.50 | 7/21/2025 | ||||||||||
| — | 24,000 | 17.40 | 7/19/2026 | ||||||||||
Ron Morrison | 10,000 | — | 0.53 | 6/9/2019 | |||||||||
| 24,000 | — | 13.81 | 11/27/2022 | ||||||||||
| 20,000 | — | 10.65 | 7/23/2023 | ||||||||||
| 19,334 | 9,666 | 5.39 | 7/22/2024 | ||||||||||
| 8,567 | 17,133 | 20.50 | 7/21/2025 | ||||||||||
| — | 24,000 | 17.40 | 7/19/2026 | ||||||||||
| | | | | | | | | | | | | | |
Option Exercises(1) The options reported above that are not yet exercisable and Stock Vestedrestricted stock unit awards that have not yet vested are scheduled to become exercisable and vest as set forth below:
None of the named executive officers exercised
The unexercisable option awards granted to Mr. Mangiaracina for 8,000 and 200,000 nonqualified stock options during 2016vest one-third per year for three years beginning on August 30, 2018 and none hold anyFebruary 26, 2020, respectively. The unexercisable option awards granted to Mr. Kuelbs for 20,000 and 50,000 nonqualified stock options vest one-third per year for three years beginning May 30, 2019 and February 26, 2020, respectively. The unexercisable option awards granted to Mr. Vahdat for
13,333 and 20,000 nonqualified stock options vest one-third per year for three years beginning on July 17, 2019 and February 1, 2020, respectively. The unvested stock award granted to Mr. Mangiaracina for 50,000 restricted stock subjectunits vests one-third per year for three years beginning on February 26, 2020. The unvested stock awards granted to vesting.Mr. Kuelbs for an aggregate of 60,069 restricted stock units vest as follows: (i) 25,000 restricted stock units vest one-third per year for three years beginning on February 26, 2020; and (ii) 35,069 restricted stock units vest one-third per year for three years beginning on May 21, 2020.
Employment Agreements
Joseph R. Tomkinson, CEO, and William S. Ashmore, President
Joseph R. Tomkinson,George A. Mangiaracina, Chief Executive Officer
On March 14, 2018, Mr. Mangiaracina and William S. Ashmore, President, each have employment agreements with the Company that were originallyexecuted an employment agreement, which has a term effective as of January 1, 2013, amended in 2015,2018 and continue throughending on December 31, 2017, unless terminated earlier.2019. The Company and Mr. Mangiaracina continue to operate under the terms of such employment agreements may be extended by mutual written agreementagreement. The following summarizes the terms of the officer and the Company.Mr. Mangiaracina’s employment agreement.
Base Salary, Annual Bonus and Other Compensation. The Pursuant to the agreement, Mr. Mangiaracina is entitled to receive a base annual salary of $750,000 and bonuses of $375,000 each payable on April 1, 2019 and October 1, 2019 and $750,000 on December 1, 2019 (the “executive bonus”). In February 2020, in lieu of receiving a 2019 cash bonus payment and as an incentive for eachfuture services, Mr. Mangiaracina was granted a discretionary grant of Messrs. Tomkinson and AshmoreRestricted Stock Units (RSUs) representing 140,397 shares of common stock. Mr. Mangiaracina is $600,000 per year. Each officer also receives a fixed expense reimbursement of $1,900 per month and isbe eligible to receive an annual bonus in an amount equal to 7.5%determined in the sole discretion of the Company's
adjusted net earningsCompany’s Board of Directors (the "Annual Bonus"“annual bonus”). The Annual Bonus is subject to a cap in any calendar year in an amount equal to 2.5 times annual base salary; provided that therebonus for 2020 will be no capbased on the Annual Bonus iffollowing criteria: implementation of the officer pre-electsCompany’s business plan, assisting the Chief Financial Officer in addressing key enterprise risk areas and internal controls, and improving the overall performance and direction of the Company as measured by GAAP, including operating income, capital raise activities, merchant bank activities, and mergers and acquisitions. The Company intends to agree on or beforethe criteria for 2021 by the end of 2020. To receive an annual bonus, Mr. Mangiaracina must be actively employed by the Company on December 31 of the applicable year. If the Board approves an annual bonus, then the first $250,000 will be paid in cash, and any amount in excess of $250,000 will be paid half in cash and half in shares of restricted common stock of the Company at a price per share based on the average closing price of the common stock on the 20 trading days prior to filing the Company’s annual report on Form 10-K. Any bonus stock will vest annually in equal installments over a three year period.
Severance Compensation. If (A) Mr. Mangiaracina is terminated by the Company without cause or (B) any of the following actions are taken: (i) there is a substantial diminution of his duties, authority, pay or responsibilities without performance or market justification, (ii) someone else is appointed as CEO of the Company upon Mr. Tomkinson’s departure, or (iii) in the event of a sale of all or substantially all of the Company’s or change of control, and Mr. Mangiaracina has provided the Company 30 days’ written notice of such giving the Company the opportunity to cure such circumstances in all material respects, then he will receive, 5.0% of adjusted net earnings duringafter signing a year. The officers may elect to defer any portiongeneral release, the following:
(i) the pro-rata remainder of his base salary bonuses or incentive compensation into an approved Company-sponsored deferred compensation plan.
An amount equalfrom the date of termination to 80%the end of the estimated Annual Bonus will be paid within 10 days after the Company has determined its adjusted net earnings for the year for which the annual bonus is to be paidcontract term, if any;
(ii) any unpaid executive bonus;
(iii) a severance payment of $750,000;
(iv) any unpaid amounts of accrued salary, vacation time and the remaining amount will be finally calculated and paid within 10 days after the release of the Company's audited financial statements for the year. The Annual Bonus is required to be paid by the Company by December 31 of the calendar year immediately following the year for which adjusted net earnings is determined for purposes of the Annual Bonus. If it is determined that any bonus or incentive compensation is underpaid or overpaid to the officer, then the Company will either pay the amount owed within 15 days after the determination is made by the Compensation Committee of the Board of Directors or offset an overpayment against the officer's next bonus or incentive compensation payments or require the officer to repay such amounts, as applicable.
For purposes of the Annual Bonus, "adjusted net earnings" means the net earnings (loss) attributable to common stockholders excluding (1) any adjustment relating to change in fair value of net trust assets, change in fair value of long-term debt (including preferred stock), noncash level yield long-term debt recognition or valuing of deferred tax assets, earnout accretion associated with the acquisition of CashCall mortgage, and change in estimated fair value of the contingent consideration liability associated with the acquisition of CashCall mortgage, (ii) any accrual already made with respect to the officer's bonus compensation, (iii) any charge relating to amortization of deferred charges, and (iv) any adjustment relating to lower of cost or market and repurchase liability of the discontinued operations.
Messrs. Tomkinson and Ashmore are also eligible to receive paid vacation, a car allowance of $1,200 per month, participate in the Company's health and other benefit plans, be reimbursed for reasonable and necessary business and entertainment expenses, and receive other benefits at the discretion of the Board of Directors. Each officer is prohibited, without approval from the Board of Directors, from receiving compensation, directly or indirectly, from any company with whom the Company or any of its affiliates has any financial, business, or affiliated relationship. Any amounts paid to the officer are subject to any claw back policy that the Company is required to adopt pursuant to listing standards of any national securities exchange or as otherwise required under applicable law.
Severance Compensation. If either Mr. Tomkinson's or Mr. Ashmore's employment is terminated (a) by the Company for cause, (b) voluntarily by such officer, (c) as a result of such officer's death, (d) by mutual agreement of the parties, or (e) because such officer is declared legally incompetent or he has a mental or physical condition that can reasonably be expected to prevent him from carrying out his essential duties for more than six months, then such officer will be entitled to receive the following:
(i)base salary earnedthrough thetermination date;(ii)Annual Bonus prorated through the termination date; with 80%date ofthe amount due relating to the Annual Bonus paid upon termination and the balance paid after the preparation of the Company's audited financial statements;(iii)any expense reimbursements due and owing for reasonable and necessary business and entertainment expenses; and(iv)the dollar value of accrued and unused paid time off.
If either officer is terminated (a) without cause or (b) resigns with good reason, such officer will also receive the following severance payments:
(i)the lesser of 18 months of base salary or the base salary payable through the balance of the employment contract term with (A) the lesser of 12 months of base salary or the balance through the employment contract term paid in a lump sum, and (B) the lesser of(v) six months ofbaseCOBRA family insurance coverage; and(vi) any unvested restricted stock will continue to vest over the remaining vesting schedule.
If the Company terminates Mr. Mangiaracina for cause by providing written notice and a 30-day period for Mr. Mangiaracina to cure such circumstances, then he will receive all accrued salary,
or the balance in excess of 12 monthsvacation time and benefits through the date of termination. Pursuant to the employmentcontract term paid overagreement, “cause” generally means thesix-month period from the termination date, in each case to be paid after the officer executes a waiver and release agreement within 52 daysexistence of any of thetermination date;(ii)incentive compensation whereby 80% of the Annual Bonus earnedfollowing, asof the termination date will be paid on the termination date and the remaining 20% will be paid after calculation of the Company's audited financial statements on or before December 31 of that year; and(iii)health insurance benefits for 18 months following the termination date.
Each officer has agreed that if he is terminated without cause or resigns for good reason, he will not compete with the Company during the 18 months after termination, provided that the agreement not to compete will be waived if the officer foregoes the severance compensation.
Termination with cause, which will be determined only by an affirmative majority vote of the Board of Directors (not including the officer if he is a director), includesDirectors: (a) conviction of, or entry of plea of nolo contendere to, a crime of dishonesty or a felony leading to incarceration of more than 90 days or a penalty or fine of $100,000 or more, (b) material and substantial failure by the officer to perform his duties after 30 days’ written notice (and given a reasonable time to correct any failures, if possible), (c) willful misconduct or gross negligence that causes material harm, or (d) material breach by the officeremployee of the terms of the employment agreementEmployment Agreement or any other obligation.
Good reason includes (a) assignment of duties materially inconsistent with, or material reduction or alteration to, employee's duties without his prior written consent, (b) relocation, without his prior written consent, of the place of principal performance of such officer's responsibilities and duties to a location more than 65 miles away, (c) a material breach by the Company of the terms of the employment agreement, including a material reduction of the officer's base salary, or (d) failure by the Company to obtain from any acquirer of the Company an agreement to assume the employment agreement prior to an acquisition. Each of Messrs. Tomkinson and Ashmore may terminate his employment for good reason upon providing the Company at least 90 days prior written notice within 90 days of event and the Company has not less than 30 days to cure.
Change of Control. The employment agreements will not be terminated by merger, an acquisition by another entity, or by transferring of all or substantially all of the Company's assets. In the event of any such change of control, the surviving entity or transferee would be bound by the employment agreements.
Todd R. Taylor, CFO, and Ron Morrison, EVP & GC
The employment agreements for Mr. Taylor and Mr. Morrison were originally entered into on February 25, 2014 and March 11, 2014, respectively. The employment agreements were each effective as of January 1, 2014, and pursuant to amendments, currently expire on December 31, 2017, unless terminated earlier, and may be extended by mutual written consent.
Base Salary, Annual Bonus and Other Compensation. Under the terms of the employments agreements, the base salary for Mr. Taylor and Mr. Morrison is $360,000 and $390,000 per year, respectively. Each are eligible to receive a bonus of up to 65%, in the case of Mr. Taylor, and up to 50%, in the case of Mr. Morrison, of their respective base salary if mutually agreed upon management objectives are achieved (the "Incentive Bonus"). The Incentive Bonus is paid quarterly within 30 days of each calendar year quarter end. Each officer (a) may elect to defer any portion of his base salary, bonuses, or incentive compensation into an approved Company-sponsored deferred compensation plan, (b) is eligible to receive stock options, paid vacation, an automobile allowance of $500 per month, and to be reimbursed for reasonable and necessary business and entertainment expenses, (c) may participate in the Company's health and other benefit plans, and (d) may receive other benefits at the discretion of the Board of Directors.
Each officer is prohibited, without approval from the Board, from receiving compensation, directly or indirectly, from any company with whom the Company or any of its affiliates has any financial, business, or affiliated relationship. Any amounts paid under the employment agreements are subject to any claw back policy that the Company is required to adopt pursuant to listing standards of any national securities exchange or as otherwise required under applicable law.
Severance Compensation. If either officer's employment is terminated (a) by the Company for cause, (b) voluntarily by the officer, (c) as a result of death, (d) by mutual agreement of the parties,obligation, or (e) because the officeremployee is declared legally incompetent or he has a mental or physical condition that can reasonably be expected to prevent him from carrying out his essential duties for more than six months,90 days.
Upon the death or disability of Mr. Mangiaracina, he or his estate will receive all accrued salary, vacation time and benefits through the date of termination, a pro rata portion of any unpaid executive bonus, and any unpaid annual bonus if declared and not yet paid. If Mr. Mangiaracina voluntarily resigns, he will receive all accrued salary and vacation time through the date of his departure.
Brian Kuelbs, Executive Vice President and Chief Financial Officer
On May 14, 2018, Mr. Kuelbs entered into an employment agreement with the Company with a term effective May 14, 2018 until May 14, 2020 and no automatic extension. The following summarizes the terms of Mr. Kuelbs’ employment agreement.
Base Salary, Bonus and Other Compensation. Pursuant to the agreement, Mr. Kuelbs will receive a base annual salary of $450,000 and an annual stay bonus of $250,000 payable on May 14, 2019 and May 14, 2020, if employed by the Company on each such date (the “Stay Bonus”). The Stay Bonus will be payable $125,000 in cash and $125,000 in shares of restricted common stock that will vest annually in three equal portions. Mr. Kuelbs will also be eligible to receive an annual bonus in the sole discretion of the Company’s Board of Directors (the “Discretionary Bonus”). If the Board approves a Discretionary Bonus, then such officerthe first $250,000 will be paid in cash, and any amount in excess of $250,000 will be paid half in cash and half in restricted shares of common stock of the Company that will vest annually in three equal installments and at a price per share based on the average closing price of the common stock on the 20 trading days prior to the date of the bonus. Upon a change of control, termination without cause or if employment is not extended by either party through the vesting date, then any unvested restricted shares granted pursuant to the Stay Bonus or Discretionary Bonus will immediately vest.
Mr. Kuelbs is eligible to participate in the Company’s stock option program. Mr. Kuelbs was granted 30,000 options at the first meeting of the Board of Directors after the date he began his employment. Additionally, Mr. Kuelbs received a matching grant of 20,000 options when the Board granted options to Mr. Mangiaracina in 2018. Mr. Kuelbs is entitled to receive all other benefits of employment generally available to the following:
(i) base salary earned through the termination date;
(ii) Incentive Bonus through the last consolidated quarter;
(iii) any expense reimbursements dueCompany’s other employees when and owingas he becomes eligible for them, including, medical, dental, life, 401K matches and disability insurance benefits. He will also be reimbursed for reasonable and necessary business expenses and entertainment expenses; andbe entitled to five weeks of paid vacation annually.
(iv)
Severance Compensation. Upon termination of Mr. Kuelbs for any reason, including death or disability, he will receive accrued salary, vacation time and benefits under the dollar valueCompany’s benefit plans through the date of accruedtermination (the “Accrued Benefits”). If the Company terminates Mr. Kuelbs for cause by providing written notice and unused paid time off.
If either officer is terminated (a) without cause or (b) resigns with good reason, in additiona 30-day period for Mr. Kuelbs to cure such circumstances, if curable, then he will receive the Accrued Benefits through the date of termination. Pursuant to the foregoing compensation, such officer will also receiveagreement, “cause” generally means the existence of any of the following, severance payments:
(i)additional payments of (A) the lesser of 12 months of base salary or the balance through the contract term, and (B) six months of base salary paid over the six-month period from the termination date, in each case to be paid after the officer executes a waiver and release agreement within 52 days of the termination date;(ii)100% of the unpaid portion of earned Incentive Bonus and the prorated Incentive Bonus for the current calendar year quarterasof and paid on the termination date; and(iii)health insurance benefits for 12 months following the termination date.
Each officer has agreed that if he is terminated without cause or resigns for good reason, he will not compete with the Company during the 12 months after termination or the balance of the employment contract term, if shorter, provided that the agreement not to compete will be waived if the officer foregoes the severance compensation.
Termination with cause, which will be determined only by an affirmative majority vote of the Board (not including the officer if he is a director), includesof Directors: (a) conviction of, or entry of plea of nolo contendere to, a crime of dishonesty or a felony leading to incarceration of more than 90 days or a penalty or fine of $100,000 or more, (b) material and substantial failure by such officer to perform his duties after 30 days’ written notice (and given a reasonable time to correct any failures, if possible), (c) willful misconduct or gross
negligence that causes material harm, or (d) material breach by the officer of the terms of the employment agreement or any other obligation.
Good reason includes assignment of duties materially inconsistent with,obligation, or material reduction or alteration(e) to employee's duties without his prior written consent, (b) relocation, without his prior written consent, of the place of principal performance of his responsibilities and dutiesextent curable, failing to a location more than 65 miles away, (c)cure in 30 days a material breach by the Companyofficer of any of the material terms of the employment agreement including a material reduction in base salary, without such officer's consent, or (d) failure byany other agreement between the Company to obtain from any acquirer of the Company an agreement to assume the employment agreement prior to an acquisition. Each officer may terminate his employment for good reason upon providing the Company at least 90 days prior written notice and the Company hasbut the Company may not terminate if the breach is cured within a reasonable time to cure any event constitutingtime.
If Mr. Kuelbs resigns from his position without good reason.
Change of Control. The employment agreementsreason, he will not be terminated by merger, an acquisition by another entity, or by transferring of all or substantially all ofreceive the Company's assets. In the event of any such change of control, the surviving entity or transferee would be bound by the employment agreements.
Potential Payments Upon Termination or Change-in-Control
Based onAccrued Benefits through the termination provisionsdate. If the Company chooses to accelerate his resignation upon receipt of their applicable employment agreements, as described above, if each named executive officer was terminated without cause or resigned for good reason ashis 30 day written notice, Mr. Kuelbs will be entitled to receive payment in lieu of December 31, 2016,notice in the amount of cash he would have received had his termination not been accelerated. “Good reason” means the existence of any of the following aggregate payments:
| Name | Cash Severance ($)(1) | Health Benefits ($)(2) | Total ($) | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
Joseph R. Tomkinson | 6,320,869 | 15,000 | 6,335,869 | |||||||
William S. Ashmore | 6,320,869 | 15,000 | 6,335,869 | |||||||
Todd R. Taylor | 594,000 | 10,000 | 604,000 | |||||||
Ronald Morrison | 585,000 | 10,000 | 595,000 | |||||||
| | | | | | | | | | | |
(1)Withwith respect to the officer without prior written consent: (a) a reduction in title, scope of duties and responsibilities, or the level of management to which he reports, which constitutes a material negative change, (b) a reduction in level of annual salary, (c) a relocation of the principal assigned business location and place of employment by more than forty (40) miles, (d) a material breach of any material terms of the employment agreement by the Company or any other agreement between the officer and the Company, or (e) the failure of the Company to have a successor entity specifically assume the employment agreement. To claim good reason, the following events must occur: (i) the officer must provide written notice within 90 days of knowing or having reason to know of the existence or occurrence of the event, (i) the Company fails to cure within 60 days after notice, and (iii) the officer resigns within 60 days of the end of the cure period (for (e), within 90 days after providing notice).If the Company terminates employment without cause or Mr.
TomkinsonKuelbs resigns for good reason, then Mr. Kuelbs will receive (a) Accrued Benefits through the termination date and (b) contingent on Mr.Ashmore, cash severance consistsKuelbs releasing all claims against the Company and not revoking the release, the following benefits (the “Severance Benefits”):(1) base salary and COBRA benefits for an additional six (6) months,
(2) if the termination date is on or after November 14, 2018 but before May 14, 2019, the Stay Bonus that would have been paid on May 14, 2019, or, if the termination date is on or after November 14, 2019 but before May 14, 2020, the Stay Bonus that would have been paid on May 14, 2020, and
(3) all restricted stock awards will immediately vest.
If the Company decides not to renew the employment agreement, it will provide to Mr. Kuelbs base salary and COBRA benefits for an additional six (6) months, contingent on his cooperation in transitioning his duties to a new person.
Nima J. Vahdat, General Counsel, Secretary and Chief Compliance Officer
On June 28, 2018, Nima Vahdat entered into an employment offer letter with the Company. The offer letter provides that Mr. Vahdat is entitled to an annual salary of
(i) $600,000, which$300,000 in 2018 increasing to $360,000 in 2019. In addition, Mr. Vahdat was entitled to a bonus of $105,000 payable in 2019 for the 2018 year and is12 monthseligible for a discretionary bonus beginning in 2019 at a target of 60% of base salary,sincedetermined by individual progress toward predetermined metrics and the overall performance of the Company. Mr. Vahdat is also eligible to participate in all of the Company’s benefit plans available to other employees.Rian Furey, Former Chief Operating Officer and President, Direct Lending
On August 14, 2019, Rian Furey entered into a Separation and Release Agreement with the Company whereby the parties agreed that Mr. Furey’s last day of employment
contract expiresat the Company would be August 16, 2019. Prior to the end of this term, Rian Furey served as Chief Operating Officer and President of Direct Lending. Pursuant to the Separation and Release Agreement, the Company agreed to pay Mr. Furey a severance payment of an aggregate of $250,000 in two equal installments onDecember 31, 2017,September 11, 2019 and(ii) $5,720,869 representing incentive compensation earnedNovember 11, 2019. The Company also agreed to reimburse healthcare coverage under its group health plan for2016. WithMr. Furey and his dependents until September 30, 2019. Mr. Furey was not be eligible to receive a bonus with respect toMr. Taylor, cash severance consists of (i) $360,000, which is 12 months of base salary since the employment contract expires on December 31, 2017, and (ii) $234,000 representing incentive compensation earned for 2016. With respect to Mr. Morrison, cash severance consists of (i) $390,000, which is 12 months of base salary since the employment contract expires on December 31, 2017, and (ii) $195,000 representing incentive compensation earned for 2016.(2)The employment contracts for the named executive officers provide for continuation of health insurance benefits for a period of 12 or 18 months, as applicable. The Company maintains a self-insured health plan, and therefore there is no direct employer contribution amount. This assumes that premiums for the named executive officers are paid by the employee only. Benefits paid by the Company will be dependent on actual claims incurred due to the self-insured nature of the Company's plan. We have estimated the cost of post-termination health care to be $10,000 per named executive officer per year. This amount could vary depending on actual claims incurred.
In connection with any termination event, the Company will continue to pledge a portion of the collateral neededCompany’s 2019 fiscal year. All unvested stock options were forfeited and vested stock options were to finance premiums from a third party lender for life insurance policies inremain exercisable until the amountearlier of $6 million, $5 millionNovember 14, 2019 and $4 million for truststhe expiration date of which the family members of Mr. Ashmore, Mr. Morrison
and Mr. Taylor, respectively, are the beneficiaries.such stock option. As of December 31, 2016, the Company posted collateraldate of $700,000, $583,333 and $466,667separation, Mr. Furey held options exercisable for each trust, respectively.10,000 shares of common stock at an exercise price per share of $9.99.
None of the named executive officers receive payments upon a change-on-control.
Equity Compensation Plan Information
Our current stock plan is the Company'sCompany’s 2010 Omnibus Incentive Plan, (the "2010 Plan"),referred to herein as the “2010 Plan,” which was approved by our stockholders and became effective on July 20, 2010.2010 and expires in July 2020. The 2010 Plan is administered by the Compensation Committee of the Company'sCompany’s Board of Directors, with participation and approval of the Board of Directors. Awards under the 2010 Plan may include incentive stock options, nonqualified stock options, stock appreciation rights, restricted shares of common stock, restricted stock units, performance share or unit awards, other stock-based awards and cash-based incentive awards. See “Proposal No. 2—Approval of 2020 Equity Incentive Plan.”
As a result of the approval of the 2010 Plan by the Company's stockholders, the Company's 2001 Stock Plan was frozen and no further grants or awards are under such plan. Further, all outstanding awards under the 2001 Stock Option, Deferred Stock and Restricted Stock Plan and are deemed to be awards granted and outstanding under the 2010 Plan (the "Assumed Options"). To the extent any of the Assumed Options are forfeited or canceled, shares of common stock underlying those options will not be available for new awards under the 2010 Plan.
The following table summarizes our equity compensation plan information as of December 31, 2016 with respect to outstanding awards and shares remaining available for issuance under our Plan.
| Plan Category | Number of securities to be issued upon exercise of outstanding options (A)(1) | Weighted-average exercise price of outstanding options (B) ($) | Number of securities remaining available for future issuance (excluding securities in col A) (C) | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
2010 Omnibus Incentive Plan approved by stockholders | 1,391,327 | 13.37 | 39,380 | |||||||
Equity compensation plans not approved by stockholders | — | — | — | |||||||
Total | ||||||||||
| | | | | | | | | | | |
(1)As of December 31, 2016, there were also 85,750 deferred stock units outstanding at a weighted average grant value of $9.83 per unit under the 2010 Plan, which amount represents 171,500 shares charged against the number of shares available for the grant of awards under the 2010 Plan. Pursuant to the 2010 Plan, shares of common stock awarded as restricted shares, restricted units, performance awards or other stock-based awards are charged as two shares against the number of shares of common stock available for the grant of awards under the 2010 Plan.
401(k) Plan
We maintain the Impac Companies 401(k) Savings Plan for all full time employees with at least six months of service, which is designed to be tax deferred in accordance with the provisions of Section 401(k) of the Internal Revenue Code. The 401(k) Plan provides that each participant may contribute from 1% to 25% of his or her salary pursuant to certain restrictions or up to $18,000$18,500 annually for 2016.2019. We will contribute to the participant'sparticipant’s plan account at the end of each plan year 50% of the first 4% of salary contributed by a participant. Under the 401(k) Plan, employees may elect to enroll on the first day of any month, provided that they have been employed for at least six months. Subject to the rules for maintaining the tax status of the 401(k) Plan, an additional company contribution may be made at our discretion, as determined by the Board of Directors. The discretionary contributions made to the plan vest over a three year period. We recorded approximately $895 thousand$562,000 for matching contributions and no discretionary contributions during 2016.2019. There were no discretionary matching contributions recorded during the year ended December 31, 2019.
The following table provides information as of December 31, 2019 regarding securities issued under our equity compensation plans that were in effect during fiscal 2019
Plan Category |
| (a) |
| (b) |
| (c) |
| |
Equity compensation plans approved by security holders |
| 1,079,039 |
| $ | 7.57 |
| 1,230,953 |
|
Equity compensation plans not approved by security holders |
| — |
| — |
| — |
| |
Total |
| 1,079,039 |
| 7.57 |
| 1,230,953 |
| |
DELINQUENT SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
16(a) REPORTS
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires our directors, executive officers, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership of such securities with the SEC. Directors, executive officers and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on review of the copies of such reports furnished to us during the fiscal year ended December 31, 2016,2019, all Section 16(a) filing requirements applicable to our executive officers, directors and greater than 10% stockholders were satisfied by such persons except for the following: Richard Pickup filed eight late Form 4 reports for 15 transactions and Todd M. Pickup filed one late Form 4 for one transaction.persons.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as disclosed herein, no
No director, executive officer, shareholder holding at least 5% of shares of our common stock, or any immediate family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since the beginning of our last fiscal year, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 since the beginningor 1% of the last fiscal year.
During 2016, Allison Ashmore (Account Executive) and Meagan Ashmore (AVP Client Management), daughters of William Ashmore, the Company's President and Director, earned $253,841 and $147,912, respectively in salary, bonus and auto allowance, and Ben Tomkinson (Account Executive) and Sedamar Fitzgerald (Relationship Manager), son and sister-in-law of Joseph Tomkinson, the Company's Chairmanaverage of the Board and Chief Executive Officer, earned $130,542 and $120,066, respectively, in salary and bonus. In addition, all participated inCompany’s total assets at year-end for the employee health care benefit plans available to all employees of the Company.last two completed fiscal years.
The Company provides a fringe benefit associated with an executive retention plan by which the Company pledges a portion of the collateral needed to finance premiums from a third party lender for life insurance policies in the amount of $6 million, $5 million and $4 million for trusts of which the family members of Mr. Ashmore, Mr. Morrison and Mr. Taylor, respectively, are the beneficiaries. As of December 31, 2016, the Company posted collateral of $700,000, $583,333 and $466,667 for each trust, respectively.
Conversion of 2018 Notes
On February 10, 2016, the Company converted the Convertible Promissory Notes Due 2018 with an aggregate principal amount of $20 million (the "2018 Notes") in accordance with their terms. Pursuant to the conversion the 2018 Notes, entities related to Richard H. Pickup and Todd M. Pickup, stockholders of the Company, received 524,138 shares and 898,851 shares, respectively. Furthermore, on January 25, 2016, the Company and the note holders, including the entities related to Messrs. Pickup and Pickup, entered into a Consent and Waiver Agreement whereby the holders waived the immediate payment at the time of conversion of the accrued and unpaid interest on such notes through April 30, 2016 and consented to the delay of the payment of such interest until April 30, 2016.
Registered Direct Public Offering
On April 18, 2017, in connection with the Company's registered direct public offering, Richard H. Pickup, Todd M. Pickup and Talkot Capital LLC and their respective affiliates purchased 1,579,779 shares, 394,945 shares, and 1,974,724 shares of common stock, respectively, at a purchase price of $12.66 per share.
Policies and Procedures
Pursuant to our Code of Business Conduct and Ethics, directors and officers must notify the General Counsel or the Chairman of our Audit Committee of the existence of any actual or potential conflict of interest. The Audit Committee, as described in its charter, reviews reports and disclosures of insider and affiliated party transactions or other conflicts of interest.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to us with respect to beneficial ownership of our common stock as of May 30, 2017April 20, 2020 by (i) each director, (ii) each named executive officer,Named Executive Officer, (iii) each person known to us to beneficially own more than five percent of our common stock, and (iv) all directors and current executive officers as a group.
As of May 30, 2017,April 20, 2020, there were 20,882,54421,264,926 shares of common stock outstanding. In computing the number of shares beneficially owned by a person and the percentage of ownership of that person, shares of common stock subject to optionssecurities held by that person that are currently exercisable or become exercisable, or convertible or become convertible, within 60 days of May 30, 2017April 20, 2020 are deemed outstanding even if they have not actually been exercised.exercised or converted. Those shares, however, are not deemed outstanding for the purpose of computing the ownership percentage of any other person. Unless otherwise indicated in the footnotes to the table, the beneficial owners named have, to our knowledge, sole voting and investment power with respect to the shares beneficially owned, subject to community property laws where applicable.
Name of Beneficial Owner(1) |
| Number of Shares |
| Percentage of Shares |
|
|
|
|
|
|
|
5% Shareholders (Other than Directors) |
|
|
|
|
|
Todd M. Pickup (2) |
| 2,938,913 |
| 13.8 | % |
Talkot Capital, LLC (3) |
| 2,777,031 |
| 13.1 | % |
|
|
|
|
|
|
Named Executive Officers and Directors |
|
|
|
|
|
George A. Mangiaracina (4) |
| 184,334 |
| * |
|
Rian Furey |
| — |
| * |
|
Brian Kuelbs (4) |
| 70,070 |
| * |
|
Thomas B. Akin (3)(4) |
| 2,793,698 |
| 13.1 | % |
Katherine J. Blair |
| — |
| * |
|
Frank P. Filipps (4) |
| 65,144 |
| * |
|
Stewart B. Koenigsberg (4) |
| 5,000 |
| * |
|
Richard H. Pickup (5) |
| 5,775,000 |
| 27.1 | % |
Nima J. Vahdat (4) |
| 13,334 |
| * |
|
Directors and current executive officers as a group (8 persons) (3)(4)(5) |
| 8,896,580 |
| 41.4 | % |
| Name of Beneficial Owner(1) | Number of Shares Beneficially Owned | Percentage of Shares Beneficially Owned | |||||
|---|---|---|---|---|---|---|---|
Richard H. Pickup (2) | 5,179,779 | 24.1 | % | ||||
Todd M. Pickup (3) | 2,949,913 | 13.8 | % | ||||
Talkot Capital, LLC (4) | 2,777,031 | 13.3 | % | ||||
Joseph R Tomkinson (5) | 408,792 | 1.9 | % | ||||
William S Ashmore (6) | 236,679 | 1.1 | % | ||||
Ron Morrison (7) | 123,025 | * | |||||
Todd R. Taylor (8) | 110,491 | * | |||||
James Walsh (9) | 35,294 | * | |||||
Leigh J Abrams (10) | 65,709 | * | |||||
Stephan R Peers (11) | 54,942 | * | |||||
Frank P Filipps (12) | 46,809 | * | |||||
Thomas B. Akin (4) | 2,777,031 | 13.3 | % | ||||
Directors and executive officers as a group (9 persons) (13) | 3,858,772 | 17.9 | % | ||||
| | | | | | | | |
*
- Indicates less than 1%
- .
(1)
- Except as otherwise noted, all named beneficial owners can be contacted at 19500 Jamboree Road, Irvine, California 92612.
(2)
According to a Schedule 13D/A filed with the SEC on April 21, 2017, (i) 2,354,146 shares are owned directly by RHP Trust, dated May 31, 2011 (the "Trust"), 100,000 shares are owned by Mr. Pickup and held in an individual retirement account, and the Trust has the right to acquire 639,535 shares at any time by converting into such shares the outstanding principal balance of Convertible Promissory Notes Due 2020 issued to the Trust, at the initial conversion price of $21.50 per share, and (ii) 1,191,153 shares are owned directly by Dito Caree LP, and 894,945 shares are owned directly by Dito Devcar LP, each of which Gamebusters, Inc. is the sole general partner with Mr. Pickup is its sole officer and director. Mr. Pickup has sole investment and voting power. The stockholder's and the Trust's address is 2532 Dupont Drive, Irvine, California 92612.(3)- According to a Schedule 13G/A filed on February
9, 201613, 2019 and subsequent filings pursuant to Section 16 of the Exchange Act, the share amount consists of (A) (i) 100,000 shares owned directly by Mr. Pickup; (ii)294,446300,000 shares owned by PickupGrandchildren'sGrandchildren’s Trust; (iii) 100,000 shares owned directly by Pickup Living Trust; (iv) 1,793,796 shares owned directly by Vintage Trust II, dated July 19, 2007, (the"Trust"“Vintage Trust”); and (v)456,117465,117 shares that the Vintage Trust has the right to acquire at any time by converting into such shares the outstanding principal balance of Convertible Promissory Notes Due 2020 issued to the Vintage Trust, at the initial conversion price of $21.50 per share,all of whichand Mr. Pickup exercises sole investment and voting power over all such shares, and (B) 100,000 shares owned directly by
Plus Four Equity Partners, L.P. and 50,00080,000 shares owned directly by Vintage Trust, dated October 28, 1993, over which Mr. Pickup shares investment and voting power. The stockholder'sstockholder’s address is 2532 Dupont Drive, Irvine, California 92612.
(4)(3)According to a Schedule
13G/A13D filed with the SEC onApril 20,July 31, 2017, consists of 1,598,394 shares held by Talkot Fund, L.P., over which it has sole voting and dispositive power, and 1,178,637 shares held by Thomas B. Akin, over which he has sole voting and dispositive power. Talkot Capital, LLC acts as an investment adviser to certain private pooled investment vehicles. Talkot Capital, by virtue of investment advisory agreements with these pooled investment vehicles, has investment and voting power over securities owned of record by these pooled investment vehicles. Despite their delegation of investment and voting power to Talkot Capital, under Rule 13d-3 of theSecuritiesExchange Act,of 1934,these pooled investment vehicles may be deemed the beneficial owner of the securities they own ofrecord because they have the right to acquire investment and voting power, and have dispositive power, through termination of the investment advisory agreements with Talkot Capital. Talkot Capital may be deemed the beneficial owner of the securities covered by this statement under Rule 13d-3 of the Exchange Act. None of the securities are owned of record by Talkot Capital, and Talkot Capital disclaims any beneficial interest in such securities. Thomas B. Akin is the Managing Member of the General Partner, Talkot Capital, LLC. The principal business address is 2400 Bridgeway, Suite 300, Sausalito, CA 94965.
(4) Includes the following: George Mangiaracina — 167,667 shares underlying options and 16,667 shares underlying vested RSUs; Brian Kuelbs — 26,667 shares underlying options, 35,069 shares underlying unvested RSAs and 8,334 shares underlying vested RSUs; Nima J. Vahdat — 13,334 shares underlying options; Thomas Akin — 16,667 shares underlying options; Frank Filipps — 33,500 shares underlying options and 27,834 shares underlying vested DSUs; Stewart Koenigsberg — 5,000 underlying vested DSUs.
(5)
RepresentsConsists of the following: (i)7,8542,605,465 shares owned directly by RHP Trust, dated May 31, 2011 (the “Trust”), and 639,535 shares underlying Convertible Promissory Notes Due 2020 issued to the Trust, at the initial conversion price ofcommon stock,$21.50 per share, (ii)215,400120,000 shares owned by Mr. Pickup and held intrustan individual retirement account, (iii) 1,400,000 shares are owned directly by Dito Caree LP, and (iv) 1,000,000 shares owned directly by Dito Devcar LP, each of which Gamebusters, Inc. is the sole general partner with Mr.Tomkinson as trusteePickup is its sole officer and(iii) options to purchase an aggregate of 185,538 shares.(6)Represents (i) 6,495director. Mr. Pickup has sole investment and voting power and (v) 10,000 sharesof commonunderlying stock(ii) 87,967 shares held in trust withoptions. The stockholder’s and the Trust’s address is 2532 Dupont Drive, Irvine, California 92612. Mr.Ashmore as trustee, and (iii) options to purchase an aggregate of 110,133 shares.(7)Represents (i) 14,892 shares of common stock, (ii) options to purchase an aggregate of 108,133 shares.(8)Represents (i) 358 shares of common stock and (ii) options to purchase an aggregate of 110,133 shares.(9)Represents (i) 5,377 shares of common stock and (ii) 29,917 shares with respect to vested deferred stock units.(10)Represents (i) 16,710 shares of common stock, (ii) options to purchase an aggregate of 35,499 shares, and (iii) 13,500 shares with respect to vested deferred stock units.(11)Represents (i) 13,943 shares of common stock, (i) options to purchase an aggregate of 21,499 shares, and (ii) 19,500 shares with respect to vested deferred stock units.(12)Represents (i) 3,810 shares of common stock, (ii) options to purchase an aggregate of 23,499 shares, and (iii) 19,500 shares with respect to vested deferred stock units.(13)Includes (i) options to purchase an aggregate of 626,518 shares and (ii) an aggregate of 82,417 shares with respect to vested deferred stock units.
Proposals to be Included in Proxy Statement
If a stockholder would like us to consider including a proposal in our proxy statement and form of proxy relating to our 20182021 annual meeting of stockholders pursuant Rule 14a-8 under the Exchange Act, a written copy of the proposal must be delivered no later than February 8, 2018January 2, 2021 (the date that is 120 calendar days before the one year anniversary of the date ofon which the proxy statement was released to stockholders for this year's annual meetingyear’s Annual Meeting of stockholders). If the date of next year'syear’s annual meeting is changed by more than 30 days from the anniversary date of this year's meeting,year’s Meeting, then the deadline is a reasonable time before we begin to print and mail proxy materials. Proposals must comply with the proxy rules relating to stockholder proposals, in particular Rule 14a-8 under Exchange Act, in order to be included in our proxy materials.
Proposals to be Submitted for Annual Meeting
Stockholders who wish to submit a proposal for consideration at our 2018 annual meeting2020 Annual Meeting of stockholders, but who do not wish to submit the proposal for inclusion in our proxy statement pursuant to Rule 14a-8 under the Exchange Act, must, in accordance with our bylaws, deliver a copy of their proposal no later than the close of business on the 60th day prior to the first anniversary of this annual meeting (May 26, 2018)Annual Meeting (April 24, 2021), nor earlier than the 90th day prior to the first anniversary of this annual meeting (April, 26, 2018)Annual Meeting (March 25, 2021). The proposal must comply with the notice procedures and information requirements set forth in our bylaws, and the stockholder making the proposal must be a stockholder of record at the time of giving the notice and is entitled to vote at the meeting. Any stockholder proposal that is not submitted pursuant to the procedures set forth in our bylaws will not be eligible for presentation or consideration at the next annual meeting.
In the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the first anniversary of the preceding year'syear’s annual meeting, then notice must be delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. Public announcement means disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable news service or in a document publicly filed by the company with the SEC pursuant to SectionSections 13, 14 or 15(d) of the Exchange Act.
Mailing Instructions
In each case, proposals should be delivered to 19500 Jamboree Road, Irvine, California 92612, Attention: Ronald M. Morrison,Nima J. Vahdat, General Counsel & Secretary. To avoid controversy and establish timely receipt by us, it is suggested that stockholders send their proposals by certified mail return receipt requested.
The Board of Directors does not know of any other matter to be acted upon at the Meeting. However, if any other matter shall properly come before the Meeting, the proxy holders named in the proxy accompanying this proxy statement will have authority to vote all proxies in accordance with their discretion.
By order of the Board of Directors | ||
| ||
|
Dated: June 2, 2017May ·, 2020
Irvine, California
Appendix A
IMPAC MORTGAGE HOLDINGS, INC.
2020 EQUITY INCENTIVE PLAN
(Effective April 8, 2020)
IMPAC MORTGAGE HOLDINGS, INC.
Appendix A
2020 EQUITY INCENTIVE PLAN
(Effective April 8, 2020)
IMPAC MORTGAGE HOLDINGS, INC.
OMNIBUS INCENTIVE PLAN
Effective July 20, 2010
(amended as of July 25, 2017)
hereby adopts the IMPAC MORTGAGE HOLDINGS, INC.OMNIBUS INCENTIVE PLAN
ARTICLE IPURPOSE AND ADOPTION OF THE PLAN
1.01 Purpose. The purpose 2020 Equity Incentive Plan (the “Plan”), by action of the Impac Mortgage Holdings, Inc. Omnibus Incentive Plan (as amended from time to time, the "Plan") is to assist in attractingCompany’s Board of Directors, on and retaining highly competent employees, directors and consultants, to acteffective as an incentive in motivating selected employees, directors and consultants of the Company and its Affiliates to achieve long-term corporate objectives and to enable stock-based and cash-based incentive awards to qualify as performance-based compensation for purposes of the tax deduction limitations under Section 162(m) of the Code.
1.02date set forth above (the “Plan Adoption and Term. The Plan shall be effective on July 20, 2010 upon and otherwiseDate”), subject to approval of the stockholdersPlan by the Company’s shareholders pursuant to Section 12.3 below. Unless otherwise defined, terms with initial capital letters are defined in Section 2 below.
SECTION 1
BACKGROUND AND PURPOSE
1.1 Background. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units and Stock-Based Awards.
1.2 Purpose of the Plan. The Plan is intended to attract, motivate and retain the following individuals: (a) employees of the Company (the "Effective Date"). The Plan shall remain in effect untilor its Affiliates; (b) consultants who provide significant services to the tenth anniversary of the Effective Date,Company or until terminated by action of the Board, whichever occurs sooner.
1.03 Assumption of Outstanding Awards under Prior Plans. As of the Effective Date, the Prior Plansits Affiliates and (c) directors of the Company shall be frozen and no new awards shall be made under such Prior Plans. Further, all awards outstanding under the Prior Plans asor any of its Affiliates who are not employees of the Effective Date shall be assumedCompany or any Affiliate. The Plan also is designed to encourage stock ownership by this Plansuch individuals, thereby aligning their interests with those of the Company’s shareholder.
SECTION 2
DEFINITIONS
The following words and thereafter deemed to be Awards granted and outstanding under this Plan;provided, that such assumed awards shall continue to be subject to the same terms and conditions as set forth in the applicable Award Agreement, except that references in such Award Agreements to the "Plan" shall be deemed to refer to this Plan and references to "Deferred Stock" shall be deemed to refer to Restricted Stock Units.
For the purpose of this Plan, capitalized termsphrases shall have the following meanings:meanings unless a different meaning is plainly required by the context:
2.01 Affiliate2.1 “1934 Act” means an entity in which, directly or indirectly through one or more intermediaries, the Company has at leastSecurities Exchange Act of 1934, as amended. Reference to a fifty percent (50%) ownership interest or, where permissible under Section 409Aspecific section of the Code, at least a twenty percent (20%) ownership interest;provided,however, for purposesAct shall include such section, any valid rules or regulations promulgated under such section, and any comparable provisions of any grant of an Incentive Stock Option, "Affiliate"future legislation, rules or regulations amending, supplementing or superseding any such section, rule or regulation.
2.2 “Administrator” means a corporation which, for purposes of Section 424the Compensation Committee of the Code, is a parent or subsidiaryBoard of Directors of the Company, directly or, indirectly.at the discretion of the Board, the Board as a whole, and/or such other person or persons as may be designated by the Board from time to time to administer the Plan or specific portions thereof; provided, however, that Awards to Nonemployee Directors may only be granted and administered by the Board as a whole, and Awards to Section 16 Persons may only be granted and administered by the Compensation Committee or another committee of Independent Directors.
2.02 Award2.3 “Affiliate” means any onecorporation or any other entity (including, but not limited to, Subsidiaries, partnerships and joint ventures) controlling, controlled by, or under common control with the Company.
2.4 “Applicable Law” means the legal requirements relating to the administration of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Stock-Based Awards and similar incentive plans under any applicable laws, including but not limited to federal and state employment, labor, privacy and securities laws, the Code, and applicable rules and regulations promulgated by the Nasdaq Stock Market, New York Stock Exchange, NYSE American or any other stock exchange or quotation system upon which the Shares may then be listed or quoted.
2.5 “Award” means, individually or collectively, a combinationgrant under the Plan of Non-QualifiedNonqualified Stock Options, or Incentive Stock Options, described in Article VI, Stock Appreciation Rights, described in Article VI, Restricted Shares orStock, Restricted Stock Units described in Article VII, Performance Awards described in Article VIII, other stock-based Awards described in Article IX, short-term cash incentive Awards described in Article X or any other award made underand Stock-Based Awards.
2.6 “Award Agreement” means the terms of the Plan.
2.03 Award Agreement means a written agreement between the Company and a Participant or a written acknowledgment from the Company to a Participant specifically setting forth the terms and conditions of anprovisions applicable to each Award granted under the Plan.Plan, including the Grant Date.
2.04 Award Period means, with respect to an Award, the period2.7 “Board” or “Board of time, if any, set forth in the Award Agreement during which specified target performance goals must be achieved or other conditions set forth in the Award Agreement must be satisfied.
2.05 Beneficiary means an individual, trust or estate who or which, by a written designation of the Participant filed with the Company, or if no such written designation is filed, by operation of law, succeeds to the rights and obligations of the Participant under the Plan and the Award Agreement upon the Participant's death.
2.06 BoardDirectors” means the Board of Directors of the Company.
2.07 2.8 “Change in Control” means and shall be deemed to have occurred upon the occurrence of any one of the following events, unless an Award Agreement specifically provides for a different definition of Change in Control:following:
(a)
2.8.1 Any "person"“person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company; any trustee or other fiduciary holding securities under an employee benefit plan of the Company; or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the Common Stock of the Company) is orAct) becomes the "beneficial owner"“beneficial owner” (as defined in Rule 13d-3 underof the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person or any securities acquired directly from the Company or its Affiliates) representing 30%fifty percent (50%) or more of the combinedtotal voting power represented by the Company’s then outstanding voting capital stock, other than a group of two or more persons not (A) acting in concert for the purpose of acquiring, holding or disposing of such stock or (B) otherwise required to file any form or report with any governmental agency or regulatory authority having jurisdiction over the Company which requires the reporting of any change in control;
2.8.2 The consummation of the Company'ssale or disposition by the Company of all or substantially all of the Company’s assets (whether by stock sale, merger, consolidation or otherwise);
2.8.3 The consummation of a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation for the sole purpose of changing the Company’s jurisdiction of incorporation or (ii) a consolidation or merger of the Company in which the holders of the voting capital stock of the Company immediately prior to the consolidation or merger (other than Persons who are parties to such consolidation or merger and their respective Affiliates) hold at least fifty percent (50%) of the voting power represented by the Company’s then outstanding securities;voting capital stock of the Company or the surviving entity (or its parent entity) immediately after the consolidation or merger; or
(b) during
2.8.4 During any period of twonot more than twelve (12) consecutive years (notmonths during which the Company continues in existence, not including any period prior to the Effective Date),effective date of this Plan, individuals who, at the beginning of such period, constitute the Board of Directors of the Company, and any new directorDirector (other than a directorDirector designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c)Section 2.8.2 or (d)2.8.3) whose appointment to the Board of this Section 2.07) whose election byDirectors of the BoardCompany or nomination for election byto the Company's stockholdersBoard of Directors of the Company was approved by a vote of at least two-thirds (2/3)a majority of the directors
Directors then still in office, who either were directorsDirectors at the beginning of thesuch period or whose electionappointment or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; or
(c) the consummation of a Merger of the Company with any other corporation, other than (i) a Merger which would result in the voting securitiesBoard of Directors of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securitiesCompany.
Notwithstanding the foregoing, if any “payment” (as defined for purposes of Section 409A of the surviving entity),Code) to be made hereunder as a result of the occurrence one or more of the foregoing events would be considered “nonqualified deferred compensation” for purposes of Section 409A of the Code, then, as to such payment, such event shall constitute a Change in combination withControl only if the event additionally constitutes a “change in ownership,” a “change in effective control” or a “change in the ownership of any trustee or other fiduciary holding securities under an employee benefit plana substantial portion of the Company, at least 75%assets” (as such terms are defined for purposes of Section 409A of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such Merger, or (ii) a Merger effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than 50% of the combined voting power of the Company's then outstanding securities;
(d) the consummation of any sale, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company to an unrelated party; or
(e) the stockholders of the Company approve a plan of complete liquidation or dissolutionCode) of the Company.
2.08 2.9 “Code” means the Internal Revenue Code of 1986, as amended. ReferencesReference to a specific section of the Code or regulation thereunder shall include thatsuch section or regulation, any valid regulation promulgated under such section, and any comparable section or sectionsprovision of any future legislation that amends, supplements or supersedes said section.regulation amending, supplementing or superseding such section or regulation.
2.09 Committee means the Compensation Committee of the Board.
2.10 Common Stock means the common stock of the “Company par value $0.01 per share.
2.11 Company” means Impac Mortgage Holdings, Inc., or any successor thereto.
2.11 “Consultant” means any consultant, independent contractor or other person who provides significant services to the Company or its Affiliates, or any employee or Affiliate of any of the foregoing, but who is neither an Employee nor a Maryland corporation,Director; and its successors.provided that the identity of such person, the nature of such services or the entity to which such services are provided would not preclude the Company from offering or selling securities to such person pursuant to registration on a Form S-8 Registration Statement under the Securities Act of 1933, as amended.
2.12 Date of Grant“Continuous Service” as an Employee, Consultant or Director means that a Participant’s employment or service relationship with the date designated by the Committee as the date as of which it grants an Award, whichCompany or any Affiliate is not interrupted or terminated. Continuous Service shall not be earlier thanconsidered interrupted in the date on whichfollowing cases: (i) any leave of absence approved by the Committee approvesCompany or (ii) transfers between locations of the grantingCompany or between the Company and any Subsidiary or successor. A leave of absence approved by the Company shall include sick leave, military leave or any other personal leave approved by an authorized representative of the Company. For purposes of Incentive Stock Options, no leave of absence may exceed ninety (90) days, unless reemployment upon expiration of such Award.leave is guaranteed by statute or contract. If such reemployment is approved by the Company but not guaranteed by statute or contract, then such employment will be considered terminated on the ninety-first (91st) day of such leave and on such date any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonqualified Stock Option. In the event a Participant’s status changes among the positions of Employee, Director and Consultant, the Participant’s Continuous Service as an Employee, Director or Consultant shall not be considered terminated solely as a result of any such changes in status.
2.13 “Director” means any individual who is a member of the Board of Directors of the Company or of an Affiliate of the Company.
2.14 “Disability” means a permanent and total disability within the meaning of Section 22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.
2.15 “Employee” means any individual who is a common-law employee of the Company or of an Affiliate.
2.16 “Exercise Price” means the price at which a Share may be purchased by a Participant pursuant to the exercise of an Option or the base value from which the appreciation in value of a Share is determined upon exercise of a Stock Appreciation Right.
2.17 “Fair Market Value” means, as of any date, provided Shares are listed on an established stock exchange or a national market system, including without limitation NYSE American, the Fair Market Value of a Share shall be the closing sales price for such stock as quoted on the exchange with the greatest volume of trading in Shares on the Grant Date of the Award. If no sales were reported on such Grant Date of the Award, the Fair Market Value of a Share shall be the closing price for the Company’s common stock as quoted on the exchange with the greatest volume of trading in Shares on the last market trading day with reported sales prior to the date of determination. In the case where the Company is not listed on an established stock exchange or national market system, Fair Market Value shall be determined by the Administrator in good faith in accordance with Code Section 409A and applicable Treasury regulations.
2.18 “Fiscal Year” means a fiscal year of the Company.
2.19 “Grant Date” means the date the Administrator approves the Award.
2.20 “Incentive Stock Option” means an option to purchase Shares that is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code.
2.21 “Independent Director” means a Nonemployee Director who is (i) a “nonemployee director” within the meaning of Section 16b-3 of the 1934 Act, and (ii) “independent” as determined under the Company's disability programapplicable rules of NYSE American, as any of these definitions may be modified or policy, or if no disability program or policy exists, thensupplemented from time to time.
2.22 “Misconduct” shall include commission of any physical or mental disability that renders a Participant unable perform services foract in competition with any activity of the Company in the capacity for which the Participant served immediately prior to such disability and such disability is reasonably expected to last for at least twelve (12) months.
2.14 Dividend Equivalent Account means a bookkeeping account in accordance with Section 11.17 and related to an Award that is credited with the amount of(or any cash dividendsAffiliate) or stock distributions that would be payable with respectany act contrary or harmful to the shares of Common Stock subject to such Awards had such shares been outstanding shares of Common Stock.
2.15 Exchange Act means the Securities Exchange Act of 1934, as amended.
2.16 Exercise Price with respect to Options, the amount established by the Committee in the Award Agreement in accordance with Section 6.01(b) which is required to purchase each share of Common Stock upon exerciseinterests of the Option, or with respect to a Stock Appreciation Right, the amount established by the Committee in the Award Agreement in accordance with Section 6.02(b) which is to be subtracted from the Fair Market Value on the date of exercise in order to determine the amount of the payment to be made to the Participant.
2.17 Fair Market Value of the Common Stock means: the closing sales price of the Common Stock on the applicable date, or if no sale of stock has been recorded on such day, then on the next preceding day on which a sale was so made. In the event the Common Stock is not admitted to trade on a securities exchange, the Fair Market Value as ofCompany (or any applicable date shall beAffiliate) as determined in good faith by the Committee (but inAdministrator and shall include, without limitation: (a) conviction of a felony or crime involving moral turpitude or dishonesty, (b) violation of Company (or any event not less than "fair market value" withinAffiliate) policies, with or acting against the meaning of Section 409Ainterests of the Code, andCompany (or any regulations and other guidance thereunder). ForAffiliate), including employing or recruiting any present, former or future employee of the Company (or any Affiliate), (c) misuse of any confidential, secret, privileged or non-public information relating to the Company’s (or any Affiliate’s) business, or (d) participating in a hostile takeover attempt of the Company or an Affiliate. The foregoing definition shall not be deemed to be inclusive of all acts or omissions that the Company (or any Affiliate) may consider as Misconduct for purposes of this definition, when determining the Fair Market Value for the grant of an Award, "applicable date" means the date of grant of the Award.Plan.
Incentive Stock OptionTable of Contents
2.23 “Nonemployee Director” means a stockDirector who is not an Employee.
2.24 “Nonqualified Stock Option” means an option withinto purchase Shares that is not designated as and/or does not meet the meaningrequirements of Section 422 of the Code.
2.19 Merger means any merger, reorganization, consolidation, exchange, transfer of assets or other transaction having similar effect involving the Company.
2.20 Non-Qualified Stock Option means a stock option which is notCode to be an Incentive Stock Option.
2.21 2.25 “NYSE American” means the NYSE American stock exchange, or any successor stock exchange on which Shares may be listed from time to time.
Non-Vested Share2.26 “Option” means an Incentive Stock Option or a Nonqualified Stock Option.
2.27 “Participant” means an Employee, Consultant or Nonemployee Director who has an outstanding Award.
2.28 “Performance Goals” means the goal(s) (or combined goal(s)) determined by the Administrator (in its discretion) to be applicable to a Participant with respect to an Award, which goals shall be specified in the agreement for such Award and upon which the vesting or settlement of such Award may be conditioned. As determined by the Administrator, the Performance Goals applicable to an Award may provide for a targeted level or levels of achievement, including without limitation goals tied to individual objectives and/or the Company’s (or a business unit’s) financial measures as determined by the Administrator. The foregoing definition shall not be deemed to be inclusive of all Performance Goals for purposes of this Plan. The Performance Goals may differ from Participant to Participant and from Award to Award.
2.29 “Period of Restriction” means the period during which Restricted Stock, RSUs or Stock-Based Awards are subject to restrictions that subject the Restricted Stock, RSUs or Stock-Based Awards to a substantial risk of forfeiture. Such restrictions may be based on the passage of time in which case the restrictions may lapse over the Period of Restriction, the achievement of Performance Goals, or the occurrence of other events as determined by the Administrator, in its discretion.
2.30 “Plan” means this Impac Mortgage Holdings, Inc. 2020 Equity Incentive Plan, as set forth in this plan document and as hereafter amended from time to time.
2.31 “Restricted Stock” means an Award granted to a Participant pursuant to Section 7. An Award of Restricted Stock constitutes a transfer of ownership of Shares to a Participant from the Company subject to restrictions against transferability, assignment, and hypothecation. Under the terms of the Award, the restrictions against transferability are removed when the Participant has met the specified vesting requirement. Vesting can be based on continued employment or service over a stated service period or the attainment of specified Performance Goals. If employment or service is terminated prior to vesting, the unvested restricted stock revert back to the Company.
2.32 “Restricted Stock Unit” or “RSU” means an Award granted to a Participant pursuant to Section 8. Restricted Stock Units constitute a right to receive Shares or their equivalent value in cash at a future time based on continued employment or service over a stated service period or the attainment of specified Performance Goals.
2.33 “Rule 16b-3” means the rule so designated promulgated under Section 16 of the 1934 Act, and any future rule or regulation amending, supplementing or superseding such rule.
2.34 “SEC” means the U.S. Securities Exchange Commission.
2.35 “Section 16 Person” means a person who, with respect to the Shares, is subject to Section 16 of the 1934 Act.
2.36 “Shares” means shares of Common common stock of the Company.
2.37 “Stock issuedAppreciation Right” or “SAR” means the right granted to a Participant pursuant to Section 6 to receive a payment in respecteither cash or Shares that is based upon the increase in Fair Market Value of a Share following the Grant Date.
2.38 “Stock-Based Award” means a right to or based upon Shares or their equivalent value granted to a Participant pursuant to Section 9.
2.39 “Subsidiary” means any corporation in an unbroken chain of corporations beginning with the Company if each of the non-vested portion of an Optioncorporations other than the last corporation in the eventunbroken chain then owns stock possessing fifty percent (50%) or more of the early exercisetotal combined voting power of all classes of stock in one of the other corporations in such Participant's Options pursuant to such Participant's Award Agreement, as permitted in Section 6.06 below.chain.
SECTION 3
ADMINISTRATION
2.22 Options means all Non-Qualified Stock Options and Incentive Stock Options granted at any3.1 The Administrator. The Administrator, if not the Compensation Committee of the Board, shall be appointed by the Board of Directors from time underto time.
3.2 Authority of the Plan.
2.23 Outstanding Common Stock means, at any time,Administrator. It shall be the issued and outstanding sharesduty of Common Stock.
2.24 Participant means a person designatedthe Administrator to receive an Award underadminister the Plan in accordance with Section 5.01.
2.25 Performance Awards means Awards grantedthe Plan’s provisions and in accordance with Article VIII.
2.26 Performance Goals means operating income, operating profit (earnings from continuing operations before interestApplicable Law. The Administrator shall have all powers and taxes), earnings per share, return on investmentdiscretion necessary or working capital, return on stockholders' equity, economic value added (the amount, if any, by which net operating profit after tax exceeds a reference cost of capital), Adjusted Net Earnings (as defined below), net earnings (loss) attributableappropriate to common stockholders, stock price any oneadminister the Plan and to control its operation, including, but not limited to, the following: (a) the determination of which mayEmployees, Consultants and Directors shall be measuredgranted Awards; (b) setting the terms and conditions of the Awards at initial grant and any subsequent revisions or changes to the terms and conditions of Awards, including, but not limited to, changes to, or removal of restrictions on, outstanding Awards relating to vesting, Period of Restriction or exercisability periods, (c) interpretation of the Plan, (d) adoption, amendment and revocation of rules, guidelines and policies relating to and consistent with respectthe Plan and for the administration, interpretation and application of the Plan, (e) adoption, amendment and revocation of sub-plans or supplements to the Plan, including, without limitation, as the Administrator deems necessary or desirable to comply with the laws of, or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions in which the Company or any oneSubsidiary operates or morewhose citizens or residents may be granted Awards; and (f) interpretation of its Affiliates, divisions, unitsany rules, guidelines and either in absolute terms or as compared to another company or companies, and quantifiable, objective measures of individual performance relevantpolicies relating to the particular individual's job responsibilitiesPlan and of any of sub-plans and supplements to the Plan.
"Adjusted Net Earnings" means net earnings (loss) attributable
3.3 Decisions Binding. All determinations and decisions made by the Administrator shall be final, conclusive and binding on all persons, and shall be given the maximum deference permitted by Applicable Law.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to common stockholdersadjustment, as reportedprovided in Section 4.3, the total number of Shares initially available for issuance under the Plan shall be two million (2,000,000) Shares, which also shall be the total number of Shares that may be issued under the Plan with respect to Incentive Stock Options.
For purposes of determining the number of Shares available for issuance under this Section 4.1, the impact of any Award shall be determined by multiplying the number of Shares underlying such Award by the applicable multiplier below:
Type of Award | Multiplier | |
Restricted Stock, RSUs, and full value Stock-Based Awards | 2.0 | |
Options, Stock Appreciation Rights and other than full value Awards | 1.0 |
Shares tendered or held back upon exercise of an Option to cover the exercise price or tax withholding shall not be available for future issuance under the Plan. Upon exercise of SARs, the gross number of Shares exercised shall be deducted from the total number of Shares remaining available for issuance under the Plan. Shares tendered or held back upon the vesting or settlement of any Restricted Stock, RSUs, and Stock-Based Awards to cover tax withholding shall not be added back to the Shares available for issuance under the Plan. Shares issued under the Plan may be authorized but unissued Shares or reacquired Shares bought on the market or otherwise.
On and after the Plan Adoption Date, no further grants will be made under the Impac Mortgage Holdings, Inc. Omnibus Incentive Plan (the “2010 Equity Plan”), but Shares may continue to be issued under the 2010 Equity Plan pursuant to grants made prior to the Plan Adoption Date, which issuances of Shares will not reduce the number of Shares available for issuance under this Section 4.1.
4.2 Lapsed Awards. If any Award made under the Plan expires, or is forfeited or cancelled without having been exercised or settled in full, or if Shares are acquired pursuant to an Award subject to forfeiture or repurchase and are forfeited or repurchased by the Company for an amount not greater than the Participant’s exercise or purchase price, the Shares allocable to the terminated portion of such Award or such forfeited or repurchased Shares shall be added back to the Shares available for issuance under the Plan based on the applicable multiplier set forth in Section 4.1 and shall again be available for future Awards under the Plan.
4.3 Adjustments in Awards and Authorized Shares. The number of Shares covered by the Plan, each outstanding Award, and the per Share exercise price of each such Award, shall be proportionately adjusted for any increase or decrease in the Company's periodic reports filed withnumber of issued shares of common stock resulting from a stock split, reverse stock split, recapitalization, spin-off, combination, reclassification, the Securities and Exchange Commission,payment of a stock dividend on the common stock or any other increase or decrease in the number of such Shares of common stock effected without receipt of
consideration by the Company; provided, however, that such amountconversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be adjustedmade by reversing the following, toAdministrator whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issue by the extent such adjustments were made in calculating such net earnings (loss) attributable to common stockholders:
(a)Company of Shares of stock of any accrual alreadyclass, or securities convertible into Shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the annual bonus, special bonus,number or incentive bonus applicable to such person:
(b) any adjustment relating to change in fair valueprice of net trust assets;
(c) any adjustment relating to change in fair valueshares of long term debt;
(d) any adjustment relating to noncash level yield long term debt;
(e) any charge relating to amortization of deferred charges; and
(f) any adjustment relating to the following items within earnings of discontinued operations: (1) lower of cost or market and (2) repurchase liability provision.
2.27 Plan has the meaning given to such term in Section 1.01.
2.28 Prior Plans means the Company's 1995 Stock Option, Deferred Stock and Restricted Stock Plan, as amended, and the Company's 2001 Stock Option, Deferred Stock and Restricted Stock Plan, as amended.
2.29 Restricted Shares means Common Stockcommon stock subject to restrictions imposedan Option or SAR.
4.4 Assumption or Substitution of Awards. The Board may, without affecting the number of Shares available pursuant to Section 4.1, authorize the issuance of Awards under this Plan in substitution or assumption of outstanding awards under the plan of another entity in connection with Awards granted under Article VII.any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with Section 409A and any other applicable provisions of the Code.
2.30 Restricted Stock Unit means4.5 Legal Compliance. Shares shall not be issued pursuant to the making or exercise of an Award unless the exercise of the Award and rights and the issuance and delivery of Shares shall comply with the Securities Act of 1933, as amended, the 1934 Act and other Applicable Law pertaining to, among other things, the issuance of Shares, excessive compensation, golden parachute payments and risk management, and shall be further subject to the approval of counsel for the Company with respect to such compliance. Any Award made in violation hereof shall be null and void. This section shall not be interpreted to preclude the issuance of Awards that may have unfavorable tax consequences to the Company or a unit representingParticipant, and, for purposes of this section, Applicable Law shall not include the rightCode or any other state or federal tax law.
4.6 Investment Representations. As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of exercise that the Shares are being acquired only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.
4.7 Limitation on Nonemployee Director Grants. No Nonemployee Director shall be granted Awards or receive cash compensation in any one calendar year having a value, as determined by the Company for financial reporting purposes, in excess of $500,000. For the purpose of the preceding sentence, cash compensation that is deferred shall be considered received in the year for which it was initially payable and any earnings on deferred amounts shall not be taken into account. In adopting and approving this Plan, the Board and the Company’s shareholders have considered that annual compensation to each Nonemployee Director of up to $500,000 is reasonable. The foregoing limit on Nonemployee Director compensation applies only to compensation for customary Board services, and does not apply to compensation for special Board services, for example, being chair or vice-chair of the Board, which shall be subject to the limit set forth in the next sentence of this section. The Board may make exceptions to this limit for individual Nonemployee Directors in extraordinary circumstances, so long as this section would not be violated if the $500,000 figure were instead $750,000, as the Board may determine in its sole discretion, provided that the Nonemployee Director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous compensation decisions involving Nonemployee Directors.
SECTION 5
STOCK OPTIONS
The provisions of this Section 5 are applicable to Options granted to Employees, Consultants and Nonemployee Directors. Such Participants shall also be eligible to receive Common Stock or the value thereofother types of Awards as set forth in the future subjectPlan.
5.1 Grant of Options. Subject to restrictions imposed in connection with Awards granted under Article VII.
2.31 Rule 16b-3 means Rule 16b-3 promulgated by the Securitiesterms and Exchange Commission under Section 16provisions of the Exchange Act, as the samePlan, Options may be amendedgranted at any time and from time to time and any successor rule.
2.32 Stock Appreciation Rights means awards granted in accordance with Article VI.
2.33 Termination of Service means the voluntary or involuntary termination of a Participant's service as an employee, director or consultant with the Company or an Affiliate for any reason, including death, disability, retirement or as the result of the divestiture of the Participant's employer or any similar transaction in which the Participant's employer ceases to be the Company or one of its Affiliates. Whether entering military or other government service shall constitute Termination of Service, or whether and when a Termination of Service shall occur as a result of disability, shall be determined in each case by the CommitteeAdministrator in its sole discretion.
(a) Duties and Authority. The Plan shall be administered by the CommitteeAdministrator may grant Incentive Stock Options, Nonqualified Stock Options, or a combination thereof, and the CommitteeAdministrator, in its discretion and subject to Sections 4.1, shall have exclusive and final authority in each determination, interpretation or other action affecting the Plan and its Participants. The Committee shall have the sole discretionary authority to interpret the Plan, to establish and modify administrative rules for the Plan, to impose such conditions and restrictions on Awards as it determines appropriate, and to make all factual determinations with respect to and take such steps in connection with the Plan and Awards granted hereunder as it may deem necessary or advisable. The Committee shall not, however, have or exercise any discretion that would disqualify amounts payable under Article X as performance-based compensation for purposes of Section 162(m) of the Code. The Committee may delegate such of its powers and authority under the Plan as it deems appropriate to a subcommittee of the Committee or designated officers or employees of the Company. In addition, the full Board may exercise any of the powers and authority of the Committee under the Plan. In the event of such delegation of authority or exercise of authority by the Board, references in the Plan to the Committee shall be deemed to refer, as appropriate, to the delegate of the Committee or the Board. To the extent applicable, actions taken by the Committee or any subcommittee thereof, and any delegation by the Committee to designated officers or employees, under this Section 3.01 shall comply with Section 16(b) of the Exchange Act, the performance-based provisions of Section 162(m) of the Code, and the regulations promulgated under each of such statutory provisions, or the respective successors to such statutory provisions or regulations, as in effect from time to time.
(b) Indemnification. Each person who is or shall have been a member of the Board or the Committee, or an officer or employee of the Company to whom authority was delegated in accordance with the Plan, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such individual in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf; provided, however, that the foregoing indemnification shall not apply to any loss, cost, liability, or expense that is a result of his or her own willful misconduct.
4.01 Number of Shares Issuable. The total number of shares of Common Stock authorized to be issued under the Plan shall be3,680,585 shares which consists of (i) 1,280,585 shares allocated to outstanding Options granted under the Prior Plans and being assumed by this Plan (the "Assumed Option Shares"), and (ii) 2,400,000 shares(1) of Common Stock reserved for future grants under this Plan. Shares of Common Stock underlying Awards issued under Articles VII, VIII and IX of this Plan shall be charged as 2.0 shares againstdetermine the number of shares of Common Stock available for the grant of Awards hereunder. The foregoing share limitsShares subject to each Option.
5.2 Award Agreement. Each Option shall be evidenced by an Award Agreement that shall specify the Exercise Price, the expiration date of the Option, the number of Shares to which the Option pertains, any conditions to exercise the Option, and such other terms and conditions as the Administrator, in its discretion, shall determine. The Award Agreement shall also specify whether the Option is intended to be an Incentive Stock Option or a Nonqualified Stock Option.
5.3 Exercise Price. The Administrator shall determine the Exercise Price for each Option subject to adjustment in accordance withthe provisions of this Section 11.07. The shares to be offered under5.3.
5.3.1 Nonqualified Stock Options. In the Plan shall be authorized and unissued Common Stock, or issued Common Stock that shall have been reacquired by the Company.
4.02 Shares Subject to Terminated Awards. The Assumed Option Shares shall only be available for issuance upon exercise of an Option granted under the Prior Plans and assumed by this Plan and none of the Assumed Option Shares shall be available for grants of new Options or other Awards under this Plan, even if the assumed Options are forfeited, canceled or otherwise terminated without issuance of any shares of Common Stock. Except as provided in the preceding sentence, Common Stock covered by any unexercised portions of terminated or forfeited Options (including canceled Options) granted under the Plan or any predecessor employee stock plan of the Company, Restricted Stock or Restricted Stock Units (whether granted under this Plan or any predecessor employee stock plan) that are forfeited or terminated for any reason prior to the date that the restrictions on such Awards would otherwise have lapsed, other stock-based Awards that are forfeited or terminated for any reason as provided under the Plan, and Common Stock subject to any Awards that are otherwise surrendered by the Participant may again be subject to new Awards under the Plan. Further, any Award settled in cash shall not be counted as shares of Common Stock for any purpose under the Plan.
5.01 Eligible Participants. Participants in the Plan shall be such employees, directors and consultants of the Company and its Affiliates as the Committee, in its sole discretion, may designate from time to time. The Committee's designationcase of a Participant in any year shall not requireNonqualified Stock Option, the Committee to designate such person to receive Awards or grants in any other year. The designation of a Participant to receive Awards or grants under one portion of the Plan does not require the Committee to include such Participant under other portions of the Plan. The Committee shall consider such factors as it deems pertinent in selecting Participants and in determining the type and amount of their respective Awards. Subject to adjustment in accordance with Section 11.07, no Participant shall be granted Awards in any calendar year in respect of more than 450,000 shares of Common Stock (whether through grants of Options or Stock Appreciation Rights or other Awards of Common Stock or rights with respect thereto) or cash-based Awards for more than $5,000,000;provided, the Committee may grant Awards to a Participant in excess of these annual limits if the Committee expressly determines that a particular Award shall not be designed to qualify as "performance-based compensation" as defined under Section 162(m) of the Code and the applicable treasury regulations thereunder.
(1)On July 20, 2010, the stockholders approved the Plan initially authorizing 450,000 shares. On each of July 24, 2012, July 23, 2013, July 22, 2014, July 21, 2015, July 19, 2016,and July 25, 2017the stockholders approved an increase of the authorized shares by 250,000, 300,000, 300,000, 300,000, 300,000and 500,000shares, respectively.
ARTICLE VISTOCK OPTIONS AND STOCK APPRECIATION RIGHTS
(a) Grant of Options. The Committee may grant, to such Participants as the Committee may select, Options entitling the Participant to purchase shares of Common Stock from the Company in such number, at suchper Share exercise price and on such terms and subject to such conditions, not inconsistent with the terms of this Plan, as may be established by the Committee. The terms of any Option granted under this Plan shall be set forth in an Award Agreement.
(b) Exercise Price of Options. The Exercise Price of each share of Common Stock upon exercise of any Option granted under the Plan shall not be less than 100%one hundred percent (100%) of the Fair Market Value of the Common Stocka Share on the Grant Date, as determined by the Administrator.
5.3.2 Incentive Stock Options. The grant of Grant;provided, however, thatIncentive Stock Options shall be subject to the Committee shall have discretion, with respect to a Non-Qualifiedfollowing limitations:
(a) The Exercise Price of an Incentive Stock Option to establish an Exercise Price atshall be not less than one hundred percent (100%) of the Fair Market Value of a Share on the Grant Date; provided, however, that if on the Grant Date, of Grantthe Employee (together with persons whose stock ownership is attributed to the extent that such Option is designedEmployee pursuant to comply with the requirements of Section 409A424(d) of the Code.
(c) Designation of Options. The Committee shall designate, at the timeCode) owns stock possessing more than 10% of the granttotal combined voting power of each Option, the Option as an Incentive Stock Option or a Non-Qualified Stock Option;provided, however, that an Option may be designated as an Incentive Stock Option only if the applicable Participant is an employeeall classes of stock of the Company or any of its Subsidiaries, the Exercise Price shall be not less than one hundred and ten percent (110%) of the Fair Market Value of a Share on the Date of Grant.Grant Date;
(d) Special
(b) Incentive Stock Option Rules.Options may be granted only to persons who are, as of the Grant Date, Employees of the Company or a Subsidiary, and may not be granted to Consultants or Nonemployee Directors;
(c) To the extent that the aggregate Fair Market Value (determined as of the time the Option is granted) of the shares of Common StockShares with respect to which Incentive Stock Options are exercisable for the first time by athe Participant during any calendar year (under all plans of the Company and itsany parent and subsidiary corporations)or Subsidiary) exceeds $100,000, the Options to acquire Shares in excess of such Incentive Stock Optionsamount shall constitute Non-Qualifiedbe treated as Nonqualified Stock Options. For purposes of this Section 6.01(d)5.3.2(c), Incentive Stock Options shall be taken into account in the order in which they were granted. If pursuantFor purposes of this limitation,
the Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted; and
(d) In the above,event of a Participant’s change of status from Employee to Consultant or Nonemployee Director, an Incentive Stock Option isheld by the Participant shall cease to be treated as an Incentive Stock Option in part and shall be treated for tax purposes as a Non-QualifiedNonqualified Stock Option in part,three (3) months and one (1) day following such change of status.
5.3.3 Substitute Options. Notwithstanding the Participant may designate at the timeprovisions of exercise which portion shall be deemed to be exercised,Sections 5.3.1 and 5.3.2, in the absenceevent that the Company or an Affiliate consummates a transaction described in Section 424(a) of the Code (e.g., the acquisition of property or stock from an unrelated corporation), persons who become Employees, Directors or Consultants on account of such express designationtransaction may be granted Options in writing, the portion of the Option treated assubstitution for options granted by their former employer, and such Options may be granted with an Incentive Stock Option shall be deemed to be exercised first. Notwithstanding any other provision of the Plan to the contrary, the Exercise Price of each Incentive Stock Option shall be equal to or greaterless than the Fair Market Value of a Share on the Common StockGrant Date; provided, however, the grant of such substitute Option shall not constitute a “modification” as defined in Code Section 424(h)(3) and the applicable Treasury regulations.
5.4 Exercise of Options. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions as set forth in the Award Agreement and conditions as the Administrator shall determine in its discretion. However, an Option that vests or becomes exercisable based on the Participant’s Continuous Service as an Employee, Consultant or Nonemployee Director, must not vest or become exercisable in whole or in part prior to the expiration of a one (1) year period of such Continuous Service following the Grant Date of such Option. Notwithstanding the foregoing sentence, the Administrator shall have the power and the discretion to provide for earlier vesting and/or exercisability in the event a Participant’s Continuous Service as an Employee, Director or Consultant terminates due to death or Disability or following a Change in Control, and to provide for earlier vesting and exercisability vesting of Awards that in the aggregate (including any Restricted Stock, RSUs and Stock-Based Awards that vest less than one (1) year from the Grant Date and SARs that vest or become exercisable less than one (1) year from Grant Date) are limited to a number of Shares that does not exceed five percent (5%) of the total number of Shares set forth in Section 4.1. An Option granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall not become first exercisable until at least six (6) months following the date of grant of such Option (except in the event of such Employee’s death, Disability or retirement, upon a Change in Control, or as otherwise permitted by the Worker Economic Opportunity Act). Except as set forth in Section 10, in all cases involving termination of Continuous Service as an Employee, Director or Consultant (including, but not limited to, the reasons described in subsections (c), (d) and (e) of Section 5.5.1), such Option shall be exercisable only to the extent the Participant was entitled to exercise it at the date of such termination.
5.5 Expiration of Options
5.5.1 Expiration Dates. Unless otherwise specified in the Award Agreement, but in any event no later than ten (10) years from the Grant Date, each Option shall terminate no later than the first to occur of the following events:
(a) Date in Award Agreement. The date for termination of the Option set forth in the written Award Agreement;
(b) Termination of Continuous Service as Employee, Director or Consultant. The last day of the three (3)-month period following the date the Participant ceases his/her Continuous Service as an Employee, Director or Consultant (other than termination for a reason described in subsections (c), (d) or (e) below).
(c) Misconduct. In the event a Participant’s Continuous Service as an Employee, Director or Consultant terminates because the Participant has performed an act of Misconduct as determined by the Administrator, all unexercised Options held by such Participant shall expire immediately upon receiving written notice from the Company to the Participant; provided, however, that the Administrator may, in its sole discretion, reinstate the Options by giving written notice of such reinstatement to Participant. In the event of such reinstatement, the Participant may exercise the Option only to such extent, for such time, and upon such terms and conditions as if the Participant had ceased to be employed by or affiliated with the Company or a Subsidiary upon the date of such termination for a reason other than Misconduct, disability or death;
(d) Disability. In the event that a Participant’s Continuous Service as an Employee, Director or Consultant terminates as a result of the Participant’s Disability, the Participant may exercise his or her Option at any time within twelve (12) months from the date of such termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). If, at the date of termination, the Participant is not entitled to exercise his or her entire Option, the Shares covered by the unexercisable portion of the Option shall revert to the Plan. If, after termination, the Participant does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan;
(e) Death. In the event of the death of a Participant, the Participant’s Option may be exercised at any time within twelve (12) months following the date of death (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement), by the Participant’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance. If, at the time of death, the Participant was not entitled to exercise his or her entire Option, the Shares covered by the unexercisable portion of the Option shall immediately revert to the Plan. If, after death, the Participant’s estate or a person who acquired the right to exercise the Option by bequest or inheritance does not exercise the Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan; or
5.5.2 10 Years from Grant. An Option shall expire no more than ten (10) years from the Grant Date; provided, however, that if an Incentive Stock Option as of the Date of Grant of the Incentive Stock Option;provided,however, that no Incentive Stock Option shall beis granted to any personan Employee who, attogether with persons whose stock ownership is attributed to the time the Option is granted, owns stock (including stock owned by application of the constructive ownership rules inEmployee pursuant to Section 424(d) of the Code)Code, owns stock possessing more than ten percent (10%)10% of the total combined voting power of all classes of the stock of the Company unless at the time theor any of its Subsidiaries, such Incentive Stock Option may not be exercised after the expiration of five (5) years from the Grant Date.
5.5.3 Administrator Discretion. Notwithstanding the foregoing the Administrator may, after an Option is granted, extend the exercise period that an Option is exercisable following a Participant’s termination of Continuous Service (recognizing in some such circumstances the Options would cease to be Incentive Stock Options); provided, however, in no event may any such extension extend beyond the stated expiration date of the Option.
5.6 Exercise Priceand Payment. Options shall be exercised by the Participant’s delivery of a written notice of exercise to the Chief Financial Officer of the Company (or its designee), setting forth the number of Shares with respect to which the Option is at least one hundred ten percent (110%) ofto be exercised, accompanied by full payment for the Fair Market Value of the Common Stock subject to the Incentive Stock OptionShares and the Incentive Stock Option, by its terms, is not exercisable for more than five years from the Date of Grant.
(e) Rights As a Stockholder. A Participant or a transferee of an Option pursuant to Section 11.04 shall have no rights as a stockholder with respect to Common Stock covered by an Option until the Participant or transferee shall have become the holder of recordpayment of any such shares, and no adjustment shall be made for dividends in cash or other property or distributions or other rights with respect to any such Common Stock for which the record date is prior to the date on which the
Participant or a transferee of the Option shall have become the holder of record of any such shares covered by the Option; provided, however, that Participants are entitled to share adjustments to reflect capital changes under Section 11.07.
6.02 Stock Appreciation Rights.
(a) Stock Appreciation Right Awards. The Committee is authorized to grant to any Participant one or more Stock Appreciation Rights. Upon exercise of a Stock Appreciation Right with respect to a share of Common Stock, the Participant shall be entitled to receive anadditional amount equal to the excess, if any, of (i) the Fair Market Value of a share of Common Stock on the date of exercise over (ii) the Exercise Price of such Stock Appreciation Right established in the Award Agreement, which amount shall be payable as provided in Section 6.02(c).
(b) Exercise Price. The Exercise Price of each share of Common Stock upon exercise of any Stock Appreciation Right granted under the Plan shall not be less than 100% of the Fair Market Value of the Common Stock on the Date of Grant;provided, however, that the Committee shall have discretion to establish an Exercise Price at less than the Fair Market Value on the Date of Grant to the extent that such Stock Appreciation RightAdministrator specifies is designed to comply with the requirements of Section 409A of the Code.
(c) Payment of Incremental Value. Any payment which may become due fromnecessary for the Company by reason of a Participant's exercise of a Stock Appreciation Right may be paid to the Participant as determined by the Committee (i) all in cash, (ii) all in Common Stock, or (iii) inpay any combination of cash and Common Stock. In the event that all or a portion of the payment is made in Common Stock, the number of shares of Common Stock delivered in satisfaction of such payment shall be determined by dividing the amount of such payment or portion thereof by the Fair Market Value on the date of exercise. No fractional share of Common Stock shall be issued to make any payment in respect of Stock Appreciation Rights; if any fractional share would be issuable, the combination of cash and Common Stock payable to the Participant shall be adjusted as directed by the Committee to avoid the issuance of any fractional share.
6.03 Terms of Stock Options and Stock Appreciation Rights.
(a) Conditions on Exercise. An Award Agreement with respect to Options or Stock Appreciation Rights may contain such waiting periods, exercise dates and restrictions on exercise (including, but not limited to, periodic installments) as may be determined by the Committee at the time of grant.
(b) Duration of Options and Stock Appreciation Rights. Options and Stock Appreciation Rights shall terminate upon the first to occur of the following events:
(i) Expiration of the Option or Stock Appreciation Right, as provided in the Award Agreement; or
(ii) Termination of the Award in the event of a Participant's disability, retirement, death or other Termination of Service, as provided in the Award Agreement; or
(iii) Ten years from the Date of Grant (five years in certain cases, as described in Section 6.01(d)).
(c) Acceleration or Extension of Exercise Period. The Committee, in its sole discretion, shall have the right (but shall not be obligated), exercisable on or at any time after the Date of Grant, to permit
the exercise of an Option or Stock Appreciation Right (i) prior to the time such Option or Stock Appreciation Right would become exercisable under the terms of the Award Agreement, or (ii) after the termination of the Option or Stock Appreciation Right under the terms of the Award Agreement.
(d) Exercise of Options or Stock Appreciation Rights Upon Termination of Services. Unless an Award Agreement provides otherwise, the following rules shall govern the treatment of an Award of Options or Stock Appreciation Rights upon a Participant's Termination of Services:
(i) Termination of Vested Options or Stock Appreciation Rights Upon Termination of Services.
(A) Termination Other Than Due to Death or Disability. In the event of a Participant's Termination of Services for any reason other than due to the Participant's death or Disability, the right of the Participant to exercise any vested Options or Stock Appreciation Rights shall, unless the exercise period is extended by the Boardrequired withholding taxes in accordance with Section 6.03(c) above, terminate upon13.
5.6.1 Form of Consideration. Upon the earlier of: (I) thirty (30) days after the dateexercise of any Option, payment of the Termination of Services; and (II) the date of expiration of the OptionsExercise Price shall be made (i) in cash, by check or Stock Appreciation Rights determined pursuant to Sections 6.03(b)(i) or (iii) above.
(B) Death or Disability. In the eventin cash equivalent; (ii) by means of a Participant's TerminationStock Tender Exercise; (iii) by means of Servicesa Cashless Exercise; (iv) by reasonmeans of death or Disability, the right of the Participant to exercise any vested Options or Stock Appreciation Rights shall, unless the exercise period is extendeda Net Exercise; (v) by such other consideration as may be approved by the Board in accordance with Section 6.03(c) above, terminate upon the earlier of: (I) six (6) months after the date of the Termination of Services; and (II) the date of expiration of the Options or Stock Appreciation Rights determined pursuant to Sections 6.03(b)(i) or (iii) above.
(ii) Termination of Unvested Options Upon Termination of Services. To the extent the right to exercise Options or Stock Appreciation Rights, or any portion thereof, has not vested as of the date of Termination of Services, the right shall expire on the date of Termination of Services regardless of the reason for the Termination of Services.
6.04 Exercise Procedures. Each Option and Stock Appreciation Right granted under the Plan shall be exercised under such procedures and by such methods as the Committee may establish or approveAdministrator from time to time.time to the extent permitted by applicable law; or (vi) by any combination thereof. The Administrator may at any time or from time to time grant Options that do not permit all of the foregoing forms of consideration to be used in payment of the Exercise Price or which otherwise restrict one or more forms of shares purchased uponconsideration. For purposes of this Section 5.6:
(a) “Stock Tender Exercise” means the delivery of a properly executed exercise of an Option granted under the Plan shall be paid in full in cashnotice accompanied by the Participant pursuanta Participant’s tender to the Award Agreement;provided, however, thatCompany, or attestation to the Committee may (but shall not be required to) permit payment to be made (a) by deliveryownership, in a form acceptable to the Company of shares of Common Stock held by the Participant, (b) by a "net exercise" method under which the Company reduces the number of shares of Common Stock issued upon exercise by the largest whole number of shares withShares having a Fair Market Value that does not exceed the aggregate Exercise Price of the Shares with respect to which the Option is exercised. A Stock Tender Exercise shall not be permitted if it would constitute a violation of the provisions of any law, regulation or (c)agreement restricting the redemption of the Company’s stock. If required by the Company, the Option may not be exercised by tender to the Company, or attestation to the ownership, of Shares unless such other consideration asShares either have been owned by the Committee deems appropriate and in complianceParticipant for a period of time required by the Company (and not used for another option exercise by attestation during such period) or were not acquired, directly or indirectly, from the Company.
(b) “Cashless Exercise” means the delivery of a properly executed exercise notice together with applicable lawirrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the Shares being acquired upon the exercise of the Option (including, payment underwithout limitation, through an arrangement constituting a brokerage transaction as permitted underexercise complying with the provisions of Regulation T applicableas promulgated from time to cashless exercises promulgatedtime by the Board of Governors of the Federal Reserve Board, unless prohibitedSystem). The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by Section 402means of a Cashless Exercise, including with respect to one or more Participants specified by the Sarbanes-Oxley ActCompany notwithstanding that such program or procedures may be available to other Participants.
(c) “Net Exercise” means the delivery of 2002). Ina properly executed exercise notice followed by a procedure pursuant to which (1) the eventCompany will reduce the number of
Shares otherwise issuable to a Participant upon the exercise of an Option by the largest whole number of Shares having a Fair Market Value that any Common Stockdoes not exceed the aggregate Exercise Price for the Shares with respect to which the Option is exercised, and (2) the Participant shall be transferredpay to the Company in cash the remaining balance of such aggregate Exercise Price not satisfied by such reduction in the number of whole Shares to satisfy all orbe issued.
5.6.2 Delivery of Shares. As soon as practicable after receipt of a written notification of exercise and full payment for the Shares purchased and taxes required to be withheld, the Company shall deliver to the Participant (or the Participant’s designated broker), Share certificates (which may be in book entry form) representing such Shares.
SECTION 6
STOCK APPRECIATION RIGHTS
6.1 Grant of SARs. Subject to the terms and provisions of the Plan, SARs may be granted at any parttime and from time to time as determined by the Administrator in its discretion. The Administrator, in its discretion and subject to Section 4.1, shall determine the number of Shares subject to each SAR.
6.2 Award Agreement. Each SAR shall be evidenced by an Award Agreement that shall specify the Exercise Price, the partexpiration date of the SAR, the number of Shares to which the SAR pertains, any conditions to exercise the SAR, and such other terms and conditions as the Administrator, in its discretion, shall determine. The Award Agreement shall also specify whether the SAR is to be paid in cash or in Shares, or a specified combination of cash and Shares.
6.3 Exercise Price. The Administrator shall determine the Exercise Price deemed to have been satisfied by such transferfor each SAR, which shall not be less than one hundred percent (100%) of Common Stock shall be equal to the product derived by multiplying the Fair Market Value as of the date of exercise times the number of shares of Common Stock transferred to the Company. The Participant may not transfer to the Company in satisfaction of the Exercise Price any fractional share of Common Stock. Any part of the Exercise Price paid in cash upon the exercise of any Option shall be added to the general funds of the Company and may be used for any proper corporate purpose. Unless the Committee shall otherwise determine, any Common Stock transferred to the Company as payment of all or part of the Exercise Price upon the exercise of any Option shall be held as treasury shares.
6.05 Change in Control. With respect to each Award of Options or Stock Appreciation Rights, the Committee shall determine whether and to what extent such Options or Stock Appreciation Rights shall become immediately and fully exercisable in the event of a Change in Control or uponShare on the occurrence of one or more specified conditions following a Change in Control. Notwithstanding the foregoing, unless otherwiseGrant Date, as determined by the Committee, no Change in ControlAdministrator.
6.4 Exercise of SARs. SARs granted under the CompanyPlan shall be deemedexercisable at such times and be subject to have occurred for purposes of determining a Participant's rights under this Plan if (a) the Participant is a member of a group that first announces a proposal which, if successful, would result in a Change in Control, which proposal (including any modifications thereof) is ultimately successful, or (b) the Participant acquires a two percent (2%) or more equity interestsuch restrictions as set forth in the entityAward Agreement and conditions as the Administrator shall determine in its discretion. However, a SAR that ultimately acquiresvests or becomes exercisable based on the Company pursuant to the transaction described in clause (a) of this Section 6.05.
6.06 Early Exercise. An Option may, but needParticipant’s Continuous Service as an Employee, Consultant or Nonemployee Director, must not include a provision by which the Participant may elect to exercise the Optionvest or become exercisable in whole or in part prior to the expiration of a one (1) year period of such Continuous Service following the Grant Date of such SAR. Notwithstanding the foregoing sentence, the Administrator shall have the power and the discretion to provide for earlier vesting and/or exercisability in the event a Participant’s Continuous Service as an Employee, Director or Consultant terminates due to death or Disability or following a Change in Control, and to provide for earlier vesting and exercisability of Awards that in the aggregate (including any Restricted Stock, RSUs and Stock-Based Awards that vest less than one (1) year from the Grant Date and Options that vest or become exercisable less than one (1) year from Grant Date) are limited to a number of Shares that does not exceed five percent (5%) of the total number of Shares set forth in Section 4.1. A SAR granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall not be first exercisable until at least six (6) months following the date of grant of such SAR (except in the event of such Employee’s death, disability or retirement, upon a Change in
Control, or as otherwise permitted by the Worker Economic Opportunity Act). Except as set forth in Section 10, in all cases involving termination of Continuous Service as an Employee, Director or Consultant (including, but not limited to, the reasons described in subsections (c), (d) and (e) of Section 6.5.1), such SAR shall be exercisable only to the extent the Participant was entitled to exercise it at the date of such termination.
6.5 Expiration of SARs
6.5.1 Expiration Dates. Unless otherwise specified in the Award Agreement, but in any event no later than ten (10) years from the Grant Date, each SAR shall terminate no later than the first to occur of the following events:
(a) Date in Award Agreement. The date for termination of the SAR set forth in the written Award Agreement;
(b) �� Termination of Continuous Service as Employee, Director or Consultant. The last day of the three (3)-month period following the date the OptionParticipant ceases his/her Continuous Service as an Employee, Director or Consultant (other than termination for a reason described in subsections (c), (d) or (e) below).
(c) Misconduct. In the event a Participant’s Continuous Service as an Employee, Director or Consultant terminates because the Participant has performed an act of Misconduct as determined by the Administrator, all unexercised SARs held by such Participant shall expire immediately upon receiving written notice from the Company to the Participant; provided, however, that the Administrator may, in its sole discretion, reinstate the SARs by giving written notice of such reinstatement to Participant. In the event of such reinstatement, the Participant may exercise the SARs only to such extent, for such time, and upon such terms and conditions as if the Participant had ceased to be employed by or affiliated with the Company or a Subsidiary upon the date of such termination for a reason other than Misconduct, Disability or death;
(d) Disability. In the event that a Participant’s Continuous Service as an Employee, Director or Consultant terminates as a result of the Participant’s Disability, the Participant may exercise his or her SAR at any time within twelve (12) months from the date of such termination (but in no event later than the expiration of the term of such SAR as set forth in the Award Agreement). If, at the date of termination, the Participant is fullynot entitled to exercise his or her entire SAR, the Shares covered by the unexercisable portion of the SAR shall revert to the Plan. If, after termination, the Participant does not exercise his or her SAR within the time specified herein, the SAR shall terminate, and the Shares covered by such SAR shall revert to the Plan; or
(e) Death. In the event of the death of a Participant, the Participant’s SAR may be exercised at any time within twelve (12) months following the date of death (but in no event later than the expiration of the term of such SAR as set forth in the Award Agreement), by the Participant’s estate or by a person who acquired the right to exercise the SAR by bequest or inheritance. If, at the time of death, the Participant was not entitled to exercise his or her entire SAR, the Shares covered by the unexercisable portion of the SAR shall immediately revert
to the Plan. If, after death, the Participant’s estate or a person who acquired the right to exercise the SAR by bequest or inheritance does not exercise the SAR within the time specified herein, the SAR shall terminate, and the Shares covered by such SAR shall revert to the Plan.
6.5.2 Administrator Discretion. Notwithstanding the foregoing the Administrator may, after a SAR is granted, extend the exercise period that a SAR is exercisable following a Participant’s termination of Continuous Service; provided, however, in no event may any such extension extend beyond the stated expiration date of the SAR.
6.6 Exercise and Payment. SARs shall be exercised by the Participant’s delivery of a written notice of exercise to the Chief Financial Officer of the Company (or its designee), setting forth the number of Shares with respect to which the SAR is to be exercised. Upon the exercise of a SAR, the Company shall pay the Participant an amount determined by multiplying (a) the difference between the Fair Market Value of a Share on the date of exercise over the Exercise Price, by (b) the number of Shares with respect to which the SAR is exercised. Except to the extent that the Award Agreement specifies otherwise, payment may be made in cash or in Shares, or a specified combination of cash and Shares, as determined by the Administrator in its discretion. Such payment shall be reduced by any amount that the Administrator determines is necessary for the Company to pay any required withholding taxes in accordance with Section 13, or if the payment is to be made in Shares, the Administrator may require, as a condition of exercise of the SAR, that the Participant pay to the Company any amount necessary for the Company to pay any required withholding taxes in accordance with Section 13.
SECTION 7
RESTRICTED STOCK
7.1 Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Employees, Directors and Consultants in such amounts as the Administrator, in its discretion, shall determine. The Administrator shall determine the number of Shares to be granted to each Participant and the purchase price, if any, to be paid by the Participant for such Shares. At the discretion of the Administrator, such purchase price may be paid by Participant with cash or through services rendered.
7.2 Restricted Stock Agreement. Each Award of Restricted Stock shall be evidenced by an Award Agreement that shall specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its discretion, shall determine. No Restricted Stock shall vest in whole or in part sooner than one (1) year following the Grant Date. Notwithstanding the foregoing sentence, the Administrator shall have the power and the discretion to provide for the vesting of Restricted Stock in less than one (1) year following the Grant Date in the event a Participant’s Continuous Service as an Employee, Director or Consultant terminates due to death or Disability or following a Change in Control, and to provide for vesting in less than one (1) year for a number of Awards that in the aggregate (including any RSUs and Stock-Based Awards that vest less than one (1) year from Grant Date and Options and SARs that vest or become exercisable less than one (1) year from Grant Date) are limited to a number of Shares that does not exceed five percent (5%) of the total number of Shares set forth in Section 4.1. Unless the Administrator determines otherwise, Shares of
Restricted Stock shall be held by the Company as escrow agent until the restrictions on such Shares have lapsed.
7.3 Transferability. Except as provided in a Participant’s Award Agreement, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until expiration of the applicable Period of Restriction.
7.4 Other Restrictions. The Administrator, in its discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate, in accordance with this Section 7.4, including, without limitation, provisions relating to expiration of restrictions.
7.4.1 General Restrictions. The Administrator may set restrictions based upon Continuous Service, the achievement of specific Performance Goals (Company-wide, business unit, or individual), or any other basis determined by the Administrator in its discretion.
7.4.2 Legend on Certificates. The Administrator, in its discretion, may place a legend or legends on the certificates representing Restricted Stock to give appropriate notice of such restrictions.
7.5 Removal of Restrictions. Except as otherwise provided in this Section 7, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall be released from escrow as soon as practicable after expiration of the Period of Restriction. After the restrictions have lapsed, the Participant shall be entitled to have any legend or legends under Section 7.4.2 removed from his or her Share certificate, and the Shares shall be freely transferable by the Participant, subject to Applicable Law.
7.6 Voting Rights. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless otherwise provided in the Award Agreement.
7.7 Dividends and Other Distributions. During the Period of Restriction, Participants holding Shares of Restricted Stock shall be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid.
7.8 Return of Restricted Stock to Company. On the date that any forfeiture event set forth in the Award Agreement occurs, the Restricted Stock for which restrictions have not lapsed shall revert to the Company and again shall become available for grant under the Plan in accordance with Section 4.2.
7.9 Section 83(b) Election. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock Award, the Participant shall promptly submit a copy of such election to the Company.
SECTION 8
RESTRICTED STOCK UNITS
8.1 Grant of Restricted Stock Units. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Restricted Stock Units to such Employees, Directors and Consultants as the Administrator, in its discretion, shall determine. The Administrator shall determine the number of Shares that are to be covered by or issuable with respect to each Award of RSUs.
8.2 RSU Agreement. Each Award of RSUs shall be evidenced by an Award Agreement that shall specify the Period of Restriction, the number of Shares subject to the Award, the time and form of payment, whether in cash or in Shares, or a combination of cash and Shares, and such other terms and conditions as the Administrator, in its discretion, shall determine. No RSUs shall vest in whole or in part sooner than one (1) year following the Grant Date. Notwithstanding the foregoing sentence, the Administrator shall have the power and the discretion to provide for the vesting of RSUs in less than one (1) year following the Grant Date in the event a Participant’s Continuous Service as an Employee, Director or Consultant terminates due to death or Disability or following a Change in Control, and to provide for vesting in less than one (1) year for a number of Awards that in the aggregate (including any Restricted Stock and Stock-Based Awards that vest less than one (1) year from Grant Date and Options and SARs that vest or become exercisable less than one (1) year from Grant Date) are limited to a number of Shares that does not exceed five percent (5%) of the total number of Shares set forth in Section 4.1. RSUs shall be similar to Restricted Stock Awards, except that no Shares are delivered to the Participant on the date of grant, but rather the Participant is granted the right to receive Shares, or cash based on the value of Shares, at a later time or event.
8.3 Nontransferability. RSUs may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated.
8.4 Other Restrictions. The Administrator, in its discretion, may impose such vesting and other restrictions on RSUs as it may deem advisable or appropriate. The Administrator may set restrictions based upon Continuous Service, the achievement of specific Performance Goals (Company-wide, business unit, or individual), or any other basis determined by the Administrator in its discretion.
8.5 Payout of RSUs. Settlement of RSUs, either by delivery of Shares or payment of cash, shall be made as soon as practicable after expiration of the Period of Restriction, based upon the extent to which the applicable restrictions have been satisfied and the RSUs have been earned and vested. At such time, any Shares delivered shall be freely transferable by the Participant, subject to Applicable Law.
8.6 No Voting Rights. Participants shall have no voting rights with respect to RSUs, or with respect to any Shares subject thereto until the Period of Restriction has expired, applicable restrictions have been met and Shares have been issued.
8.7 Dividend Equivalents. During the Period of Restriction, Participants holding RSUs may, if the Administrator so determines, be credited with dividend equivalents with
respect to the RSUs in a manner determined by the Administrator in its sole discretion. The provisionAdministrator may apply any restrictions to the right to receive or payment of dividend equivalents that the Administrator deems appropriate. The Administrator, in its sole discretion, may determine the form of payment of dividend equivalents, including cash, Shares, Restricted Stock, or RSUs and such dividend equivalents may be subject to accrual, forfeiture, or payout restrictions as determined by the Administrator in its sole discretion.
SECTION 9
STOCK-BASED AWARDS
9.1 Stock-Based Awards. The Administrator may grant other types of equity-based or equity-related Awards (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Administrator shall determine. Such Awards may entail the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
9.2 Value of Stock-Based Awards. Each Stock-Based Award shall have a value based on the value of a Share, as determined by the Administrator, and may be subject to Performance Goals and other restrictions and conditions as the Administrator may establish in its discretion. If the Administrator exercises its discretion to establish Performance Goals, the number and/or value of Stock-Based Awards that will be paid out to the Participant will depend on the extent to which the Performance Goals are met.
9.3 Earning of Stock-Based Awards. Subject to the terms of this Plan, a recipient of Stock-Based Awards shall be entitled to receive payout on the number and value of Stock-Based Awards earned by the Participant, to be determined as a function of the extent to which applicable Performance Goals, if any, have been achieved.
9.4 Form and Timing of Payment of Stock-Based Awards. Payment of earned Stock-Based Awards shall be as determined by the Administrator and as evidenced in the Award Agreement. Subject to the terms of the Plan, the Administrator, in its sole discretion, may pay earned Stock-Based Awards in the form of cash or in Shares (or in a combination thereof) that have an aggregate Fair Market Value equal to the value of the earned Stock-Based Awards. Such Shares may be granted subject to any restrictions deemed appropriate by the Administrator. The determination of the Administrator with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.
9.5 Termination of Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right to benefit from Stock-Based Awards following termination of the Participant’s Continuous Service. Such provisions shall be determined in the sole discretion of the Administrator shall be included in the Award Agreement atentered into with each Participant, need not be uniform among all Awards of Stock-Based Awards issued pursuant to the timePlan, and may reflect distinctions based on the reasons for termination; provided, however, that a Participant shall be required to have a period of Continuous Service of not less than one (1) year following the grant of the OptionStock-Based Award in order to benefit from it in whole or in part.
Notwithstanding the foregoing sentence, the Administrator shall have the power and the discretion to reduce the required period of Continuous Service to a period of less than one (1) year in the event a Participant’s Continuous Service terminates due to death or Disability or following a Change in Control, and to provide for periods of Continuous Service that are less than one (1) year for a number of Awards that in the aggregate (including any Options and SARs that vest or become exercisable less than one (1) year from Grant Date and Restricted Stock and RSUs that vest less than one (1) year from the Grant Date) pertain to a limited number of Shares that does not exceed five percent (5%) of the total number of Shares set forth in Section 4.1.
9.6 Nontransferability. Except as otherwise provided in a Participant’s Award Agreement, Stock-Based Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement, a Participant’s rights under the Plan shall be exercisable during the Participant’s lifetime only by the Participant.
9.7 Dividend Equivalents. At the discretion of the Administrator, Participants holding Stock-Based Awards may be addedentitled to receive or be credited with dividend equivalents corresponding to dividends declared with respect to the Shares. The Administrator, in its sole discretion, may determine the form of payment of dividend equivalents, including cash, Shares, Restricted Stock, or RSUs and such dividend equivalents may be subject to accrual, forfeiture, or payout restrictions as determined by the Administrator in its sole discretion.
SECTION 10
CHANGE IN CONTROL
Subject to the requirements and limitations of Section 409A of the Code, if applicable, the Board or the Administrator may provide for any one or more of the following consequences of a Change in Control on Awards:
10.1 Accelerated Vesting. In its discretion, the Board or the Administrator may provide in the grant of any Award Agreement by amendmentor at any other time may take such action as it deems appropriate to provide for acceleration of the exercisability and/or vesting in connection with a later time.Change in Control of each or any outstanding Award or portion thereof and Shares acquired pursuant thereto upon such conditions, including termination of the Participant’s Continuous Service prior to, upon, or following such Change in Control, and to such extent as the Board or the Administrator shall determine.
10.2 Assumption, Continuation or Substitution of Awards. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of any Participant, assume or continue the Company’s rights and obligations under each or any Award or portion thereof outstanding immediately prior to the Change in Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with respect to the Acquiror’s stock. For purposes of this Section 10.2, if so determined by the Board or the Administrator, in its discretion, an earlyAward or any portion thereof shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and the applicable Award Agreement, for each Share subject to such
portion of the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a Share on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration is not solely common stock of the Acquiror, the Board or the Administrator may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise of the Award for each Share to consist solely of common stock of the Acquiror equal in Fair Market Value to the per Share consideration received by holders of Shares pursuant to the Change in Control. If any portion of such consideration may be received by holders of Shares pursuant to the Change in Control on a contingent or delayed basis, the Board or the Administrator may, in its discretion, determine such Fair Market Value per Share as of the time of the Change in Control on the basis of the Board’s or the Administrator’s good faith estimate of the present value of the probable future payment of such consideration. Any Award or portion thereof which is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control. Notwithstanding the foregoing, Shares acquired upon exercise of an Award prior to the Change in Control and any consideration received pursuant to the Change in Control with respect to such Shares shall continue to be subject to all applicable provisions of the Award Agreement evidencing such Award except as otherwise provided in such Award Agreement.
10.3 Cash-Out of Outstanding Awards. The Board or the Administrator may, in its discretion and without the consent of any Participant, determine that, upon the occurrence of a Change in Control, each or any Award or portion thereof outstanding immediately prior to the Change in Control and not previously exercised or settled shall be canceled in exchange for a payment with respect to each vested Share (including any Share for which vesting is accelerated, if so determined by the Board or the Administrator, but without payment for any unvested Share) subject to such canceled Award in (i) cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair Market Value equal to the Fair Market Value of the consideration to be paid per Share in the Change in Control, reduced (but not below zero) by the exercise price or purchase price per Share, if any, under such Award. If any portion of such consideration may be received by holders of Shares pursuant to the Change in Control on a contingent or delayed basis, the Board or the Administrator may, in its sole discretion, determine such Fair Market Value per Share as of the time of the Change in Control on the basis of the Board’s or the Administrator’s good faith estimate of the present value of the probable amount of future payment of such consideration. In the event such determination is made by the Board or the Administrator, an Award having an exercise or purchase price per Share equal to or greater than the Fair Market Value of the consideration to be paid per Share in the Change in Control may be canceled without payment of consideration to the holder thereof. Payment pursuant to this Section 10.3 (reduced by applicable withholding taxes, if any) shall be made to Participants in respect of the vested portions of their canceled Awards as soon as practicable following the date of the Change in Control and in respect of the unvested portions of their canceled Awards in accordance with the vesting schedules applicable to such Awards.
SECTION 11
MISCELLANEOUS
11.1 No Effect on Employment or Service. Nothing in the Plan shall interfere with or limit in any way the right of the Company or an Affiliate to terminate any Participant’s employment or service at any time, with or without cause. Unless otherwise provided by written contract, employment or service with the Company or any of its Affiliates is on an at-will basis only. Additionally, the Plan shall not confer upon any Director any right with respect to continuation of service as a Director or nomination to serve as a Director, nor shall it interfere in any way with any rights which such Director or the Company may have to terminate his or her directorship at any time.
11.2 Participation. No Employee, Consultant or Nonemployee Director shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.
11.3 Successors. All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or, otherwise, sale or disposition of all or substantially all of the business or assets of the Company.
11.4 Beneficiary Designations. If permitted by the Administrator, a Participant under the Plan may name a beneficiary or beneficiaries to whom any vested but unpaid Award shall be paid in the event of the Participant’s death. Each such designation shall revoke all prior designations by the Participant and shall be effective only if given in a form and manner acceptable to the Administrator. In the absence of any such designation, any vested benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate and, subject to the terms of the Plan and of the applicable Award Agreement, any unexercised vested Award may be exercised by the administrator or executor of the Participant’s estate.
11.5 Limited Transferability of Awards. No Award granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. All rights with respect to an Award granted to a Participant shall be available during his or her lifetime only to the Participant. Notwithstanding the foregoing, the Participant may, in a manner specified by the Administrator, (a) transfer a Nonqualified Stock Option to a Participant’s spouse, former spouse or dependent pursuant to a court-approved domestic relations order which relates to the provision of child support, alimony payments or marital property rights and (b) transfer a Nonqualified Stock Option, Restricted Stock, RSU or Stock-Based Award by bona fide gift and not for any consideration to (i) a member or members of the Participant’s immediate family, (ii) a trust established for the exclusive benefit of the Participant and/or member(s) of the Participant’s immediate family, (iii) a partnership, limited liability company of other entity whose only partners or members are the Participant and/or member(s) of the Participant’s immediate family or (iv) a foundation in which the Participant and/or member(s) of the Participant’s immediate family control the management of the foundation’s assets.
11.6 Restrictions on Share Transferability. The Administrator may impose such restrictions on any Shares acquired pursuant to the exercise of an Award as it may deem advisable, including, but not limited to, restrictions related to applicable federal securities laws, the requirements of any national securities exchange or system upon which Shares are then listed or traded or any blue sky or state securities laws.
11.7 No “Re-Pricing” Without Shareholder Approval. Except as provided in Section 4.3, neither the Board nor any Administrator shall have the authority: (i) to reduce the Exercise Price or other purchase or strike price of any outstanding Option or SAR, or (ii) to cancel any outstanding Option or SAR that has an Exercise Price greater than the current Fair Market Value in exchange for cash or any other Award under the Plan (except in the event of a Change in Control), unless the shareholders of the Company have approved such an action within twelve (12) months prior to such an event.
11.8 Clawback of Awards.
11.8.1 Forfeiture under Sarbanes-Oxley Act. If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, then any grantee who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, to the extent required by such Section 304, shall reimburse the Company for (a) the amount of any Award received by such individual under the Plan during the 12-month period following the first public issuance or filing with the SEC, as the case may be, of the financial document embodying such financial reporting requirement, and (b) any profits received from the sale of securities of the Company during that 12-month period.
11.8.2 Repayment as a Result of Improper Conduct. If an Award has been paid to an executive officer of the Company or to his or her spouse or beneficiary, and the Administrator later determines either (a) that financial results used to determine the amount of that Award must be materially restated and that the executive officer engaged in fraud or intentional misconduct related thereto or (b) that recovery or repayment of the Award is required by Applicable Law, the Company will seek repayment or recovery, as appropriate, of the Award to the extent overpaid notwithstanding any contrary provision of the Plan. In addition, the Administrator may provide that any Award, including any Shares subject to or issued under an Award, is subject to any other recovery, recoupment, clawback and/or other forfeiture policy maintained by the Company from time to time.
SECTION 12
AMENDMENT, SUSPENSION, AND TERMINATION
12.1 Amendment, Suspension, or Termination. Except as provided in Section 12.2, the Board, in its sole discretion, may amend, suspend or terminate the Plan, or any part thereof, at any time and for any reason. The amendment, suspension or termination of the Plan shall not, without the consent of the Participant, alter or impair any rights or obligations under any Award theretofore granted to such Participant. No Award may be granted during any period of suspension or after termination of the Plan.
12.2 Shareholder Approval of Amendments. The Company shall obtain shareholder approval of any Plan amendment (a) that would increase the number of Shares available for grants under Section 4.1 (other than adjustments pursuant to Section 4.3), (b) that would alter or delete Section 11.7, (c) for which and to the extent that shareholder approval is required to comply with the rules of NYSE American, the Exchange Act, or other Applicable Law, and (d) under such other circumstances as the Board may determine.
12.3 Plan Effective Date and Duration of Awards. The Plan shall be effective as of the Plan Adoption Date, subject to approval of the Plan by the shareholders of the Company by the required vote, and shall remain in effect thereafter, subject to Sections 12.1 and 12.2 (regarding Plan amendment or termination). No Awards shall be granted under the Plan unless and until such shareholder approval is received. If the shareholders of the Company do not approve the Plan by the required vote within twelve months before or after the Plan Adoption Date, the Plan shall not become effective and shall immediately terminate. Without further shareholder approval, no Award may be granted under the Plan more than ten (10) years after the Plan Adoption Date, and no Incentive Stock Option may be granted under the Plan more than ten (10) years after the earlier of the Plan Adoption Date or the date of approval of the Plan by the Company’s shareholders.
SECTION 13
TAX WITHHOLDING
13.1 Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof) or the release of Shares from escrow arrangements or removal of legends, the Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof).
13.2 Withholding Arrangements. The Administrator, in its discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (a) electing to have the Company withhold otherwise deliverable Shares or (b) delivering to the Company already-owned Shares having a Fair Market Value equal to the amount required to be withheld. The amount of the withholding requirement shall be deemed to include any amount which the Administrator agrees may be withheld at the time the election is made; provided, however, in the case that Shares that would otherwise be issued to the Participant are withheld by the Company to satisfy the tax withholding, the Shares applied to such tax withholding shall have a Fair Market Value that is no greater than the maximum statutory federal, state or local tax rates that could apply to the Award in the jurisdictions applicable to the Participant on the date that the amount of tax to be withheld is to be determined, or such other limitation as may be required by then applicable accounting rules and regulations to maintain favorable equity accounting treatment for the Award. The Fair Market Value of the Shares to be withheld or delivered shall be determined as of the date taxes are required to be withheld.
SECTION 14
LEGAL CONSTRUCTION
14.1 Liability of Company. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful grant or any Award or the issuance and sale of any Shares hereunder, shall relieve the Company, its officers, Directors and Employees of any liability in respect of the failure to grant such Award or to issue or sell such Shares as to which such requisite authority shall not have been obtained.
14.2 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.
14.3 Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
14.4 Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
14.5 Governing Law. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of California.
14.6 Captions. Captions are provided herein for convenience only, and shall not serve as a basis for interpretation or construction of the Plan.
EXECUTION COPY
TAX BENEFITS PRESERVATION RIGHTS AGREEMENT
DATED AS OF OCTOBER 23, 2019
BY AND BETWEEN
IMPAC MORTGAGE HOLDINGS, INC.
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC
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TAX BENEFITS PRESERVATION RIGHTS AGREEMENT
This Tax Benefits Preservation Rights Agreement, dated as of October 23, 2019 (as it may be amended from time to time as provided herein, the “Agreement”), is entered into by and between Impac Mortgage Holdings, Inc., a Maryland corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, a New York limited liability trust company (the “Rights Agent” which term shall include any successor Rights Agent hereunder). Capitalized terms contained herein and not otherwise defined shall have the meanings ascribed to them in Section 1.
W I T N E S S E T H
WHEREAS, the Company has generated Tax Benefits (as defined in Section 1) for United States federal income tax purposes, and as such Tax Benefits may potentially provide valuable tax benefits to the Company, the Company desires to avoid an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations promulgated thereunder, and thereby preserve the ability to utilize fully such Tax Benefits and, in furtherance of such objective, the Company desires to enter into this Agreement;
WHEREAS, the Board of Directors of the Company (“Board of Directors”) has authorized, and the Company declared, a dividend distribution of one Rights (as defined below) for each share of Common Stock outstanding as of the Close of Business on November 5, 2019 (the “Record Date”), and authorized the issuance of one Right for each share of Common Stock of the Company issued between the Record Date and the earlier of the Distribution Date or the Expiration Date, each Right initially representing the right to purchase one one-thousandth of a share (as such number may be adjusted pursuant to the provisions of this Agreement) of Series A-1 Junior Participating Preferred Stock of the Company having the rights, powers and preferences set forth on Exhibit A hereto, upon the terms and subject to the conditions hereinafter set forth (the “Rights”);
WHEREAS, the Company views the Tax Benefits as highly valuable assets of the Company that are likely to inure to the benefit of the Company and its stockholders, and the Company believes that it is in the best interests of the Company and its stockholders that the Company provide for the protection of the Tax Benefits on the terms and conditions set forth herein; and
WHEREAS, the Company desires to appoint the Rights Agent to act as rights agent hereunder, in accordance with the terms and conditions hereof.
NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the following terms have the meanings indicated:
“Acquiring Person” means any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 4.99% or more of the shares of Common Stock received shall be subject to a special repurchase right in favor of the Company with termsthen outstanding, but shall not include:
(i) any Exempt Person;
(ii) any Existing Holder, unless and until such time as such Existing Holder becomes the Beneficial Owner of a percentage of the shares of Common Stock of the Company then outstanding equal to or exceeding such Existing Holder’s Existing Holder Percentage (other than any increase pursuant to or as a result of (A) a stock split, reverse stock split, stock dividend, reclassification or similar transaction effected by the Company in which all registered holders of shares of Common Stock are treated substantially equally, (B) the grant or issuance by the Company to its directors, officers and employees of options, warrants, convertible instruments, rights or similar interests to acquire shares of Common Stock pursuant to any employee benefit plan, stock incentive plan, stock option plan or stock ownership plan of the Company adopted by the Board, and the subsequent vesting, exercise or conversion of such options, warrants, rights or similar interests, or (C) the grant or issuance by the Company to its directors, officers and employees of shares of restricted Common Stock or restricted stock units and the subsequent vesting of such shares or stock units, pursuant to a restricted stock or other benefits or compensation plan or arrangement adopted by the Board), (at which such time such Existing Holder shall be deemed an “Acquiring Person”); or
(iii) any Person who becomes the Beneficial Owner of 4.99% or more of the shares of Common Stock of the Company then outstanding solely as a result of the initial grant or vesting of any options, warrants, rights or similar interests (including restricted shares and restricted stock units) by the Company to its directors, officers and employees pursuant to any employee benefit or stock ownership plan of the Company, or the acquisition of shares of Common Stock of the Company upon the exercise or conversion of any such securities so granted.
Notwithstanding the foregoing, no Person shall become an “Acquiring Person” (i) as the result of an acquisition by the Company of Common Stock of the Company (or any Subsidiary of the Company, any employee benefit plan of the Company or any Subsidiary of the Company, or any Person organized, appointed or established by the Committee. The Committee shall determineCompany for or pursuant to the time and/terms of any such plan) which, by reducing the number of shares outstanding, increases the proportionate number of shares Beneficially Owned by such Person to 4.99% (or in the case of an Existing Holder, the Existing Holder Percentage applicable to such Existing Holder) or more of the event that causes the repurchase right to terminate and fully vest theshares of Common Stock of the Company then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 4.99% (or in the Participant.case of an Existing Holder, the Existing Holder Percentage applicable to such Existing Holder) or more of the shares of Common Stock of the Company then outstanding by reason of share purchases by the Company (or any Subsidiary of the Company, any employee benefit plan of the Company or any Subsidiary of the Company, or any Person organized, appointed or established by the Company for or pursuant to the terms of any such plan) and shall, after such share purchases by the Company (or any Subsidiary of the Company, any employee benefit plan of the Company or any Subsidiary of the Company, or any
Table of ContentsARTICLE VIIRESTRICTED SHARES AND RESTRICTED STOCK UNITS
7.01 AwardPerson organized, appointed or established by the Company for or pursuant to the terms of Restrictedany such plan), become the Beneficial Owner of any additional shares (other than pursuant to a stock split, stock dividend or similar transaction) of Common Stock of the Company and Restrictedimmediately thereafter be the Beneficial Owner of 4.99% (or in the case of an Existing Holder, the Existing Holder Percentage applicable to such Existing Holder) or more of the shares of Common Stock Units. The Committee may grantof the Company then outstanding, then such Person shall be deemed to be an “Acquiring Person,” and (ii) who becomes the Beneficial Owner of 4.99% or more of the outstanding shares of Common Stock as a result of the acquisition of shares of Common Stock directly from the Company, as long as, prior to the acquisition of shares of Common Stock directly from the Company, the Company has been apprised in writing by any Participant an Awardsuch Person of Restricted Shares consisting of a specifiedthe number of shares of Common Stock issuedBeneficially Owned by such Person immediately prior to any such acquisition; provided, however, that if a Person shall become the Beneficial Owner of 4.99% or more of the shares of Common Stock then outstanding as a result of a direct purchase from the Company and shall, after that date, acquire one or more additional shares of the Company’s Common Stock (other than pursuant to a stock split, reverse stock split, stock dividend, reclassification or similar transaction effected by the Company) without the prior written consent of the Company and shall then Beneficially Own more than 4.99% of the shares of Common Stock then outstanding, then such Person shall be deemed to be an “Acquiring Person.”
Notwithstanding the foregoing, no Person shall be an Acquiring Person if the Board shall have affirmatively determined, in its sole and absolute discretion, prior to or after the Distribution Date, in light of the intent and purposes of this Agreement or other circumstances facing the Company, that such Person shall not be deemed an Acquiring Person, for so long as such Person complies with any limitations or conditions required by the Board in making such determination.
Notwithstanding the foregoing, no regulated investment company under Section 851 of the Code shall be deemed to be an Acquiring Person, unless the Board determines, in its reasonable discretion, that such regulated investment company is deemed to Beneficially Own more than 4.99% or more of the shares of Common Stock of the Company then outstanding under the applicable standards of Treasury Regulation 1.382-3(a). In determining whether any regulated investment company is an Acquiring Person, the filing of a statement under Section 13 of the Exchange Act with respect to such regulated investment company shall not be deemed to establish that such regulated investment company has acquired Beneficial Ownership of 4.99% or more of the shares of Common Stock of the Company then outstanding; provided, that the Board shall be entitled to rely upon any such filing unless such regulated investment company provides information that permits the Board to conclude, in its reasonable discretion, that such regulated investment company has not acquired Beneficial Ownership of 4.99% or more of the shares of Common Stock of the Company then outstanding pursuant to the Participant subjectstandards of Treasury Regulation 1.382-3. “Adjustment Shares” has the meaning set forth in Section 11(a)(ii).
“Affiliate” and “Associate” have the respective meanings ascribed to such terms conditionsin Rule 12b-2 of the General Rules and forfeitureRegulations under the Exchange Act, as in effect on the date of this Agreement; and transfer restrictions, whether based on performance standards, periods of service, retention byto the Participant of ownership of specifiedextent not included within the foregoing, shall also include with respect to any Person, any other Person whose shares of Common Stock or other criteria,securities of the Company (i) would be deemed to be constructively owned by such Person for purposes of Section 382 of the Code, (ii) would be deemed owned by a “single entity” as defined in Section
1.382-3(a)(1) of the Treasury Regulations, or (iii) otherwise aggregated with shares owned by such first Person, pursuant to the provisions of Section 382 of the Code, or any successor or replacement provision, and the Treasury Regulations thereunder; provided , however , that a Person shall not be deemed to be the Affiliate or Associate of another Person solely because either or both Persons are or were directors of the Company.
For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of the outstanding shares of Common Stock of which any Person is the Beneficial Owner, will be calculated in accordance with Section 382 and the Treasury Regulations promulgated thereunder. Notwithstanding anything to the contrary set forth herein, any shares of Common Stock of which a Person or any Affiliate or Associate of such Person becomes the Beneficial Owner pursuant to an equity compensation award granted to such Person by the Company or as a result of an adjustment by the Company to the number of shares of Common Stock represented by such equity compensation award pursuant to the terms thereof shall, solely for purposes of determining the number of shares of Common Stock of which such Person or any Affiliate or Associate of such Person is the Beneficial Owner at any time, not be included in the calculation of the number of shares of Common Stock outstanding.
A Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “Beneficially Own” and have “Beneficial Ownership” of (or any derivative of such phrases), any securities:
(i) that such Person or any of such Person’s Affiliates or Associates, directly or indirectly, owns or has the legal, equitable or contractual right or obligation to acquire (whether directly or indirectly and whether exercisable immediately or only after the passage of time, compliance with regulatory requirements, satisfaction of one or more conditions (whether or not within the control of such Person) or otherwise) (A) pursuant to any agreement, arrangement or understanding whether or not in writing (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities); (B) upon the exercise of any conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; (C) pursuant to the power to revoke a trust, discretionary account or similar arrangement; (D) pursuant to the power to terminate a repurchase or similar so-called “stock borrowing” agreement, arrangement or understanding; (E) pursuant to the automatic termination of a trust, discretionary account or similar arrangement; or (F) any securities (including rights, options or warrants) that are convertible or exchangeable into, or exercisable for, shares of Common Stock until such time as such securities are converted, exchanged or exercised, except to the extent that the acquisition or transfer of securities (including rights, options or warrants) would be treated as exercised on the date of its acquisition or transfer pursuant to Section 1.382-4(d) of the Treasury Regulations promulgated under Section 382; provided, however, that a Person will not be deemed to be the Beneficial Owner of, or to Beneficially Own, securities (1) tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange; (2) issuable upon the exercise of Rights at any time prior to the occurrence of a Triggering Event; (3) issuable upon the exercise of Rights from and after the occurrence of a Triggering Event if such Rights were acquired by such Person or any of such Person’s Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 (the “Original Rights”) or pursuant to Section 11(i) in connection with an adjustment made with respect to any Original Rights; or (4) that a Person or any of such Person’s Affiliates or Associates may be deemed to have the right to acquire pursuant to any merger or other acquisition agreement between the Company and such Person (or one or more of its Affiliates or Associates), or any tender, voting or support agreement entered into by such Person (or one or more of its Affiliates or Associates) in connection therewith, if such agreement has been approved by the Board prior to there being an Acquiring Person;
(ii) that such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote (including the power to vote or to direct the voting of) or dispose (or direct the disposition) of or has “beneficial ownership” of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations promulgated under the Exchange Act, as in effect on the date of this Agreement), including pursuant to any agreement, arrangement or understanding whether or not in writing; provided, however, that a Person will not be deemed the Beneficial Owner of, or to Beneficially Own, any security as a result of an agreement, arrangement or understanding whether or not in writing to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations promulgated under the Exchange Act; and (B) is not also then reportable by such Person on Schedule 13D pursuant to the Exchange Act (or any comparable or successor report); or
(iii) that are Beneficially Owned, directly or indirectly, by any other Person (or any of such Person’s Affiliates or Associates) with which such first Person (or any of such first Person’s Affiliates or Associates) has any agreement, arrangement or understanding whether or not in writing (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy to the extent contemplated by subsection (ii) of this definition) or disposing of any securities of the Company, but only if the effect of such agreement, arrangement or understanding is to treat such Persons as an “entity” pursuant to Section 1.382-3(a)(1) of the Treasury Regulations; provided, however, that no person who is an officer, director or employee of an Exempt Person will be deemed, solely by reason of such person’s status or authority as such, to be a Beneficial Owner of, to have Beneficial Ownership of or to Beneficially Own any securities of the Company that are Beneficially Owned (including in a fiduciary capacity) by an Exempt Person or by any other such officer, director or employee of an Exempt Person; provided further, however, that any stockholder of the Company, together with any Affiliate, Associate or other person who may be deemed to be a representative of such stockholder then serving as a director of the Company, will not be deemed to be the Beneficial Owner of, to have Beneficial Ownership of or to Beneficially Own any securities of the Company held by any other Person as a result of any Person affiliated or otherwise associated with such stockholder serving as a director of the Company.
Notwithstanding anything in this Agreement to the contrary, to the extent not within the foregoing provisions of this definition, a Person will be deemed to be the Beneficial Owner of, and will be deemed to Beneficially Own or have Beneficial Ownership of, Stock held by any other Person that such Person would be deemed to own constructively or indirectly or otherwise would be aggregated with Stock owned by such Person pursuant to Section 382, or any successor provision or replacement provision and Treasury Regulations thereunder.
“Agreement” has the meaning set forth in the preamble hereto.
“Board of Directors” has the meaning set forth in the preamble to this Agreement.
“Book Entry Shares” has the meaning set forth in Section 3(a).
“Business Day” means any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
“Charter” when used in reference to the Company means the charter of the Company, as may be amended or supplemented from time to time.
“Close of Business” on any given date means 11:59 P.M. (New York City time), on such date; provided, however , that if such date is not a Business Day it means 11:59 P.M. (New York City time), on the next succeeding Business Day.
“Code” has the meaning set forth in the preamble to this Agreement.
“Common Stock” when used in reference to the Company means the Common Stock, par value $0.01 per share, of the Company or any other shares of capital stock of the Company into which such stock shall be reclassified or changed. “Common Stock” when used with reference to any Person other than the Company organized in corporate form means (i) the capital stock or other equity interest of such Person with the greatest voting power, (ii) the equity securities or other equity interest having power to control or direct the management of such Person or (iii) if such Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person and which have issued any such outstanding capital stock, equity securities or equity interest. “Common Stock” when used with reference to any Person not organized in corporate form shall mean units of beneficial interest which (x) shall represent the right to participate generally in the profits and losses of such Person (including without limitation any flow-through tax benefits resulting from an ownership interest in such Person) and (y) shall be entitled to exercise the greatest voting power of such Person or, in the case of a limited partnership, shall have the power to remove or otherwise replace the general partner or partners.
“Common Stock Equivalents” has the meaning set forth in Section 11(a)(iii).
“Company” has the meaning set forth in the preamble to this Agreement.
“Current Exchange Value” has the meaning set forth in Section 24(d).
“Current Value” has the meaning set forth in Section 11(a)(iii).
“Depositary Agent” has the meaning set forth in Section 7(c).
“Distribution Date” means the earlier of (i) the Close of Business on the 10th Business Day (or such later date as may be determined by action of the Board of Directors, which action must be taken prior to the Distribution Date that otherwise would have occurred) after the Stock
Acquisition Date (or, if the 10th Business Day after the Stock Acquisition Date occurs before the Record Date, then the Record Date); or (ii) the Close of Business on the 10 th Business Day (or such later date as may be determined by the Board of Directors) after the date that a tender or exchange offer by any Person (other than an Exempt Person) is first published, sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations promulgated under the Exchange Act if, assuming the successful consummation thereof, such Person would be an Acquiring Person (including any such date which is after the date of this Agreement and prior to the issuance of the Rights); provided, however, that if any tender or exchange offer referred to in clause (ii) is cancelled, terminated or otherwise withdrawn prior to the Distribution Date without the purchase or exchange of any shares of Common Stock pursuant thereto, then such offer will be deemed, for purposes of this paragraph, never to have been made.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Exchange Date” has the meaning set forth in Section 7(a).
“Exchange Ratio” has the meaning set forth in Section 24(a).
“Exempt Person” means (i) the Company or any Subsidiary of the Company, in each case including the officers and members of the board of directors thereof acting in their fiduciary capacities, (ii) any employee benefit plan or compensation arrangement of the Company or any Subsidiary of the Company, (iii) any Person holding (or acting in a fiduciary capacity in respect of) shares of Common Stock of the Company organized, appointed or established by the Company or any Subsidiary of the Company for or pursuant to the terms of any such employee benefit plan or compensation arrangement, (iv) any Person who is a transferee from the estate of an Exempt Person and who receives Common Stock of the Company as a bequest or inheritance from such Exempt Person, but only for so long as such transferee continues to be the Beneficial Owner of 4.99% or more of the then outstanding shares of Common Stock of the Company, and (v) any Person deemed to be an “Exempt Person” in accordance with Section 25.
“Exemption Request” has the meaning set forth in Section 25(a).
“Existing Holder Percentage” means, with respect to any Existing Holder, the percentage of the outstanding shares of Common Stock of the Company that such Existing Holder, together with all Affiliates and Associates of such Existing Holder, Beneficially Owns (including any Convertible Promissory Notes Due 2018 held by such Existing Holder) immediately prior to the first public announcement of the adoption of this Plan; provided, however, that, in the event any Existing Holder shall sell, transfer, or otherwise dispose of any outstanding shares of Common Stock of the Company after the first public announcement of the adoption of this Plan, the Existing Holder Percentage shall, subsequent to such sale, transfer or disposition, mean, with respect to such Existing Holder, the lesser of (i) the Existing Holder Percentage as in effect immediately prior to such sale, transfer or disposition or (ii) the percentage of outstanding shares of Common Stock of the Company that such Existing Holder Beneficially Owns immediately following such sale, transfer or disposition.
“Existing Holder” means any Person who or which, together with all Affiliates and Associates of such Person, is, immediately prior to the first public announcement of the adoption of this Plan, the Beneficial Owner of 4.99% or more of the shares of Common Stock of the
Company then outstanding, including (i) Thomas B. Akin and Talkot Capital, LLC and together with all their Affiliates and Associates, (ii) Todd M. Pickup and Vintage Trust II, dated July 19, 2007 and together with all their Affiliates and Associates, and (iii) Richard H. Pickup and RHP Trust, dated May 31, 2011 and together with all their Affiliates and Associates. Notwithstanding anything to the contrary provided in this Agreement, any Existing Holder who becomes the Beneficial Owner of less than 4.99% of the shares of Common Stock of the Company then outstanding shall cease to be an Existing Holder and shall be subject to all of the provisions of this Agreement in the same manner as any Person who is not and was not an Existing Holder.
“Expiration Date” and “Final Expiration Date” have the meanings set forth in Section 7(a).
“Fair Market Value” of any securities or other property shall be as determined in accordance with Section 11(d).
“Force Majeure Condition” has the meanings set forth in Section 36.
“Group” has the meaning set forth in clause (b) of the definition of “Person.”
“Maryland Courts” has the meaning set forth in Section 33.
“Original Rights” has the meaning set forth in the definition of “Beneficial Owner.”
“Person” means any individual, firm, corporation, partnership, limited liability company, joint venture, business trust, trust, association, syndicate, group (as such term is used in Rule 13d-5 of the General Rules and Regulations promulgated under the Exchange Act, as in effect on the Rights Dividend Declaration Date), other entity or any group of Persons making a “coordinated acquisition” of shares of Common Stock within the meaning of Treasury Regulation § 1.382-3(a)(1) or who are otherwise treated as an “entity” within the meaning of Treasury Regulation § 1.382-3(a)(1), and, in each case, will include any successor (by merger or otherwise) of any such Person, but will not include a Public Group (as defined in Section 1.382-2T(f)(13) of the Treasury Regulations.
“Preferred Stock” means shares of Series A-1 Junior Participating Preferred Stock, par value $0.01 per share, of the Company having the rights and preferences set forth in the form of the articles supplementary attached hereto as Exhibit A, and, to the extent that there are not a sufficient number of shares of shares of Preferred Stock authorized to permit the full exercise of the Rights, any other series of preferred stock of the Company designated for such purpose containing terms substantially similar to the terms of the Preferred Stock .
“Preferred Stock Equivalents” has the meaning set forth in Section 11(b).
“Principal Party” has the meaning set forth in Section 13(b).
“Purchase Price” means, as of any date, the price at which a holder may purchase securities issuable upon exercise of one whole Right. Until adjustment thereof in accordance with the terms hereof, the Purchase Price shall equal $45.00.
“Record Date” has the meaning set forth in the Preamble of this Agreement.
“Redemption Date” has the meaning set forth in Section 7(a).
“Redemption Price” has the meaning set forth in Section 23.
“Registered Common Stock” has the meaning set forth in Section 13(b).
“Requesting Person” has the meaning set forth in Section 25(a).
“Rights” has the meaning set forth in the Preamble of this Agreement.
“Rights Agent” has the meaning set forth in the Preamble of this Agreement.
“Rights Certificate” has the meaning set forth in Section 4(a).
“Section 11(a)(ii) Event” has the meaning set forth in Section 11(a)(ii).
“Section 11(a)(ii) Trigger Date” has the meaning set forth in Section 11(a)(iii).
“Section 13 Event” means any event described in clauses (x), (y) or (z) of Section 13(a).
“Section 382” means Section 382 of the Code or any successor or replacement provision and the Treasury Regulations promulgated thereunder.
“Securities Act” means the Securities Act of 1933, as amended.
“Spread” has the meaning set forth in Section 11(a)(iii).
“Stock Acquisition Date” means the first date of public announcement (which, for purposes of this definition, includes the filing or amending of a report pursuant to Section 13(d) of the Exchange Act or pursuant to a comparable successor statute) by the Company or an Acquiring Person that an Acquiring Person has become such or that discloses information that reveals the existence of an Acquiring Person.
“Subsidiary” means, with reference to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power sufficient to elect a majority of the board of directors or other persons performing similar functions of such corporation or other entity or a majority of the equity or ownership interests, is Beneficially Owned, directly or indirectly or otherwise controlled by such Person either alone or together with one or more Affiliates of such Person.
“Substitution Period” has the meaning set forth in Section 11(a)(iii).
“Tax Benefits” means the net operating losses, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers, foreign tax credit carryovers, any loss or deduction attributable to a “net unrealized built-in loss” within the meaning of Section 382 of the Code, and the Treasury Regulations promulgated thereunder, in each case of the Company or any of its Subsidiaries, and any other tax attribute the benefit of which is subject to possible limitation pursuant to Section 382 of the Code, and the Treasury Regulations promulgated thereunder.
“Trading Day” means a day on which the principal national securities exchange on which a referenced security is listed or admitted to trading is open for the transaction of business or, if a referenced security is not listed or admitted to trading on any national securities exchange, a Business Day.
“Treasury Regulations” means the final, temporary and proposed income tax regulations promulgated by the United States Department of the Treasury pursuant to the Code, as amended or superseded from time to time.
“Triggering Event” means any Section 11(a)(ii) Event or any Section 13 Event.
Section 2. Appointment of Rights Agent.
The Company hereby appoints the Rights Agent to act as rights agent for the Company and the holders of the Rights (who, in accordance with Section 3, will prior to the Distribution Date also be the holders of shares of Common Stock) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable. In the event the Company appoints one or more Co-Rights Agents, the respective duties of the Rights Agent and any Co-Rights Agents shall be as the CommitteeCompany shall establish.determine. The Committee mayCompany shall give ten (10) days’ prior written notice to the Rights Agent of the appointment of one or more Co-Rights Agents and the respective duties of the Rights Agent and any such Co-Rights Agents. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such Co-Rights Agent.
Section 3. Issuance of Rights Certificates.
(a) Rights Evidenced by Certificates for Common Shares and Book Entry Shares. Until the Distribution Date, (i) the Rights (unless earlier expired, redeemed or terminated) will be evidenced (subject to the provisions of Section 3(b) and Section 3(c)) by the certificates for the Common Stock registered in the names of the holders thereof or, in the case of uncertificated Common Stock registered in book entry form (“Book Entry Shares”), by notation in book entry accounts reflecting the ownership of such Common Stock (which certificates and Book Entry Shares, as applicable, will also grant Restricted Stock Units representingbe deemed to be Rights Certificates) and not by separate Rights Certificates; and (ii) the Rights (and the right to receive sharesRights Certificates) will be transferable only in connection with the transfer of the underlying Common Stock in(including a transfer to the future subject to such terms, conditions and restrictions, whether based on performance standards, periods of service, retention by the Participant of ownership of specified shares of Common Stock or other criteria, as the Committee shall establish. With respect to performance-based Awards of Restricted Shares or Restricted Stock Units intended to qualify as "performance-based" compensation for purposes of Section 162(m) of the Code, performance targets will consist of specified levels of one or more of the Performance Goals. The terms of any Restricted Share and Restricted Stock Unit Awards granted under this Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with this Plan.
7.02 Restricted SharesCompany).
(a) Issuance of Restricted Shares. As soon as practicable after the Distribution Date, of Grant of a Restricted Share Award by the Committee, the Company shallwill prepare and execute, the Rights Agent will countersign and the Company will send or cause to be transferredsent (and the Rights Agent will, if requested, send) (by mailing, in accordance with Section 27 or by such means as may be selected by the Company) to each record holder of Common Stock as of the Close of Business on the Distribution Date (other than any Acquiring Person or any of its Affiliates or Associates), at the address of such holder shown on the transfer books of the Company or itsthe transfer agent for the Common Stock, one or more Rights Certificates evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein. Receipt of a Rights Certificate by any Person will not preclude a later determination that all or part of the Rights represented thereby are null and void pursuant to Section 7(e). To the
extent that a Section 11(a)(ii) Event has also occurred, the Company may implement such procedures as it deems appropriate in its sole and absolute discretion to minimize the possibility that Rights are received by any Person whose Rights are null and void pursuant to Section 7(e). In the event that an adjustment in the number of Rights per shares of Common Stock has been made pursuant to Section 11, then at the time of distribution of the Rights Certificates, the Company will make the necessary and appropriate rounding adjustments (in accordance with Section 14(a)) so that Rights Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights (in accordance with Section 14(a)). As of and after the Distribution Date, the Rights will be evidenced solely by the Rights Certificates and may be transferred by the transfer of the Rights Certificates as permitted hereby, separately and apart from any transfer of Common Stock, and the holders of such Rights Certificates as shown on the transfer books of the Company or the transfer agent for the Rights (which may be the Rights Agent) will be the record holders thereof. The Company will promptly notify the Rights Agent in writing upon the occurrence of the Distribution Date. Until such notice is provided to the Rights Agent, it may presume conclusively that the Distribution Date has not occurred.
(b) Summary of Rights; Outstanding Common Stock. The Company will make available, or cause to be made available, promptly after the Record Date, a copy of the Summary of Rights to any holder of Rights who may so request from time to time prior to the Expiration Date. With respect to certificates for Common Stock and Book Entry Shares, as applicable, outstanding as of the Record Date or issued subsequent to the Record Date, until the earlier of the Distribution Date or the Expiration Date, the Rights will be evidenced by such certificates or Book Entry Shares, and the registered holders of the Common Stock will also be the registered holders of the associated Rights. Until the earlier of the Distribution Date or the Expiration Date, the surrender for transfer of any Common Stock in respect of which Rights have been issued (with or without a copy of the Summary of Rights) will also constitute the transfer of the Rights associated with such Common Stock. Notwithstanding anything to the contrary in this Agreement, upon the effectiveness of a redemption pursuant to Section 23 or an exchange pursuant to Section 24, the Company will not thereafter issue any additional Rights and, for the avoidance of doubt, no Rights will be attached to or will be issued with any Common Stock (including any Common Stock issued pursuant to an exchange) at any time thereafter.
(c) Legend. Certificates for the Common Stock of the Company issued after the Record Date, but prior to the earlier of the Distribution Date or the Expiration Date, shall be deemed also to be certificates for Rights, and shall bear a legend, substantially in the form set forth below:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH IN A TAX BENEFITS PRESERVATION RIGHTS AGREEMENT BETWEEN IMPAC MORTGAGE HOLDINGS, INC. (THE “COMPANY”) AND AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC (OR ANY SUCCESSOR THERETO), AS RIGHTS AGENT, DATED AS OF OCTOBER 23, 2019 AS AMENDED, RESTATED, RENEWED, SUPPLEMENTED OR EXTENDED FROM TIME TO TIME (THE “RIGHTS AGREEMENT”), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICES OF THE COMPANY AND THE STOCK TRANSFER ADMINISTRATION OFFICE OF THE RIGHTS AGENT. UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE. THE COMPANY MAY REDEEM THE RIGHTS AT A REDEMPTION PRICE OF $0.001 PER RIGHT, SUBJECT TO ADJUSTMENT, UNDER THE TERMS OF THE RIGHTS AGREEMENT. THE COMPANY WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT, AS IN EFFECT ON THE DATE OF MAILING, WITHOUT CHARGE PROMPTLY AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES, RIGHTS ISSUED TO OR HELD BY ACQUIRING PERSONS OR ANY AFFILIATES OR ASSOCIATES THEREOF (AS DEFINED IN THE RIGHTS AGREEMENT), AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS, MAY BECOME NULL AND VOID. THE RIGHTS SHALL NOT BE EXERCISABLE, AND SHALL BE VOID SO LONG AS HELD, BY A HOLDER IN ANY JURISDICTION WHERE THE REQUISITE QUALIFICATION, IF ANY, TO THE ISSUANCE TO SUCH HOLDER, OR THE EXERCISE BY SUCH HOLDER, OF THE RIGHTS IN SUCH JURISDICTION SHALL NOT HAVE BEEN OBTAINED OR BE OBTAINABLE.
With respect to any Book Entry Shares, a legend in substantially similar form will be included in a notice to the record holder of such shares in accordance with applicable law. With respect to such certificates or Book Entry Shares, as applicable, containing the foregoing legend, the Rights associated with the Common Stock of the Company represented by such certificates or Book Entry Shares shall be evidenced by such certificates or Book Entry Shares alone until the earlier of the Distribution Date or the Expiration Date, the registered holders of the Common Stock will also be registered holders of the associated Rights, and the surrender or transfer of any of such certificates or Book Entry Shares shall also constitute the surrender or transfer of the Rights associated with the Common Stock of the Company represented by such certificates or Book Entry Shares. In the event that the Company purchases or acquires any shares of Common Stock of the Company after the Record Date but prior to the Distribution Date, any Rights associated with such Common Stock of the Company shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock of the Company which are no longer outstanding. The failure to print the foregoing legend on any such certificate representing Common Stock of the Company or any defect therein or the failure to provide notice thereof shall not affect the enforceability of any part of the Agreement or the rights of any holder of Rights.
Section 4. Form of Rights Certificates.
(a) Rights Certificates. The Rights Certificates (and the forms of election to purchase shares and of assignment and certificate to be printed on the reverse thereof) shall each be substantially in the form of Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law, rule or regulation or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or the Financial Industry Regulatory Authority or to conform to customary usage. The Rights Certificates shall be in a machine printable format and in a form reasonably satisfactory to the Rights Agent. Subject
to the provisions of Section 11 and Section 22, the Rights Certificates, whenever distributed, shall be dated as of the Record Date (or in the case of Rights issued with respect to Common Stock issued by the Company after the Record Date, as of the date of issuance of such Common Stock), shall show the date of countersignature, and on their face shall entitle the holders thereof to purchase such number of one one-thousandths of a share of Preferred Stock as shall be set forth therein at the Purchase Price, but the number and type of such securities and the Purchase Price shall be subject to adjustment as provided herein.
(b) Certain Legends. Any Rights Certificate issued pursuant to Section 3(a), Section 11(i) or Section 22 that represents Rights Beneficially Owned by (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who becomes a transferee after the Acquiring Person becomes such, (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights, the shares of Common Stock of the Company associated with such Rights or the Company or (B) a transfer which the Board of Directors has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of Section 7(e), or (iv) any nominee of any of the foregoing, and any Rights Certificate issued pursuant to Section 6, Section 11 or Section 22 upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, will contain (to the extent feasible) the following legend:
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID UNDER CERTAIN CIRCUMSTANCES AS SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.
The Company shall give notice to the Rights Agent promptly after it becomes aware of the existence and identity of any Acquiring Person or any Associate or Affiliate thereof. The Company shall instruct the Rights Agent in writing of the Rights which should be so legended. The failure to print the foregoing legend on any such Rights Certificate or any defect therein shall not affect in any manner whatsoever the application or interpretation of the provisions of Section 7(e).
Section 5. Countersignature and Registration.
(a) Countersignature. The Rights Certificates shall be executed on behalf of the Participant, evidencingCompany by its Chairman or Vice Chairman of the Restricted Shares coveredBoard of Directors, its President, any Vice President, Chief Executive Officer, its Chief Operating Officer or its Chief Financial Officer,
either manually or by facsimile signature, and shall have affixed thereto the Company’s seal (if any) or a facsimile thereof which shall be attested to by the Award, but subjectTreasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Company, either manually or by facsimile signature. The Rights Certificates shall be countersigned, either manually or by facsimile signature, by an authorized signatory of the Rights Agent and shall not be valid for any purpose unless so countersigned, and such countersignature upon any Rights Certificate shall be conclusive evidence, and the only evidence, that such Rights Certificate has been duly countersigned as required hereunder. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to forfeiturebe such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by an authorized signatory of the Rights Agent, and issued and delivered by the Company with the same force and effect as though the person who signed or attested to such Rights Certificates had not ceased to be such officer of the Company; and any Rights Certificates may be signed or attested to on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer.
(b) Transfer Books. Following the Distribution Date, the Rights Agent will keep or cause to be kept, at one of its offices designated as the appropriate place for surrender of Rights Certificates upon exercise or transfer, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates. The Rights Agent will not register, or permit to be registered, any transfer or exchange of any Rights Certificates (or the underlying Rights) that have become null and void pursuant to Section 7(e), have been redeemed pursuant to Section 23 or have been exchanged pursuant to Section 24.
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Transfer, Split Up, Combination and Exchange of Rights Certificates. Subject to the Company asprovisions of Section 4(b), Section 7(e), Section 14 and Section 24, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Rights Certificate or Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates (other than any Rights Certificate representing Rights that have become null and void pursuant to Section 7(e) or that have been exchanged pursuant to Section 24), entitling the registered holder to purchase a like number of one one-thousandths of a share of Preferred Stock (or following a Triggering Event, Common Stock of the DateCompany, cash, property, debt securities, Preferred Stock or any combination thereof, including any such securities, cash or property following a Section 13 Event) as the Rights Certificate or Certificates surrendered then entitled such holder to purchase and at the same Purchase Price. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged, with the form of Grant if an Award Agreementassignment and certificate duly executed, at the office or offices of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall
be obligated to take any action whatsoever with respect to the Restricted Shares coveredtransfer of any such surrendered Rights Certificate until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side of such Rights Certificate and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and Section 24, countersign and deliver to the Person entitled thereto a Rights Certificate or Certificates, as the case may be, as so requested. The Company may require payment by the Award isregistered holder of a Rights Certificate, of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates.
(b) Mutilated, Destroyed, Lost or Stolen Rights Certificates. Subject to the provisions of Section 7(e), Section 11(a)(ii) and Section 24, upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate and such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company or the Rights Agent may request, and, in case of loss, theft or destruction, of indemnity or security satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate, if mutilated, the Company will execute and deliver a new Rights Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated. Every new Rights Certificate issued pursuant to this Section 6(b) in lieu of any lost, stolen, destroyed or mutilated Rights Certificate will evidence an original additional contractual obligation of the Company, whether or not the lost, stolen, destroyed or mutilated Rights Certificate will be at any time enforceable by anyone, and, subject to Section 7(e) will be entitled to all the benefits of this Plan equally and proportionately with any and all other Rights duly issued hereunder.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Exercise of Rights. Subject to Section 7(e), Section 23(b) and Section 24(a), the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part on any Business Day at any time after the Distribution Date and prior to the Close of Business on the Expiration Date upon surrender of the Rights Certificate, with the form of election to purchase and the certificate on the reverse side thereof properly completed and duly executed, to the Rights Agent at the office or offices of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price for the total number of one one-thousandths of a share of Preferred Stock (or other securities, cash or other assets, as the case may be) as to which such surrendered Rights are then exercised, at or prior to the earliest of (i) the Close of Business on October 22, 2022 (the “Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section 23 (the “Redemption Date”), (iii) the time at which such Rights are exchanged as provided in Section 24 (the “Exchange Date”), (iv) the final adjournment of the Company’s 2020 annual meeting of stockholders if the stockholders fail to approve this Agreement with an affirmative vote of a majority of the votes cast by holders of shares of Common Stock at the 2020 annual meeting of stockholders (or any adjournment or postponement thereof), (v) the repeal of Section 382 of the
Code or any successor statute if the Board of Directors determines that this Plan is no longer necessary for the preservation of Tax Benefits, (vi) the beginning of a taxable year of the Company with respect to which the Board of Directors determines that no Tax Benefits may be carried forward, or (vii) such time as the Board of Directors determines that a limitation on the use of the Tax Benefits under Section 382 of the Code would no longer be material to the Company (the earliest of (i), through (vii) being herein referred to as the “Expiration Date”). The Board of Directors shall at least annually consider whether to make the determination provided by Section 7(a)(vii) in light of all relevant factors, including, in particular, the amount and anticipated utilization of the Company’s Tax Benefits and the Company’s market capitalization. The Company shall promptly notify the Rights Agent in writing upon the occurrence of the Expiration Date and, if such notification is given orally, the Company shall confirm same in writing on or prior to the Business Day next following. Until such notice is received by the Participant and timely returnedRights Agent, the Rights Agent may presume conclusively for all purposes, prior to the Company. AllClose of Business on October 22, 2022, that the Expiration Date has not occurred. Except as set forth in Section 7(e) and notwithstanding any other provision of this Agreement, any Person who prior to the Distribution Date becomes a record holder of shares of Common Stock coveredof the Company is entitled to all of the rights of a registered holder of a Rights Certificate with respect to the Rights associated with such shares of Common Stock of the Company in accordance with the provisions of this Agreement, as of the date such Person becomes a record holder of shares of Common Stock of the Company.
(b) Price. The Purchase Price for each one-one thousandth of a share of Preferred Stock issuable pursuant to the exercise of a Right is initially $45.00 and is subject to adjustment from time to time as provided in Section 11 or Section 13, and payable in accordance with Section 7(c).
(c) Payment. As promptly as practicable following the Distribution Date, the Company shall deposit with a corporation, trust, bank or similar institution in good standing organized under the laws of the United States or any State of the United States, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by Awards undera federal or state authority (such institution is hereinafter referred to as the “Depositary Agent”), certificates representing the shares of Preferred Stock that may be acquired upon exercise of the Rights and the Company shall cause such Depositary Agent to enter into an agreement pursuant to which the Depositary Agent shall issue receipts representing interests in the shares of Preferred Stock so deposited. Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate on the reverse side thereof duly executed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable transfer tax (as determined by the Rights Agent) by certified check or bank draft payable to the order of the Company or by money order, the Rights Agent shall, subject to Section 7(f), Section 20(k) and Section 14(b), thereupon promptly (i) requisition from the Depositary Agent (or make available, if the Rights Agent is the Depositary Agent) depositary receipts or certificates for the number of one one-thousandths of a share of Preferred Stock (or other securities, cash or other assets, as the case may be) to be purchased and the Company hereby irrevocably authorizes the Depositary Agent to comply with all such requests, (ii) when appropriate, requisition from the Company the amount of cash, if any, to be paid in lieu of issuance of fractional shares in accordance with Section 14, (iii) promptly after receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt of each certificate or depositary receipts promptly deliver such cash to or upon the order of the registered holder of such Rights Certificate. In the event that the Company is obligated to issue other securities (including Common Stock of the Company) of the Company, pay cash or distribute other property pursuant to Section 11(a), the Company will make all arrangements necessary so that such other securities, cash or other property are available for distribution by the Rights Agent, if and when appropriate. The payment of the Purchase Price may be made by certified or bank check payable to the order of the Company, or by money order or wire transfer of immediately available funds to the account of the Company (provided that notice of such wire transfer shall be given by the holder of the related Rights to the Rights Agent). The Purchase Price shall be payable in lawful money of the United States of America. Notwithstanding anything to the contrary in this Article VIIPlan, the Company reserves the right to require that prior to the occurrence of a Triggering Event, upon any exercise of Rights, a number of Rights be exercised so that only whole shares of Preferred Stock would be issued.
(d) Partial Exercise.In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent and delivered to the registered holder of such Rights Certificate or to his duly authorized assigns, subject to the restrictions, termsprovisions of Section 14.
(e) Prohibited Issuances. Notwithstanding anything in this Agreement to the contrary, from and conditions containedafter the first occurrence of a Triggering Event, any Rights Beneficially Owned by (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who becomes a transferee after the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Plan andAcquiring Person has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the Award Agreement entered into bytransferred Rights, the Participant. Until the lapse or releaseshares of all restrictions applicable to an AwardCommon Stock of Restricted Shares, the share certificates representing such Restricted Shares may be held in custody by the Company associated with such Rights or the Company, or (B) a transfer which the Board of Directors has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(e), (iv) any subsequent transferee receiving transferred Rights as described in subsections (ii) or (iii) above, either directly or through one or more intermediate transferees, or (v) any nominee of any of the foregoing will, in each case, be null and void without any further action and no holder (whether or not such holder is an Acquiring Person or an Affiliate or Associate of an Acquiring Person) of such Rights shall have any rights whatsoever (including the right to exercise) with respect to such Rights or any Rights Certificates that formerly evidenced such Rights, whether under any provision of this Agreement or otherwise. From and after the first occurrence of a Triggering Event, no Rights Certificate will be issued pursuant to this Agreement (including to any Person described in subsections (i) through (v) of this section 7(e), an) that represents one or more Rights that are or have become void pursuant to this Section 7(e) or with respect to any Shares of Common Stock otherwise deemed to be Beneficially Owned by any of the foregoing, and any Rights Certificate delivered to the Rights Agent that represents
Rights that are or have become null and void pursuant to this Section 7(e) will be cancelled. The Company shall use all reasonable efforts to ensure that the provisions of this Section 7(e) and Section 4(b) are complied with, but shall have no liability to any holder of Rights Certificates or other Person as a result of its designee, or, if the certificates bear a restrictive legend, by the Participant. Upon the lapse or release of all restrictionsfailure to make any determinations with respect to an AwardAcquiring Person or any Affiliates or Associates of an Acquiring Person or any transferee of any of them hereunder.
(f) Information Concerning Ownership. Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of Rights upon the occurrence of any purported exercise or transfer of Rights as set forth in this Section 7 unless such registered holder, in addition to having complied with the requirements of Section 7(a), shall have (i) properly completed and duly executed the certificate contained in the form of election to purchase or form of assignment, as applicable, set forth on the reverse side of the Rights Certificate surrendered for such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company or the Rights Agent shall reasonably request. If such registered holder does not comply with the foregoing requirements, then the Company will be entitled to conclusively deem such Rights to be Beneficially Owned by an Acquiring Person (or an Affiliate or Associate of an Acquiring Person, or other Person described in Section 7.02(d)7(e), oneas applicable) and, accordingly, such Rights will be null and void and not exercisable or more share certificates, registered intransferable.
Section 8. Cancellation and Destruction of Rights Certificates.
All Rights Certificates surrendered for the namepurpose of exercise, transfer, split up, combination, redemption or exchange shall, if surrendered to the
Participant, for an appropriate number Company or any of shares as provided in Section 7.02(d), free of any restrictions set forth in the Plan and the Award Agreement shallits agents, be delivered to the Participant.Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate evidencing the destruction thereof to the Company (or, at the Company’s option, appropriate copies of the electronic or physical evidence relating to the Rights Certificates so canceled or destroyed by the Rights Agent).
Section 9. Reservation and Availability of Preferred Stock.
(a) Reservation. The Company covenants and agrees that it will use all reasonable efforts to cause to be reserved and kept available out of its authorized and unissued shares of preferred stock (and, following the occurrence of a Triggering Event, out of its authorized and unissued Shares of Common Stock or other securities), the number of shares of Preferred Stock (and, following the occurrence of a Triggering Event, Shares of Common Stock or other securities) that that will be sufficient to permit the exercise in full of all outstanding and exercisable Rights. Upon the occurrence of any events resulting in an increase in the aggregate number of shares of
Preferred Stock issuable upon exercise of all outstanding Rights in excess of the number then reserved, the Company shall make appropriate increases in the number of shares so reserved.
(b) StockholderListing. The Company shall use commercially reasonable efforts to cause, from and after such time as the Rights become exercisable (but only to the extent that it is reasonably likely that the Rights will be exercised), all shares of Preferred Stock issued or reserved for issuance to be listed, upon official notice of issuance, upon the principal national securities exchange, if any, upon which the Common Stock of the Company is listed or, if the principal market for the Common Stock of the Company is not on any national securities exchange, to be eligible for quotation on such system as the Common Stock is then quoted.
(c) Registration. The Company shall use commercially reasonable efforts to (i) file, as soon as practicable following the earliest date after the occurrence of a Section 11(a)(ii) Event on which the consideration to be delivered by the Company upon exercise of the Rights described in Section 11(a)(ii) or Section 11(a)(iii), or as soon as required by law following the Distribution Date, as the case may be, a registration statement under the Securities Act, with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing and (iii) cause such registration statement to remain effective (with a prospectus that at all times meets the requirements of the Securities Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities and (B) the Expiration Date. The Company will also take such action as may be appropriate under, and which will ensure compliance with, the securities or “blue sky” laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed one hundred twenty (120) days after the date determined in accordance with the provisions of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect, in each case with prompt written notice to the Rights Agent. Notwithstanding any such provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualification in such jurisdiction shall have been obtained (and the exercise thereof is permitted pursuant to applicable law), or an exemption therefrom is available, and until a registration statement in respect thereof has been declared and remains effective.
(d) Valid Issuance. The Company covenants and agrees that it will take all such action as may be necessary to ensure that all shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock or other securities of the Company) delivered upon the exercise of the Rights shall, at the time of delivery of the certificates or depositary receipts for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable.
(e) Taxes and Charges. The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and governmental charges which may be payable in respect of the issuance or delivery of the Rights Certificates or of any certificates for shares of Preferred Stock and/or other property upon the exercise or surrender of Rights. The
Company shall not, however, be required to pay any transfer tax or governmental charges which may be payable in respect of any transfer or delivery of Rights Certificates or the issuance or delivery of other securities or property to a Person other than, or in respect of the issuance or delivery of securities or other property in a name other than that of, the registered holder of the Rights Certificates evidencing Rights surrendered for exercise or to issue or deliver any certificates for securities or other property in a name other than that of the registered holder upon the exercise of any Rights until such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company’s satisfaction that no such tax is due. The foregoing also apply to any transfer taxes and governmental charges that may be payable in respect of any uncertificated Rights Certificates, shares or other securities.
Section 10. Record Date for Securities Issued.
Each Person in whose name any certificate for a number of one one-thousandths of Preferred Stock or other securities (including any fraction of a share of Preferred Stock or such other securities) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the shares of Preferred Stock or such other securities represented thereby on, and such certificate shall be dated (or registration on the Date of Granttransfer books of the Restricted Share AwardCompany or the applicable transfer agent effected), the date upon which the Rights Certificate evidencing such Rights was duly surrendered and subject to executionpayment of the Award AgreementPurchase Price (and any applicable transfer taxes) was made; provided, however , that if the date of such surrender and payment is a date upon which the transfer books of the Company for the Preferred Stock or such other securities, as provided in Section 7.02(a)applicable, are closed, such Person shall be deemed to have become the record holder of such shares of Preferred Stock or such other securities on, and such certificate shall be dated (or registration on the transfer books of the Company or the applicable transfer agent effected), the Participantnext succeeding Business Day on which the transfer books of the Company are open; and further provided, however , that if delivery of shares of Preferred Stock or such other securities is delayed pursuant to Section 9(c), such Person shall be deemed to have become the record holder of such shares of Preferred Stock or such other securities only when such shares or such other securities first become deliverable. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights of a stockholder of the Company with respect to all shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights. The Purchase Price, the number and kind of shares or other property covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.
(a) Certain Events.
(i) Certain Adjustments to Preferred Stock. Notwithstanding anything to the Awardcontrary in this Agreement, in the event the Company shall at any time after the date of this Agreement (A) declare a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide or
split the outstanding Preferred Stock, (C) combine or consolidate the outstanding Preferred Stock into a smaller number of shares of Preferred Stock (by reverse stock split or otherwise), or (D) issue, change or alter any shares of its capital stock in a reclassification or recapitalization of the Preferred Stock (including any such reclassification or recapitalization in connection with a share exchange, consolidation or merger in which the Company is the continuing or surviving corporation), then, in each such event, except as otherwise provided in this Section 11(a)(i) and Section 7(e), the Purchase Price in effect at the time of the record date for such dividend or the effective time of such subdivision, split, combination, consolidation, reclassification or recapitalization, and the number and kind of shares of Preferred Stock or capital stock of the Company, as the case may be, issuable on such date or at such time, shall be proportionately adjusted so that the holder of any Rights exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of shares of Preferred Stock or securities of the Company, as the case may be, if such Rights had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, split, combination, consolidation, reclassification or recapitalization; provided, however , that in no event shall the consideration to be paid upon the exercise of a Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of a Right. If an event occurs which would require an adjustment under both Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii).
(ii) Exercise of Rights Following Certain Events. Subject to the provisions of Section 23 and Section 24, in the event any Person, alone or together with its Affiliates and Associates, shall become an Acquiring Person, then, promptly following any such occurrence (a “Section 11(a)(ii) Event”), proper provision shall be made so that each holder of a Right, except as provided in Section 7(e), shall thereafter have a right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, in lieu of a number of one one-thousandths of a share of Preferred Stock, such number of shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event, whether or not such Right was then exercisable, and dividing that product by (y) 50% of the Fair Market Value per share of Common Stock of the Company (determined pursuant to Section 11(d)) on the date of the occurrence of a Section 11(a)(ii) Event (such number of shares being referred to as the “Adjustment Shares”).
(iii) Insufficient Common Stock. In the event that the number of shares of Common Stock of the Company which are authorized by the Company’s Charter but not outstanding or reserved for issuance for purposes other than upon exercise of the Right is not sufficient to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a), the Company shall: (A) determine the excess of (X) the Fair Market Value of the Adjustment Shares issuable upon the exercise of a Right (the “Current Value”) over (Y) the Purchase Price attributable to each Right (such excess being referred to as the “Spread”) and (B) with respect to all or a portion of each Right (subject to Section 7(e)), make adequate provision to substitute for the Adjustment Shares, upon payment of the applicable Purchase
Price, (1) other equity securities of the Company (including shares or units of shares of any series of preferred stock that, by virtue of having dividend, voting and liquidation rights substantially comparable to those of the Common Stock, the Board of Directors has deemed in good faith to have substantially the same value or economic rights as the Common Stock (such shares of preferred stock being referred to herein as “Common Stock Equivalents”)), (2) cash, (3) a reduction in the Purchase Price, (4) Preferred Stock Equivalents which the Board of Directors has deemed in good faith to have substantially the same value as shares of Common Stock of the Company, (5) debt securities of the Company, (6) other assets or securities of the Company or (7) any combination of the foregoing, in each case having an aggregate value equal to the Current Value (less the amount of any reduction in the Purchase Price), where such aggregate value has been determined by the Board of Directors after receiving the advice of a nationally recognized investment banking firm selected by the Board of Directors; provided, however, that if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date on which the Company’s right of redemption pursuant to Section 23(a) expires (the later of (x) and (y) being referred to herein as the “Section 11(a)(ii) Trigger Date”), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock of the Company (to the extent available and except to the extent that the Company has not obtained any necessary stockholder or regulatory approval for such issuance) and then, if necessary, cash, which shares or cash have an aggregate value equal to the Spread. If the Board of Directors determines in good faith that it is likely that sufficient additional shares of Common Stock of the Company could be authorized for issuance or that any necessary stockholder or regulatory approval for such issuance could be obtained upon exercise in full of the Rights, the 30-day period set forth above may be extended and re-extended to the extent necessary from time to time, but not more than one hundred twenty (120) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional shares or take such action necessary for regulatory approval (such period, as it may be extended, being referred to herein as the “Substitution Period”). To the extent that the Company determines that some action need be taken pursuant to the first and/or second sentences of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e), that such action shall apply uniformly to all outstanding Rights and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares, seek such stockholder approval, to take any action necessary to obtain such regulatory approval, or to decide the appropriate form of distribution to be made pursuant to such first sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended and a public announcement at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of the Common Stock of the Company and of the Preferred Stock shall be the Fair Market Value (as determined pursuant to Section 11(d)) per share of the Common Stock of the Company and the Preferred Stock, respectively, on the Section 11(a)(ii) Trigger Date, the value of any Common Stock Equivalent shall be deemed to have the same value as the Common Stock of the Company on such date and the value of any Preferred Stock Equivalent shall be deemed to have the same value as the Preferred Stock on such date. The Board of Directors may, but will not be required to, establish procedures to allocate the right to receive Common Stock upon the exercise of the Rights among holders of Rights pursuant to this Section 11(a)(iii).
(b) Dilutive Rights Offering. If the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them (for a period expiring within forty-five (45) calendar days after such record date) to subscribe for or purchase Preferred Stock (or securities having the same or more favorable rights, privileges and preferences as the shares of Preferred Stock (“Preferred Stock Equivalents”)) or securities convertible into Preferred Stock or Preferred Stock Equivalents at a price per share of Preferred Stock or per share of Preferred Stock Equivalents (or having a conversion price per share, if a security convertible into Preferred Stock or Preferred Stock Equivalents) less than the Fair Market Value (as determined pursuant to Section 11(d)) per share of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or Preferred Stock Equivalents to be offered (and the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Fair Market Value and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of additional shares of Preferred Stock and Preferred Stock Equivalents to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of a Right be less than the aggregate par value of the shares of stock of the Company issuable upon exercise of a Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be the Fair Market Value thereof determined in accordance with Section 11(d). Shares of Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.
(c) Distributions. If the Company shall fix a record date for the making of a distribution to all holders of Preferred Stock (including any such distribution made in connection with a share exchange, consolidation or merger in which the Company is the continuing or surviving corporation), of evidences of indebtedness, cash (other than a regular periodic cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Preferred Stock, but including any dividend payable in stock other than Preferred Stock) or convertible securities, subscription rights, options or warrants (excluding those referred to in Section 11(b)), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the Fair Market Value (as determined pursuant to Section 11(d)) per one one-thousandth of a share of Preferred Stock on such record date, less the Fair Market Value (as determined pursuant to Section 11(d)) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such convertible securities, subscription rights, options or warrants applicable to one one-thousandth of a share of Preferred Stock and the denominator of which shall be the Fair Market Value (as determined pursuant to Section 11(d)) per one one-
thousandth of a share of Preferred Stock; provided, however, that in no event shall the consideration to be paid upon the exercise of a Rights be less than the aggregate par value of the shares of stock of the Company issuable upon exercise of a Rights. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would be in effect if such record date had not been fixed.
(d) Fair Market Value. For the purpose of this Agreement, the “Fair Market Value” of any share of Preferred Stock, Common Stock or any other stock or any Rights or other security or any other property shall be determined as provided in this Section 11(d).
(i) General. In the case of a publicly-traded stock or other security, the Fair Market Value on any date shall be deemed to be the average of the daily closing prices per share of such stock or per unit of such other security for the thirty (30) consecutive Trading Days immediately prior to such date, and for purposes of computations made pursuant to Section 11(a)(iii), the Fair Market Value on any date shall be deemed to be the average of the daily closing prices per share of stock or per unit of such other security for the ten (10) consecutive Trading Days immediately following but not including such date; provided, however, that in the event that the Fair Market Value per share of any share of stock is determined during a period following the announcement by the issuer of such stock of (x) a dividend or distribution on such stock payable in shares of such stock or securities convertible into shares of such stock or (y) any subdivision, combination or reclassification of such stock, and prior to the expiration of the thirty (30) Trading Day period or ten (10) Trading Day period, as applicable, after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the Fair Market Value shall be properly adjusted to take into account ex-dividend trading. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE MKT or, if the securities are not listed or admitted to trading on the NYSE MKT, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such security is listed or admitted to trading; or, if not listed or admitted to trading on any national securities exchange, the last quoted price (or, if not so quoted, the average of the last quoted high bid and low asked prices) in the over-the-counter market, as reported by the OTC Bulletin Board, the Pink Sheets or such other system then in use; or, if on any such date no bids for such security are quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such security selected by the Board of Directors. If on any such date no market maker is making a market in such security, the Fair Market Value of such security on such date shall be determined in good faith by the Board of Directors whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. If the Fair Market Value of the Preferred Stock cannot be determined in the manner provided above or if the Preferred Stock is not publicly held or not listed or traded in a manner described above, then the Fair Market Value of the Preferred Stock will be conclusively deemed to be (x) the Fair Market Value of the Common Stock as determined pursuant to this Section 11(d) multiplied by (y) 1,000 (as such
number may be appropriately adjusted to reflect any subdivision, combination, consolidation, reverse stock split or reclassification of the Common Stock occurring after the date of this Agreement). If a security (other than the Preferred Stock) is not publicly held or not so listed or traded, or if on any such date such security is not so quoted and no such market maker is making a market in the security, then the Fair Market Value means the fair value per share as determined in good faith by the Board of Directors, after consultation with a nationally recognized investment banking firm, whose determination will be described in a statement filed with the Rights Agent and will be conclusive and binding on the Rights Agent and the holders of the Rights.
(ii) Property or Other Securities. In the case of property other than securities, the Fair Market Value thereof shall be determined in good faith by the Board of Directors, which determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.
(e) Insignificant Changes. Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1.0% in the Purchase Price; provided, however , that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a share of Common Stock of the Company or ten millionth of a share of Preferred Stock, as the case may be, or to such other figure as the Board of Directors may deem appropriate. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three (3) years from the date of the transaction which mandates such adjustment or (ii) the Expiration Date.
(f) Shares Other Than Preferred Stock. If as a result of any provision of Section 11(a) or Section 13(a), the holder of any Right thereafter exercised shall become entitled to receive any shares of stock of the Company other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Section 11(a), (b), (c), (d), (e), (g) through (k) and (m), inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Stock shall apply on like terms to any such other shares.
(g) Rights Issued Subsequent to Adjustment. All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-thousandths of a share of Preferred Stock (or other securities, assets or amount of cash or combination thereof) purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.
(h) Effect of Adjustments on Existing Rights. Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of one one-thousandths of a share of Preferred Stock (calculated to the nearest one-ten millionth) as the Board of Directors determines is appropriate to preserve the economic value of the Rights, including, by way of example, that number obtained by (i) multiplying (x) the number of one one-thousandths of a share of Preferred Stock for which a Rights may be exercisable immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.
(i) Adjustment in Number of Rights. The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of shares of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least ten (10) days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to Section 14, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement.
(j) Rights Certificates Unchanged. Irrespective of any adjustment or change in the Purchase Price or the number of one one-thousandths of a share of Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one ten-thousandth of a share and the number of one ten-thousandths of a share which were expressed in the initial Rights Certificates issued hereunder without prejudice to any adjustment or change.
(k) Par Value Limitations. Before taking any action that would cause an adjustment reducing the Purchase Price below the then aggregate par value, if any, of the number of one one-thousandths of a share of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable shares of Preferred Stock at such adjusted Purchase Price.
(l) Deferred Issuance. In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Rights exercised after such record date the number of one one-thousandths of a share of Preferred Stock or other stock, securities, assets or cash of the Company, if any, issuable upon such exercise over and above the number of one one-thousandths of a share of Preferred Stock and other stock, securities, assets or cash of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares (fractional or otherwise) or securities upon the occurrence of the event requiring such adjustment.
(m) Reduction in Exercise Price. Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole and absolute discretion shall determine to be advisable in order that any consolidation or subdivision of the Preferred Stock or Common Stock, issuance wholly for cash of any shares of Preferred Stock or Common Stock at less than the Fair Market Value, issuance wholly for cash of shares of Preferred Stock or Common Stock or securities which by their terms are convertible into or exchangeable for shares of Preferred Stock, or Common Stock, stock dividends or issuance of rights, options or warrants referred to hereinabove in this Section 11, hereafter made by the Company to holders of its Preferred Stock or Common Stock, shall not be taxable to such stockholders.
(n) No Diminishment of Rights. The Company covenants and agrees that after the Distribution Date it will not, except as permitted by Section 23, Section 24 or Section 28, take (or permit to be taken) any action if at the time such action is taken it is reasonably foreseeable that such action will substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights.
(o) Certain Adjustments to Common Stock. Notwithstanding anything in this Agreement to the contrary, in the event the Company shall at any time after the date of this Agreement and prior to the Distribution Date (i) declare or pay any dividend on the outstanding Common Stock of the Company payable in shares of Common Stock, (ii) subdivide or split the outstanding Common Stock (other than by the payment of dividends payable in Common Stock) (iii) combine or consolidate the outstanding Common Stock (by reverse stock split or otherwise) into a lesser number of shares of Common Stock of the Company, or (iv) issue, change or alter any shares of its capital stock in a reclassification or recapitalization of the Common Stock (including any such reclassification or recapitalization in connection with a share exchange, consolidation or merger in which the Company is the continuing or surviving corporation), then in each such event, except as otherwise provided in this Section 11 or Section 7(e), (A) the number of one one-thousandths of a share of Preferred Stock (or shares of such other capital stock) purchasable after such event upon proper exercise of each Right shall be determined by multiplying the number of one one-thousandths of a share of Preferred Stock (or shares of such other capital
stock) so purchasable immediately prior to such event by a fraction, the numerator of which is the number of shares of Common Stock of the Company outstanding immediately prior to such event and the denominator of which is the number of shares of Common Stock of the Company outstanding immediately after such event, (B) the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, split, combination, consolidation or reclassification will be adjusted so that the Purchase Price thereafter equals the result obtained by multiplying the Purchase Price in effect immediately prior to such time by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such event; provided, however, that in no event will the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon the exercise of such Right, and (C) each share of Common Stock (or shares of capital stock issued in such reclassification of the Common Stock) of the Company outstanding immediately after such event shall have issued with respect to it that number of Rights which each share of Common Stock of the Company outstanding immediately prior to such event had issued with respect to it. Each Share of Common Stock that becomes outstanding after an adjustment has been made pursuant to this Section 11(o) will have issued with it that number of Rights, exercisable at the Purchase Price and for the number of one one-thousandths of a Preferred Share (or shares of such other capital stock), as one share of Common Stock has associated with it immediately following the adjustment made pursuant to this Section 11(o). If an event occurs that would require an adjustment pursuant to both this Section 11(o) and Section 11(a)(ii), then the adjustment provided for in this Section 11(o) will be in addition to, and will be made prior to, any adjustment required pursuant to Section 11(a)(ii). The adjustments provided for in this Section 11(o) shall be made successively whenever such a dividend is declared or paid or such a subdivision, split, combination, consolidation or reclassification is effected.
(p) Adjustment of Rights Associated with Certain Distributions. Other than in connection with a transaction contemplated by Section 11(o), in the event that the Company, at any time after the date of this Agreement and prior to the Distribution Date, issues or distributes any securities or assets in respect of Common Stock (other than (A) a distribution or dividend of its capital stock and (B) pursuant to any non-extraordinary periodic cash dividend), then the Company will make such adjustments, if any, in the Purchase Price or the number of Rights or securities or other property purchasable upon exercise of Rights as the Board of Directors, in its sole discretion, may deem to be appropriate under the circumstances in order to adequately protect the interests of the holders of the Rights generally, and the Company and the Rights Agent will amend this Plan as necessary to provide for such adjustments.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or Section 13, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Preferred Stock and the Common Stock of the Company a copy of such certificate and (c) if a Distribution Date has occurred, mail a brief summary thereof to each holder of a Rights Certificate (or, if prior to the Distribution Date, to each holder of a certificate representing shares of Common Stock of the Company) in accordance with Section 26.
Notwithstanding the foregoing, the failure of the Company to make or provide such certification or notice will not affect the validity of such adjustment or the force or effect of the requirement for such adjustment. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment contained therein and shall not be deemed to have knowledge of any such adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.
(a) In the event that, following the Stock Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any other Person (other than a wholly-owned Subsidiary of the Company in a transaction which is not prohibited by Section 11(n)), and the Company shall not be the continuing or surviving corporation of such consolidation or merger, (y) any Person (other than a wholly-owned Subsidiary of the Company in a transaction which is not prohibited by the proviso at the end of the first sentence of Section 11(n)) shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the shares of Common Stock of the Company shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (z) the Company shall sell, mortgage or otherwise transfer (or one or more of its wholly-owned Subsidiaries shall sell, mortgage or otherwise transfer), in one transaction or a series of related transactions, assets or earning power aggregating 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company or one or more of its wholly-owned Subsidiaries in one or more transactions, each of which individually (and together) is not prohibited by the proviso at the end of the first sentence of Section 11(n)), then, and in each such case, proper provision shall be made so that: (i) each holder of a Right (except as provided in Section 7(e)) shall have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement, and in lieu of Preferred Shares, such number of validly authorized and issued, fully paid and nonassessable shares of freely tradable Common Stock of the Principal Party (as hereinafter defined in Section 13(b)), free and clear of rights of call or first refusal, liens, encumbrances, transfer restrictions or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of one one-thousandths of a share of Preferred Stock for which a Right is exercisable immediately prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section 13 Event, multiplying the number of such one one-thousandths of a Preferred Share for which a Right was exercisable immediately prior to the first occurrence of a Section 11(a)(ii) Event by the Exercise Price in effect immediately prior to such first occurrence of a Section 11(a)(ii) Event), and (2) dividing that product (which, following the first occurrence of a Section 13 Event, will be referred to as the “Purchase Price” for each Right and for all purposes of this Agreement) by 50% of the Fair Market Value (determined pursuant to Section 11(d)) per share of the Common Stock of such Principal Party on the date of consummation of such Section 13 Event, provided, however, that the price per Right so payable and the number of shares of Common Stock of such Principal Party so receivable upon exercise of a Right will be subject to further adjustment as appropriate in accordance with Section 11(e) to reflect any events covered thereby occurring in respect of the Common Stock of such Principal Party after the occurrence of such Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale, mortgage
or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term “Company” shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 shall apply to such Principal Party; (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock to permit exercise of all outstanding Rights in accordance with this Section 13(a) and the making of payments in cash and/or other securities in accordance with Section 11(a)(iii)) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its shares of Common Stock thereafter deliverable upon the exercise of the Rights; (v) the provisions of Section 11(a)(ii) will be of no effect following the first occurrence of any Section 13 Event; and (vi) upon the subsequent occurrence of any consolidation, merger, sale, exchange, mortgage, transfer or other extraordinary transaction in respect of such Principal Party, each holder of a Right will thereupon be entitled to receive, upon exercise of a Right and payment of the Exercise Price as provided in this Section 13(a), such cash, shares, rights, warrants and other property that such holder would have been entitled to receive had such holder, at the time of such transaction, owned the Common Stock of the Principal Party receivable upon the exercise of a Right pursuant to this Section 13(a), and such Principal Party must take such steps (including reservation of a sufficient number of shares of its capital stock) as may be necessary to permit the subsequent exercise of the Rights in accordance with the terms hereof for such cash, shares, rights, warrants and other property.
(b) “Principal Party” shall mean
(i) in the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a), the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger or consolidation, or, if there is more than one such issuer, the issuer of Common Stock that has the highest aggregate Fair Market Value (determined pursuant to Section 11(d)), and if no securities are so issued, the Person that is the other party to the merger or consolidation, or, if there is more than one such Person, the Person the Common Stock of which has the highest aggregate Fair Market Value (determined pursuant to Section 11(d)), if the Person that is the other party to the merger does not survive such consolidation or merger, the Person that does survive such consolidation or merger (including the Company if it survives) or the Person resulting from the consolidation or merger; and
(ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions, or, if each Person that is a party to such transaction or transactions receives the same portion of the assets or earning power transferred pursuant to such transaction or transactions or if the Person receiving the largest portion of the assets or earning power cannot be determined, whichever Person the Common Stock of which has the highest aggregate Fair Market Value (determined pursuant to Section 11(d));
provided, however, that in any such case described in clauses (i) or (ii) of Section 13(b), (1) if the Common Stock of such Person is not at such time and has not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act (“Registered Common Stock”) or such Person is not a corporation, and such Person is a direct or
indirect Subsidiary or Affiliate of another Person who has Registered Common Stock outstanding, “Principal Party” shall refer to such other Person; (2) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is a direct or indirect Subsidiary of another Person but is not a direct or indirect Subsidiary of another Person which has Registered Common Stock outstanding, “Principal Party” shall refer to the ultimate parent entity of such first-mentioned Person; (3) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is directly or indirectly controlled by more than one Person, and one or more of such other Persons has Registered Common Stock outstanding, “Principal Party” shall refer to whichever of such other Persons is the issuer of the Registered Common Stock having the highest aggregate Fair Market Value (determined pursuant to Section 11(d)); and (4) if the Common Stock of such Person is not Registered Common Stock or such Person is not a corporation, and such Person is directly or indirectly controlled by more than one Person, and none of such other Persons has Registered Common Stock outstanding, “Principal Party” shall refer to whichever ultimate parent entity is the corporation having the greatest stockholders’ equity or, if no such ultimate parent entity is a corporation, “Principal Party” shall refer to whichever ultimate parent entity is the entity having the greatest net assets.
(c) Certain Arrangements. The Company shall not consummate any Section 13 Event unless prior thereto (x) the Principal Party shall have a sufficient number of authorized shares of its Common Stock, which have not been issued or reserved for issuance, to permit the exercise in full of the Rights in accordance with this Section 13, and (y) the Company and each Principal Party and each other Person who may become a Principal Party as a result of such consolidation, merger, sale or transfer shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in Section 13(a) and (b) and further providing that, as soon as practicable after the date of any Section 13 Event, the Principal Party at its own expense will:
(i) prepare and file a registration statement under the Securities Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, cause such registration statement to become effective as soon as practicable after such filing and cause such registration statement to remain effective (with a prospectus that at all times meets the requirements of the Securities Act) until the Expiration Date;
(ii) qualify or register the Rights and the securities purchasable upon exercise of the Rights under the blue sky laws of such jurisdictions as may be necessary or appropriate;
(iii) list (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on a national securities exchange or meet the eligibility requirements for listing on an automated quotation system or such other system on which the Common Stock of the Company is then traded;
(iv) deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act; and
(v) take all other action as may be necessary to allow the Principal Party to issue the securities purchasable upon exercise of the Rights.
(d) Prohibited Transactions.
(i) In case the Principal Party which is to be a party to a transaction referred to in this Section 13 has a provision in any of its authorized securities or in its charter or By-laws or other instrument governing its affairs, which provision would have the effect of (A) causing such Principal Party to issue (other than to holders of Rights pursuant to this Section 13), in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, shares of Common Stock of such Principal Party at less than the then current Fair Market Value (determined pursuant to Section 11(d)) or securities exercisable for, or convertible into, Common Stock of such Principal Party at less than such Fair Market Value, or (B) providing for any special payment, tax or similar provisions in connection with the issuance of the Common Stock of such Principal Party pursuant to the provisions of this Section 13, then, in such event, the Company shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been canceled, waived or amended, or that the authorized securities shall be redeemed, so that the applicable provision will have no effect in connection with, or as a consequence of, the consummation of the proposed transaction.
(ii) Notwithstanding anything to the contrary in this Agreement, the Company hereby agrees with each holder of Rights that it will not consummate or permit to occur any Section 13 Event if (A) at the time or immediately after such Section 13 Event there are any rights, warrants, instruments or securities outstanding, or any agreements or arrangements, that, as a result of the consummation of such Section 13 Event, would eliminate or diminish in any material respect the benefits intended to be afforded by the Rights; (B) all rights of first refusal or preemptive rights in respect of the issuance of Common Stock or common stock equivalents of the Principal Party upon exercise of outstanding Rights have not been irrevocably waived or rendered inapplicable; (C) prior to, simultaneously with or immediately after such Section 13 Event, the stockholders of the Person who constitutes, or would constitute, the Principal Party have received a distribution of Rights previously owned by such Person or any of its Affiliates or Associates; or (D) the form or nature of organization of the Principal Party would preclude or limit the exercisability of the Rights.
(e) Continued Applicability. The provisions of this Section 13 will similarly apply to successive mergers, consolidations, sales, exchanges, mortgages, transfers or other extraordinary transactions. In the event that a Section 13 Event occurs at any time after the occurrence of a Section 11(a)(ii) Event, then the Rights that have not theretofore been exercised will thereafter become exercisable in the manner described in Section 13(a) (without taking into account any prior adjustment required by Section 11(a)(ii)).
Section 14. Fractional Rights and Fractional Shares.
(a) Cash in Lieu of Fractional Rights. The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(o), or to distribute Rights Certificates which evidence fractional Rights. If the Company elects not to issue such fractional Rights, the Company shall pay, in lieu of such fractional Rights, to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the Fair Market Value of a whole Right, calculated as of the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable.
(b) Cash in Lieu of Fractional Preferred Stock. The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock) upon exercise or exchange of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock). Interests in fractions of shares of Preferred Stock in integral multiples of one one-thousandth of a shares of Preferred Stock may, at the election of the Company, be evidenced by depositary receipts pursuant to an appropriate agreement between the Company and a depositary selected by the Company; provided, however, that such agreement must provide that the holders of such depositary receipts have all of the rights, privileges and preferences to which they are entitled as Beneficial Owners of the Preferred Stock represented by such depositary receipts. In lieu of fractional shares of Preferred Stock that are not integral multiples of one one-thousandth of a share of Preferred Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised or exchanged as herein provided an amount in cash equal to the same fraction of the Fair Market Value of one one-thousandth of a share of Preferred Stock. For purposes of this Section 14(b), the Fair Market Value of one one-thousandth of a share of Preferred Stock shall be one one thousandth of the Fair Market Value of a share of Preferred Stock, calculated as of the Trading Day immediately prior to the date of such exercise or exchange.
(c) Cash in Lieu of Fractional Shares of Common Stock. The Company is not required to issue fractions of shares of Common Stock or to distribute certificates that evidence fractional shares of Common Stock upon the exercise or exchange of Rights. In lieu of such fractional shares of Common Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised or exchanged as provided herein an amount in cash equal to the same fraction of the current market value of a share of Common Stock. For purposes of this Section 14(c), the current market value of a shares of Common Stock will be the Fair Market Value of a shares of Common Stock, calculated as of the Trading Day immediately prior to the date of such exercise or exchange.
(d) Waiver of Fractional Rights. The holder of a Rights by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Rights, except as permitted by this Section 14.
(e) Procedure for Payment. Whenever a payment for fractional Rights, Preferred Stock or Common Stock is to be made by the Rights Agent pursuant to this Agreement, the Company will (i) promptly prepare and deliver to the Rights Agent a certificate setting forth in reasonable detail the facts related to such payment and the prices or formulas utilized in calculating such payments; and (ii) provide sufficient monies to the Rights Agent to make such payments.
All rights of action in respect of this Agreement, other than rights of action vested in the Rights Agent pursuant to Sections 18 and 20, are vested in the respective registered holders of the Rights Certificates (or, prior to the Distribution Date, the registered holders of the Common Stock of the Company); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the Common Stock of the Company), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the Common Stock of the Company), may, in such registered holder’s own behalf and for such registered holder’s own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Rights that:
(a) prior to the Distribution Date, each Right will be transferable only simultaneously and together with the transfer of shares of Common Stock of the Company;
(b) after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office or offices of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully completed;
(c) subject to Sections 6(a) and 7(f), the Company and the Rights Agent may deem and treat the person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated certificate representing Common Stock of the Company or Book Entry Shares, as applicable) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated certificate representing Common Stock of the Company or Book Entry Shares, as applicable, made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and, subject to Section 7(e), neither the Company nor the Rights Agent shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have allany liability to any holder of a Rights or other Person as the result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, judgment, decree or ruling (whether interlocutory or final) issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority prohibiting or otherwise restraining performance of such obligations; provided, however, that the Company must use commercially reasonable efforts to have any such order, decree or ruling lifted or otherwise overturned as promptly as practical;
(e) Rights that are Beneficially Owned by certain Persons will, under the circumstances set forth in Section 7(e), become null and void; and
(f) this Agreement may be supplemented or amended from time to time in accordance with Section 28.
Section 17. Rights Certificate Holder Not Deemed a Stockholder.
No holder, as such, of any Rights Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the shares of Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise or exchange of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, as such, any of the rights of a stockholder including, but not limited to,of the Company or any right to vote such shares andfor the rightelection of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive dividends;provided, however, that the Award Agreement may provide that any dividend distributed with respect to any Restricted Shares as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Shares and heldnotice of meetings or restrictedother actions affecting stockholders (except as provided in Section 7.02(a).26), or to receive dividends or subscription rights, or otherwise, until the Rights or Rights evidenced by such Rights Certificate shall have been exercised or exchanged in accordance with the provisions hereof.
(c)Section 18. Concerning the Rights Agent.
Restriction(a) The Company agrees to pay to the Rights Agent such compensation as shall be agreed to in writing between the Company and the Rights Agent for all services rendered by it hereunder and, from time to time, on Transferability. Nonedemand of the Restricted SharesRights Agent, its reasonable expenses and attorney fees and disbursements and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability arising therefrom, directly or indirectly. The provisions of this Section 18(a) shall survive the expiration of the Rights and the termination of this Agreement.
(b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Rights Certificate or certificate representing Common Stock of the Company, Preferred Stock, or other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it in good faith and without gross negligence to be genuine and to be signed and executed by the proper Person or Persons.
(c) The Rights Agent shall not be liable for consequential damages under any provision of this Agreement or for any consequential damages arising out of any act or failure to act hereunder. Any liability of the Rights Agent under this Agreement will be limited to the amount of fees paid by the Company to the Rights Agent.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights Agent may be assignedmerged or transferred (other than by willwith which it may effect a share exchange be consolidated, or the laws of descent and distribution,any corporation resulting from any merger, share exchange or to an inter vivos trust with respectconsolidation to which the Participant is treated asRights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the owner under Sections 671 through 677corporate trust or stockholder services business of the Code, exceptRights Agent or any successor Rights Agent, shall be the successor to the extent that Section 16Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the Exchange Act limitsparties hereto, provided that such corporation would be eligible for appointment as a Participant's right to make such transfers), pledged or sold prior to lapse of the restrictions applicable thereto.
(d) Delivery of Shares Upon Vesting. Upon expiration or earlier termination of the forfeiture period without a forfeiture and the satisfaction of or release from any other conditions prescribed by the Committee, or at such earlier time as providedsuccessor Rights Agent under the provisions of Section 7.04,21. The purchase of all or substantially all of the restrictions applicableRights Agent’s assets employed in the performance of this Agreement, or transfer or rights agent services generally, will be deemed to be a merger, share exchange or consolidation for purposes of this Section 19. In case at the time such successor Rights Agent shall succeed to the Restricted Sharesagency created by this Agreement, any of the Rights Certificates shall lapse. As promptly as administratively feasible thereafter, subjecthave been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations expressly imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel selected by it (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the requirementsRights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of “Fair Market Value”) be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof shall be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by a person believed by the Rights Agent to be the Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, the President, a Vice President, the Treasurer, any Assistant Treasurer, the Secretary or an Assistant Secretary of the Company and delivered to the Rights Agent. Any such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Rights Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 7(e)) or any adjustment required under the provisions of Sections 11, 13 or 24(c) or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after receipt of a certificate describing any such adjustment furnished in accordance with Section 12), nor shall it be responsible for any determination by the Board of Directors of the Fair Market Value of the Rights or Preferred Stock pursuant to the provisions of Section 11.05,14; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock of the Company or Preferred Stock to be issued pursuant to this Agreement or any Rights Certificate or as to whether or not any shares of Common Stock of the Company or Preferred Stock will, when so issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder and certificates delivered pursuant to any provision hereof from any person believed by the Rights Agent to be the Chairman of the Board of Directors, any Vice Chairman of the Board of Directors, the President, a Vice President, the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of the Company, and is authorized to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Agreement and the date on or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents.
(j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to clause (1) or clause (2) thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent.
The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days’ notice in writing mailed to the Company by first class mail, provided, however, that in the event the transfer agency relationship in effect between the Company and the Rights Agent with respect to the Common Stock of the Companyterminates, the Rights Agent will be deemed to have resigned automatically on the effective date of such termination. The Company may remove the Rights Agent or any successor Rights Agent (with or without cause), effective immediately or on a specified date, by written notice given to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock of the Company and Preferred Stock, and by giving notice to the holders of the Rights Certificates by any means reasonably determined by the Company to inform such holders of such removal (including without limitation, by including such information in one or more of the Company’s reports to stockholders or reports or filings with the Securities and Exchange Commission). If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall deliverappoint a successor to the ParticipantRights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in casewriting of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), then the incumbent Rights Agent or the registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized and doing business under the laws of the Participant's death,United States, the State of Maryland or the State of New York (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the State of Maryland or the State of New York), in good standing, which is authorized under such laws to exercise stock transfer or corporate trust powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $100,000,000 or (b) an Affiliate of a Person described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the Participant's Beneficiary,successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock of the Company and the Preferred Stock, and give notice to the holders of the Rights Certificates by any means reasonably determined by the Company to inform such holders of such appointment (including without limitation, by including such information in one or more of the Company’s reports to stockholders or reports or filings with the Securities and Exchange Commission). Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by the Board of Directors to reflect any adjustment or change in the Purchase Price per share certificatesand the number or kind or class of shares of stock or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale of shares of Common Stock of the Company following the Distribution Date and prior to the redemption or expiration of the Rights, the Company (a) shall, with respect to shares of Common Stock of the Company so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities hereafter issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors, issue Rights Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustments shall otherwise have been made in lieu of the issuance thereof.
(a) Right to Redeem. The Board of Directors may, at its option, at any time prior to the earlier to occur of (i) the Distribution Date, or (ii) the Close of Business on the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a redemption price of $0.001 per Right, as such amount may be appropriately adjusted to reflect any stock dividend declared or paid, any split, recapitalization, subdivision or combination of the outstanding shares of Common Stock of the Company or any similar event occurring after the date of this Agreement (such redemption price, as adjusted from time to time, being hereinafter referred to as the “Redemption Price”). Notwithstanding anything to the contrary in this Agreement, the Rights will not be exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the Company’s right of redemption pursuant to this Section 23 has expired. Such redemption of the Rights by the Board may be made effective at such time, on such basis and with such conditions as the Board of Director in its sole and absolute discretion may establish. The date on which the Board of Directors elects to make the redemption effective is referred to as the “Redemption Date.”
(b) General Redemption Procedures. Immediately upon the action of the Board of Directors ordering the redemption of the Rights (or at such later time as the Board of Directors may establish for the effectiveness of such redemption), and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Rights so held. Promptly after the action of the Board of Directors ordering the redemption of the Rights in accordance with this Section 23, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to the Rights Agent and to all
such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the Common Stock of the Company. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. The failure to given, or any defect in, any notice required by this Section 23 will not affect the legality or validity of the action taken by the Board of Directors or of the redemption.
(c) Form of Payment of Redemption Price. The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock of the Company (based on the Fair Market Value of the Common Stock of the Company as of the time of redemption) or any other form of consideration deemed appropriate by the Board of Directors, in its sole discretion, to be at least equivalent to the Redemption Price.
(d) Discharge of Obligations. Notwithstanding anything to the contrary in this Agreement, in the event of a redemption pursuant to Section 23(a), the Company may, at its option, discharge all of its obligations with respect to the Rights by (i) issuing a press release or making a publicly-available filing with the Securities and Exchange Commission announcing the manner of redemption of the Rights and (ii) mailing payment of the Redemption Price to the holders of Rights at the addresses of such holders as shown on the transfer books of the Rights Agent or, prior to the Distribution Date, on the transfer books of the Company or the transfer agent for the Common Stock, and upon such action, all outstanding Right Certificates will be void without any further action by the Company.
(e) Prohibited Purchases. Notwithstanding anything to the contrary in this Agreement, neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or Section 24 or in connection with the purchase of shares of Common Stock of the Company prior to the Distribution Date.
(a) Exchange of Common Stock for Rights. The Board of Directors may, at its option, at any time on or after any Person becomes an Acquiring Person, exchange all or part of the then outstanding Rights, whether or not previously exercised (but which exchange shall not include Rights that have become null and void pursuant to the provisions of Section 7(e)) for shares of Common Stock of the Company at an exchange ratio of one share of Common Stock of the Company per Right, appropriately adjusted to reflect any stock split, stock dividend, recapitalization or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the “Exchange Ratio”). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Acquiring Person, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the shares of Common Stock of the Company then outstanding. Notwithstanding the foregoing, from and after the occurrence of a Section 13 Event, any Rights
that theretofore have not been exchanged pursuant to this Section 24(a) will thereafter be exercisable only in accordance with Section 13 and may not be exchanged (or eligible for exchange) pursuant to this Section 24(a).
(b) Exchange Procedures. Immediately upon the action of the Board of Directors ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock free of the Company equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give notice of any such exchange in accordance with Section 27 and shall promptly mail a notice of any such exchange to all of the holders of such restrictions, exceptRights at their last addresses as they appear upon the registry books of the Rights Agent; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares of Common Stock of the Company for Rights will be effected and, in the event of any restrictionspartial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become null and void pursuant to the provisions of Section 7(e)) held by each holder of Rights. Following the determination to exchange rights pursuant to this Section 24, the Company may implement such procedures as it deems appropriate, in its sole and absolute discretion, to minimize the possibility that any shares of Common Stock (or other consideration) issuable pursuant to this Section 24 are received by Persons whose Rights are null and void pursuant to Section 7(e). Prior to effecting any exchange, the Company may require as a condition thereof, that any registered holder of Rights provide such evidence (including the identity of the Beneficial Owner (or former Beneficial Owner) thereof and the Affiliates or Associates of such Beneficial Owner or former Beneficial Owner) as the Company may reasonably request in order to determine if such Rights are null and void pursuant to Section 7(e). If such registered holder does not comply with the foregoing requirements, then the Company will be entitled to conclusively deem such Rights to be Beneficially Owned by an Acquiring Person (or an Affiliate or Associate of an Acquiring Person, or any Person described in Section 7(e)) and, accordingly, such Rights will be null and void and not exchangeable in connection herewith. Any shares of Common Stock (or other securities) issued at the direction of the Board of Directors pursuant to this Section 24 will be duly and validly authorized and issued and fully paid and nonassesable, and the Company will be deemed to have received as consideration for such issuance a benefit having a calculate that is at least equal to the aggregate par value of the shares of Common Stock (or other securities) so issued. The failure to give, or any defect in, any notice required by this Section 24 will not affect the legality or validity f the action taken by the Board of Directors. The exchange of the Rights pursuant to Section 24(a) may be imposed by law.made effective at such time, on such basis and with such conditions as the Board of Directors, in its sole and absolute discretion, may establish.
(e)(c) Forfeiture of Restricted Shares.Preferred Stock Substitution Subject. In any exchange pursuant to Sections 7.02(f) and 7.04, all Restricted Shares shall be forfeited and returned tothis Section 24, the Company, and allat its option, may substitute Preferred Stock (or Preferred Stock Equivalent, as such term is defined in Section 11(b)) for Common Stock of the Company exchangeable for Rights, at the initial rate of one one-thousandth of a share of Preferred Stock (or Preferred Stock Equivalent) for each share of Common Stock of the Company, as appropriately adjusted to
reflect adjustments in the voting rights of the ParticipantPreferred Stock pursuant to the terms thereof, so that the fraction of a share of Preferred Stock delivered in lieu of each share of Common Stock of the Company shall have the same voting rights as one share of Common Stock of the Company.
(d) Insufficient Shares. In the event that there shall not be sufficient shares of Common Stock of the Company authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock of the Company for issuance upon exchange of the Rights or alternatively, at the option of the Board of Directors, with respect to such Restrictedeach Right (i) pay cash in lieu of issuing Shares shall terminate unless the Participant continues in the service of the Company or an Affiliate as an employee until the expiration of the forfeiture period for such Restricted Shares and satisfies any and all other conditions set forth in the Award Agreement. The Committee shall determine the forfeiture period (which may, but need not, lapse in installments) and any other terms and conditions applicable with respect to any Restricted Share Award.
(f) Waiver of Forfeiture Period. Notwithstanding anything contained in this Article VII to the contrary, the Committee may, in its sole discretion, waive the forfeiture period and any other conditions set forth in any Award Agreement under appropriate circumstances (including the death, disability or retirement of the Participant or a material change in circumstances arising after the date of an Award) and subject to such terms and conditions (including forfeiture of a proportionate number of the Restricted Shares) as the Committee shall deem appropriate.
(a) Settlement of Restricted Stock Units. Payments shall be made to Participants with respect to their Restricted Stock Units as soon as practicable after the Committee has determined that the terms and conditions applicable to such Award have been satisfied or at a later date if distribution has been deferred. Payments to Participants with respect to Restricted Stock Units shall be made in the form of Common Stock or cash or a combination of both, asin exchange therefor in an amount equal to the Committee may determine. The amount of any cash to be paid in lieu of Common Stock shall be determined on the basisproduct of the Fair Market Value of the Common Stock on the date any such payment is processed. As to shares of
Common Stock which constitute all or any part of such payment, the Committee may impose such restrictions concerning their transferability and/or their forfeiture as may be provided in the applicable Award Agreement or as the Committee may otherwise determine, provided such determination is made on or before the date certificates for such shares are first delivered to the applicable Participant.
(b) Shareholder Rights. Until the lapse or release of all restrictions applicable to an Award of Restricted Stock Units, no shares of Common Stock shall be issued in respect of such Awards and no Participant shall have any rights as a shareholder of the Company with respect to the shares of Common Stock coveredmultiplied by such Award of Restricted Stock Units.
(c) Waiver of Forfeiture Period. Notwithstanding anything contained in this Section 7.03 to the contrary, the Committee may, in its sole discretion, waive the forfeiture period and any other conditions set forth in any Award Agreement under appropriate circumstances (including the death, Disability or retirement of the Participant or a material change in circumstances arising after the date of an Award) and subject to such terms and conditions (including forfeiture of a proportionate number of shares issuable upon settlement of the Restricted Stock Units constituting an Award) as the Committee shall deem appropriate.
(d) Deferral of Payment. If approved by the Committee and set forth in the applicable Award Agreement, a Participant may elect to defer the amount payable with respect to the Participant's Restricted Stock Units in accordance with such terms as may be established by the Committee, subject to the requirements of Section 409A of the Code.
7.04 Change in Control. With respect to each Award of Restricted Stock or Restricted Stock Units, the Committee shall determine whether and to what extent such Restricted Stock or Restricted Stock Units shall become immediately and fully exercisable in the event of a Change in Control or upon the occurrence of one or more specified conditions following a Change in Control. Notwithstanding the foregoing, unless otherwise determined by the Committee, no Change in Control of the Company shall be deemed to have occurred for purposes of determining a Participant's rights under this Plan if (a) the Participant is a member of a group that first announces a proposal which, if successful, would result in a Change in Control, which proposal (including any modifications thereof) is ultimately successful, or (b) the Participant acquires a two percent (2%) or more equity interest in the entity that ultimately acquires the Company pursuant to the transaction described in clause (a) of this Section 7.04.
ARTICLE VIIIPERFORMANCE AWARDS
(a) Award Periods and Calculations of Potential Incentive Amounts. The Committee may grant Performance Awards to Participants. A Performance Award shall consist of the right to receive a payment (measured by the Fair Market Value of a specified number of shares of Common Stock, increases in such Fair Market Value during the Award Period and/or a fixed cash amount) contingent upon the extent to which certain predetermined performance targets have been met during an Award Period. The Award Period shall be one or more fiscal or calendar years as determined by the Committee. The Committee, in its discretion and under such terms as it deems appropriate, may permit newly eligible Participants, such as those who are promoted or newly hired, to receive Performance Awards after an Award Period has commenced.
(b) Performance Targets. Subject to Section 11.18, the performance targets applicable to a Performance Award may include such goals related to the performance of the Company or, where relevant, any one or more of its Affiliates or divisions and/or the performance of a Participant as may be established by the Committee in its discretion. In the case of Performance Awards to "covered employees" (as defined in Section 162(m) of the Code), the targets will be limited to specified levels of one or more of the Performance Goals. The performance targets established by the Committee may vary for different Award Periods and need not be the same for each Participant receiving a Performance Award in an Award Period.
(c) Earning Performance Awards. The Committee, at or as soon as practicable after the Date of Grant, shall prescribe a formula to determine the percentage of the Performance Award to be earned based upon the degree of attainment of the applicable performance targets.
(d) Payment of Earned Performance Awards. Subject to the requirements of Section 11.05, payments of earned Performance Awards shall be made in cash or Common Stock, or a combination of cash and Common Stock, in the discretion of the Committee. The Committee, in its sole discretion, may define, and set forth in the applicable Award Agreement, such terms and conditions with respect to the payment of earned Performance Awards as it may deem desirable.
8.02 Termination of Service or Change in Control. The Award Agreement with respect to any Performance Award shall contain provisions dealing with the disposition of such Award in the event of a Change in Control or in the event of a Termination of Services prior to the exercise, realization or payment of such Award, with such provisions to take account of the specific nature and purpose of the Award.
ARTICLE IX
OTHER STOCK-BASED AWARDS
9.01 Grant of Other Stock-Based Awards. Other stock-based awards, consisting of stock purchase rights (with or without loans to Participants by the Company containing such terms as the Committee shall determine), Awards of Common Stock, or Awards valued in whole or in part by reference to, or otherwise based on, Common Stock, may be granted either alone or in addition to or in conjunction with other Awards under the Plan. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the persons to whom and the time or times at which such Awards shall be made, the number of shares of Common Stock for which the Right would otherwise be exchangeable (without regard to whether there were sufficient shares of Common Stock available therefore) (the “Current Exchange Value”); (ii) issue debt or equity securities (or a combination thereof) having a value equal to the Current Exchange Value in lieu of issuing Common Stock in exchange for each such Right, where the value of such securities will be granted pursuant to such Awards, and all other conditions of the Awards. Any such Award shall be confirmed by an Award Agreement executeddetermined by the CommitteeBoard of Directors based upon the advice of a nationally recognized investment banking firm selected by the Board of Directors, which determination will be described in a written statement filed with the Rights Agent and will be binding on the Rights Agent and the Participant, which Award Agreement shall contain such provisions as the Committee determines to be necessaryholders of Rights; or appropriate to carry out the intent(iii) deliver any combination of this Plan with respect to such Award.
9.02 Terms of Other Stock-Based Awards. In additioncash, property, Common Stock, Preferred Stock, Common Stock Equivalents, Preferred Stock Equivalents or other securities having a value equal to the terms and conditions specifiedCurrent Exchange Value in exchange for each Right. To the Award Agreement, Awards madeextent that the Company determines that some action need be taken pursuant to this Article IX shall be subjectSection 24(d), then the Board of Directors may temporarily suspend the exercisability of the Rights for a period of up to the following:
(a) Any Common Stock subject to Awards made under this Article IX may not be sold, assigned, transferred, pledged or otherwise encumbered prior to120 days following the date on which the Board of Directors orders the exchange of Rights pursuant to Section 24(a) in order to seek any authorization of additional shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses; and
(b) If specified by the Committee in the Award Agreement, the recipient of an Award under this Article IX shall be entitled to receive, currently or on a deferred basis, interest or dividends or dividend equivalents with respect to the Common Stock or other securities covered byto decide the Award; and
(c) The Award Agreement with respectappropriate form of distribution to any Award shall contain provisions dealing with the disposition of such Award in the event of a Termination of Service priorbe made pursuant to the exercise, payment or other settlement ofabove provision and to determine the value thereof. Upon any such Award, whether such termination occurs because of retirement, disability, death or other reason, with such provisions to take accountsuspension, the Company will issue a public announcement stating, and notify the Rights Agent in writing, that the exercisability of the specific natureRights has been temporarily suspended, as well as issue a public announcement, and purpose ofnotify the Award.
ARTICLE X
SHORT-TERM CASH INCENTIVE AWARDS
10.01 Eligibility. Executive officers of the Company who are from time to time determined by the Committee to be "covered employees" for purposes of Section 162(m) of the Code will be eligible to receive short-term cash incentive awards under this Article X.
10.02 Awards.
(a) Performance Targets. The Committee shall establish objective performance targets based on specified levels of one or more of the Performance Goals. Such performance targets shall be established by the Committee on a timely basis to ensure that the targets are considered "preestablished" for purposes of Section 162(m) of the Code.
(b) Amounts of Awards. In conjunction with the establishment of performance targets for a fiscal year or such other short-term performance period established by the Committee, the Committee shall adopt an objective formula (on the basis of percentages of Participants' salaries, sharesRights Agent in a bonus pool or otherwise) for computing the respective amounts payable under the Plan to Participants if and to the extent that the performance targets are attained. Such formula shall comply with the requirements applicable to performance-based compensation plans under Section 162(m) of the Code and, to the extent based on percentages of a bonus pool, such percentages shall not exceed 100% in the aggregate.
(c) Payment of Awards. Awards will be payable to Participants in cash each year upon prior written certification by the Committee of attainment of the specified performance targets for the preceding fiscal year or other applicable performance period.
(d) Negative Discretion. Notwithstanding the attainment by the Company of the specified performance targets, the Committee shall have the discretion, which need not be exercised uniformly among the Participants, to reduce or eliminate the award that would be otherwise paid.
(e) Guidelines. The Committee may adopt from time to time written policies for its implementation of this Article X. Such guidelines shall reflect the intention of the Company that all payments hereunder qualify as performance-based compensation under Section 162(m) of the Code.
(f) Non-Exclusive Arrangement. The adoption and operation of this Article X shall not preclude the Board or the Committee from approving other short-term incentive compensation arrangements for the benefit of individuals who are Participants hereunder as the Board or Committee, as the case may be, deems appropriate and in the best interests of the Company.
ARTICLE XI
TERMS APPLICABLE GENERALLY TO AWARDSGRANTED UNDER THE PLAN
11.01 Plan Provisions Control Award Terms. Except as provided in Section 11.16, the terms of the Plan shall govern all Awards granted under the Plan, and in no event shall the Committee have the power to grant any Award under the Plan which is contrary to any of the provisions of the Plan. In the event any provision of any Award granted under the Plan shall conflict with any term in the Plan as constituted on the Date of Grant of such Award, the term in the Plan as constituted on the Date of Grant of such Award shall control. Except as provided in Section 11.03 and Section 11.07, the terms of any Award granted under the Plan may not be changed after the Date of Grant of such Award so as to materially decrease the value of the Award without the express written approval of the holder.
11.02 Award Agreement. No person shall have any rights under any Award granted under the Plan unless and until the Company and the Participant to whom such Award shall have been granted shall have executed and delivered an Award Agreement or received any other Award acknowledgment authorized by the Committee expressly granting the Award to such person and containing provisions setting forth the terms of the Award.
11.03 Modification of Award After Grant. No Award granted under the Plan to a Participant may be modified (unless such modification does not materially decrease the value of the Award) after the Date of Grant except by express written agreement between the Company and the Participant, provided that any such change (a) shall not be inconsistent with the terms of the Plan, and (b) shall be approved by the Committee.
11.04 Limitation on Transfer. Except as provided in Section 7.02(c) in the case of Restricted Shares, a Participant's rights and interest under the Plan may not be assigned or transferred other than by will or the laws of descent and distribution, and during the lifetime of a Participant, only the Participant personally (or the Participant's personal representative) may exercise rights under the Plan. The Participant's Beneficiary may exercise the Participant's rights to the extent they are exercisable under the Plan following the death of the Participant. Notwithstanding the foregoing, to the extent permitted under Section 16(b) of the Exchange Act with respect to Participants subject to such Section, the Committee may grant Non-Qualified Stock Options that are transferable, without payment of consideration, to immediate family members of the Participant or to trusts or partnerships for such family members, and the Committee may also amend outstanding Non-Qualified Stock Options to provide for such transferability.
11.05 Taxes. The Company shall be entitled, if the Committee deems it necessary or desirable, to withhold (or secure payment from the Participant in lieu of withholding) the amount of any withholding or other tax required by law to be withheld or paid by the Company with respect to any amount payable and/or shares issuable under such Participant's Award, and the Company may defer payment or issuance of the cash or shares upon exercise or vesting of an Award unless indemnified to its satisfaction against any liability for any such tax. The amount of such withholding or tax payment shall be determined by the Committee and shall be payable by the Participantwriting, at such time as the Committee determinessuspension is no longer in effect.
(e) Fractional Shares. The Company shall not be required to issue fractions of Common Stock of the Company or to distribute certificates which evidence fractional shares of Common Stock of the Company. If the Company elects not to issue such fractional shares of Common Stock of the Company, the Company shall pay, in lieu of such fractional shares of Common Stock of the Company, to the registered holders of the Rights Certificates with regard to which such fractional shares of Common Stock of the Company would otherwise be issuable, an amount in cash equal to the same fraction of the Fair Market Value of a whole share of Common Stock of the Company. For the purposes of this paragraph (e), the Fair Market Value of a whole share of Common Stock of the Company shall be the closing price of a share of Common Stock of the Company (as determined pursuant to the second sentence of Section 11(d)(i)) for the Trading Day immediately prior to the date the Board of Directors ordered the exchange of Rights pursuant to this Section 24.
Section 25. Process to Seek Exemption.
Any Person who desires to effect any acquisition of Common Stock that would, if consummated, result in such Person beneficially owning 4.99% or more of the then outstanding Common Stock (or, in the case of an Existing Holder, additional shares of Common Stock) (a “Requesting Person”) may, prior to the Stock Acquisition Date and in accordance with this Section 25, request that the following rules:
(a) The ParticipantBoard of Directors grant an exemption with respect to such acquisition under this Plan so that such Person would be deemed to be an “Exempt Person” under subsection (v) of the definition thereof in Section 1 for purposes of this Agreement (an “Exemption Request”). An Exemption Request shall havebe in proper form and shall be delivered by overnight delivery service or registered mail, return receipt requested, to the right to elect to meet his or her withholding requirement (i) by having withheld from such AwardSecretary of the Company at the appropriate time thatprincipal executive office of the Company. The Exemption Request shall be deemed made upon receipt by the Secretary of the Company. To be in proper form, an Exemption Request shall set forth (i) the name and address of the Requesting Person, (ii) the number and percentage of shares of Common Stock rounded down tothen Beneficially Owned by the nearest whole share, whose Fair Market Value is equal to the amount of withholding taxes due, (ii) by direct payment to the Company in cashRequesting Person, together with all Affiliates and Associates of the amountRequesting Person, and (iii) a reasonably detailed description of any taxes requiredthe transaction or transactions by which the Requesting Person would propose to be withheld with respect to such Awardacquire Beneficial Ownership of Common Stock aggregating 4.99% or (iii) by a combinationmore of shares and cash.
(b) Inthe then outstanding Common Stock (or in the case of Participants who are subject to Section 16an Existing Holder, additional shares of Common Stock) and the Exchange Act, the Committee may impose such limitationsmaximum number and restrictions as it deems necessary or appropriate with respect to the delivery or withholdingpercentage of shares of Common Stock that the Requesting Person proposes to meet tax withholding obligations.
11.06 Surrenderacquire. The Board of Awards.Directors shall make a determination whether to grant an exemption in response to an Exemption Request as promptly as practicable (and, in any event, within ten (10) Business Days) after receipt thereof; provided Any Award granted under, that the Plan may be surrendered to the Company for cancellation on such terms as the Committee and the holder approve. With the consentfailure of the Participant, the Committee may substitute a new Award under this Plan in connection with the surrender by the ParticipantBoard of an equity compensation award previously granted under this Plan or any other plan sponsored by the Company.
11.07 Adjustments to Reflect Capital Changes.
(a) Recapitalization. In the event of any corporate event or transaction (including, but not limited to, a change in the Common Stock or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, spin-off, or other distribution of stock or property of the Company, a combination or exchange of Common Stock, dividend in kind, or other like change in capital structure, number of outstanding shares of Common Stock, distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Committee, in order to prevent dilution or enlargement of Participants' rights under this Plan, shall make equitable and appropriate adjustments and substitutions, as applicable, to or of the number and kind of shares subject to outstanding Awards, the Exercise Price for such shares, the number and kind of shares available for future issuance under the Plan and the maximum number of shares in respect of which Awards can be made to any Participant in any calendar year, and other determinations applicable to outstanding Awards. The Committee shall have the power and sole discretion to determine the amount of the adjustment to be made in each case.
(b) Merger. In the event that the Company is a party to a Merger, outstanding Awards shall be subject to the agreement of merger or reorganization. Such agreement may provide, without limitation, for the continuation of outstanding Awards by the Company (if the Company is a surviving corporation), for their assumption by the surviving corporation or its parent or subsidiary, for the substitution by the surviving corporation or its parent or subsidiary of its own awards for such Awards, for accelerated vesting and accelerated expiration, or for settlement in cash or cash equivalents.
(c) Options to Purchase Shares or Stock of Acquired Companies. After any Merger in which the Company or an Affiliate shall be a surviving corporation, the Committee may grant substituted options under the provisions of the Plan, pursuant to Section 424 of the Code, replacing old options granted under a plan of another party to the Merger whose shares or stock subject to the old options may no longer be issued following the Merger. The foregoing adjustments and manner of application of the foregoing provisions shall be determined by the Committee in its sole discretion. Any such adjustments may provide for the elimination of any fractional shares which might otherwise become subject to any Options.
11.08 No Right to Continued Service. No person shall have any claim of right to be granted an Award under this Plan. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the service of the Company or any of its Affiliates.
11.09 Awards Not Includable for Benefit Purposes. Payments received by a Participant pursuant to the provisions of the Plan shall not be included in the determination of benefits under any pension, group insurance or other benefit plan applicable to the Participant which is maintained by the Company or any
of its Affiliates, except as may be provided under the terms of such plans or determined by the Committee.
11.10 Governing Law. All determinations made and actions taken pursuant to the Plan shall be governed by the laws of the State of California and construed in accordance therewith.
11.11 No Strict Construction. No rule of strict construction shall be implied against the Company, the Committee, or any other person in the interpretation of any of the terms of the Plan, any Award granted under the Plan or any rule or procedure established by the Committee.
11.12 Compliance with Rule 16b-3. It is intended that, unless the Committee determines otherwise, Awards under the Plan be eligible for exemption under Rule 16b-3. The Board is authorized to amend the Plan andDirectors to make anya determination within such modifications to Award Agreements to comply with Rule 16b-3, as it may be amended from time to time, and to make any other such amendments or modifications as it deems necessary or appropriate to better accomplish the purposes of the Plan in light of any amendments made to Rule 16b-3.
11.13 Captions. The captions (i.e., all Section headings) used in the Plan are for convenience only, do not constitute a part of the Plan, andperiod shall not be deemed to limit, characterize or affect in any way any provisionsconstitute the denial by the Board of Directors of the Plan,Exemption Request. The Requesting Person shall respond promptly to reasonable and all provisions of the Plan shall be construed as if no captions have been used in the Plan.
11.14 Severability. Whenever possible, each provision in the Plan and every Award at any time granted under the Plan shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Plan or any Award at any time granted under the Plan shall be held to be prohibited by or invalid under applicable law, then (a) such provision shall be deemed amended to accomplish the objectives of the provision as originally written to the fullest extent permitted by law and (b) all other provisions of the Plan and every other Award at any time granted under the Plan shall remain in full force and effect.
11.15 Amendment and Termination.
(a) Amendment. The Board shall have complete power and authority to amend the Plan at any time; provided, however, thatappropriate requests for additional information from the Board shall not, without the requisite affirmative approval of stockholders of the Company, make any amendment which requires stockholder approval under the Code or under any other applicable law or rule of any stock exchange or listing service which lists Common Stock or Company Voting Securities. No termination or amendment of the Plan may, without the consent of the Participant to whom any Award shall theretofore have been granted under the Plan, adversely affect the right of such individual under such Award.
(b) Termination. The Board shall have the right and the power to terminate the Plan at any time. No Award shall be granted under the Plan after the termination of the Plan, but the termination of the Plan shall not have any other effect on any Award outstanding at the time of the termination of the Plan and any such outstanding Award will continue in accordance with its terms and conditions.
11.16 Foreign Qualified Awards. Awards under the Plan may be granted to such employees, directors and consultants of the CompanyDirectors and its Affiliates who are residingadvisors to assist the Board of Directors in foreign jurisdictions asmaking its determination. For purposes of considering the Committee in its sole discretion may determine from time to time. The Committee may adopt such supplements to the Plan as may be necessary or appropriate to comply with the applicable lawsExemption Request, any calculation of such foreign jurisdictions and to afford Participants favorable treatment under such laws.
11.17 Dividend Equivalents. For any Award granted under the Plan, the Committee shall have the discretion, upon the Date of Grant or thereafter, to establish a Dividend Equivalent Account with respect to the Award, and the applicable Award Agreement or an amendment thereto shall confirm such establishment. If a Dividend Equivalent Account is established, the following terms shall apply:
(a) Terms and Conditions. Dividend Equivalent Accounts shall be subject to such terms and conditions as the Committee shall determine and as shall be set forth in the applicable Award Agreement. Such terms and conditions may include, without limitation, for the Participant's Account to be credited as of the record date of each cash dividend on the Common Stock with an amount equal to the cash dividends which would be paid with respect to the number of shares of Common Stock then covered byoutstanding at any particular time, including for purposes of determining the related Awardparticular percentage of such outstanding Common Stock of which any Person is the Beneficial Owner, shall be made pursuant to and in accordance with Section 382 of the Code. The Board of Directors shall only grant an exemption in response to an Exemption Request if suchthe Board of Directors determines in its sole and absolute discretion that the acquisition of Beneficial Ownership of shares of Common Stock had been owned of record by the ParticipantRequesting Person (A) will not adversely impact in any material respect the time period in which the Company could use the Tax Benefits or limit or impair the availability to the Company of the Tax Benefits or (B) is in the best interests of the Company despite the fact that it may adversely impact in a material respect the time period in which the Company could use the Tax Benefits or limit or impair the availability to the Company of the Tax Benefits. Any exemption granted hereunder may be granted in whole or in part, and may be subject to limitations or conditions (including a requirement that the Requesting Person agree that it will not acquire Beneficial Ownership of shares of Common Stock in excess of the maximum number and percentage of shares approved by the Board of Directors), in each case as and to the extent the Board of Directors shall determine necessary or desirable to provide for the protection of the Company’s Tax Benefits. Any Exemption Request may be submitted on a confidential basis and, except to the extent required by applicable law, the Company shall maintain the confidentiality of such record date.Exemption Request and the Board of Directors’ determination with respect thereto, unless the information contained in the Exemption Request or
(b) Unfunded Obligation. Dividend Equivalent Accounts
the Board of Directors’ determination with respect thereto otherwise becomes publicly available. The Exemption Request shall be establishedconsidered and maintained onlyevaluated by directors serving on the books and recordsBoard of Directors, or a duly constituted committee thereof, who are independent of the Company and no assets or fundsthe Requesting Person and disinterested with respect to the Exemption Request, and the action of a majority of such independent and disinterested directors shall be deemed to be the determination of the Board of Directors for purposes of such Exemption Request.
Section 26. Notice of Certain Events.
(a) Certain Distributions. In case the Company shall be set aside, placedpropose, at any time after the Distribution Date, (i) to pay any dividend payable in trust, removed fromstock of any class to the claimsholders of Preferred Stock or to make any other distribution to the holders of Preferred Stock (other than a regular periodic cash dividend out of earnings or retained earnings of the Company's general creditors,Company), or otherwise made available until such amounts are actually payable as provided hereunder.
11.18 Adjustment of Performance Goals and Targets. Notwithstanding any provision of the Plan(ii) to offer to the contrary, the Committee shall have the authorityholders of Preferred Stock rights or warrants to adjustsubscribe for or to purchase any Performance Goal, performance targetadditional shares of Preferred Stock or other performance-based criteria established with respect toshares of stock of any Award under the Plan if circumstances occur (including, but not limited to, unusual or nonrecurring events, changes in tax laws or accounting principles or practices or changed business or economic conditions) that cause any such Performance Goal, performance target or performance-based criteria to be inappropriate in the judgment of the Committee; provided, that with respect to any Award that is intended to qualify for the "performance-based compensation" exception under Section 162(m) of the Code and the regulations thereunder, any adjustment by the Committee shall be consistent with the requirements of Section 162(m) and the regulations thereunder.
11.19 Legality of Issuance. Notwithstanding any provision of this Planclass or any applicable Award Agreementother securities, rights or options, or (iii) to effect any reclassification of Preferred Stock (other than a reclassification involving only the contrary, the Committee shall have the sole discretionsubdivision of outstanding shares of Preferred Stock), or (iv) to impose such conditions, restrictions and limitations (including suspending exercises of Optionseffect any consolidation or Stock Appreciation Rights and the tolling ofmerger into or with, or to effect any applicable exercise period during such suspension) on the issuance of Common Stock with respect to any Award unless and until the Committee determines that such issuance complies with (a) any applicable registration requirements under the Securities Act of 1933 or the Committee has determined that an exemption therefrom is available, (b) any applicable listing requirement of any stock exchange on which the Common Stock is listed, (c) any applicable Company policy or administrative rules, and (d) any other applicable provision of state, federal or foreign law, including foreign securities laws where applicable.
11.20 Restrictions on Transfer. Regardless of whether the offering and sale, of Common Stock under the Plan have been registered under the Securities Act of 1933 or have been registered or qualified under the securities laws of any state, the Company may impose restrictions upon the sale, pledge,mortgage or other transfer (or to permit one or more of such Common Stock (includingits Subsidiaries to effect any sale, mortgage or other transfer), in one transaction or a series of related transactions, of 50% or more of the placement of appropriate legends on stock certificates) if, in the judgmentassets or earning power of the Company and its counsel,Subsidiaries (taken as a whole) to, any other Person (other than a Subsidiary of the Company in one or more transactions each of which is not prohibited by the proviso at the end of the first sentence of Section 11(n)), or (v) to effect the liquidation, dissolution or winding up of the Company, or (vi) to declare or pay any dividend on the Common Stock of the Company payable in Common Stock of the Company or to effect a subdivision, combination or consolidation of the Common Stock of the Company (by reclassification or otherwise than by payment of dividends in Common Stock of the Company) then in each such restrictions are necessarycase, the Company shall give to each holder of a Rights Certificate and to the Rights Agent, in accordance with Section 27, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution of rights or desirablewarrants, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to achieve compliancetake place and the date of participation therein by the holders of the shares of Common Stock of the Company and/or Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least twenty (20) days prior to the record date for determining holders of the shares of Preferred Stock for purposes of such action, and in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the shares of Common Stock of the Company and/or Preferred Stock, whichever shall be the earlier; provided, however, no such notice shall be required pursuant to this Section 26 as a result of any Subsidiary of the Company effecting a consolidation or merger with or into, or effecting a sale or other transfer of assets or earnings power to, any other Subsidiary of the Company in a manner not inconsistent with the provisions of this Agreement.
(b) Certain Events. In case any Triggering Event shall occur, then, in any such case, the Company shall as soon as practicable thereafter give to each registered holder of a Rights Certificate and to the Rights Agent, in accordance with Section 27, a notice of the occurrence of
such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) or Section 13.
Section 27. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made if in writing sent by first-class mail, postage prepaid, by facsimile transmission (when such fax is transmitted to the fax number set forth below and confirmation of transmission is received) or by nationally-recognized overnight courier addressed (until another address is filed in writing with the Rights Agent) as follows:
Impac Mortgage Holdings, Inc.
19500 Jamboree Road
Irvine, California 92612
Facsimile: 949-475-3969
Attention: General Counsel
Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, by facsimile transmission (when such fax is transmitted to the fax number set forth below and confirmation of transmission is received) or by nationally-recognized overnight courier addressed (until another address is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company, LLC
6201 15 th Avenue
Brooklyn, NY 11219
Facsimile: 718-921-8200
Attention: General Counsel
Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, prior to the Distribution Date, to the holder of any certificate representing shares of Common Stock of the Company) shall be sufficiently given or made if sent by recognized national overnight delivery service or first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. Any notice that is sent or mailed in the manner herein provided will be deemed given whether or not the holder receives the notice. Notwithstanding anything to the contrary in this Agreement, prior to the Distribution Date, the issuance of a press release or the making of a publicly-available filing by the Company with the Securities Actand Exchange Commission will constitute sufficient notice by the Rights Agent or the Company to the holders of 1933,securities of the securitiesCompany, including the Rights, for all purposes of this Agreement and no other notice need be given.
Section 28. Supplements and Amendments.
Prior to the occurrence of a Distribution Date, the Company may in its sole and absolute discretion and the Rights Agent shall, if the Board of Directors so directs, supplement or amend any provision of this Agreement as the Board of Directors may deem necessary or desirable
without the approval of any holders of certificates representing shares of Common Stock of the Company. From and after the occurrence of a Distribution Date, the Company and the Rights Agent shall, if the Board of Directors so directs, supplement or amend this Agreement without the approval of any holder of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein or otherwise defective, including any change in order to satisfy any applicable law, rule or regulation, (iii) to shorten or lengthen any time period hereunder, or (iv) to change or supplement the provisions hereof in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Rights Certificates (other than an Acquiring Person or any Affiliate or Associate of an Acquiring Person or Any Person described in Section 7(e)); provided, however, that this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, a time period relating to when the Rights may be redeemed at such time as the Rights are not then redeemable, provided further, however, that the right of the Board of Directors to extend the Distribution Date does not require any amendment or supplement hereunder. Upon the delivery of such certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 28, the Rights Agent shall execute such supplement or amendment, and any failure of the Rights Agent to so execute such supplement or amendment shall not affect the validity of the actions taken by the Board of Directors pursuant to this Section 28; provided, that any supplement or amendment that does not amend Section 18, Section 19, Section 20 or Section 21 or this Section 28 or any other Section of this Plan in a manner that is adverse to the Rights Agent will become effective immediately upon execution by the Company, whether or not also executed by the Rights Agent. Prior to the occurrence of a Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock of the Company. Notwithstanding any other provision hereof, the Rights Agent’s consent must be obtained regarding any amendment or supplement pursuant to this Section 28 which alters the Rights Agent’s rights or duties.
All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
Section 30. Determinations and Actions by the Board of Directors.
The Board of Directors shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board of Directors or to the Company, or as may be necessary or advisable in the administration of this Agreement, including without limitation, the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations and computations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board of Directors in good faith shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other Persons, and
(y) not subject any member of the Board of Directors to any liability to any Person, including the Rights Agent and the holders of the Rights. In administering this Agreement, and exercising the right and powers specifically granted to the Board of Directors and to the Company hereunder, and in interpreting this Agreement and making any determination hereunder, the Board of Directors (or an authorized committee thereof) may consider any and all facts, circumstances or information that it deems to be necessary, useful or appropriate.
Section 31. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, the Common Stock of the Company) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of the Common Stock of the Company).
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors determines in good faith that severing the invalid language from the Agreement would adversely affect the purpose or effect of the Agreement, the right of redemption set forth in Section 23 shall be reinstated and shall not expire until the Close of Business on the tenth day following the date of such determination by the Board of Directors.
This Agreement and the Rights issued hereunder shall be governed by and construed in accordance with the internal laws of any state,Maryland without regard to the principles of conflicts of laws; provided, however, that all provisions regarding the rights, obligations, duties and immunities of the Rights Agent shall be governed by and construed in accordance with, the laws of the State of New York. The courts of the State of Maryland and of the United States of America located in the State of Maryland (the “Maryland Courts”) shall have exclusive jurisdiction over any suit, action or proceeding arising out of or relating to or concerning this Agreement and the transactions contemplated hereby, and any Person commencing or otherwise involved in any such litigation shall waive any objection to the laying of venue of such litigation in the Maryland Courts and shall not plead or claim in any Maryland Court that such litigation brought therein has been brought in an inconvenient forum. The Company and the registered holders of Rights Certificates (and, prior to the Distribution Date, the registered holders of Common Stock) each hereby waive, to the fullest extent permitted by applicable law, any objection that they now or hereafter have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding brought in any court referred to in this Section 33 (or the appellate courts thereof). The Company and the registered holders of Rights Certificates (and,
prior to the Distribution Date, the registered holders of Shares of Common Stock) each hereby agree that, to the fullest extent permitted by applicable law, a final and non-appealable judgment in any such suit, action or proceeding brought in any such court will be conclusive and binding upon such Persons. Notwithstanding the foregoing, the Company and the Rights Agent may mutually agree to a jurisdiction other than Maryland for any litigation directly between the Company and the Rights Agent arising out of or relating to this Agreement.
This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. A signature to this Agreement transmitted electronically (including by fax and .pdf) will have the same authority, effect and enforceability as an original signature. No party hereto may raise the use of such electronic transmission to deliver a signature, or the fact that any signature or agreement or instrument was transmitted or communicated through such electronic transmission, as a defense to the formation of a contract, and each party forever waives any such defense, except to the extent such defense relates to lack of authenticity.
Section 35. Descriptive Headings.
Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
Notwithstanding anything to the contrary contained herein, neither the Company nor the Rights Agent shall be liable for any delay or failure in performance resulting directly from any act or event beyond its reasonable control and without the fault or gross negligence of the delayed or non-performing party that causes a sudden, substantial or widespread disruption in business activities, including, without limitation, fire, flood, natural disaster or act of God, strike or other industrial disturbance, war (declared or undeclared), embargo, blockade, legal restriction, riot, insurrection, act of terrorism, disruption in transportation, communications, electric power or other utilities, or other vital infrastructure or any means of disrupting or damaging internet or other applicable foreign law.
11.21 Further Assurances. Ascomputer networks or facilities (each, a condition“Force Majeure Condition”); provided, that such delayed or non-performing party shall use reasonable commercial efforts to receipt ofresume performance as soon as practicable. If any Award underForce Majeure Condition occurs, the Plan, a Participantparty delayed or unable to perform shall agree, upon demandgive prompt written notice to the other party, stating the nature of the Company,Force Majeure Condition and any action being taken to doavoid or minimize its effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as an instrument under seal and attested, all acts and execute, deliver and perform all additional documents, instruments and agreements which may be reasonably required by the Company, to implement the provisions and purposesas of the Plan.day and year first above written.
ATTEST: | IMPAC MORTGAGE HOLDINGS, INC. | |||
By: | /s/ Nima J. Vahdat | By: | /s/ George Mangiaracina | |
Name: Nima J. Vahdat | Name: George Mangiaracina | |||
Title: General Counsel | Title: Chief Executive Officer | |||
Signature Page to Tax Benefits Preservation Rights Agreement
ATTEST: | AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, as Rights Agent | ||||
By: | By: | /s/ Michael A. Nespoli | |||
Name: | Name: | Michael A. Nespoli | |||
Title | Title | Executive Director | |||
Signature Page to Tax Benefits Preservation Rights Agreement
Exhibit A
IMPAC MORTGAGE HOLDINGS, INC.
ARTICLES SUPPLEMENTARY
SERIES A-1 JUNIOR PARTICIPATING PREFERRED STOCK
IMPAC MORTGAGE HOLDINGS, INC.
ARTICLES SUPPLEMENTARY
SERIES A-1 JUNIOR PARTICIPATING PREFERRED STOCK
Impac Mortgage Holdings, Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Under a power contained in Article VI of the charter of the Corporation (the “Charter”), the Board of Directors of the Corporation (the “Board”), by duly adopted resolutions, reclassified and designated 2,500,000 shares of the authorized but unissued shares of Series A Junior Participating Preferred Stock of the Corporation, $0.01 par value per share, as shares of Series A-1 Junior Participating Preferred Stock, $0.01 par value per share, with the following preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption, which, upon any restatement of the Charter, shall become part of Article VI of the Charter, with any necessary or appropriate renumbering or relettering of the sections or subsections hereof:
Section 1. Designation and Amount. The shares of such series shall be designated as “Series A-1 Junior Participating Preferred Stock” (the “Series A-1 Preferred Stock”) and the number of shares constituting such series shall be 2,500,000. Such number of shares may be increased or decreased by resolution of the Board in accordance with the Charter; provided, that no decrease shall reduce the number of shares of Series A-1 Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A-1 Preferred Stock.
Section 2. Dividends and Distributions.
(A) (i) Subject to the rights of the holders of any shares of any class or series of preferred stock of the Corporation, $0.01 par value per share (the “Preferred Stock”) (or any similar stock) ranking prior and superior to the Series A-1 Preferred Stock with respect to dividends, the holders of shares of Series A-1 Preferred Stock, in preference to the holders of shares of Common Stock of the Corporation, par value $0.01 per share (“Common Stock”) and of any other class or series of stock ranking junior to the Series A-1 Preferred Stock, shall be entitled to receive, when, as and if authorized by the Board and declared by the Corporation out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A-1 Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $0.01 or (b) subject to the provisions for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A-1 Preferred Stock. The multiple of cash and non-cash dividends declared on the Common Stock to which holders of the Series A-1 Preferred Stock are entitled, which shall be 1,000 initially but which shall be adjusted from time to time as hereinafter provided, is hereinafter referred to as the “Dividend Multiple.” In the event the Corporation shall at any time after September 3, 2013 (the “Rights Declaration Date”) (i) declare or pay any dividend on Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the Dividend Multiple thereafter applicable to the determination of the amount of dividends which holders of shares of Series A-1 Preferred Stock shall be entitled to receive shall be the Dividend Multiple applicable immediately prior to such event multiplied by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(ii) Notwithstanding anything else contained in this paragraph (A), the Corporation shall, out of funds legally available for that purpose, declare a dividend or distribution on the Series A-1 Preferred Stock as provided in this paragraph (A) immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per share on the Series A-1 Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(B) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A-1 Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A-1 Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A-1 Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A-1 Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix in accordance with applicable law a record date for the determination of holders of shares of Series A-1 Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than such 90 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A-1 Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each share of Series A-1 Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. The number of votes which a holder of a share of Series A-1 Preferred Stock is entitled to cast, which shall initially be 1,000 but which may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the “Vote Multiple.” In the event the Corporation shall at any time after the Rights Declaration Date (i) declare or pay any dividend on Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the Vote Multiple thereafter applicable to the determination of the number of votes per share to which holders of shares of Series A-1 Preferred Stock shall be entitled shall be the Vote Multiple immediately prior to such event multiplied by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided in the Charter or by law, the holders of shares of Series A-1 Preferred Stock and the holders of shares of Common Stock and the holders of shares of any other stock of this Corporation having general voting rights, shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
(C) (i) Whenever, at any time or times, dividends payable on any shares of Series A-1 Preferred Stock shall be in arrears in an amount equal to at least six full quarter dividends (whether or not declared and whether or not consecutive), the holders of record of the outstanding shares of Series A-1 Preferred Stock shall have the exclusive right, voting separately as a single class, to elect two directors of the Corporation at a special meeting of stockholders of the Corporation or at the Corporation’s next annual meeting of stockholders, and at each subsequent annual meeting of stockholders, as provided below.
(ii) Upon the vesting of such right of the holders of shares of Series A-1 Preferred Stock, the maximum authorized number of members of the Board of Directors shall automatically be increased by two and the two vacancies so created shall be filled by vote of the holders of the outstanding shares of Series A-1 Preferred Stock as hereinafter set forth. A special meeting of the stockholders of the Corporation then entitled to vote shall be called by the Chairman of the Board, Chief Executive Officer or President of the Corporation or the Secretary of the Corporation, if requested in writing by the holders of record of not less than 10% of the shares of Series A-1 Preferred Stock then outstanding. At such special meeting, or, if no such special meeting shall have been called, then at the next annual meeting of stockholders of the Corporation, the holders of the shares of Series A-1 Preferred Stock shall elect, voting as above provided, two directors of the Corporation to fill the aforesaid vacancies created by the automatic increase in the number of members of the Board of Directors. Notice of the meeting and of any annual meeting at which holders of Series A-1 Preferred Stock are entitled to vote pursuant to this paragraph (C)(ii) shall be given to each holder of record of Series A-1 Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. The meeting shall be called for a time not earlier than 10 days and not later than 90 days after the order or request or, in default of the calling of the meeting, within 90 days after the order or request, the meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than 5% of the shares of Series A-1 Preferred Stock then
outstanding. Notwithstanding the provisions of this paragraph (c)(ii), no such special meeting shall be called during the period within 90 days immediately preceding the date fixed for the next annual meeting of the stockholders.
(iii) At any and all meetings for the election of directors by holders of shares of Series A-1 Preferred Stock, the holders of a majority of the outstanding shares of Series A-1 Preferred Stock shall be necessary to constitute a quorum for such election, whether present in person or proxy, and such two directors shall be elected by a plurality of the votes cast by the holders of Series A-1 Preferred Stock. Each such additional director shall serve until the next annual meeting of stockholders for the election of directors, or until his successor shall be elected and shall qualify, or until his right to hold such office terminates pursuant to the provisions of this Section 3(C). Any director elected by holders of shares of Series A-1 Preferred Stock pursuant to this Section 3(C) may be removed at any annual or special meeting, by vote of a majority of the outstanding shares of Series A-1 Preferred Stock, with or without cause. In case any vacancy shall occur among the directors elected by the holders of shares of Series A-1 Preferred Stock pursuant to this Section 3(C), such vacancy may be filled by the remaining director so elected, or his successor then in office, and the director so elected to fill such vacancy shall serve until the next meeting of stockholders for the election of directors.
(iv) The right of the holders of shares of Series A-1 Preferred Stock, voting separately as a class, to elect two members of the Board as aforesaid shall continue until, and only until, such time as all arrears in dividends (whether or not declared) on the Series A-1 Preferred Stock shall have been paid or declared and set apart for payment, at which time such right shall terminate, subject to revesting in the event of each and every subsequent default of the character above-mentioned. Upon any termination of the right of the holders of the Series A-1 Preferred Stock as a class to vote for directors as herein provided, the term of office of all directors then in office elected by the holders of shares of Series A-1 Preferred Stock pursuant to this Section 3(C) shall terminate immediately and the number of directors shall be reduced accordingly. The voting rights granted by this Section 3(C) shall be in addition to any other voting rights granted to the holders of the Series A-1 Preferred Stock in this Section 3.
(D) Except as set forth herein, holders of Series A-1 Preferred Stock shall have no voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever dividends or distributions payable on the Series A-1 Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A-1 Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A-1 Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with
the Series A-1 Preferred Stock, except dividends paid ratably on the Series A-1 Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) except as permitted in subsection 4(A)(iv) below, redeem, purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A-1 Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A-1 Preferred Stock; or
(iv) redeem, purchase or otherwise acquire for consideration any shares of Series A-1 Preferred Stock, or any shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A-1 Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board) to all holders of such shares upon such terms as the Board, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under subsection (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A-1 Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall become authorized but unissued shares of Preferred Stock without designation as to Series A-1 and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board, subject to the conditions and restrictions on issuance set forth in the Charter or otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation (voluntary or otherwise), no distribution shall be made (x) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A-1 Preferred Stock unless, prior thereto, the holders of shares of Series A-1 Preferred Stock shall have received an amount (the “Series A-1 Liquidation Preference”) equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, plus an amount equal to the greater of (1) $1,000.00 per share or (2) an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount of all cash or other property to be distributed per share to holders of Common Stock upon such liquidation, dissolution or winding up of the Corporation, or (y) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A-1 Preferred Stock, except distributions made ratably on the Series A-1 Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare or pay any dividend on Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount per share to which holders of shares of Series A-1 Preferred Stock were entitled immediately prior to such event under clause (x) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
In the event, however, that there are not sufficient assets available to permit payment in full of the Series A-1 Liquidation Preference and the liquidation preferences of all other classes and series of stock of the Corporation, if any, that rank on a parity with the Series A-1 Preferred Stock in respect thereof, then the assets available for such distribution shall be distributed ratably to the holders of the Series A-1 Preferred Stock and the holders of such parity shares in proportion to their respective liquidation preferences.
Neither the consolidation of nor merging of the Corporation with or into any other entity or entities, nor the sale or other transfer of all or substantially all of the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 6.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the outstanding shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A-1 Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged, plus accrued and unpaid dividends, if any, payable with respect to the Series A-1 Preferred Stock. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare or pay any dividend on Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A-1 Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 8. Redemption. The shares of Series A-1 Preferred Stock shall not be redeemable; provided, however, that the foregoing shall not limit the ability of the Corporation to purchase or otherwise deal in such shares to the extent otherwise permitted by the Charter (including this Articles Supplementary) or by law.
Section 9. Ranking. Any class or series of shares of stock of the Corporation shall be deemed to rank: (A) prior to the Series A-1 Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Series A-1 Preferred Stock, or they are the Corporation’s 9.375% Series B Cumulative Redeemable Preferred Stock or 9.125% Series C Cumulative Redeemable Preferred Stock; (B) on a parity with the Series A-1 Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Series A-1 Preferred Stock, if the holders of such class or series and the Series A-1 Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other; or (C) junior to the Series A-1 Preferred Stock, as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up.
Section 10. Fractional Shares. Series A-1 Preferred Stock may be issued in whole shares or in any fraction of a share that is one one-thousandth (1/1,000th) of a share or any integral multiple of such fraction, which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A-1 Preferred Stock. In lieu of fractional shares, the Corporation may elect to make a cash payment as provided in the Rights Agreement for fractions of a share other than one one-thousandth (1/1,000th) of a share or any integral multiple thereof.
Section 11. Amendment. At any time any shares of Series A-1 Preferred Stock are outstanding, the Charter and the foregoing Sections 1 through 10, inclusive, and this Section 11 shall not be amended in any manner, including by merger, consolidation or otherwise, which would materially alter or change the powers, preferences or special rights of the Series A-1 Preferred Stock so as to affect them adversely without the affirmative vote of the holders of two-thirds or more of the outstanding shares of Series A-1 Preferred Stock, voting separately as a class.
SECOND: The Series A-1 Preferred Stock has been classified and designated by the Board of Directors under the authority contained in the Charter.
THIRD: These Articles Supplementary have been approved by the Board of Directors in the manner and by the vote required by law.
FOURTH: The undersigned officer of the Corporation acknowledges these Articles Supplementary to be the corporate act of the Corporation and, as to all matters or facts required to be verified under oath, the undersigned officer acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties of perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary to be signed in its name and on its behalf by its President and attested to by its Secretary as of the 3rd day of September, 2013.
Exhibit B
FORM OF RIGHTS CERTIFICATE
Certificate No. R- Rights
NOT EXERCISABLE AFTER OCTOBER 22, 2022 OR EARLIER IF NOTICE OF REDEMPTION IS GIVEN OR THE RIGHTS ARE TERMINATED IN ACCORDANCE WITH SECTION 7(a) OF THE RIGHTS AGREEMENT (DEFINED BELOW). THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF IMPAC MORTGAGE HOLDINGS, INC., AT $0.001 PER RIGHT, ON THE TERMS SET FORTH IN THE TAX BENEFITS PRESERVATION RIGHTS AGREEMENT BETWEEN IMPAC MORTGAGE HOLDINGS, INC. AND AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, AS RIGHTS AGENT, DATED AS OF OCTOBER 23, 2019 (THE “RIGHTS AGREEMENT”). UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
Rights Certificate
IMPAC MORTGAGE HOLDINGS, INC.
This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Tax Benefits Preservation Rights Agreement dated as of October 23, 2019 (the “Rights Agreement”) between Impac Mortgage Holdings, Inc., a Maryland corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, a New York limited liability trust company, as Rights Agent (the “Rights Agent”), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to the close of business on November 5, 2019 at the office or offices of the Rights Agent designated for such purpose, or its successors as Rights Agent, one one-thousandth of a fully paid, non-assessable share of the Series A-1 Junior Participating Preferred Stock (the “Preferred Stock”) of the Company, at a purchase price of $45.00 per one one-thousandth of a share (the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and the related Certificate duly executed. The number of Rights evidenced by this Rights Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of , based on the Preferred Stock as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Rights Certificate are beneficially owned by (i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who becomes a transferee after the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring Person has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights, the shares of Common Stock of the Company associated with such Rights or the Company, or (B) a transfer which the Board of Directors has determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of Section 7(e) of the Rights Agreement, (iv) any subsequent transferee receiving transferred Rights as described in subsections (ii) or (iii) above, either directly or through one or more intermediate transferees, or (v) any nominee of any of the foregoing, such Rights shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number of shares of Preferred Stock or other securities which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment upon the happening of certain events.
This Rights Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the principal office of the Company and the designated office of the Rights Agent and are also available upon written request to the Company or the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon surrender at the office or offices of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of shares of Preferred Stock as the Rights evidenced by the Rights Certificate or Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate or Certificates for the number of whole Rights not exercised. If this Rights Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii) of the Rights Agreement, the holder shall be entitled to receive this Rights Certificate duly marked to indicate that such exercise has occurred as set forth in the Rights Agreement.
Under certain circumstances, subject to the provisions of the Rights Agreement, the Board of Directors at its option may cause the Company to exchange all or any part of the Rights evidenced by this Certificate for shares of the Company’s Common Stock or Preferred Stock at an exchange ratio (subject to adjustment) specified in the Rights Agreement.
Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Board of Directors at its option at a redemption price of $0.001 per Right (payable in cash, Common Stock or other consideration deemed appropriate by the Board of Directors).
The Company is not obligated to issue fractional shares of stock upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock, which may, at the election of the Company, be evidenced by depositary receipts). If the Company elects not to issue such fractional shares, in lieu thereof a cash payment will be made, as provided in the Rights Agreement. The Company, at its election, may require that a number of Rights be exercised so that only whole shares of Preferred Stock would be issued.
No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the number of one one thousandths of shares of Preferred Stock, Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by an authorized signatory of the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company as a document under corporate seal.
ATTESTED: | IMPAC MORTGAGE HOLDINGS, INC. | |||
By: | By: | |||
Name: | Name: | |||
Title | Title | |||
Countersigned: | ||
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC | ||
By: | ||
Name: | ||
Title: | ||
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto (Please print name and address of transferee) this Rights Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution.
Dated: , | |
Signature |
Signature Guaranteed:*
* Signatures must be guaranteed by a participant in a Medallion Signature Guarantee Program at a guarantee level satisfactory to the Rights Agent. a notary public is not sufficient.
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate o are o are not being transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the undersigned o did o did not directly or indirectly acquire the Rights evidenced by this Rights Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of any such Person.
Dated: , | Signature |
NOTICE
The signature to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Rights Certificate.)
To IMPAC MORTGAGE HOLDINGS, INC.:
The undersigned hereby irrevocably elects to exercise Rights represented by this Rights Certificate to purchase the shares of Preferred Stock issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of:
Please insert social security or other identifying taxpayer number: | |
(Please print name and address) | |
If such number of Rights shall not be all the Rights evidenced by this Rights Certificate or if the Rights are being exercised pursuant to Section 11(a)(ii) of the Rights Agreement, a new Rights Certificate for the balance of such Rights shall be registered in the name of and delivered to:
Please insert social security or other identifying taxpayer number: | |
(Please print name and address) | |
Dated: , | Signature |
Signature Guaranteed:* |
* Signatures must be guaranteed by a participant in a Medallion Signature Guarantee Program at a guarantee level satisfactory to the Rights Agent. a notary public is not sufficient.
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate o are o are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the undersigned o did o did not directly or indirectly acquire the Rights evidenced by this Rights Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of any such Person.
Dated: , | Signature |
Signature Guaranteed:* |
* Signatures must be guaranteed by a participant in a Medallion Signature Guarantee Program at a guarantee level satisfactory to the Rights Agent. a notary public is not sufficient.
NOTICE
The signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Rights Certificate in every particular, without alteration or enlargement or any change whatsoever.
Exhibit C
FORM OF
SUMMARY OF RIGHTS
SUMMARY OF
TAX BENEFIT PRESERVATION PLAN
OF
IMPAC MORTGAGE HOLDINGS, INC.
On October 23, 2019, Impac Mortgage Holdings, Inc. (the “Company”) entered into a Tax Benefits Preservation Rights Agreement (the “Rights Agreement”) with American Stock Transfer & Trust Company, LLC, as rights agent (the “Rights Agent”), and the Boardof Directors (the “Board”) of the Company have authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock, par value $0.01 per share (the “Common Stock”), of the Company to stockholders of record as of the close of business on November 5, 2019 (the “Record Date”). Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A-1 Participating Preferred Stock, par value $0.01 per share (the “Preferred Stock”), of the Company at an exercise price of $45.00 per one one-thousandth of a Preferred Share, subject to adjustment (the “Purchase Price”). The complete terms of the Rights are set forth in the Rights Agreement.
By adopting the Rights Agreement, the Board is helping to preserve the value of certain deferred tax benefits, including those generated by net operating losses (collectively, the “Tax Benefits”). In general, the Company may “carry forward” net operating losses in certain circumstances to offset current and future taxable income, which will reduce federal and state income tax liability, subject to certain requirements and restrictions. The Rights Agreement also has certain ancillary anti-takeover effects.
The Tax Benefits can be valuable to the Company. However, the Company’s ability to use these Tax Benefits would be substantially limited and impaired if it were to experience an “ownership change” for purposes of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations promulgated thereunder. Generally, the Company will experience an “ownership change” if the percentage of the shares of Common Stock owned by one or more “five-percent shareholders” increases by more than 50 percentage points over the lowest percentage of shares of Common Stock owned by such stockholder at any time during the prior three year on a rolling basis. The Rights Agreement reduces the likelihood that changes in the Company’s investor base have the unintended effect of limiting the Company’s use of its Tax Benefits. As such, the Rights Agreement has a 4.99% “trigger” threshold that is intended to act as a deterrent to any person or entity seeking to acquire 4.99% or more of the outstanding Common Stock without the prior approval of the Board. This would protect the Tax Benefits because changes in ownership by a person owning less than 4.99% of the Company’s stock are not included in the calculation of “ownership change” for purposes of Section 382 of the Code. The Board believes it is in the best interest of the Company and its stockholders that the Company provide for the protection of the Tax Benefits by adopting the
Rights Agreement. The Board has established procedures to consider requests to exempt certain acquisitions of the Company’s securities from the Rights Agreement if the Board determines that doing so would not limit or impair the availability of the Tax Benefits or is otherwise in the best interests of the Company.
For those interested in the specific terms of the Rights Agreement, the following is a summary description. Please note, however, that this description is only a summary and is not complete, and should be read together with the entire Rights Agreement, which will be filed by the Company with the Securities and Exchange Commission as an exhibit to a Registration Statement on Form 8-A and a Current Report on Form 8-K. A copy of the Rights Agreement is available free of charge from the Company.
Issuance and Transfer of Rights; Rights Certificates
The Board has declared a dividend of one Right for each outstanding share of Common Stock. Until the Distribution Date (as defined below):
· the Rights will be evidenced by and trade with the certificates for shares of Common Stock (or, with respect to any uncertificated shares of Common Stock registered in book entry form, by notation in book entry), and no separate rights certificates will be distributed;
· new Common Stock certificates issued after the Record Date will contain a legend incorporating the Rights Agreement by reference (for uncertificated shares of Common Stock registered in book entry form, this legend will be contained in a notation in book entry); and
· the surrender for transfer of any certificates for shares of Common Stock (or the surrender for transfer of any uncertificated Shares of Common Stock registered in book entry form) will also constitute the transfer of the Rights associated with such Common Stock.
Distribution Date; Separation of Rights
Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from the Common Stock and become separately tradable and exercisable only upon the earlier of:
(i) ten business days (or such later day as the Board may determine) following a public announcement that a person or group of affiliated or associated persons (collectively, an “Acquiring Person”) has acquired beneficial ownership of 4.99% or more of the outstanding Common Stock; or
(ii) ten business days (or such later day as the Board may determine) following the announcement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person.
The date on which the Rights separate from the Common Stock and become exercisable is referred to as the “Distribution Date.”
As soon as practicable after the Distribution Date, the Company will mail Rights certificates to the Company’s stockholders as of the close of business on the Distribution Date and the Rights will become transferable apart from the Common Stock. Thereafter, such Rights certificates alone will represent the Rights.
The definition of “Acquiring Person” contained in the Rights Agreement contains several exemptions, including for (i) the Company or any subsidiary of the Company, (ii) any employee benefit plan of the Company or any subsidiary of the Company, or any person organized, appointed or established by the Company for or pursuant to the terms of any such plan, (iii) any person who becomes the beneficial owner of 4.99% or more of the shares of the Common Stock then outstanding as a result of a reduction in the number of shares of Common Stock by the Company or a stock dividend, stock split, reverse stock split or similar transaction, (iv) any person who becomes the beneficial owner of 4.99% or more of the shares of Common Stock of the Company then outstanding solely as a result of the initial grant or vesting of any options, warrants, rights or similar interest, (v) any Existing Holder (as defined below), (vi) any person who becomes the beneficial owner of 4.99% or more of the outstanding shares of Common Stock as a result of the acquisition of shares of Common Stock directly from the Company, as long as, prior to the acquisition of shares of Common Stock directly from the Company, the Company has been apprised in writing by such person of the number of shares of Common Stock beneficially owned by such person immediately prior to any such acquisition, and (vii) any person that the Board has affirmatively determined shall not be deemed an Acquiring Person.
The Rights Agreement also includes a procedure whereby the Board will consider requests to exempt certain acquisitions of Common Stock from the applicable ownership trigger if the Board determines that the requested acquisition will not adversely impact in any material respect the time period in which the Company could use the Tax Benefits or limit or impair the availability to the Company of the Tax Benefits, or is in the best interests of the Company despite the fact it may adversely impact in a material respect the time period in which the Company could use the Tax Benefits or limit or impair the availability of the Tax Benefits.
Rights Holders Have No Rights as Stockholder Until Right Is Exercised
Until a Right is exercised, the holder of such Right will have no rights as a stockholder of the Company (beyond those possessed as an existing stockholder), including, without limitation, the right to vote or to receive dividends with respect to the Right.
Existing Holders
The Rights Agreement provides that any person or entity who otherwise would be an Acquiring Person on the date the Rights Agreement was adopted (each, an “Existing Holder”) will not be deemed to be an “Acquiring Person” for purposes of the Rights Agreement unless such Existing Holder increases its beneficial ownership over such Existing Holder’s lowest percentage of ownership of the Common Stock after the adoption of the Rights Agreement, subject to specified exceptions.
Preferred Shares Purchasable Upon Exercise of Right
After the Distribution Date, each Right will entitle the holder to purchase, for $45.00 (the “Purchase Price”), one one-thousandth of a Preferred Share having economic and other terms similar to that of one Share of Common Stock. This portion of a Preferred Share is intended to give the stockholder approximately the same dividend, voting and liquidation rights as would one Share of Common Stock, and should approximate the value of one Share of Common Stock.
More specifically, each one one-thousandth of a Preferred Share, if issued, will:
· not be redeemable;
· entitle holders to quarterly dividend payments of $0.00001 per share, or an amount equal to the dividend paid on one share of Common Stock, whichever is greater;
· entitle holders upon liquidation either to receive $1.00 per share or an amount equal to the payment made on one share of Common Stock, whichever is greater;
· have the same voting power as one share of Common Stock; and
· entitle holders to a per share payment equal to the payment made on one Share of Common Stock if the Shares of Common Stock are exchanged via merger, consolidation or a similar transaction.
“Flip-in” Rights
At any time after a Distribution Date has occurred, each holder of a Right, other than the Acquiring Person, will thereafter have the right to receive, upon paying the Purchase Price and in lieu of a number of one one-thousandths of a share of Preferred Stock, Common Stock (or, in certain circumstances, cash or other of our securities) having a market value equal to two times the Purchase Price of the Right. However, the Rights are not exercisable following the occurrence of the foregoing event until such time as the Rights are no longer redeemable by the Company, as further described below. Following the occurrence of an event set forth above, all Rights that are or, under certain circumstances specified in the Rights Agreement, were beneficially owned by an Acquiring Person or certain of its transferees will be null and void.
“Flip-over” Rights
In the event any person or group becomes an Acquiring Person and the Company merges into or engages in certain other business combinations with an Acquiring Person, or 50% or more of the Company’s consolidated assets or earning power are sold to an Acquiring Person, each holder of a Right (other than void Rights owned by an Acquiring Person) will thereafter have the right to receive, upon payment of the Purchase Price, common stock of the acquiring company that at the time of such transaction will have a market value equal to two times the Purchase Price of the Right.
Exchange of Rights
At any time after a person becomes an Acquiring Person, in lieu of allowing the “flip-in” to occur, the Board may exchange the Rights (other than void Rights owned by an Acquiring Person), in whole or in part, at an exchange ratio of one share of the Common Stock (or, under certain circumstances, cash, property or other securities of the Company, including fractions of a share of preferred stock) per Right (subject to adjustment). Notwithstanding the foregoing, the Board may not conduct such an exchange at any time any person (other than the Company or certain entities affiliated with the Company) together with such person’s affiliates or associates becomes the beneficial owner of 50% or more of the Common Stock.
Redemption of Rights
At any time prior to a Distribution Date, the Board may redeem the Rights in whole, but not in part, at a price of $0.001 per Right and on such terms and conditions as the Board may establish. Immediately upon the action of the Board ordering redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the redemption price. The redemption price will be adjusted if the Company undertakes a stock dividend or a stock split.
Expiration Date of the Rights
The Rights will expire on the earliest of:
· 11:59 P.M. (New York City time) on October 22, 2022, the three-year anniversary of adoption of the Rights Agreement;
· the time at which the Rights are redeemed or exchanged under the Rights Agreement;
· the final adjournment of the Company’s 2020 annual meeting of stockholders if stockholders fail to approve the Rights Agreement with a majority of the votes cast by holders of shares of common stock at the 2020 annual meeting of stockholders;
· the repeal of Section 382 or any successor statute, if the Board determines that the Plan is no longer necessary for the preservation of Tax Benefits;
· the beginning of a taxable year with respect to which the Board determines that no Tax Benefits may be carried forward; or
· such time when the Board determines that a limitation on the use of Tax Benefits under Section 382 would no longer be material to the Company.
Amendment of Rights
The terms of the Rights may be amended by a resolution of the Board without the consent of the holders of the Rights prior to the Distribution Date. Thereafter, the terms of the Rights and the Rights Agreement may be amended without the consent of the holders of Rights in order to (i) cure any ambiguities, (ii) shorten or lengthen any time period pursuant to the Rights Agreement or (iii) make changes that do not adversely affect the interests of holders of the Rights.
Anti-Dilution Provisions
The Board may adjust the Purchase Price, the number of shares of Preferred Stock issuable and the number of outstanding Rights to prevent dilution that may occur from a stock dividend, a stock split or a reclassification of the Preferred Stock or Common Stock.
With certain exceptions, no adjustments to the Purchase Price will be made until the cumulative adjustments amount to at least 1% of the Purchase Price. No fractional shares of Preferred Stock will be issued and, in lieu thereof, an adjustment in cash will be made based on the current market price of the Preferred Stock.
Taxes
The distribution of Rights should not be taxable for federal income tax purposes. However, following an event that renders the Rights exercisable or upon redemption of the Rights, stockholders may recognize taxable income.
IMPAC MORTGAGE HOLDINGS, INC. Annual Meeting of Stockholders
July 25, 2017 June 23, 2020 9:00 AM
This proxy is solicited by the Board of Directors
The undersigned stockholder(s) of Impac Mortgage Holdings, Inc., a Maryland corporation, hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement dated June 2, 2017,May •, 2020, and hereby appoints Todd R. TaylorGeorge A. Mangiaracina and Ronald M. Morrison,Nima J. Vahdat, or either of them acting singly in the absence of the other, with full power of substitution, as attorneys-in-fact and proxies for, and in the name and place of, the undersigned, and hereby authorizes each of them to represent and to vote all of the shares which the undersigned is entitled to vote at the Annual Meeting of Stockholders of Impac Mortgage Holdings, Inc. to be held on July 25, 2017,June 23, 2020, at 9:00 a.m. Pacific Daylight Time, and at any adjournments thereof, upon the matters as set forth in the Notice of Annual Meeting of Stockholders and Proxy Statement, receipt of which is hereby acknowledged.
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED IN A TIMELY MANNER, WILL BE VOTED AT THE ANNUAL MEETING AND AT ANY ADJOURNMENTS THEREOF IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO SPECIFICATION IS MADE, THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS RECOMMENDATIONS AND IN ACCORDANCE WITH THE JUDGMENT OF THE PERSONS NAMED AS PROXIES HEREIN ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION ONLY
(Continued, (Continued, and to be marked, dated and signed, on the other side)
PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED.
Important Notice Regarding the Availability of Proxy Materials for the Annual
Meeting of Stockholders to be held July 25, 2017.June 23, 2020. The Proxy Statement and our
2016 2019 Annual Report to Stockholders are available at:
http://www.viewproxy.com/impaccompanies/20172020.
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The Board of Directors recommends you vote FOR the following: proposals 2, 3, 4 and 5 The Board of Directors recommends you vote FOR WITHHOLD ALL FOR ALL EXCEPT 1. Election of Directors Nominees: 01 Thomas B. Akin 02 Katherine J. Blair 03 Frank P. Filipps 04 Stewart B. Koenigsberg 05 George A. Mangiaracina 2. Approval of 2020 Equity Incentive Plan. FOR ALL FOR AGAINST ABSTAIN 3. Approval, on an advisory basis, of the compensation of named executive officers. FOR AGAINST ABSTAIN 4. Approval of the Tax Benefits Rights Preservation Agreement. FOR AGAINST ABSTAIN 5. Ratification of the appointment of Squar Milner LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2020. FOR AGAINST ABSTAIN To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. NOTE: Such other business as may properly come before the meeting or any adjournments or postponements thereof. I plan on attending the meeting Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. Date: , 2020 Signature Signature (if held jointly) CONTROL NUMBER For address change/comments, mark here. (see reverse for instructions) PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED.
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CONTROL NUMBER PROXY VOTING INSTRUCTIONS
Please have your 11 digit control number ready when voting by Internet or Telephone Vote Your Proxy by Mail: Use any touch-tone proxy card, then detach it, paid envelope provided. to vote your shares. MAIL Mark, sign, and date your and return it in the postage-TELEPHONE Vote Your Proxy by Phone: Call 1 (866) 804-9616 telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions INTERNET Vote Your Proxy on the Internet: Go to www.aalvote.com/IMH Have your proxy card available when you access the abovewebsite. Follow the prompts to vote your shares.
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