SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table indicates, as to (i) each person who is known to own beneficially 5% or more of the outstanding shares of our common stock, (ii) each Director, (iii) each NEO and (iv) all Directors and current executive officers as a group, the number of shares and percentage of common stock beneficially owned as of April 3, 2017. As of the close of business on April 3, 2017, there were outstanding 25,087,571 shares of common stock of West Marine.
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COMMON STOCK BENEFICIALLY OWNED AS OF APRIL 3, 2017
(1)
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BENEFICIAL OWNER
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NUMBER OF SHARES
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PERCENT
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Randolph K. Repass
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6,501,286
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(2)
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25.9
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%
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Matthew L. Hyde
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221,823
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(3)
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*
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Jeffrey L. Lasher
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12,149
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(4)
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*
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Barry Kelley
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84,940
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(4)
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*
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Paul Rutenis
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13,224
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(4)
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*
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Dennis F. Madsen
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34,205
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(5)
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*
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James F. Nordstrom, Jr.
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19,683
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(5)
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*
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Robert D. Olsen
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19,683
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(5)
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*
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Barbara L. Rambo
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35,495
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(5)
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*
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Alice M. Richter
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37,871
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(5)
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*
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Christiana Shi
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27,590
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(5)
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*
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All Directors and current executive officers as a group (11 persons)
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7,007,949
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(6)
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27.5
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%
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Dimensional Fund Advisors LP
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2,097,189
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(7)
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8.4
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%
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Franklin Resources, Inc.
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2,039,905
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(8)
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8.1
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%
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BlackRock, Inc.
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1,795,613
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(9)
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7.2
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%
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Royce & Associates, LLC
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1,306,947
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(10)
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5.2
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%
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(1)
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Except as otherwise noted, each person has sole voting and investment power over the common stock shown as beneficially owned, subject to community property laws where applicable. References to vest within 60 days are measured from April 3, 2017.
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(2)
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The address of Mr. Repass is 500 Westridge Drive, Watsonville, California 95076. Includes 234,600 shares held by Mr. Repass’ spouse, 277,715 shares held in trust for Mr. Repass’ younger adult son, 147,800 shares held in trust for Mr. Repass' older adult son, 40,400 shares held in trust for the benefit of Mr. Repass’ grandchildren, 801,383 shares held in a grantor retained annuity trust and 358,201 shares held by the Repass-Rodgers Family Foundation Inc. Mr. Repass has sole voting power with respect to 5,452,400 shares and sole dispositive power with respect to 6,266,686 shares and is deemed to have shared voting and dispositive power with respect to 234,600 shares. Includes stock options exercisable within 60 days to purchase 10,123 shares. Includes 2,780 restricted stock units that vest on May 26, 2017. Mr. Repass disclaims beneficial ownership of all shares attributed to his spouse and all shares held by the Repass-Rodgers Family Foundation.
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(3)
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Includes stock options exercisable within 60 days to purchase 126,667 shares. Includes 87,717 RSUs and 7,439 PVUs that vest within 60 days.
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(4)
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Includes stock options exercisable within 60 days to purchase shares as follows: Barry Kelley, 30,833 shares. Includes RSUs that vest within 60 days as follows: Jeffrey L. Lasher, 8,150; Barry Kelley, 27,657 shares; and Paul Rutenis 8,147 shares. Includes PVUs that vest within 60 days as follows: Jeffrey L. Lasher, 2,155; Barry Kelley, 2,851 shares; and Paul Rutenis 2,136 shares.
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(5)
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Includes stock options exercisable within 60 days to purchase shares as follows: Dennis F. Madsen, 6,691 shares. Includes RSUs that vest on May 26, 2017 as follows: Dennis F. Madsen, 5,561 shares; James F. Nordstrom, Jr., 5,561 shares; Robert D. Olsen, 5,561 shares; Barbara L. Rambo, 5,561 shares; Alice M. Richter, 5,561 shares; and Christiana Shi, 5,561 shares.
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(6)
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Includes stock options exercisable within 60 days to purchase 174,314 shares. Includes 167,817 RSUs and 14,581 PVUs that vest within 60 days.
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(7)
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The information contained in the table and this footnote with respect to Dimensional Fund Advisors LP is based solely on a statement on Schedule 13G/A filed February 9, 2017, reporting beneficial ownership as of December 31, 2016, by Dimensional Fund Advisors LP to the effect that (a) it has sole dispositive power over all of the reported shares and (b) it has sole voting power over 2,035,856 shares. The business address for Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, Texas 78746.
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(8)
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The information contained in the table and this footnote with respect to Franklin Resources, Inc. is based solely on a statement on Schedule 13G/A filed December 12, 2016, reporting beneficial ownership as of November 30, 2016, by Franklin Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr., Franklin Templeton Investments Corp., Templeton Investment Counsel, LLC and Franklin Advisory Services, LLC to the effect that (a) each (directly or indirectly) has dispositive and voting power over these shares to the extent disclosed therein and (b) these shares are held by investment companies or other managed accounts which are advised by subsidiaries of Franklin Resources, Inc. pursuant to investment management contracts which grant to such subsidiaries all investment and voting power over these shares. The business address for Franklin Resources, Inc., Charles B. Johnson and Rupert H. Johnson, Jr. is One Franklin Parkway, San Mateo, California 94403-1906. The business address for Franklin Templeton Investments Corp. is 200 King Street West, Suite 1500,
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Toronto, Ontario, Canada M5H 3T4. The business address for Templeton Investment Counsel, LLC is 300 S.E. 2nd Street, Fort Lauderdale, Florida 33301 and the business address for Franklin Advisory Services, LLC is 55 Challenger Road, Suite 501, Ridgefield Park, New Jersey 07660.
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(9)
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The information contained in the table and this footnote with respect to BlackRock, Inc. is based solely on a statement on Schedule 13G filed January 27, 2017, reporting beneficial ownership as of December 31, 2016, by BlackRock, Inc. to the effect that (a) it has sole dispositive power over all of these shares and (b) it has sole voting power over 1,722,872 shares. The business address for BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.
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(10)
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The information contained in the table and this footnote with respect to Royce & Associates, LLC is based solely on a statement on Schedule 13G/A filed January 23, 2017, reporting beneficial ownership as of December 31, 2016, by Royce & Associates, LP to the effect that it has sole dispositive and voting power over all of these shares. The business address for Royce & Associates, LLC is 745 Fifth Avenue, New York, New York 10151.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires executive officers and Directors, and persons who own more than 10% of our common stock, to file reports of ownership and changes in ownership of West Marine common stock with the SEC. Executive officers, Directors and greater than 10% stockholders are required by SEC regulation to furnish West Marine with copies of all Section 16(a) forms they file.
Based solely on a review of copies of such reports received by West Marine, or written representations from certain reporting persons that no Forms 5 were required for those persons, we believe that, during the period from January 3, 2016 to December 31, 2016, our NEOs, Directors and greater than 10% stockholders filed on a timely basis all reports due under Section 16(a).
OTHER MATTERS
As of the date of this Proxy Statement, management does not know of any other matters to be considered at the Annual Meeting. If any other matters do properly come before the meeting, the persons named in the accompanying proxy intend to vote thereon in accordance with their best judgment, and the discretionary authority to do so is included in the proxy.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement includes “forward-looking statements,” including statements concerning earnings expectations and statements that are predictive or express expectations that depend on future events or conditions that involve risks and uncertainties. Actual results may differ materially from the preliminary expectations expressed or implied in these forward-looking statements due to various risks, uncertainties or other factors, including those set forth in the Annual Report. Except as required by applicable law, we assume no responsibility to update any forward-looking statements as a result of new information, future events or otherwise.
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By Order of the Board of Directors
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/s/ Pamela J. Fields
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Pamela J. Fields, Esq.
Secretary
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Watsonville, California
April 21, 2017
Appendix A
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West Marine
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Reconciliations of Non-GAAP Information
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Net Income to Earnings Before Interest, Taxes Depreciation and Amortization ("EBITDA")
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(Unaudited and in millions)
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52 Weeks Ended
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53 Weeks Ended
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December 31, 2016
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January 2, 2016
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January 3, 2015
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GAAP Net Income
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$
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6.5
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$
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4.5
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$
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1.9
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Add Back:
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Interest Expense
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0.4
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0.5
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0.4
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Depreciation and Amortization *
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22.0
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20.5
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18.2
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Income Tax Expense
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5.1
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2.8
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2.1
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27.5
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23.8
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20.7
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EBITDA
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$
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34.0
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$
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28.3
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$
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22.6
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* Included in cost of goods sold and SG&A. Amortization of deferred financing costs related to our revolving credit facility are included in interest expense.
EBITDA, which is a non-GAAP financial measure, is a supplemental measure to help investors evaluate our fundamental operational performance. EBITDA is calculated as net income (loss) plus interest expense, depreciation and amortization, and income tax expense. EBITDA is not a presentation made in accordance with GAAP, is not a measure of financial performance or condition, liquidity or profitability, and should not be considered as alternatives to (1) net income, operating income or any other performance measures determined in accordance with GAAP or (2) operating cash flows determined in accordance with GAAP. Additionally, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments, debt service requirements and replacements of fixed assets. By eliminating interest, income taxes, depreciation and amortization, we believe the result is a useful measure across time in evaluating our fundamental core operating performance. We also believe that EBITDA provides a clearer picture of operating performance of the business, given the significant investments we are making in the growth of the business, by eliminating the effects of depreciation and interest expense.
Our presentation of EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Because not all companies use identical calculations, the presentation of EBITDA may not be comparable to other similarly titled measures of other companies. Management believes that the presentation of EBITDA is useful to investors because these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of the operating performance of companies in our industry and industries similar to ours. Management also uses EBITDA to evaluate our operations. However, as indicated, EBITDA does not include interest expense on borrowed money, the payment of income taxes, amortization of our definite-lived intangible assets, or depreciation expense on our capital assets, which are necessary elements of our operations. Since EBITDA does not account for these and other expenses, its utility as a measure of our operating performance has limitations. Due to these limitations, management does not view EBITDA in isolation, but also uses other measurements, such as net income and revenues to measure operating performance.
Appendix
B
WEST MARINE, INC.
AMENDED AND RESTATED OMNIBUS EQUITY INCENTIVE PLAN
ADOPTED BY THE BOARD OF DIRECTORS: APRIL 12, 2017
APPROVED BY THE STOCKHOLDERS: JUNE 1, 2017
SECTION 1
ESTABLISHMENT, PURPOSE AND DURATION
1.1
Establishment of the Plan
. West Marine, Inc., a Delaware corporation (the "Company"), previously established the "West Marine, Inc. 1993 Omnibus Equity Incentive Plan,” and the “West Marine, Inc. Nonemployee Director Stock Option Plan,” and merged those plans effective as of March, 2002, which merged plan was amended and restated in its entirety effective May 21, 2008 and May 19, 2011, was subsequently amended on March 30, 2012 and February 21, 2014, was thereafter amended and restated in its entirety to incorporate such amendments effective March 26, 2014, and was thereafter amended and restated on April 26, 2016 and approved by the Company’s stockholders on May 26, 2016, as amended by Amendment #1 dated March 23, 2017 (collectively, the “Prior Plan”). The Prior Plan is hereby amended and restated in its entirety and is effective as of April 12, 2017 (“Effective Date”), subject to the approval by an affirmative vote, at the next meeting of the stockholders of the Company, or any adjournment thereof, of a majority of the votes cast by stockholders present in person or by proxy and entitled to vote at such meeting (the “Plan”). Any awards issued under the Prior Plan, together with the terms and conditions of any award agreement previously issued to any participant under the Prior Plan, shall continue in force and effect under the terms of the Plan. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Stock Unit Awards, Performance Cash Awards, and Other Stock-Based Awards as described in the Plan.
1.2
Purpose of the Plan
. The purpose of the Plan, through the granting of Awards, is intended to promote the success, and to enhance the value, of the Company by linking the personal interests of Participants to those of Company stockholders, and by providing such Participants with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Participants upon whose judgment, interest, and special effort the successful conduct of its operation largely is dependent, to achieve long-term Company objectives, and to enable, if applicable, Awards to qualify as performance-based compensation for purposes of the tax deduction limitations under Section 162(m) of the Code.
1.3
Duration of the Plan
. The Plan shall commence on the Effective Date and shall remain in effect, subject to the right of the Board to terminate the Plan at any time pursuant to Section 16, until all Shares subject to the Plan have been purchased or acquired pursuant to the provisions of the Plan.
SECTION 2
DEFINITIONS
The following terms shall have the meanings set forth below, unless plainly required by the context:
2.1
“Adjustment Event” means any “equity restructuring,” as defined under the Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation (or any successor thereto) including but not limited to, any large or extraordinary dividend payable in capital stock, stock split, share combination, large or extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares or other similar event affecting the Common Stock.
2.2
"Affiliated SAR" means a Stock Appreciation Right that is granted in connection with a related Option, and which will be deemed to automatically be exercised simultaneous with the exercise of the related Option.
2.3
“Applicable Law” means the requirements relating to the administration of equity plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, the rules of any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.
2.4
"Award" means, individually or collectively, a grant under the Plan of a Stock Award and/or a Performance Cash Award.
2.5
“Award Agreement” means a written or electronic agreement, instrument, document or arrangement setting forth the terms and provisions applicable to Awards granted to Participants under this Plan. The Award Agreement is subject to the terms and conditions of the Plan, and in the event of any inconsistency or conflict between the terms of the Plan and an Award Agreement, the terms of the Plan shall govern. An Award Agreement shall not require the signature of the Participant and/or the Company. The approval of an Award by the Company, the Committee and/or the Board (in accordance with the Plan), together with notice of the Award to the Participant (which notice may be accomplished through the posting thereof on a website for the Plan), shall be sufficient evidence of the issuance to, and acceptance by, the Participant of the Award reflected in the Award Agreement and/or notice of Award, unless such Participant expressly rejects such Award and/or the Award Agreement in writing. The terms of any Other Company Plan applicable to an Award and this Plan shall be deemed incorporated in and part of the related Award Agreement.
2.6
“Beneficiary” means the person designated in accordance with Section 14 of the Plan.
2.7
"Board" or "Board of Directors" means the Board of Directors of the Company.
2.8
“Cause” means: (i) a breach of any material obligation to the Company or any Subsidiary that is or could reasonably be expected to result in material harm to the Company; (ii) a violation of any significant Company or a Subsidiary’s policy; (iii) a violation of any of the Company’s or a Subsidiary’s operating and/or financial/accounting procedures which results in a material loss to the Company; (iv) an arrest for, conviction of, or a plea of guilty or nolo contendere to, any felony, or to any misdemeanor
involving moral turpitude (including forgery, fraud, theft or embezzlement); (v) an arrest for, conviction of, or a plea of guilty or nolo contendere to, any offense involving fraud, dishonesty, breach of trust or money laundering; (vi) engagement in dishonesty, embezzlement, misappropriation or fraud in connection with the business of the Company or any Subsidiary; (vii) stolen property or opportunities of the Company or any Subsidiary; (viii) an assault or battery of an associate or Director of the Company; (ix) failure substantially to perform assigned duties with the Company or any Subsidiary (other than a failure resulting from incapacity due to physical or mental illness or from the assignment of duties that would constitute “good reason” as set forth in any applicable Other Company Plan); or (x) engagement in willful malfeasance, illegal conduct, gross negligence or misconduct demonstrably injurious to the Company or any Subsidiary.
2.9
“Change in Control” means, and shall be deemed to have occurred upon the occurrence of, any one of the following events:
(a) The acquisition in one or more transactions, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than the Company, a Subsidiary or any employee benefit plan (or related trust) sponsored or maintained by the Company or a Subsidiary, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a number of the Company’s Voting Securities in excess of 50% of the Company’s Voting Securities;
(b) Any election has occurred of persons to the Board that causes two-thirds of the Board to consist of persons other than: (i) persons who were members of the Board on the Effective Date of the Plan; and (ii) persons who were nominated for election as members of the Board at a time when two-thirds of the Board consisted of persons who were members of the Board on the Effective Date of the Plan, provided, however, that any person nominated for election by: (x) a Board at least two-thirds of whom constituted persons described in clauses (i) and/or (ii); or (y) by persons who were themselves nominated by such Board, shall for this purpose be deemed to have been nominated by a Board composed of persons described in clause (i);
(c) The consummation (i.e. closing) of a reorganization, merger or consolidation involving the Company, unless, following such reorganization, merger or consolidation, all or substantially all of the persons who were the respective beneficial owners of the Outstanding Common Stock and the Company’s Voting Securities immediately prior to such reorganization, merger or consolidation, following such reorganization, merger or consolidation beneficially own, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding Voting Securities entitled to vote generally in the election of directors of the entity resulting from such reorganization, merger or consolidation in substantially the same proportion as their ownership of the Outstanding Common Stock and the Company’s Voting Securities immediately prior to such reorganization, merger or consolidation, as the case may be;
(d) The consummation (i.e. closing) of a sale or other disposition of all or substantially all the assets of the Company, unless, following such sale or disposition, all or substantially all of the persons who were the respective beneficial owners of the Outstanding Common Stock and the Company’s Voting Securities immediately prior to such sale or disposition, following such sale or disposition beneficially own, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors or trustees, as the case may be, of the entity acquiring such assets in substantially the same proportion as their ownership of the Outstanding Common Stock and the Company’s Voting Securities immediately prior to such sale or disposition, as the case may be; or
(e) a complete liquidation or dissolution of the Company.
2.10
"Code" means the Internal Revenue Code of 1986, as amended from time to time. Reference to a specific section of the Code shall include such section, any valid final or temporary regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section.
2.11
"Committee" means the Compensation and Leadership Development Committee of the Board or any successor committee appointed by the Board to administer the Plan with respect to grants of Awards, or any subcommittee thereof.
2.12
“Common Stock” means the common stock of the Company, par value $0.001 per Share.
2.13
"Company" means West Marine, Inc., a Delaware corporation.
2.14
“Covered Employee” has the same meaning as set forth in Section 162(m) of the Code, and successor provisions.
2.15
“Date of Grant” means:
(a) for annual Awards to Participants who are current Employees of the Company, the 14
th
day of March of each year, or if the 14
th
falls on a weekend or a holiday, the immediately preceding business day in March; and
(b) for one-time Awards made to Participants who are newly-hired Employees, the 10th business day of the calendar month following the new Employee’s date of hire; and
(c) for one-time Awards made to existing Employee Participants who are promoted and whom the Management Committee or the Committee determines are entitled to receive an Award, the 3rd business day following the release of quarterly earnings which occurs immediately following the effective date of the promotion; and
(d) for annual Awards made to Non-Employee Directors, the close of each annual meeting of the Company’s stockholders at which the Non-Employee Director is nominated for reelection and is so elected by the stockholders; and
(e) for Awards, other than annual Awards, made to Non-Employee Directors appointed by the Board at any time prior to the next annual meeting of stockholders (e.g. an appointment to fill a vacancy on the Board), the first day of attendance by such newly-appointed Non-Employee Director at the first to occur of a Board meeting or a meeting of any of the Board’s standing committees; and
(f) for any other Awards and/or for Awards set forth in subsections (a) through (e) above notwithstanding the dates set forth therein, any date designated by the Committee or the Board as the date as of which an Award is granted, which shall not be earlier than the date on which the Committee or the Board approves the granting of such Award.
2.16
"Director" means any individual who is a member of the Board of Directors of the Company.
2.17
"Disability" means a permanent and total disability within the meaning of Code Section 22(e)(3).
2.18
“Dividend” means an amount equal to any ordinary cash dividends or other cash distributions, other than a cash distribution that constitutes an Adjustment Event, paid by the Company with respect to the Common Stock.
2.19
“Dividend Equivalents” means a credit payable in Shares equal to (i) the amount of Dividends paid by the Company multiplied by the number of Shares underlying a Restricted Stock Award, Restricted Stock Unit Award or Performance Stock Unit Award, (ii) divided by the Fair Market Value of the Common Stock on the record date for such Dividends.
2.20
“Effective Date” means April 12, 2017, subject to approval by the Company’s stockholders at the Annual Meeting of Stockholders scheduled to be held on June 1, 2017 (or, if the vote on the Plan is accelerated or postponed, such other date on which a stockholders’ meeting to vote to approve the Plan occurs).
2.21
"Employee" means any employee of the Company or of the Company's Subsidiaries, whether such employee is so employed at the time the Plan is adopted or becomes so employed subsequent to the adoption of the Plan.
2.22
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto. Reference to a specific section or regulation of the Exchange Act shall include such section or regulation, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section or regulation.
2.23
"Fair Market Value" means the average of the highest and lowest quoted selling prices for Shares on the relevant date as reflected by composite transactions on the national securities exchange or system upon which such Shares are then listed and/or traded, or if there were no sales on such date, the weighted average of the means between the highest and lowest quoted selling prices on the nearest day before and the nearest day after the relevant date, as determined by the Committee.
2.24
“Freestanding SAR" means a Stock Appreciation Right that is granted independently of any Options.
2.25
“Full-Value Stock Award” means a Restricted Stock Award, a Restricted Stock Unit Award, a Performance Stock Unit Award, or any Other Stock-Based Award.
2.26
"Incentive Stock Option" or "ISO" means an option to purchase Shares, which is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code.
2.27
"Insider" shall mean an individual who, on the relevant date, is a Company Director, Company officer (within the meaning of Rule 16a-1 promulgated under the Exchange Act), or beneficial owner of 10% or more of the outstanding Shares.
2.28
“Management Committee” means a committee consisting of the Chief Executive Officer, the Chief Financial Officer and the Vice President of Human Resources, or such other Company officers that the Committee may designate from time to time, to whom the Committee has delegated authority to grant Awards to Employees not constituting Insiders, pursuant to and consistent with the terms of this Plan and Applicable Law.
2.29
"Non-Employee Director" shall mean a Director who is an employee of neither the Company nor any Subsidiary (within the meaning of Rule 16b-3(b) promulgated under the Exchange Act).
2.30
"Nonqualified Stock Option" or "NQSO" means an option to purchase Shares which is not intended to be an Incentive Stock Option.
2.31
"Option" means an Incentive Stock Option or a Nonqualified Stock Option.
2.32
"Option Price" means the price at which a Share may be purchased by a Participant pursuant to an Option, as determined by the Committee in accordance with the terms of this Plan.
2.33
“Other Company Plan” means any Company plan, policy, agreement or guideline adopted by the Company, the Committee or the Board other than this Plan, applicable to an Award.
2.34
“Other Stock-Based Award” means a right, granted to a Participant under Section 13, that relates to or is valued by reference to Shares.
2.35
“Outstanding Common Stock” means, at any time, the issued and outstanding shares of Common Stock.
2.36
"Participant" means an Employee or Non-Employee Director to whom an Award is granted, or who holds (or if applicable, any other person who holds) an outstanding Stock Award granted under the Plan.
2.37
“Performance Cash Award” means an award of cash granted pursuant to the terms of Section 11.
2.38
“Performance Criteria” means the one or more criteria that the Committee will select for purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria that will be used to establish such Performance Goals may be based on any one of, or combination of, the following as determined by the Committee or the Board: (i) income or earnings (before or after taxes), (ii) operating income or operating income after taxes; (iii) earnings per share or earnings per share growth, (iv) sales, net sales, sales growth, total revenue, or revenue growth, (v) product revenue; (vi) pre-tax profit or pre-tax or pre-bonus, pre-tax operating profit, (viii) operating profit or net operating profit; (ix) return measures (including, but not limited to, return on assets, return on investment, return on capital, return on capital employed, return on invested capital, return on equity, sales, or revenue), (x) shareholder’s equity or average stockholder’s equity; (xi) cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, cash flow per share and cash flow return on investment), (xii) earnings before or after taxes, interest or depreciation; (xiii) earnings before or after taxes, interest, depreciation, and amortization, (xiv) margin (including gross or operating margins), (xv) economic value added (or an equivalent metric); (xvi) share price, share price performance, share price return or relative share price (including, but not limited to, growth measures and total shareholder return), (xvii) market share or change in market share, (xviii) expense or cost reduction goals; (xix) customer retention or satisfaction, (xx) working capital targets or improvement in or attainment of working capital goals, (xxi) debt reduction; (xxii) debt reduction or debt levels; (xxiii) capital expenditures; (xxiv) workforce diversity; (xxv) reduction in billings; and (xxvi) to the extent that an Award is not intended to comply with Section 162(m) of the Code, other measures of performance determined by the Committee or the Board.
2.39
“Performance Goals” mean, for a Performance Period, the one or more goals established by the Committee or the Board for the Performance Period based upon the Performance Criteria. Performance Goals may be measured with respect to the Company or any one or more of its Subsidiaries or one or more of its business units, divisions and either in absolute terms or as compared to another company or companies or the performance of one or more relevant indices. Unless specified otherwise by the Committee or the Board (i) in the Award Agreement at the time the Award is granted or (ii) in such other document setting forth the Performance Goals at the time the Performance Goals are established, the Board will appropriately make adjustments in the method of calculating the attainment of Performance Goals for a Performance Period as follows: (1) to exclude restructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects of items that are “unusual” in nature or occur “infrequently” as determined under accounting principles generally accepted in the United States; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; (8) to exclude the effect of any change in the outstanding shares of Common Stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends; (9) to exclude the effects of stock based compensation and the award of bonuses under the Company’s bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles; and (11) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles.
2.40
“Performance Period” means the period of time selected by the Committee or the Board over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Stock Award or a Performance Cash Award. Performance Periods may be of varying and overlapping duration, at the sole discretion of the Committee or the Board.
2.41
"Performance Stock Unit Award" means a Participant’s right to receive a stated number of Shares of Common Stock pursuant to Section 10 of the Plan that is forfeitable by the Participant until the completion of the Period of Restriction or until otherwise determined by the Committee or the Board or in accordance with the Plan. Each Performance Stock Unit Award represents an unfunded and unsecured obligation of the Company.
2.42
"Period of Restriction" means, for Stock Awards, the period during which the transfer of Shares of a Stock Award is limited in some way (based on the passage of time, the achievement of one or more Performance Criteria and/or Performance Goals, or upon the occurrence of other events as determined by the Committee or the Board, in its discretion), and/or the Shares are subject to a substantial risk of forfeiture. For Performance Cash Awards, the Period of Restriction means the period during which the transfer of payment with respect to such Performance Cash Award is limited in some way (based on the achievement of one or more Performance Criteria and/or Performance Goals, or upon the occurrence of other events as determined by the Committee or the Board, in its discretion), and the Performance Cash Awards are subject to a substantial risk of forfeiture.
2.43
"Restricted Stock Award" means a grant of a stated number of Shares of Common Stock to a Participant pursuant to Section 8 of the Plan that is forfeitable by the Participant until the completion of the Period of Restriction or until otherwise determined by the Committee or the Board or in accordance with the Plan.
2.44
Restricted Stock Unit Award” means a Participant’s right to receive a stated number of Shares of Common Stock pursuant to Section 9 of the Plan that is forfeitable by the Participant until the completion of the Period of Restriction or until otherwise
determined by the Committee or the Board in accordance with the Plan. Each Restricted Stock Unit Award represents an unfunded and unsecured obligation of the Company.
2.45
"Shares" means the shares of Common Stock of the Company.
2.46
“Stock Award” means any right to receive Shares granted under the Plan including a Nonqualified Stock Option, an Incentive Stock Option, a Stock Appreciation Right, a Restricted Stock Award, a Restricted Stock Unit Award, a Performance Stock Unit Award, or any Other Stock-Based Award.
2.47
"Stock Appreciation Right" or "SAR" means an Award, granted alone or in connection with a related Option, designated as a SAR, pursuant to the terms of Section 7 including, without limitation, a Freestanding SAR, an Affiliated SAR and a Tandem SAR.
2.48
"Subsidiary" means any corporation in which the Company owns directly, or indirectly through subsidiaries, at least fifty percent (50%) of the total combined voting power of all classes of stock, or any other entity (including, but not limited to, partnerships and joint ventures) in which the Company owns at least fifty percent (50%) of the combined equity thereof.
2.49
“Substitute Awards" means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, in each case by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.
2.50
"Tandem SAR" means a Stock Appreciation Right that is granted in connection with a related Option, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, a SAR shall similarly be cancelled).
2.51
“Voting Securities” means the combined voting power of all outstanding voting securities of the Company entitled to vote generally in the election of directors to the Board.
SECTION 3
ADMINISTRATION
3.1
The Committee
. The Plan shall be administered by the Committee. The Committee shall consist of not less than two (2) Directors who must be Non-Employee Directors. The members of the Committee shall be appointed from time to time by, and shall serve at the pleasure of, the Board.
3.2
Authority of the Committee or the Board
. The Committee or the Board shall have full power, except as limited by Applicable Law or by the Certificate of Incorporation or Bylaws of the Company, and subject to the provisions of this Plan: to determine the size and types of Awards and when and how such Awards will be granted; to determine the terms and conditions of such Awards in a manner consistent with the Plan; to determine the number of shares of Common Stock subject to, or the cash value of, an Award; to determine the terms and conditions of each Award Agreement, which need not be identical for each Participant; to construe and interpret the Plan and any or instrument entered into under the Plan; to establish, amend, or waive rules and regulations for the Plan's administration; and (subject to the provisions of Section 17 herein) to amend the terms and conditions of any outstanding Stock Award to the extent such terms and conditions are within the discretion of the Committee and/or the Board as provided in the Plan; to construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan and Awards. The Committee or the Board, in the exercise of these powers, may correct any defect, omission or inconsistency in the Plan or in any Award Agreement, in a manner and to the extent it will deem necessary or expedient to make the Plan or Award fully effective; to settle all controversies regarding the Plan and Awards granted under it, subject to any restrictions contained in this Plan; to accelerate, in whole or in part, the time at which an Award may be exercised or vest (or at which cash or Shares may be issued); to submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of (A) Section 162(m) of the Code regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to Covered Employees, (B) Section 422 of the Code regarding incentive stock options or (C) Rule 16b-3 promulgated under the Exchange Act; to approve forms of Award Agreements for use under the Plan and to amend the terms of any one or more Awards, including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Award Agreement, subject to any specified limits in the Plan that are not subject to Committee or Board discretion;
provided
,
however
, that a Participant’s rights under any Award will not be materially impaired by any such amendment unless (A) the Company requests the consent of the affected Participant, and (B) such Participant consents in writing. Notwithstanding the foregoing, (1) a Participant’s rights will not be deemed to have been materially impaired by any such amendment if the Committee or the Board, in its sole discretion, determines that the amendment, taken as a whole, does not materially impair the Participant’s rights, and (2) subject to the limitations of Applicable Law, if any, the Board may amend the terms of any one or more Stock Awards without the affected Participant’s consent (A) to maintain the qualified status of the Stock Award as an Incentive Stock Option under Section 422 of the Code; (B) to change the terms of an Incentive Stock Option, if such change results in impairment of the Stock Award solely because it impairs the qualified status of the Stock Award as an Incentive Stock Option under Section 422 of the Code; (C) to clarify the manner of exemption from, or to bring the Award into compliance with, Section 409A of the Code; (D) to comply with the applicable provisions of any Other Company Plan; or (E) to comply with other Applicable Laws or listing requirements; and generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best
interests of the Company and that are not in conflict with the provisions of the Plan or Awards. Further, the Committee shall make all other determinations, which may be necessary or advisable for the administration of the Plan.
3.3
Delegation
. As permitted by Applicable Law, the Committee or the Board may delegate authority to the Management Committee to grant Awards permitted under this Plan to Employees who are not Insiders, in accordance with such guidelines as the Committee shall set forth at any time or from time to time.
3.4
Decisions Binding
. All determinations and decisions made by the Committee or the Board pursuant to the provisions of the Plan and all related orders or resolutions of the Committee or the Board shall be final, conclusive, and binding on all persons, including the Company, its shareholders, Employees, Participants, and their estates and beneficiaries, and shall be given the maximum deference permitted by Applicable Law. Such determinations and decisions need not be uniform and may be made by the Committee or the Board selectively among Participants who receive, or are eligible to receive, Awards under the Plan, whether or not such Participants are similarly situated.
3.5
Limitation of Liability
.
Each member of the Committee and the Board shall be entitled to rely or act in good faith upon any report or other information furnished to him or her by any officer or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants, legal counsel or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan. No member of the Committee, nor any Employee of the Company acting on behalf of the Committee, including, without limitation, the Management Committee or any member thereof, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Committee and any such Employee of the Company acting on their behalf, shall, to the extent permitted by Applicable Law, be fully indemnified and protected by the Company, pursuant to Section 20 hereof, with respect to any such action, determination, or interpretation.
3.6
Minimum Vesting Requirement of Stock Awards.
In addition to any other limitations set forth in the Plan, and notwithstanding any provisions of the Plan to the contrary, Awards granted to Participants under the Plan shall vest over a period that is not less than one year from the Date of Grant (except that this limit need not apply in the event of any Substitute Award or the death or disability of the Participant or as otherwise provided in Section 22). In addition, subject to adjustments, if any, made in accordance with Section 4.3, up to 5% of the aggregate number of Shares authorized for issuance under the Plan may be used for such Awards without regard to the minimum vesting requirements set forth above.
3.7
Exercisability of Stock Awards
. Except as otherwise permitted or required under the Plan or any Other Company Plan, any stock-settled Stock Award granted on or after the Effective Date that vests solely on the basis of the passage of time (e.g., not on the basis of achievement of Performance Goals) generally will vest in three equal annual installments over a three (3)-year period following the Date of Grant. This Section 3.7 shall not apply to (i) any Stock Award that becomes vested based on the achievement of Performance Goals, (ii) Stock Awards to Non-Employee Directors, or (iii) Stock Awards involving an aggregate number of Shares of Common Stock not exceeding 10% of the number of Shares available for Stock Awards under the first sentence of Section 4.1 as of the Effective Date.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1
Number of Shares
. Subject to adjustment upon the occurrence of an Adjustment Event as provided in Section 4.3, the total number of Shares available for grant under the Plan, including shares subject to Stock Awards previously issued and outstanding under the Prior Plan, may not exceed 11,700,000. These 11,700,000 Shares may be either authorized but unissued or reacquired Shares. The following rules will apply for purposes of the determination of the number of Shares available for grant under the Plan:
(a)
While a Stock Award is outstanding, it shall be counted against the authorized pool of Shares, regardless of its vested status.
(b)
The grant of an Option shall reduce the Shares available for grant under the Plan by the number of Shares subject to such Stock Award.
(c)
The grant of a Tandem SAR shall reduce the number of Shares available for grant by the number of Shares subject to the related Option (i.e., there is no double counting of Options and their related Tandem SARs).
(d)
The grant of an Affiliated SAR shall reduce the number of Shares available for grant by the number of Shares subject to the SAR, in addition to the number of Shares subject to the related Option.
(e)
The grant of a Freestanding SAR shall reduce the number of Shares available for grant by the number of Freestanding SARs granted.
(f)
The Committee shall in each case determine the appropriate number of Shares to deduct from the authorized pool in connection with the grant of Performance Stock Unit Awards.
(g)
Commencing with the Effective Date of this Plan, each grant of a Full-Value Stock Award shall reduce the authorized Share pool by 1.0 Share.
(h)
To the extent that a Stock Award is settled in cash rather than in Shares, the Shares reserved for such Award shall not be deducted from the authorized Share pool.
(i)
To the extent Shares are withheld from any Stock Award by the Company or tendered by a Participant to pay taxes applicable to any Stock Award, such Shares shall be deducted from the authorized Share pool.
(j)
Shares withheld by the Company or tendered by a Participant to pay the exercise price of any Option or SAR shall not be added to the authorized Share pool.
(k)
Shares withheld by the Company or tendered by a Participant to satisfy tax-withholding obligations of any Stock Award shall not be added to the authorized Share pool.
(l)
All Shares covered by a SAR, to the extent that a SAR is exercised and settled in Shares, whether or not Shares are actually delivered to the Participant upon exercise of the right, shall be deducted from the authorized Share pool.
(m)
Any Shares repurchased by the Company using Option exercise proceeds shall not be added to the authorized Share Pool.
(n)
Substitute Awards
shall not reduce the number of Shares authorized for grant under the Plan or the applicable per person limitations for grant to a Participant under Section 5.3 or Section 12.2 below, nor shall Shares subject to a Substitute Award again be available for Awards. Additionally, in the event that a company acquired by the Company or any Subsidiary, or with which the Company or any Subsidiary combines, has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided, that, Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employees or directors prior to such acquisition or combination.
4.2
Lapsed Awards
. If any Stock Award granted under this Plan is cancelled, terminates, expires, or lapses for any reason (with the exception of the termination of a Tandem SAR upon exercise of the related Option, or the termination of a related Option upon exercise of the corresponding Tandem SAR), any Shares subject to such Stock Award again shall be available for the grant of a Stock Award under the Plan. Without limiting the foregoing, to the extent a Full-Value Stock Award is forfeited prior to the expiration of the applicable Period of Restriction or Performance Period, the same number of Shares shall be added to the authorized share pool as were deducted when such Stock Award first was granted under the Prior Plan or the Plan.
4.3
Adjustments in Authorized Shares
. In the event of any Adjustment Event affecting the Common Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Participants under the Plan, such adjustment shall be made in the number and/or class of Shares which may be delivered under the Plan (including adjustment to the limits contained in Section 12.2), and in the number and/or class of and/or price of Shares subject to outstanding Stock Awards granted under the Plan, as is necessary to equalize a Stock Award’s value before and after an Adjustment Event, and provided that the number of Shares subject to any Stock Award shall always be rounded down to the nearest whole number. In the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, or other change in the corporate structure of the Company that does not constitute such an Adjustment Event, the Committee or the Board may make such adjustment, if any, as it deems appropriate in the number and/or class of and/or price of Shares subject to outstanding Awards granted under the Plan. Any adjustments made pursuant to this Section 4.2 shall be consistent with Sections 424, 409A and 162(m) of the Code to the extent the Awards subject to adjustment are subject to such Sections of the Code.
SECTION 5
ELIGIBILITY AND PARTICIPATION
5.1
Eligibility
. Persons eligible to participate in this Plan include all Employees and Non-Employee Directors of the Company and its Subsidiaries, as determined by the Committee.
5.2
Actual Participation
. Subject to the provisions of the Plan, the Committee or the Board, in its sole discretion, shall select from all eligible Employees and Non-Employee Directors, those to whom Awards shall be granted, and the Committee or the Board, in its sole discretion, shall determine the nature and amount of each Award, subject to the Committee’s or Board’s delegation of its powers, including to the Management Committee, as set forth in this Plan.
5.3
Annual Limit on Non-Employee Director Awards
. The maximum number of shares of Common Stock subject to Stock Awards granted under the Plan or otherwise during any one calendar year to any Non-Employee Director for service on the Board, taken together with any cash fees paid by the Company to such Non-Employee Director with respect to such calendar year for service on the Board, will not exceed $300,000 in total value (calculating the value of any such Stock Awards based on the grant date fair value of such Stock Awards for financial reporting purposes). The Board may make exceptions to such limit for individual Non-Employee Directors in extraordinary circumstances, as the Board may determine in its discretion, provided that the Non-Employee Director receiving such additional compensation may not participate in the decision to award such compensation.
SECTION 6
STOCK OPTIONS
6.1
Grant of Options
. Subject to the terms and provisions of the Plan, Options may be granted to Employees and Non-Employee Directors on the Date of Grant. The Committee shall have discretion in determining the number of Shares subject to Options granted to each Participant, subject to the Committee’s delegation of powers, including delegation to the Management Committee, as set forth in this Plan. The Committee may grant ISOs, NQSOs, or a combination thereof.
6.2
Award Agreement
. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, the conditions of exercise of the Options, and such other provisions as the Committee shall determine. The Award Agreement also shall specify whether the Option is intended to be an ISO or a NQSO, provided that if the Stock Award Agreement does not so specify, the Option shall be a NQSO.
6.3
Option Price
. The Option Price for each grant of an Option shall be determined by the Committee in its sole discretion, provided that:
6.3.1
Nonqualified Stock Options
. In the case of a Nonqualified Stock Option, the Option Price shall be not less than one-hundred percent (100%) of the Fair Market Value of a Share on the Date of Grant.
6.3.2
Incentive Stock Options
. In the case of an Incentive Stock Option, the Option Price shall be not less than one-hundred percent (100%) of the Fair Market Value of a Share on the Date of Grant; provided, however, that if at the time the Option is granted, the Employee (together with persons whose stock ownership is attributed to the Employee pursuant to Section 424(d) of the Code) owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, the Option Price shall be not less than one-hundred and ten percent (110%) of the Fair Market Value of a Share on the Date of Grant.
6.4
Duration of Options
. Each Option shall expire at such time as the Committee, in its sole discretion, shall determine; provided, however, that for grants made on or after the Effective Date of this Plan, no Option may be exercised after the expiration of seven (7) years from the date the Option was granted. After the Option is granted, the Committee, in its sole discretion, may extend the maximum term of such Option, provided, however, that on or after the Effective Date of this Plan, no extension shall make the Option exercisable more than seven (7) years after the date the Option was granted.
6.5
Exercise of Options
. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee, in its sole discretion, shall determine or as otherwise set forth in this Plan. After an Option is granted, the Committee, in its sole discretion, may accelerate the exercisability of the Option, subject to any restrictions on acceleration as set forth elsewhere in this Plan.
6.6
Payment
. Options shall be exercised by the Participant's delivery of a notice of exercise to the Secretary of the Company, to the Company’s designated broker, or to another person designated by the Committee setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. The Option Price upon exercise of any Option shall be payable to the Company in full in cash or its equivalent. The Committee, in its sole discretion, also may permit exercise (a) by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Option Price (provided that the Shares which are tendered must have been held by the Participant for at least six (6) months prior to their tender to satisfy the Option Price), or (b) by any other means which the Committee, in its sole discretion, determines to provide legal consideration for the Shares, and to be consistent with the Plan's purpose and applicable law. As soon as practicable after receipt of a written notification of exercise and full payment, the Company shall transfer into the Participant's name, by book entry into Participant’s brokerage account or by causing a Share certificate(s) to be issued to Participant, the number of Shares purchased under the Option(s).
6.7
Restrictions on Share Transferability
. The Committee may impose restrictions on any Shares acquired pursuant to the exercise of an Option under the Plan, as it may deem advisable, including, without limitation, restrictions under applicable Federal securities laws, under the requirements of any national securities exchange or system upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.
6.8
Certain Additional Provisions for Incentive Stock Options
.
6.8.1
Exercisability
. The aggregate Fair Market Value (determined at the time the Option is granted) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by any Employee during any calendar year (under all plans of the Company and its Subsidiaries) shall not exceed $100,000, or such other limitation required under Section 422(d) of the Code.
6.8.2
Termination of Employment
. Except as otherwise provided in this Plan or any applicable Other Company Plan, no Incentive Stock Option may be exercised more than three months after the effective date of the Participant's termination of employment for any reason other than Disability or death, unless (a) the Participant dies during such three-month period, and/or (b) the Award Agreement permits later exercise. Except as otherwise provided in this Plan or any applicable Other Company Plan, no Incentive Stock Option may be exercised more than one year after the Participant's termination of employment on account of death or Disability, unless (a) the Participant dies during such one-year period, and (b) the Award Agreement permits later exercise.
6.8.3
Employees Only
. Incentive Stock Options may be granted only to persons who are Employees at the time of grant. Non-Employee Directors shall not be eligible to receive Incentive Stock Options.
6.9
Non-Transferability of Options
. No Option granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, the laws of descent and distribution, or as allowed under Section 14. All Options granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant.
SECTION 7
APPRECIATION RIGHTS
7.1
Grant of SARs
. Subject to the terms and conditions of the Plan, a SAR may be granted to an Employee and/or a Non-Employee Director on the Date of Grant. The Committee may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination thereof. The Committee shall have complete discretion to determine the number of SARs granted to any Participant, and consistent with the provisions of the Plan, the terms and conditions pertaining to such SARs. However, the grant price of any SAR, including Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination thereof, shall be not less than one-hundred percent (100%) of the Fair Market Value of a Share on the Date of Grant of the SAR.
7.2
Exercise of Tandem SARs
. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR will expire no later than the expiration of the underlying ISO; (ii) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Option Price of the underlying ISO and the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO.
7.3
Exercise of Affiliated SARs
. Affiliated SARs shall be deemed to be exercised upon the exercise of the related Options. The deemed exercise of Affiliated SARs shall not necessitate a reduction in the number of related Options.
7.4
Exercise of Freestanding SARs
. Freestanding SARs shall be exercisable on such terms and conditions as shall be determined by the Committee, in its sole discretion.
7.5
Term of SARs
. The term of a SAR granted under the Plan shall be determined by the Committee, in its sole discretion, provided, however, that for grants made on or after the Effective Date of this Plan, no SAR may be exercised after the expiration of seven (7) years from the date the SAR was granted..
7.6
SAR Award Agreement
. Each SAR grant shall be evidenced by an Award Agreement that shall specify the grant price, the term of the SAR, the conditions of exercise and such other provisions as the Committee, in its sole discretion, shall determine. After a SAR is granted, the Committee, in its sole discretion, may accelerate the exercisability of the Option or extend the term of the SAR, subject to any restrictions on acceleration as set forth elsewhere in this Plan, provided, however, that on or after the Effective Date of this Plan, no extension shall make the SAR exercisable more than seven (7) years after the date the SAR was granted.
7.7
Payment of SAR Amount
. Upon exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: (a) the difference between the Fair Market Value of a Share on the date of exercise over the grant price; times (b) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof.
7.8
Restrictions on Share Transferability
. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of a SAR under the Plan, as it may deem advisable, including, without limitation, restrictions under applicable Federal securities laws, under the requirements of any national securities exchange or system upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.
7.9
Non-Transferability of SARs
. No SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, the laws of descent and distribution, or as permitted under Section 14. Further, all SARs granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant.
SECTION 8
RESTRICTED STOCK AWARDS
8.1
Grant of Restricted Stock Awards
. Subject to the terms and provisions of the Plan, the Committee may grant Restricted Stock Awards to Employees and Non-Employee Directors on the Date of Grant in such amounts as the Committee, in its sole discretion, shall determine.
8.2
Restricted Stock Award Agreement
. Each Restricted Stock Award granted pursuant to this Plan shall be evidenced by an Award Agreement that shall specify the Period (or Periods) of Restriction, the number of Restricted Stock Shares or Restricted Stock Units granted, and such other terms and conditions as the Committee, in its sole discretion, shall determine.
8.3
Non-Transferability of Restricted Stock Awards
. Except as provided in this Plan, Shares of Restricted Stock Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated other than by will, the laws of descent and distribution, or as allowed under Section 14. All rights with respect to the Restricted Stock Award granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant.
8.4
Other Restrictions
. The Committee, in its sole discretion, may impose such other restrictions on any Restricted Stock Awards as it may deem advisable including, without limitation, Performance Criteria, Performance Goals (Company-wide, divisional, and/or individual), stop-transfer order, and/or such other restrictions under applicable Federal or state securities laws, rules and regulations thereunder or rules of the national securities exchange or system on which the Shares are listed.
8.5
Certificate Legend
. The Committee may cause a legend or legends to be placed on any such Restricted Stock Award certificates to make appropriate reference to any restrictions that may be applicable to Shares. In addition, during any Period of Restriction, or during any period during which delivery or receipt of a Stock Award or Shares has been deferred by the Committee or a Participant, the Committee may require the Participant to enter into an agreement providing that certificates representing Shares issuable or issued pursuant to a Stock Award shall remain in the physical custody of the Company or such other person as the Committee may designate.
8.6
Removal of Restrictions
. Except as otherwise provided in this Plan, Restricted Stock Award grants made under the Plan shall become freely transferable by the Participant after the last day of the Period of Restriction. The Committee, in its discretion, may accelerate the time at which any restrictions shall lapse, and/or remove any restrictions, subject to the terms of this Plan and any applicable Other Company Plan. After the Shares are released from restrictions, the Participant shall be entitled to have the applicable legend or legends required by Section 8.5 removed from his or her Share certificate.
8.7
Voting Rights
. During the Period of Restriction, Participants holding Restricted Stock Awards granted hereunder may exercise full voting rights with respect to those Shares unless otherwise provided in the Stock Award Agreement.
8.8
Dividends and Dividend Equivalents
. Any Dividends and/or Dividend Equivalents paid by the Company to a Participant holding Restricted Stock Awards shall be governed by Section 18 of this Plan.
8.9
Return of Restricted Stock to Company
. Subject to the applicable Stock Award Agreement and Section 8.6, upon the earlier of (a) the Participant's termination of employment, or (b) the date set forth in the Stock Award Agreement, the Restricted Stock Award for which the Period of Restriction has not lapsed shall revert to the Company and, subject to Section 4.2, again shall become available for grant under the Plan.
SECTION 9
RESTRICTED STOCK UNIT AWARDS
9.1
Grant of Restricted Stock Unit Awards
. Subject to the terms and provisions of the Plan, the Committee may grant Restricted Stock Unit Awards to Employees and Non-Employee Directors on the Date of Grant in such amounts as the Committee, in its sole discretion, shall determine.
9.2
Restricted Stock Unit Award Agreement
. Each Restricted Stock Unit Award granted pursuant to this Plan shall be evidenced by an Award Agreement that shall specify the Period (or Periods) of Restriction, the number of Restricted Stock Units granted, and such other terms and conditions as the Committee, in its sole discretion, shall determine.
9.3
Non-Transferability of Restricted Stock Unit Awards
. Except as provided in this Plan, Restricted Stock Unit Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated other than by will, the laws of descent and distribution, or as allowed under Section 14. All rights with respect to the Restricted Stock Award granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant.
9.4
Restrictions on Share Transferability
. The Committee may impose restrictions on any Shares acquired pursuant to any Restricted Stock Unit Award granted under this Section 9 as it may deem advisable, including, without limitation, restrictions under applicable Federal securities laws, under the requirements of any national securities exchange or system upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.
9.5
Other Restrictions
. The Committee, in its sole discretion, may impose such other restrictions on any Restricted Stock Unit Awards as it may deem advisable including, without limitation, Performance Criteria, Performance Goals (Company-wide, divisional, and/or individual), stop-transfer order, and/or such other restrictions under applicable Federal or state securities laws, rules and regulations thereunder or rules of the national securities exchange or system on which the Shares are listed.
9.6
Removal of Restrictions
. Except as otherwise provided in this Plan, Shares underlying each Restricted Stock Unit Award under the Plan shall be issued to the Participant after the Period of Restriction. The Committee, in its discretion, may accelerate the time at which any Period of Restriction shall lapse, and/or remove any restrictions, subject to the terms of this Plan and any Other Company Plan. After the Shares are released from restrictions, the Participant shall be entitled to receive Shares.
9.7
Voting Rights
. Unless and until the Company provides issuance of Shares in respect of Restricted Stock Units Awards, a Participant holding outstanding Restricted Stock Unit Awards shall not be entitled to exercise any voting rights with respect to such Restricted Stock Unit Awards.
9.8
Dividends and Dividend Equivalents
. Any Dividends and/or Dividend Equivalents paid by the Company to a Participants holding Restricted Stock Unit Awards granted hereunder shall be governed by Section 18 of this Plan..
9.9
Return of Restricted Stock Units to Company
. Subject to the applicable Stock Award Agreement and Section 9.6, upon the earlier of (a) the Participant's termination of employment, or (b) the date set forth in the Stock Award Agreement, the Shares underlying the Restricted Stock Unit Award for which the Period of Restriction has not lapsed shall revert to the Company and, subject to Section 4.2, again shall become available for grant under the Plan.
SECTION 10
PERFORMANCE STOCK UNIT AWARDS
10.1
Grant of Performance Stock Unit Awards
. Subject to the terms of the Plan, Performance Stock Unit Awards may be granted to Employees and Non-Employee Directors on the Date of Grant. The Committee shall have complete discretion in determining the number of Performance Stock Unit Awards granted to each Participant, subject to the Committee’s delegation of its powers, including to the Management Committee, as set forth in this Plan. With respect to Covered Employees, Performance Stock Unit Awards are intended to be “qualified performance-based compensation” within the meaning of Section 162(m) of the Code and shall be paid solely on account of the attainment of one or more pre-established Performance Criteria and/or Performance Goals within the meaning of Section 162(m) and the regulations thereunder. The payout of any such Award to a Covered Employee may be reduced, but not increased, based on the degree of attainment of other performance criteria or otherwise at the direction of the Committee.
10.2
Maximum Individual Performance Stock Unit Awards.
No Employee may be granted more than the maximum number of Shares set forth in Section 12, which are subject to any combination of Performance Stock Unit Awards in any given calendar year. The maximum payout for any Covered Employee for a Performance Stock Unit Award paid in cash is set forth in Section 12.2.2. The Share amounts in this Section 10.2 are subject to the Share amount set forth in Section 4.1 and the adjustment provisions under Section 4.3. The Committee shall determine the applicable Performance Goals.
10.3
Value of Performance Units/Shares
. Each Performance Stock Unit Award shall have an initial value equal to one-hundred percent (100%) of the Fair Market Value of a Share on the Date of Grant. The Committee shall set Performance Goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Shares that will be paid out to the Participants upon vesting. Performance Periods of Performance Stock Unit Awards granted to Insiders shall, in all cases, exceed one (1) year in length, unless the Performance Stock Unit Awards were granted by a committee comprised solely of two or more Non-Employee Directors.
10.4
Earning of Performance Stock Unit Awards
. After the applicable Performance Period has ended, the holder of Performance Stock Unit Awards shall be entitled to receive a payout of the number of Shares, if any, earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Goals have been achieved.
10.5
Form and Timing of Payment of Performance Stock Unit Awards
. The settlement of any earned Performance Stock Unit Awards shall be made in a single lump sum, within forty-five (45) calendar days following the close of the applicable Performance Period. The Committee, in its sole discretion, may pay earned Performance Stock Unit Awards in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Stock Unit Awards at the close of the applicable Performance Period) or in a combination thereof. Prior to the beginning of each Performance Period, Participants may, in the discretion of the Committee, elect to defer the receipt of any Performance Stock Unit Award payout upon such terms as the Committee shall determine.
10.6
Cancellation of Performance Stock Unit Awards
. Subject to the applicable Award Agreement, upon the earlier of (a) the Participant's termination of employment, or (b) the date set forth in the Award Agreement, all remaining Performance Stock Unit Awards shall be forfeited by the Participant to the Company, and subject to Section 4.2, the Shares subject thereto shall again be available for grant under the Plan.
10.7
Performance Stock Unit Award Agreement
. Each Performance Stock Unit Award granted pursuant to this Plan shall be evidenced by an Award Agreement that shall specify the Performance Criteria, the Performance Goals, the Performance Period and the Period (or Periods) of Restriction, the number of Performance Stock Unit Award Shares granted, and such other terms and conditions as the Committee, in its sole discretion, shall determine.
10.8
Non-Transferability of Performance Stock Unit Awards
. Performance Stock Unit Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or as allowed under Section 14. Further, a Participant's rights under the Plan shall be exercisable during the Participant's lifetime only by the Participant or the Participant's legal representative.
10.9
Restrictions on Share Transferability
. The Committee may impose restrictions on any Shares acquired pursuant to any Performance Stock Unit Award granted under this Section 10 as it may deem advisable, including, without limitation, restrictions under applicable Federal securities laws, under the requirements of any national securities exchange or system upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.
10.10
Voting Rights
. Unless and until the Company provides issuance of Shares in respect of Performance Stock Unit Awards, a Participant holding outstanding Performance Stock Unit Awards shall not be entitled to exercise any voting rights with respect to such Performance Stock Unit Awards.
10.11
Dividends and Dividend Equivalents
. Any Dividends and/or Dividend Equivalents paid by the Company to Participants holding Performance Stock Unit Awards granted hereunder shall be governed by Section 18 of this Plan.
10.12
Cancellation of Performance Stock Unit Awards
. All Performance Stock Unit Awards for which a Performance Goal has not been met shall not be deemed earned by a Participant. Additionally, if the Performance Goal is met for the applicable Performance Period, but the Participant’s employment is terminated, whether such termination is voluntary or involuntary, prior to the date such Performance Stock Unit Award is distributed to all Participants, unless otherwise determined by the Committee or the Board, the Shares underlying such terminated Participant’s Performance Stock Unit Award shall be forfeited by the Participant immediately upon such termination.
SECTION 11
PERFORMANCE CASH AWARDS
11.1
Grant of a Performance Cash Awards
. A Performance Cash Award is a cash award (for a dollar value not in excess of that set forth in Section 11.2.2) that is payable contingent upon the attainment during a Performance Period of certain Performance Criteria and/or Performance Goals. At the time of grant of a Performance Cash Award, the length of any Performance Period, the Performance Criteria and/or Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Criteria and/or Performance Goals have been attained will be conclusively determined by the Committee (or, if not required for compliance with Section 162(m) of the Code, the Board), in its sole discretion.
11.2
Maximum Individual Performance Cash Awards.
No Performance Cash Award may exceed the maximum amount to any Employee set forth in Section 11.2.2 in any given calendar year.
11.3
Form and Timing of Payment of Performance Cash Awards
. The Committee or the Board may specify the form of payment of Performance Cash Awards, which may be cash or other property, or may provide for a Participant to have the option for his or her Performance Cash Award, or such portion thereof as the Committee or the Board may specify, to be paid in whole or in part in cash or other property. Any earned Performance Cash Award shall be made in a single lump sum, within forty-five (45) calendar days following the close of the applicable Performance Period.
11.4
Performance Cash Award Agreement
. Each Performance Cash Award granted pursuant to this Plan shall be evidenced by an Award Agreement that shall specify the Performance Criteria, the Performance Goals, the Performance Period and the Period (or Periods) of Restriction, and such other terms and conditions as the Committee, in its sole discretion, shall determine.
11.5
Committee and Board Discretion
. The Committee and the Board each retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to define the manner of calculating the Performance Criteria it selects to use for a Performance Period.
11.6
Cancellation of Performance Cash Awards
. All Performance Cash Awards for which a Performance Criteria and/or Performance Goal has not been met shall not be deemed earned by a Participant. Additionally, if the Performance Criteria and/or Performance Goal is met for the applicable Performance Period, but the Participant’s employment is terminated, whether such termination is voluntary or involuntary, prior to the date such Performance Cash Award is distributed to all Participants, unless otherwise determined by the Committee or the Board, such terminated Participant’s Performance Cash Award shall be forfeited by the Participant immediately upon such termination.
SECTION 12
APPLICATION OF CODE SECTION 162(m)
12.1
Section 162(m) Compliance
. Unless otherwise permitted in compliance with Section 162(m) of the Code with respect to an Award intended to qualify as “performance-based compensation” thereunder, the Committee will establish the Performance Goals applicable to, and the formula for calculating the amount payable under, the Award no later than the earlier of (A) the date ninety (90) days after the commencement of the applicable Performance Period, and (B) the date on which twenty-five percent (25%) of the Performance Period has elapsed, and in any event at a time when the achievement of the applicable Performance Goals remains substantially uncertain. Prior to the payment of any compensation under an Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Committee will certify the extent to which any Performance Goals and any other material terms under such Award have been satisfied (other than in cases where the Performance Goals relate solely to the increase in the value of the Common Stock).
12.2
Section 162(m) Limitations
. At such time as the Company may be subject to the applicable provisions of Section 162(m) of the Code, and subject to the provisions of Sections 4.1 and 4.3, the following limitations will apply:
12.2.1 A maximum of one million five hundred thousand (1,500,000) Shares of Common Stock subject to Options or SARs may be granted to any Employee during any fiscal year. A maximum of one million five hundred and thousand (1,500,000) Shares of Common Stock subject to Performance Stock Unit Awards (other than Options or SARs) may be granted to any one
Employee during any one fiscal year (whether the grant, vesting or exercise is contingent upon the attainment during the Performance Period of the Performance Goals).
12.2.2 The maximum payout with respect to a Performance Cash Award to any one Employee during any one fiscal year is two million ($2,000,000) dollars.
SECTION 13
OTHER STOCK-BASED AWARDS
13.1
Other Stock-Based Awards
. The Committee is authorized to grant to Participants such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares, as deemed by the Committee to be consistent with the purposes of the Plan, including without limitation, Shares awarded purely as a “bonus” and not subject to any restrictions or conditions, other rights convertible or exchangeable into Shares, purchase rights and Awards valued by reference to book value of Shares or the performance of specified Subsidiaries.
13.2
Terms and Conditions
. The Committee shall determine the terms and conditions of such Other Stock-Based Awards, which may include Performance Criteria and Performance Goals. Shares delivered pursuant to an Award in the nature of a purchase right granted under this Section 13 shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Shares, other Awards, or other property, as the Committee shall determine.
13.3
Restrictions on Share Transferability.
The Committee may impose restrictions on any Shares acquired pursuant to any Other Stock-Based Award granted under this Section 13 as it may deem advisable, including, without limitation, restrictions under applicable Federal securities laws, under the requirements of any national securities exchange or system upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.
13.4
Other Restrictions
. The Committee, in its sole discretion, may impose such other restrictions on any Other Stock-Based Awards as it may deem advisable including, without limitation, Performance Criteria, Performance Goals (Company-wide, divisional, and/or individual), stop-transfer order, and/or such other restrictions under applicable Federal or state securities laws, rules and regulations thereunder or rules of the national securities exchange or system on which the Shares are listed.
13.5
Removal of Restrictions
. Except as otherwise provided in this Plan, if the Other Stock-Based Awards are subject to a Period of Restriction, the Committee, in its discretion, may accelerate the time at which any Period of Restriction shall lapse, and/or remove any restrictions, subject to the terms of this Plan and any Other Company Plan. After the Shares are released from restrictions, the Participant shall be entitled to receive Shares.
13.6
Voting Rights
. Unless and until the Company provides issuance of Shares in respect of Other Stock-Based Awards, a Participant holding outstanding Other Stock-Based Awards shall not be entitled to exercise any voting rights with respect to such Other Stock-Based Awards.
13.7
Dividends and Dividend Equivalents
. Any Dividends and/or Dividend Equivalents paid by the Company to a Participants holding Other Stock-Based Awards granted hereunder shall be governed by Section 18 of this Plan.
SECTION 14
BENEFICIARY DESIGNATION
As provided in this Section 14, each Participant under the Plan may name a beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of the Participant's death before he or she receives any or all of such benefit and/or who may exercise any vested Stock Award under the Plan following the Participant's death. Each such designation shall revoke all prior designations by the same Participant and must be in a form and manner acceptable to the Committee. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate and, subject to the terms of the Plan, any unexercised vested Stock Award may be exercised by the administrator or executor of the Participant's estate.
SECTION 15
DEFERRALS
The Committee, in its sole discretion, may require or permit a Participant to defer such Participant's receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, the lapse or waiver of restrictions with respect to Restricted Stock, or the satisfaction of any requirements or goals with respect to Performance Stock Unit Awards. Any such deferral elections shall be subject to such rules and procedures as shall be determined by the Committee from time to time.
SECTION 16
RIGHTS OF PARTICIPANTS
Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment or any Non-Employee Director’s service with the Company, or any Subsidiary thereof, at any time, with or without cause. For
purposes of the Plan, transfer of employment of a Participant between the Company and any one of its Subsidiaries (or between Subsidiaries) shall not be deemed a termination of employment.
SECTION 17
AMENDMENT, SUSPENSION, OR TERMINATION AND REPRICING
17.1
Amendment/Suspension/Termination
. The Board or the Committee, in its sole discretion, may alter, amend or terminate the Plan, or any part thereof, at any time and for any reason, including, without limitation, by adopting amendments relating to Incentive Stock Options and certain nonqualified deferred compensation under Section 409A of the Code and/or to make the Plan or Awards granted under the Plan compliant with the requirements for Incentive Stock Options or exempt from or compliant with the requirements for nonqualified deferred compensation under Section 409A of the Code, subject to the limitations, if any, of applicable law; provided, however, that without further stockholder approval, no such alteration or amendment shall (a) materially increase the benefits accruing to Participants under the Plan, (b) materially increase the number of securities which may be issued under the Plan, or (c) materially modify the requirements as to eligibility for participation in the Plan; provided, further, that stockholder approval is not required if such approval is not required in order to assure the Plan's continued qualification under Rule 16b-3 promulgated under the 1934 Act; to submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of (A) Section 162(m) of the Code regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to Covered Employees, (B) Section 422 of the Code regarding incentive stock options or (C) Rule 16b-3 promulgated under the Exchange Act to approve forms of Award Agreements for use under the Plan and to amend the terms of any one or more Awards, including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Award Agreement, subject to any specified limits in the Plan that are not subject to Committee or Board discretion;
provided
,
however
, that a Participant’s rights under any Award will not be impaired by any such amendment unless (A) the Company requests the consent of the affected Participant, and (B) such Participant consents in writing. Notwithstanding the foregoing, (1) a Participant’s rights will not be deemed to have been impaired by any such amendment if the Committee or the Board, in its sole discretion, determines that the amendment, taken as a whole, does not materially impair the Participant’s rights, and (2) subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Awards without the affected Participant’s consent (A) to maintain the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code; (B) to change the terms of an Incentive Stock Option, if such change results in impairment of the Award solely because it impairs the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code; (C) to clarify the manner of exemption from, or to bring the Award into compliance with, Section 409A of the Code; or (D) to comply with other applicable laws or listing requirements; and generally, to exercise such powers and to perform such acts as the Committee or the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Awards.
17.2
No Re-pricing.
Notwithstanding anything in the Plan to the contrary, neither the Board nor the Committee shall amend the Plan, or any part thereof, to permit a transaction that would have the effect of repricing an Option or Stock Appreciation Right without obtaining shareholder approval of such amendment. For this purpose “repricing” means (i) any transaction that would have the effect of repricing an Option or Stock Appreciation Right under applicable financial accounting standards, or (ii) with respect to an Option with an exercise price equal to or greater than the Fair Market Value of the underlying stock, either the Company’s cancellation of such Option in exchange for another Award or the Company’s purchase of such Option for cash. Neither the amendment, suspension, nor termination of the Plan shall, without the consent of the Participant, alter or impair any material rights or obligations under any Award theretofore granted. No Award may be granted during any period of suspension, or after termination, of the Plan.
SECTION 18
DIVIDENDS AND DIVIDEND EQUIVALENTS
If the Company pays a Dividend, any Dividend (or, at the Committee’s sole discretion, a Dividend Equivalent) shall accrue to any Restricted Stock Award, Restricted Stock Unit Award or Performance Stock Unit Award for which the Period of Restriction has not lapsed or been satisfied. Such Dividend or Dividend Equivalent shall not be paid unless or until Shares are transferred to a Participant in settlement of a Stock Award. No interest will accrue or otherwise be payable with respect to any Dividends.: Dividend Equivalents will be subject to the same vesting terms and conditions as the underlying Restricted Stock Unit Awards or Performance Stock Unit Awards to which they relate. Nothing in this Section 18 shall limit or restrict the Committee’s or the Board’s ability to make any adjustment pursuant to Section 4.3 or Section 22 of the Plan. If any distributions on Common Stock are paid in Shares or other securities, the Shares or other securities shall be subject to the same restrictions, including restrictions on transferability and forfeitability, as the underlying Stock Awards with respect to which such distributions were paid.
SECTION 19
WITHHOLDING
19.1
Tax Withholding
. Prior to the delivery of any Shares or cash pursuant to the Plan, the Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any Awards.
19.2
Shares Withholding
. The Committee may, in its absolute discretion, permit a Participant to satisfy such tax withholding obligation, in whole or in part, by electing to have the Company withhold Shares having a value equal to the amount required to be withheld or by delivering to the Company already-owned shares to satisfy the withholding requirement. The amount of the withholding requirement shall be deemed to include any amount which the Committee agrees may be withheld at the time the election is made, not to exceed the amount determined by using the maximum Federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to be determined (the "Tax Date"). The value of the Shares to be withheld or delivered will be based on their Fair Market Value on the Tax Date. Such elections will be subject to the following restrictions: (1) the election must be made on or before the Tax Date; (2) the election will be irrevocable; and (3) the election will be subject to the disapproval of the Committee.
19.3
Shares Withholding Election for Insiders
. Notwithstanding anything to the contrary contained in Section 19.2 above or other Sections of this Plan, an Insider rather than the Committee or the Company, shall have the sole right to determine and direct the Company to withhold Shares to satisfy any applicable taxes and fees attributable to the settlement of any Stock Award in Shares, provided that: (1) the Insider makes such election prior to Tax Date;(2) the Insider makes the election during an open trading window set by the Company; and (3) the election will be irrevocable once made, unless any modification of such election is made during an open trading window.
19.4
No Tax Gross-Ups
. In no event will the Company pay, reimburse or provide any “gross-up” payment to, the Participant for taxes on the income recognized as a result of the grant, vesting, exercise or sale of any Award.
SECTION 20
INDEMNIFICATION
Each person who is or shall have been a member of the Committee, or of the Board, or who had been delegated a duty by them under the Plan including, without limitation, the Management Committee, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, notion, suit, or proceeding to which he or she may be a party, or in which he or she may be involved by reason of any action taken or failure to act, which such person took or failed to take, in good faith, in carrying out his or her duties under the Plan or any Award Agreement, and against and from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
SECTION 21
SUCCESSORS
All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
SECTION 22
CHANGE IN CONTROL RESTRICTIONS
Notwithstanding anything to the contrary contained in this Plan, and subject to the terms of any Other Company Plan, in no event may the Committee accelerate the vesting and exercisability of any Award in the event of a Change in Control unless such vesting and exercisability is conditioned on the consummation of such Change in Control
and
either (i) the Participant’s employment with the Company is terminated (except a termination for Cause) in connection with a Change in Control, or (ii) the Committee or the Board determines that (A) such outstanding Awards will not be continued, assumed, converted and/or substituted, or (B) it is in the best interests of the Company to vest such outstanding Awards.
SECTION 23
ELECTRONIC DELIVERY
Any reference herein to a “written” agreement or document will include any agreement or document delivered electronically, filed publicly at www.sec.gov (or any successor website thereto) or posted on the Company’s intranet (or other shared electronic medium controlled by the Company to which the Participant has access).
SECTION 24
DEFERRALS AND COMPLIANCE WITH SECTION 409A OF THE CODE
24.1 To the extent permitted by applicable law, the Committee or the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Committee Board may provide for distributions while a Participant is still an Employee or otherwise providing services to the Company. The Board is authorized to make deferrals of Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of Continuous Service, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law. The Committee or the Board may also provide that deferred settlements include the payment or crediting of interest or other earnings on the deferral amounts, or the payment or crediting of Dividend Equivalents where the deferred amounts are denominated in Shares.
24.2 To the extent that the Committee or the Board determines that any Award granted hereunder is subject to Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code. To the extent applicable, the Plan and Award Agreements shall be interpreted in accordance with Section 409A of the Code. Notwithstanding anything to the contrary in this Plan (and unless the Award Agreement specifically provides otherwise), if the shares of Common Stock are publicly traded and a Participant holding an Award that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the Code, no distribution or payment of any amount shall be made upon a “separation from service” before a date that is six (6) months following the date of such Participant’s “separation from service” (as defined in Section 409A of the Code without regard to alternative definitions thereunder) or, if earlier, the date of the Participant’s death.
SECTION 25
CLAWBACK/RECOVERY
Any Performance Stock Unit Awards and Performance Cash Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company has in effect when the Performance Criteria and/or Performance Goals are satisfied, or is required to adopt or modify, pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law (“Clawback Policy”). In addition, the Committee or the Board may impose such clawback, recovery or recoupment provisions in an Award Agreement as the Committee or the Board determines necessary or appropriate, including but not limited to a reacquisition right in respect of previously acquired Shares or other cash or property as set forth in the Award Agreement, subject to the Clawback Policy. No recovery of compensation under such a Clawback Policy will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any applicable Other Company Plan or otherwise with the Company.
SECTION 26
LEGAL CONSTRUCTION
26.1
Gender and Number
. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.
26.2
Severability
. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
26.3
Requirements of Law
. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges or systems as may be required.
26.4
Securities Law Compliance
. With respect to Insiders, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 promulgated under the Exchange Act or its successors under the Exchange Act. To the extent any provision of the Plan, Award Agreement or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee.
26.5
Governing Law
. The Plan and all Award Agreements hereunder, shall be construed in accordance with and governed by the laws of the State of California (without giving effect to principles of conflicts of laws thereof) and applicable Federal law.
26.6
Captions
. Captions are provided herein for convenience only, and are not to serve as a basis for interpretation or construction of the Plan.
Appendix C
WEST MARINE, INC.
AMENDED AND RESTATED ASSOCIATES STOCK BUYING PLAN
ADOPTED BY THE BOARD OF DIRECTORS: APRIL 12, 2017
APPROVED BY THE STOCKHOLDERS: JUNE 1, 2017
SECTION 1
PURPOSE
West Marine, Inc. established the West Marine, Inc. Associates Stock Buying Plan (as amended through September 23, 2015, the "Prior Plan"), on November 1, 1994, to provide Eligible Associates and its participating Subsidiaries with the opportunity to purchase Common Stock at a discount through payroll deductions.
Upon the recommendation of the Committee, the Associates Stock Buying Plan was amended and restated in its entirety and adopted by the Board on March 23, 2017, subject to stockholder approval (the “Plan”). The Plan replaces the Prior Plan. Except as otherwise provided by the Committee, the terms and provisions of the Plan as set forth herein shall apply to enrollment and/or purchases made after such date. For the terms of any purchases made prior to such date, please see the version of the Prior Plan document in effect for such period.
The Plan is intended to qualify as an employee stock purchase plan under Section 423 of the IRC and the Plan shall be interpreted in a manner that is consistent with that intent. The Plan is not intended to be an employee benefit plan under the Employee Retirement Income Security Act of 1974, and therefore is not required to comply with that Act.
This Plan is intended to encourage Eligible Associates to remain in the employ of the Company (or any Subsidiary which may be designated by the Committee as a “Subsidiary”) and to provide them with an additional incentive to advance the best interests of the Company.
SECTION 2
DEFINITIONS
2.1 "1934 Act" means the Securities Exchange Act of 1934, as amended. Reference to a specific Section of the 1934 Act or regulation thereunder shall include such Section or regulation, any valid regulation promulgated under such Section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such Section or regulation.
2.2 “Account” means the account established for each Participant into which the amount of each Participant’s payroll deductions shall be credited for the purchase of Common Stock pursuant to the Plan. No interest will be paid or allowed on amounts credited to a Participant’s Account. All payroll deductions received by the Company under the Plan are general corporate assets of the Company and may be used by the Company for any corporate purpose. The Company is not obligated to segregate such payroll deductions.
2.3 “Adjustment Event” means any “equity restructuring,” as defined under the Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation (or any successor thereto) including but not limited to, any large or extraordinary dividend payable in capital stock, stock split, share combination, large or extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares or other similar event affecting the Common Stock.
2.4 "Board" means the Board of Directors of the Company.
2.5 “Change in Control” means, and shall be deemed to have occurred upon the occurrence of, any one of the following events:
(a) The acquisition in one or more transactions, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than the Company, a Subsidiary or any employee benefit plan (or related trust) sponsored or maintained by the Company or a Subsidiary, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a number of the Company’s Voting Securities in excess of 50% of the Company’s Voting Securities;
(b) Any election has occurred of persons to the Board that causes two-thirds of the Board to consist of persons other than: (i) persons who were members of the Board on the Effective Date of the Plan; and (ii) persons who were nominated for election as members of the Board at a time when two-thirds of the Board consisted of persons who were members of the Board on the Effective Date of the Plan, provided, however, that any person nominated for election by: (x) a Board at least two-thirds of whom constituted persons described in clauses (i) and/or (ii); or (y) by persons who were themselves nominated by such Board, shall for this purpose be deemed to have been nominated by a Board composed of persons described in clause (i);
(c) The consummation (i.e. closing) of a reorganization, merger or consolidation involving the Company, unless, following such reorganization, merger or consolidation, all or substantially all of the persons who were the respective beneficial owners of the Outstanding Common Stock and the Company’s Voting Securities immediately prior to such reorganization, merger or consolidation, following such reorganization, merger or consolidation beneficially own, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding Voting Securities entitled to vote generally in the election of directors of the entity resulting from such reorganization, merger or consolidation in substantially the same proportion as their ownership of the Outstanding Common Stock and the Company’s Voting Securities immediately prior to such reorganization, merger or consolidation, as the case may be;
(d) The consummation (i.e. closing) of a sale or other disposition of all or substantially all the assets of the Company, unless, following such sale or disposition, all or substantially all of the persons who were the respective beneficial owners of the
Outstanding Common Stock and the Company’s Voting Securities immediately prior to such sale or disposition, following such sale or disposition beneficially own, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors or trustees, as the case may be, of the entity acquiring such assets in substantially the same proportion as their ownership of the Outstanding Common Stock and the Company’s Voting Securities immediately prior to such sale or disposition, as the case may be; or
(e) a complete liquidation or dissolution of the Company.
2.6 "Committee" means the Compensation and Leadership Development Committee of the Board (or any successor), or such other committee designated by the Board to oversee administration of the Plan.
2.7 "Common Stock" means the common stock of the Company, par value $0.0001 per share.
2.8 "Company" means West Marine, Inc., a Delaware corporation.
2.9 "Compensation" means a Participant's base compensation, plus pay for overtime, holiday, and time off (such as sick and vacation pay), but excluding incentive pay (such as bonuses, commissions or stock compensation), fringe benefits, deferred compensation payments or payments connected with or after the termination of employment, calculated before reduction for elective deferrals and deductions.
2.10 "Disability" means a permanent and total disability within the meaning of IRC Section 22(e)(3).
2.11 "Eligible Associate" means each Employee of an Employer who has been employed for such period as the Committee may determine (up to two years), except any Employee who, immediately after the grant of an option under the Plan, would own stock and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary of the Company (including stock attributed to such Employee pursuant to Section 424(d) of the IRC).
2.12 "Employee" means an individual who is a common-law employee of any Employer, whether such employee is so employed at the time the Plan is adopted or becomes so employed subsequent to the adoption of the Plan.
2.13 "Employer" or "Employers" means any one or all of the Company and those Subsidiaries which, with the consent of the Board, have adopted this Plan.
2.14 "Enrollment Date" means each May 1 and November 1, and/or such other dates determined by the Committee from time to time.
2.15 “Enrollment Form” means a paper or electronic form provided by an Employer pursuant to which an Eligible Associate elects to enroll in the Plan.
2.16 "Grant Date" means any date on which a Participant is granted an option under the Plan.
2.17 “Hardship” means the Committee’s determination that a Participant has suffered or will suffer a severe financial hardship as a result of any of the following:
2.17.1 Expenses for medical care described in Section 213(d) of the IRC previously incurred by Participant or Participant’s spouse or dependent, or necessary for Participant or Participant’s spouse or dependent to obtain medical care;
2.17.2 Costs directly related to the purchase of Participant’s principal residence (excluding mortgage payments);
2.17.3 Tuition, related educational fees, and room and board expenses for the next twelve (12) months of post-secondary education for Participant or Participant’s spouse or dependent; or
2.17.4 Amounts necessary to prevent Participant’s eviction from Participant’s principal residence or foreclosure on the mortgage of Participant’s principal residence.
2.17.5 Payments for burial or funeral expenses for the Participant’s deceased parent, spouse, children or dependents (as defined in IRC Section 152 without regard to IRC Section 152(d)(1)(B));
2.17.6 Expenses for the repair of damage to the Participant’s principal residence that would qualify for the casualty deduction under IRC Section 165 (determined without regard to whether the loss exceeds 10% of adjusted gross income); or
2.17.7 Any other event as the Committee determines will give rise to an immediate and heavy financial need.
2.18 "Holding Period" shall mean that period of time beginning on the Purchase Date on which Shares are purchased by Participants under the Plan and ending twelve (12) calendar months thereafter.
2.19 "IRC" means the Internal Revenue Code of 1986, as amended. Reference to a specific Section of the IRC or regulation thereunder shall include such Section or regulation, any valid regulation promulgated under such Section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such Section or regulation.
2.20 “Participant" means an Eligible Associate who (a) has become a Participant pursuant to Section 4.1 and (b) has not ceased to be a Participant pursuant to Section 8 or Section 9.
2.21 "Plan" means the Amended and Restated West Marine, Inc. Associates Stock Buying Plan, as set forth in this instrument and as hereafter amended or restated from time to time.
2.22 "Purchase Date" means the last business day of April or October, as applicable, next following the Grant Date, (or such other specific business days as may be established by the Committee from time to time) prior to an Enrollment Date for all options to be granted on such Enrollment Date.
2.23 "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of granting options under the Plan, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
SECTION 3
SHARES SUBJECT TO THE PLAN
3.1
Number Available
. As of March 23, 2017, a total of 945,890
shares of Common Stock are available for issuance pursuant to the Plan, which includes 195,890
shares of Common Stock that were previously reserved for issuance under the Prior Plan. Shares of Common Stock sold under the Plan may be newly issued shares or treasury shares.
3.2
Adjustments
. In the event of any Adjustment Event, the Board shall make such adjustment, if any, as it deems appropriate in the number, kind and purchase price of the shares available for purchase under the Plan and in the maximum number of shares subject to any option under the Plan.
SECTION 4
ENROLLMENT
4.1
Participation
. Each Eligible Associate may elect to become a Participant by enrolling or re-enrolling in the Plan effective as of any Enrollment Date. In order to enroll, an Eligible Associate must complete, sign (which includes electronic signature or acknowledgement) and submit to the Company an Enrollment Form in such form and format as may be specified by the Committee from time to time. Any Enrollment Form received by the Company no later than sixteen (16) calendar days before an Enrollment Date shall be effective on that Enrollment Date, provided that the Committee, in its discretion, may (on a uniform and nondiscriminatory basis) specify an earlier or later deadline for the submission of Enrollment Forms. Any Participant whose option expires and who has not withdrawn from the Plan automatically will be re-enrolled in the Plan on the Enrollment Date immediately following the Purchase Date on which his or her option expired.
4.2
Payroll Withholding
. On his or her Enrollment Form, each Participant must elect to make Plan contributions via payroll withholding from his or her Compensation at a rate equal to any whole percentage from 1% to such maximum percentage (not to exceed 10%) that the Committee may establish from time to time for all options to be granted on any Enrollment Date. A Participant may elect to increase or decrease his or her rate of payroll withholding (effective as of the next Enrollment Date) by submitting a new Enrollment Form in accordance with such procedures as may be established by the Committee from time to time. In order to be effective, the Enrollment Form must be received by the Company no later than sixteen (16) calendar days before the Enrollment Date elected for the change, provided that the Committee, in its discretion, may (on a uniform and nondiscriminatory basis) specify an earlier or later deadline for the submission of Enrollment Forms. All Enrollment Forms received by the Company shall take effect on the next subsequent Enrollment Date. Any Participant who is automatically re-enrolled in the Plan will be deemed to have elected to continue his or her contributions at the percentage last elected by the Participant.
SECTION 5
OPTIONS TO PURCHASE COMMON STOCK
5.1
Grant of Option
. On each Enrollment Date on which the Participant enrolls or re-enrolls in the Plan, he or she shall be granted an option to purchase, at the price determined under Section 6.1, that number of whole shares of Common Stock that can be purchased or issued by the Company based upon that price with the amount held in the Participant’s Account.
5.2
Duration of Option
. Each option granted under the Plan shall expire on the earliest to occur of (a) the date which is 27 months from the Grant Date, or the expiration of any shorter option period established by the Committee prior to an Enrollment Date, (b) the completion of the purchase of shares of Common Stock on the applicable Purchase Date, or (c) the date on which the Participant ceases to be such for any reason.
5.3
Number of Shares Subject to Option
. The number of shares of Common Stock available for purchase by each Participant under the option will be established by the Committee from time to time prior to an Enrollment Date for all options to be granted on such Enrollment Date. Notwithstanding the preceding sentence, an option (taken together with all other options then outstanding under this Plan and under all other similar employee stock purchase plans of the Employers) shall not give the Participant the right to purchase shares of Common Stock at a rate which accrues in excess of $25,000 of fair market value at the applicable Grant Dates of such shares (less the fair market value at the applicable Grant Dates of any shares previously purchased during such year under options which have expired or terminated) in any calendar year during which such Participant is enrolled in the Plan at any time.
5.4
Other Terms and Conditions
. Each option shall be subject to the following additional terms and conditions: (a) payment for shares of Common Stock purchased under the option shall be made only through payroll withholding under Section 4.2 held in Participant’s Account; (b) purchase of shares upon exercise of the option will be accomplished only in installments in accordance
with Section 6.1; (c) the price per share under the option will be determined as provided in Section 6.1; (d) the option in all respects shall be subject to such terms and conditions (applied on a uniform and nondiscriminatory basis), as the Committee shall determine from time to time in its discretion.
SECTION 6
PURCHASE OF SHARES
6.1
Exercise of Option
. On each Purchase Date, the funds then credited to each Participant's Account shall be used to purchase shares of Common Stock. The price of the shares purchased under any option shall be 85% of the lower of: (a) the closing price of Common Stock on the Grant Date for such option on the primary national securities exchange (as defined under the 1934 Act) on which the Common Stock is listed for trading; or (b) the closing price of Common Stock on that Purchase Date on the primary national securities exchange (as defined under the 1934 Act) on which the Common Stock is listed for trading.
6.2
Crediting of Shares
. Shares of Common Stock purchased on any Purchase Date shall be delivered to a broker designated by the Committee for the benefit of the Participant. As determined by the Committee from time to time, such shares shall be delivered as physical certificates or by means of a book entry system. Although the Participant may direct the broker to sell such shares at any time (subject to applicable securities laws and Section 7 below), the shares may not be transferred to another broker or to any other person (including the Participant) until 24 months after the Grant Date of the option with which the shares were purchased. Upon expiration of the 24-month period, a Participant may transfer such shares to an account at another brokerage firm of the Participant's choosing or request that a certificate that represents the shares be issued and delivered to the Participant.
6.3
Exhaustion of Shares
. If at any time the shares of Common Stock available under the Plan are over-enrolled, enrollments shall be reduced proportionately to eliminate the over-enrollment. Any funds that cannot be applied to the purchase of shares due to over-enrollment shall be refunded to the Participants.
SECTION 7
HOLDING PERIOD
7.1
Dispositions Subject to Holding Period
. Subject to Section 7.2 below, a Participant may undertake a disposition, as that term is defined in Section 424(c) of the IRC (which generally includes any sale, exchange, gift or transfer of legal title), of shares of Common Stock in the Participant's brokerage account (as contemplated by Section 6.2) which were acquired on or after April 30, 2010, only after the expiration of the Holding Period.
7.2
Distributions Exempted from the Holding Period
. Notwithstanding the foregoing, a Participant (or his or her beneficiary, if applicable) may undertake a disposition of any shares of Common Stock in the brokerage account prior to the expiration of the Holding Period upon the occurrence of any of the following events, in which case such disposition shall be made as soon as administratively practical following the effective date thereof:
7.2.1 Death;
7.2.2 Disability;
7.2.3 The cessation of Participant’s status as an Eligible Associate (for example, because of his or her termination of employment from all Employers for any reason);
7.2.4 Hardship -- provided that Participant certifies and agrees that: (i) the number of shares or other amounts subject to such disposition shall be limited to the amount reasonably necessary to meet the Participant's needs resulting from the Hardship plus amounts necessary to pay taxes or penalties reasonably anticipated as a result of the disposition; and (ii) Participant has first obtained all distributions (other than hardship distributions from the Company’s 401(k) plan) and nontaxable loans currently available to Participant under the Company’s other employee benefit plans or programs; or
7.2.5 Change in Control.
SECTION 8
WITHDRAWAL
8.1
Withdrawal
. A Participant may withdraw from the Plan by submitting a completed written notice of withdrawal in the form and manner provided by the Committee. A withdrawal will be effective only if it is received by the Company at least sixteen (16) calendar days before the proposed date of withdrawal, provided that the Committee, in its discretion, may specify (on a uniform and nondiscriminatory basis) an earlier or later deadline for the submission of such written notice of withdrawal. When a withdrawal becomes effective, the Participant's payroll contributions shall cease and all amounts then credited to the Participant's Account shall be distributed to him or her (without interest) as soon as reasonably practicable. Notwithstanding any contrary provision of the Plan, a Participant who has withdrawn from the Plan pursuant to this Section 8 may not re-enroll in the Plan until the next Enrollment Date after the date of his or her withdrawal. A Participant’s withdrawal from the Plan shall not affect any shares held in the brokerage account for the benefit of the Participant, which shares of Common Stock shall remain subject to the Holding Period.
SECTION 9
CESSATION OF PARTICIPATION
9.1
Termination of Status as an Eligible Associate.
A Participant shall cease to be a Participant immediately upon the cessation of his or her status as an Eligible Associate (for example, because of his or her termination of employment from all Employers for any reason). As soon as practicable after such cessation, the Participant's payroll contributions shall cease and all amounts then credited to the Participant's account shall be distributed to him or her (without interest).
9.2
Leave of Absence
. Unless a Participant voluntarily withdraws from the Plan, shares of Common Stock will be purchased for that Participant's Account on the Purchase Date next following commencement of a leave of absence by such Participant. However, the Participant will cease to be a Participant immediately after such purchase of shares, provided that if and when he or she returns from the leave, he or she may re-enroll under Section 4.1, if then eligible.
SECTION 10
DESIGNATION OF BENEFICIARY
10.1
Designation
. If permitted by the Committee, each Participant may, pursuant to such procedures as the Committee may specify, designate one or more beneficiaries to receive shares of Common Stock purchased under the Plan or any amounts credited to the Participant's Account in the event of his or her death subsequent to a Purchase Date but prior to delivery of such shares or cash.
10.2
Changes
. A Participant may designate different beneficiaries (or may revoke a prior beneficiary designation) at any time by delivering a new designation (or revocation of a prior designation) in like manner. Any designation or revocation shall be effective only if it is received by the Committee. However, when so received, the designation or revocation shall be effective as of the date the notice is executed (whether or not the Participant still is living), but without prejudice to the Committee on account of any payment made before the change is recorded. The last effective designation received by the Committee shall supersede all prior designations and the Committee may rely upon the most recent beneficiary designation it has on file as being the appropriate beneficiary(ies).
10.3
Failed Designations
. If a Participant dies without having effectively designated a beneficiary, or if no beneficiary (primary or secondary) survives the Participant, any cash in the Participant's Account or shares of Common Stock shall be delivered to the executor or administrator of the Participant’s estate, or if no such executor or administrator has been appointed to the knowledge of the Committee, in its sole discretion, may deliver such shares or cash to the spouse or any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Committee, then to such other person as the Committee may designate.
SECTION 11
ADMINISTRATION
11.1
Plan Administration
. The Plan shall be administered by the Committee. Any power of the Committee may also be exercised by the Board, except to the extent that the grant or exercise of such authority would cause any purchase or option to purchase Common Stock under the Plan to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16 of the 1934 Act. The Committee shall have the authority to control and manage the operation and administration of the Plan. The Board and/or Committee may delegate all matters relating to the administration of the Plan to one or more of the Company’s officers as the Board and/or Committee so determines.
11.2
Actions by Committee
. Each decision of a majority of the members of the Committee then in office shall constitute the final and binding act of the Committee. The Committee may act with or without a meeting being called or held and shall keep minutes of all meetings held and a record of all actions taken by written consent.
11.3
Powers of Committee
. The Committee shall, except as limited by applicable law or by the Certificate of Incorporation or Bylaws of the Company, and subject to the provisions of this Plan, have all powers and discretion necessary or appropriate to supervise the administration of the Plan and to control its operation in accordance with its terms, including, but not by way of limitation, the powers and authority conferred on the Committee elsewhere in this Plan in addition to the following discretionary powers:
11.3.1 To interpret and determine the meaning and validity of the provisions of the Plan and the options and to determine any question arising under, or in connection with, the administration, operation or validity of the Plan and the options;
11.3.2 To determine any and all considerations affecting the eligibility of any Employee to become a Participant or remain a Participant in the Plan;
11.3.3 To cause an Account or Accounts to be maintained for each Participant;
11.3.4 To determine the time or times when, and the number of shares of Common Stock for which, options shall be granted;
11.3.5 To establish and revise an accounting method or formula for the Plan;
11.3.6 To determine the manner and form in which shares are to be delivered to the designated broker;
11.3.7 To determine the status and rights of Participants and their beneficiaries or estates;
11.3.8 To employ such brokers, counsel, agents and advisers, and to obtain such broker, legal, clerical and other services, as it may deem necessary or appropriate in carrying out the provisions of the Plan;
11.3.9 To establish, from time to time, rules for the performance of its powers and duties and for the administration of the Plan;
11.3.10 To adopt such procedures and subplans as are necessary or appropriate to permit participation in the Plan by Employees who are foreign nationals or employed outside of the United States;
11.3.11 To delegate to any one or more of its members or to any other person, severally or jointly, the authority to perform for and on behalf of the Committee one or more of the functions of the Committee under the Plan;
11.3.12 To determine a waiver of the Holding Period due to a Participant’s Hardship;
11.3.13 To determine whether a Participant has a Disability; and/or
11.3.14 To perform or cause to be performed such further acts as it may deem necessary, appropriate or convenient for the administration and/or operation of the Plan.
11.4
Decisions of Committee
. All actions taken and/or interpretations and decisions made by the Committee in good faith in the exercise of authority conferred upon it by this Plan shall be conclusive and binding on all persons, including all Participants and their beneficiaries, and shall be given the maximum possible deference allowed by applicable law.
11.5
Administrative Expenses
. All expenses incurred in the operation and administration of the Plan by the Committee, or otherwise, including legal fees and expenses, shall be paid and borne by the Employers, except any stamp duties or transfer taxes applicable to the purchase of shares of Common Stock may be charged to the Account of each Participant. Any brokerage fees for the purchase of shares by a Participant shall be paid by the Company, but brokerage fees for the resale of shares by a Participant shall be borne by the Participant.
11.6
Eligibility to Participate
. No member of the Committee who is also an Employee of an Employer shall be excluded from participating in the Plan if otherwise eligible, but he or she shall not be entitled, as a member of the Committee, to act or pass upon any matters pertaining specifically to his or her own account under the Plan.
11.7
Limitation of Liability
. No Employee of the Company nor any member of the Committee or the Board shall be subject to any liability with respect to her or his duties under the Plan, unless the person acts fraudulently or in bad faith.
11.8
Indemnification
. To the extent permitted by applicable law, each of the Employers shall, and hereby does, indemnify and hold harmless the members of the Committee, the Board, and any Employee of the Employers with duties under the Plan who was or is a party, or is threatened to be made a party, to any threatened, pending or completed proceeding, wither civil, criminal, administrative, or investigative, from and against any and all losses, claims, damages or liabilities (including attorneys' fees and amounts paid, with the approval of the Board, in settlement of any claim) arising out of or resulting from the implementation of a duty, act or decision with respect to the Plan, so long as such duty, act or decision does not involve gross negligence or willful misconduct on the part of any such individual.
11.9
Reliance on Experts
. In making any determination or in taking or not taking any action under the Plan, the Committee or the Board, as the case may be, may obtain and may rely upon the advice of experts, including professional advisors to the Company. No director, officer or agent of the Employers shall be liable for any such action or determination taken or made or omitted in good faith.
SECTION 12
AMENDMENT, TERMINATION, DURATION AND CHANGE IN CONTROL
12.1
Amendment, Suspension or Termination
. The Board, in its sole discretion, may amend, suspend or terminate the Plan, or any part thereof, at any time and for any reason. If the Plan is terminated, the Board may elect to terminate all outstanding options either immediately or upon completion of the purchase of shares of Common Stock on the next Purchase Date, or may elect to permit options to expire in accordance with their terms (and participation to continue through such expiration dates). If the options are terminated prior to expiration, all amounts then credited to Participants' accounts that have not been used to purchase shares shall be returned to the Participants (without interest) as soon as administratively practicable. Notwithstanding the foregoing, no such amendment or termination shall affect rights previously granted without the Participant’s consent. In addition, no amendment may be made without the prior approval of the Company’s stockholders and if such amendment would:
12.1.1 Increase the number of shares of the Company Common Stock that may be issued under the Plan;
12.1.2 Materially modify the requirements as to eligibility for participation in the Plan; or
12.1.3 Materially increase the benefits which accrue to Participants under the Plan.
12.2
Duration of the Plan
. The Plan, as amended and restated, shall commence on March 23, 2017, subject to stockholder approval, and subject to Section 12.1 (regarding the Board's right to amend or terminate the Plan), shall remain in effect thereafter.
12.3
In the event of a Change in Control.
The Board may, in its sole discretion and without limiting or otherwise modifying the Board’s powers under Section 12.1, (a) permit outstanding options under the Plan to remain outstanding to the next Purchase Date or to permit options to expire in accordance with their terms, (b) approve conversion of options under the Plan into options
to purchase securities of the successor or surviving entity in connection with a Change in Control, (c) establish a new Purchase Date for outstanding options under the Plan that is prior to a Change in Control, or (d) terminate outstanding options under the Plan and return amounts then credited to Participants’ accounts to Participants.
SECTION 13
GENERAL PROVISIONS
13.1
Participation by Subsidiaries
. One or more Subsidiaries of the Company may become participating Employers by adopting the Plan and obtaining approval for such adoption from the Board. By adopting the Plan, a Subsidiary shall be deemed to agree to all of its terms, including (but not limited to) the provisions granting exclusive authority (a) to the Board to amend the Plan, and (b) to the Committee to administer and interpret the Plan. Any Subsidiary may terminate its participation in the Plan at any time. The liabilities incurred under the Plan to the Participants employed by each Employer shall be solely the liabilities of that Employer, and no other Employer shall be liable for benefits accrued by a Participant during any period when he or she was not employed by such Employer.
13.2
Inalienability
. In no event may either a Participant, a former Participant or his or her beneficiary, spouse or estate, whether voluntarily or involuntarily, sell, transfer, anticipate, assign, hypothecate, pledge, or otherwise dispose of any right or interest under the Plan; and such rights and interests shall not at any time be subject to the claims of creditors nor be liable to attachment, execution or other legal process. Any attempt at assignment, transfer, pledge or other disposition shall be without effect. Accordingly, for example, a Participant's interest in the Plan is not transferable pursuant to a domestic relations order. The preceding shall not affect the Participant's right to direct the sale or transfer of shares that have been allocated to the Participant's account at the broker designated by the Participant (subject to the provisions of the Plan).
13.3
Severability
. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
13.4
Requirements of Law
. The granting of options and the issuance of shares of Common Stock shall be subject to all applicable laws, rules, and regulations and to such approvals by any governmental agencies or national securities exchanges (as defined under the 1934 Act) as the Committee may determine are necessary or appropriate.
13.5
No Enlargement of Employment Rights
. Neither the establishment or maintenance of the Plan, the granting of any options, the purchase or any shares of Common Stock, nor any action of any Employer or the Committee, shall be held or construed as a contract or confer upon any individual any right to be continued as an Employee of the Employer nor, upon dismissal, any right or interest in any specific assets of the Employers other than as provided in the Plan. Each Employer expressly reserves the right to discharge any Employee at any time, with or without cause.
13.6
Apportionment of Costs and Duties
. All acts required of the Employers under the Plan may be performed by the Company for itself and its Subsidiary, and the costs of the Plan may be equitably apportioned by the Committee among the Company and the other Employers. Whenever an Employer is permitted or required under the terms of the Plan to do or perform any act, matter or thing, it shall be done and performed by any officer or employee of the Employer who is thereunto duly authorized by the board of directors of the Employer.
13.7
Construction and Applicable Law
. The Plan is intended to qualify as an "employee stock purchase plan" within the meaning of Section 423 of the IRC. Any provision of the Plan which is inconsistent with Section 423 of the IRC shall without further act or amendment by the Company or the Board be reformed to comply with the requirements of Section 423. The provisions of the Plan shall be construed, administered and enforced in accordance with such Section and with the laws of the State of California (excluding California's conflict of laws provisions).
13.8
Captions
. The captions contained in the Plan are inserted only as a matter of convenience and for reference and in no way define, limit, enlarge or describe the scope or intent of the Plan nor in any way shall affect the construction of any provision of the Plan.
13.9
Non-Business Days
. When any act under the Plan is required to be performed on a day that falls on a Saturday, Sunday or U.S. federal holiday, that act shall be performed on the next succeeding day which is not a Saturday, Sunday or U.S. federal holiday.
13.10
Compliance with Securities Laws
. The Plan, the granting of options under the Plan and the offer, issuance and delivery of Common Stock, are subject to compliance with all applicable federal and state laws, rules and regulations (including, but not limited to, state and federal securities laws) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. The person acquiring any securities under the Plan will, if requested by the Company and as a condition precedent to the exercise of her or his option, provide such assurances and representations to the Company as the Committee may deem necessary or desirable to assure compliance with all applicable legal requirements.