Avid Technology, Inc.
2005 Stock Incentive Plan
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1. Purpose
The purpose of this 2005 Stock Incentive Plan (the "Plan") of Avid
Technology, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate persons who are expected to make important
contributions to the Company and by providing such persons with equity ownership
opportunities and performance-based incentives that are intended to align their
interests with those of the Company's stockholders. Except where the context
otherwise requires, the term "Company" shall include any of the Company's
present or future parent or subsidiary corporations as defined in Sections
424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder (the "Code") and any other business venture
(including, without limitation, joint venture or limited liability company) in
which the Company has a controlling interest, as determined by the Board of
Directors of the Company (the "Board").
2. Eligibility
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All of the Company's employees, officers, directors, consultants and
advisors are eligible to receive options, stock appreciation rights, restricted
stock, restricted stock units and other stock-based awards (each, an "Award")
under the Plan. Each person who receives an Award under the Plan is deemed a
"Participant".
3. Administration and Delegation
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(a) Administration by Board of Directors. The Plan will be administered
by the Board. The Board shall have authority to grant Awards and to adopt, amend
and repeal such administrative rules, guidelines and practices relating to the
Plan as it shall deem advisable. The Board may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. All decisions by the Board
shall be made in the Board's sole discretion and shall be final and binding on
all persons having or claiming any interest in the Plan or in any Award. No
director or person acting pursuant to the authority delegated by the Board shall
be liable for any action or determination relating to or under the Plan made in
good faith.
(b) Appointment of Committees. To the extent permitted by applicable
law, the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a "Committee"). All references in
the Plan to the "Board" shall mean the Board or a Committee of the Board or the
officers referred to in Section 3(c) to the extent that the Board's powers or
authority under the Plan have been delegated to such Committee or officers.
(c) Delegation to Officers. To the extent permitted by applicable law,
the Board may delegate to one or more officers of the Company the power to grant
Awards to employees or officers of the Company or any of its present or future
subsidiary corporations and to exercise such other powers under the Plan as the
Board may determine, provided that the Board shall fix the terms of the Awards
to be granted by such officers (including the exercise price of such Awards,
which may include a formula by which the exercise price will be determined) and
the maximum number of shares subject to Awards that the officers may grant;
provided further, however, that no officer shall be authorized to grant Awards
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to any "executive officer" of the Company (as defined by Rule 3b-7 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) or to any
"officer" of the Company (as defined by Rule 16a-1 under the Exchange Act).
4. Stock Available for Awards.
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(a) Number of Shares. Subject to adjustment under Section 10, Awards may
be made under the Plan for up to 3,000,000 shares of common stock, $.01 par
value per share, of the Company (the "Common Stock"). If any Award expires or is
terminated, surrendered or canceled without having been fully exercised or is
forfeited in whole or in part (including as the result of shares of Common Stock
subject to such Award being repurchased by the Company at the original issuance
price pursuant to a contractual repurchase right) or results in any Common Stock
not being issued (including as the result of a SAR being settled in Common
Stock), the unused Common Stock covered by such Award shall again be available
for the grant of Awards under the Plan. However, in the case of Incentive Stock
Options (as hereinafter defined), the foregoing provisions shall be subject to
any limitations under the Code. Shares issued under the Plan may consist in
whole or in part of authorized but unissued shares or treasury shares.
(b) Section 162(m) Per-Participant Limit. Subject to adjustment under
Section 10, the maximum number of shares of Common Stock with respect to which
Awards may be granted to any Participant under the Plan shall be 500,000 per
calendar year. For purposes of the foregoing limit, the combination of an Option
in tandem with a SAR (as each is hereafter defined) shall be treated as a single
Award. The per-Participant limit described in this Section 4(b) shall be
construed and applied consistently with Section 162(m) of the Code or any
successor provision thereto, and the regulations thereunder ("Section 162(m)").
5. Stock Options
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(a) General. The Board may grant options to purchase Common Stock (each,
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option".
(b) Incentive Stock Options. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of Avid Technology, Inc., any
of Avid Technology, Inc.'s present or future parent or subsidiary corporations
as defined in Sections 424(e) or (f) of the Code, and any other entities the
employees of which are eligible to receive Incentive Stock Options under the
Code, and shall be subject to and shall be construed consistently with the
requirements of Section 422 of the Code. The Company shall have no liability to
a Participant, or any other party, if an Option (or any part thereof) that is
intended to be an Incentive Stock Option is not an Incentive Stock Option or for
any action taken by the Board pursuant to Section 11(f), including without
limitation the conversion of an Incentive Stock Option to a Nonstatutory Stock
Option.
(c) Exercise Price. The Board shall establish the exercise price of each
Option and specify such exercise price in the applicable option agreement;
provided, however, that the exercise price shall not be less than 100% of the
Fair Market Value (as defined below in subsection (h)(3)) at the time the Option
is granted.
(d) Limitation on Repricing. Unless such action is approved by the
Company's stockholders: (1) no outstanding Option granted under the Plan may be
amended to provide an exercise price per share that is lower than the
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then-current exercise price per share of such outstanding Option (other than
adjustments pursuant to Section 10) and (2) the Board may not cancel any
outstanding Option and grant in substitution therefore new Awards under the Plan
covering the same or a different number of shares of Common Stock and having an
exercise price per share lower than the then-current exercise price per share of
the cancelled Option.
(e) No Reload Rights. No Option granted under the Plan shall contain any
provision entitling the optionee to the automatic grant of additional Options in
connection with any exercise of the original Option.
(f) Duration of Options. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement; provided, however, that no Option will be granted
for a term in excess of 10 years.
(g) Exercise of Option. Options may be exercised by delivery to the
Company of a written notice of exercise signed by the proper person or by any
other form of notice (including electronic notice) approved by the Board
together with payment in full as specified in Section 5(h) for the number of
shares for which the Option is exercised. Shares of Common Stock subject to the
Option will be delivered by the Company following exercise either as soon as
practicable.
(h) Payment Upon Exercise. Common Stock purchased upon the exercise of
an Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as the Board may otherwise provide in an option
agreement, by (i) delivery of an irrevocable and unconditional undertaking by a
creditworthy broker to deliver promptly to the Company sufficient funds to pay
the exercise price and any required tax withholding or (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price and any required tax withholding;
(3) when the Common Stock is registered under the Securities
Exchange Act of 1934 (the "Exchange Act"), by delivery of shares of Common Stock
owned by the Participant valued at their fair market value as determined by (or
in a manner approved by) the Board ("Fair Market Value"), provided (i) such
method of payment is then permitted under applicable law, (ii) such Common
Stock, if acquired directly from the Company, was owned by the Participant for
such minimum period of time, if any, as may be established by the Board in its
discretion and (iii) such Common Stock is not subject to any repurchase,
forfeiture, unfulfilled vesting or other similar requirements;
(4) to the extent permitted by applicable law and by the Board,
by payment of such other lawful consideration as the Board may determine; or
(5) by any combination of the above permitted forms of payment.
(i) Substitute Options. In connection with a merger or consolidation of
an entity with the Company or the acquisition by the Company of property or
stock of an entity, the Board may grant Options in substitution for any options
or other stock or stock-based awards granted by such entity or an affiliate
thereof. Substitute Options may be granted on such terms as the Board deems
appropriate in the circumstances, notwithstanding any limitations on Options
contained in the other sections of this Section 5 or in Section 2.
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6. Director Awards
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(a) Initial Grant. Upon the commencement of service on the Board by any
individual who is not then an employee of the Company or any subsidiary of the
Company, the Company shall grant to such person (1) a Nonstatutory Stock Option
to purchase up to 15,000 shares of Common Stock (subject to adjustment under
Section 10), (2) a Restricted Stock Award (as defined in Section 8(a) below)
that entitles such member to receive up to 7,500 shares of Common Stock (subject
to adjustment under Section 10) or (3) a combination of a Nonstatutory Stock
Option and a Restricted Stock Award, provided that the sum of (i) the number of
shares of Common Stock that such member is entitled to purchase pursuant to the
Nonstatutory Stock Option plus (ii) two multiplied by the number of shares of
Common Stock that such member is entitled to receive pursuant to the Restricted
Stock Award does not exceed 15,000 (subject to adjustment under Section 10).
(b) Annual Grant. On the date of each annual meeting of stockholders of
the Company, the Company shall grant to each member of the Board of Directors of
the Company who (1) has served as a director of the Company for at least six
months prior to such annual meeting, (2) is serving as a director of the Company
immediately following such annual meeting and (3) is not then an employee of the
Company or any of its subsidiaries, (i) a Nonstatutory Stock Option to purchase
up to 15,000 shares of Common Stock (subject to adjustment under Section 10),
(ii) a Restricted Stock Award that entitles such member to receive up to 7,500
shares of Common Stock (subject to adjustment under Section 10) or (iii) a
combination of a Nonstatutory Stock Option and a Restricted Stock Award,
provided that the sum of (A) the number of shares of Common Stock that such
member is entitled to purchase pursuant to the Nonstatutory Stock Option plus
(B) two multiplied by the number of shares of Common Stock that such member is
entitled to receive pursuant to the Restricted Stock Award does not exceed
15,000 (subject to adjustment under Section 10).
(c) Terms of Director Options. Options granted under this Section 6
shall (1) have an exercise price equal to the closing sale price (for the
primary trading session) of the Common Stock on The Nasdaq Stock Market or the
national securities exchange on which the Common Stock is then traded on the
date of grant (and if the Common Stock is not then traded on The Nasdaq Stock
Market or a national securities exchange, the fair market value of the Common
Stock on such date as determined by the Board), (2) vest in full on the First
Anniversary (as defined below in Section 6(f)) of the date of grant provided
that the individual is serving on the Board on such date, provided that no
additional vesting shall take place after the Participant ceases to serve as a
director and further provided that the Board may provide for accelerated vesting
in the case of death, disability, attainment of mandatory retirement age or
retirement following at least 10 years of service, (3) expire on the earlier of
10 years from the date of grant or three months following cessation of service
on the Board and (4) contain such other terms and conditions as the Board shall
determine.
(d) Restricted Stock Vesting. Restricted Stock Awards granted pursuant
to this Section 6 shall be zero percent vested prior to the First Anniversary of
the date of grant, no more than 33-1/3% vested prior to the Second Anniversary
(as defined below in Section 6(f)) of the date of grant, and no more than
66-2/3% vested prior to the Third Anniversary (as defined below in Section 6(f))
of the date of grant.
(e) Limitations on Awards to Non-Employee Directors. Directors who are
not employees of the Company may only be granted Awards under the Plan pursuant
to, and subject to the limitations set forth in, this Section 6 of the Plan.
(f) Annual Meetings. For Awards granted on the date of an annual meeting
of stockholders of the Company pursuant to this Section 6: the term "First
Anniversary" shall mean the earlier of (1) the first anniversary of the date of
grant or (2) the business day prior to the date of the next annual meeting of
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stockholders of the Company to be held after the date of grant; the term "Second
Anniversary" shall mean the earlier of (1) the second anniversary of the date of
grant or (2) the business day prior to the date of the second annual meeting of
stockholders of the Company to be held after the date of grant; and the term
"Third Anniversary" shall mean the earlier of (1) the third anniversary of the
date of grant or (2) the business day prior to the date of the third annual
meeting of stockholders of the Company to be held after the date of grant.
7. Stock Appreciation Rights
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(a) General. A Stock Appreciation Right, or SAR, is an Award entitling
the holder, upon exercise, to receive an amount in Common Stock determined in
whole or in part by reference to appreciation, from and after the date of grant,
in the fair market value of a share of Common Stock. SARs may be based solely on
appreciation in the fair market value of Common Stock or on a comparison of such
appreciation with some other measure of market growth such as (but not limited
to) appreciation in a recognized market index. The date as of which such
appreciation or other measure is determined shall be the exercise date unless
another date is specified by the Board in the SAR Award.
(b) Grants. Stock Appreciation Rights may be granted in tandem with, or
independently of, Options granted under the Plan.
(1) Tandem Awards. When Stock Appreciation Rights are expressly
granted in tandem with Options, (i) the Stock Appreciation Right will be
exercisable only at such time or times, and to the extent, that the related
Option is exercisable (except to the extent designated by the Board in
connection with a Reorganization Event) and will be exercisable in accordance
with the procedure required for exercise of the related Option; (ii) the Stock
Appreciation Right will terminate and no longer be exercisable upon the
termination or exercise of the related Option, except to the extent designated
by the Board in connection with a Reorganization Event and except that a Stock
Appreciation Right granted with respect to less than the full number of shares
covered by an Option will not be reduced until the number of shares as to which
the related Option has been exercised or has terminated exceeds the number of
shares not covered by the Stock Appreciation Right; (iii) the Option will
terminate and no longer be exercisable upon the exercise of the related Stock
Appreciation Right; and (iv) the Stock Appreciation Right will be transferable
only with the related Option.
(2) Independent SARs. A Stock Appreciation Right not expressly
granted in tandem with an Option will become exercisable at such time or times,
and on such conditions, as the Board may specify in the SAR Award.
(c) Exercise. Stock Appreciation Rights may be exercised by delivery to
the Company of a written notice of exercise signed by the proper person or by
any other form of notice (including electronic notice) approved by the Board,
together with any other documents required by the Board.
8. Restricted Stock; Restricted Stock Units
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(a) General. The Board may grant Awards entitling recipients to acquire
shares of Common Stock ("Restricted Stock"), subject to the right of the Company
to repurchase all or part of such shares at their issue price or other stated or
formula price (or to require forfeiture of such shares if issued at no cost)
from the recipient in the event that conditions specified by the Board in the
applicable Award are not satisfied prior to the end of the applicable
restriction period or periods established by the Board for such Award. Instead
of granting Awards for Restricted Stock, the Board may grant Awards entitling
the recipient to receive shares of Common Stock to be delivered at the time such
shares of Common Stock vest ("Restricted Stock Units") subject to such terms and
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conditions on the delivery of the shares of Common Stock as the Board shall
determine (each Award for Restricted Stock or Restricted Stock Units, a
"Restricted Stock Award").
(b) Limitations on Vesting.
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(1) Subject to Section 6(d), Restricted Stock Awards that vest
based on the passage of time alone shall be zero percent vested prior to the
first anniversary of the date of grant, no more than 33-1/3% vested prior to the
second anniversary of the date of grant, and no more than 66-2/3% vested prior
to the third anniversary of the date of grant. Restricted Stock Awards that vest
upon the passage of time and provide for accelerated vesting based on
performance shall not vest prior to the first anniversary of the date of grant.
This subsection (b)(1) shall not apply to Awards granted pursuant to Section
11(i).
(2) Notwithstanding any other provision of this Plan, the Board
may, in its discretion, either at the time a Restricted Stock Award is made or
at any time thereafter, waive its right to repurchase shares of Common Stock (or
waive the forfeiture thereof) or remove or modify any part or all of the
restrictions applicable to the Restricted Stock Award, provided that the Board
may only exercise such rights in extraordinary circumstances which shall
include, without limitation, death or disability of the Participant; estate
planning needs of the Participant; a merger, consolidation, sale,
reorganization, recapitalization, or change in control of the Company; or any
other nonrecurring significant event affecting the Company, a Participant or the
Plan.
(c) Terms and Conditions. The Board shall determine the terms and
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any.
(d) Stock Certificates. Any stock certificates issued in respect of a
Restricted Stock Award shall be registered in the name of the Participant and,
unless otherwise determined by the Board, deposited by the Participant, together
with a stock power endorsed in blank, with the Company (or its designee). At the
expiration of the applicable restriction periods, the Company (or such designee)
shall deliver the certificates no longer subject to such restrictions to the
Participant or if the Participant has died, to the beneficiary designated, in a
manner determined by the Board, by a Participant to receive amounts due or
exercise rights of the Participant in the event of the Participant's death (the
"Designated Beneficiary"). In the absence of an effective designation by a
Participant, "Designated Beneficiary" shall mean the Participant's estate.
9. Other Stock-Based Awards
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Other Awards of shares of Common Stock, and other Awards that are valued
in whole or in part by reference to, or are otherwise based on, shares of Common
Stock or other property, may be granted hereunder to Participants ("Other Stock
Unit Awards"). Such Other Stock Unit Awards shall also be available as a form of
payment in the settlement of other Awards granted under the Plan or as payment
in lieu of compensation to which a Participant is otherwise entitled. Other
Stock Unit Awards may be paid in shares of Common Stock or cash, as the Board
shall determine. Subject to the provisions of the Plan, the Board shall
determine the conditions of each Other Stock Unit Awards, including any purchase
price applicable thereto.
10. Adjustments for Changes in Common Stock and Certain Other Events.
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(a) Changes in Capitalization. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of Common Stock other than an ordinary
cash dividend, (1) the number and class of securities available under this Plan,
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(2) the sub-limits set forth in Sections 4(b), 6(a) and 6(b), (3) the number and
class of securities and exercise price per share of each outstanding Option, (4)
the share - and per share provisions of each outstanding Restricted Stock
Unit,(5) the share- and per-share provisions of each outstanding Stock
Appreciation Right, (6) the repurchase price per share subject to each
outstanding Restricted Stock Award and (7) the share- and per-share-related
provisions of each outstanding Other Stock Unit Award, shall be appropriately
adjusted by the Company (or substituted Awards may be made, if applicable) to
the extent determined by the Board.
(b) Reorganization Events.
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(1) Definition. A "Reorganization Event" shall mean: (i) any
merger or consolidation of the Company with or into another entity as a result
of which all of the Common Stock of the Company is converted into or exchanged
for the right to receive cash, securities or other property or is cancelled,
(ii) any exchange of all of the Common Stock of the Company for cash, securities
or other property pursuant to a share exchange transaction or (iii) any
liquidation or dissolution of the Company.
(2) Consequences of a Reorganization Event on Awards Other than
Restricted Stock Awards. In connection with a Reorganization Event, the Board
shall take any one or more of the following actions as to all or any outstanding
Awards on such terms as the Board determines: (i) provide that Awards shall be
assumed, or substantially equivalent Awards shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof), (ii) upon written
notice to a Participant, provide that the Participant's unexercised Options or
other unexercised Awards shall become exercisable in full and will terminate
immediately prior to the consummation of such Reorganization Event unless
exercised by the Participant within a specified period following the date of
such notice, (iii) provide that outstanding Awards shall become realizable or
deliverable, or restrictions applicable to an Award shall lapse, in whole or in
part prior to or upon such Reorganization Event, (iv) in the event of a
Reorganization Event under the terms of which holders of Common Stock will
receive upon consummation thereof a cash payment for each share surrendered in
the Reorganization Event (the "Acquisition Price"), make or provide for a cash
payment to a Participant equal to (A) the Acquisition Price times the number of
shares of Common Stock subject to the Participant's Options or other Awards (to
the extent the exercise price does not exceed the Acquisition Price) minus (B)
the aggregate exercise price of all such outstanding Options or other Awards, in
exchange for the termination of such Options or other Awards, (v) provide that,
in connection with a liquidation or dissolution of the Company, Awards shall
convert into the right to receive liquidation proceeds (if applicable, net of
the exercise price thereof) and (vi) any combination of the foregoing.
For purposes of clause (i) above, an Option shall be considered
assumed if, following consummation of the Reorganization Event, the Option
confers the right to purchase, for each share of Common Stock subject to the
Option immediately prior to the consummation of the Reorganization Event, the
consideration (whether cash, securities or other property) received as a result
of the Reorganization Event by holders of Common Stock for each share of Common
Stock held immediately prior to the consummation of the Reorganization Event
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares of
Common Stock); provided, however, that if the consideration received as a result
of the Reorganization Event is not solely common stock of the acquiring or
succeeding corporation (or an affiliate thereof), the Company may, with the
consent of the acquiring or succeeding corporation, provide for the
consideration to be received upon the exercise of Options to consist solely of
common stock of the acquiring or succeeding corporation (or an affiliate
thereof) equivalent in fair market value to the per share consideration received
by holders of outstanding shares of Common Stock as a result of the
Reorganization Event.
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To the extent all or any portion of an Option becomes exercisable
solely as a result of clause (ii) above, the Board may provide that upon
exercise of such Option the Participant shall receive shares subject to a right
of repurchase by the Company or its successor at the Option exercise price; such
repurchase right (A) shall lapse at the same rate as the Option would have
become exercisable under its terms and (B) shall not apply to any shares subject
to the Option that were exercisable under its terms without regard to clause
(ii) above.
(3) Consequences of a Reorganization Event on Restricted Stock
Awards. Upon the occurrence of a Reorganization Event other than a liquidation
or dissolution of the Company, the repurchase and other rights of the Company
under each outstanding Restricted Stock Award shall inure to the benefit of the
Company's successor and shall apply to the cash, securities or other property
which the Common Stock was converted into or exchanged for pursuant to such
Reorganization Event in the same manner and to the same extent as they applied
to the Common Stock subject to such Restricted Stock Award. Upon the occurrence
of a Reorganization Event involving the liquidation or dissolution of the
Company, except to the extent specifically provided to the contrary in the
instrument evidencing any Restricted Stock Award or any other agreement between
a Participant and the Company, all restrictions and conditions on all Restricted
Stock Awards then outstanding shall automatically be deemed terminated or
satisfied.
11. General Provisions Applicable to Awards
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(a) Transferability of Awards. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution or, other than in the case of an Incentive Stock
Option, pursuant to a qualified domestic relations order, and, during the life
of the Participant, shall be exercisable only by the Participant. References to
a Participant, to the extent relevant in the context, shall include references
to authorized transferees.
(b) Documentation. Each Award shall be evidenced in such form (written,
electronic or otherwise) as the Board shall determine. Each Award may contain
terms and conditions in addition to those set forth in the Plan.
(c) Board Discretion. Except as otherwise provided by the Plan, each
Award may be made alone or in addition or in relation to any other Award. The
terms of each Award need not be identical, and the Board need not treat
Participants uniformly.
(d) Termination of Status. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, or the Participant's legal
representative, conservator, guardian or Designated Beneficiary, may exercise
rights under the Award.
(e) Withholding. Each Participant shall pay to the Company, or make
provision satisfactory to the Company for payment of, any taxes required by law
to be withheld in connection with an Award to such Participant. Except as the
Board may otherwise provide in an Award, for so long as the Common Stock is
registered under the Exchange Act, Participants may satisfy such tax obligations
in whole or in part by delivery of shares of Common Stock, including shares
retained from the Award creating the tax obligation, valued at their Fair Market
Value; provided, however, except as otherwise provided by the Board, that the
total tax withholding where stock is being used to satisfy such tax obligations
cannot exceed the Company's minimum statutory withholding obligations (based on
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, that are applicable to such supplemental taxable
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income). Shares surrendered to satisfy tax withholding requirements cannot be
subject to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements. The Company may, to the extent permitted by law, deduct any such
tax obligations from any payment of any kind otherwise due to a Participant.
(f) Amendment of Award. Except as otherwise provided in Section 5(d),
the Board may amend, modify or terminate any outstanding Award, including but
not limited to, substituting therefor another Award of the same or a different
type, changing the date of exercise or realization, and converting an Incentive
Stock Option to a Nonstatutory Stock Option, provided that the Participant's
consent to such action shall be required unless the Board determines that the
action, taking into account any related action, would not materially and
adversely affect the Participant.
(g) Conditions on Delivery of Stock. The Company will not be obligated
to deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (1) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (2) in the opinion of the Company's counsel, all other legal matters in
connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (3) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
(h) Acceleration. Except as otherwise provided in Section 8(b), the
Board may at any time provide that any Award shall become immediately
exercisable in full or in part, free of some or all restrictions or conditions,
or otherwise realizable in full or in part, as the case may be.
(i) Performance Conditions.
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(1) This Section 11(i) shall be administered by the Compensation
Committee, all of the members of which will be "outside directors" as defined by
Section 162(m) (the "Compensation Committee").
(2) Notwithstanding any other provision of the Plan, if the
Compensation Committee determines, at the time a Restricted Stock Award or Other
Stock Unit Award is granted to a Participant who is then an officer, that such
Participant is, or is likely to be as of the end of the tax year in which the
Company would claim a tax deduction in connection with such Award, a Covered
Employee (as defined in Section 162(m)), then the Compensation Committee may
provide that this Section 11(i) is applicable to such Award.
(3) If a Restricted Stock Award or Other Stock Unit Award is
subject to this Section 11(i), then the lapsing of restrictions thereon and the
distribution of cash or Shares pursuant thereto, as applicable, shall be subject
to the achievement of one or more objective performance goals established by the
Compensation Committee, which shall be based on the relative or absolute
attainment of specified levels of one or any combination of the following: (i)
earnings per share, (ii) return on average equity or average assets with respect
to a pre-determined peer group, (iii) earnings, (iv) earnings growth, (v)
revenues, (vi) revenue growth, (vii) expenses, (viii) stock price, (ix) market
share, (x) return on sales, assets, equity or investment, (xi) regulatory
compliance, (xii) improvement of financial ratings, (xiii) achievement of
balance sheet or income statement objectives, (xiv) total shareholder return,
(xv) net operating profit after tax, (xvi) pre-tax or after-tax income, (xvii)
cash flow, (xviii) gross margin, (xix) gross margin growth, (xx) product
schedule, (xxi) product quality, (xxii) individual balance sheet categories or
(xxiii) such other objective goals established by the Board, and may be absolute
in their terms or measured against or in relationship to other companies
9
comparably, similarly or otherwise situated. Such performance goals may be
adjusted to exclude any one or more of (A) extraordinary items, (B) gains or
losses on the dispositions of discontinued operations, (C) the cumulative
effects of changes in accounting principles, (D) the writedown of any asset, (E)
charges for restructuring and rationalization programs or (F) foreign exchange
impact. Such performance goals may vary by Participant and may be different for
different Awards. Such performance goals shall be set by the Compensation
Committee within the time period prescribed by, and shall otherwise comply with
the requirements of, Section 162(m).
(4) Notwithstanding any provision of the Plan, with respect to
any Restricted Stock Award or Other Stock Unit Award that is subject to this
Section 11(i), the Compensation Committee may adjust downwards, but not upwards,
the cash or number of Shares payable pursuant to such Award, and the
Compensation Committee may not waive the achievement of the applicable
performance goals except in the case of the death or disability of the
Participant.
(5) The Compensation Committee shall have the power to impose
such other restrictions on Awards subject to this Section 11(i) as it may deem
necessary or appropriate to ensure that such Awards satisfy all requirements for
"performance-based compensation" within the meaning of Section 162(m)(4)(C) of
the Code, or any successor provision thereto.
12. Miscellaneous
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(a) No Right To Employment or Other Status. No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
with respect to an Award until becoming the record holder of such shares.
Notwithstanding the foregoing, in the event the Company effects a split of the
Common Stock by means of a stock dividend and the exercise price of and the
number of shares subject to such Option are adjusted as of the date of the
distribution of the dividend (rather than as of the record date for such
dividend), then an optionee who exercises an Option between the record date and
the distribution date for such stock dividend shall be entitled to receive, on
the distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such Option exercise, notwithstanding the fact that such
shares were not outstanding as of the close of business on the record date for
such stock dividend.
(c) Effective Date and Term of Plan. The Plan shall become effective on
the date on which it is adopted by the Board, but no Award may be granted unless
and until the Plan has been approved by the Company's stockholders. No Awards
shall be granted under the Plan after the completion of 10 years from the
earlier of (1) the date on which the Plan was adopted by the Board or (2) the
date the Plan was approved by the Company's stockholders, but Awards previously
granted may extend beyond that date.
(d) Amendment of Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that, to the extent required
by Section 162(m), no Award granted to a Participant that is intended to comply
with Section 162(m) after the date of such amendment shall become exercisable,
realizable or vested, as applicable to such Award, unless and until such
amendment shall have been approved by the Company's stockholders if required by
Section 162(m) (including the vote required under Section 162(m)); and provided
further that, without approval of the Company's stockholders, no amendment may
(1) increase the number of shares authorized under the Plan (other than pursuant
10
to Section 10), (2) materially increase the benefits provided under the Plan,
(3) materially expand the class of participants eligible to participate in the
Plan, (4) expand the types of Awards provided under the Plan or (5) make any
other changes that require stockholder approval under the rules of the Nasdaq
National Market, Inc. In addition, if at any time the approval of the Company's
stockholders is required as to any other modification or amendment under Section
422 of the Code or any successor provision with respect to Incentive Stock
Options, the Board may not effect such modification or amendment without such
approval. No Award shall be made that is conditioned upon stockholder approval
of any amendment to the Plan.
(e) Provisions for Foreign Participants. The Board may modify Awards or
Options granted to Participants who are foreign nationals or employed outside
the United States or establish subplans or procedures under the Plan to
recognize differences in laws, rules, regulations or customs of such foreign
jurisdictions with respect to tax, securities, currency, employee benefit or
other matters.
(f) Governing Law. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.