Exhibit 99.1
TABLE OF CONTENTS
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1. Establishment, Purpose and Term of Plan..................................................................1
1.1 Establishment...................................................................................1
1.2 Purpose.........................................................................................1
1.3 Term of Plan....................................................................................1
2. Definitions and Construction.............................................................................1
2.1 Definitions.....................................................................................1
2.2 Construction....................................................................................9
3. Administration...........................................................................................9
3.1 Administration by the Committee.................................................................9
3.2 Authority of Officers...........................................................................9
3.3 Administration with Respect to Insiders........................................................10
3.4 Committee Complying with Section 162(m)........................................................10
3.5 Powers of the Committee........................................................................10
3.6 Option or SAR Repricing........................................................................11
3.7 Indemnification................................................................................11
4. Shares Subject to Plan..................................................................................12
4.1 Maximum Number of Shares Issuable..............................................................12
4.2 Adjustment for Unissued Predecessor Plan Shares................................................12
4.3 Share Counting.................................................................................12
4.4 Adjustments for Changes in Capital Structure...................................................13
5. Eligibility, Participation and Award Limitations........................................................13
5.1 Persons Eligible for Awards....................................................................13
5.2 Participation in the Plan......................................................................13
5.3 Award Limitations..............................................................................14
6. Stock Options...........................................................................................16
6.1 Exercise Price.................................................................................16
6.2 Exercisability and Term of Options.............................................................16
6.3 Payment of Exercise Price......................................................................16
6.4 Effect of Termination of Service...............................................................17
6.5 Transferability of Options.....................................................................18
7. Stock Appreciation Rights...............................................................................18
7.1 Types of SARs Authorized.......................................................................19
7.2 Exercise Price.................................................................................19
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7.3 Exercisability and Term of SARs................................................................19
7.4 Exercise of SARs...............................................................................19
7.5 Deemed Exercise of SARs........................................................................20
7.6 Effect of Termination of Service...............................................................20
7.7 Transferability of SARs........................................................................20
8. Restricted Stock Awards.................................................................................20
8.1 Types of Restricted Stock Awards Authorized....................................................20
8.2 Purchase Price.................................................................................20
8.3 Purchase Period................................................................................21
8.4 Payment of Purchase Price......................................................................21
8.5 Vesting and Restrictions on Transfer...........................................................21
8.6 Voting Rights; Dividends and Distributions.....................................................21
8.7 Effect of Termination of Service...............................................................22
8.8 Nontransferability of Restricted Stock Award Rights............................................22
9. Restricted Stock Unit Awards............................................................................22
9.1 Grant of Restricted Stock Unit Awards..........................................................22
9.2 Purchase Price.................................................................................22
9.3 Vesting........................................................................................23
9.4 Voting Rights, Dividend Equivalent Rights and Distributions....................................23
9.5 Effect of Termination of Service...............................................................23
9.6 Settlement of Restricted Stock Unit Awards.....................................................24
9.7 Nontransferability of Restricted Stock Unit Awards.............................................24
10. Performance Awards......................................................................................24
10.1 Types of Performance Awards Authorized.........................................................24
10.2 Initial Value of Performance Shares and Performance Units......................................24
10.3 Establishment of Performance Period, Performance Goals and Performance Award Formula...........25
10.4 Measurement of Performance Goals...............................................................25
10.5 Settlement of Performance Awards...............................................................27
10.6 Voting Rights; Dividend Equivalent Rights and Distributions....................................28
10.7 Effect of Termination of Service...............................................................29
10.8 Nontransferability of Performance Awards.......................................................29
11. Deferred Compensation Awards............................................................................29
11.1 Establishment of Deferred Compensation Award Programs..........................................29
11.2 Terms and Conditions of Deferred Compensation Awards...........................................30
12. Cash-Based Awards and Other Stock-Based Awards..........................................................31
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12.1 Grant of Cash-Based Awards.....................................................................31
12.2 Grant of Other Stock-Based Awards..............................................................31
12.3 Value of Cash-Based and Other Stock-Based Awards...............................................31
12.4 Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards........................31
12.5 Voting Rights; Dividend Equivalent Rights and Distributions....................................32
12.6 Effect of Termination of Service...............................................................32
12.7 Nontransferability of Cash-Based Awards and Other Stock-Based Awards...........................32
13. Nonemployee Director Awards.............................................................................32
14. Standard Forms of Award Agreement.......................................................................33
14.1 Award Agreements...............................................................................33
14.2 Authority to Vary Terms........................................................................33
15. Change in Control.......................................................................................33
15.1 Effect of Change in Control on Awards..........................................................33
15.2 Effect of Change in Control on Nonemployee Director Awards.....................................34
15.3 Federal Excise Tax Under Section 4999 of the Code..............................................35
16. Compliance with Securities Law..........................................................................35
17. Compliance with Section 409A............................................................................36
17.1 Awards Subject to Section 409A.................................................................36
17.2 Deferral and/or Distribution Elections.........................................................36
17.3 Subsequent Elections...........................................................................37
17.4 Distributions Pursuant to Deferral Elections...................................................37
17.5 Unforeseeable Emergency........................................................................38
17.6 Disabled.......................................................................................38
17.7 Death..........................................................................................39
17.8 No Acceleration of Distributions...............................................................39
18. Tax Withholding.........................................................................................39
18.1 Tax Withholding in General.....................................................................39
18.2 Withholding in Shares..........................................................................39
19. Amendment or Termination of Plan........................................................................39
20. Miscellaneous Provisions................................................................................40
20.1 Repurchase Rights..............................................................................40
20.2 Forfeiture Events..............................................................................40
20.3 Provision of Information.......................................................................40
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20.4 Rights as Employee, Consultant or Director.....................................................40
20.5 Rights as a Stockholder........................................................................41
20.6 Delivery of Title to Shares....................................................................41
20.7 Fractional Shares..............................................................................41
20.8 Retirement and Welfare Plans...................................................................41
20.9 Beneficiary Designation........................................................................41
20.10 Severability...................................................................................41
20.11 No Constraint on Corporate Action..............................................................42
20.12 Unfunded Obligation............................................................................42
20.13 Choice of Law..................................................................................42
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Immersion Corporation
2007 Equity Incentive Plan
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
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1.1 Establishment. The Immersion Corporation 2007 Equity
Incentive Plan (the "Plan") is hereby established effective as of June 6, 2007,
the date of its approval by the stockholders of the Company (the "Effective
Date").
1.2 Purpose. The purpose of the Plan is to advance the
interests of the Participating Company Group and its stockholders by providing
an incentive to attract, retain and reward persons performing services for the
Participating Company Group and by motivating such persons to contribute to the
growth and profitability of the Participating Company Group. The Plan seeks to
achieve this purpose by providing for Awards in the form of Options, Stock
Appreciation Rights, Restricted Stock Purchase Rights, Restricted Stock Bonuses,
Restricted Stock Units, Performance Shares, Performance Units, Deferred
Compensation Awards, Cash-Based and Other Stock-Based Awards and Nonemployee
Director Awards. The Company intends that Awards granted pursuant to the Plan be
exempt from or comply with Section 409A of the Code (including any amendments or
replacements of such section), and the Plan shall be so construed.
1.3 Term of Plan. The Plan shall continue in effect until its
termination by the Committee; provided, however, that all Awards shall be
granted, if at all, within ten (10) years from the Effective Date.
2. DEFINITIONS AND CONSTRUCTION.
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2.1 Definitions. Whenever used herein, the following terms
shall have their respective meanings set forth below:
(a) "Affiliate" means (i) an entity, other than a Parent
Corporation, that directly, or indirectly through one or more intermediary
entities, controls the Company or (ii) an entity, other than a Subsidiary
Corporation, that is controlled by the Company directly or indirectly through
one or more intermediary entities. For this purpose, the term "control"
(including the term "controlled by") means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
the relevant entity, whether through the ownership of voting securities, by
contract or otherwise; or shall have such other meaning assigned such term for
the purposes of registration on Form S-8 under the Securities Act.
(b) "Award" means any Option, Stock Appreciation Right,
Restricted Stock Purchase Right, Restricted Stock Bonus, Restricted Stock Unit,
Performance Share, Performance Unit, Deferred Compensation Award, Cash-Based
Award, Other Stock-Based Award or Nonemployee Director Award granted under the
Plan.
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(c) "Award Agreement" means a written or electronic
agreement between the Company and a Participant setting forth the terms,
conditions and restrictions of the Award granted to the Participant.
(d) "Board" means the Board of Directors of the Company.
(e) "Cash-Based Award" means an Award denominated in cash
and granted pursuant to Section 12.
(f) "Cause" means, unless such term or an equivalent term is
otherwise defined with respect to an Award by the Participant's Award Agreement
or by a written contract of employment or service, any of the following: (i) the
Participant's theft, dishonesty, willful misconduct, breach of fiduciary duty
for personal profit, or falsification of any Participating Company documents or
records; (ii) the Participant's material failure to abide by a Participating
Company's code of conduct or other policies (including, without limitation,
policies relating to confidentiality and reasonable workplace conduct); (iii)
the Participant's unauthorized use, misappropriation, destruction or diversion
of any tangible or intangible asset or corporate opportunity of a Participating
Company (including, without limitation, the Participant's improper use or
disclosure of a Participating Company's confidential or proprietary
information); (iv) any intentional act by the Participant which has a material
detrimental effect on a Participating Company's reputation or business; (v) the
Participant's repeated failure or inability to perform any reasonable assigned
duties after written notice from a Participating Company of, and a reasonable
opportunity to cure, such failure or inability; (vi) any material breach by the
Participant of any employment, service, non-disclosure, non-competition,
non-solicitation or other similar agreement between the Participant and a
Participating Company, which breach is not cured pursuant to the terms of such
agreement; or (vii) the Participant's conviction (including any plea of guilty
or nolo contendere) of any criminal act involving fraud, dishonesty,
misappropriation or moral turpitude, or which impairs the Participant's ability
to perform his or her duties with a Participating Company.
(g) "Change in Control" means, unless such term or an
equivalent term is otherwise defined with respect to an Award by the
Participant's Award Agreement or by a written contract of employment or service,
the occurrence of any of the following:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule
13d-3 promulgated under the Exchange Act), directly or indirectly, of securities
of the Company representing more than fifty percent (50%) of the total combined
voting power of the Company's then-outstanding securities entitled to vote
generally in the election of Directors; provided, however, that the following
acquisitions shall not constitute a Change in Control: (1) an acquisition by any
such person who on the Effective Date is the beneficial owner of more than fifty
percent (50%) of such voting power, (2) any acquisition directly from the
Company, including, without limitation, a public offering of securities, (3) any
acquisition by the Company, (4) any acquisition by a trustee or other fiduciary
under an employee benefit plan of a Participating Company or (5) any acquisition
by an entity owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of the voting securities
of the Company; or
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(ii) an Ownership Change Event or series of related
Ownership Change Events (collectively, a "Transaction") in which the
stockholders of the Company immediately before the Transaction do not retain
immediately after the Transaction direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding securities entitled to vote generally in the election of Directors
or, in the case of an Ownership Change Event described in Section 2.1(ff)(iii),
the entity to which the assets of the Company were transferred (the
"Transferee"), as the case may be; or
(iii) a liquidation or dissolution of the Company;
provided, however, that a Change in Control shall be deemed not to include a
transaction described in subsections (i) or (ii) of this Section 2.1(g) in which
a majority of the members of the board of directors of the continuing, surviving
or successor entity, or parent thereof, immediately after such transaction is
comprised of Incumbent Directors. Notwithstanding the foregoing, to the extent
that any amount constituting Section 409A Deferred Compensation would become
payable under this Plan by reason of a Change in Control, such amount shall
become payable only if the event constituting a Change in Control would also
constitute a change in ownership or effective control of the Company or a change
in the ownership of a substantial portion of the assets of the Company within
the meaning of Section 409A.
For purposes of the preceding sentence, indirect beneficial ownership
shall include, without limitation, an interest resulting from ownership of the
voting securities of one or more corporations or other business entities which
own the Company or the Transferee, as the case may be, either directly or
through one or more subsidiary corporations or other business entities. The
Committee shall have the right to determine whether multiple sales or exchanges
of the voting securities of the Company or multiple Ownership Change Events are
related, and its determination shall be final, binding and conclusive.
(h) "Code" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations or administrative guidelines promulgated
thereunder.
(i) "Committee" means the Compensation Committee and such
other committee or subcommittee of the Board, if any, duly appointed to
administer the Plan and having such powers in each instance as shall be
specified by the Board. If, at any time, there is no committee of the Board then
authorized or properly constituted to administer the Plan, the Board shall
exercise all of the powers of the Committee granted herein, and, in any event,
the Board may in its discretion exercise any or all of such powers.
(j) "Company" means Immersion Corporation, a Delaware
corporation, or any successor corporation thereto.
(k) "Consultant" means a person engaged to provide
consulting or advisory services (other than as an Employee or a member of the
Board) to a Participating Company, 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 the Plan in reliance on registration on a Form S-8
Registration Statement under the Securities Act.
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(l) "Covered Employee" means, at any time the Plan is
subject to Section 162(m), any Employee who is or may reasonably be expected to
become a "covered employee" as defined in Section 162(m), or any successor
statute, and who is designated, either as an individual Employee or a member of
a class of Employees, by the Committee no later than (i) the date ninety (90)
days after the beginning of the Performance Period, or (ii) the date on which
twenty-five percent (25%) of the Performance Period has elapsed, as a "Covered
Employee" under this Plan for such applicable Performance Period.
(m) "Deferred Compensation Award" means an award granted to
a Participant pursuant to Section 11.
(n) "Director" means a member of the Board.
(o) "Disability" means the permanent and total disability of
the Participant, within the meaning of Section 22(e)(3) of the Code.
(p) "Dividend Equivalent Right" means the right of a
Participant, granted at the discretion of the Committee or as otherwise provided
by the Plan, to receive a credit for the account of such Participant in an
amount equal to the cash dividends paid on one share of Stock for each share of
Stock represented by an Award held by such Participant.
(q) "Employee" means any person treated as an employee
(including an Officer or a member of the Board who is also treated as an
employee) in the records of a Participating Company and, with respect to any
Incentive Stock Option granted to such person, who is an employee for purposes
of Section 422 of the Code; provided, however, that neither service as a member
of the Board nor payment of a director's fee shall be sufficient to constitute
employment for purposes of the Plan. The Company shall determine in good faith
and in the exercise of its discretion whether an individual has become or has
ceased to be an Employee and the effective date of such individual's employment
or termination of employment, as the case may be. For purposes of an
individual's rights, if any, under the terms of the Plan as of the time of the
Company's determination of whether or not the individual is an Employee, all
such determinations by the Company shall be final, binding and conclusive as to
such rights, if any, notwithstanding that the Company or any court of law or
governmental agency subsequently makes a contrary determination as to such
individual's status as an Employee.
(r) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(s) "Fair Market Value" means, as of any date, the value of
a share of Stock or other property as determined by the Committee, in its
discretion, or by the Company, in its discretion, if such determination is
expressly allocated to the Company herein, subject to the following:
(i) Except as otherwise determined by the Committee, if, on
such date, the Stock is listed on a national or regional securities exchange or
market system, the Fair Market Value of a share of Stock shall be the closing
price of a share of Stock (or the mean of the closing bid and asked prices of a
share of Stock if the Stock is so quoted instead) as quoted on the national or
regional securities exchange or market system constituting the primary market
for the Stock, as reported in The Wall Street Journal or such other source as
the Company deems reliable. If the relevant date does not fall on a day on which
the Stock has traded on such securities exchange or market system, the date on
which the Fair Market Value shall be established shall be the last day on which
the Stock was so traded prior to the relevant date, or such other appropriate
day as shall be determined by the Committee, in its discretion.
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(ii) Notwithstanding the foregoing, the Committee may, in
its discretion, determine the Fair Market Value of a share of Stock on the basis
of the opening, closing, or average of the high and low sale prices of a share
of Stock on such date or the preceding trading day, the actual sale price of a
share of Stock received by a Participant, any other reasonable basis using
actual transactions in the Stock as reported on a national or regional
securities exchange or market system and consistently applied, or on any other
basis consistent with the requirements of Section 409A. The Committee may also
determine the Fair Market Value upon the average selling price of the Stock
during a specified period that is within thirty (30) days before or thirty (30)
days after such date, provided that, with respect to the grant of an Option or
SAR, the commitment to grant such Award based on such valuation method must be
irrevocable before the beginning of the specified period and such valuation
method must be used consistently for grants of Options and SARs under the same
and substantially similar programs. The Committee may vary its method of
determination of the Fair Market Value as provided in this Section for different
purposes under the Plan to the extent consistent with the requirements of
Section 409A.
(iii) If, on such date, the Stock is not listed on a
national or regional securities exchange or market system, the Fair Market Value
of a share of Stock shall be as determined by the Committee in good faith,
without regard to any restriction other than a restriction which, by its terms,
will never lapse, and in a manner consistent with the requirements of Section
409A.
(t) "Full Value Award" means any Award settled in Stock,
other than (i) an Option, (ii) a Stock Appreciation Right, (iii) a Restricted
Stock Purchase Right or an Other Stock-Based Award under which the Company will
receive monetary consideration equal to the Fair Market Value (determined as of
the date of grant) of the shares subject to such Award, or (iv) a Nonemployee
Director Award which is any of the foregoing types of Awards.
(u) "Incentive Stock Option" means an Option intended to be
(as set forth in the Award Agreement) and which qualifies as an incentive stock
option within the meaning of Section 422(b) of the Code.
(v) "Incumbent Director" means a director who either (i) is
a member of the Board as of the Effective Date or (ii) is elected, or nominated
for election, to the Board with the affirmative votes of at least a majority of
the Incumbent Directors at the time of such election or nomination, but who was
not elected or nominated in connection with an actual or threatened proxy
contest relating to the election of directors of the Company.
(w) "Insider" means an Officer, Director or any other person
whose transactions in Stock are subject to Section 16 of the Exchange Act.
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(x) "Insider Trading Policy" means the written policy of the
Company pertaining to the purchase, sale, transfer or other disposition of the
Company's equity securities by Directors, Officers, Employees or other service
providers who may possess material, nonpublic information regarding the Company
or its securities.
(y) "Net-Exercise" means a procedure by which the
Participant will be issued a number of whole shares of Stock upon the exercise
of an Option determined in accordance with the following formula:
N = X(A-B)/A, where
"N" = the number of shares of Stock to be issued to the Participant upon
exercise of the Option;
"X" = the total number of shares with
respect to which the Participant has
elected to exercise the Option;
"A" = the Fair Market Value of one (1) share of Stock determined on the
exercise date; and
"B" = the exercise price per share (as defined in the Participant's Award
Agreement)
(z) "Nonemployee Director" means a Director who is not an
Employee.
(aa) "Nonemployee Director Award" means a Nonstatutory Stock
Option, Stock Appreciation Right, Restricted Stock Award or Restricted Stock
Unit Award granted to a Nonemployee Director pursuant to Section 13.
(bb) "Nonstatutory Stock Option" means an Option not
intended to be (as set forth in the Award Agreement) an incentive stock option
within the meaning of Section 422(b) of the Code.
(cc) "Officer" means any person designated by the Board as
an officer of the Company.
(dd) "Option" means an Incentive Stock Option or a
Nonstatutory Stock Option granted pursuant to Section 6 or Section 13.
(ee) "Other Stock-Based Award" means an Award denominated in
shares of Stock granted pursuant to Section 12.
(ff) "Ownership Change Event" means the occurrence of any of
the following with respect to the Company: (i) the direct or indirect sale or
exchange in a single or series of related transactions by the stockholders of
the Company of more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a party; or (iii) the
sale, exchange, or transfer of all or substantially all of the assets of the
Company (other than a sale, exchange or transfer to one or more subsidiaries of
the Company).
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(gg) "Parent Corporation" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(hh) "Participant" means any eligible person who has been
granted one or more Awards.
(ii) "Participating Company" means the Company or any Parent
Corporation, Subsidiary Corporation or Affiliate.
(jj) "Participating Company Group" means, at any point in
time, all entities collectively which are then Participating Companies.
(kk) "Performance Award" means an Award of Performance
Shares or Performance Units.
(ll) "Performance Award Formula" means, for any Performance
Award, a formula or table established by the Committee pursuant to Section 10.3
which provides the basis for computing the value of a Performance Award at one
or more threshold levels of attainment of the applicable Performance Goal(s)
measured as of the end of the applicable Performance Period.
(mm) "Performance-Based Compensation" means compensation
under an Award that satisfies the requirements of Section 162(m) for certain
performance-based compensation paid to Covered Employees.
(nn) "Performance Goal" means a performance goal established
by the Committee pursuant to Section 10.3.
(oo) "Performance Period" means a period established by the
Committee pursuant to Section 10.3 at the end of which one or more Performance
Goals are to be measured.
(pp) "Performance Share" means a right granted to a
Participant pursuant to Section 10 to receive a payment equal to the value of a
Performance Share, as determined by the Committee, based on performance.
(qq) "Performance Unit" means a right granted to a
Participant pursuant to Section 10 to receive a payment equal to the value of a
Performance Unit, as determined by the Committee, based upon performance.
(rr) "Predecessor Plan" means the Company's 1997 Stock
Option Plan, as amended and as in effect immediately prior to its termination
effective as of the Effective Date.
(ss) "Restricted Stock Award" means an Award of a Restricted
Stock Bonus or a Restricted Stock Purchase Right.
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(tt) "Restricted Stock Bonus" means Stock granted to a
Participant pursuant to Section 8 or Section 13.
(uu) "Restricted Stock Purchase Right" means a right to
purchase Stock granted to a Participant pursuant to Section 8 or Section 13.
(vv) "Restricted Stock Unit" or "Stock Unit" means a right
granted to a Participant pursuant to Section 9, Section 11 or Section 13 to
receive a share of Stock on a date determined in accordance with the provisions
of such Sections, as applicable, and the Participant's Award Agreement.
(ww) "Rule 16b-3" means Rule 16b-3 under the Exchange Act,
as amended from time to time, or any successor rule or regulation.
(xx) "SAR" or "Stock Appreciation Right" means a right
granted to a Participant pursuant to Section 7 or Section 13 to receive payment,
for each share of Stock subject to such SAR, of an amount equal to the excess,
if any, of the Fair Market Value of a share of Stock on the date of exercise of
the SAR over the exercise price.
(yy) "Section 162(m)" means Section 162(m) of the Code.
(zz) "Section 409A" means Section 409A of the Code.
(aaa) "Section 409A Deferred Compensation" means
compensation provided pursuant to the Plan that constitutes deferred
compensation subject to and not exempted from the requirements of Section 409A.
(bbb) "Securities Act" means the Securities Act of 1933, as
amended.
(ccc) "Service" means a Participant's employment or service
with the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. Unless otherwise provided by the Committee, a
Participant's Service shall not be deemed to have terminated merely because of a
change in the capacity in which the Participant renders such Service or a change
in the Participating Company for which the Participant renders such Service,
provided that there is no interruption or termination of the Participant's
Service. Furthermore, a Participant's Service shall not be deemed to have
terminated if the Participant takes any military leave, sick leave, or other
bona fide leave of absence approved by the Company. However, unless otherwise
provided by the Committee, if any such leave taken by a Participant exceeds
ninety (90) days, then on the ninety-first (91st) day following the commencement
of such leave the Participant's Service shall be deemed to have terminated,
unless the Participant's right to return to Service is guaranteed by statute or
contract. Notwithstanding the foregoing, unless otherwise designated by the
Company or required by law, an unpaid leave of absence shall not be treated as
Service for purposes of determining vesting under the Participant's Award
Agreement. A Participant's Service shall be deemed to have terminated either
upon an actual termination of Service or upon the entity for which the
Participant performs Service ceasing to be a Participating Company. Subject to
the foregoing, the Company, in its discretion, shall determine whether the
Participant's Service has terminated and the effective date of such termination.
8
(ddd) "Stock" means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.4.
(eee) "Subsidiary Corporation" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
(fff) "Ten Percent Owner" means a Participant who, at the
time an Option is granted to the Participant, owns stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
a Participating Company (other than an Affiliate) within the meaning of Section
422(b)(6) of the Code.
(ggg) "Vesting Conditions" mean those conditions established
in accordance with the Plan prior to the satisfaction of which shares subject to
an Award remain subject to forfeiture or a repurchase option in favor of the
Company exercisable for the Participant's monetary purchase price, if any, for
such shares upon the Participant's termination of Service.
2.2 Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.
3. ADMINISTRATION.
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3.1 Administration by the Committee. The Plan shall be
administered by the Committee. All questions of interpretation of the Plan, of
any Award Agreement or of any other form of agreement or other document employed
by the Company in the administration of the Plan or of any Award shall be
determined by the Committee, and such determinations shall be final, binding and
conclusive upon all persons having an interest in the Plan or such Award, unless
fraudulent or made in bad faith. Any and all actions, decisions and
determinations taken or made by the Committee in the exercise of its discretion
pursuant to the Plan or Award Agreement or other agreement thereunder (other
than determining questions of interpretation pursuant to the preceding sentence)
shall be final, binding and conclusive upon all persons having an interest
therein.
3.2 Authority of Officers. Any Officer shall have the
authority to act on behalf of the Company with respect to any matter, right,
obligation, determination or election which is the responsibility of or which is
allocated to the Company herein, provided the Officer has apparent authority
with respect to such matter, right, obligation, determination or election. The
Board or Committee may, in its discretion, delegate to a committee comprised of
one or more Officers the authority to grant one or more Awards, without further
approval of the Board or the Committee, to any Employee, other than a person
who, at the time of such grant, is an Insider or a Covered Employee; provided,
however, that (a) such Awards shall not be granted for shares in excess of the
maximum aggregate number of shares of Stock authorized for issuance pursuant to
Section 4.1, (b) each such Award which is a Full Value Award shall be subject to
the minimum vesting provisions described in Section 5.3(b), (c) each such Award
shall be subject to the terms and conditions of the appropriate standard form of
Award Agreement approved by the Board or the Committee and shall conform to the
provisions of the Plan, and (d) each such Award shall conform to such limits and
guidelines as shall be established from time to time by resolution of the Board
or the Committee.
9
3.3 Administration with Respect to Insiders. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.
3.4 Committee Complying with Section 162(m). If the Company is
a "publicly held corporation" within the meaning of Section 162(m), the Board
may establish a Committee of "outside directors" within the meaning of Section
162(m) to approve the grant of any Award intended to result in the payment of
Performance-Based Compensation.
3.5 Powers of the Committee. In addition to any other powers
set forth in the Plan and subject to the provisions of the Plan, the Committee
shall have the full and final power and authority, in its discretion:
(a) to determine the persons to whom, and the time or times
at which, Awards shall be granted and the number of shares of Stock, units or
monetary value to be subject to each Award;
(b) to determine the type of Award granted;
(c) to determine the Fair Market Value of shares of Stock or
other property;
(d) to determine the terms, conditions and restrictions
applicable to each Award (which need not be identical) and any shares acquired
pursuant thereto, including, without limitation, (i) the exercise or purchase
price of shares pursuant to any Award, (ii) the method of payment for shares
purchased pursuant to any Award, (iii) the method for satisfaction of any tax
withholding obligation arising in connection with Award, including by the
withholding or delivery of shares of Stock, (iv) the timing, terms and
conditions of the exercisability or vesting of any Award or any shares acquired
pursuant thereto, (v) the Performance Measures, Performance Period, Performance
Award Formula and Performance Goals applicable to any Award and the extent to
which such Performance Goals have been attained, (vi) the time of the expiration
of any Award, (vii) the effect of the Participant's termination of Service on
any of the foregoing, and (viii) all other terms, conditions and restrictions
applicable to any Award or shares acquired pursuant thereto not inconsistent
with the terms of the Plan;
(e) to determine whether an Award will be settled in shares
of Stock, cash, or in any combination thereof;
(f) to approve one or more forms of Award Agreement;
10
(g) to amend, modify, extend, cancel or renew any Award or
to waive any restrictions or conditions applicable to any Award or any shares
acquired pursuant thereto;
(h) to accelerate, continue, extend or defer the
exercisability or vesting of any Award or any shares acquired pursuant thereto,
including with respect to the period following a Participant's termination of
Service;
(i) to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt sub-plans or supplements to, or
alternative versions of, the Plan, including, without limitation, as the
Committee deems necessary or desirable to comply with the laws or regulations of
or to accommodate the tax policy, accounting principles or custom of, foreign
jurisdictions whose citizens may be granted Awards; and
(j) to correct any defect, supply any omission or reconcile
any inconsistency in the Plan or any Award Agreement and to make all other
determinations and take such other actions with respect to the Plan or any Award
as the Committee may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law.
3.6 Option or SAR Repricing. Without the affirmative vote of
holders of a majority of the shares of Stock cast in person or by proxy at a
meeting of the stockholders of the Company at which a quorum representing a
majority of all outstanding shares of Stock is present or represented by proxy,
the Board shall not approve (a) the cancellation of outstanding Options or SARs
and the grant in substitution therefore of new Options or SARs having a lower
exercise price, (b) the amendment of outstanding Options or SARs to reduce the
exercise price thereof, or (c) the cancellation of outstanding Options or SARs
having exercise prices per share greater than the then current Fair Market Value
of a share of Stock and the grant in substitution therefore of Full Value
Awards. This paragraph shall not be construed to apply to "issuing or assuming a
stock option in a transaction to which section 424(a) applies," within the
meaning of Section 424 of the Code.
3.7 Indemnification. In addition to such other rights of
indemnification as they may have as members of the Board or the Committee or as
officers or employees of the Participating Company Group, members of the Board
or the Committee and any officers or employees of the Participating Company
Group to whom authority to act for the Board, the Committee or the Company is
delegated shall be indemnified by the Company against all reasonable expenses,
including attorneys' fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided, however,
that within sixty (60) days after the institution of such action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at its own expense to handle and defend the same.
11
4. SHARES SUBJECT TO PLAN.
----------------------
4.1 Maximum Number of Shares Issuable. Subject to adjustment
as provided in Sections 4.2, 4.3 and 4.4, the maximum aggregate number of shares
of Stock that may be issued under the Plan shall be equal to two million three
hundred three thousand two hundred thirty-two (2,303,232) shares, representing
the lesser of (a) two million five hundred thousand (2,500,000) or (b) the
number of shares that remained available for the future grant of stock options
under the Predecessor Plan immediately prior to its termination, and shall
consist of authorized but unissued or reacquired shares of Stock or any
combination thereof.
4.2 Adjustment for Unissued Predecessor Plan Shares. The
maximum aggregate number of shares of Stock that may be issued under the Plan as
set forth in Section 4.1 shall be cumulatively increased from time to time by:
(a) the number of shares of Stock subject to that portion of
any option outstanding pusuant to the Predecessor Plan as of the Effective Date
which, on or after the Effective Date, expires or is terminated or canceled for
any reason without having been exercised or settled in full; and
(b) the number of shares of Stock acquired pursuant to the
Predecessor Plan subject to forfeiture or repurchase by the Company at the
Participant's purchase price which, on or after the Effective Date, is so
forfeited or repurchased;
provided, however, that the aggregate number of shares of Stock authorized for
issuance under the Predecessor Plan that may become authorized for issuance
under the Plan pursuant to this Section 4.2 shall not exceed one million
(1,000,000).
4.3 Share Counting. If an outstanding Award for any reason
expires or is terminated or canceled without having been exercised or settled in
full, or if shares of Stock acquired pursuant to an Award subject to forfeiture
or repurchase are forfeited or repurchased by the Company for an amount not
greater than the Participant's purchase price, the shares of Stock allocable to
the terminated portion of such Award or such forfeited or repurchased shares of
Stock shall again be available for issuance under the Plan. Shares of Stock
shall not be deemed to have been issued pursuant to the Plan with respect to any
portion of an Award that is settled in cash. Upon payment in shares of Stock
pursuant to the exercise of an SAR, the number of shares available for issuance
under the Plan shall be reduced by the gross number of shares for which the SAR
is exercised. If the exercise price of an Option is paid by tender to the
Company, or attestation to the ownership, of shares of Stock owned by the
Participant, or by means of a Net-Exercise, the number of shares available for
issuance under the Plan shall be reduced by the gross number of shares for which
the Option is exercised. If Options, SARs or Performance Awards are settled in
the form of Stock Units issued pursuant to a stock issuance deferral award
described in Section 11.1(b), the number of shares available for issuance under
the Plan shall be reduced by the number of shares subject to such Stock Units,
but shall not be further reduced by the number of shares of Stock originally
subject to such Options, SARs or Performance Awards settled in such manner.
Shares withheld or reacquired by the Company in satisfaction of tax withholding
obligations pursuant to Section 18.2 shall not again be available for issuance
under the Plan.
12
4.4 Adjustments for Changes in Capital Structure. Subject to
any required action by the stockholders of the Company, in the event of any
change in the Stock effected without receipt of consideration by the Company,
whether through merger, consolidation, reorganization, reincorporation,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares,
or similar change in the capital structure of the Company, or in the event of
payment of a dividend or distribution to the stockholders of the Company in a
form other than Stock (excepting normal cash dividends) that has a material
effect on the Fair Market Value of shares of Stock, appropriate and
proportionate adjustments shall be made in the number and kind of shares subject
to the Plan and to any outstanding Awards, in the Award limits set forth in
Section 5.3 and in the exercise or purchase price per share under any
outstanding Award in order to prevent dilution or enlargement of Participants'
rights under the Plan. For purposes of the foregoing, conversion of any
convertible securities of the Company shall not be treated as "effected without
receipt of consideration by the Company." If a majority of the shares which are
of the same class as the shares that are subject to outstanding Awards are
exchanged for, converted into, or otherwise become (whether or not pursuant to
an Ownership Change Event) shares of another corporation (the "New Shares"), the
Committee may unilaterally amend the outstanding Awards to provide that such
Awards are for New Shares. In the event of any such amendment, the number of
shares subject to, and the exercise or purchase price per share of, the
outstanding Awards shall be adjusted in a fair and equitable manner as
determined by the Committee, in its discretion. Any fractional share resulting
from an adjustment pursuant to this Section 4.4 shall be rounded down to the
nearest whole number, and in no event may the exercise or purchase price under
any Award be decreased to an amount less than the par value, if any, of the
stock subject to such Award. The Committee in its sole discretion, may also make
such adjustments in the terms of any Award to reflect, or related to, such
changes in the capital structure of the Company or distributions as it deems
appropriate, including modification of Performance Goals, Performance Award
Formulas and Performance Periods. The adjustments determined by the Committee
pursuant to this Section shall be final, binding and conclusive.
The Committee may, without affecting the number of Shares reserved or
available hereunder, authorize the issuance or assumption of benefits under this
Plan in connection with 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 and related guidance issued by the U.S. Treasury
Department.
5. ELIGIBILITY, PARTICIPATION AND AWARD LIMITATIONS.
-------------------------------------------------
5.1 Persons Eligible for Awards. Awards, other than Deferred
Compensation Awards or Nonemployee Director Awards, may be granted only to
Employees and Consultants. Deferred Compensation Awards may be granted only to
Officers, Directors and individuals who are among a select group of management
or highly compensated Employees. Nonemployee Director Awards may be granted only
to persons who, at the time of grant, are Nonemployee Directors.
5.2 Participation in the Plan. Awards are granted solely at
the discretion of the Committee. Eligible persons may be granted more than one
Award. However, eligibility in accordance with this Section shall not entitle
any person to be granted an Award, or, having been granted an Award, to be
granted an additional Award.
13
5.3 Award Limitations.
(a) Incentive Stock Option Limitations.
(i) Maximum Number of Shares Issuable Pursuant to Incentive
Stock Options. Subject to adjustment as provided in Section 4.4, the maximum
aggregate number of shares of Stock that may be issued under the Plan pursuant
to the exercise of Incentive Stock Options shall not exceed three million and
five hundred thousand (3,500,000) shares. The maximum aggregate number of shares
of Stock that may be issued under the Plan pursuant to all Awards other than
Incentive Stock Options shall be the number of shares determined in accordance
with Section 4.1, subject to adjustment as provided in Sections 4.2, 4.3 and
4.4.
(ii) Persons Eligible. An Incentive Stock Option may be
granted only to a person who, on the effective date of grant, is an Employee of
the Company, a Parent Corporation or a Subsidiary Corporation (each being an
"ISO-Qualifying Corporation"). Any person who is not an Employee of an
ISO-Qualifying Corporation on the effective date of the grant of an Option to
such person may be granted only a Nonstatutory Stock Option. An Incentive Stock
Option granted to a prospective Employee upon the condition that such person
become an Employee of an ISO-Qualifying Corporation shall be deemed granted
effective on the date such person commences Service as an Employee of an
ISO-Qualifying Corporation, with an exercise price determined as of such date in
accordance with Section 6.1.
(iii) Fair Market Value Limitation. To the extent that
options designated as Incentive Stock Options (granted under all stock option
plans of the Participating Company Group, including the Plan) become exercisable
by a Participant for the first time during any calendar year for stock having a
Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the
portion of such options which exceeds such amount shall be treated as
Nonstatutory Stock Options. For purposes of this Section, options designated as
Incentive Stock Options shall be taken into account in the order in which they
were granted, and the Fair Market Value of stock shall be determined as of the
time the option with respect to such stock is granted. If the Code is amended to
provide for a limitation different from that set forth in this Section, such
different limitation shall be deemed incorporated herein effective as of the
date and with respect to such Options as required or permitted by such amendment
to the Code. If an Option is treated as an Incentive Stock Option in part and as
a Nonstatutory Stock Option in part by reason of the limitation set forth in
this Section, the Participant may designate which portion of such Option the
Participant is exercising. In the absence of such designation, the Participant
shall be deemed to have exercised the Incentive Stock Option portion of the
Option first. Upon exercise, shares issued pursuant to each such portion shall
be separately identified.
(b) Aggregate Limit on Full Value Awards. In no event shall
more than forty percent (40%) of the maximum aggregate number of shares of Stock
that may be issued under the Plan, determined in accordance with Sections 4.1,
4.2, 4.3 and 4.4, be issued pursuant to Full Value Awards.
14
(c) Limit on Full Value Awards without Minimum Vesting.
Except with respect to a maximum of five percent (5%) of the maximum aggregate
number of shares of Stock that may be issued under the Plan, determined in
accordance with Sections 4.1, 4.2, 4.3 and 4.4, Full Value Awards which vest on
the basis of the Participant's continued Service shall provide for vesting over
a period of not less than three (3) years, and Full Value Awards which vest on
the basis of the attainment of performance goals shall provide for a performance
period of not less than twelve (12) months. The foregoing limitations shall not
preclude the acceleration of vesting of any such Award upon the death,
disability, retirement or involuntary termination of Service of the Participant
or upon or following a Change in Control, as determined by the Committee in its
discretion.
(d) Nonemployee Director Award Limits. Subject to adjustment
as provided in Section 4.4, no Nonemployee Director may be granted within any
fiscal year of the Company one or more Nonemployee Director Awards for more than
twenty thousand (20,000) shares; provided, however, that the foregoing annual
limit shall be increased by one or more of the following additions, as
applicable: (i) an additional fifty-five thousand (55,000) shares in the fiscal
year in which the Nonemployee Director is first appointed or elected to the
Board as a Nonemployee Director, (ii) an additional twenty thousand (20,000)
shares in any fiscal year in which the Nonemployee Director is serving as the
Chairman or Lead Director of the Board, (iii) an additional ten thousand
(10,000) shares in any fiscal year for each committee of the Board on which the
Nonemployee Director is then serving as chairman of the committee, and (iv) an
additional five thousand (5,000) shares in any fiscal year for each committee of
the Board on which the Nonemployee Director is then serving other than as
chairman of the committee.
(e) Section 162(m) Award Limits. The following limits shall
apply to the grant of any Award intended to qualify for treatment as
Performance-Based Compensation:
(i) Options and SARs. Subject to adjustment as provided in
Section 4.4, no Employee shall be granted within any fiscal year of the Company
one or more Options or Freestanding SARs which in the aggregate are for more
than one million (1,000,000) shares.
(ii) Restricted Stock Awards and Restricted Stock Unit
Awards. Subject to adjustment as provided in Section 4.4, no Employee shall be
granted within any fiscal year of the Company one or more Restricted Stock
Awards or Restricted Stock Unit Awards for more than four hundred thousand
(400,000) shares.
(iii) Performance Awards. Subject to adjustment as provided
in Section 4.4, no Employee shall be granted (1) Performance Shares which could
result in such Employee receiving more than four hundred thousand (400,000)
shares for each full fiscal year of the Company contained in the Performance
Period for such Award, or (2) Performance Units which could result in such
Employee receiving more than one million dollars ($1,000,000) for each full
fiscal year of the Company contained in the Performance Period for such Award.
No Participant may be granted more than one Performance Award for the same
Performance Period.
(iv) Cash-Based Awards and Other Stock-Based Awards. Subject
to adjustment as provided in Section 4.4, no Employee shall be granted (1)
Cash-Based Awards in any fiscal year of the Company which could result in such
Employee receiving more than one million dollars ($1,000,000) for each full
fiscal year of the Company contained in the Performance Period for such Award,
or (2) Other Stock-Based Awards in any fiscal year of the Company which could
result in such Employee receiving more than four hundred thousand (400,000)
shares for each full fiscal year of the Company contained in the Performance
Period for such Award. No Participant may be granted more than one Cash-Based
Award or Other Stock-Based Award for the same Performance Period.
15
6. STOCK OPTIONS.
--------------
Options shall be evidenced by Award Agreements specifying the
number of shares of Stock covered thereby, in such form as the Committee shall
from time to time establish. Award Agreements evidencing Options may incorporate
all or any of the terms of the Plan by reference and shall comply with and be
subject to the following terms and conditions:
6.1 Exercise Price. The exercise price for each Option shall
be established in the discretion of the Committee; provided, however, that (a)
the exercise price per share shall be not less than the Fair Market Value of a
share of Stock on the effective date of grant of the Option and (b) no Incentive
Stock Option granted to a Ten Percent Owner shall have an exercise price per
share less than one hundred ten percent (110%) of the Fair Market Value of a
share of Stock on the effective date of grant of the Option. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) may be granted with an exercise price lower than the minimum exercise
price set forth above if such Option is granted pursuant to an assumption or
substitution for another option in a manner qualifying under the provisions of
Section 424(a) of the Code.
6.2 Exercisability and Term of Options. Options shall be
exercisable at such time or times, or upon such event or events, and subject to
such terms, conditions, performance criteria and restrictions as shall be
determined by the Committee and set forth in the Award Agreement evidencing such
Option; provided, however, that (a) no Option shall be exercisable after the
expiration of ten (10) years after the effective date of grant of such Option
and (b) no Incentive Stock Option granted to a Ten Percent Owner shall be
exercisable after the expiration of five (5) years after the effective date of
grant of such Option. Subject to the foregoing, unless otherwise specified by
the Committee in the grant of an Option, each Option shall terminate ten (10)
years after the effective date of grant of the Option, unless earlier terminated
in accordance with its provisions.
6.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash or by check or
cash equivalent, (ii) by tender to the Company, or attestation to the ownership,
of shares of Stock owned by the Participant having a Fair Market Value not less
than the exercise price, (iii) by delivery of a properly executed notice of
exercise together with irrevocable 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,
without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of the
Federal Reserve System) (a "Cashless Exercise"), (iv) by delivery of a properly
executed notice electing a Net-Exercise, (v) by such other consideration as may
be approved by the Committee from time to time to the extent permitted by
applicable law, or (vi) by any combination thereof. The Committee may at any
time or from time to time grant Options which 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 consideration.
16
(b) Limitations on Forms of Consideration.
(i) Tender of Stock. Notwithstanding the foregoing, an
Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock to the extent such tender or attestation would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company's stock. Unless otherwise provided by
the Committee, an Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock unless such shares either have
been owned by the Participant for more than six (6) months (or such other
period, if any, as the Committee may permit) and not used for another Option
exercise by attestation during such period, or were not acquired, directly or
indirectly, from the Company.
(ii) Cashless Exercise. 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 means of a Cashless Exercise, including with respect to one or more
Participants specified by the Company notwithstanding that such program or
procedures may be available to other Participants.
6.4 Effect of Termination of Service.
(a) Option Exercisability. Subject to earlier termination of
the Option as otherwise provided herein and unless otherwise provided by the
Committee, an Option shall terminate immediately upon the Participant's
termination of Service to the extent that it is then unvested and shall be
exercisable after the Participant's termination of Service to the extent it is
then vested only during the applicable time period determined in accordance with
this Section and thereafter shall terminate:
(i) Disability. If the Participant's Service terminates
because of the Disability of the Participant, the Option, to the extent
unexercised and exercisable for vested shares on the date on which the
Participant's Service terminated, may be exercised by the Participant (or the
Participant's guardian or legal representative) at any time prior to the
expiration of twelve (12) months after the date on which the Participant's
Service terminated, but in any event no later than the date of expiration of the
Option's term as set forth in the Award Agreement evidencing such Option (the
"Option Expiration Date").
(ii) Death. If the Participant's Service terminates because
of the death of the Participant, then the Option, to the extent unexercised and
exercisable for vested shares on the date on which the Participant's Service
terminated, may be exercised by the Participant's legal representative or other
person who acquired the right to exercise the Option by reason of the
Participant's death at any time prior to the expiration of twelve (12) months
after the date on which the Participant's Service terminated, but in any event
no later than the Option Expiration Date. The Participant's Service shall be
deemed to have terminated on account of death if the Participant dies within
three (3) months after the Participant's termination of Service.
17
(iii) Termination for Cause. Notwithstanding any other
provision of the Plan to the contrary, if the Participant's Service is
terminated for Cause or if, following the Participant's termination of Service
and during any period in which the Option otherwise would remain exercisable,
the Participant engages in any act that would constitute Cause, the Option shall
terminate in its entirety and cease to be exercisable immediately upon such
termination of Service or act.
(iv) Other Termination of Service. If the Participant's
Service terminates for any reason, except Disability, death or Cause, the
Option, to the extent unexercised and exercisable for vested shares on the date
on which the Participant's Service terminated, may be exercised by the
Participant at any time prior to the expiration of three (3) months after the
date on which the Participant's Service terminated, but in any event no later
than the Option Expiration Date.
(b) Extension if Exercise Prevented by Law or Insider
Trading Policy. Notwithstanding the foregoing, other than termination of Service
for Cause, if the exercise of an Option within the applicable time periods set
forth in Section 6.4(a) is prevented by the provisions of Section 16 below or a
sale of shares pursuant to a Cashless Exercise of the Option would violate the
provisions of the Insider Trading Policy, the Option shall remain exercisable
until thirty (30) days after the date such exercise or sale, as the case may be,
first would no longer be prevented by such provisions, but in any event no later
than the Option Expiration Date.
6.5 Transferability of Options. During the lifetime of the
Participant, an Option shall be exercisable only by the Participant or the
Participant's guardian or legal representative. An Option shall not be subject
in any manner to anticipation, alienation, sale, exchange, transfer, assignment,
pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant's beneficiary, except transfer by will or by the laws of descent and
distribution. Notwithstanding the foregoing, to the extent permitted by the
Committee, in its discretion, and set forth in the Award Agreement evidencing
such Option, a Nonstatutory Stock Option shall be assignable or transferable
subject to the applicable limitations, if any, described in the General
Instructions to Form S-8 under the Securities Act.
7. STOCK APPRECIATION RIGHTS.
--------------------------
Stock Appreciation Rights shall be evidenced by Award
Agreements specifying the number of shares of Stock subject to the Award, in
such form as the Committee shall from time to time establish. Award Agreements
evidencing SARs may incorporate all or any of the terms of the Plan by reference
and shall comply with and be subject to the following terms and conditions:
18
7.1 Types of SARs Authorized. SARs may be granted in tandem
with all or any portion of a related Option (a "Tandem SAR") or may be granted
independently of any Option (a "Freestanding SAR"). A Tandem SAR may only be
granted concurrently with the grant of the related Option.
7.2 Exercise Price. The exercise price for each SAR shall be
established in the discretion of the Committee; provided, however, that (a) the
exercise price per share subject to a Tandem SAR shall be the exercise price per
share under the related Option and (b) the exercise price per share subject to a
Freestanding SAR shall be not less than the Fair Market Value of a share of
Stock on the effective date of grant of the SAR.
7.3 Exercisability and Term of SARs.
(a) Tandem SARs. Tandem SARs shall be exercisable only at
the time and to the extent, and only to the extent, that the related Option is
exercisable, subject to such provisions as the Committee may specify where the
Tandem SAR is granted with respect to less than the full number of shares of
Stock subject to the related Option. The Committee may, in its discretion,
provide in any Award Agreement evidencing a Tandem SAR that such SAR may not be
exercised without the advance approval of the Company and, if such approval is
not given, then the Option shall nevertheless remain exercisable in accordance
with its terms. A Tandem SAR shall terminate and cease to be exercisable no
later than the date on which the related Option expires or is terminated or
canceled. Upon the exercise of a Tandem SAR with respect to some or all of the
shares subject to such SAR, the related Option shall be canceled automatically
as to the number of shares with respect to which the Tandem SAR was exercised.
Upon the exercise of an Option related to a Tandem SAR as to some or all of the
shares subject to such Option, the related Tandem SAR shall be canceled
automatically as to the number of shares with respect to which the related
Option was exercised.
(b) Freestanding SARs. Freestanding SARs shall be
exercisable at such time or times, or upon such event or events, and subject to
such terms, conditions, performance criteria and restrictions as shall be
determined by the Committee and set forth in the Award Agreement evidencing such
SAR; provided, however, that no Freestanding SAR shall be exercisable after the
expiration of ten (10) years after the effective date of grant of such SAR.
7.4 Exercise of SARs. Upon the exercise (or deemed exercise
pursuant to Section 7.5) of an SAR, the Participant (or the Participant's legal
representative or other person who acquired the right to exercise the SAR by
reason of the Participant's death) shall be entitled to receive payment of an
amount for each share with respect to which the SAR is exercised equal to the
excess, if any, of the Fair Market Value of a share of Stock on the date of
exercise of the SAR over the exercise price. Payment of such amount shall be
made (a) in the case of a Tandem SAR, solely in whole shares of Stock in a lump
sum as soon as practicable following the date of exercise of the SAR and (b) in
the case of a Freestanding SAR, in cash, whole shares of Stock, or any
combination thereof as determined by the Committee, in a lump sum as soon as
practicable following the date of exercise of the SAR. When payment is to be
made in shares of Stock, the number of shares to be issued shall be determined
on the basis of the Fair Market Value of a share of Stock on the date of
exercise of the SAR. For purposes of Section 7, an SAR shall be deemed exercised
on the date on which the Company receives notice of exercise from the
Participant or as otherwise provided in Section 7.5.
7.5 Deemed Exercise of SARs. If, on the date on which an SAR
would otherwise terminate or expire, the SAR by its terms remains exercisable
immediately prior to such termination or expiration and, if so exercised, would
result in a payment to the holder of such SAR, then any portion of such SAR
which has not previously been exercised shall automatically be deemed to be
exercised as of such date with respect to such portion.
19
7.6 Effect of Termination of Service. Subject to earlier
termination of the SAR as otherwise provided herein and unless otherwise
provided by the Committee in the grant of an SAR and set forth in the Award
Agreement, an SAR shall be exercisable after a Participant's termination of
Service only to the extent and during the applicable time period determined in
accordance with Section 6.4 (treating the SAR as if it were an Option) and
thereafter shall terminate.
7.7 Transferability of SARs. During the lifetime of the
Participant, an SAR shall be exercisable only by the Participant or the
Participant's guardian or legal representative. An SAR shall not be subject in
any manner to anticipation, alienation, sale, exchange, transfer, assignment,
pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant's beneficiary, except transfer by will or by the laws of descent and
distribution. Notwithstanding the foregoing, to the extent permitted by the
Committee, in its discretion, and set forth in the Award Agreement evidencing
such Award, a Tandem SAR related to a Nonstatutory Stock Option or a
Freestanding SAR shall be assignable or transferable subject to the applicable
limitations, if any, described in the General Instructions to Form S-8 under the
Securities Act.
8. RESTRICTED STOCK AWARDS.
------------------------
Restricted Stock Awards shall be evidenced by Award Agreements
specifying whether the Award is a Restricted Stock Bonus or a Restricted Stock
Purchase Right and the number of shares of Stock subject to the Award, in such
form as the Committee shall from time to time establish. Award Agreements
evidencing Restricted Stock Awards may incorporate all or any of the terms of
the Plan by reference and shall comply with and be subject to the following
terms and conditions:
8.1 Types of Restricted Stock Awards Authorized. Restricted
Stock Awards may be granted in the form of either a Restricted Stock Bonus or a
Restricted Stock Purchase Right. Restricted Stock Awards may be granted upon
such conditions as the Committee shall determine, including, without limitation,
upon the attainment of one or more Performance Goals described in Section 10.4.
If either the grant of or satisfaction of Vesting Conditions applicable to a
Restricted Stock Award is to be contingent upon the attainment of one or more
Performance Goals, the Committee shall follow procedures substantially
equivalent to those set forth in Sections 10.3 through 10.5(a).
8.2 Purchase Price. The purchase price for shares of Stock
issuable under each Restricted Stock Purchase Right shall be established by the
Committee in its discretion. No monetary payment (other than applicable tax
withholding) shall be required as a condition of receiving shares of Stock
pursuant to a Restricted Stock Bonus, the consideration for which shall be
services actually rendered to a Participating Company or for its benefit.
Notwithstanding the foregoing, if required by applicable state corporate law,
the Participant shall furnish consideration in the form of cash or past services
rendered to a Participating Company or for its benefit having a value not less
than the par value of the shares of Stock subject to a Restricted Stock Award.
20
8.3 Purchase Period. A Restricted Stock Purchase Right shall
be exercisable within a period established by the Committee, which shall in no
event exceed thirty (30) days from the effective date of the grant of the
Restricted Stock Purchase Right.
8.4 Payment of Purchase Price. Except as otherwise provided
below, payment of the purchase price for the number of shares of Stock being
purchased pursuant to any Restricted Stock Purchase Right shall be made (a) in
cash or by check or cash equivalent, (b) by such other consideration as may be
approved by the Committee from time to time to the extent permitted by
applicable law, or (c) by any combination thereof.
8.5 Vesting and Restrictions on Transfer. Subject to Section
5.3(c), Shares issued pursuant to any Restricted Stock Award may (but need not)
be made subject to Vesting Conditions based upon the satisfaction of such
Service requirements, conditions, restrictions or performance criteria,
including, without limitation, Performance Goals as described in Section 10.4,
as shall be established by the Committee and set forth in the Award Agreement
evidencing such Award. During any period in which shares acquired pursuant to a
Restricted Stock Award remain subject to Vesting Conditions, such shares may not
be sold, exchanged, transferred, pledged, assigned or otherwise disposed of
other than pursuant to an Ownership Change Event or as provided in Section 8.8.
The Committee, in its discretion, may provide in any Award Agreement evidencing
a Restricted Stock Award that, if the satisfaction of Vesting Conditions with
respect to any shares subject to such Restricted Stock Award would otherwise
occur on a day on which the sale of such shares would violate the provisions of
the Insider Trading Policy, then satisfaction of the Vesting Conditions
automatically shall be determined on the next trading day on which the sale of
such shares would not violate the Insider Trading Policy. Upon request by the
Company, each Participant shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and shall
promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate
legends evidencing any such transfer restrictions.
8.6 Voting Rights; Dividends and Distributions. Except as
provided in this Section, Section 8.5 and any Award Agreement, during any period
in which shares acquired pursuant to a Restricted Stock Award remain subject to
Vesting Conditions, the Participant shall have all of the rights of a
stockholder of the Company holding shares of Stock, including the right to vote
such shares and to receive all dividends and other distributions paid with
respect to such shares. However, in the event of a dividend or distribution paid
in shares of Stock or other property or any other adjustment made upon a change
in the capital structure of the Company as described in Section 4.4, any and all
new, substituted or additional securities or other property (other than normal
cash dividends) to which the Participant is entitled by reason of the
Participant's Restricted Stock Award shall be immediately subject to the same
Vesting Conditions as the shares subject to the Restricted Stock Award with
respect to which such dividends or distributions were paid or adjustments were
made.
21
8.7 Effect of Termination of Service. Unless otherwise
provided by the Committee in the Award Agreement evidencing a Restricted Stock
Award, if a Participant's Service terminates for any reason, whether voluntary
or involuntary (including the Participant's death or disability), then (a) the
Company shall have the option to repurchase for the purchase price paid by the
Participant any shares acquired by the Participant pursuant to a Restricted
Stock Purchase Right which remain subject to Vesting Conditions as of the date
of the Participant's termination of Service and (b) the Participant shall
forfeit to the Company any shares acquired by the Participant pursuant to a
Restricted Stock Bonus which remain subject to Vesting Conditions as of the date
of the Participant's termination of Service. The Company shall have the right to
assign at any time any repurchase right it may have, whether or not such right
is then exercisable, to one or more persons as may be selected by the Company.
8.8 Nontransferability of Restricted Stock Award Rights.
Rights to acquire shares of Stock pursuant to a Restricted Stock Award shall not
be subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance or garnishment by creditors of the Participant
or the Participant's beneficiary, except transfer by will or the laws of descent
and distribution. All rights with respect to a Restricted Stock Award granted to
a Participant hereunder shall be exercisable during his or her lifetime only by
such Participant or the Participant's guardian or legal representative.
9. RESTRICTED STOCK UNIT AWARDS.
-----------------------------
Restricted Stock Unit Awards shall be evidenced by Award
Agreements specifying the number of Restricted Stock Units subject to the Award,
in such form as the Committee shall from time to time establish. Award
Agreements evidencing Restricted Stock Units may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
9.1 Grant of Restricted Stock Unit Awards. Restricted Stock
Unit Awards may be granted upon such conditions as the Committee shall
determine, including, without limitation, upon the attainment of one or more
Performance Goals described in Section 10.4. If either the grant of a Restricted
Stock Unit Award or the Vesting Conditions with respect to such Award is to be
contingent upon the attainment of one or more Performance Goals, the Committee
shall follow procedures substantially equivalent to those set forth in Sections
10.3 through 10.5(a).
9.2 Purchase Price. No monetary payment (other than applicable
tax withholding, if any) shall be required as a condition of receiving a
Restricted Stock Unit Award, the consideration for which shall be services
actually rendered to a Participating Company or for its benefit. Notwithstanding
the foregoing, if required by applicable state corporate law, the Participant
shall furnish consideration in the form of cash or past services rendered to a
Participating Company or for its benefit having a value not less than the par
value of the shares of Stock issued upon settlement of the Restricted Stock Unit
Award.
22
9.3 Vesting. Subject to Section 5.3(c), Restricted Stock Unit
Awards may (but need not) be made subject to Vesting Conditions based upon the
satisfaction of such Service requirements, conditions, restrictions or
performance criteria, including, without limitation, Performance Goals as
described in Section 10.4, as shall be established by the Committee and set
forth in the Award Agreement evidencing such Award. The Committee, in its
discretion, may provide in any Award Agreement evidencing a Restricted Stock
Unit Award that, if the satisfaction of Vesting Conditions with respect to any
shares subject to the Award would otherwise occur on a day on which the sale of
such shares would violate the provisions of the Insider Trading Policy, then
satisfaction of the Vesting Conditions automatically shall be determined on the
first to occur of (a) the next trading day on which the sale of such shares
would not violate the Insider Trading Policy or (b) the later of (i) the last
day of the calendar year in which the original vesting date occurred or (ii) the
last day of the Company's taxable year in which the original vesting date
occurred.
9.4 Voting Rights, Dividend Equivalent Rights and
Distributions. Participants shall have no voting rights with respect to shares
of Stock represented by Restricted Stock Units until the date of the issuance of
such shares (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company). However, the Committee,
in its discretion, may provide in the Award Agreement evidencing any Restricted
Stock Unit Award that the Participant shall be entitled to Dividend Equivalent
Rights with respect to the payment of cash dividends on Stock during the period
beginning on the date such Award is granted and ending, with respect to each
share subject to the Award, on the earlier of the date the Award is settled or
the date on which it is terminated. Such Dividend Equivalent Rights, if any,
shall be paid by crediting the Participant with additional whole Restricted
Stock Units as of the date of payment of such cash dividends on Stock. The
number of additional Restricted Stock Units (rounded to the nearest whole
number) to be so credited shall be determined by dividing (a) the amount of cash
dividends paid on such date with respect to the number of shares of Stock
represented by the Restricted Stock Units previously credited to the Participant
by (b) the Fair Market Value per share of Stock on such date. Such additional
Restricted Stock Units shall be subject to the same terms and conditions and
shall be settled in the same manner and at the same time as the Restricted Stock
Units originally subject to the Restricted Stock Unit Award. In the event of a
dividend or distribution paid in shares of Stock or other property or any other
adjustment made upon a change in the capital structure of the Company as
described in Section 4.4, appropriate adjustments shall be made in the
Participant's Restricted Stock Unit Award so that it represents the right to
receive upon settlement any and all new, substituted or additional securities or
other property (other than normal cash dividends) to which the Participant would
be entitled by reason of the shares of Stock issuable upon settlement of the
Award, and all such new, substituted or additional securities or other property
shall be immediately subject to the same Vesting Conditions as are applicable to
the Award.
9.5 Effect of Termination of Service. Unless otherwise
provided by the Committee and set forth in the Award Agreement evidencing a
Restricted Stock Unit Award, if a Participant's Service terminates for any
reason, whether voluntary or involuntary (including the Participant's death or
disability), then the Participant shall forfeit to the Company any Restricted
Stock Units pursuant to the Award which remain subject to Vesting Conditions as
of the date of the Participant's termination of Service.
23
9.6 Settlement of Restricted Stock Unit Awards. The Company
shall issue to a Participant on the date on which Restricted Stock Units subject
to the Participant's Restricted Stock Unit Award vest or on such other date
determined by the Committee, in its discretion, and set forth in the Award
Agreement one (1) share of Stock (and/or any other new, substituted or
additional securities or other property pursuant to an adjustment described in
Section 9.4) for each Restricted Stock Unit then becoming vested or otherwise to
be settled on such date, subject to the withholding of applicable taxes, if any.
If permitted by the Committee, the Participant may elect, consistent with the
requirements of Section 409A, to defer receipt of all or any portion of the
shares of Stock or other property otherwise issuable to the Participant pursuant
to this Section, and such deferred issuance date(s) and amount(s) elected by the
Participant shall be set forth in the Award Agreement. Notwithstanding the
foregoing, the Committee, in its discretion, may provide in any Award Agreement
for settlement of any Restricted Stock Unit Award by payment to the Participant
in cash of an amount equal to the Fair Market Value on the payment date of the
shares of Stock or other property otherwise issuable to the Participant pursuant
to this Section.
9.7 Nontransferability of Restricted Stock Unit Awards. The
right to receive shares pursuant to a Restricted Stock Unit Award shall not be
subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the Participant
or the Participant's beneficiary, except transfer by will or by the laws of
descent and distribution. All rights with respect to a Restricted Stock Unit
Award granted to a Participant hereunder shall be exercisable during his or her
lifetime only by such Participant or the Participant's guardian or legal
representative.
10. PERFORMANCE AWARDS.
-------------------
Performance Awards shall be evidenced by Award Agreements in
such form as the Committee shall from time to time establish. Award Agreements
evidencing Performance Awards may incorporate all or any of the terms of the
Plan by reference and shall comply with and be subject to the following terms
and conditions:
10.1 Types of Performance Awards Authorized. Performance
Awards may be granted in the form of either Performance Shares or Performance
Units. Each Award Agreement evidencing a Performance Award shall specify the
number of Performance Shares or Performance Units subject thereto, the
Performance Award Formula, the Performance Goal(s) and Performance Period
applicable to the Award, and the other terms, conditions and restrictions of the
Award.
10.2 Initial Value of Performance Shares and Performance
Units. Unless otherwise provided by the Committee in granting a Performance
Award, each Performance Share shall have an initial monetary value equal to the
Fair Market Value of one (1) share of Stock, subject to adjustment as provided
in Section 4.4, on the effective date of grant of the Performance Share, and
each Performance Unit shall have an initial monetary value established by the
Committee at the time of grant. The final value payable to the Participant in
settlement of a Performance Award determined on the basis of the applicable
Performance Award Formula will depend on the extent to which Performance Goals
established by the Committee are attained within the applicable Performance
Period established by the Committee.
24
10.3 Establishment of Performance Period, Performance Goals
and Performance Award Formula. In granting each Performance Award, the Committee
shall establish in writing the applicable Performance Period (subject to Section
5.3(c)), Performance Award Formula and one or more Performance Goals which, when
measured at the end of the Performance Period, shall determine on the basis of
the Performance Award Formula the final value of the Performance Award to be
paid to the Participant. Unless otherwise permitted in compliance with the
requirements under Section 162(m) with respect to each Performance Award
intended to result in the payment of Performance-Based Compensation, the
Committee shall establish the Performance Goal(s) and Performance Award Formula
applicable to each Performance Award no later than the earlier of (a) the date
ninety (90) days after the commencement of the applicable Performance Period or
(b) the date on which 25% of the Performance Period has elapsed, and, in any
event, at a time when the outcome of the Performance Goals remains substantially
uncertain. Once established, the Performance Goals and Performance Award Formula
applicable to a Covered Employee shall not be changed during the Performance
Period. The Company shall notify each Participant granted a Performance Award of
the terms of such Award, including the Performance Period, Performance Goal(s)
and Performance Award Formula.
10.4 Measurement of Performance Goals. Performance Goals shall
be established by the Committee on the basis of targets to be attained
("Performance Targets") with respect to one or more measures of business or
financial performance (each, a "Performance Measure"), subject to the following:
(a) Performance Measures. Performance Measures shall have
the same meanings as used in the Company's financial statements, or, if such
terms are not used in the Company's financial statements, they shall have the
meaning applied pursuant to generally accepted accounting principles, or as used
generally in the Company's industry. Performance Measures shall be calculated
with respect to the Company and each Subsidiary Corporation consolidated
therewith for financial reporting purposes or such division or other business
unit as may be selected by the Committee. For purposes of the Plan, the
Performance Measures applicable to a Performance Award shall be calculated in
accordance with generally accepted accounting principles, if applicable, but
prior to the accrual or payment of any Performance Award for the same
Performance Period and excluding the effect (whether positive or negative) of
any change in accounting standards or any extraordinary, unusual or nonrecurring
item, as determined by the Committee, occurring after the establishment of the
Performance Goals applicable to the Performance Award. Each such adjustment, if
any, shall be made solely for the purpose of providing a consistent basis from
period to period for the calculation of Performance Measures in order to prevent
the dilution or enlargement of the Participant's rights with respect to a
Performance Award. Performance Measures may be one or more of the following, as
determined by the Committee:
(i) revenue;
(ii) sales;
(iii) expenses;
25
(iv) operating income;
(v) gross margin;
(vi) operating margin;
(vii) earnings before any one or more of: stock-based
compensation expense, interest, taxes, depreciation and amortization;
(viii) pre-tax profit;
(ix) net operating income;
(x) net income;
(xi) economic value added;
(xii) free cash flow;
(xiii) operating cash flow;
(xiv) balance of cash, cash equivalents and marketable
securities;
(xv) stock price;
(xvi) earnings per share;
(xvii) return on stockholder equity;
(xviii) return on capital;
(xix) return on assets;
(xx) return on investment;
(xxi) employee satisfaction;
(xxii) employee retention;
(xxiii) market share;
(xxiv) customer satisfaction;
(xxv) product development;
(xxvi) research and development expenses;
(xxvii) completion of an identified special project; and
26
(xxviii) completion of a joint venture or other corporate
transaction.
(b) Performance Targets. Performance Targets may include a
minimum, maximum, target level and intermediate levels of performance, with the
final value of a Performance Award determined under the applicable Performance
Award Formula by the level attained during the applicable Performance Period. A
Performance Target may be stated as an absolute value or as a value determined
relative to an index, budget or other standard selected by the Committee.
10.5 Settlement of Performance Awards.
(a) Determination of Final Value. As soon as practicable
following the completion of the Performance Period applicable to a Performance
Award, the Committee shall certify in writing the extent to which the applicable
Performance Goals have been attained and the resulting final value of the Award
earned by the Participant and to be paid upon its settlement in accordance with
the applicable Performance Award Formula.
(b) Discretionary Adjustment of Award Formula. In its
discretion, the Committee may, either at the time it grants a Performance Award
or at any time thereafter, provide for the positive or negative adjustment of
the Performance Award Formula applicable to a Performance Award granted to any
Participant who is not a Covered Employee to reflect such Participant's
individual performance in his or her position with the Company or such other
factors as the Committee may determine. If permitted under a Covered Employee's
Award Agreement, the Committee shall have the discretion, on the basis of such
criteria as may be established by the Committee, to reduce some or all of the
value of the Performance Award that would otherwise be paid to the Covered
Employee upon its settlement notwithstanding the attainment of any Performance
Goal and the resulting value of the Performance Award determined in accordance
with the Performance Award Formula. No such reduction may result in an increase
in the amount payable upon settlement of another Participant's Performance Award
that is intended to result in Performance-Based Compensation.
(c) Effect of Leaves of Absence. Unless otherwise required
by law or a Participant's Award Agreement, payment of the final value, if any,
of a Performance Award held by a Participant who has taken in excess of thirty
(30) days in unpaid leaves of absence during a Performance Period shall be
prorated on the basis of the number of days of the Participant's Service during
the Performance Period during which the Participant was not on a leave of
absence.
(d) Notice to Participants. As soon as practicable following
the Committee's determination and certification in accordance with Sections
10.5(a) and (b), the Company shall notify each Participant of the determination
of the Committee.
(e) Payment in Settlement of Performance Awards. As soon as
practicable following the Committee's determination and certification in
accordance with Sections 10.5(a) and (b), but in any event within the Short-Term
Deferral Period described in Section 17.1 (except as otherwise provided below or
consistent with the requirements of Section 409A), payment shall be made to each
eligible Participant (or such Participant's legal representative or other person
who acquired the right to receive such payment by reason of the Participant's
death) of the final value of the Participant's Performance Award. Payment of
such amount shall be made in cash, shares of Stock, or a combination thereof as
determined by the Committee. Unless otherwise provided in the Award Agreement
evidencing a Performance Award, payment shall be made in a lump sum. If
permitted by the Committee, the Participant may elect, consistent with the
requirements of Section 409A, to defer receipt of all or any portion of the
payment to be made to the Participant pursuant to this Section, and such
deferred payment date(s) elected by the Participant shall be set forth in the
Award Agreement. If any payment is to be made on a deferred basis, the Committee
may, but shall not be obligated to, provide for the payment during the deferral
period of Dividend Equivalent Rights or interest.
27
(f) Provisions Applicable to Payment in Shares. If payment
is to be made in shares of Stock, the number of such shares shall be determined
by dividing the final value of the Performance Award by the Fair Market Value of
a share of Stock determined by the method specified in the Award Agreement.
Shares of Stock issued in payment of any Performance Award may be fully vested
and freely transferable shares or may be shares of Stock subject to Vesting
Conditions as provided in Section 8.5. Any shares subject to Vesting Conditions
shall be evidenced by an appropriate Award Agreement and shall be subject to the
provisions of Sections 8.5 through 8.8 above.
10.6 Voting Rights; Dividend Equivalent Rights and
Distributions. Participants shall have no voting rights with respect to shares
of Stock represented by Performance Share Awards until the date of the issuance
of such shares, if any (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). However, the
Committee, in its discretion, may provide in the Award Agreement evidencing any
Performance Share Award that the Participant shall be entitled to Dividend
Equivalent Rights with respect to the payment of cash dividends on Stock during
the period beginning on the date the Award is granted and ending, with respect
to each share subject to the Award, on the earlier of the date on which the
Performance Shares are settled or the date on which they are forfeited. Such
Dividend Equivalent Rights, if any, shall be credited to the Participant in the
form of additional whole Performance Shares as of the date of payment of such
cash dividends on Stock. The number of additional Performance Shares (rounded to
the nearest whole number) to be so credited shall be determined by dividing (a)
the amount of cash dividends paid on the dividend payment date with respect to
the number of shares of Stock represented by the Performance Shares previously
credited to the Participant by (b) the Fair Market Value per share of Stock on
such date. Dividend Equivalent Rights may be paid currently or may be
accumulated and paid to the extent that Performance Shares become
nonforfeitable, as determined by the Committee. Settlement of Dividend
Equivalent Rights may be made in cash, shares of Stock, or a combination thereof
as determined by the Committee, and may be paid on the same basis as settlement
of the related Performance Share as provided in Section 10.5. Dividend
Equivalent Rights shall not be paid with respect to Performance Units. In the
event of a dividend or distribution paid in shares of Stock or other property or
any other adjustment made upon a change in the capital structure of the Company
as described in Section 4.4, appropriate adjustments shall be made in the
Participant's Performance Share Award so that it represents the right to receive
upon settlement any and all new, substituted or additional securities or other
property (other than normal cash dividends) to which the Participant would be
entitled by reason of the shares of Stock issuable upon settlement of the
Performance Share Award, and all such new, substituted or additional securities
or other property shall be immediately subject to the same Performance Goals as
are applicable to the Award.
28
10.7 Effect of Termination of Service. Unless otherwise
provided by the Committee and set forth in the Award Agreement evidencing a
Performance Award, the effect of a Participant's termination of Service on the
Performance Award shall be as follows:
(a) Death or Disability. If the Participant's Service
terminates because of the death or Disability of the Participant before the
completion of the Performance Period applicable to the Performance Award, the
final value of the Participant's Performance Award shall be determined by the
extent to which the applicable Performance Goals have been attained with respect
to the entire Performance Period and shall be prorated based on the number of
months of the Participant's Service during the Performance Period. Payment shall
be made following the end of the Performance Period in any manner permitted by
Section 10.5.
(b) Other Termination of Service. If the Participant's
Service terminates for any reason except death or Disability before the
completion of the Performance Period applicable to the Performance Award, such
Award shall be forfeited in its entirety; provided, however, that in the event
of an involuntary termination of the Participant's Service, the Committee, in
its sole discretion, may waive the automatic forfeiture of all or any portion of
any such Award.
10.8 Nontransferability of Performance Awards. Prior to
settlement in accordance with the provisions of the Plan, no Performance Award
shall be subject in any manner to anticipation, alienation, sale, exchange,
transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participant's beneficiary, except transfer by will or by the
laws of descent and distribution. All rights with respect to a Performance Award
granted to a Participant hereunder shall be exercisable during his or her
lifetime only by such Participant or the Participant's guardian or legal
representative.
11. DEFERRED COMPENSATION AWARDS.
-----------------------------
11.1 Establishment of Deferred Compensation Award Programs.
This Section 11 shall not be effective unless and until the Committee determines
to establish a program pursuant to this Section. The Committee, in its
discretion and upon such terms and conditions as it may determine, consistent
with the requirements of Section 409A, may establish one or more programs
pursuant to the Plan under which:
(a) Elective Cash Compensation Reduction Awards.
Participants designated by the Committee who are Officers, Directors or
otherwise among a select group of management or highly compensated Employees may
irrevocably elect, prior to a date specified by the Committee in compliance with
Section 409A, to reduce such Participant's compensation otherwise payable in
cash (subject to any minimum or maximum reductions imposed by the Committee) and
to be granted automatically at such time or times as specified by the Committee
one or more Awards of Stock Units with respect to such numbers of shares of
Stock as determined in accordance with the rules of the program established by
the Committee and having such other terms and conditions as established by the
Committee.
29
(b) Stock Issuance Deferral Awards. Participants designated
by the Committee who are Officers, Directors or otherwise among a select group
of management or highly compensated Employees may irrevocably elect, prior to a
date specified by the Committee in compliance with Section 409A, to be granted
automatically an Award of Stock Units with respect to such number of shares of
Stock and upon such other terms and conditions as established by the Committee
in lieu of:
(i) shares of Stock otherwise issuable to such Participant
upon the exercise of an Option;
(ii) cash or shares of Stock otherwise issuable to such
Participant upon the exercise of an SAR; or
(iii) cash or shares of Stock otherwise issuable to such
Participant upon the settlement of a Performance Award.
11.2 Terms and Conditions of Deferred Compensation Awards.
Deferred Compensation Awards granted pursuant to this Section 11 shall be
evidenced by Award Agreements in such form as the Committee shall from time to
time establish. Award Agreements evidencing Deferred Compensation Awards may
incorporate all or any of the terms of the Plan by reference and, except as
provided below, shall comply with and be subject to the terms and conditions of
Section 9.
(a) Voting Rights; Dividend Equivalent Rights and
Distributions. Participants shall have no voting rights with respect to shares
of Stock represented by Stock Units until the date of the issuance of such
shares (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company). However, a Participant shall
be entitled to Dividend Equivalent Rights with respect to the payment of cash
dividends on Stock during the period beginning on the date the Stock Units are
granted automatically to the Participant and ending on the earlier of the date
on which such Stock Units are settled or the date on which they are forfeited.
Such Dividend Equivalent Rights shall be paid by crediting the Participant with
additional whole Stock Units as of the date of payment of such cash dividends on
Stock. The number of additional Stock Units (rounded to the nearest whole
number) to be so credited shall be determined by dividing (A) the amount of cash
dividends paid on the dividend payment date with respect to the number of shares
of Stock represented by the Stock Units previously credited to the Participant
by (B) the Fair Market Value per share of Stock on such date. Such additional
Stock Units shall be subject to the same terms and conditions and shall be
settled in the same manner and at the same time as the Stock Units originally
subject to the Stock Unit Award. In the event of a dividend or distribution paid
in shares of Stock or other property or any other adjustment made upon a change
in the capital structure of the Company as described in Section 4.4, appropriate
adjustments shall be made in the Participant's Stock Unit Award so that it
represents the right to receive upon settlement any and all new, substituted or
additional securities or other property (other than normal cash dividends) to
which the Participant would be entitled by reason of the shares of Stock
issuable upon settlement of the Award.
30
(b) Settlement of Deferred Compensation Awards. A
Participant electing to receive an Award of Stock Units pursuant to this Section
11 shall specify at the time of such election a settlement date with respect to
such Award in compliance with the requirements of Section 409A. The Company
shall issue to the Participant on the settlement date elected by the
Participant, or as soon thereafter as practicable, a number of whole shares of
Stock equal to the number of vested Stock Units subject to the Stock Unit Award.
Such shares of Stock shall be fully vested, and the Participant shall not be
required to pay any additional consideration (other than applicable tax
withholding) to acquire such shares.
12. CASH-BASED AWARDS AND OTHER STOCK-BASED AWARDS.
-----------------------------------------------
Cash-Based Awards and Other Stock-Based Awards shall be
evidenced by Award Agreements in such form as the Committee shall from time to
time establish. Award Agreements evidencing Cash-Based Awards and Other
Stock-Based Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:
12.1 Grant of Cash-Based Awards. Subject to the provisions of
the Plan, the Committee, at any time and from time to time, may grant Cash-Based
Awards to Participants in such amounts and upon such terms and conditions,
including the achievement of performance criteria, as the Committee may
determine.
12.2 Grant of Other Stock-Based Awards. The Committee may
grant other types of equity-based or equity-related Awards not otherwise
described by the terms of this Plan (including the grant or offer for sale of
unrestricted securities, stock-equivalent units, stock appreciation units,
securities or debentures convertible into common stock or other forms determined
by the Committee) in such amounts and subject to such terms and conditions as
the Committee shall determine. Such Awards may involve the transfer of actual
shares of Stock to Participants, or payment in cash or otherwise of amounts
based on the value of Stock 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.
12.3 Value of Cash-Based and Other Stock-Based Awards. Each
Cash-Based Award shall specify a monetary payment amount or payment range as
determined by the Committee. Each Other Stock-Based Award shall be expressed in
terms of shares of Stock or units based on such shares of Stock, as determined
by the Committee. Subject to Section 5.3(c), the Committee may require the
satisfaction of such Service requirements, conditions, restrictions or
performance criteria, including, without limitation, Performance Goals as
described in Section 10.4, as shall be established by the Committee and set
forth in the Award Agreement evidencing such Award. If the Committee exercises
its discretion to establish performance criteria, the final value of Cash-Based
Awards or Other Stock-Based Awards that will be paid to the Participant will
depend on the extent to which the performance criteria are met. The
establishment of performance criteria with respect to the grant or vesting of
any Cash-Based Award or Other Stock-Based Award intended to result in
Performance-Based Compensation shall follow procedures substantially equivalent
to those applicable to Performance Awards set forth in Section 10.
31
12.4 Payment or Settlement of Cash-Based Awards and Other
Stock-Based Awards. Payment or settlement, if any, with respect to a Cash-Based
Award or an Other Stock-Based Award shall be made in accordance with the terms
of the Award, in cash, shares of Stock or other securities or any combination
thereof as the Committee determines. The determination and certification of the
final value with respect to any Cash-Based Award or Other Stock-Based Award
intended to result in Performance-Based Compensation shall comply with the
requirements applicable to Performance Awards set forth in Section 10. To the
extent applicable, payment or settlement with respect to each Cash-Based Award
and Other Stock-Based Award shall be made in compliance with the requirements of
Section 409A.
12.5 Voting Rights; Dividend Equivalent Rights and
Distributions. Participants shall have no voting rights with respect to shares
of Stock represented by Other Stock-Based Awards until the date of the issuance
of such shares of Stock (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company), if any, in
settlement of such Award. However, the Committee, in its discretion, may provide
in the Award Agreement evidencing any Other Stock-Based Award that the
Participant shall be entitled to Dividend Equivalent Rights with respect to the
payment of cash dividends on Stock during the period beginning on the date such
Award is granted and ending, with respect to each share subject to the Award, on
the earlier of the date the Award is settled or the date on which it is
terminated. Such Dividend Equivalent Rights, if any, shall be paid in accordance
with the provisions set forth in Section 9.4. Dividend Equivalent Rights shall
not be granted with respect to Cash-Based Awards.
12.6 Effect of Termination of Service. Each Award Agreement
evidencing a Cash-Based Award or Other Stock-Based Award shall set forth the
extent to which the Participant shall have the right to retain such Award
following termination of the Participant's Service. Such provisions shall be
determined in the sole discretion of the Committee, need not be uniform among
all Cash-Based Awards or Other Stock-Based Awards, and may reflect distinctions
based on the reasons for termination.
12.7 Nontransferability of Cash-Based Awards and Other
Stock-Based Awards. Prior to the payment or settlement of a Cash-Based Award or
Other Stock-Based Award, the Award shall not be subject in any manner to
anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant's
beneficiary, except transfer by will or by the laws of descent and distribution.
The Committee may impose such additional restrictions on any shares of Stock
issued in settlement of Cash-Based Awards and Other Stock-Based Awards as it may
deem advisable, including, without limitation, minimum holding period
requirements, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such shares of Stock are
then listed and/or traded, or under any state securities laws applicable to such
shares of Stock.
32
13. NONEMPLOYEE DIRECTOR AWARDS.
----------------------------
From time to time, the Board or the Committee shall set the
amount(s) and type(s) of Nonemployee Director Awards that shall be granted to
all Nonemployee Directors on a periodic, nondiscriminatory basis pursuant to the
Plan, as well as the additional amount(s) and type(s) of Nonemployee Director
Awards, if any, to be awarded, also on a periodic, nondiscriminatory basis, in
consideration of one or more of the following: (a) the initial election or
appointment of an individual to the Board as a Nonemployee Director, (b) a
Nonemployee Director's service as Chairman or Lead Director of the Board, (c) a
Nonemployee Director's service as the chairman of a committee of the Board, and
(d) a Nonemployee Director's service other than as the chairman of a committee
of the Board. The terms and conditions of each Nonemployee Director Award shall
comply with the applicable provisions of the Plan. Subject to the limits set
forth in Section 5.3(c), Section 5.3(d) and the foregoing, the Board or the
Committee shall grant Nonemployee Director Awards having such terms and
conditions as it shall from time to time determine.
14. STANDARD FORMS OF AWARD AGREEMENT.
----------------------------------
14.1 Award Agreements. Each Award shall comply with and be
subject to the terms and conditions set forth in the appropriate form of Award
Agreement approved by the Committee and as amended from time to time. No Award
or purported Award shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Award Agreement. Any Award Agreement may consist
of an appropriate form of Notice of Grant and a form of Agreement incorporated
therein by reference, or such other form or forms, including electronic media,
as the Committee may approve from time to time.
14.2 Authority to Vary Terms. The Committee shall have the
authority from time to time to vary the terms of any standard form of Award
Agreement either in connection with the grant or amendment of an individual
Award or in connection with the authorization of a new standard form or forms;
provided, however, that the terms and conditions of any such new, revised or
amended standard form or forms of Award Agreement are not inconsistent with the
terms of the Plan.
15. CHANGE IN CONTROL.
------------------
15.1 Effect of Change in Control on Awards. Subject to the
requirements and limitations of Section 409A if applicable, the Committee may
provide for any one or more of the following:
(a) Accelerated Vesting. The Committee may, in its
discretion, provide in any Award Agreement or, in the event of a Change in
Control, may take such actions as it deems appropriate to provide for the
acceleration of the exercisability, vesting and/or settlement in connection with
such 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 Service prior to, upon, or following such Change in Control,
to such extent as the Committee shall determine.
33
(b) Assumption, Continuation or Substitution. 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, either 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, as applicable. For purposes of this
Section, if so determined by the Committee, in its discretion, an Award
denominated in shares of Stock 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 of
Stock subject to 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 of Stock on the effective date
of the Change in Control was entitled; provided, however, that if such
consideration is not solely common stock of the Acquiror, the Committee may,
with the consent of the Acquiror, provide for the consideration to be received
upon the exercise or settlement of the Award, for each share of Stock subject to
the Award, to consist solely of common stock of the Acquiror equal in Fair
Market Value to the per share consideration received by holders of Stock
pursuant to the Change in Control. If any portion of such consideration may be
received by holders of Stock pursuant to the Change in Control on a contingent
or delayed basis, the Committee 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 Committee'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 or settled 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.
(c) Cash-Out of Outstanding Stock-Based Awards. The
Committee 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
denominated in shares of Stock 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 (and each
unvested share, if so determined by the Committee) of Stock 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 of Stock in
the Change in Control, reduced by the exercise or purchase price per share, if
any, under such Award. If any portion of such consideration may be received by
holders of Stock pursuant to the Change in Control on a contingent or delayed
basis, the Committee 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
Committee's good faith estimate of the present value of the probable future
payment of such consideration. In the event such determination is made by the
Committee, the amount of such payment (reduced by applicable withholding taxes,
if any) shall be paid 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.
34
15.2 Effect of Change in Control on Nonemployee Director
Awards. Subject to the requirements and limitations of Section 409A, if
applicable, in the event of a Change in Control, each outstanding Nonemployee
Director Award shall become immediately exercisable and vested in full and,
except to the extent assumed, continued or substituted for pursuant to Section
15.1(b), shall be settled effective immediately prior to the time of
consummation of the Change in Control.
15.3 Federal Excise Tax Under Section 4999 of the Code.
(a) Excess Parachute Payment. In the event that any
acceleration of vesting pursuant to an Award and any other payment or benefit
received or to be received by a Participant would subject the Participant to any
excise tax pursuant to Section 4999 of the Code due to the characterization of
such acceleration of vesting, payment or benefit as an "excess parachute
payment" under Section 280G of the Code, the Participant may elect, in his or
her sole discretion, to reduce the amount of any acceleration of vesting called
for under the Award in order to avoid such characterization.
(b) Determination by Independent Accountants. To aid the
Participant in making any election called for under Section 15.3(a), no later
than the date of the occurrence of any event that might reasonably be
anticipated to result in an "excess parachute payment" to the Participant as
described in Section 15.3(a), the Company shall request a determination in
writing by independent public accountants selected by the Company (the
"Accountants"). As soon as practicable thereafter, the Accountants shall
determine and report to the Company and the Participant the amount of such
acceleration of vesting, payments and benefits which would produce the greatest
after-tax benefit to the Participant. For the purposes of such determination,
the Accountants may rely on reasonable, good faith interpretations concerning
the application of Sections 280G and 4999 of the Code. The Company and the
Participant shall furnish to the Accountants such information and documents as
the Accountants may reasonably request in order to make their required
determination. The Company shall bear all fees and expenses the Accountants may
reasonably charge in connection with their services contemplated by this
Section.
16. COMPLIANCE WITH SECURITIES LAW.
-------------------------------
The grant of Awards and the issuance of shares of Stock
pursuant to any Award shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to such securities
and the requirements of any stock exchange or market system upon which the Stock
may then be listed. In addition, no Award may be exercised or shares issued
pursuant to an Award unless (a) a registration statement under the Securities
Act shall at the time of such exercise or issuance be in effect with respect to
the shares issuable pursuant to the Award or (b) in the opinion of legal counsel
to the Company, the shares issuable pursuant to the Award may be issued in
accordance with the terms of an applicable exemption from the registration
requirements of the Securities Act. The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares hereunder shall relieve the Company of any liability in respect of the
failure to issue or sell such shares as to which such requisite authority shall
not have been obtained. As a condition to issuance of any Stock, the Company may
require the Participant to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as may be requested by
the Company.
35
17. COMPLIANCE WITH SECTION 409A.
-----------------------------
17.1 Awards Subject to Section 409A. The provisions of this
Section 17 shall apply to any Award or portion thereof that is or becomes
subject to Section 409A, notwithstanding any provision to the contrary contained
in the Plan or the Award Agreement applicable to such Award. Awards subject to
Section 409A include, without limitation:
(a) Any Nonstatutory Stock Option or SAR that permits the
deferral of compensation other than the deferral of recognition of income until
the exercise of the Award.
(b) Each Deferred Compensation Award.
(c) Any Restricted Stock Unit Award, Performance Award,
Cash-Based Award or Other Stock-Based Award if either (i) the Award provides by
its terms for settlement of all or any portion of the Award on one or more dates
following the Short-Term Deferral Period (as defined below) or (ii) the
Committee permits or requires the Participant to elect one or more dates on
which the Award will be settled.
Subject to any applicable U.S. Treasury Regulations promulgated
pursuant to Section 409A or other applicable guidance, the term "Short-Term
Deferral Period" means the period ending on the later of (i) the 15th day of the
third month following the end of the Company's fiscal year in which the
applicable portion of the Award is no longer subject to a substantial risk of
forfeiture or (ii) the 15th day of the third month following the end of the
Participant's taxable year in which the applicable portion of the Award is no
longer subject to a substantial risk of forfeiture. For this purpose, the term
"substantial risk of forfeiture" shall have the meaning set forth in any
applicable U.S. Treasury Regulations promulgated pursuant to Section 409A or
other applicable guidance.
17.2 Deferral and/or Distribution Elections. Except as
otherwise permitted or required by Section 409A or any applicable U.S. Treasury
Regulations promulgated pursuant to Section 409A or other applicable guidance,
the following rules shall apply to any deferral and/or distribution elections
(each, an "Election") that may be permitted or required by the Committee
pursuant to an Award subject to Section 409A:
(a) All Elections must be in writing and specify the amount
of the distribution in settlement of an Award being deferred, as well as the
time and form of distribution as permitted by this Plan.
(b) All Elections shall be made by the end of the
Participant's taxable year prior to the year in which services commence for
which an Award may be granted to such Participant; provided, however, that if
the Award qualifies as "performance-based compensation" for purposes of Section
409A and is based on services performed over a period of at least twelve (12)
months, then the Election may be made no later than six (6) months prior to the
end of such period.
36
(c) Elections shall continue in effect until a written
election to revoke or change such Election is received by the Company, except
that a written election to revoke or change such Election must be made prior to
the last day for making an Election determined in accordance with paragraph (b)
above or as permitted by Section 17.3.
17.3 Subsequent Elections. Except as otherwise permitted or
required by Section 409A or any applicable U.S. Treasury Regulations promulgated
pursuant to Section 409A or other applicable guidance, any Award subject to
Section 409A which permits a subsequent Election to delay the distribution or
change the form of distribution in settlement of such Award shall comply with
the following requirements:
(a) No subsequent Election may take effect until at
least twelve (12) months after
the date on which the subsequent Election is made;
(b) Each subsequent Election related to a
distribution in settlement of an Award
not described in Section 17.4(b), 17.4(c) or 17.4(f) must result in a delay of
the distribution for a period of not less than five (5) years from the date such
distribution would otherwise have been made; and
(c) No subsequent Election related to a distribution
pursuant to Section 17.4(d)
shall be made less than twelve (12) months prior to the date of the first
scheduled payment under such distribution.
17.4 Distributions Pursuant to Deferral Elections. Except as
otherwise permitted or required by Section 409A or any applicable U.S. Treasury
Regulations promulgated pursuant to Section 409A or other applicable guidance,
no distribution in settlement of an Award subject to Section 409A may commence
earlier than:
(a) Separation from service (as determined by the Secretary
of the United States Treasury);
(b) The date the Participant becomes Disabled (as defined
below);
(c) Death;
(d) A specified time (or pursuant to a fixed schedule) that
is either (i) specified by the Committee upon the grant of an Award and set
forth in the Award Agreement evidencing such Award or (ii) specified by the
Participant in an Election complying with the requirements of Section 17.2
and/or 17.3, as applicable;
(e) To the extent provided by the Secretary of the U.S.
Treasury, a change in the ownership or effective control of the Company or in
the ownership of a substantial portion of the assets of the Company; or
(f) The occurrence of an Unforeseeable Emergency (as defined
by applicable U.S. Treasury Regulations promulgated pursuant to Section 409A).
37
Notwithstanding anything else herein to the contrary, to the extent
that a Participant is a "Specified Employee" (as defined in Section
409A(a)(2)(B)(i) of the Code) of the Company, no distribution pursuant to
Section 17.4(a) in settlement of an Award subject to Section 409A may be made
before the date (the "Delayed Payment Date") which is six (6) months after such
Participant's date of separation from service, or, if earlier, the date of the
Participant's death. All such amounts that would, but for this paragraph, become
payable prior to the Delayed Payment Date shall be accumulated and paid on the
Delayed Payment Date.
17.5 Unforeseeable Emergency. The Committee shall have the
authority to provide in the Award Agreement evidencing any Award subject to
Section 409A for distribution in settlement of all or a portion of such Award in
the event that a Participant establishes, to the satisfaction of the Committee,
the occurrence of an Unforeseeable Emergency. In such event, the amount(s)
distributed with respect to such Unforeseeable Emergency cannot exceed the
amounts necessary to satisfy such Unforeseeable Emergency plus amounts necessary
to pay taxes reasonably anticipated as a result of such distribution(s), after
taking into account the extent to which such hardship is or may be relieved
through reimbursement or compensation by insurance or otherwise, by liquidation
of the Participant's assets (to the extent the liquidation of such assets would
not itself cause severe financial hardship) or by cessation of deferrals under
the Award. All distributions with respect to an Unforeseeable Emergency shall be
made in a lump sum as soon as practicable following the Committee's
determination that an Unforeseeable Emergency has occurred.
The occurrence of an Unforeseeable Emergency shall be judged and
determined by the Committee. The Committee's decision with respect to whether an
Unforeseeable Emergency has occurred and the manner in which, if at all, the
distribution in settlement of an Award shall be altered or modified, shall be
final, conclusive, and not subject to approval or appeal.
17.6 Disabled. The Committee shall have the authority to
provide in any Award subject to Section 409A for distribution in settlement of
such Award in the event that the Participant becomes Disabled. A Participant
shall be considered "Disabled" if either:
(a) the Participant is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months, or
(b) the Participant is, by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than twelve
(12) months, receiving income replacement benefits for a period of not less than
three (3) months under an accident and health plan covering employees of the
Participant's employer.
All distributions payable by reason of a Participant becoming Disabled
shall be paid in a lump sum or in periodic installments as established by the
Participant's Election, commencing as soon as practicable following the date the
Participant becomes Disabled. If the Participant has made no Election with
respect to distributions upon becoming Disabled, all such distributions shall be
paid in a lump sum as soon as practicable following the date the Participant
becomes Disabled.
38
17.7 Death. If a Participant dies before complete distribution
of amounts payable upon settlement of an Award subject to Section 409A, such
undistributed amounts shall be distributed to his or her beneficiary under the
distribution method for death established by the Participant's Election as soon
as administratively possible following receipt by the Committee of satisfactory
notice and confirmation of the Participant's death. If the Participant has made
no Election with respect to distributions upon death, all such distributions
shall be paid in a lump sum as soon as practicable following the date of the
Participant's death.
17.8 No Acceleration of Distributions. Notwithstanding
anything to the contrary herein, this Plan does not permit the acceleration of
the time or schedule of any distribution under an Award subject to Section 409A,
except as provided by Section 409A and/or the Secretary of the U.S. Treasury.
18. TAX WITHHOLDING.
----------------
18.1 Tax Withholding in General. The Company shall have the
right to deduct from any and all payments made under the Plan, or to require the
Participant, through payroll withholding, cash payment or otherwise, to make
adequate provision for, the federal, state, local and foreign taxes, if any,
required by law to be withheld by the Participating Company Group with respect
to an Award or the shares acquired pursuant thereto. The Company shall have no
obligation to deliver shares of Stock, to release shares of Stock from an escrow
established pursuant to an Award Agreement, or to make any payment in cash under
the Plan until the Participating Company Group's tax withholding obligations
have been satisfied by the Participant.
18.2 Withholding in Shares. The Company shall have the right,
but not the obligation, to deduct from the shares of Stock issuable to a
Participant upon the exercise or settlement of an Award, or to accept from the
Participant the tender of, a number of whole shares of Stock having a Fair
Market Value, as determined by the Company, equal to all or any part of the tax
withholding obligations of the Participating Company Group. The Fair Market
Value of any shares of Stock withheld or tendered to satisfy any such tax
withholding obligations shall not exceed the amount determined by the applicable
minimum statutory withholding rates.
19. AMENDMENT OR TERMINATION OF PLAN.
---------------------------------
The Committee may amend, suspend or terminate the Plan at any
time. However, without the approval of the Company's stockholders, there shall
be (a) no increase in the maximum aggregate number of shares of Stock that may
be issued under the Plan (except by operation of the provisions of Section 4.4),
(b) no change in the class of persons eligible to receive Incentive Stock
Options, and (c) no other amendment of the Plan that would require approval of
the Company's stockholders under any applicable law, regulation or rule,
including the rules of any stock exchange or market system upon which the Stock
may then be listed. No amendment, suspension or termination of the Plan shall
affect any then outstanding Award unless expressly provided by the Committee.
Except as provided by the next sentence, no amendment, suspension or termination
of the Plan may adversely affect any then outstanding Award without the consent
of the Participant. Notwithstanding any other provision of the Plan to the
contrary, the Committee may, in its sole and absolute discretion and without the
consent of any Participant, amend the Plan or any Award Agreement, to take
effect retroactively or otherwise, as it deems necessary or advisable for the
purpose of conforming the Plan or such Award Agreement to any present or future
law, regulation or rule applicable to the Plan, including, but not limited to,
Section 409A.
39
20. MISCELLANEOUS PROVISIONS.
-------------------------
20.1 Repurchase Rights. Shares issued under the Plan may be
subject to one or more repurchase options, or other conditions and restrictions
as determined by the Committee in its discretion at the time the Award is
granted. The Company shall have the right to assign at any time any repurchase
right it may have, whether or not such right is then exercisable, to one or more
persons as may be selected by the Company. Upon request by the Company, each
Participant shall execute any agreement evidencing such transfer restrictions
prior to the receipt of shares of Stock hereunder and shall promptly present to
the Company any and all certificates representing shares of Stock acquired
hereunder for the placement on such certificates of appropriate legends
evidencing any such transfer restrictions.
20.2 Forfeiture Events.
(a) The Committee may specify in an Award Agreement that the
Participant's rights, payments, and benefits with respect to an Award shall be
subject to reduction, cancellation, forfeiture, or recoupment upon the
occurrence of specified events, in addition to any otherwise applicable vesting
or performance conditions of an Award. Such events may include, but shall not be
limited to, termination of Service for Cause or any act by a Participant,
whether before or after termination of Service, that would constitute Cause for
termination of Service.
(b) 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,
any Participant who knowingly or through gross negligence engaged in the
misconduct, or who knowingly or through gross negligence failed to prevent the
misconduct, and any Participant who is one of the individuals subject to
automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, shall
reimburse the Company the amount of any payment in settlement of an Award earned
or accrued during the twelve- (12-) month period following the first public
issuance or filing with the United States Securities and Exchange Commission
(whichever first occurred) of the financial document embodying such financial
reporting requirement.
20.3 Provision of Information. Each Participant shall be given
access to information concerning the Company equivalent to that information
generally made available to the Company's common stockholders.
20.4 Rights as Employee, Consultant or Director. No person,
even though eligible pursuant to Section 5, shall have a right to be selected as
a Participant, or, having been so selected, to be selected again as a
Participant. Nothing in the Plan or any Award granted under the Plan shall
confer on any Participant a right to remain an Employee, Consultant or Director
or interfere with or limit in any way any right of a Participating Company to
terminate the Participant's Service at any time. To the extent that an Employee
of a Participating Company other than the Company receives an Award under the
Plan, that Award shall in no event be understood or interpreted to mean that the
Company is the Employee's employer or that the Employee has an employment
relationship with the Company.
40
20.5 Rights as a Stockholder. A Participant shall have no
rights as a stockholder with respect to any shares covered by an Award until the
date of the issuance of such shares (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the Company).
No adjustment shall be made for dividends, distributions or other rights for
which the record date is prior to the date such shares are issued, except as
provided in Section 4.4 or another provision of the Plan.
20.6 Delivery of Title to Shares. Subject to any governing
rules or regulations, the Company shall issue or cause to be issued the shares
of Stock acquired pursuant to an Award and shall deliver such shares to or for
the benefit of the Participant by means of one or more of the following: (a) by
delivering to the Participant evidence of book entry shares of Stock credited to
the account of the Participant, (b) by depositing such shares of Stock for the
benefit of the Participant with any broker with which the Participant has an
account relationship, or (c) by delivering such shares of Stock to the
Participant in certificate form.
20.7 Fractional Shares. The Company shall not be required
to issue fractional shares upon the exercise or settlement of any Award.
20.8 Retirement and Welfare Plans. Neither Awards made under
this Plan nor shares of Stock or cash paid pursuant to such Awards may be
included as "compensation" for purposes of computing the benefits payable to any
Participant under any Participating Company's retirement plans (both qualified
and non-qualified) or welfare benefit plans unless such other plan expressly
provides that such compensation shall be taken into account in computing a
Participant's benefit.
20.9 Beneficiary Designation. Subject to local laws and
procedures, each Participant may file with the Company a written designation of
a beneficiary who is to receive any benefit under the Plan to which the
Participant is entitled in the event of such Participant's death before he or
she receives any or all of such benefit. Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Company, and will be effective only when filed by the Participant in writing
with the Company during the Participant's lifetime. If a married Participant
designates a beneficiary other than the Participant's spouse, the effectiveness
of such designation may be subject to the consent of the Participant's spouse.
If a Participant dies without an effective designation of a beneficiary who is
living at the time of the Participant's death, the Company will pay any
remaining unpaid benefits to the Participant's legal representative.
20.10 Severability. If any one or more of the provisions (or
any part thereof) of this Plan shall be held invalid, illegal or unenforceable
in any respect, such provision shall be modified so as to make it valid, legal
and enforceable, and the validity, legality and enforceability of the remaining
provisions (or any part thereof) of the Plan shall not in any way be affected or
impaired thereby.
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20.11 No Constraint on Corporate Action. Nothing in this Plan
shall be construed to: (a) limit, impair, or otherwise affect the Company's or
another Participating Company's right or power to make adjustments,
reclassifications, reorganizations, or changes of its capital or business
structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer
all or any part of its business or assets; or (b) limit the right or power of
the Company or another Participating Company to take any action which such
entity deems to be necessary or appropriate.
20.12 Unfunded Obligation. Participants shall have the status
of general unsecured creditors of the Company. Any amounts payable to
Participants pursuant to the Plan shall be unfunded and unsecured obligations
for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974. No Participating Company shall be
required to segregate any monies from its general funds, or to create any
trusts, or establish any special accounts with respect to such obligations. The
Company shall retain at all times beneficial ownership of any investments,
including trust investments, which the Company may make to fulfill its payment
obligations hereunder. Any investments or the creation or maintenance of any
trust or any Participant account shall not create or constitute a trust or
fiduciary relationship between the Committee or any Participating Company and a
Participant, or otherwise create any vested or beneficial interest in any
Participant or the Participant's creditors in any assets of any Participating
Company. The Participants shall have no claim against any Participating Company
for any changes in the value of any assets which may be invested or reinvested
by the Company with respect to the Plan.
20.13 Choice of Law. Except to the extent governed by
applicable federal law, the validity, interpretation, construction and
performance of the Plan and each Award Agreement shall be governed by the laws
of the State of California, without regard to its conflict of law rules.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing sets forth the Immersion Corporation 2007 Equity Incentive
Plan as duly adopted by the Board on February 28, 2007.
/s/ James M. Koshland
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