PROPOSAL 3 - PROPOSAL TO APPROVE THE 2022 OMNIBUS EQUITY INCENTIVE PLAN (Vote Required)
A majority of the shares present and eligible to vote at the Annual Meeting of Shareholders must vote “FOR” Proposal 3 to approve 2022 Omnibus Equity Incentive Plan. The enclosed form of proxy provides a means for you to vote “For,” “Against” or to “Abstain” on this proposal. Each properly executed proxy received in time for the Annual Meeting will be voted as specified therein. Abstentions and broker non-votes will the effect of a vote against this proposal.
Introduction
On April 25, 2022, the Board of Directors approved, upon the recommendation of the Compensation Committee but subject to stockholder approval, adoption of the Synalloy Corporation 2022 Omnibus Equity Incentive Plan (the “Plan”) and directed that the Plan be submitted for approval by our stockholders at our 2022 Annual Meeting of Stockholders. The full text of the Plan is set forth in Exhibit A to this proxy statement. The following summary description is qualified in its entirety by reference to the full text of the Plan.
Background of the Proposal to Approve the Plan
In considering whether to propose adoption of the Plan, including the number of shares to be covered thereby, the Board of Directors considered many factors, including the following:
•Compensation Philosophy - The Board views equity awards as a key component of our compensation program and believes that use of equity awards helps align the interests of employees, directors, and other persons who provide substantial services to us and our subsidiaries with those of our stockholders and motivate such individuals to make sound business decisions focused on long-term stockholder value creation.
•Pool of Shares Available for Awards - The Plan contemplates a pool of shares available for awards equal to 750,000 shares of common stock, subject to the share recycling terms and conditions set forth in the Plan. In establishing such number, the Board evaluated, among other things, the value of our common stock, outstanding and potential plan awards in relation to our total shares issued and outstanding and the market capitalization of the Company, and historic and anticipated grant practices. Upon approval of the Plan by our stockholders, the Company will cease granting new awards under the 2015 Stock Awards Plan, pursuant to which there are currently 693,272 shares of stock that remain authorized for issuance. In establishing the number of shares available for grant under the Plan, the Board also thus took into account the termination of additional grants under the 2015 Stock Awards Plan, and that in effect the shares available thereunder would be transferred from such old plan to the Plan.
•Inclusion of Best Practices - The Plan incorporates certain current best practices in compensation governance such as:
◦No In-the-Money Option or Stock Appreciation Right Grants - The Plan prohibits the grant of options or stock appreciation rights with an exercise price less than the fair market value of our common stock on the date of grant;
◦No Repricing Without Stockholder Approval - Repricing of stock options and stock appreciation rights is prohibited under the Plan except (i) if stockholder approval is obtained or (ii) in connection with certain “corporate events” as defined in the Plan, including a stock dividend, extraordinary dividend, stock split or share combination or any recapitalization, merger, consolidation, exchange of shares, spin-off, liquidation or dissolution of the Company or other similar transaction;
◦Clawback Provision - Awards granted under the Plan will be subject to clawback on the terms of any clawback policy adopted by the Board of Directors or administrator of the Plan, including any clawback policy adopted in response to the SEC or stock exchange rules. Any such policy may subject awards and shares or amounts paid or realized with respect to awards to reduction, cancellation, forfeiture or recoupment if certain specified events or wrongful conduct occur; and
◦Forfeiture and Recoupment of Awards – Awards granted under the Plan will be subject to generally applicable policies as to forfeiture and recoupment as may be adopted from time to time by the Board or administrator of the Plan. Participants must forfeit and disgorge to the Company any awards granted or vested and any gains earned or accrued due to the exercise of options or stock appreciation rights or the sale of any common stock to the extent required by applicable law or as required by applicable stock exchange rules.
•Expected Duration - The Board of Directors expects that if the Plan is approved by our stockholders, the shares available for future awards will be sufficient for currently anticipated needs for approximately three years. Expectations regarding future share usage under the Plan are based on a number of assumptions such as future growth in the population of eligible participants, the rate of future compensation increases, the rate at which shares are returned to the Plan reserve upon their expiration, forfeiture or cash settlement, and the future performance of our stock price. While the Board of Directors believes that the assumptions it used are reasonable, future share usage will differ from current expectations to the extent that actual events differ from the assumptions utilized.
Purpose of the Plan
The purpose of the Plan is to attract, retain, motivate and reward our qualified employees, directors, and consultants whose present and potential contributions to us and our subsidiaries are of importance, by providing the opportunity to acquire and maintain awards. We believe that the Plan will encourage long-term service, recognize individual contributions and reward achievement of Company goals, and will promote the creation of long-term value for stockholders by closely aligning the interests of Plan participants with those of stockholders.
Administration
The Plan will be administered by the Board or any committee of the Board so designated to administer the Plan (the “Administrator”). The Administrator has authority to determine (among other things) to whom awards will be granted, the value of shares under the Plan, the type, form, and number of awards, and vesting, acceleration, restrictions, limitations, form of payment and terms and conditions applicable to awards. The Administrator may also suspend or accelerate award vesting or waive award restrictions.
The Administrator is authorized to prescribe, amend and rescind rules and regulations relating to the Plan, to interpret and reconcile inconsistencies or omissions relating to the Plan and award terms, and to make all decisions and determinations under the Plan. The Administrator may authorize any person to execute documents in relation to the Plan on its behalf and may delegate its authorities and powers to officers and directors subject to certain conditions and application of applicable Delaware Law.
The Administrator has authority, with respect to non-U.S. jurisdictions, to determine which of our affiliates are covered by the Plan, to determine which individuals outside of the U.S. are eligible for the Plan, to modify the terms and conditions of awards to comply with foreign laws or listing requirements, to establish sub-plans and modify exercise procedures to the extent necessary or advisable (subject to certain limitations), and to take any action it deems advisable to comply with applicable governmental regulatory exemptions or approval or listing requirements of any foreign securities exchange.
Eligibility
Any individual classified as an employee by us or one of our subsidiaries and consultants and directors are eligible to participate in the Plan. Only employees are eligible to receive Incentive Stock Options (defined below).
Number of shares Available for Issuance
The aggregate number of shares which may be issued under the Plan is equal to 750,000. The shares issued under the Plan may be authorized but unissued or reacquired Company common stock, including shares purchased by the Company on the open market for purposes of the Plan.
Upon exercise, settlement or conversion of any award, the number of shares subject to the award (less the shares actually issued in connection with the exercise, settlement or conversion) will be again available for grant under the Plan. Additionally, shares associated with awards that are forfeited, canceled, expired or otherwise terminated and shares that are withheld to satisfy tax withholding obligations will be again available for grant under the Plan. Awards which the Administrator reasonably determine will be settled in cash will not reduce the maximum number of shares which may be issued under the Plan. Shares or awards that are issued in assumption of or in substitution for any outstanding awards will not count against the shares available for grant under the Plan. The Administrator may adopt reasonable counting procedures to ensure appropriate counting of shares and may make adjustments if the number of shares actually delivered differs from the number of shares previously counted in connection with an award.
Authority to Amend Awards and Shares; Corporate Events
In the event of a stock dividend, extraordinary dividend, stock split or share combination or any recapitalization, merger, consolidation, exchange of shares, spin-off, liquidation or dissolution of the Company or other similar transaction affecting the Company common stock, the Administrator is authorized to adjust the number of shares available for issuance under the Plan and the number, class and option price or base price of any outstanding awards (as applicable), make substitutions, revisions or other provisions and take such other actions as it determines to be equitable. In the event of certain “corporate events” as defined in the Plan, the Administrator has authority to change the number of shares or other securities covered by outstanding awards, the prices specified in such awards, the securities, cash or other property to be received upon award exercise, settlement or conversion of such awards, and any applicable performance goals. Unless approved in advance by a majority of shares entitled to vote generally in the election of our directors or as a result of a corporate event, the Administrator does not have authority to reduce the exercise price of any outstanding option or base price of any outstanding stock appreciation rights.
General Terms of Awards
Award Agreements. Each award will be evidenced by an agreement setting the terms, conditions, restrictions and/or limitations applicable to an award, in addition to and not inconsistent with those set forth in the Plan, as the Administrator may deem equitable and in the best interests of the Company and its subsidiaries. Awards may be granted either alone or in tandem, in the discretion of the Administrator.
Vesting and Term. Each agreement will set forth the period until the award is scheduled to expire. The Administrator may determine the vesting conditions of awards.
Transferability. Unless otherwise approved by the Administrator, no award will be liable for the debts, contracts or engagements of a Plan participant or his or her successors, nor will it be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means or by operation of law, judgment, levy, attachment, garnishment or any other legal or equitable proceedings; provided, however, that awards may be transferred by will or by the applicable laws of descent and distribution or, with the prior approval of the Company’s General Counsel or the Administrator, estate planning transfers. The Administrator may set forth additional restrictions on the transferability of shares issued upon exercise of options and stock appreciation rights as it deems appropriate. Each participant may designate a beneficiary to exercise any award or receive payment under any award payable on or after the participant’s death.
Termination of Service. Subject to certain exceptions, unvested awards granted under the Plan are forfeited upon a participant’s termination of employment or service for any reason, unless otherwise provided in the applicable award agreement.
Stockholder Rights. Unless otherwise provided, the holder of an award is not entitled to the rights or privileges of a stockholder with respect to such award unless and until the associated shares have been issued to such holder.
Section 409A. If the Administrator determines that any award may be subject to Section 409A of the Internal Revenue Code and related regulations under such section (“Section 409A”), the Administrator may adopt amendments to the Plan and applicable award agreement or other policies and procedures determined by the Administrator as necessary to exempt the award from Section 409A, comply with Section 409A, or comply with any correction procedures available under Section 409A.
Types of Awards
The types of awards that may be granted under the Plan include stock option awards, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance shares, performance units, deferred share units, cash awards, and dividend equivalents. The Administrator also has the discretion to grant other types of equity-based or equity-related awards, as long as they are evidenced by an award agreement. In addition to the general terms of all the awards, as described above, the basic characteristics of the awards that may be granted under the Plan are as follows:
Stock Option Awards. A stock option award is an option to purchase Company common stock. Stock option awards vest and become exercisable according to the terms of the agreement (unless sooner accelerated by the Administrator), but in no event will an option become exercisable after the expiration of 10 years from the grant date (5 years for certain Incentive Stock Options). Award agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to qualify such options as “incentive stock options” under Section 422 of the Code. Non-Qualified Stock Options are stock option awards that do not meet the requirements of Incentive Stock Options, as described below. The exercise price will be determined by the Administrator and may not be less than the fair market value of a share of common stock on the grant date. The exercise price is payable in full at the time of
exercise and may be paid in cash, cash equivalents, shares or other awards under the Plan or other Company plans, other property, or any other legal consideration the Administrator deems appropriate.
A participant may not receive an Incentive Stock Option under the Plan if, immediately after the grant of the award, the participant would own shares with more than 10% of the total combined voting power of all classes of stock of the Company or a parent or subsidiary corporation of the Company, subject to certain exceptions. If a Participant makes any disposition of shares issued pursuant to an Incentive Stock Option under circumstances that would constitute a disqualifying disposition, the Participant shall notify the Company of such disposition within the time provided to do so in the applicable award agreement.
Stock Appreciation Rights. A stock appreciation right is a right to receive payment in cash and/or shares equal to the product of (i) the excess, if any, of the fair market value of one share on the date of exercise over a specified price that will not be less than 100% of the fair market value of one share on the grant date, multiplied by (ii) a stated number of shares. Stock appreciation rights vest and become exercisable according to the terms of the award agreement (unless sooner accelerated by the Administrator), but in no event will stock appreciation rights be exercisable after the expiration of 10 years from the grant date. Stock appreciation rights granted in tandem with stock option awards become vested and exercisable on the same date or dates as such stock option awards and may only be exercised upon surrender of the right to exercise such stock option awards for an equivalent number of shares and only with respect to the shares for which the related stock option awards are then exercisable. The agreement may provide for a limitation upon the amount or percentage of total appreciation on which payment may be made upon exercise.
Restricted Stock Awards. Restricted stock awards are stock awards subject to restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Administrator may impose. These restrictions may lapse separately or in combination at such times, in such installments, as the Administrator determines. Restricted stock awards may be evidenced in such manner as the Administrator shall determine. The Administrator may allow or require a restricted stock award recipient to elect that any cash dividends paid on a share of restricted stock be automatically reinvested in additional shares of restricted stock, applied to the purchase of additional awards, or deferred without interest to the date of vesting of the restricted stock award. Unless otherwise determined by the Administrator, shares distributed in connection with a stock split or stock dividend and other property distributed as a dividend will be subject to restrictions and risk of forfeiture to the same extent as the restricted stock award.
Restricted Stock Units. Restricted stock unit awards are a right to receive shares, cash or a combination of cash and shares at the end of a specified period (which may or may not be coterminous with the vesting schedule of the underlying award). The Administrator will set the terms and conditions and specific dates of vesting for restricted stock units in its discretion. Unless otherwise provided in an award agreement, on the settlement date, the Company will transfer to the participant a number of shares equal to the number of restricted stock units or cash in an amount equal to the fair market value of the specified number of shares equal to the number of restricted stock units, or a combination thereof, as determined by the Administrator. The Administrator will specify the purchase price, if any, to be paid by the restricted stock unit award recipient for any shares that are issued.
Performance Shares and Performance Units. A Performance share is a contractual right to receive a share (or the cash equivalent of the share) upon achievement, in whole or in part, of certain performance goals set by the Administrator. Performance units are a U.S. Dollar denominated unit payable on the achievement, in whole or in part, of applicable performance goals set by the Administrator. The Administrator will specify the performance period for achievement of performance goals and may impose, as a vesting condition, completion of a minimum period of service. After the end of a performance cycle, the Administrator will determine the number of performance shares, other performance awards, and the number and value of performance units or the amount of any cash entitlement that has been earned or vested. The Administrator has the right, in its absolute discretion, to reduce or eliminate the amount otherwise payable to an award recipient based on individual performance or any other factors that the Administrator deems appropriate.
Deferred Share Units. Deferred share unit awards allow for the credit to a notational account of a hypothetical unit which represents the right to receive a share of Company stock or cash equal to the fair market value thereof on settlement of the account. No shares are issued at the time of grant. Unless otherwise provided by the Administrator, deferred share unit awards are fully vested and nonforfeitable when granted. Deferred share units are settled in cash or in shares or any combination of cash and shares on the date specified in the award agreement.
Cash Awards and Dividend Equivalents. The Administrator may grant awards denominated in cash on a free-standing basis or as an element of, a supplement to, or in lieu of any other awards under the plan in such amounts and subject to other terms as the Administrator in its discretion determines to be appropriate. The Administrator may grant dividend equivalents in tandem with other awards or as freestanding awards. Dividend equivalents may be subject to vesting conditions as determined by the Administrator. Dividend equivalents granted in connection with other awards do not vest until the connected awards vest and dividend equivalents are forfeited if the connected awards are forfeited.
Effect of a Change in Control
Unless otherwise provided in an award agreement or determined by the Administrator prior to the occurrence of a change in control (as defined in the Plan), upon a change in control, each outstanding award that is not yet fully exercisable or vested (and certain vested awards, as determined by the Administrator), will not be accelerated or cancelled if the Administrator determines that such awards will be honored or assumed or that new rights will be substituted for such awards (“Alternative Awards”) following the change in control. The Alternative Awards must give participants rights and entitlements substantially equivalent to or better than the rights and terms applicable to the original awards and provide for certain vesting with respect to service-based or performance-based vesting requirements if the participant’s employment is terminated without cause or for good reason within twelve months of the change in control. The Administrator may modify or impose certain new performance-based vesting requirements on performance-based awards to the extent that they no longer operate as intended in connection with a change in control.
If the shares provided under Alternative Awards are not publicly traded, (1) the acquisition, holding and disposition of such shares may be subject to terms and conditions established by the Administrator and (2) the Company or our acquirer in a change in control will be required to repurchase any Alternative Awards or underlying shares following termination of employment (other than for Cause or other circumstances resulting in forfeiture of the Alternative Awards) for cash or marketable securities equal to the fair market value of the shares underlying the Alternative Awards on the effective date of termination.
If the Administrator determines that no Alternative Awards will or should be provided in connection with a change in control, unless otherwise provided in the applicable award agreement: each unvested award (other than performance awards and freestanding dividend equivalents) will immediately become exercisable or vested; outstanding option and stock appreciation rights awards will be canceled in exchange for payment equal to the excess of the change in control price (as defined in the Plan) over the applicable option price or stock appreciation right base price; shares underlying restricted stock, restricted stock units, performance shares and performance units and other stock-based awards that are vested will be issued, unless the Administrator otherwise settles such awards in cash pursuant to the Plan; outstanding performance awards will be cancelled (unless otherwise determined by the Administrator or set forth in the applicable award agreement); and freestanding dividend equivalent awards will be cancelled without payment.
To the extent that any portion of the amount paid by an acquirer in connection with a change in control is other than cash or is paid other than at the time of the change in control, the award holders will receive the same value in respect of their awards as is received by our stockholders in respect of their common stock, and the Administrator will determine the extent to which such value will be paid in cash, securities or other property, or in a combination of cash and securities or other property.
Duration, Amendment and Termination
The Administrator may modify, suspend or terminate the Plan at any time except that approval of the majority of the shares entitled to vote at a duly constituted meeting of shareholders is required to increase the number of shares under the Plan (subject to certain exceptions), modify the class of persons eligible to participate in the Plan, modify the prohibition regarding repricing under the Plan, and materially modify the Plan in a manner that would require shareholder approval, under applicable law. No amendment, suspension or termination may adversely alter or impair any rights or obligations under an award without the consent of the award holder. Subject to stockholder approval, the Plan will be effective and continue in effect unless sooner terminated until the day immediately preceding the tenth anniversary of the effective date of the Plan.
Federal Tax Considerations
The following summary sets forth the tax events generally expected for United States citizens under current United States federal income tax laws in connection with awards under the Plan.
Incentive Stock Options. A recipient will realize no taxable income, and we will not be entitled to any related deduction, at the time an incentive stock option is granted under the Plan. If certain statutory employment and holding period conditions are satisfied before the recipient disposes of shares acquired pursuant to the exercise of such an option, then no taxable income will result upon the exercise of such option, and we will not be entitled to any deduction in connection with such exercise. Upon disposition of the shares after expiration of the statutory holding periods, any gain or loss realized by a recipient will be a long-term capital gain or loss. We will not be entitled to a deduction with respect to a disposition of the shares by a recipient after the expiration of the statutory holding periods.
Except in the event of death, if shares acquired by a recipient upon the exercise of an incentive stock option are disposed of by such recipient before the expiration of the statutory holding periods (a “disqualifying disposition”), such recipient will be considered to have realized as compensation, taxable as ordinary income in the year of disposition, an amount, not exceeding the gain realized on such disposition, equal to the difference between the exercise price and the fair market value of the shares on the date of exercise of
the option. We will be entitled to a deduction at the same time and in the same amount as the recipient is deemed to have realized ordinary income. Any gain realized on the disposition in excess of the amount treated as compensation or any loss realized on the disposition will constitute capital gain or loss, respectively. Such capital gain or loss will be long-term or short-term based upon how long the shares were held. If the recipient pays the option price with shares that were originally acquired pursuant to the exercise of an incentive stock option and the statutory holding periods for such shares have not been met, the recipient will be treated as having made a disqualifying disposition of such shares, and the tax consequence of such disqualifying disposition will be as described above.
The foregoing discussion applies only for regular tax purposes. For alternative minimum tax purposes, an incentive stock option will be generally treated as if it were a non-qualified stock option, the tax consequences of which are discussed below.
Non-Qualified Stock Options. A recipient will realize no taxable income, and we will not be entitled to any related deduction, at the time a non-qualified stock option is granted under the Plan. At the time of exercise of a non-qualified stock option, the recipient will realize ordinary income, and we will be entitled to a deduction, equal to the excess of the fair market value of the stock on the date of exercise over the option price. A recipient’s tax basis in the shares received upon exercise of a non-qualified stock option will be its fair market value on the date of exercise. Upon disposition of the shares, the difference between any amount realized by the recipient and the recipient’s tax basis in the shares disposed will be taxed as a capital gain or loss, long-term or short-term, based upon how long the shares are held.
Stock Appreciation Rights; Performance Shares and Performance Units. Generally: (a) the recipient will not realize income upon the grant of a stock appreciation right, performance shares or performance unit award; (b) the recipient will realize ordinary income, and we will be entitled to a corresponding deduction, in the year cash or shares of common stock are delivered to the recipient upon exercise of a stock appreciation right or in payment of the performance shares or performance unit award; and (c) the amount of such ordinary income, and our deduction will be the amount of cash received plus the fair market value of the shares of common stock received on the date of issuance. The federal income tax consequences of a disposition of unrestricted shares received by the recipient upon exercise of a stock appreciation right or in payment of a performance share or performance unit award are the same as described below with respect to a disposition of unrestricted shares.
Restricted Stock; Restricted Stock Units. For restricted stock, unless the recipient files an election to be taxed under Section 83(b) of the Code: (a) the recipient will not realize income upon the grant of restricted stock; (b) the recipient will realize ordinary income, and we will be entitled to a corresponding deduction, when the restrictions have been removed or expire; and (c) the amount of such ordinary income and deduction will be the fair market value of the restricted stock on the date the restrictions are removed or expire. If the recipient files an election to be taxed under Section 83(b) of the Code, the recipient will generally realize ordinary income, and we will be entitled to a corresponding deduction, equal to the fair market value of the restricted stock (determined without regard to any restrictions that may lapse) as of the date of grant and the later removal or expiration of the restrictions will have no tax consequences.
When the recipient disposes of restricted stock, the difference between the amount received upon such disposition and the amount the recipient realized as ordinary income (the recipient’s basis) will be treated as a capital gain or loss, long-term or short-term, based upon how long the shares have been held. A recipient’s holding period for restricted stock will begin when the restrictions are removed or expire or, if an election was made under Section 83(b) of the Code, the date of grant of the restricted stock.
Deferred Share Unit Awards. Recipients of deferred unit awards will not realize ordinary income upon grant of the award. The recipient will recognize income, and we will be entitled to a corresponding deduction, at the time of payment of the award in accordance with Section 409A of the Code. The amount that must be included in income is the value of the cash or shares received on the date of payment.
Dividend Equivalents and Cash Awards. Recipients of dividend equivalents and cash awards will be subject to taxation on such awards depending on whether such awards are subject to vesting conditions and whether such awards are subject to or exempt from Section 409A.
Withholding. The Plan permits us to withhold from awards or from any other amounts due the service provider an amount sufficient to cover any required withholding taxes. In lieu of cash, the Administrator may permit a participant to cover withholding obligations through (among other things) a reduction in the number of shares to be delivered to such participant or by delivery of shares already owned by the participant.
New Plan Benefits
The table below provides the benefits and amounts that will be received by or allocated to each of the named individuals if the Plan is approved by the stockholders. Because other awards under the Plan are within the discretion of the Administrator, except as set forth in the table below, future awards under the Plan are generally not determinable.
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2022 Omnibus Equity Incentive Plan |
Name and Position(1) | Dollar Value ($) | Number of Units |
Christopher G. Hutter, President and Chief Executive Officer | — | — |
Aaron M. Tam, Chief Financial Officer | — | — |
Timothy J. Lynch, EVP, Synalloy Metals | — | — |
Current Executive Officers (as a group) | — | — |
Current Non-Employee Directors (as a group)(2) | $1,729,600 | 65,000 |
All Employees, Excluding Executive Officers (as a group) | — | — |
(1) Ms. Cunningham and Mr. Gibson are no longer employed by the Company and are omitted from the table. |
(2) Effective as of March 18, 2022, Mr. Rosenzweig was appointed as the Executive Chairman of the Board. In connection with the appointment, in recognition of (among other things) significant responsibilities undertaken and his historic and anticipated time commitment to the Company, Mr. Rosenzweig was awarded, contingent upon and subject to approval of the Plan: (i) 15,000 restricted stock units, 50% of which will vest on April 26, 2023 and the remainder of which will vest on April 26, 2024, and (ii) 50,000 performance stock units, 12,500 of which will vest upon the achievement of a VWAP of the Company of $25.00, $27.50, $30.00 and $35.00, respectively, during the performance period from March 18, 2022 through April 26, 2025, in each case subject to certain terms and conditions. The dollar value set forth above is based on (a) the Company’s stock price as of March 7, 2022 for the restricted stock units and (b) for the performance stock units, the applicable VWAP targets causing the vesting of such performance stock unit awards. |
Board Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 2022 OMNIBUS EQUITY INCENTIVE PLAN.
SHAREHOLDER PROPOSALS FOR THE 2023 ANNUAL MEETING OF SHAREHOLDERS
Any shareholder proposal to be included in the proxy materials for the 2023 Annual Meeting of Shareholders must be submitted in accordance with applicable regulations of the SEC and received by the Company at its principal executive offices, 1400 16th Street, Suite 270, Oak Brook, Illinois 60523, no later than December 29, 2022.
In order for a shareholder to bring any business or nominations before the 2023 Annual Meeting of Shareholders, certain conditions set forth in the Company’s Bylaws must be complied with, including but not limited to, the delivery of a notice to the Corporate Secretary of the Company not less than 60 days nor more than 90 days prior to the first anniversary of the date of the 2022 Annual Meeting which is scheduled to be held on June 6, 2022; provided, however, that if the date of the 2023 Annual Meeting of Shareholders is advanced by more than 30 days or delayed by more than 30 days from the first anniversary of the 2022 Annual Meeting of Shareholders, to be timely, notice must be received by the Company not earlier than the close of business on the 90th day prior to such meeting and not later than the close of business on the 60th day prior to such meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. With respect to any shareholder proposal not received by the Company in accordance with the Company’s Bylaws, the designated proxy agents will vote on the proposal in their discretion.
REFERENCES TO OUR WEBSITE ADDRESS
References to our website address throughout this Proxy Statement and the accompanying materials are for informational purposes only, or to fulfill specific disclosure requirements of the SEC’s rules or the Nasdaq Rules. These references are not intended to, and do not, incorporate the contents of our website by reference into this Proxy Statement or the accompanying materials.
INCORPORATION BY REFERENCE
The "Audit Committee Report" is not deemed to be filed with the SEC and shall not be deemed incorporated by reference into any prior or future filings made by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent the Company specifically incorporates such information by reference.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Directors does not know of any other matters which may come before the meeting. However, if any other matters do properly come before the meeting, it is the intention of the persons named as proxies to vote upon them in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Doug Tackett, Corporate Secretary
Exhibit A
SYNALLOY CORPORATION
2022 OMNIBUS EQUITY INCENTIVE PLAN
Synalloy Corporation
2022 Omnibus Equity Incentive Plan
TABLE OF CONTENTS
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Synalloy Corporation
2022 Omnibus Equity Incentive Plan
ARTICLE I
PURPOSES
The purpose of the Synalloy Corporation 2022 Omnibus Equity Incentive Plan, as may be amended from time to time (the “Plan”), is to aid the Company and its Subsidiaries in attracting, retaining, motivating and rewarding qualified Employees, Directors, and Consultants whose present and potential contributions to the Company and its Subsidiaries are of importance, by providing the opportunity to acquire and maintain Awards. The Company believes that the Plan will encourage long-term service, recognize individual contributions and reward achievement of Company goals, and will promote the creation of long-term value for stockholders by closely aligning the interests of Participants with those of stockholders.
ARTICLE II
DEFINITIONS
Whenever the following terms are used in the Plan, they shall have the meanings specified below unless the context clearly indicates to the contrary. The singular pronoun shall include the plural where the context so indicates.
Section 2.1 “Administrator” shall mean the Board or any committee of the Board designated by the Board to administer the Plan, in each case as further provided in Article III.
Section 2.2 “Affiliate” shall mean, with respect to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with, the Company. For purposes of the preceding sentence, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any entity or organization, shall have the meaning given such term under Rule 405 of the Securities Act.
Section 2.3 “Alternative Award” shall have the meaning set forth in Section 14.1.
Section 2.4 “Applicable Laws” shall mean the requirements relating to [stock options, restricted stock, restricted stock units, performance shares, performance awards, and other equity-based compensation awards] and plans under U.S. federal and state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Company Common Stock is listed or quoted and the applicable laws of any other country or jurisdiction where Awards are granted under the Plan.
Section 2.5 “Award” shall mean any Option, Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit, Stock Appreciation Right (SAR), Dividend Equivalent, Deferred Share Unit or other Stock-Based Award granted to a Participant pursuant to the Plan, including an Award combining two or more types of Awards into a single grant.
Section 2.6 “Award Agreement” shall mean any written agreement, contract or other instrument or document that sets forth the terms, conditions, restrictions and/or limitations applicable to an Award in addition to those set forth in the Plan. The Administrator may provide for the use of electronic, internet or other non-paper Award Agreements, and the use of electronic, internet or other non-paper means for Participant acceptance of, or actions under, an Award Agreement, unless otherwise expressly specified herein.
Section 2.7 “Base Price” shall have the meaning set forth in Section 2.49.
Section 2.8 “Board” shall mean the Board of Directors of the Company, as constituted from time to time.
Section 2.9 “Cash Award” shall have the meaning set forth in Section 12.1.
Section 2.10 “Cause” with, respect to any Participant, shall mean any one or more of the following, as determined by the Administrator in its sole discretion, unless an alternative definition is set forth in an applicable Award Agreement or an applicable employment agreement of the Participant:
(a) a Participant’s commission of a felony or any crime of moral turpitude:
(b) a material violation of a written policy of the Company or any Subsidiary which is grounds for termination;
(c) failure on the part of the Participant to perform his or her officer, employment or other duties to the Company or any Subsidiary in any material respect, after notice of such failure and (if such may be corrected as determined by the Administrator) a reasonable opportunity to correct it; or
(d) failure to comply in any material respect with any applicable legal or regulatory requirements, including but not limited to the Foreign Corrupt Practices Act, the Securities Act, the Exchange, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Truth in Negotiations Act, or any rules or regulations promulgated thereunder.
Section 2.11 “Change in Control” shall mean the first to occur of any of the following events after the Effective Date:
(a) any transaction or series of related transactions, whether by way of sales of capital stock, merger, consolidation or otherwise, that results in the direct or indirect beneficial ownership by any person, entity or “group” (as defined in Section 13(d) of the Exchange Act), excluding the Company, any of its Subsidiaries, any employee benefit plan of the Company or any of its Subsidiaries, or any Affiliates of any of the foregoing, of more than 50% of the combined voting power of the Company’s (or, if applicable, the surviving company after such a merger) then outstanding voting securities;
(b) within any 12-month period, the persons who were members of the Board at the beginning of such period (the “Incumbent Directors”) shall cease to constitute at least a majority of the Board, provided that any director appointed or nominated for election to the Board by a majority of the Incumbent Directors then still in office shall be deemed to be an Incumbent Director for purposes of this clause (b); or
(c) the sale, transfer or other disposition of all or substantially all of the assets of the Company, in one or a series of related transactions, to one or more Persons that are not, immediately prior to such sale, transfer or other disposition, Affiliates of the Company;
in each case, provided that, as to Awards subject to Section 409A of the Code, such event also constitutes a “change in control” within the meaning of Section 409A of the Code.
In addition, notwithstanding the foregoing, a “Change in Control” shall not be deemed to occur if the Company files for bankruptcy, liquidation or reorganization under the United States Bankruptcy Code or as a result of any restructuring that occurs as a result of any such proceeding.
Section 2.12 “Change in Control Price” shall mean the price per share of Company Common Stock paid in conjunction with any transaction resulting in a Change in Control. If any part of the price is payable other than in cash, the value of the non-cash portion of the Change in Control Price shall be determined in good faith by the Administrator as constituted immediately prior to the Change in Control.
Section 2.13 “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, including the guidance and regulations promulgated thereunder and successor provisions, guidance and regulations thereto.
Section 2.14 “Company” shall mean Synalloy Corporation, a Delaware corporation, and shall include any successor thereto.
Section 2.15 “Company Common Stock” shall mean the Class A common stock, par value $1.00 per share, of the Company and such other stock or securities into which such common stock is hereafter converted or for which such common stock is exchanged.
Section 2.16 “Consultant” shall mean any Person who is engaged by the Company or any of the Subsidiaries to render consulting or advisory services to such entity.
Section 2.17 “Corporate Event” shall mean, as determined by the Administrator in its sole discretion, any transaction or event described in Section 4.2(a) or any unusual or nonrecurring transaction or event affecting the Company, any Subsidiary, or the financial statements of the Company or any of its Subsidiaries, or changes in Applicable Laws or accounting principles (including, without limitation, a recapitalization of the Company).
Section 2.18 “Deferred Share Unit” shall mean a unit credited to a Participant’s account in the books of the Company under Article X, which represents the right to receive one Share of Company Common Stock or cash equal to the Fair Market Value thereof on settlement of the account.
Section 2.19 “Director” shall mean a member of the Board or a member of the board of directors of any Subsidiary.
Section 2.20 “Disability” shall mean (x) for Awards that are not subject to Section 409A of the Code, “disability” as such term is defined in the long-term disability insurance plan or program of the Company or any Subsidiary then covering the Participant or, in the absence of such a plan or program, as determined by the Administrator, provided, that, with respect to Awards that are not subject to Section 409A of the Code, in the case of any Participant who, as of the date of determination, is a party to an effective employment, severance, consulting or other services agreement with the Company or any Subsidiary that employs such Participant, “Disability” shall have the meaning, if any, specified in such agreement, and (y) for Awards that are subject to Section 409A of the Code, “disability” shall have the meaning set forth in Section 409A(a)(2)(c) of the Code.
Section 2.21 “Dividend Equivalent” shall mean the right to receive payments, in cash or in Shares, based on dividends paid with respect to Shares.
Section 2.22 “Effective Date” shall have the meaning set forth in Section 15.7.
Section 2.23 “Eligible Representative” for a Participant shall mean such Participant’s personal representative or such other person as is empowered under the deceased Participant’s will or trust or the then applicable laws of descent and distribution to represent the Participant hereunder.
Section 2.24 “Employee” shall mean any individual classified as an employee by the Company or one of its Subsidiaries, whether such employee is so employed at the time this Plan is adopted or becomes so employed subsequent to the adoption of this Plan, including any person to whom an offer of employment has been extended (except that any Award granted to such person shall be conditioned on his or her commencement of service). A person shall not cease to be an Employee in the case of (a) any leave of absence approved by the Company or (b) transfers between locations of the Company or between the Company, any of its Subsidiaries, or any successor to the foregoing. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, the employment relationship shall be deemed to have terminated on the first day immediately following such three (3)-month period, and such Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Non-Qualified Stock Option on the first (1st) day immediately following a three (3)-month period from the date the employment relationship is deemed terminated.
Section 2.25 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time, including the guidance, rules and regulations promulgated thereunder and successor provisions, guidance, rules and regulations thereto.
Section 2.26 “Executive Officer” shall mean each person who is an officer of the Company or any Subsidiary and who is subject to the reporting requirements under Section 16(a) of the Exchange Act.
Section 2.27 “Fair Market Value” of a Share as of any date of determination shall be, unless otherwise determined by the Administrator:
(a) If the Company Common Stock is listed on any established stock exchange or a national market system, then the closing price on such date per Share as reported on such stock exchange or system shall be the Fair Market Value for the date of determination;
(b) If there are no transactions in the Company Common Stock that are available to the Company on any date of determination pursuant to clause (a) but transactions are available to the Company as of the immediately preceding trading date, then the Fair Market Value determined as of the immediately preceding trading date shall be the Fair Market Value for the date of determination; or
(c) If neither clause (a) nor clause (b) shall apply on any date of determination, then the Fair Market Value shall be determined in good faith by the Administrator.
Section 2.28 “FICA” shall mean the U.S. Federal Insurance Contributions Act, as amended.
Section 2.29 “Good Reason” with respect to any Participant, has the meaning, if any, set forth in an applicable Award Agreement or an applicable employment agreement (or, if there is no such definition in the Participant’s Award Agreement or employment agreement of the Participant, this term shall not apply to the Participant).
Section 2.30 “Incentive Stock Option” shall mean an “incentive stock option” within the meaning of Section 422 of the Code.
Section 2.31 “Incumbent Directors” shall have the meaning set forth in the definition of “Change in Control.”
Section 2.32 “Non-Qualified Stock Option” shall mean an Option that is not an Incentive Stock Option.
Section 2.33 “Option” shall mean an option to purchase Company Common Stock granted under the Plan. The term “Option” includes both an Incentive Stock Option and a Non-Qualified Stock Option.
Section 2.34 “Option Price” shall have the meaning set forth in Section 6.3.
Section 2.35 “Optionee” shall mean a Participant to whom an Option or SAR is granted under the Plan.
Section 2.36 “Participant” shall mean any Service Provider who has been granted an Award pursuant to the Plan that remains outstanding.
Section 2.37 “Performance Award” shall mean Performance Shares, Performance Units and all other Awards that vest (in whole or in part) upon the achievement of specified Performance Goals.
Section 2.38 “Performance Cycle” shall mean the period of time selected by the Administrator during which performance is measured for the purpose of determining whether or the extent to which a Performance Award has been earned or vested.
Section 2.39 “Performance Goals” means the objectives established by the Administrator for a Performance Cycle pursuant to Section 9.5 for the purpose of determining the extent to which a Performance Award has been earned or vested.
Section 2.40 “Performance Share” means an Award granted pursuant to Article IX of the Plan of a contractual right to receive a Share (or the cash equivalent thereof) upon the achievement, in whole or in part, of the applicable Performance Goals.
Section 2.41 “Performance Unit” means a U.S. Dollar denominated unit (or a unit denominated in the Participant’s local currency) granted pursuant to Article IX of the Plan, payable upon the achievement, in whole or in part, of the applicable Performance Goals.
Section 2.42 “Person” shall mean an individual, partnership, corporation, limited liability company, limited liability partnership, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or any other entity of whatever nature.
Section 2.43 “Plan” shall have the meaning set forth in Article I.
Section 2.44 “Replacement Awards” shall mean Shares or Awards, issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form or combination by the Company or any of the Subsidiaries as reasonably determined by the Administrator.
Section 2.45 “Restricted Stock” shall mean an Award granted pursuant to Section 8.1.
Section 2.46 “Restricted Stock Unit” shall mean a right, granted pursuant to Article VIII of the Plan, to receive Shares, cash or a combination thereof at the end of a specified period (which may or may not be coterminous with the vesting schedule of the underlying Award).
Section 2.47 “Securities Act” shall mean the Securities Act of 1933, as amended from time to time, including the guidance, rules and regulations promulgated thereunder and successor provisions, guidance, rules and regulations thereto.
Section 2.48 “Service Provider” shall mean an Employee, Consultant or Director.
Section 2.49 “Share” shall mean a share of Company Common Stock.
Section 2.50 “Stock Appreciation Right” or “SAR” shall mean the right to receive a payment from the Company in cash and/or Shares equal to the product of (i) the excess, if any, of the Fair Market Value of one Share on the exercise date over a specified price (the “Base Price”) fixed by the Administrator (which specified price shall not be less than the Fair Market Value of one Share on the grant date), multiplied by (ii) a stated number of Shares.
Section 2.51 “Stock-Based Award” shall have the meaning set forth in Article XI.
Section 2.52 “Subsidiary” shall mean any entity that is directly or indirectly controlled by the Company or any entity in which the Company directly or indirectly controls at least a 50% equity interest, provided that, to the extent required under Section 422 of the Code when granting an Incentive Stock Option, Subsidiary shall mean any corporation in an unbroken chain of corporations beginning with such entity if each of the corporations other than the last corporation in the unbroken chain then 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 2.53 “termination of employment,” “termination of service” and any similar term or terms shall mean, with respect to an Employee, the date the Participant ceases to be an Employee (determined without regard to any statutory or deemed or express contractual notice period); with respect to a Director who is not an Employee of the Company or any of its Subsidiaries, the date upon which such Director ceases to be a member of the Board; and, with respect to a Consultant who is not an Employee of the Company or any of its Subsidiaries, the date upon which such Consultant ceases to provide consulting or advisory services to the Company or any of its Subsidiaries; provided that with respect to any Award subject to Section 409A of the Code, such terms shall mean “separation
from service,” as defined in Section 409A of the Code and the rules, regulations and guidance promulgated thereunder.
Section 2.54 “Withholding Taxes” shall mean any federal, state, local or foreign income, employment or other taxes, however denominated, required to be deducted or withheld under Applicable Law, as determined by the Company.
ARTICLE III
ADMINISTRATION
Section 3.1 Administrator. The Plan shall be administered by the Board or a committee appointed by the Board.
Section 3.2 Powers of the Administrator. Subject to the provisions of the Plan, the Administrator shall have the authority to do the following:
(a) determine the Fair Market Value;
(b) determine the type or types of Awards to be granted to each Participant;
(c) select the Service Providers to whom Awards may from time to time be granted hereunder;
(d) determine the number of Awards to be granted and the number of Shares to which an Award will relate;
(e) approve forms of Award Agreements for use under the Plan, which need not be identical for each Service Provider;
(f) determine the terms and conditions of any Awards granted hereunder (including, without limitation, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions and any restriction or limitation regarding any Awards or the Company Common Stock relating thereto) based in each case on such factors as the Administrator, in its sole discretion, shall determine;
(g) determine all matters and questions related to the termination of service of a Service Provider with respect to any Award, including, but not by way of limitation of, all questions of whether a particular Service Provider has taken a leave of absence, all questions of whether a leave of absence taken by a particular Service Provider constitutes a termination of service, and all questions of whether a termination of service of a particular Service Provider was for Cause;
(h) prescribe, amend and rescind rules and regulations relating to the Plan;
(i) determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise or purchase price of an Award may be paid in, cash, Company Common Stock, other Awards, or other property, or an Award may be canceled, forfeited or surrendered;
(j) suspend or accelerate the vesting of any Award or waive the forfeiture restrictions or any other restriction or limitation regarding any Awards or the Company Common Stock relating thereto;
(k) construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;
(l) interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan;
(m) authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan; and
(n) make all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable to administer the Plan.
Any determination made by the Administrator under the Plan, including, without limitation, under Section 4.2, shall be final, binding and conclusive on all Participants and other persons having or claiming any right or interest under the Plan.
Section 3.3 Delegation by the Administrator. The Administrator may delegate any portion of its authority, duties and powers under the Plan with respect to Participants who are not the Chief Executive Officer, Executive Officers or non-employee Directors of the Board, subject to such terms or conditions or guidelines as the Board or Administrator shall determine (in the case of a committee acting as the Administrator, to the extent of its authority under the committee’s charter or as otherwise approved by the Board), to any officer or group of officers, or Director or group of Directors of the Company or its Affiliates; provided that any delegation to one or more officers of the Company shall be subject to and comply with Section 157(c) of the Delaware General Corporation Law (or successor provision). In addition, with respect to any Award intended to qualify for the exemption contained in Rule 16b-3 promulgated under the Exchange Act, it is intended that such Award be granted by a committee consisting of solely two or more “non-employee directors” within the meaning of such rule, or, in the alternative, the entire Board.
Section 3.4 Professional Assistance, Good Faith Actions. The Administrator may, in its discretion, elect to engage the services of attorneys, consultants, accountants, appraisers, brokers or other persons assisting in the administration of the Plan. The Administrator, the Company and its officers and Directors shall be entitled to, in good faith, rely upon the advice, reports, opinions or valuations of any such persons. All actions taken and all interpretations, decisions and determinations made by the Administrator, in good faith shall be final and binding upon all Participants, the Company and all other interested persons. The Administrator’s determinations under the Plan need not be uniform and may be made by the Administrator selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated. The Administrator (and its members) shall not be personally liable for any action, determination or interpretation made with respect to the Plan or the Awards, and the Administrator (and its members) shall be fully indemnified and held harmless by the Company with respect to any such action, determination or interpretation.
Section 3.5 (e) Participants in Non-U.S. Jurisdictions. Notwithstanding any provision of the Plan to the contrary, to comply with applicable laws in countries other than the United States in which the Company or any Affiliate operates or has employees, directors or other service providers from time to time, or to ensure that the Company complies with any applicable requirements of foreign securities exchanges, the Administrator, in its sole discretion, shall have the power and authority to: (i) determine which of the Affiliates shall be covered by the Plan; (ii) determine which Service Providers outside the United States are eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to Service Providers outside the United States to comply with applicable foreign laws or listing requirements of any foreign exchange; (iv) establish sub-plans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable (any such sub-plans and/or modifications shall be attached to the Plan as appendices), provided, however, that no such sub-plans and/or modifications shall increase the share limitations contained in Article IV of the Plan; and (v) take any action, before or after an Award is granted, that it deems advisable to comply with any applicable governmental regulatory exemptions or approval or listing requirements of any such foreign securities exchange. For purposes of the Plan, all references to foreign laws, rules, regulations or taxes shall be references to the laws, rules, regulations and taxes of any applicable jurisdiction other than the United States or a political subdivision thereof.
ARTICLE IV
SHARES SUBJECT TO PLAN
Section 4.1 Shares Subject to Plan.
(a) Subject to adjustment in a manner consistent with Section 4.2, the aggregate number of Shares which are reserved and available for issuance under this Plan is equal to 750,000, and without limitation all such Shares may be granted as Incentive Stock Options. The Shares issued under the Plan may be
authorized but unissued or reacquired Company Common Stock, including Shares purchased by the Company on the open market for purposes of the Plan. No provision of this Plan shall be construed to require the Company to maintain the Shares in certificated form.
(b) Upon the grant of an Award, the maximum number of Shares set forth in Section 4.1(a) shall be reduced by the maximum number of Shares that are issued or may be issued pursuant to such Award. Upon the exercise, settlement or conversion of any Award or portion thereof, there shall again be available for grant under the Plan the number of Shares subject to such Award or portion thereof minus the actual number of Shares issued in connection with such exercise, settlement or conversion. If any such Award or portion thereof is for any reason forfeited, canceled, expired or otherwise terminated without the issuance of Shares, the Shares subject to such forfeited, canceled, expired or otherwise terminated Award or portion thereof shall again be available for grant under the Plan. The Administrator may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting and make adjustments if the number of Shares actually delivered differs from the number of Shares previously counted in connection with an Award. For the avoidance of doubt, if Shares are withheld from issuance with respect to an Award by the Company in satisfaction of any tax withholding or similar obligations, such withheld Shares shall again be available for grant under the Plan. Awards which the Administrator reasonably determines will be settled in cash shall not reduce the Plan maximum set forth in Section 4.1(a). Notwithstanding the foregoing, and except to the extent required by Applicable Law, Replacement Awards shall not be counted against Shares available for grant pursuant to this Plan.
Section 4.2 Changes in Company Common Stock; Disposition of Assets and Corporate Events.
(a) If and to the extent necessary or appropriate to reflect any stock dividend, extraordinary dividend, stock split or share combination or any recapitalization, merger, consolidation, exchange of shares, spin-off, liquidation or dissolution of the Company or other similar transaction affecting the Company Common Stock or other Corporate Event, the Administrator shall adjust the number of shares of Company Common Stock available for issuance under the Plan and the number, class and Option Price (if applicable) or Base Price (if applicable) of any outstanding Award, and/or make such substitution, revision or other provisions or take such other actions with respect to any outstanding Award or the holder or holders thereof, in each case as it determines to be equitable. Without limiting the generality of the foregoing sentence, in the event of any Corporate Event, the Administrator shall have the power to make such changes as it deems appropriate in (i) the number and type of shares or other securities covered by outstanding Awards, (ii) the prices specified therein (if applicable), (iii) the securities, cash or other property to be received upon the exercise, settlement or conversion of such outstanding Awards or otherwise to be received in connection with such outstanding Awards, and (iv) and any applicable Performance Goals. After any adjustment made by the Administrator pursuant to this Section 4.2, the number of shares subject to each outstanding Award shall be rounded down to the nearest whole number.
(b) Any adjustment of an Award pursuant to this Section 4.2 shall be made in compliance with Section 422 and 409A of the Code, to the extent applicable.
Section 4.3 Award Agreement Provisions. The Administrator may include such further provisions and limitations in any Award Agreement as it may deem equitable and in the best interests of the Company and its Subsidiaries. Awards granted under the Plan may, in the discretion of the Administrator, be granted either alone, in addition to, or in tandem with any other Award. In addition, the Administrator may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 15.2), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Administrator shall determine. Without limiting the scope of the preceding sentence, the Administrator may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance goals applicable to an Award, and any such performance goals may differ among Awards granted to any one Participant or to different Participants. Notwithstanding anything to the contrary herein, an Award Agreement must be accepted within a period of ninety (90) days (or such other period as the Administrator may specify in such Award Agreement) after the grant date or else such Award Agreement shall be ineffective and void.
Section 4.4 Prohibition Against Repricing. Except to the extent (i) approved in advance by holders of a majority of the Shares entitled to vote generally in the election of Directors of the Company or (ii) pursuant to Section 4.2 as a result of any Corporate Event, the Administrator shall not have the power or authority to reduce, whether through amendment or otherwise, the exercise price of any outstanding Option or Base Price of any outstanding SAR.
ARTICLE V
GRANTING OF OPTIONS AND SARS
AND SALE OF COMPANY COMMON STOCK
Section 5.1 Eligibility. Non-Qualified Stock Options and SARs may be granted to Service Providers. Subject to Section 5.2, Incentive Stock Options may only be granted to Employees.
Section 5.2 Qualification of Incentive Stock Options. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code. Incentive Stock Options may only be granted to Employees. Incentive Stock Options shall not be granted more than ten (10) years after the earlier of the adoption of the Plan or the approval of the Plan by the Company’s stockholders. Notwithstanding the foregoing, to the extent that the aggregate Fair Market Value of Shares subject to an Incentive Stock Option and the aggregate Fair Market Value of shares of stock of any parent or subsidiary corporation (within the meaning of Sections 424(e) and (f) of the Code) subject to any other incentive stock options of the Company or a parent or subsidiary corporation (within the meaning of Sections 424(e) and (f) of the Code) that are exercisable for the first time by a Participant during any calendar year exceeds $100,000, or such other amount as may be prescribed under Section 422 of the Code, such excess shall be treated as Non-Qualified Stock Options in accordance with the Code. As used in the previous sentence, Fair Market Value shall be determined as of the date the Incentive Stock Option is granted. If a Participant shall make any disposition of Shares issued pursuant to an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to disqualifying dispositions), the Participant shall notify the Company of such disposition within the time provided to do so in the applicable award agreement. No Employee may be granted an Incentive Stock Option under the Plan if such Employee, at the time the Incentive Stock Option is granted, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any then-existing Subsidiary or “parent corporation” (within the meaning of Section 424(e) of the Code) unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code.
Section 5.3 Granting of Options and SARs to Service Providers.
(a) Options and SARs. The Administrator may from time to time:
(i) Select from among the Service Providers (including those to whom Options or SARs have been previously granted under the Plan) such of them as in its opinion should be granted Options and/or SARs;
(ii) Determine the number of Shares to be subject to such Options and/or SARs granted to such Service Provider, and determine whether such Options are to be Incentive Stock Options or Non-Qualified Stock Options; and
(iii) Determine the terms and conditions of such Options and SARs, consistent with the Plan.
(b) SARs may be granted in tandem with Options or may be granted on a freestanding basis, not related to any Option. Unless otherwise determined by the Administrator at the grant date or determined thereafter in a manner more favorable to the Participant, SARs granted in tandem with Options shall have substantially similar terms and conditions to such Options to the extent applicable, or may be granted on a freestanding basis, not related to any Option.
(c) Upon the selection of a Service Provider to be granted an Option or SAR under this Section 5.3, the Administrator shall issue, or shall instruct an authorized officer to issue, such Option or SAR and may impose such conditions on the grant of such Option or SAR as it deems appropriate. Subject to Section 15.2 of the Plan, any Incentive Stock Option granted under the Plan may be modified by the Administrator, without the consent of the Optionee, even if such modification would result in the disqualification of such Option as an “incentive stock option” under Section 422 of the Code.
ARTICLE VI
TERMS OF OPTIONS AND SARS
Section 6.1 Award Agreement. Each Option and each SAR shall be evidenced by an Award Agreement, which shall be accepted and acknowledged by the Optionee, including by electronic means, and which shall contain such terms and conditions as the Administrator shall determine, consistent with the Plan. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to qualify such Options as “incentive stock options” under Section 422 of the Code.
Section 6.2 Exercisability and Vesting of Options and SARs.
(a) Each Option and SAR shall vest and become exercisable according to the terms of the applicable Award Agreement; provided, however, that by a resolution adopted after an Option or SAR is granted the Administrator may, on such terms and conditions as it may determine to be appropriate, accelerate the time at which such Option or SAR or any portion thereof may be vested or exercised.
(b) Except as otherwise provided by the Administrator or in the applicable Award Agreement, no portion of an Option or SAR which is unexercisable on the date that an Optionee incurs a termination of service as a Service Provider shall thereafter become exercisable.
(c) The aggregate Fair Market Value (determined as of the time the Option is granted) of all Shares with respect to which Incentive Stock Options are first exercisable by a Service Provider in any calendar year may not exceed U.S. $100,000 or such other limitation as imposed by Section 422(d) of the Code, or any successor provision. To the extent that Incentive Stock Options are first exercisable by a Participant in excess of such limitation, the excess shall be considered Non-Qualified Stock Options.
(d) SARs granted in tandem with an Option shall become vested and exercisable on the same date or dates as the Options with which such SARs are associated vest and become exercisable. SARs that are granted in tandem with an Option may only be exercised upon the surrender of the right to exercise such Option for an equivalent number of Shares, and may be exercised only with respect to the Shares for which the related Option is then exercisable.
Section 6.3 Option Price and Base Price. Excluding Replacement Awards, the per Share purchase price of the Shares subject to each Option (the “Option Price”) and the Base Price of each SAR shall be set by the Administrator and shall be not less than 100% of the Fair Market Value of such Shares on the date such Option or SAR is granted.
Section 6.4 Expiration of Options and SARs. No Option or SAR may be exercised after the first to occur of the following events:
(a) The expiration of ten (10) years from the date the Option or SAR was granted; or
(b) With respect to an Incentive Stock Option, in the case of an Optionee owning (within the meaning of Section 424(d) of the Code), at the time the Incentive Stock Option was granted, more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary, the expiration of five (5) years from the date the Incentive Stock Option was granted.
ARTICLE VII
EXERCISE OF OPTIONS AND SARS
Section 7.1 Person Eligible to Exercise. During the lifetime of the Optionee, only the Optionee may exercise an Option or SAR (or any portion thereof) granted to him or her; provided, however, that the Optionee’s Eligible Representative may exercise his or her Option or SAR or portion thereof during the period of the Optionee’s disability. After the death of the Optionee, any exercisable portion of an Option or SAR may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Award Agreement, be exercised by his or her Eligible Representative.
Section 7.2 Partial Exercise. At any time and from time to time prior to the date on which the Option or SAR becomes unexercisable under the Plan or the applicable Award Agreement, the exercisable portion of an Option or SAR may be exercised in whole or in part; provided, however, that the Company shall not be required to issue fractional Shares and the Administrator may, by the terms of the Option or SAR, require any partial exercise to exceed a specified minimum number of Shares.
Section 7.3 Manner of Exercise. Subject to any generally applicable conditions or procedures that may be imposed by the Administrator, an exercisable Option or SAR, or any exercisable portion thereof, may be exercised solely by delivery to the Administrator or its designee of all of the following prior to the time when such Option or SAR or such portion becomes unexercisable under the Plan or the applicable Award Agreement:
(a) Notice in writing delivered by the Optionee or his or her Eligible Representative, stating that such Option or SAR or portion is being exercised, and specifically stating the number of Shares with respect to which the Option or SAR is being exercised (which form of notice shall be provided by the Administrator upon request and may be electronic);
(b) A copy of any agreements or other documentation required by the Company at the time of exercise;
(c) (i) With respect to the exercise of any Option, full payment of the aggregate Option Price of the Shares in cash (through wire transfer or by personal, certified, or bank cashier check) or cash equivalents, Shares (including previously owned Shares or through a cashless exercise, i.e., “net settlement,” a broker-assisted exercise, or other reduction of the amount of Shares otherwise issuable pursuant to the Option), other Awards or awards granted under other plans of the Company or any Affiliate, other property, or any other legal consideration the Administrator deems appropriate (including notes or other contractual obligations of Participants to make payment on a deferred basis). In the case of an exercise whereby the Option Price is paid with Shares, such Shares shall be valued based on Fair Market Value as of the date of exercise. No Option may be exercisable for a period of more than ten (10) years following the date of grant of the Option (or in the case of an Incentive Stock Option granted to an individual who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its parent or any of its subsidiaries, for a period of more than five (5) years following the date of grant of the Incentive Stock Option).
(d) In the event that the Option or SAR or portion thereof shall be exercised as permitted under Section 7.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option or SAR or portion thereof; and
(e) Satisfaction of any applicable Withholding Taxes, as contemplated by Section 15.11.
Section 7.4 Optionee Representations. The Company, in its sole discretion, may require an Optionee to make certain representations or acknowledgements, on or prior to the purchase of any Shares pursuant to any Option or SAR granted under this Plan, in respect thereof including, without limitation, that the Optionee is acquiring the Shares for an investment purpose and not for resale, and, if the Optionee is an Affiliate, additional acknowledgements regarding when and to what extent any transfers of such Shares may occur.
Section 7.5 Settlement of SARs. Unless otherwise determined by the Administrator, upon exercise of a SAR, the Participant shall be entitled to receive payment in the form, determined by the Administrator, of Shares, or cash, or a combination of Shares and cash having an aggregate value equal to the amount determined by multiplying:
(a) any increase in the Fair Market Value of one Share on the exercise date over the Base Price of such SAR, by
(b) the number of Shares with respect to which such SAR is exercised;
provided, however, that on the grant date, the Administrator may establish, in its sole discretion, a maximum amount per Share that may be payable upon exercise of a SAR, and provided, further, that in no event shall the value of the Company Common Stock or cash delivered on exercise of a SAR exceed the excess of the Fair Market Value of the Shares with respect to which the SAR is exercised over the Fair Market Value of such Shares on the grant date of such SAR.
Section 7.6 Conditions to Issuance of Shares. The Company shall evidence the issuance of Shares delivered upon exercise of an Option or SAR in the books and records of the Company or in a manner determined by the Company. The Administrator shall not have any liability to any Optionee for any delay in the delivery of Shares to be issued upon an Optionee’s exercise of an Option or SAR.
Section 7.7 Rights as Stockholders. The holder of an Option or SAR shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any Shares purchasable upon the exercise of any part of an Option or SAR unless and until the Shares attributable to the exercise of the Option or SAR have been issued by the Company to such holder.
Section 7.8 Transfer Restrictions. The Administrator, in its sole discretion, may set forth in an Award Agreement or in such other agreements to be entered into at the time of exercise, such further restrictions on the transferability of the Shares purchasable upon the exercise of an Option or SAR as it deems appropriate. Any such restriction may be referred to in the Share register maintained by the Company or otherwise in a manner reflecting its applicability to the Shares. An Employee must give the Company prompt notice of any disposition of Shares acquired by exercise of an Incentive Stock Option, within two (2) years from the date of granting such Option or one (1) year after the transfer of such Shares to such Employee.
ARTICLE VIII
RESTRICTED STOCK AWARDS AND RESTRICTED STOCK UNIT AWARDS
Section 8.1 Restricted Stock.
(a) Grant of Restricted Stock. The Administrator is authorized to make Awards of Restricted Stock to any Service Provider selected by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator. All Awards of Restricted Stock shall be evidenced by an Award Agreement.
(b) Issuance and Restrictions. Restricted Stock shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Administrator may impose. These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Administrator determines at the time of the grant of the Award or thereafter.
(c) Issuance of Restricted Stock. The issuance of Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Administrator shall determine.
(d) Dividends and Splits. As a condition to the grant of an Award of Restricted Stock, the Administrator may allow a Participant to elect, or may require, that any cash dividends paid on a Share of Restricted Stock be automatically reinvested in additional Shares of Restricted Stock, applied to the purchase of additional
Awards or deferred without interest to the date of vesting of the associated Award of Restricted Stock. Unless otherwise determined by the Administrator and specified in the applicable Award Agreement, Shares distributed in connection with a stock split or stock dividend, and other property (other than cash) distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such stock or other property has been distributed.
Section 8.2 Restricted Stock Units. The Administrator is authorized to make Awards of Restricted Stock Units to any Service Provider selected by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator. At the time of grant, the Administrator shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable and may specify such conditions to vesting as it deems appropriate. At the time of grant, the Administrator shall specify the settlement date applicable to each grant of Restricted Stock Units. Unless otherwise provided in an Award Agreement, on the settlement date, the Company shall, subject to the terms of this Plan (including satisfaction of applicable Withholding Taxes), transfer to the Participant (i) a number of Shares equal to the number of Restricted Stock Units, or (ii) cash in an amount equal to the Fair Market Value of the specified number of Shares equal to the number of Restricted Stock Units, or a combination thereof, as determined by the Administrator at the date of grant or thereafter for each Restricted Stock Unit scheduled to be settled on such date and not previously forfeited. The Administrator shall specify the purchase price, if any, to be paid by the grantee to the Company for such Shares.
Section 8.3 Rights as a Stockholder. A Participant shall not be, nor have any of the rights or privileges of, a stockholder in respect of Restricted Stock Units awarded pursuant to the Plan unless and until the Shares attributable to such Restricted Stock Units have been issued to such Participant.
ARTICLE IX
PERFORMANCE SHARES AND PERFORMANCE UNITS
Section 9.1 Grant of Performance Awards. The Administrator is authorized to make Awards of Performance Shares and Performance Units to any Participant selected by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator. All Performance Shares and Performance Units shall be evidenced by an Award Agreement.
Section 9.2 Issuance and Restrictions. The Administrator shall have the authority to determine the Participants who shall receive Performance Shares and Performance Units, the number of Performance Shares and the number and value of Performance Units each Participant receives for any Performance Cycle, and the Performance Goals applicable in respect of such Performance Shares and Performance Units for each Performance Cycle. The Administrator shall determine the duration of each Performance Cycle (and the duration of Performance Cycles may differ from one another), and there may be more than one Performance Cycle in existence at any one time. An Award Agreement evidencing the grant of Performance Shares or Performance Units shall specify the number of Performance Shares and the number and value of Performance Units awarded to the Participant, the Performance Goals applicable thereto, and such other terms and conditions not inconsistent with the Plan as the Administrator shall determine. No Company Common Stock will be issued at the time an Award of Performance Shares is made.
Section 9.3 Earned Performance Shares and Performance Units. Performance Shares and Performance Units shall become earned, in whole or in part, based upon the attainment of specified Performance Goals or the occurrence of any event or events, as the Administrator shall determine, either in an Award Agreement or thereafter on terms more favorable to the Participant. In addition to the achievement of the specified Performance Goals, the Administrator may condition payment of Performance Shares and Performance Units on such other conditions as the Administrator shall specify in an Award Agreement. The Administrator may also provide in an Award Agreement for the completion of a minimum period of service (in addition to the achievement of any applicable Performance Goals) as a condition to the vesting of any Performance Share or Performance Unit Award.
Section 9.4 Rights as a Stockholder. A Participant shall not have any rights as a stockholder in respect of Performance Shares or Performance Units awarded pursuant to the Plan (including, without limitation, the right to
vote on any matter submitted to the Company’s stockholders) until such time as the Shares attributable to such Performance Shares or Performance Units have been issued to such Participant or his or her beneficiary.
Section 9.5 Performance Goals. The Administrator shall establish in the Award Agreement or otherwise the Performance Goals that must be satisfied in order for a Participant to receive an Award for a Performance Period or for an Award of Performance Shares or Performance Units to be earned or vested. The Administrator may provide for a threshold level of performance below which no amount of compensation will be paid and a maximum level of performance above which no additional amount of compensation will be paid under the Plan, and it may provide for the payment of differing amounts of compensation for different levels of performance. Performance Goals may be established on a Company-wide basis, with respect to one or more business units, divisions, Subsidiaries or products or based on individual performance measures, and may be expressed in absolute terms or relative to other metrics including internal targets or budgets, past performance of the Company, the performance of one or more similarly situated companies, performance of an index, outstanding equity or other external measures. In the case of earning-based measures, Performance Goals may include comparisons relating to capital (including but limited to, the cost of capital), shareholders’ equity, shares outstanding, assets or net assets, or any combination thereof. Performance Goals may also be subject to such other terms and conditions as the Administrator may determine appropriate. The Administrator may also adjust the Performance Goals for any Performance Cycle as it deems equitable or appropriate in recognition of unusual or nonrecurring events affecting the Company, changes in applicable tax laws or accounting principles or such other events, changes or factors as the Administrator may determine.
Section 9.6 Determination of Attainment of Performance Goals. As soon as practicable following the end of a Performance Cycle and prior to any payment or vesting in respect of such Performance Cycle, the Administrator shall determine the number of Performance Shares, other Performance Awards, the number and value of Performance Units or the amount of any cash entitlement, as applicable that has been earned or vested. Notwithstanding anything in this Article IX to the contrary, the Administrator shall have the right, in its absolute discretion, to reduce or eliminate the amount otherwise payable to any Participant based on individual performance or any other factors that the Administrator, in its discretion, shall deem appropriate.
Section 9.7 Newly Eligible Participants. Notwithstanding anything in this Article IX to the contrary, the Administrator shall be entitled to make such rules, determinations and adjustments as it deems appropriate with respect to any Participant who becomes eligible to receive Performance Shares, Performance Units or other Performance Awards after the commencement of a Performance Cycle.
ARTICLE X
DEFERRED SHARE UNITS
Section 10.1Grant. Subject to Article III, the Administrator is authorized to make awards of Deferred Share Units to any Participant selected by the Administrator at such time or times as shall be determined by the Administrator without regard to any election by the Participant to defer receipt of any compensation or bonus amount payable to him. The grant date of any Deferred Share Unit under the Plan will be the date on which such Deferred Share Unit is awarded by the Administrator or on such other future date as the Administrator shall determine in its sole discretion. Upon the grant of Deferred Share Units pursuant to the Plan, the Company shall establish a notional account for the Participant and will record in such account the number of Deferred Share Units awarded to the Participant. No Shares will be issued to the Participant at the time an award of Deferred Share Units is granted. Subject to Article III and Applicable Law (including Section 409A of the Code), Deferred Share Units may become payable on a Corporate Event, termination of employment or service or on a specified date or dates set forth in the Award Agreement evidencing such Deferred Share Units.
Section 10.2Rights as a Stockholder. A Participant shall not be, nor have any of the rights and privileges of, a stockholder of the Company in respect of Deferred Share Units awarded pursuant to the Plan unless and until such time as the Shares attributable to such Deferred Share Units have been issued to such Participant.
Section 10.3Vesting. Unless the Administrator provides otherwise at the grant date or provides thereafter in a manner more favorable to the Participant, Deferred Share Units shall be fully vested and nonforfeitable when granted.
Section 10.4Settlement. Subject to this Article X, upon the date specified in the Award Agreement evidencing the Deferred Share Units, for each such Deferred Share Unit the Participant shall receive, as specified in the Award Agreement (and subject to satisfaction of applicable Withholding Taxes), (i) a cash payment equal to the Fair Market Value of one (1) Share as of such payment date, (ii) one (1) Share or (iii) any combination of clauses (i) and (ii).
ARTICLE XI
OTHER STOCK-BASED AWARDS
Section 11.1Grants of Stock-Based Awards. The Administrator is authorized to make Awards of other types of equity-based or equity-related awards (“Stock-Based Awards”) not otherwise described by the terms of the Plan in such amounts and subject to such terms and conditions as the Administrator shall determine. All Stock-Based Awards shall be evidenced by an Award Agreement. Such Stock-Based Awards may be granted as an inducement to enter the employ of the Company or any Subsidiary or in satisfaction of any obligation of the Company or any Subsidiary to a Service Provider, whether pursuant to this Plan or otherwise, that would otherwise have been payable in cash or in respect of any other obligation of the Company. Such Stock-Based Awards may entail the transfer of actual Shares, or payment in cash or otherwise of amounts based on the value of Shares.
ARTICLE XII
CASH AWARDS AND DIVIDEND EQUIVALENTS
Section 12.1Cash Awards. The Administrator is authorized to grant Awards denominated in cash (“Cash Awards”), on a free-standing basis or as an element of, a supplement to, or in lieu of any other Award under the Plan to Service Providers in such amounts and subject to such other terms as the Administrator in its discretion determines to be appropriate.
Section 12.2Dividend Equivalents. Dividend Equivalents may be granted to Participants at such time or times as shall be determined by the Administrator. Dividend Equivalents may be granted in tandem with other Awards, in addition to other Awards, or freestanding and unrelated to other Awards. The grant date of any Dividend Equivalents under the Plan will be the date on which the Dividend Equivalent is awarded by the Administrator, or such other date permitted by Applicable Laws as the Administrator shall determine in its sole discretion. Dividend Equivalents may, at the discretion of the Administrator, be fully vested and nonforfeitable when granted or subject to such vesting conditions as determined by the Administrator. For the avoidance of doubt, Dividend Equivalents with respect to Awards shall not be fully vested until the Awards have been earned and shall be forfeited if the related Award is forfeited. Dividend Equivalents shall be evidenced in writing, whether as part of the Award Agreement governing the terms of the Award, if any, to which such Dividend Equivalent relates, or pursuant to a separate Award Agreement with respect to freestanding Dividend Equivalents.
ARTICLE XIII
TERMINATION AND FORFEITURE
Section 13.1Termination. Except as provided in Article XIV or in the applicable Award Agreement, or as determined by the Administrator, unvested Awards granted under the Plan will be forfeited upon a Participant’s termination of employment or service to the Company for any reason.
Section 13.2Forfeiture and Recoupment of Awards. Awards granted under this Plan (and gains earned or accrued in connection with Awards) shall be subject to such generally applicable policies as to forfeiture and recoupment (including, without limitation, upon the occurrence of material financial or accounting errors, financial or other misconduct) as may be adopted by the Administrator or the Board from time to time. Any such policies may (in the discretion of the Administrator or the Board) be applied to outstanding Awards at the time of adoption of
such policies, or on a prospective basis only. Participants shall also forfeit and disgorge to the Company any Awards granted or vested and any gains earned or accrued due to the exercise of Options or SARs or the sale of any Company Common Stock to the extent required by Applicable Law or as required by any stock exchange or quotation system on which the Company Common Stock is listed or quoted, in each case in effect on or after the Effective Date, including Section 304 of the Sarbanes-Oxley Act of 2002 and Section 10D of the Exchange Act and any regulations promulgated thereunder. For the avoidance of doubt, the Administrator shall have full authority to implement any policies and procedures necessary to comply with Applicable Law and/or the requirements of any stock exchange or quotation system on which the Company Common Stock is listed or quoted. The implementation of policies and procedures pursuant to this Section 13.2 and any modification of the same shall not be subject to any restrictions on amendment or modification of Awards.
Section 13.3Clawbacks. Awards shall be subject to any generally applicable clawback policy adopted by the Administrator, the Board, the Company or any Subsidiary of the Company that is communicated to the Participants or any such policy adopted to comply with Applicable Law. Any such policy may subject Awards and Shares or amounts paid or realized with respect to Awards to reduction, cancelation, forfeiture or recoupment if certain specified events or wrongful conduct occur, including an accounting restatement due to the Company’s material noncompliance with financial reporting regulations or other events or wrongful conduct specified in any such clawback policy.
ARTICLE XIV
CHANGE IN CONTROL
Section 14.1Alternative Awards. Unless otherwise expressly provided in an Award Agreement or determined by the Administrator at any time prior to a Change in Control, subject to Section 14.2, no cancellation, acceleration of vesting or other payment shall occur in connection with a Change in Control with respect to any (i) unvested or unexercisable Award and/or (ii) if reasonably determined in good faith by the Administrator prior to the occurrence of the Change in Control, vested Awards, and such Award shall be honored or assumed, or new rights substituted therefor following the Change in Control (such honored, assumed or substituted award, an “Alternative Award”), provided that any Alternative Award must (x) give the Participant who held such Award rights and entitlements substantially equivalent to or better than the rights and terms applicable under such Award immediately prior to the Change in Control, including, without limitation, an identical or better schedule as to vesting and/or exercisability and that Alternative Awards that are stock options have identical or better methods of payment of the exercise price thereof; (y) as to any service-based vesting requirement applicable to the Award, provide for full vesting of the Alternative Award, if within twelve (12) months following a Change in Control, the Participant’s employment or service is terminated by the Company without Cause or by the Participant for Good Reason during the remaining vesting period thereof; and (z) as to any performance-based vesting requirement applicable to the Award, provide for vesting of the Alternative Award at target levels, if within twelve (12) months following a Change in Control, the Participant’s employment or service is terminated by the Company without Cause or by the Participant for Good Reason during the remaining vesting period thereof. If the Administrator determines in connection with a Change in Control that performance-based vesting requirements applicable to an Award will no longer operate as intended following the Change in Control or will no longer provide the intended incentive, the Administrator may modify such performance-based vesting requirements or impose new performance-based vesting requirements so long as the Administrator determines that such modified or new performance-based vesting requirements are not materially more difficult to achieve than the performance-based vesting requirements applicable to the Award immediately prior to the Change in Control, or determine to vest such Awards.
Notwithstanding this Section 14.1, if the securities underlying the Alternative Award are not publicly traded, (i) the acquisition, holding and disposition of the shares underlying the Alternative Award may be subject to such terms and conditions as are established by the Administrator prior to the Change in Control and (ii) the Company or the acquiror in such Change in Control shall be required to repurchase any vested Alternative Awards or securities underlying such Alternative Awards following termination of employment (other than termination for Cause or other circumstances resulting in the forfeiture of such Alternative Awards in accordance with Section 13.2 or an applicable award agreement) for cash or marketable securities equal to the fair market value of the securities subject to such Alternative Award on the effective date of termination (and, in the case of Alternative Awards that are stock
options or stock appreciation rights, in excess of the exercise price or base price that the Participant would be required to pay in respect of such Alternative Award).
Section 14.2Settlement. Except as otherwise provided in this Article XIV or in an Award Agreement or thereafter on terms more favorable to a Participant, if the Administrator reasonably determines in good faith, prior to the occurrence of a Change in Control, that no Alternative Awards will (or should) be provided upon a Change in Control:
(a) each unvested Award (other than Performance Awards and freestanding Dividend Equivalents not granted in connection with another Award) shall vest;
(b) each outstanding Option and SAR shall be canceled in exchange for a payment equal to the excess, if any, of the Change in Control Price over the applicable Option Price or Base Price;
(c) Shares underlying all Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units, and other Stock-Based Awards that are vested (as provided in this Section 14.2 or otherwise) shall be issued or released to the Participant holding such Award, except to the extent that the Administrator has determined, in accordance with authority granted to it by the Plan or the applicable Award Agreement to settle such Award in cash in lieu of shares;
(d) Each outstanding unvested Performance Award shall be cancelled without payment therefor, unless otherwise provided in the individual Award Agreement governing such Performance Award or determined by the Administrator; and
(e) all freestanding Dividend Equivalents not granted in connection with another Award shall be cancelled without payment therefor.
To the extent any portion of the Change in Control Price is payable other than in cash and/or other than at the time of the Change in Control, Award holders under the Plan shall receive the same value in respect of their Awards (less any applicable exercise price, Base Price or similar feature) as is received by the Company’s stockholders in respect of their Company Common Stock (as determined by the Administrator), and the Administrator shall determine the extent to which such value shall be paid in cash, in securities or other property, or in a combination of cash and securities or other property, consistent with Applicable Law. To the extent any portion of the Change in Control Price is payable other than at the time of the Change in Control, the Administrator shall determine the time and form of payment to the holders of Award consistent with Section 409A of the Code and other Applicable Laws. For avoidance of doubt, upon a Change in Control the Administrator may cancel Options and SARs for no consideration if the aggregate Fair Market Value of the Shares subject to Options and SARs is less than or equal to the Option Price of such Options or the Base Price of such SARs.
Section 14.3Section 409A. Notwithstanding the discretion in Sections 14.1 and 14.2, if any Award is subject to Section 409A of the Code and an Alternative Award would be deemed a non-compliant modification of such Award under Section 409A of the Code, then no Alternative Award shall be provided and such Award shall instead be treated as provided in Section 14.2 or in the Award Agreement (or in such other manner determined by the Administrator that is a compliant modification under Section 409A of the Code).
ARTICLE XV
OTHER PROVISIONS
Section 15.1Awards Not Transferable. Unless otherwise approved by the Administrator, no Award or interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law, by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section
15.1 shall prevent transfers by will or by the applicable laws of descent and distribution or, with the prior approval of the Company’s General Counsel or the Administrator, estate planning transfers.
Section 15.2Amendment, Suspension or Termination of the Plan or Award Agreements.
(a) The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator; provided that without the approval by a majority of the shares entitled to vote at a duly constituted meeting of shareholders of the Company, no amendment or modification to the Plan may (i) except as otherwise expressly provided in Section 4.1(a) or Section 4.2, increase the number of Shares subject to the Plan, (ii) modify the class of persons eligible for participation in the Plan; (iii) modify the prohibition against repricing in Section 4.4; or (iv) materially modify the Plan in any other way that would require shareholder approval under Applicable Law.
(b) Except as otherwise expressly provided in the Plan, neither the amendment, suspension nor termination of the Plan shall, without the consent of the holder of the Award, adversely alter or impair any rights or obligations under any Award theretofore granted.
(c) Notwithstanding any provision of the Plan to the contrary, in no event shall adjustments made by the Administrator pursuant to Section 4.2 or the application of Section 13.2, Section 13.3, Section 14.1, Section 14.2, Section 15.6 or Section 15.12 to any Participant constitute an amendment of the Plan or of any Award Agreement requiring the consent of any Participant.
(d) No Award may be granted during any period of suspension or after termination of the Plan, and in no event may any Award be granted under this Plan after the expiration of ten (10) years from the Effective Date.
Section 15.3Effect of Plan upon Other Award and Compensation Plans. The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company or any of its Subsidiaries. Nothing in this Plan shall be construed to limit the right of the Company or any of the Subsidiaries (a) to establish any other forms of incentives or compensation for Service Providers or (b) to grant or assume options or restricted stock other than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options or restricted stock in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association.
Section 15.4At-Will Employment. Nothing in the Plan or any Award Agreement hereunder shall confer upon the Participant any right to continue as a Service Provider of the Company or any of the Subsidiaries or shall interfere with or restrict in any way the rights of the Company and any of its Subsidiaries, which are hereby expressly reserved, to discharge any Participant at any time for any reason whatsoever, with or without Cause.
Section 15.5Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan.
Section 15.6Conformity to Securities Laws. The Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated under any of the foregoing, to the extent the Company, any of the Subsidiaries or any Participant is subject to the provisions thereof. Notwithstanding anything herein to the contrary, the Plan shall be administered, and Awards shall be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by Applicable Law, the Plan and Awards granted hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
Section 15.7Term of Plan. The Plan shall be effective upon and subject to the approval by the stockholders of the Company in accordance with Applicable Law (the “Effective Date”) and shall continue in effect, unless sooner terminated pursuant to Section 15.2, until the day immediately preceding the tenth (10th) anniversary of the Effective Date. The provisions of the Plan shall continue thereafter to govern all outstanding Awards.
Section 15.8Governing Law. To the extent not preempted by federal law, the Plan shall be construed in accordance with and governed by the laws of the State of Delaware regardless of the application of rules of conflict of law that would apply the laws of any other jurisdiction. With respect to any claim or dispute related to or arising under the Plan, the Company and each Participant who accepts an Award hereby consent to the exclusive jurisdiction, forum and venue of the state and federal courts located in Cook County, Illinois.
Section 15.9Severability. In the event any portion of the Plan or any action taken pursuant thereto 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 provisions had not been included, and the illegal or invalid action shall be null and void.
Section 15.10Governing Documents. In the event of any express contradiction between the Plan and any Award Agreement or any other written agreement between a Participant and the Company or any Subsidiary that has been approved by the Administrator, the express terms of the Plan shall govern, unless it is expressly specified in such Award Agreement or other written document that such express provision of the Plan shall not apply.
Section 15.11Withholding Taxes. In addition to any rights or obligations with respect to Withholding Taxes under any applicable Award Agreement, this Plan provides that the Company or any Subsidiary employing a Service Provider shall have the right to deduct and withhold from the Service Provider, or otherwise require the Service Provider or an assignee to pay to the Company or any such Subsidiary, any Withholding Taxes arising out of or due as a result of the grant, exercise, vesting, settlement or transfer of any Award or any other event occurring pursuant to the Plan or any Award Agreement, that may give rise to a Withholding Tax obligation. The Company and any such Subsidiary shall be entitled, without limitation to deduct any amount the Company determines constitutes the applicable Withholding Taxes from any payment of any kind or from any amount otherwise due to the Service Provider or to take such other actions (including, without limitation and in the sole discretion of the Company, withholding cash deliverable pursuant to any Award, delivery of previously owned Shares, net settlement, a broker-assisted sale, or other cashless withholding or reduction of the amount of Shares otherwise issuable or delivered pursuant to the Award) as the Company may determine is necessary to satisfy all or any portion of such Withholding Taxes; provided, however, that in the event that the Company withholds Shares issued or issuable to the Participant to satisfy all or any portion of the Withholding Taxes, the Company shall withhold a number of whole Shares having a Fair Market Value, determined as of the date of withholding, that shall satisfy the maximum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid liability award accounting); and provided, further, that with respect to any Award subject to Section 409A of the Code, in no event shall Shares be withheld pursuant to this Section 15.11 (other than upon or immediately prior to settlement in accordance with the Plan and the applicable Award Agreement) other than to pay taxes imposed under FICA and any associated U.S. federal withholding tax imposed under Section 3401 of the Code and in no event shall the value of such Shares (other than upon immediately prior to settlement) exceed the amount of the tax imposed under FICA and any associated U.S. federal withholding tax imposed under Section 3401 of the Code. For the avoidance of doubt, the Company (or the Administrator) shall not be obligated to withhold Shares otherwise deliverable to a Participant to satisfy any applicable Withholding Taxes. Notwithstanding the Company’s ability deduct and withhold Withholding Taxes, Participant shall in all cases be and remain responsible for all Participant taxes and any tax consequences of any Award.
Section 15.12Section 409A. It is the general intention, but not the obligation, of the Administrator to design Awards to comply with or to be exempt from Section 409A of the Code, and Awards will be operated and construed accordingly. Neither this Section 15.12 nor any other provision of the Plan is or contains a representation to any Participant regarding the tax consequences of the grant, vesting, exercise, settlement, or sale of any Award (or the Shares underlying such Award) granted hereunder, and should not be interpreted as such. In no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with Section 409A of the Code. To the extent that the Administrator determines that any Award is subject to Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate any terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan and Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such
regulations or other guidance that may be issued after the adoption of the Plan. Notwithstanding any provision of the Plan to the contrary, in the event that following the adoption of the Plan, the Administrator determines that any Award may be subject to Section 409A of the Code and related regulations and Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the adoption of the Plan), the Administrator may adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance or (c) comply with any correction procedures available with respect to Section 409A of the Code. Notwithstanding anything else contained in this Plan or any Award Agreement to the contrary, if a Service Provider is a “specified employee” as determined pursuant to Section 409A of the Code under any Company Specified Employee policy in effect at the time of the Service Provider’s “separation from service” (as determined under Section 409A of the Code) or, if no such policy is in effect, as defined in Section 409A of the Code), then, to the extent necessary to comply with, and avoid imposition on such Service Provider of any tax penalty imposed under, Section 409A of the Code, any payment required to be made to a Service Provider hereunder upon or following his or her separation from service shall be delayed until the first to occur of (i) the six (6)-month anniversary of the Service Provider’s separation from service and (ii) the Service Provider’s death. Should payments be delayed in accordance with the preceding sentence, the accumulated payment that would have been made but for the period of the delay shall be paid in a single lump sum during the ten (10)-day period following the lapsing of the delay period. No provision of this Plan or an Award Agreement shall be construed to indemnify any Service Provider for any taxes incurred by reason of Section 409A of the Code (or timing of incurrence thereof), other than an express indemnification provision therefor.
Section 15.13Notices. Except as provided otherwise in an Award Agreement, all notices and other communications required or permitted to be given under this Plan or any Award Agreement shall be in writing and shall be deemed to have been given if delivered personally, sent by email or any other form of electronic transfer approved by the Administrator, sent by certified or express mail, return receipt requested, postage prepaid, or by any recognized international equivalent of such delivery, (i) in the case of notices and communications to the Company, to its current business address and to the attention of the General Counsel of the Company or (ii) in the case of a Participant, to the last known address, or email address or, where the individual is an employee of the Company or one of its subsidiaries, to the individual’s workplace address or email address or by other means of electronic transfer acceptable to the Administrator. All such notices and communications shall be deemed to have been received on the date of delivery, if sent by email or any other form of electronic transfer, at the time of dispatch or on the third business day after the mailing thereof.
Section 15.14Beneficiary Designation. Each Participant under the Plan may from time to time pursuant to procedures approved by the Company name any beneficiary or beneficiaries by whom any right under the Plan is to be exercised in case of such Participant’s death.
Section 15.15Establishment of Sub-plans. The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable blue sky, securities or tax laws of various jurisdictions. The Board shall establish such sub-plans by adopting supplements to the Plan setting forth (i) such limitations on the Administrator’s discretion under the Plan as the Board deems necessary or desirable and (ii) such additional terms and conditions not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable. All supplements adopted by the Board shall be deemed to be part of the Plan, but each supplement shall apply only to Participants within the affected jurisdiction and the Employer shall not be required to provide copies of any supplement to Participants in any jurisdiction that is not affected.
Section 15.16Funding of the Plan; Limitation on Rights. This Plan shall be unfunded. Neither the Company nor any other Employer shall be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Awards under this Plan. No Participant or any other person shall under any circumstances acquire any property interest in any specific assets of the Company or any Subsidiary. To the extent that any person acquires a right to receive payment from the Company hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company.