Exhibit 99.1
HALOZYME THERAPEUTICS, INC.
2008 OUTSIDE DIRECTORS STOCK PLAN
1.
Establishment, Purpose and Term of Plan
.
1.1
Establishment
.
The Halozyme Therapeutics, Inc. 2008 Outside Directors Stock Plan (the
Plan
) is adopted by the Board of Directors as of March 13, 2008 (the
Effective Date
). Upon
approval of the Plan by the stockholders of the Company and upon the issuance of automatic grants
from the 2005 Outside Directors Stock Plan (the
Predecessor Plan
) following the 2008 Annual
Meeting, the Predecessor Plan shall be terminated and no further Awards shall be granted
thereunder.
1.2
Purpose
.
The purpose of the Plan is to advance the interests of the Company and its
stockholders by providing an incentive to attract, retain and reward persons performing services as
Outside Directors of the Company and by motivating such persons to contribute to the growth and
profitability of the Company. The Plan seeks to achieve this purpose by providing Awards in the
form of Restricted Stock.
1.3
Term of Plan.
The Plan shall continue in effect until terminated by the Board or the date
on which all of the shares of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements evidencing Awards
granted under the Plan have lapsed. However, all Awards shall be granted, if at all, within ten
(10) years from the Effective Date.
2.
Definitions and Construction
.
2.1
Definitions.
Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a)
Annual Meeting
means an annual meeting of the Companys stockholders at which directors
are elected.
(b)
Award
means any Restricted Stock granted under the Plan.
(c)
Award Agreement
means a written agreement between the Company and a Participant setting
forth the terms, conditions and restrictions of the Award granted to the Participant.
(d)
Board
means the Board of Directors of the Company. If one or more Committees have been
appointed by the Board to administer the Plan,
Board
also means such Committee(s).
(e)
Change in Control
means, unless such term or an equivalent term is otherwise defined
with respect to an Award by the Participants Award Agreement or written contract of employment or
service, the occurrence of any of the following:
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(i) an Ownership Change Event or series of related Ownership Change Events (collectively, a
Transaction
) in which the stockholders of the Company immediately before the Transaction do not
retain immediately after the Transaction direct or indirect beneficial ownership of more than fifty
percent (50%) of the total combined voting power of the outstanding securities entitled to vote
generally in the election of Directors or, in the case of an Ownership Change Event described in
Section 2.1(q)(iii), the entity to which the assets of the Company were transferred (the
Transferee
), as the case may be; or
(ii) a liquidation or dissolution of the Company;
provided, however, that a Change in Control shall be deemed not to include a transaction described
in subsection (i) of this Section 2(e) in which a majority of the members of the board of directors
of the continuing, surviving or successor entity, or parent thereof, immediately after such
transaction is comprised of Incumbent Directors. Notwithstanding the foregoing, to the extent that
any amount constituting deferred compensation subject to and not exempted from the requirements of
Section 409A of the Code would become payable under this Plan by reason of a Change in Control,
such amount shall become payable only if the event constituting a Change in Control would also
constitute a change in ownership or effective control of the Company or a change in the ownership
of a substantial portion of the assets of the Company within the meaning of Section 409A.
For purposes of the preceding sentence, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting securities of one or more
corporations or other business entities which own the Company or the Transferee, as the case may
be, either directly or through one or more subsidiary corporations or other business entities. The
Committee shall determine whether multiple sales or exchanges of the voting securities of the
Company or multiple Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
(f)
Code
means the Internal Revenue Code of 1986, as amended, and any applicable regulations
promulgated thereunder.
(g)
Committee
means the compensation committee or other committee of one or members of the
Board duly appointed to administer the Plan and having such powers as shall be specified by the
Board. Unless the powers of the Committee have been specifically limited, the Committee shall have
all of the powers of the Board granted herein, including, without limitation, the power to amend or
terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations
imposed by law.
(h)
Company
means Halozyme Therapeutics, Inc. a Delaware corporation, or any successor
corporation thereto.
(i)
Consultant
means a person engaged to provide consulting or advisory services (other than
as an Employee or a Director) to a Participating Company.
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(j)
Director
means a member of the Board or of the board of directors of any other Parent
Corporation or Subsidiary Corporation.
(k)
Disability
means the permanent and total disability of the Participant within the
meaning of Section 22(e)(3) of the Code.
(l)
Employee
means any person treated as an employee (including an officer of the Company or
a Director who is also treated as an employee) in the records of a Participating Company; provided,
however, that neither service as a Director nor payment of a directors fee shall be sufficient to
constitute employment for purposes of the Plan.
(m)
Exchange Act
means the Securities Exchange Act of 1934, as amended.
(n)
Fair Market Value
means, as of any date, the value of a share of Stock or other property
as determined by the Board, in its discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein, subject to the following:
(i) If, on such date, the Stock is listed on a national or regional securities exchange or
market system, the Fair Market Value of a share of Stock shall be the closing price of a share of
Stock (or the closing bid price of a share of Stock if the Stock is so quoted instead) as quoted on
the NASDAQ Global Market or such other national or regional securities exchange or market system
constituting the primary market for the Stock, as reported in
The Wall Street Journal
or
such other source as the Company deems reliable. If the relevant date does not fall on a day on
which the Stock has traded on such securities exchange or market system, the date on which the Fair
Market Value shall be established shall be the last day on which the Stock was so traded prior to
the relevant date, or such other appropriate day as shall be determined by the Board, in its
discretion.
(ii) Notwithstanding the foregoing, the Board may, in its discretion, determine the Fair
Market Value on the basis of the opening, closing, high, low or average sale price of a share of
Stock or the actual sale price of a share of Stock received by a Participant, on such date, the
preceding trading day or the next succeeding trading day or an average determined over a period of
trading days. The Board may vary its method of determination of the Fair Market Value as provided
in this Section for different purposes under the Plan.
(iii) If, on such date, the Stock is not listed on a national or regional securities exchange
or market system, the Fair Market Value of a share of Stock shall be as determined by the Board in
good faith without regard to any restriction other than a restriction which, by its terms, will
never lapse.
(o)
Incumbent Director
means a director who either (i) is a member of the Board as of the
Effective Date or (ii) is elected, or nominated for election, to the Board with the affirmative
votes of at least a majority of the Incumbent Directors at the time of such
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election or nomination, but who was not elected or nominated in connection with an actual or
threatened proxy contest relating to the election of directors of the Company.
(p)
Outside Director
means a Director of the Company who is not an Employee or Consultant
and who has not been an Employee or Consultant during the preceding twelve months.
(q)
Ownership Change Event
means the occurrence of any of the following with respect to the
Company: (i) the direct or indirect sale or exchange in a single or series of related transactions
by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the
Company; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale,
exchange, or transfer of all or substantially all of the assets of the Company (other than a sale,
exchange or transfer to one or more subsidiaries of the Company).
(r)
Parent Corporation
means any present or future parent corporation of the Company, as
defined in Section 424(e) of the Code.
(s)
Participant
means a person who has been granted one or more Awards.
(t)
Participating Company
means the Company or any Parent Corporation or Subsidiary
Corporation.
(u)
Participating Company Group
means, at any point in time, all corporations collectively
which are then Participating Companies.
(v)
Restricted Stock
means Stock granted to a Participant pursuant to Section 6 of the Plan.
(w)
Rule 16b-3
means Rule 16b-3 under the Exchange Act, as amended from time to time, or any
successor rule or regulation.
(x)
Securities Act
means the Securities Act of 1933, as amended.
(y)
Service
means a Participants employment or service with the Participating Company
Group, whether in the capacity of an Employee, a Director, or a Consultant. A Participants
Service shall not be deemed to have terminated merely because of a change in the capacity in which
the Participant renders Service to the Participating Company Group or a change in the Participating
Company for which the Participant renders such Service, provided that there is no interruption or
termination of the Participants Service. Furthermore, a Participants Service shall not be deemed
to have terminated if the Participant takes any military leave, sick leave, or other bona fide
leave of absence approved by the Company. A Participants Service shall be deemed to have
terminated either upon an actual termination of Service or upon the corporation for which the
Participant performs Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its discretion, shall determine whether a Participants Service has terminated and the
effective date of such termination.
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(z)
Stock
means the common stock of the Company, as adjusted from time to time in accordance
with Section 4.2.
(aa)
Subsidiary Corporation
means any present or future subsidiary corporation of the
Company, as defined in Section 424(f) of the Code.
(bb)
Vesting Conditions
mean those conditions established in accordance with Section 6 of
the Plan prior to the satisfaction of which shares of Restricted Stock remain subject to forfeiture
to the Company upon the Participants termination of Service.
2.2
Construction.
Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated
by the context, the singular shall include the plural and the plural shall include the singular.
Use of the term or is not intended to be exclusive, unless the context clearly requires
otherwise.
3.
Administration
.
3.1
Administration by the Board.
The Plan shall be administered by the Board. All questions
of interpretation of the Plan or of any Award shall be determined by the Board, and such
determinations shall be final and binding upon all persons having an interest in the Plan or such
Award.
3.2
Authority of Officers.
Any officer of the Company shall have the authority to act on
behalf of the Company with respect to any matter, right, obligation, determination or election
which is the responsibility of or which is allocated to the Company herein, provided the officer
has been delegated such authority by the Board with respect to such matter, right, obligation,
determination or election.
3.3
Powers of the Board
.
In addition to any other powers set forth in the Plan and subject to
the provisions of the Plan, the Board shall have the full and final power and authority, in its
discretion:
(a) to determine the Fair Market Value of shares of Stock or other property;
(b) to determine the terms, conditions and restrictions applicable to each Award (which need
not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the
purchase price of shares purchased pursuant to any Award, (ii) the method of payment for shares
purchased pursuant to any Award, (iii) the timing, terms and conditions of the vesting of any Award
or any shares acquired pursuant thereto, (iv) the time of the expiration of any Award, (v) the
effect of the Participants termination of Service on any of the foregoing, and (vi) all other
terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto not
inconsistent with the terms of the Plan;
(c) to approve one or more forms of Award Agreement;
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(d) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or
conditions applicable to any Award or any shares acquired pursuant thereto;
(e) to accelerate, continue, extend or defer the vesting of any Award or any shares acquired
pursuant thereto, including with respect to the period following a Participants termination of
Service;
(f) to prescribe, amend or rescind rules, guidelines and policies relating to the plan, or to
adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without
limitation, as the Board deems necessary or desirable to comply with the laws or regulations of or
to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose
citizens may be granted Awards; and
(g) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or
any Award Agreement and to make all other determinations and take such other actions with respect
to the Plan or any Award as the Board may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law.
3.4
Indemnification.
In addition to such other rights of indemnification as they may have as
members of the Board or Officers or employees of the Company, members of the Board and any Officers
or employees of the Company to whom authority to act for the Board or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including attorneys fees,
actually and necessarily incurred in connection with the defense of any action, suit or proceeding,
or in connection with any appeal therein, to which they or any of them may be a party by reason of
any action taken or failure to act under or in connection with the Plan, or any right granted
hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad
faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the
institution of such action, suit or proceeding, such person shall offer to the Company, in writing,
the opportunity at its own expense to handle and defend the same.
4.
Shares Subject to Plan
.
4.1
Maximum Number of Shares Issuable.
Subject to adjustment as provided in Section 4.2, the
maximum aggregate number of shares of Stock that may be issued under the Plan shall be Six Hundred
Thousand (600,000) shares. Shares issuable under this Plan shall consist of authorized but
unissued or reacquired shares of Stock or any combination thereof. If shares of Stock acquired
pursuant to an Award subject to forfeiture are forfeited, the shares of Stock allocable to such
forfeiture shall again be available for issuance under the Plan.
4.2
Adjustments for Changes in Capital Structure
.
Subject to any required action by the
stockholders of the Company, in the event of any change in the Stock effected without receipt of
consideration by the Company, whether through merger, consolidation, reorganization,
reincorporation, recapitalization, reclassification, stock dividend, stock split,
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reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares,
or similar change in the capital structure of the Company, or in the event of payment of a dividend
or distribution to the stockholders of the Company in a form other than Stock (excepting normal
cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate
adjustments shall be made in the number and kind of shares subject to the Plan and to any
outstanding Awards and in the number and kind of shares subject to the automatic grants provided
under Section 6.1. For purposes of the foregoing, conversion of any convertible securities of the
Company shall not be treated as effected without receipt of consideration by the Company. Any
fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to
the nearest whole number, and in no event may the purchase price under any Award be decreased to an
amount less than the par value, if any, of the stock subject to such Award. The adjustments
determined by the Board pursuant to this Section 4.2 shall be final, binding and conclusive.
5.
Eligibility
.
Awards shall be granted only to those persons who, at the time of grant, are serving as
Outside Directors.
6.
Terms and Conditions of Restricted Stock Awards
.
Restricted Stock Awards shall be evidenced by Award Agreements specifying the number of shares
of Stock subject to the Award, in such form as the Board shall from time to time establish. No
Restricted Stock Award or purported Restricted Stock Award shall be a valid and binding obligation
of the Company unless evidenced by a fully executed Award Agreement. Award Agreements evidencing
Restricted Stock may incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:
6.1
Automatic Grant.
Subject to (i) the approval of the Plan by the stockholders of the
Company at the 2008 Annual Meeting and (ii) the execution by an Outside Director of an appropriate
Award Agreement, Restricted Stock Awards shall be granted automatically and without further action
of the Board, as follows:
(a)
Initial Restricted Stock Award
. Each person who first becomes an Outside Director after
the date of the 2008 Annual Meeting shall be granted on the date such person first becomes an
Outside Director a Restricted Stock Award for Twenty Thousand (20,000) shares of Stock (an
Initial
Stock Award
).
(b)
Annual Restricted Stock Award.
Immediately following the 2009 Annual Meeting, and each
subsequent Annual Meeting for so long as a sufficient amount of shares are available to grant the
automatic Awards described in this Plan to all Outside Directors, each Outside Director shall
automatically be granted a Restricted Stock Award for Twenty Thousand (20,000) shares of Stock (an
Annual Stock Award
); provided, however, that an Outside Director who has not served on the Board
for six (6) full months prior to the date of such Board meeting shall not be granted an Annual
Stock Award.
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(c)
Right to Decline Restricted Stock Award.
Notwithstanding the foregoing, any person may
elect not to receive a Restricted Stock Award by delivering written notice of such election to the
Board no later than the day prior to the date such Restricted Stock would otherwise be granted. A
person so declining a Restricted Stock Award shall receive no payment or other consideration in
lieu of such declined Restricted Stock. A person who has declined a Restricted Stock Award may
revoke such election by delivering written notice of such revocation to the Board no later than the
day prior to the date such Restricted Stock would be granted pursuant to Section 6.1(a) or (b), as
the case may be.
6.2
Purchase Price.
No monetary payment shall be required as a condition of receiving shares
of Restricted Stock, the consideration for which shall be services actually rendered to a
Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable
law, the Participant shall furnish consideration in the form of cash or past services rendered to a
Participating Company or for its benefit having a value not less than the par value of the shares
of Restricted Stock subject to such Award.
6.3
Vesting Conditions and Restrictions on Transfer
.
Except as otherwise provided in the Plan
or in the Award Agreement evidencing a Restricted Stock Award and provided that the Participants
Service has not terminated prior to the relevant date, each Restricted Stock Award shall be subject
to the Vesting Conditions as follows:
(a)
Initial Stock Award
. The Initial Stock Award shall vest and no longer be subject to
forfeiture with respect to the total number of shares subject thereto on the later of: (a) the
first day that Participant may trade Company stock in compliance with the Companys Insider Trading
Policy that occurs after the six-month anniversary of the date of grant or (b) the first day that
Participant may trade Company stock in compliance with the Companys Insider Trading Policy that
occurs after the date of the first Annual Meeting following the grant of the Initial Stock Award.
(b)
Annual Stock Award
: The Annual Stock Award shall vest and no longer be subject to
forfeiture with respect to the total number of shares subject thereto on the first day that
Participant may trade Company stock in compliance with the Companys Insider Trading Policy that
occurs after the date immediately preceding the date of the Annual Meeting following the date of
grant.
At any time the shares acquired pursuant to a Restricted Stock Award remain subject to Vesting
Conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise
disposed of other than pursuant to an Ownership Change Event or as provided in Section 6.6 below.
Upon request by the Company, each Participant shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Restricted Stock hereunder and shall promptly
present to the Company any and all certificates representing shares of Restricted Stock acquired
hereunder for the placement on such certificates of appropriate legends evidencing any such
transfer restrictions.
6.4
Voting Rights; Dividends and Distributions.
Except as provided in this Section,
Section 6.3 and any Award Agreement, during the period in which shares subject to a
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Restricted Stock Award are subject to Vesting Conditions, the Participant shall have all of
the rights of a stockholder of the Company holding shares of Stock, including the right to vote
such shares and to receive all dividends and other distributions paid with respect to such shares.
However, in the event of a dividend or distribution paid in shares of Stock or any other adjustment
made upon a change in the capital structure of the Company as described in Section 4.2, then any
and all new, substituted or additional securities or other property (other than normal cash
dividends) to which the Participant is entitled by reason of the Participants Restricted Stock
Award shall be immediately subject to the same Vesting Conditions as the shares subject to the
Restricted Stock Award with respect to which such dividends or distributions were paid or
adjustments were made.
6.5
Effect of Termination of Service.
Unless otherwise provided by the Board in the grant of
a Restricted Stock Award and set forth in the Award Agreement, if a Participants Service
terminates for any reason, whether voluntary or involuntary (including the Participants death or
Disability), then the Participant shall forfeit to the Company any shares acquired by the
Participant pursuant to a Restricted Stock Award which remain subject to Vesting Conditions as of
the date of the Participants termination of Service.
6.6
Nontransferability of Restricted Stock Award Rights.
Prior to the issuance of shares of
Stock pursuant to a Restricted Stock Award, rights to acquire such shares shall not be subject in
any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance
or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by
will or the laws of descent and distribution.
7.
Standard Forms of Award Agreement
.
7.1
Award Agreement
.
Each Award shall comply with and be subject to the terms and conditions
set forth in the appropriate form of Award Agreement approved by the Board and as amended from time
to time. Any Award Agreement may consist of an appropriate form of Notice of Grant and a form of
Agreement incorporated therein by reference, or such other form or forms as the Board may approve
from time to time.
7.2
Authority to Vary Terms
.
The Board shall have the authority from time to time to vary the
terms of any standard form of Award Agreement either in connection with the grant or amendment of
an individual Award or in connection with the authorization of a new standard form or forms;
provided, however, that the terms and conditions of any such new, revised or amended standard form
or forms of Award Agreement are not inconsistent with the terms of the Plan.
8.
Change in Control
.
Notwithstanding any other provision of the Plan to the contrary, in the event of a Change in
Control, the lapsing of any Vesting Conditions applicable to the shares subject to the Restricted
Stock Award held by a Participant whose Service has not terminated prior to such date shall be
accelerated effective immediately prior to the consummation of the Change in Control. Any
acceleration of the lapsing of any Vesting Conditions that was permissible solely by reason
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of this Section 8.2 and the provisions of such Award Agreement shall be conditioned upon the
consummation of the Change in Control.
9.
Compliance with Securities Law
.
The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject
to compliance with all applicable requirements of federal, state and foreign law with respect to
such securities and the requirements of any stock exchange or market system upon which the Stock
may then be listed. In addition, no shares may be issued pursuant to an Award unless (i) a
registration statement under the Securities Act shall at the time of such issuance be in effect
with respect to the shares issuable pursuant to the Award or (ii) in the opinion of legal counsel
to the Company, the shares issuable pursuant to the Award may be issued in accordance with the
terms of an applicable exemption from the registration requirements of the Securities Act. The
inability of the Company to obtain from any regulatory body having jurisdiction the authority, if
any, deemed by the Companys legal counsel to be necessary to the lawful issuance and sale of any
shares hereunder shall relieve the Company of any liability in respect of the failure to issue or
sell such shares as to which such requisite authority shall not have been obtained. As a condition
to issuance of any Stock, the Company may require the Participant to satisfy any qualifications
that may be necessary or appropriate, to evidence compliance with any applicable law or regulation
and to make any representation or warranty with respect thereto as may be requested by the Company.
10.
Termination or Amendment of Plan
.
The Board may amend, suspend or terminate the Plan at any time. However, without the approval
of the Companys stockholders, there shall be (a) no increase in the maximum aggregate number of
shares of Stock that may be issued under the Plan (except by operation of the provisions of
Section 4.2), and (b) no other amendment of the Plan that would require approval of the Companys
stockholders under any applicable law, regulation or rule. No amendment, suspension or termination
of the Plan shall affect any then outstanding Award unless expressly provided by the Board. In any
event, no amendment, suspension or termination of the Plan may adversely affect any then
outstanding Award without the consent of the Participant unless necessary to comply with any
applicable law, regulation or rule.
11.
Miscellaneous Provisions
.
11.1
Rights as Outside Director.
Nothing in the Plan or any Award granted under the Plan, nor
any action taken pursuant to the Plan, shall (a) confer on any Participant a right to remain an
Outside Director or to continue in the Service of the Company in any capacity for any period of
time or at a particular retainer or other rate of compensation, or interfere with or limit in any
way any right of a Participating Company to terminate the Participants Service at any time, and
(b) limit, interfere with, or otherwise affect the provisions of the Companys charter, bylaws or
the Delaware General Corporation Law relating to the removal of Directors.
11.2
Fractional Shares.
The Company shall not be required to issue fractional shares upon the
settlement of any Award.
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11.3
Beneficiary Designation.
Subject to local laws and procedures, each Participant may file
with the Company a written designation of a beneficiary who is to receive any benefit under the
Plan to which the Participant is entitled in the event of such Participants death before he or she
receives any or all of such benefit. Each designation will revoke all prior designations by the
same Participant, shall be in a form prescribed by the Company, and will be effective only when
filed by the Participant in writing with the Company during the Participants lifetime. If a
married Participant designates a beneficiary other than the Participants spouse, the effectiveness
of such designation may be subject to the consent of the Participants spouse, if required by
applicable law or the Company. If a Participant dies without an effective designation of a
beneficiary who is living at the time of the Participants death, the Company will pay any
remaining unpaid benefits to the Participants legal representative.
11.4
Rights as a Stockholder.
A Participant shall have no rights as a stockholder with
respect to any shares covered by an Award until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions or other rights
for which the record date is prior to the date such shares are issued, except as provided in
Section 4.2 or another provision of the Plan.
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PLAN HISTORY
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March 13, 2008
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Board adopts 2008 Outside Directors Stock Plan (Plan)
effective as of the Effective Date, with an initial
reserve of 600,000 shares.
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May [___], 2008
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Stockholders approve Plan at Annual Meeting.
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Exhibit 99.2
Halozyme Therapeutics, Inc.
2008 Stock Plan
TABLE OF CONTENTS
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Page
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1.
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Establishment, Purpose and Term of Plan
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1
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1.1
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Establishment
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1
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1.2
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Purpose
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1
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1.3
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Term of Plan
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1
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2.
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Definitions and Construction
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1
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2.1
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Definitions
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1
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2.2
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Construction
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7
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3.
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Administration
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7
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3.1
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Administration by the Committee
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7
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3.2
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Authority of Officers
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7
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3.3
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Committee Complying with Section 162(m)
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7
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3.4
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Powers of the Committee
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7
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3.5
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Indemnification
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9
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3.6
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Arbitration
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|
|
9
|
|
|
|
|
3.7
|
|
Repricing and Reloading Prohibited
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
4.
|
|
Shares Subject to Plan
|
|
|
9
|
|
|
|
|
4.1
|
|
Maximum Number of Shares Issuable
|
|
|
9
|
|
|
|
|
4.2
|
|
Adjustments for Changes in Capital Structure
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
5.
|
|
Eligibility and Award Limitations
|
|
|
10
|
|
|
|
|
5.1
|
|
Persons Eligible for Awards
|
|
|
10
|
|
|
|
|
5.2
|
|
Participation
|
|
|
10
|
|
|
|
|
5.3
|
|
Incentive Stock Option Limitations
|
|
|
11
|
|
|
|
|
5.4
|
|
Award Limits
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
6.
|
|
Terms and Conditions of Options
|
|
|
12
|
|
|
|
|
6.1
|
|
Exercise Price
|
|
|
12
|
|
|
|
|
6.2
|
|
Exercisability and Term of Options
|
|
|
13
|
|
|
|
|
6.3
|
|
Payment of Exercise Price
|
|
|
13
|
|
|
|
|
6.4
|
|
Effect of Termination of Service
|
|
|
13
|
|
|
|
|
6.5
|
|
Transferability of Options
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
7.
|
|
Terms and Conditions of Stock Appreciation Rights
|
|
|
14
|
|
-i-
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
7.1
|
|
Types of SARs Authorized
|
|
|
14
|
|
|
|
|
7.2
|
|
Exercise Price
|
|
|
14
|
|
|
|
|
7.3
|
|
Exercisability and Term of SARs
|
|
|
14
|
|
|
|
|
7.4
|
|
Deemed Exercise of SARs
|
|
|
15
|
|
|
|
|
7.5
|
|
Effect of Termination of Service
|
|
|
15
|
|
|
|
|
7.6
|
|
Nontransferability of SARs
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
8.
|
|
Terms and Conditions of Stock Awards
|
|
|
15
|
|
|
|
|
8.1
|
|
Types of Restricted Stock Awards Authorized
|
|
|
15
|
|
|
|
|
8.2
|
|
Purchase Price
|
|
|
15
|
|
|
|
|
8.3
|
|
Purchase Period
|
|
|
16
|
|
|
|
|
8.4
|
|
Vesting and Restrictions on Transfer
|
|
|
16
|
|
|
|
|
8.5
|
|
Voting Rights; Dividends and Distributions
|
|
|
16
|
|
|
|
|
8.6
|
|
Effect of Termination of Service
|
|
|
16
|
|
|
|
|
8.7
|
|
Nontransferability of Restricted Stock Award Rights
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
9.
|
|
Terms and Conditions of Performance Awards
|
|
|
17
|
|
|
|
|
9.1
|
|
Types of Performance Awards Authorized
|
|
|
17
|
|
|
|
|
9.2
|
|
Initial Value of Performance Shares and Performance Units
|
|
|
17
|
|
|
|
|
9.3
|
|
Establishment of Performance Period, Performance Goals and Performance
Award Formula
|
|
|
17
|
|
|
|
|
9.4
|
|
Measurement of Performance Goals
|
|
|
18
|
|
|
|
|
9.5
|
|
Settlement of Performance Awards
|
|
|
18
|
|
|
|
|
9.6
|
|
Voting Rights; Dividend Equivalent Rights and Distributions
|
|
|
19
|
|
|
|
|
9.7
|
|
Effect of Termination of Service
|
|
|
20
|
|
|
|
|
9.8
|
|
Nontransferability of Performance Awards
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
10.
|
|
Terms and Conditions of Restricted Stock Unit Awards
|
|
|
20
|
|
|
|
|
10.1
|
|
Grant of Restricted Stock Unit Awards
|
|
|
20
|
|
|
|
|
10.2
|
|
Vesting
|
|
|
20
|
|
|
|
|
10.3
|
|
Voting Rights, Dividend Equivalent Rights and Distributions
|
|
|
21
|
|
|
|
|
10.4
|
|
Effect of Termination of Service
|
|
|
21
|
|
|
|
|
10.5
|
|
Settlement of Restricted Stock Unit Awards
|
|
|
21
|
|
-ii-
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
10.6
|
|
Nontransferability of Restricted Stock Unit Awards
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
11.
|
|
Effect of Change in Control on Options and SARs
|
|
|
22
|
|
|
|
|
11.1
|
|
Change in Control Transactions
|
|
|
22
|
|
|
|
|
11.2
|
|
Unusual or Nonrecurring Events
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
12.
|
|
Compliance with Securities Law
|
|
|
23
|
|
|
13.
|
|
Tax Withholding
|
|
|
23
|
|
|
|
|
13.1
|
|
Tax Withholding in General
|
|
|
23
|
|
|
|
|
13.2
|
|
Withholding in Shares
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
14.
|
|
Amendment or Termination of Plan
|
|
|
23
|
|
|
15.
|
|
Miscellaneous Provisions
|
|
|
24
|
|
|
|
|
15.1
|
|
Repurchase Rights
|
|
|
24
|
|
|
|
|
15.3
|
|
Rights as Employee, Consultant or Director
|
|
|
24
|
|
|
|
|
15.4
|
|
Rights as a Stockholder
|
|
|
24
|
|
|
|
|
15.5
|
|
Fractional Shares
|
|
|
24
|
|
|
|
|
15.6
|
|
Severability
|
|
|
24
|
|
|
|
|
15.7
|
|
Beneficiary Designation
|
|
|
24
|
|
|
|
|
15.8
|
|
Unfunded Obligation
|
|
|
24
|
|
-iii-
Halozyme Therapeutics, Inc.
2008 Stock Plan
1.
Establishment, Purpose and Term of Plan
.
1.1
Establishment
.
The Halozyme Therapeutics, Inc. 2008 Stock
Plan (the
Plan
) is hereby
adopted March 13, 2008 subject to approval by the stockholders of the Company (the date of such
approval, the
Effective Date
).
1.2
Purpose
.
The purpose of the Plan is to advance the interests of the Participating Company
Group and its stockholders by providing an incentive to attract and retain the best qualified
personnel to perform services for the Participating Company Group, by motivating such persons to
contribute to the growth and profitability of the Participating Company Group, by aligning their
interests with interests of the Companys stockholders, and by rewarding such persons for their
services by tying a significant portion of their total compensation package to the success of the
Company. The Plan seeks to achieve this purpose by providing for Awards in the form of Options,
Stock Appreciation Rights, Stock Awards, Restricted Stock Awards, Performance Shares, Performance
Units, and Restricted Stock Units as described below.
1.3
Term of Plan
. The Plan shall continue in effect until the earlier of its termination by
the Board or the date on which all of the shares of Stock available for issuance under the Plan
have been issued and all restrictions on such shares under the terms of the Plan and the agreements
evidencing Awards granted under the Plan have lapsed. However, Awards shall not be granted later
than March 12, 2018. The Company intends that the Plan comply with Section 409A of the Code
(including any amendments to or replacements of such section), and the Plan shall be so construed.
2.
Definitions and Construction
.
2.1
Definitions
. Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a)
Affiliate
means (i) an entity, other than a Parent Corporation, that directly, or
indirectly through one or more intermediary entities, controls the Company or (ii) an entity, other
than a Subsidiary Corporation, that is controlled by the Company directly, or indirectly through
one or more intermediary entities. For this purpose, the term control (including the term
controlled by) means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of the relevant entity, whether through the ownership of
voting securities, by contract or otherwise; or shall have such other meaning assigned such term
for the purposes of registration on Form S-8 under the Securities Act.
(b)
Award
means any Option, SAR, Stock Award, Restricted Stock Award, Performance Share,
Performance Unit, or Restricted Stock Unit granted under the Plan.
1
(c)
Award Agreement
means a written agreement between the Company and a Participant setting
forth the terms, conditions and restrictions of the Award granted to the Participant.
(d)
Board
means the Board of Directors of the Company.
(e)
Change in Control
means, unless such term or an equivalent term is otherwise defined
with respect to an Award by the Participants Award Agreement or written contract of employment or
service, the occurrence of any of the following:
(i) an Ownership Change Event or series of related Ownership Change Events (collectively, a
Transaction
) in which the stockholders of the Company immediately before the Transaction do not
retain immediately after the Transaction direct or indirect beneficial ownership of more than fifty
percent (50%) of the total combined voting power of the outstanding securities entitled to vote
generally in the election of Directors or, in the case of an Ownership Change Event described in
Section 2.1(y)(iii), the entity to which the assets of the Company were transferred (the
Transferee
), as the case may be; or
(ii) a liquidation or dissolution of the Company;
provided, however, that a Change in Control shall be deemed not to include a transaction described
in subsection (i) of this Section 2.1(e) in which a majority of the members of the board of
directors of the continuing, surviving or successor entity, or parent thereof, immediately after
such transaction is comprised of Incumbent Directors. Notwithstanding the foregoing, to the extent
that any amount constituting deferred compensation subject to and not exempted from the
requirements of Section 409A of the Code would become payable under this Plan by reason of a Change
in Control, such amount shall become payable only if the event constituting a Change in Control
would also constitute a change in ownership or effective control of the Company or a change in the
ownership of a substantial portion of the assets of the Company within the meaning of Section 409A.
For purposes of the preceding sentence, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting securities of one or more
corporations or other business entities which own the Company or the Transferee, as the case may
be, either directly or through one or more subsidiary corporations or other business entities. The
Committee shall determine whether multiple sales or exchanges of the voting securities of the
Company or multiple Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
(f)
Code
means the Internal Revenue Code of 1986, as amended, and any applicable regulations
promulgated thereunder.
(g)
Committee
means the Compensation Committee or other committee of the Board duly
appointed to administer the Plan and having such powers as shall be specified by the Board. If no
committee of the Board has been appointed to administer the Plan,
the Board shall exercise all of the powers of the Committee granted herein, and, in any event,
the Board may in its discretion exercise any or all of such powers. The Committee shall have the
exclusive authority to administer the Plan and shall have all of the powers granted herein,
2
including, without limitation, the power to amend or terminate the Plan at any time, subject to the
terms of the Plan and any applicable limitations imposed by law.
(h)
Company
means Halozyme Therapeutics, Inc., a Delaware corporation, or any Successor.
(i)
Consultant
means a person engaged to provide consulting or advisory services (other than
as an Employee or a member of the Board) to a Participating Company.
(j)
Director
means a member of the Board or of the board of directors of any Participating
Company.
(k)
Disability
means the permanent and total disability of the Participant, within the
meaning of Section 22(e)(3) of the Code.
(l)
Dividend Equivalent
means a credit, made at the discretion of the Committee or as
otherwise provided by the Plan, to the account of a Participant, or a cash payment, in an amount
equal to the cash dividends paid on one share of Stock for each share of Stock represented by an
Award held by such Participant.
(m)
Employee
means any person treated as an employee (including an Officer or a member of
the Board who is also treated as an employee) in the records of a Participating Company and, with
respect to any Incentive Stock Option granted to such person, who is an employee for purposes of
Section 422 of the Code; provided, however, that neither service as a member of the Board nor
payment of a directors fee shall be sufficient to constitute employment for purposes of the Plan.
The Company shall determine in good faith and in the exercise of its discretion whether an
individual has become or has ceased to be an Employee and the effective date of such individuals
employment or termination of employment, as the case may be. For purposes of an individuals
rights, if any, under the Plan as of the time of the Companys determination, all such
determinations by the Company shall be final, binding and conclusive, notwithstanding that the
Company or any court of law or governmental agency subsequently makes a contrary determination.
(n)
Exchange Act
means the Securities Exchange Act of 1934, as amended.
(o)
Fair Market Value
means, as of any date, the value of a share of Stock or other property
as determined by the Committee, in its discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein, subject to the following:
(i) Except as otherwise determined by the Committee, if, on such date, the Stock is listed on
a national or regional securities exchange or market system, the Fair Market Value of a share of
Stock shall be the closing price of a share of Stock as quoted on such national or regional
securities exchange or market system constituting the primary market for the Stock on the day of
determination, as reported in The Wall Street Journal or such other source as the Company deems
reliable.
3
(ii) Notwithstanding the foregoing, the Committee may, in its discretion, determine the Fair
Market Value on the basis of the closing, high, low or average sale price of a share of Stock or
the actual sale price of a share of Stock received by a Participant, on such date, the preceding
trading day, the next succeeding trading day or an average determined over a period of trading
days. The Committee may vary its method of determination of the Fair Market Value as provided in
this Section for different purposes under the Plan.
(iii) If, on such date, the Stock is not listed on a national or regional securities exchange
or market system, the Fair Market Value of a share of Stock shall be as determined by the Committee
in good faith without regard to any restriction other than a restriction which, by its terms, will
never lapse.
(p)
Incentive Stock Option
means an Option intended to be (as set forth in the Award
Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of
the Code.
(q)
"
Incumbent Director
means a director who either (i) is a member of the Board as of the
Effective Date or (ii) is elected, or nominated for election, to the Board with the affirmative
votes of at least a majority of the Incumbent Directors at the time of such election or nomination,
but who was not elected or nominated in connection with an actual or threatened proxy contest
relating to the election of directors of the Company.
(r)
Insider
means an Officer, a Director or any other person whose transactions in Stock are
subject to Section 16 of the Exchange Act.
(s)
Non-Control Affiliate
means any entity in which any Participating Company has an
ownership interest and which the Committee shall designate as a Non-Control Affiliate.
(t)
Nonemployee Director
means a Director who is not an Employee.
(u)
Nonstatutory Stock Option
means an Option not intended to be (as set forth in the Award
Agreement) an incentive stock option within the meaning of Section 422(b) of the Code.
(v)
Officer
means any person designated by the Board as an officer of the Company.
(w)
Option
means the right to purchase Stock at a stated price for a specified period of
time granted to a Participant pursuant to Section 6 of the Plan. An Option may be either an
Incentive Stock Option or a Nonstatutory Stock Option.
(x)
Option Expiration Date
means the date of expiration of the Options term as set forth in
the Award Agreement.
(y)
Ownership Change Event
means the occurrence of any of the following with respect to the
Company: (i) the direct or indirect sale or exchange in a single or
4
series of related transactions
by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the
Company; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale,
exchange, or transfer of all or substantially all of the assets of the Company (other than a sale,
exchange or transfer to one or more subsidiaries of the Company).
(z)
Parent Corporation
means any present or future parent corporation of the Company, as
defined in Section 424(e) of the Code.
(aa)
Participant
means any eligible person who has been granted one or more Awards.
(bb)
Participating Company
means the Company or any Parent Corporation, Subsidiary
Corporation or Affiliate.
(cc)
Participating Company Group
means, at any point in time, all entities collectively
which are then Participating Companies.
(dd)
Performance Award
means an Award of Performance Shares or Performance Units.
(ee)
Performance Award Formula
means, for any Performance Award, a formula or table
established by the Committee pursuant to Section 9.3 of the Plan which provides the basis for
computing the value of a Performance Award at one or more threshold levels of attainment of the
applicable Performance Goal(s) measured as of the end of the applicable Performance Period.
(ff)
Performance Goal
means a performance goal established by the Committee pursuant to
Section 9.3 of the Plan.
(gg)
Performance Period
means a period established by the Committee pursuant to Section 9.3
of the Plan at the end of which one or more Performance Goals are to be measured.
(hh)
Performance Share
means a bookkeeping entry representing a right granted to a
Participant pursuant to Section 9 of the Plan to receive a payment equal to the value of a
Performance Share, as determined by the Committee, based on performance.
(ii)
Performance Unit
means a bookkeeping entry representing a right granted to a
Participant pursuant to Section 9 of the Plan to receive a payment equal to the value of a
Performance Unit, as determined by the Committee, based upon performance.
(jj)
Restricted Stock Award
means an Award of Restricted Stock.
(kk)
Restricted Stock Unit
or
Stock Unit
means a bookkeeping entry representing a right
granted to a Participant pursuant to Section 10 of the Plan to receive a share of Stock on a date
determined in accordance with the provisions of Section 10 and the Participants Award Agreement.
5
(ll)
Restriction
Period
means the period established in accordance with Section 8.4 of the
Plan during which shares subject to a Restricted Stock Award are subject to Vesting Conditions.
(mm)
Rule 16b-3
means Rule 16b-3 under the Exchange Act, as amended from time to time, or
any successor rule or regulation.
(nn)
SAR
or
Stock Appreciation Right
means a bookkeeping entry representing, for each
share of Stock subject to such SAR, a right granted to a Participant pursuant to Section 7 of the
Plan to receive payment in any combination of shares of Stock or cash of an amount equal to the
excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR
over the exercise price.
(oo)
Section
162(m)
means
Section 162(m) of the Code.
(pp)
Securities Act
means the
Securities Act of 1933, as amended.
(qq)
Service
means a Participants employment or service with the Participating Company
Group, whether in the capacity of an Employee, a Director or a Consultant. Unless otherwise
provided by the Committee, a Participants Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Participant renders such Service or a change in
the Participating Company for which the Participant renders such Service, provided that there is no
interruption or termination of the Participants Service. Furthermore, a Participants Service
shall not be deemed to have terminated if the Participant takes any military leave, sick leave, or
other bona fide leave of absence approved by the Company. A Participants Service shall be deemed
to have terminated either upon an actual termination of Service or upon the entity for which the
Participant performs Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its discretion, shall determine whether the Participants Service has terminated and
the effective date of such termination.
(rr)
Stock
means the common stock of the Company, as adjusted from time to time in
accordance with Section 4.2 of the Plan.
(ss)
Stock Award
means an Award of Stock as described in
Section 8 of the Plan.
(tt)
Subsidiary Corporation
means any present or future subsidiary corporation of the
Company, as defined in Section 424(f) of the Code.
(uu)
Successor
means a corporation into or with which the Company is merged or consolidated
or which acquires all or substantially all of the assets of the Company and which is designated by
the Board as a Successor for purposes of the Plan.
(vv)
Ten Percent Owner
means a Participant who, at the time an Option is granted to the
Participant, owns stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of a Participating Company (other than an Affiliate) within the meaning of
Section 422(b)(6) of the Code.
6
(ww)
Vesting
Conditions
means those conditions established in accordance with Section 8.4 or
Section 10.2 of the Plan prior to the satisfaction of which shares subject to a Restricted Stock Award
or Restricted Stock Unit Award, respectively, remain subject to forfeiture or a repurchase option
in favor of the Company upon the Participants termination of Service.
2.2
Construction
. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated
by the context, the singular shall include the plural and the plural shall include the singular.
Use of the term or is not intended to be exclusive, unless the context clearly requires
otherwise.
3.
Administration
.
3.1
Administration by the Committee
. The Plan shall be administered by the Committee. All
questions of interpretation of the Plan or of any Award shall be determined by the Committee, and
such determinations shall be final and binding upon all persons having an interest in the Plan or
such Award.
3.2
Authority of Officers
. Any Officer shall have the authority to act on behalf of the
Company with respect to any matter, right, obligation, determination or election which is the
responsibility of or which is allocated to the Company herein, provided the Officer has been
delegated such authority by the Committee with respect to such matter, right, obligation,
determination or election.
3.3
Committee Complying with Section 162(m)
. While the Company is a publicly held
corporation within the meaning of Section 162(m), the Board may establish a Committee of outside
directors within the meaning of Section 162(m) to approve the grant of any Award which might
reasonably be anticipated to result in the payment of employee remuneration that would otherwise
exceed the limit on employee remuneration deductible for income tax purposes pursuant to
Section 162(m).
3.4
Powers of the Committee
.
In addition to any other powers set forth in the Plan and
subject to the provisions of the Plan, the Committee shall have the full and final power and
authority, in its discretion:
(a) to determine the persons to whom, and the time or times at which, Awards shall be granted
and the number of shares of Stock or units to be subject to each Award;
(b) to determine the type of Award granted and to designate Options as Incentive Stock Options
or Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of Stock or other property;
(d) to determine the terms, conditions and restrictions applicable to each Award (which need
not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the
exercise or purchase price of shares purchased pursuant to any Award,
7
(ii) the method of payment for shares purchased pursuant to any Award, (iii) the method for
satisfaction of any tax withholding obligation arising in connection with any Award, including by
the withholding or delivery of shares of Stock, (iv) the timing, terms and conditions of the
exercisability or vesting of any Award or any shares acquired pursuant thereto, (v) the Performance
Award Formula and Performance Goals applicable to any Award and the extent to which such
Performance Goals have been attained, (vi) the time of the expiration of any Award, (vii) the
effect of the Participants termination of Service on any of the foregoing, and (viii) all other
terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto not
inconsistent with the terms of the Plan;
(e) to determine whether an Award will be settled in shares of Stock, cash, or in any
combination thereof;
(f) to approve one or more forms of Award Agreement;
(g) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or
conditions applicable to any Award or any shares acquired pursuant thereto;
(h) to accelerate, continue, extend or defer the exercisability or vesting of any Award or any
shares acquired pursuant thereto, including with respect to the period following a Participants
termination of Service;
(i) without the consent of the affected Participant and notwithstanding the provisions of any
Award Agreement to the contrary, to unilaterally substitute at any time a Stock Appreciation Right
providing for settlement solely in shares of Stock in place of any outstanding Option, provided
that such Stock Appreciation Right covers the same number of shares of Stock and provides for the
same exercise price (subject in each case to adjustment in accordance with Section 4.2) as the
replaced Option and otherwise provides substantially equivalent terms and conditions as the
replaced Option, as determined by the Committee;
(j) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to
adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without
limitation, as the Committee deems necessary or desirable to comply with the laws or regulations of
or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose
citizens may be granted Awards;
(k) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or
any Award Agreement and to make all other determinations and take such other actions with respect
to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with
the provisions of the Plan or applicable law; and
(l) to delegate to any proper Officer the authority to grant one or more Awards, without
further approval of the Committee, to any person eligible pursuant to Section 5, other than himself
or a person who, at the time of such grant, is an Insider; provided, however, that (i) the exercise
price per share of each such Option shall be equal to the Fair Market Value per share of the Stock
on the effective date of grant, and (ii) each such Award shall be subject to the terms and
conditions of the appropriate standard form of Award Agreement approved by the
8
Committee and shall conform to the provisions of the Plan and such other guidelines as shall
be established from time to time by the Committee.
3.5
Indemnification
. In addition to such other rights of indemnification as they may have as
members of the Board or the Committee or as officers or employees of the Participating Company
Group, members of the Board or the Committee and any officers or employees of the Participating
Company Group to whom authority to act for the Board, the Committee or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including attorneys fees,
actually and necessarily incurred in connection with the defense of any action, suit or proceeding,
or in connection with any appeal therein, to which they or any of them may be a party by reason of
any action taken or failure to act under or in connection with the Plan, or any right granted
hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad
faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the
institution of such action, suit or proceeding, such person shall offer to the Company, in writing,
the opportunity at its own expense to handle and defend the same.
3.6
Arbitration
. Any dispute or claim concerning any Awards granted (or not granted) pursuant
to this Plan and any other disputes or claims relating to or arising out of the Plan shall be
fully, finally and exclusively resolved by binding arbitration conducted pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. By accepting an Award, Participants and
the Company waive their respective rights to have any such disputes or claims tried by a judge or
jury.
3.7
Repricing and Reloading Prohibited
. Without the affirmative vote of holders of a majority
of the shares of Stock cast in person or by proxy at a meeting of the stockholders of the Company
at which a quorum representing a majority of all outstanding shares of Stock is present or
represented by proxy, the Committee shall not approve a program providing for either (a) the
cancellation of outstanding Options or SARs and the grant in substitution therefor of cash, other
Awards, or new Options or SARs having a lower exercise price or (b) the amendment of outstanding
Options or SARs to reduce the exercise price thereof. This paragraph shall not be construed to
apply to the issuance or assumption of an Award in a transaction to which Code section 424(a)
applies, within the meaning of Section 424 of the Code.
4.
Shares Subject to Plan
.
4.1
Maximum Number
of Shares Issuable
. Subject to adjustment as provided in Section 4.2, the
maximum aggregate number of shares of Stock that may be issued under the Plan shall be Five Million
(5,000,000). Shares issuable under this Plan shall consist of authorized but unissued or
reacquired shares of Stock or any combination thereof. If an outstanding Award for any reason
expires or is terminated or canceled without having been exercised or settled in full, or if shares
of Stock acquired pursuant to an Award subject to forfeiture or repurchase are forfeited or
repurchased by the Company, the shares of Stock allocable to the terminated portion of such Award
or such forfeited or repurchased shares of
9
Stock shall again be available for issuance under the Plan. Shares of Stock shall not be
deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is
settled in cash.
4.2
Adjustments for Changes in Capital Structure
.
Subject to any required action by the
stockholders of the Company, in the event of any change in the Stock effected without receipt of
consideration by the Company, whether through merger, consolidation, reorganization,
reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change
in the capital structure of the Company, or in the event of payment of a dividend or distribution
to the stockholders of the Company in a form other than Stock (excepting normal cash dividends)
that has a material effect on the Fair Market Value of shares of Stock, appropriate adjustments
shall be made in the number and kind of shares subject to the Plan and to any outstanding Awards,
in the Award limits set forth in Section 5.4, and in the exercise or purchase price per share under
any outstanding Award in order to prevent dilution or enlargement of Participants rights under the
Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall
not be treated as effected without receipt of consideration by the Company. If a majority of the
shares which are of the same class as the shares that are subject to outstanding Awards are
exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change
Event) shares of another corporation (the
New Shares
), the Committee may unilaterally amend the
outstanding Options to provide that such Options are exercisable for New Shares. In the event of
any such amendment, the number of shares subject to, and the exercise price per share of, the
outstanding Awards shall be adjusted in a fair and equitable manner as determined by the Committee,
in its discretion. Any fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded down to the nearest whole number. The Committee in its sole discretion, may also
make such adjustments in the terms of any Award to reflect, or related to, such changes in the
capital structure of the Company or distributions as it deems appropriate, including modification
of Performance Goals, Performance Award Formulas and Performance Periods, so long as such
adjustment does not prevent an Award intended to qualify as performance-based compensation under
Section 162(m) from being so qualified. The adjustments determined by the Committee pursuant to
this Section 4.2 shall be final, binding and conclusive.
5.
Eligibility and Award Limitations
.
5.1
Persons Eligible for Awards
. Awards may be granted only to Employees, Consultants and
Directors. For purposes of the foregoing sentence, Employees, Consultantsand Directors shall
include prospective Employees, prospective Consultants and prospective Directors to whom Awards are
offered to be granted in connection with written offers of an employment or other service
relationship with the Participating Company Group; provided, however, that no Stock subject to any
such Award shall vest, become exercisable or be issued prior to the date on which such person
commences Service.
5.2
Participation
. Awards are granted solely at the discretion of the Committee. Eligible
persons may be granted more than one Award. However, eligibility in accordance with this Section
shall not entitle any person to be granted an Award, or, having been granted an Award, to be
granted an additional Award.
10
5.3
Incentive Stock Option Limitations
.
(a)
Persons Eligible
.
An Incentive Stock Option may be granted only to a person who, on the
effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary
Corporation (each being an
ISO-Qualifying Corporation
). Any person who is not an Employee of an
ISO-Qualifying Corporation on the effective date of the grant of an Option to such person may be
granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee of an ISO-Qualifying Corporation
shall be deemed granted effective on the date such person commences Service with an ISO-Qualifying
Corporation, with an exercise price determined as of such date in accordance with Section 6.1.
(b)
Fair Market Value Limitation
.
To the extent that options designated as Incentive Stock
Options (granted under all stock option plans of the Participating Company Group, including the
Plan) become exercisable by a Participant for the first time during any calendar year for Stock
having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of
such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For
purposes of this Section, options designated as Incentive Stock Options shall be taken into account
in the order in which they were granted, and the Fair Market Value of Stock shall be determined as
of the time the option with respect to such Stock is granted. If the Code is amended to provide
for a limitation different from that set forth in this Section, such different limitation shall be
deemed incorporated herein effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in
part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section, the Participant may designate which portion of such Option the Participant is exercising.
In the absence of such designation, the Participant shall be deemed to have exercised the Incentive
Stock Option portion of the Option first. Upon exercise, shares issued pursuant to each such
portion shall be separately identified.
5.4
Award Limits
.
(a)
Maximum Number of Shares Issuable Pursuant to Incentive Stock Options
.
Subject to
adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be
issued under the Plan pursuant to the exercise of Incentive Stock Options shall not exceed Five
Million (5,000,000) shares. The maximum aggregate number of shares of Stock that may be issued
under the Plan pursuant to all Awards other than Incentive Stock Options shall be the number of
shares determined in accordance with Section 4.1, subject to adjustment as provided in Section 4.2 and
further subject to the limitation set forth in Section 5.4(b) below.
(b)
Aggregate Limit on Full Value Awards.
Subject to adjustment as provided in Section 4.2, in
no event shall more than Two Million Five Hundred Thousand (2,500,000) shares in the aggregate be
issued under the Plan pursuant to the exercise or settlement of Stock Awards, Restricted Stock
Awards, Restricted Stock Unit Awards and Performance Awards (
Full Value Awards
).
11
(c)
Section
162(m)
Award Limits.
The following limits shall apply to the grant of any Award
if, at the time of grant, the Company is a publicly held corporation within the meaning of
Section 162(m). Per-individual limits shall not be adjusted to effect a restoration of shares of
Stock with respect to which the related Award is terminated, surrendered, or canceled.
(i)
Options and
SARs.
Subject to adjustment as provided in Section 4.2, no Employee shall be
granted within any fiscal year of the Company one or more Options or Freestanding SARs which in the
aggregate are for more than One Million (1,000,000) shares of Stock reserved for issuance under the
Plan; provided, however, that such maximum number shall be Two Million (2,000,000) shares with
respect to any individual during the first fiscal year that the individual is employed with the
Participating Company Group.
(ii)
Stock, Restricted Stock and Restricted Stock Unit Awards.
Subject to adjustment as
provided in Section 4.2, no Employee shall be granted within any fiscal year of the Company one or
more Stock Awards, Restricted Stock Awards or Restricted Stock Unit Awards, the grant or vesting of
which is based on the attainment of Performance Goals, for more than Five Hundred Thousand
(500,000) shares of Stock reserved for issuance under the Plan; provided, however, that such
maximum number shall be One Million (1,000,000) shares with respect to any individual during the
first fiscal year that the individual is employed with the Participating Company Group.
(iii)
Performance
Awards.
Subject to adjustment as provided in Section 4.2 and the limitation
set forth in Section 5.4(b), no Employee shall be granted (1) Performance Shares which could result in
such Employee receiving more than Five Hundred Thousand (500,000) shares of Stock reserved for
issuance under the Plan for each full fiscal year of the Company contained in the Performance
Period for such Award, or (2) Performance Units having a grant date value equal to the Fair Market
Value of Five Hundred Thousand (500,000) shares of Stock on the date of grant for each full fiscal
year of the Company contained in the Performance Period for such Award.
6.
Terms and Conditions of Options
.
Options shall be evidenced by Award Agreements specifying the number of shares of Stock
covered thereby, in such form as the Committee shall from time to time establish. No Option or
purported Option shall be a valid and binding obligation of the Company unless evidenced by a fully
executed Award Agreement. Award Agreements evidencing Options may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the following terms and
conditions:
6.1
Exercise Price
.
The exercise price for each Option shall be established in the discretion
of the Committee; provided, however, that (a) the exercise price per share shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the Option and (b) no
Incentive Stock Option granted to a Ten Percent Owner shall have an exercise price per share less
than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective
date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock
Option or a Nonstatutory Stock Option) may be granted with an
12
exercise price lower than the minimum exercise price set forth above if such Option is granted
pursuant to an assumption or substitution for another option in a manner qualifying under the
provisions of Section 424(a) of the Code.
6.2
Exercisability and Term of Options
.
(a)
Option Vesting and Exercisability.
Options shall be exercisable at such time or times, or
upon such event or events, and subject to such terms, conditions, performance criteria and
restrictions as shall be determined by the Committee and set forth in the Award Agreement
evidencing such Option; provided, however, that (a) no Option shall be exercisable after the
expiration of ten (10) years after the effective date of grant of such Option, and (b) no Incentive
Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5)
years after the effective date of grant of such Option.
(b)
Participant Responsibility for Exercise of Option.
Each Participant is responsible for
taking any and all actions as may be required to exercise any Option in a timely manner, and for
properly executing any documents as may be required for the exercise of an Option in accordance
with such rules and procedures as may be established from time to time. By signing an Option
Agreement each Participant acknowledges that information regarding the procedures and requirements
for the exercise of any Option is available upon such Participants request. The Company shall
have no duty or obligation to notify any Participant of the expiration date of any Option.
6.3
Payment of Exercise Price
.
(a)
Forms of Consideration Authorized
.
Except as otherwise provided below, payment of the
exercise price for the number of shares of Stock being purchased pursuant to any Option shall be
made (i) in cash, by check or in cash equivalent, (ii) by tender to the Company, or attestation to
the ownership, of shares of Stock owned by the Participant having a Fair Market Value not less than
the exercise price, (iii) by delivery of a properly executed notice of exercise together with
irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of
a sale or loan with respect to some or all of the shares being acquired upon the exercise of the
Option (including, without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve
System) (a
Cashless Exercise
), (iv) by such other consideration as may be approved by the
Committee from time to time to the extent permitted by applicable law, or (v) by any combination
thereof. The Committee may at any time or from time to time grant Options which do not permit all
of the foregoing forms of consideration to be used in payment of the exercise price or which
otherwise restrict one or more forms of consideration.
(b)
Limitations on Forms of Consideration.
Notwithstanding the foregoing, an Option may not
be exercised by tender to the Company, or attestation to the ownership, of shares of Stock to the
extent such tender or attestation would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Companys stock. The Company reserves,
at any and all times, the right, in the Companys sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of Options by means of a
Cashless Exercise, including with respect to one or
13
more Participants specified by the Company notwithstanding that such program or procedures may
be available to other Participants.
6.4
Effect of Termination of Service
.
(a)
Option Exercisability.
Subject to earlier termination of the Option as otherwise provided
herein and unless otherwise provided by the Committee, an Option shall be exercisable after a
Participants termination of Service only during the applicable time periods provided in the Award
Agreement.
(b)
Extension if Exercise Prevented by Law.
Notwithstanding the foregoing, unless the
Committee provides otherwise in the Award Agreement, if the exercise of an Option within the
applicable time periods is prevented by the provisions of Section 12 below, the Option shall remain
exercisable until three (3) months (or such longer period of time as determined by the Committee,
in its discretion) after the date the Participant is notified by the Company that the Option is
exercisable, but in any event no later than the Option Expiration Date.
6.5
Transferability of Options
. During the lifetime of the Participant, an Option shall be
exercisable only by the Participant or the Participants guardian or legal representative. Prior
to the issuance of shares of Stock upon the exercise of an Option, the Option shall not be subject
in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participants beneficiary,
except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing,
to the extent permitted by the Committee, in its discretion, a Nonstatutory Stock Option shall be
assignable or transferable subject to the applicable limitations, if any, described in the General
Instructions to Form S-8 Registration Statement under the Securities Act or as necessary to qualify
for an exemption from registration under Section 12(g) of the Exchange Act.
7.
Terms and Conditions of Stock Appreciation Rights
.
Stock Appreciation Rights shall be evidenced by Award Agreements specifying the number of
shares of Stock subject to the Award, in such form as the Committee shall from time to time
establish. No SAR or purported SAR shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Award Agreement. Award Agreements evidencing SARs may incorporate
all or any of the terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
7.1
Types of SARs Authorized
. SARs may be granted in tandem with all or any portion of a
related Option (a
Tandem SAR
) or may be granted independently of any Option (a
Freestanding
SAR
). A Tandem SAR may be granted either concurrently with the grant of the related Option or at
any time thereafter prior to the complete exercise, termination, expiration or cancellation of such
related Option.
7.2
Exercise Price
. The exercise price for each SAR shall be established in the discretion of
the Committee; provided, however, that (a) the exercise price per share subject to a Tandem SAR
shall be the exercise price per share under the related Option and (b) the
14
exercise price per share subject to a Freestanding SAR shall be not less than the Fair Market
Value of a share of Stock on the effective date of grant of the SAR.
7.3
Exercisability and Term of SARs
.
(a)
Tandem SARs
.
Tandem SARs shall be exercisable only at the time and to the extent, and
only to the extent, that the related Option is exercisable, subject to such provisions as the
Committee may specify where the Tandem SAR is granted with respect to less than the full number of
shares of Stock subject to the related Option.
(b)
Freestanding SARs
.
Freestanding SARs shall be exercisable at such time or times, or upon
such event or events, and subject to such terms, conditions, performance criteria and restrictions
as shall be determined by the Committee and set forth in the Award Agreement evidencing such SAR;
provided, however, that no Freestanding SAR shall be exercisable after the expiration of ten (10)
years after the effective date of grant of such SAR.
7.4
Deemed Exercise of SARs
. If, on the date on which an SAR would otherwise terminate or
expire, the SAR by its terms remains exercisable immediately prior to such termination or
expiration and, if so exercised, would result in a payment to the holder of such SAR, then any
portion of such SAR which has not previously been exercised shall automatically be deemed to be
exercised as of such date with respect to such portion, except as otherwise prohibited by
applicable law.
7.5
Effect of Termination of Service
. Subject to earlier termination of the SAR as otherwise
provided herein and unless otherwise provided by the Committee in the grant of an SAR and set forth
in the Award Agreement, an SAR shall be exercisable after a Participants termination of Service
only as provided in the Award Agreement.
7.6
Nontransferability of SARs
. During the lifetime of the Participant, an SAR shall be
exercisable only by the Participant or the Participants guardian or legal representative. Prior
to the exercise of an SAR, the SAR shall not be subject in any manner to anticipation, alienation,
sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participants beneficiary, except transfer by will or by the laws of descent and
distribution.
8.
Terms and Conditions of Stock Awards
.
Stock Awards may be granted with or without Vesting Conditions and may or may not require the
payment of cash consideration. Stock Awards shall be evidenced by Award Agreements specifying the
number of shares of Stock subject to the Award, in such form as the Committee shall from time to
time establish. No Stock Award or purported Stock Award shall be a valid and binding obligation of
the Company unless evidenced by a fully executed Award Agreement. Award Agreements evidencing
Stock Awards may incorporate all or any of the terms of the Plan by reference and shall comply with
and be subject to the following terms and conditions:
8.1
Types of Restricted Stock Awards Authorized
. Restricted Stock Awards may or may not
require the payment of cash consideration for the stock. Restricted
15
Stock Awards may be granted upon such conditions as the Committee shall determine, including,
without limitation, upon the attainment of one or more Performance Goals described in Section 9.4.
If either the grant of a Restricted Stock Award or the lapsing of the Restriction Period is to be
contingent upon the attainment of one or more Performance Goals, the Committee shall follow
procedures substantially equivalent to those set forth in Sections 9.3 through 9.5(a).
8.2
Purchase Price
. The purchase price, if any, for shares of Stock issuable under each Stock
Award and the means of payment shall be established by the Committee in its discretion.
8.3
Purchase Period
. A Stock Award requiring the payment of cash consideration shall be
exercisable within a period established by the Committee.
8.4
Vesting and Restrictions on Transfer
. Shares issued pursuant to any Stock Award may or
may not be made subject to Vesting Conditions based upon the satisfaction of such Service
requirements, conditions, restrictions or performance criteria, including, without limitation,
Performance Goals as described in Section 9.4, as shall be established by the Committee and set forth
in the Award Agreement evidencing such Award. During any Restriction Period in which shares
acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, such shares may
not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other than as
provided in the Award Agreement or as provided in Section 8.7. Upon request by the Company, each
Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt
of shares of Stock hereunder.
8.5
Voting Rights;
Dividends and Distributions
. Except as provided in this Section, Section 8.4
and any Award Agreement, during the Restriction Period applicable to shares subject to a Restricted
Stock Award, the Participant shall have all of the rights of a stockholder of the Company holding
shares of Stock, including the right to vote such shares and to receive all dividends and other
distributions paid with respect to such shares. However, in the event of a dividend or
distribution paid in shares of Stock or any other adjustment made upon a change in the capital
structure of the Company as described in Section 4.2, any and all new, substituted or additional
securities or other property (other than normal cash dividends) to which the Participant is
entitled by reason of the Participants Restricted Stock Award shall be immediately subject to the
same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which
such dividends or distributions were paid or adjustments were made.
8.6
Effect of Termination of Service
. Unless otherwise provided by the Committee in the grant
of a Restricted Stock Award and set forth in the Award Agreement, if a Participants Service
terminates for any reason, whether voluntary or involuntary (including the Participants death or
disability), then the Participant shall forfeit to the Company any shares acquired by the
Participant pursuant to a Restricted Stock Award which remain subject to Vesting Conditions as of
the date of the Participants termination of Service in exchange for the payment of the purchase
price, if any, paid by the Participant. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to one or more persons
as may be selected by the Company.
16
8.7
Nontransferability of Restricted Stock Award Rights
. Prior to the issuance of shares of
Stock pursuant to a Restricted Stock Award, rights to acquire such shares shall not be subject in
any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance
or garnishment by creditors of the Participant or the Participants beneficiary, except transfer by
will or the laws of descent and distribution. All rights with respect to a Restricted Stock Award
granted to a Participant hereunder shall be exercisable during his or her lifetime only by such
Participant or the Participants guardian or legal representative.
9.
Terms and Conditions of Performance Awards
.
Performance Awards shall be evidenced by Award Agreements in such form as the Committee shall
from time to time establish. No Performance Award or purported Performance Award shall be a valid
and binding obligation of the Company unless evidenced by a fully executed Award Agreement. Award
Agreements evidencing Performance Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and conditions:
9.1
Types of Performance Awards Authorized
. Performance Awards may be in the form of either
Performance Shares or Performance Units. Each Award Agreement evidencing a Performance Award shall
specify the number of Performance Shares or Performance Units subject thereto, the Performance
Award Formula, the Performance Goal(s) and Performance Period applicable to the Award, and the
other terms, conditions and restrictions of the Award.
9.2
Initial Value of Performance Shares and Performance Units
. Unless otherwise provided by
the Committee in granting a Performance Award, each Performance Share shall have an initial value
equal to the Fair Market Value of one (1) share of Stock, subject to adjustment as provided in
Section 4.2, on the effective date of grant of the Performance Share. Each Performance Unit shall
have an initial value determined by the Committee; provided, however, that in no event shall the
value be less than the aggregate Fair Market Value of the underlying shares on the date of grant.
The final value payable to the Participant in settlement of a Performance Award determined on the
basis of the applicable Performance Award Formula will depend on the extent to which Performance
Goals established by the Committee are attained within the applicable Performance Period
established by the Committee.
9.3
Establishment of Performance Period, Performance Goals and Performance Award Formula
. In
granting each Performance Award, the Committee shall establish in writing the applicable
Performance Period, Performance Award Formula and one or more Performance Goals which, when
measured at the end of the Performance Period, shall determine on the basis of the Performance
Award Formula the final value of the Performance Award to be paid to the Participant. To the
extent compliance with the requirements under Section 162(m) with respect to performance-based
compensation is desired, the Committee shall establish the Performance Goal(s) and Performance
Award Formula applicable to each Performance Award no later than the earlier of (a) the date ninety
(90) days after the commencement of the applicable Performance Period or (b) the date on which 25%
of the Performance Period has elapsed, and, in any event, at a time when the outcome of the
17
Performance Goals remains substantially uncertain. Once established, the Performance Goals
and Performance Award Formula shall not be changed during the Performance Period. The Company
shall notify each Participant granted a Performance Award of the terms of such Award, including the
Performance Period, Performance Goal(s) and Performance Award Formula.
9.4
Measurement of Performance Goals
. Performance Goals shall be established by the Committee
on the basis of targets to be attained (
Performance Targets
) with respect to one or more measures
of business or financial performance (each, a
Performance Measure
), subject to the following:
(a)
Performance Measures
.
Performance Measures shall have the same meanings as used in the
Companys financial statements, or, if such terms are not used in the Companys financial
statements, they shall have the meaning applied pursuant to generally accepted accounting
principles, or as used generally in the Companys industry. Performance Measures shall be
calculated with respect to the Company and each Subsidiary Corporation and Parent Corporation
consolidated therewith for financial reporting purposes or such division or other business unit as
may be selected by the Committee. For purposes of the Plan, the Performance Measures applicable to
a Performance Award shall be calculated in accordance with generally accepted accounting
principles, but prior to the accrual or payment of any Performance Award for the same Performance
Period, if determined by the Committee, and excluding the effect (whether positive or negative) of
any change in accounting standards, as determined by the Committee, occurring after the
establishment of the Performance Goals applicable to the Performance Award. Each such adjustment,
if any, shall be made solely for the purpose of providing a consistent basis from period to period
for the calculation of Performance Measures in order to prevent the dilution or enlargement of the
Participants rights with respect to a Performance Award. Performance Measures may be one or more
of the following, as determined by the Committee: (i) sales revenue; (ii) gross margin;
(iii) operating margin; (iv) operating income; (v) pre-tax profit; (vi) earnings before stock-based
compensation expense, interest, taxes and depreciation and amortization; (vii) earnings before
interest, taxes and depreciation and amortization; (viii) earnings before interest and taxes;
(ix) net income; (x) expenses; (xi) the market price of the Stock; (xii) stock price;
(xiii) earnings per share; (xiv) return on stockholder equity; (xv) return on capital; (xvi) return
on net assets; (xvii) economic value added; (xviii) market share; (xix) customer service;
(xx) customer satisfaction; (xxi) safety; (xxii) total stockholder return; (xxiii) free cash flow;
(xxiv) net operating income; (xxv) operating cash flow; (xxvi) return on investment; (xxvii)
employee satisfaction; (xxviii) employee retention; (xxix) balance of cash, cash equivalents and
marketable securities; (xxx) product development; (xxxi) research and development expenses; (xxxii)
completion of an identified special project; (xxxiii) completion of a joint venture or other
corporate transaction; or (xxxiv) such other measures as determined by the Committee consistent
with this Section 9.4(a).
(b)
Performance Targets
.
Performance Targets may include a minimum, maximum, target level and
intermediate levels of performance, with the final value of a Performance Award determined under
the applicable Performance Award Formula by the level attained during the applicable Performance
Period. A Performance Target may be stated as an absolute value or as a value determined relative
to a standard selected by the Committee.
18
9.5
Settlement of Performance Awards
.
(a)
Determination of Final Value
.
As soon as practicable following the completion of the
Performance Period applicable to a Performance Award, the Committee shall certify in writing the
extent to which the applicable Performance Goals have been attained and the resulting final value
of the Award earned by the Participant and to be paid upon its settlement in accordance with the
applicable Performance Award Formula.
(b)
Discretionary Adjustment of Award Formula
.
In its discretion, the Committee may, either
at the time it grants a Performance Award or at any time thereafter, provide for the positive or
negative adjustment of the Performance Award Formula applicable to a Performance Award that is not
intended to constitute qualified performance based compensation to a covered employee within
the meaning of Section 162(m) (a
Covered Employee
) to reflect such Participants individual
performance in his or her position with the Company or such other factors as the Committee may
determine. With respect to a Performance Award intended to constitute qualified performance-based
compensation to a Covered Employee, the Committee shall have the discretion to reduce some or all
of the value of the Performance Award that would otherwise be paid to the Covered Employee upon its
settlement notwithstanding the attainment of any Performance Goal and the resulting value of the
Performance Award determined in accordance with the Performance Award Formula.
(c)
Payment in Settlement of Performance Awards
.
As soon as practicable following the
Committees determination and certification in accordance with Sections 9.5(a) and (b), payment shall be
made to each eligible Participant (or such Participants legal representative or other person who
acquired the right to receive such payment by reason of the Participants death) of the final value
of the Participants Performance Award. Payment of such amount shall be made in cash in a lump sum
or in installments, shares of Stock (either fully vested or subject to vesting), or a combination
thereof, as determined by the Committee.
9.6
Voting Rights; Dividend Equivalent Rights and Distributions
. Participants shall have no
voting rights with respect to shares of Stock represented by Performance Share Awards until the
date of the issuance of such shares, if any (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its
discretion, may provide in the Award Agreement evidencing any Performance Share Award that the
Participant shall be entitled to receive Dividend Equivalents with respect to the payment of cash
dividends on Stock having a record date prior to the date on which the Performance Shares are
settled or forfeited. Such Dividend Equivalents, if any, shall be credited to the Participant in
the form of additional whole Performance Shares as of the date of payment of such cash dividends on
Stock. The number of additional Performance Shares (rounded to the nearest whole number) to be so
credited shall be determined by dividing (a) the amount of cash dividends paid on such date with
respect to the number of shares of Stock represented by the Performance Shares previously credited
to the Participant by (b) the Fair Market Value per share of Stock on such date. Dividend
Equivalents may be paid currently or may be accumulated and paid to the extent that Performance
Shares become nonforfeitable, as determined by the Committee. Settlement of Dividend Equivalents
may be made in cash, shares of Stock, or a combination thereof as determined by the Committee, and
may be paid on the same basis as settlement of the related Performance Share as provided in
19
Section 9.5. Dividend Equivalents shall not be paid with respect to Performance Units. In the
event of a dividend or distribution paid in shares of Stock or any other adjustment made upon a
change in the capital structure of the Company as described in Section 4.2, appropriate adjustments
shall be made in the Participants Performance Share Award so that it represents the right to
receive upon settlement any and all new, substituted or additional securities or other property
(other than normal cash dividends) to which the Participant would be entitled by reason of the
shares of Stock issuable upon settlement of the Performance Share Award, and all such new,
substituted or additional securities or other property shall be immediately subject to the same
Performance Goals as are applicable to the Award.
9.7
Effect of Termination of Service
. Unless otherwise provided by the Committee in the grant
of a Performance Award and set forth in the Award Agreement, if the Participants Service
terminates for any reason, including death or Disability, before the completion of the Performance
Period applicable to the Performance Award, the final value of the Participants Performance Award
shall be determined by the extent to which the applicable Performance Goals have been attained with
respect to the entire Performance Period and shall be prorated based on the number of months of the
Participants Service during the Performance Period. Payment shall be made following the end of
the Performance Period in any manner permitted by Section 9.5.
9.8
Nontransferability of Performance Awards
. Prior to settlement in accordance with the
provisions of the Plan, no Performance Award shall be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
of the Participant or the Participants beneficiary, except transfer by will or by the laws of
descent and distribution. All rights with respect to a Performance Award granted to a Participant
hereunder shall be exercisable during his or her lifetime only by such Participant or the
Participants guardian or legal representative.
10.
Terms and Conditions of Restricted Stock Unit Awards
.
Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of
Restricted Stock Units subject to the Award, in such form as the Committee shall from time to time
establish. No Restricted Stock Unit Award or purported Restricted Stock Unit Award shall be a
valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement.
Award Agreements evidencing Restricted Stock Units may incorporate all or any of the terms of the
Plan by reference and shall comply with and be subject to the following terms and conditions:
10.1
Grant of Restricted Stock Unit Awards
. Restricted Stock Unit Awards may be granted upon
such conditions as the Committee shall determine, including, without limitation, upon the
attainment of one or more Performance Goals described in Section 9.4. If either the grant of a
Restricted Stock Unit Award or the Vesting Conditions with respect to such Award is to be
contingent upon the attainment of one or more Performance Goals, the Committee shall follow
procedures substantially equivalent to those set forth in Sections 9.3 through 9.5(a).
20
10.2
Vesting
. Restricted Stock Units may or may not be made subject to Vesting Conditions
based upon the satisfaction of such Service requirements, conditions, restrictions or performance
criteria, including, without limitation, Performance Goals as described in Section 9.4, as shall be
established by the Committee and set forth in the Award Agreement evidencing such Award.
10.3
Voting Rights, Dividend Equivalent Rights and Distributions
. Participants shall have no
voting rights with respect to shares of Stock represented by Restricted Stock Units until the date
of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion,
may provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant
shall be entitled to receive Dividend Equivalents with respect to the payment of cash dividends on
Stock having a record date prior to the date on which Restricted Stock Units held by such
Participant are settled. Such Dividend Equivalents, if any, shall be paid in cash or by crediting
the Participant with additional whole Restricted Stock Units as of the date of payment of such cash
dividends on Stock. The number of additional Restricted Stock Units (rounded to the nearest whole
number) to be so credited, if any, shall be determined by dividing (a) the amount of cash dividends
paid on such date with respect to the number of shares of Stock represented by the Restricted Stock
Units previously credited to the Participant by (b) the Fair Market Value per share of Stock on
such date. Such additional Restricted Stock Units, if any, shall be subject to the same terms and
conditions and shall be settled in the same manner and at the same time (or as soon thereafter as
practicable) as the Restricted Stock Units originally subject to the Restricted Stock Unit Award.
In the event of a dividend or distribution paid in shares of Stock or any other adjustment made
upon a change in the capital structure of the Company as described in Section 4.2, appropriate
adjustments shall be made in the Participants Restricted Stock Unit Award so that it represents
the right to receive upon settlement any and all new, substituted or additional securities or other
property (other than normal cash dividends) to which the Participant would be entitled by reason of
the shares of Stock issuable upon settlement of the Award, and all such new, substituted or
additional securities or other property shall be immediately subject to the same Vesting Conditions
as are applicable to the Award.
10.4
Effect of Termination of Service
. Unless otherwise provided by the Committee in the
grant of a Restricted Stock Unit Award and set forth in the Award Agreement, if a Participants
Service terminates for any reason, whether voluntary or involuntary (including the Participants
death or disability), then the Participant shall forfeit to the Company any Restricted Stock Units
pursuant to the Award which remain subject to Vesting Conditions as of the date of the
Participants termination of Service.
10.5
Settlement of Restricted Stock Unit Awards
. The Company shall issue to a Participant on
the date on which Restricted Stock Units subject to the Participants Restricted Stock Unit Award
vest or on such other date determined by the Committee, in its discretion, and set forth in the
Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities
or other property pursuant to an adjustment described in Section 10.3) for each Restricted Stock Unit
then becoming vested or otherwise to be settled on such date, subject to the withholding of
applicable taxes. Notwithstanding the foregoing, if permitted by the Committee and set forth in
the Award Agreement, the Participant may elect in accordance with terms specified in the Award
Agreement to defer receipt of all or any portion of
21
the shares of Stock or other property otherwise issuable to the Participant pursuant to this
Section.
10.6
Nontransferability of Restricted Stock Unit Awards
. Prior to the issuance of shares of
Stock in settlement of a Restricted Stock Unit Award, the Award shall not be subject in any manner
to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or
garnishment by creditors of the Participant or the Participants beneficiary, except transfer by
will or by the laws of descent and distribution. All rights with respect to a Restricted Stock
Unit Award granted to a Participant hereunder shall be exercisable during his or her lifetime only
by such Participant or the Participants guardian or legal representative.
11.
Effect of Change in Control on Awards
.
11.1
Change in Control Transactions
. In the event of any transaction resulting in a Change in
Control of the Company, outstanding Awards that are payable in or convertible into Stock under the
Plan will terminate upon the effective time of such Change in Control unless provision is made by
the Company in connection with the transaction for the continuation or assumption of such Awards
by, or for the substitution of equivalent awards of, the surviving or successor entity or a parent
thereof. All determinations as to whether any, some or all outstanding Awards and, if any, which
such Awards, will be continued, assumed or substituted in a transaction and whether any such
substitution is for equivalent awards shall be made in the sole discretion of the Administrator,
and such continuation, assumption, or substitution may be effectuated without the consent of the
holder of any such outstanding Award. In the event of such termination, the holders of Awards that
will be terminated upon the effective time of the Change in Control will be permitted, immediately
before the Change in Control, to exercise or convert all portions of such Awards under the Plan
that are then exercisable or convertible or which become exercisable or convertible upon or prior
to the effective time of the Change in Control.
11.2
Unusual or Nonrecurring Events
. The Committee is authorized to make, in its discretion
and without the consent of holders of Awards, adjustments in the terms and conditions of, and the
criteria included in, Awards in recognition of unusual or nonrecurring events affecting the
Company, or the financial statements of the Company, or of changes in applicable laws, regulations,
or accounting principles, whenever the Committee determines that such adjustments are appropriate
in order to prevent dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan.
12.
Compliance with Securities Law
.
The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject
to compliance with all applicable requirements of federal, state and foreign law with respect to
such securities and the requirements of any stock exchange or market system upon which the Stock
may then be listed. In addition, no Award may be exercised or shares issued pursuant to an Award
unless (a) a registration statement under the Securities Act shall at the time of such exercise or
issuance be in effect with respect to the shares issuable pursuant to the Award or (b) in the
opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in
accordance with the terms of an applicable exemption from the registration
22
requirements of the Securities Act. The inability of the Company to obtain from any
regulatory body having jurisdiction the authority, if any, deemed by the Companys legal counsel to
be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of
any liability in respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to issuance of any Stock, the Company may
require the Participant to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the Company.
13.
Tax Withholding
.
13.1
Tax Withholding in General
. The Company shall have the right to deduct from any and all
payments made under the Plan, or to require the Participant, through payroll withholding, cash
payment or otherwise, including by means of a Cashless Exercise or net exercise of an Option, or
net settlement of other types of Awards, to make adequate provision for, the federal, state, local
and foreign taxes, if any, required by law to be withheld by the Participating Company Group with
respect to an Award or the shares acquired pursuant thereto. The Company shall have no obligation
to deliver shares of Stock, to release shares of Stock from an escrow established pursuant to an
Award Agreement, or to make any payment in cash under the Plan until the Participating Company
Groups tax withholding obligations have been satisfied by the Participant.
13.2
Withholding in Shares
. The Company shall have the right, but not the obligation, to
deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an
Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a
Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding
obligations of the Participating Company Group. The Fair Market Value of any shares of Stock
withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount
determined by the applicable minimum statutory withholding rates.
14.
Amendment or Termination of Plan
.
The Board or the Committee may amend, suspend or terminate the Plan at any time. However,
without the approval of the Companys stockholders, there shall be (a) no increase in the maximum
aggregate number of shares of Stock that may be issued under the Plan (except by operation of the
provisions of Section 4.2), (b) no change in the class of persons eligible to receive Incentive Stock
Options, the prohibition on repricing and reloading in Section 3.7, the Award limits in Section 5.4,
the minimum exercise price, maximum term, and vesting period of Options or SARs, and any limitation
on the Vesting Conditions of Restricted Stock or Restricted Stock Units, and (c) no other amendment
of the Plan that would require approval of the Companys stockholders under any applicable law,
regulation or rule. No amendment, suspension or termination of the Plan shall affect any then
outstanding Award unless expressly provided by the Board or the Committee. In any event, no
amendment, suspension or termination of the Plan may adversely affect any then outstanding Award
without the consent of the Participant unless necessary to comply with any applicable law,
regulation or rule.
23
15.
Miscellaneous Provisions
.
15.1
Repurchase Rights
.
Shares issued under the Plan may be subject to one or more repurchase
options, or other conditions and restrictions as determined by the Committee in its discretion at
the time the Award is granted. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to one or more persons
as may be selected by the Company. Upon request by the Company, each Participant shall execute any
agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder
and shall promptly present to the Company any and all certificates representing shares of Stock
acquired hereunder for the placement on such certificates of appropriate legends evidencing any
such transfer restrictions.
15.2
Rights as Employee, Consultant or Director
. No person, even though eligible pursuant to
Section 5, shall have a right to be selected as a Participant, or, having been so selected, to be
selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall
confer on any Participant a right to remain an Employee, Consultant or Director or interfere with
or limit in any way any right of a Participating Company to terminate the Participants Service at
any time. To the extent that an Employee of a Participating Company other than the Company
receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean
that the Company is the Employees employer or that the Employee has an employment relationship
with the Company.
15.3
Rights as a Stockholder
. A Participant shall have no rights as a stockholder with
respect to any shares covered by an Award until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions or other rights
for which the record date is prior to the date such shares are issued, except as provided in
Section 4.2 or another provision of the Plan.
15.4
Fractional Shares
. The Company shall not be required to issue fractional shares upon the
exercise or settlement of any Award.
15.5
Severability
. If any one or more of the provisions (or any part thereof) of this Plan
shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so
as to make it valid, legal and enforceable, and the validity, legality and enforceability of the
remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired
thereby.
15.6
Beneficiary Designation
. Subject to local laws and procedures, each Participant may file
with the Company a written designation of a beneficiary who is to receive any benefit under the
Plan to which the Participant is entitled in the event of such Participants death before he or she
receives any or all of such benefit. Each designation will revoke all prior designations by the
same Participant, shall be in a form prescribed by the Company, and will be effective only when
filed by the Participant in writing with the Company during the Participants lifetime. If a
married Participant designates a beneficiary other than the Participants spouse, the effectiveness
of such designation may be subject to the consent of the Participants spouse, if required by
applicable law or the Company. If a Participant dies without an effective designation
24
of a beneficiary who is living at the time of the Participants death, the Company will pay
any remaining unpaid benefits to the Participants legal representative.
15.7
Unfunded Obligation
. Participants shall have the status of general unsecured creditors
of the Company. Any amounts payable to Participants pursuant to the Plan shall be unfunded and
unsecured obligations for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974. No Participating Company shall be required to segregate
any monies from its general funds, or to create any trusts, or establish any special accounts with
respect to such obligations. The Company shall retain at all times beneficial ownership of any
investments, including trust investments, which the Company may make to fulfill its payment
obligations hereunder. Any investments or the creation or maintenance of any trust or any
Participant account shall not create or constitute a trust or fiduciary relationship between the
Committee or any Participating Company and a Participant, or otherwise create any vested or
beneficial interest in any Participant or the Participants creditors in any assets of any
Participating Company. The Participants shall have no claim against any Participating Company for
any changes in the value of any assets which may be invested or reinvested by the Company with
respect to the Plan. Each Participating Company shall be responsible for making benefit payments
pursuant to the Plan on behalf of its Participants or for reimbursing the Company for the cost of
such payments, as determined by the Company in its sole discretion. In the event the respective
Participating Company fails to make such payment or reimbursement, a Participants (or other
individuals) sole recourse shall be against the respective Participating Company, and not against
the Company. A Participants acceptance of an Award pursuant to the Plan shall constitute
agreement with this provision.
25
PLAN HISTORY AND NOTES TO COMPANY
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March 13, 2008
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Board adopts Plan with a reserve of Five Million
(5,000,000) shares.
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May
, 2008
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Stockholders approve Plan.
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