SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 13, 2006
LEVI STRAUSS & CO.
(Exact name of registrant as specified in its charter)
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Delaware
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002-90139
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94-0905160
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(State or Other jurisdiction
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(Commission File Number)
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(I.R.S. Employer
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of Incorporation)
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Identification No.)
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1155 BATTERY STREET
SAN FRANCISCO, CALIFORNIA 94111
(Address of principal executive offices, including zip code)
(415) 501-6000
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions:
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Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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ITEM 1.01 Entry into a Material Definitive Agreement.
2006 Equity Incentive Plan
Summary
On July 13, 2006, our board of directors adopted, and our stockholders approved, our 2006
Equity Incentive Plan. The new plan is a ten-year equity-based incentive compensation plan that
replaces our existing long-term incentive plan for senior executives. The new plan is intended to:
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focus and motivate our senior executive team to achieve sustained, long-term
increases in shareholder value;
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reward participants in direct relationship with increases in shareholder value; and
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attract and retain executive talent in a highly-competitive industry.
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The plan is an omnibus plan that enables our board to select from a variety of stock awards,
including stock options, restricted stock and stock appreciation rights, as well as performance
awards, in defining long-term incentives for our management.
On July 13, 2006, our board made initial grants of stock appreciation rights to a small group
of our senior-most executives. These grants will enable the executives to obtain shares of common
stock in the future in an amount based on share price appreciation over time. The plan and initial
awards include requirements relating to vesting, exercise, stock sales and other matters, including
entry by executives into the stockholders and voting trust agreements to which our family and
other stockholders are bound and other provisions reflecting our status as a privately-held
company. The board did not make any other grants of stock appreciation rights or other awards
under the plan.
Description of Equity Incentive Plan
The description of the Equity Incentive Plan below is qualified in its entirety by reference
to a copy of the plan, attached hereto as Exhibit 99.1.
Term.
The Equity Incentive Plan will be effective for ten years if not sooner terminated by
our board.
Stock Awards.
The Equity Incentive Plan provides for the grant of the following types of
awards (which we collectively refer to as stock awards):
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incentive stock options,
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nonstatutory stock options,
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restricted stock awards,
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restricted stock unit awards,
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stock appreciation rights, and
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other forms of equity compensation.
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The Equity Incentive Plan also provides for the grant of performance stock awards and
performance cash awards (together, the performance awards). Stock awards and performance awards
may be granted to employees, including officers, non-employee directors, and consultants.
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Share Reserve.
The aggregate number of shares of our common stock that may be issued
initially pursuant to stock awards or performance stock awards under the Equity Incentive Plan is
418,175 shares, provided, however, that this number automatically
adjusts upward to the extent necessary to satisfy the exercise of
stock appreciation rights granted or otherwise authorized on
July 13, 2006. However, the following shares may return to the Equity Incentive Plan and be
available for issuance in connection with a future award: (i) shares covered by an award that
expires or otherwise terminates without having been exercised in full, (ii) shares that are
forfeited to or repurchased by us prior to becoming fully vested, (iii) shares covered by an award
that is settled in cash, (iv) shares withheld to cover payment of an exercise price or cover
applicable tax withholding obligations, (v) shares tendered to cover payment of an exercise price,
and (vi) shares that are cancelled pursuant to an exchange or repricing program.
Administration.
Our board may amend, suspend, or terminate the Equity Incentive Plan at any
time. Amendments will not be effective without stockholder approval if stockholder approval is
required by applicable law. Our board has delegated its authority to administer the Equity
Incentive Plan to the Human Resources Committee of our board. Subject to the terms of the Equity
Incentive Plan, our board or its authorized committee (the plan administrator) construes and
interprets the plan, determines the persons to whom and the dates on which awards will be granted,
and, subject to the terms and conditions of the plan, determines the terms and conditions of
awards. The plan administrator also has the authority to (i) reduce the exercise price of any
outstanding option or the strike price of any outstanding stock appreciation right; (ii) cancel any
outstanding option or stock appreciation right and to grant in exchange one or more of the
following: (A) a new option or stock appreciation right covering the same or different number of
shares, (B) new stock awards, or (C) cash and/or other valuable consideration; and (iii) prior to
an initial public offering of a class of our common stock (an IPO), cancel an award, to the
extent not vested, with or without substitution of consideration.
Stock Appreciation Rights.
Stock appreciation rights are granted pursuant to stock
appreciation rights agreements. The plan administrator determines the strike price for a stock
appreciation right, provided that the strike price of a stock appreciation right cannot be less
than 100% of the fair market value of our common stock on the date of grant. Upon the exercise of
a stock appreciation right, we will pay the participant an amount equal to the product of (i) the
excess of the per share fair market value of our common stock on the date of exercise over the
strike price, multiplied by (ii) the number of shares of common stock with respect to which the
stock appreciation right is exercised. Our board determines how we make payment, which may include
delivery of common stock, cash, a combination of cash and stock or any other form of consideration,
as set forth in the stock appreciation right agreement. A stock appreciation right granted under
the Equity Incentive Plan vests at the rate specified in the stock appreciation right agreement as
determined by the plan administrator.
The plan administrator determines the terms of stock appreciation rights granted under the
Equity Incentive Plan, subject to a ten year maximum term. Earlier termination of a stock
appreciation right depends on the circumstances of a participants termination from employment as
follows:
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Unless the terms of a participants stock appreciation rights agreement provide
otherwise, if a participants service relationship with us, or any of our affiliates,
ceases for any reason other than for cause, or by reason of retirement, disability or
death, the participant generally may
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exercise his or her stock appreciation right (to
the extent the participant was entitled to exercise such stock appreciation right on
the date of such termination of service) for a period of three months following the
cessation of service.
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Stock appreciation rights terminate immediately upon termination for cause, the
participant will be prohibited from exercising his or her stock appreciation rights
from and after the time of such termination of service, and we are authorized to
rescind any transfer of common stock or cash to the participant that occurred within
six months prior to such termination for cause. In addition, we may demand the
repayment of any proceeds received upon any disposition of the common stock.
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If a participants service relationship with us, or any of our affiliates, ceases
due to retirement, disability or death (or a participant dies within a specified
period, if any, following cessation of service), the participant or a beneficiary
generally may exercise the stock appreciation right (to the extent the participant was
entitled to exercise such stock appreciation right on the date of such termination of
service or death) for a period of 18 months.
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We may extend the term of the stock appreciation right in the event that exercise following
termination of service is prohibited by applicable securities laws. In no event, however, may a
stock appreciation right be exercised beyond the expiration of its term.
Stock Options.
Incentive and nonstatutory stock options are granted pursuant to incentive and
nonstatutory stock option agreements. Employees, directors, and consultants may be granted
nonstatutory stock options, but only employees may be granted incentive stock options. The plan
administrator determines the exercise price of a stock option, provided that the exercise price of
a stock option cannot be less than 100% (and in the case of an incentive stock option granted to a
10% stockholder, 110%) of the fair market value of our common stock on the date of grant, except
when assuming or substituting options in connection with limited situations such as an acquisition.
Options granted under the Equity Incentive Plan vest at the rate specified by the plan
administrator.
The plan administrator determines the terms of stock options granted under the Equity
Incentive Plan, up to a maximum of ten years (five years in the case of an incentive stock option
granted to a 10% stockholder). The rules that apply to stock appreciation rights for exercise
following termination of service and our rights following a termination for cause generally also
apply to stock options.
Acceptable consideration for the purchase of common stock issued upon the exercise of a stock
option will be determined by the plan administrator and may include (i) cash or check, (ii) a
broker-assisted cashless exercise, (iii) the tender of common stock previously owned by the
optionee, (iv) a net exercise of the option, and (v) other legal consideration approved by the plan
administrator.
Unless the plan administrator provides otherwise, options generally are not transferable
except by will, the laws of descent and distribution, or pursuant to a domestic relations order.
An optionee may designate a beneficiary, however, who may exercise an option following the
optionees death.
Restricted Stock Awards.
Restricted stock awards are granted pursuant to restricted stock
award agreements. A restricted stock award may be granted in consideration for the recipients
past or future services performed for us or our affiliates or any other form of legal
consideration. Shares of common stock acquired under a restricted stock award may be subject to
forfeiture to us in accordance with a vesting schedule to be determined by the plan administrator. If a participants service
relationship is terminated for cause, we are authorized to rescind any transfer of common stock to
the participant that ceased to be subject to a forfeiture condition within six months prior to such
termination for cause. In
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addition, we may demand the repayment of any proceeds received upon any
disposition of the common stock. Rights to acquire shares under a restricted stock award may be
transferred only upon such terms and conditions as set by the plan administrator.
Restricted Stock Unit Awards.
Restricted stock unit awards are granted pursuant to restricted
stock unit award agreements. The plan administrator determines the consideration, if any. We may
settle a vested restricted stock unit award with payment in cash, delivery of common stock, a
combination of cash and common stock, or in any other form of consideration set forth in the
restricted stock unit award agreement. At the time of grant of the restricted stock unit award,
the plan administrator may impose restrictions or conditions that delay the delivery of the shares
of common stock or cash to a date that is after the vesting of such restricted stock unit award.
Additionally, dividend equivalents may be credited in respect to shares covered by a restricted
stock unit award. Except as otherwise provided in the applicable award agreement, restricted stock
units that have not vested will be forfeited upon the participants cessation of continuous service
for any reason. If a participants service relationship is terminated for cause, we are authorized
to rescind any transfer of common stock or cash to the participant with respect to restricted stock
units that vested within six months prior to such termination for cause. In addition, we may
demand the repayment of any proceeds received upon any disposition of the common stock.
Other Equity Awards.
The plan administrator may grant other awards based in whole or in part
by reference to our common stock. The plan administrator determines the number of shares under the
award and all other terms and conditions of the awards.
Performance Awards.
The Equity Incentive Plan allows the plan administrator to issue
performance stock awards (in the form of restricted stock awards or restricted stock unit awards)
and performance cash awards. The Human Resources Committee has the authority to structure one or more of these
awards so that stock or cash will be issued or paid pursuant to the award only upon the achievement
of certain pre-established performance goals. These goals may be based on any one of, or
combination of, the following:
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earnings before interest, taxes, depreciation, amortization, and rent (EBITDAR);
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earnings before interest, taxes, depreciation and amortization (EBITDA);
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earnings before interest and taxes (EBIT);
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EBITDAR, EBITDA, EBIT or earnings before taxes and unusual or nonrecurring items as
measured either against the annual budget or as a ratio to revenue or return on total
capital;
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net earnings;
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earnings per share;
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net income;
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gross profit margin;
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operating margin;
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operating income;
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net worth;
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cash flow;
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cash flow per share;
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total stockholder return;
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return on capital;
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stock price performance;
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revenues;
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costs;
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working capital;
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capital expenditures;
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changes in capital structure;
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economic value added;
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industry indices;
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expenses and expense ratio management;
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debt reduction;
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profitability of an identifiable business unit or product;
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levels of expense, cost or liability by category, operating unit or any other delineation; and
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implementation or completion of projects or processes.
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We
are not presently subject to Section 162(m) of the Internal
Revenue Code, a tax code provision which imposes limits on deductibility of executive
compensation. We would expect to amend the Equity Incentive Plan to
address Section 162(m) requirements should Section 162(m)
become applicable to us.
Special Provisions Prior to an Initial Public Offering
. Prior to an IPO, exercise of stock
options and stock appreciation rights is limited to the two-month period following the later of (i)
the most recent date on which we have received a fair market value determination with respect to
our common stock by an independent appraiser (as of June 30 and December 31) and (ii) the date of
our most recent 10-Q filing (following a June 30 appraisal) or 10-K filing (following a December 31
appraisal). In the event of a termination of service that occurs when exercise would not be
permitted for at least two weeks during the standard three-month post-termination exercise period,
exercise may be extended through the next two-month permissible exercise period.
In addition, prior to an IPO, a participant (or estate or other beneficiary of a deceased
participant) may require us to repurchase shares of our common stock held by the participant at
then-current fair market value (a put right). Put rights are personal to the participant and do
not run with an award or shares of common stock acquired pursuant to the award. If the award or
common stock is transferred to another person, that person will not be entitled to exercise the put
right, except for the estate or other beneficiary of a deceased participant. If a participants
service is terminated for cause, the participants put rights terminate. Prior to an IPO, we also
have a right to repurchase shares of our common stock held by a participant (or estate or other
beneficiary of a deceased participant, or other permitted transferee) at then-current fair market
value (a call right). Call rights run with an award and any shares of common stock acquired
pursuant to the award. If the award or common stock is transferred to another person, that person
is subject to the call right. However, we will not be obligated to repurchase our common stock,
whether pursuant to a put right or a call right, in certain situations, such as if the repurchase
would violate applicable law or the provisions of any agreement, including credit agreements or
bond indentures, to which we are a party, or if we determine that the repurchase would be
inadvisable in view of a pending or planned IPO, dividend, redemption or other distribution to our
stockholders, or any change has occurred or has been threatened in our business, condition, income,
operations, liquidity, stock ownership, or prospects. Both put rights and call rights may be
exercised only with respect to shares of our common stock that have been held by a participant for
at least six months following their issuance date (including, for this purpose, the period during
which our common stock is held by the estate or other beneficiary of a deceased participant, or
other permitted transferee).
Finally, prior to an IPO, we may require, as a condition to receipt of common stock under the
Equity Incentive Plan, that the recipient enter into certain agreements, including voting and
transfer agreements, such as our stockholders agreement and our voting trust agreement.
Changes to Capital Structure.
In the event that there is a specified type of change in our
capital structure, such as a merger, consolidation, recapitalization, reorganization,
reincorporation, stock dividend or other change in capital structure, appropriate adjustments will
be made to the Equity Incentive Plan and outstanding awards.
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Corporate Transactions.
In the event of certain corporate transactions specified in the
Equity Incentive Plan, such as a sale of substantially all of our assets or a merger where we are
not the surviving corporation, all outstanding stock awards under the Equity Incentive Plan may be
assumed, continued, or substituted for by any surviving or acquiring entity (or its parent
company). If the surviving or acquiring entity (or its parent company) elects not to assume,
continue or substitute for such stock awards, then (i) with respect to any stock awards that are
held by individuals whose service with us or our affiliates has not terminated prior to the
effective date of the corporate transaction, the vesting and exercisability provisions of these
stock awards will be accelerated in full and these awards will be terminated if not exercised prior
at or prior to the effective date of the corporate transaction, and any reacquisition or repurchase
rights held by us will lapse, and (ii) all other outstanding stock awards will terminate if not
exercised prior to the effective date of the corporate transaction (except that any reacquisition
or repurchase rights will not terminate and may continue to be exercised notwithstanding the
corporate transaction). However, put and call rights will survive a corporate transaction, unless
the shares of common stock acquired pursuant to the award are converted into securities of a
publicly-held surviving or acquiring corporation (or its parent). Our board also may provide that
the holder of an outstanding stock award not assumed in the corporate transaction will surrender
the stock award in exchange for a payment equal to the excess of (i) the value of the property that
the holder would have received upon exercise of the stock award, over (ii) the exercise price
otherwise payable in connection with the stock award.
Award of Stock Appreciation Rights
On July 13, 2006, our board approved the award of stock appreciation rights (SARs) under our
2006 Equity Incentive Plan to a small group of our senior-most executives. The number of shares
covered by awards to persons who qualified as our named executive officers as of November 27,
2005, the end of our 2005 fiscal year, is set forth in the following table:
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Number of
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Securities
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Underlying SARs
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Exercise or Base Price
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Name
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Granted (#)
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($/Sh)(1)
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Expiration Date
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Philip A. Marineau
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150,000
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$
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42.00
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12/31/2012
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R. John Anderson
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462,696
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$
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42.00
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12/31/2012
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Hans Ploos Van Amstel
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127,242
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$
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42.00
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12/31/2012
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Robert L. Hanson
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127,242
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$
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42.00
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12/31/2012
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Paul Mason(2)
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N/A
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N/A
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N/A
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(1)
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100% of fair market value of one share of our common stock on the date of grant as
determined by our board based upon an independent appraisal.
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(2)
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Mr. Mason left us at the end of February 2006.
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These SAR grants vest as follows: For all recipients other than Mr. Marineau, one
twenty-fourth (1/24
th
) of each SAR grant vests on the first day of each month commencing
January 1, 2008 and ending December 1, 2009, subject to continued service through the applicable
vesting date. For Mr. Marineau, his grant will vest evenly over an 11 month period commencing
January 1, 2008 and ending November 30, 2008, and Mr. Marineau will be treated for purposes of this grant as if he had
remained employed by us through November 30, 2008 notwithstanding his retirement at the end of our fiscal 2006. If we determine that an award results in the
imposition of an additional tax under Section 409A of the Internal Revenue Code, we may cancel
unvested SAR grants prior to an IPO or agree with the
participant to revise his or her award to avoid the imposition of such additional tax. Our
boards standard form of SAR award agreement is filed with this Form 8-K as Exhibit 99.2.
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We
expect in our third quarter to early adopt the provisions of and account for these awards under SFAS No. 123
(revised 2004), Share-Based Payment (SFAS 123R). We expect these awards will be
equity-classified under the guidelines of SFAS 123R.
ITEM 3.02 Unregistered Sales of Equity Securities.
On July 13, 2006, our board approved the award of stock appreciation rights under our 2006
Equity Incentive Plan covering 1,318,310 shares of our common stock to a small group of our
senior-most executives. All stock appreciation rights were granted with an exercise price equal to
the fair market value of the covered shares on the date of grant. Upon exercise,
the holder of a stock appreciation right is entitled to receive shares of common stock with an
aggregate value equal to the excess of the then current fair market value of the covered shares
over the exercise price. In the case of all recipients other than Mr.
Marineau, one twenty-fourth (1/24th) of each stock appreciation right grant vests (becomes
exercisable) on the first day of each month commencing January 1, 2008 and ending December 1, 2009,
subject to continued service through the applicable vesting date. In the case of Mr. Marineau, his
grant vests evenly over an 11-month period commencing January 1, 2008 and ending November 30, 2008, and Mr. Marineau will
be treated for purposes of this grant as if he had
remained employed by us through November 30, 2008 notwithstanding his retirement at the end of our fiscal 2006.
The stock appreciation rights were granted under Section 4(2) of the Securities Act of 1933,
as amended. Section 4(2) generally provides an exemption from registration for transactions by an
issuer not involving any public offering. The stock appreciation rights were granted to a limited
number of employees, all of whom are our senior-most executives.
We are a privately-held company; there is no public trading of our common stock. As of July
13, 2006, we had 37,278,238 shares outstanding.
ITEM 8.01 Other Events.
Completion of Exchange Offer for 2013 Euro Notes and 2016 Notes
On July 13, 2006, we completed our exchange offer whereby we offered to exchange
102.0
million of our unregistered 8.625% senior unsecured notes due 2013 and $350.0 million of our
unregistered 8.875% senior unsecured notes due 2016 for similar notes that have been registered
under the Securities Act of 1933, as amended. The exchange offer was accepted by holders of
100.7
million of unregistered 2013 Euro notes and $350.0 million of unregistered 2016 notes. Following
completion of the exchange offer, $1.3 million aggregate principal amount of our 2013 Euro notes
remain unregistered and no 2016 notes remain unregistered. The
100.7 million of registered 2013
Euro notes are listed on the Luxembourg Stock Exchange and are fungible with the
148.0 million of
registered 2013 Euro notes which were listed on the Luxembourg Stock Exchange in 2005.
ITEM 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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99.1
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2006 Equity Incentive Plan.
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99.2
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Form of stock appreciation right award agreement.
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8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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LEVI STRAUSS & CO.
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DATE: July 19, 2006
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By:
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/s/ Heidi L. Manes
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Name:
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Heidi L. Manes
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Title:
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Vice President, Controller
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9
EXHIBIT INDEX
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Exhibit Number
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Description
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99.1
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2006 Equity Incentive Plan.
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99.2
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Form of stock appreciation right award agreement.
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Exhibit 99.1
Levi Strauss & Co.
2006 Equity Incentive Plan
Adopted by the Board:
July 13, 2006
Approved by the Stockholders:
July 13, 2006
Termination Date:
July 12, 2016
1.
General.
(a) Eligible Award Recipients.
The persons eligible to receive discretionary Awards are
Employees, Directors and Consultants.
(b) Available Awards.
The Plan provides for the grant of the following Stock Awards: (i)
Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Restricted Stock Awards, (iv)
Restricted Stock Unit Awards, (v) Stock Appreciation Rights, (vi) Performance Stock Awards, and
(vii) Other Stock Awards. The Plan also provides for the grant of Performance Cash Awards.
(c) Purpose.
The Company, by means of the Plan, seeks to secure and retain the services of
the group of persons eligible to receive Awards as set forth in Section 1(a), to provide incentives
for such persons to exert maximum efforts for the success of the Company and any Affiliate and to
provide a means by which such eligible recipients may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of Awards.
2.
Definitions.
As used in the Plan, the following definitions shall apply to the capitalized terms indicated
below:
(a)
Affiliate
means (i) any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, provided each corporation in the unbroken chain (other than
the Company) owns, at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other corporations in such
chain, and (ii) any corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other corporations in such
chain. The Board, in its sole discretion, shall have the authority to determine (i) the time or
times at which the foregoing ownership tests are applied, and (ii) whether Affiliate includes
entities other than corporations within the foregoing definition.
(b)
Award
means a Stock Award or a Performance Cash Award.
(c)
Board
means the Board of Directors of the Company.
1.
(d)
Capitalization Adjustment
has the meaning ascribed to that term in Section 11(a).
(e)
Cause
means that the Participant has: (i) committed any willful, intentional or grossly
negligent act materially injuring the interest, business or reputation of the Company or an
Affiliate; (ii) engaged in any willful misconduct, including insubordination, in respect of his or
her duties or obligations to the Company or an Affiliate; (iii) violated or failed to comply in any
material respect with the Companys or any Affiliates published rules, regulations or policies
(including, without limitation, the Companys Worldwide Code of Business Conduct), as in effect
from time to time; (iv) committed a felony or misdemeanor involving moral turpitude, fraud, theft
or dishonesty (including entry of a
nolo contendere
plea resulting in conviction of a felony or
misdemeanor involving moral turpitude, fraud, theft or dishonesty); (v) misappropriated or
embezzled any property of the Company or an Affiliate (whether or not a misdemeanor or felony);
(vi) failed, neglected or refused to perform the employment or Board duties, as applicable, related
to his or her position as from time to time assigned to him or her (including, without limitation,
the Participants inability to perform such duties as a result of alcohol or drug abuse, chronic
alcoholism or drug addiction); or (vii) breached any applicable employment agreement. For purposes
of this Section 2(e), willful means an act or omission in bad faith and without reasonable belief
that such act or omission was in, or not opposed to, the best interests of the Company.
(f)
Code
means the Internal Revenue Code of 1986, as amended.
(g)
Committee
means a committee of one (1) or more members of the Board to whom authority
has been delegated by the Board in accordance with Section 3(c).
(h)
Common Stock
means the common stock of the Company;
provided, however,
that after an IPO
Date, such term shall mean the class of common stock of the Company that was sold to the public in
the initial public offering.
(i)
Company
means Levi Strauss & Co., a Delaware corporation.
(j)
Consultant
means any person, including an advisor, who is engaged by the Company or an
Affiliate to render consulting or advisory services and is compensated for such services.
(k)
Continuous Service
means that the Participants service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A
change in the capacity in which the Participant renders service to the Company or an Affiliate as
an Employee, Consultant or Director or a change in the entity for which the Participant renders
such service, provided that there is no interruption or termination of the Participants service
with the Company or an Affiliate, shall not terminate a Participants Continuous Service;
provided,
however
, if the corporation for which a Participant is rendering service ceases to qualify as an
Affiliate, as determined by the Board in its sole discretion, such Participants Continuous Service
shall be considered to have terminated on the date such corporation ceases to qualify as an
Affiliate. For example, a change in status from an employee of the Company to a consultant of an
Affiliate or to a Director shall not constitute an interruption of Continuous
2.
Service. To the extent permitted by law, the Board or the chief executive officer of the
Company, in that partys sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that party, including sick
leave, military leave or any other personal leave. Notwithstanding the foregoing, a leave of
absence shall be treated as Continuous Service for purposes of vesting in a Stock Award only to
such extent as may be provided in the Companys leave of absence policy or in the written terms of
the Participants leave of absence.
(l)
Corporate Transaction
means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:
(i)
a sale or other disposition of all or substantially all, as determined by the Board in its
sole discretion, of the consolidated assets of the Company and its Subsidiaries;
(ii)
a sale or other disposition of at least ninety percent (90%) of the outstanding voting
securities of the Company;
(iii)
the consummation of a merger, consolidation or similar transaction following which the
Company is not the surviving corporation; or
(iv)
the consummation of a merger, consolidation or similar transaction following which the
Company is the surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of
the merger, consolidation or similar transaction into other property, whether in the form of
securities, cash or otherwise.
The foregoing definition shall not include transfers of shares by one Permitted Holder to another
Permitted Holder.
(m)
Covered Employee
means the chief executive officer and the four (4) other highest
compensated officers of the Company for whom total compensation is required to be reported to
stockholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code.
(n)
Director
means a member of the Board.
(o)
Disability
means the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code.
(p)
Employee
means any person employed by the Company or an Affiliate. However, service
solely as a Director, or payment of a fee for such services, shall not cause a Director to be
considered an Employee for purposes of the Plan.
(q)
Entity
means a corporation, partnership or other entity.
(r)
Exchange Act
means the Securities Exchange Act of 1934, as amended.
3.
(s)
Fair Market Value
means, as of any date, the value of the Common Stock determined as
follows:
(i)
If the Common Stock is listed on any established stock exchange or traded on the Nasdaq
National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest volume of trading in
the Common Stock) on the date of determination, as reported in
The Wall Street Journal
or such
other source as the Board deems reliable. Unless otherwise provided by the Board, if there is no
closing sales price (or closing bid if no sales were reported) for the Common Stock on the date of
determination, then the Fair Market Value shall be the closing selling price (or closing bid if no
sales were reported) on the last preceding date for which such quotation exists.
(ii)
In the absence of such markets for the Common Stock, the Fair Market Value shall be
determined by the Board based upon an independent appraisal in compliance with Section 409A of the
Code or, in the case of an Incentive Stock Option, in compliance with Section 422 of the Code.
(t)
Incentive Stock Option
means an Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(u)
IPO Date
means the date of completion of the Companys initial underwritten public
offering, if any, of the Common Stock pursuant to a registration statement.
(v)
Non-Employee Director
means a Director who either (i) is not a current employee or
officer of the Company or an Affiliate, does not receive compensation, either directly or
indirectly, from the Company or an Affiliate for services rendered as a consultant or in any
capacity other than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
(
Regulation S-K
)), does not possess an interest in any other transaction for which disclosure
would be required under Item 404(a) of Regulation S-K, and is not engaged in a business
relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or
(ii) is otherwise considered a non-employee director for purposes of Rule 16b-3.
(w)
Nonstatutory Stock Option
means an Option not intended to qualify as an Incentive Stock
Option.
(x)
Officer
means a person who is an officer of the Company within the meaning of Section 16
of the Exchange Act and the rules and regulations promulgated thereunder.
(y)
Option
means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares
of Common Stock granted pursuant to the Plan.
(z)
Option Agreement
means a written agreement between the Company and an Optionholder
evidencing the terms and conditions of an Option grant. Each Option Agreement shall be subject to
the terms and conditions of the Plan.
4.
(aa)
Optionholder
means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.
(bb)
Other Stock Award
means an award based in whole or in part by reference to the Common
Stock which is granted pursuant to Section 7(d).
(cc)
Other Stock Award Agreement
means a written agreement between the Company and a holder
of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant. Each
Other Stock Award Agreement shall be subject to the terms and conditions of the Plan.
(dd)
Outside Director
means a Director who either (i) is not a current employee of the
Company or an affiliated corporation (within the meaning of Treasury Regulations promulgated
under Section 162(m) of the Code), is not a former employee of the Company or an affiliated
corporation who receives compensation for prior services (other than benefits under a
tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or
an affiliated corporation, and does not receive remuneration from the Company or an affiliated
corporation, either directly or indirectly, in any capacity other than as a Director, or (ii) is
otherwise considered an outside director for purposes of Section 162(m) of the Code.
(ee)
Own, Owned, Owner, Ownership
A person or Entity shall be deemed to Own, to
have Owned, to be the Owner of, or to have acquired Ownership of securities if such person or
Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power, which includes the power to vote or to direct the voting,
with respect to such securities.
(ff)
Participant
means a person to whom an Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Award.
(gg)
Performance Cash Award
means an award of cash granted pursuant to Section 7(d)(ii).
(hh)
Performance Criteria
means the one or more criteria that the Board shall select for
purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria
that shall be used to establish such Performance Goals may be based on any one of, or combination
of, the following: (i) earnings before interest, taxes, depreciation, amortization, and rent
(EBITDAR); (ii) earnings before interest, taxes, depreciation and amortization (EBITDA); (iii)
earnings before interest and taxes (EBIT); (iv) EBITDAR, EBITDA, EBIT or earnings before taxes
and unusual or nonrecurring items as measured either against the annual budget or as a ratio to
revenue or return on total capital; (v) net earnings; (vi) earnings per share; (vii) net income;
(viii) gross profit margin; (ix) operating margin; (x) operating income; (xi) net worth; (xii) cash
flow; (xiii) cash flow per share; (xiv) total stockholder return; (xv) return on capital; (xvi)
stock price performance; (xvii) revenues; (xviii) costs; (xix) working capital; (xx) capital
expenditures; (xxi) changes in capital structure; (xxii) economic value added; (xxiii) industry
indices; (xxiv) expenses and expense ratio management; (xxv) debt reduction; (xxvi) profitability
of an identifiable business unit or product; (xxvii) levels of expense, cost or liability by
category, operating unit or any other delineation; and (xxviii) implementation or completion
5.
of projects or processes. Partial achievement of the specified criteria may result in the
payment or vesting corresponding to the degree of achievement as specified in the Stock Award
Agreement or the written terms of a Performance Cash Award. The Board shall, in its sole
discretion, define the manner of calculating the Performance Criteria it selects to use for a
Performance Period.
(ii)
Performance Goals
means, for a Performance Period, the one or more goals established by
the Board for the Performance Period based upon the Performance Criteria. Performance Goals may be
set on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or
business segments, and in either absolute terms or relative to internally generated business plans,
approved by the Board, the performance of one or more comparable companies or a relevant index.
The Board is authorized to make adjustments in the method of calculating the attainment of
Performance Goals for a Performance Period as follows: (i) to exclude restructuring and/or other
nonrecurring charges; (ii) to exclude exchange rate effects, as applicable, for non-U.S. dollar
denominated net sales and operating earnings; (iii) to exclude the effects of changes to generally
accepted accounting standards required by the Financial Accounting Standards Board; (iv) to exclude
the effects of any statutory adjustments to corporate tax rates; (v) to exclude the effects of any
extraordinary items as determined under generally accepted accounting principles; (vi) to exclude
any other unusual, non-recurring gain or loss or other extraordinary item; (vii) to respond to, or
in anticipation of, any unusual or extraordinary corporate item, transaction, event or development;
(viii) to respond to, or in anticipation of, changes in applicable laws, regulations, accounting
principles, or business conditions; (ix) to exclude the dilutive effects of acquisitions or joint
ventures; (x) to assume that any business divested by the Company achieved performance objectives
at targeted levels during the balance of a Performance Period following such divestiture; (xi) to
exclude the effect of any change in the outstanding shares of common stock of the Company by reason
of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger,
consolidation, spin-off, combination or exchange of shares or other similar corporate change, or
any distributions to common shareholders other than regular cash dividends; (xii) to reflect a
corporate transaction, such as a merger, consolidation, separation (including a spinoff or other
distribution of stock or property by a corporation), or reorganization (whether or not such
reorganization comes within the definition of such term in Section 368 of the Code); and (xiii) to
reflect any partial or complete corporate liquidation. The Board also retains the discretion to
reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals.
(jj)
Performance Period
means the one or more periods of time, which may be of varying and
overlapping durations, as the Committee may select, over which the attainment of one or more
Performance Goals will be measured for the purpose of determining a Participants right to and the
payment of a Performance Stock Award or a Performance Cash Award.
(kk)
Performance Stock Award
means a Stock Award granted pursuant to Section 7(d)(i).
(ll)
Permitted Holders
means the holders of Voting Stock as of the date of adoption of this
Plan by the Board, together with (i) any voting trustee under the Voting Trust Agreement and (ii)
any Person who is a Permitted Transferee, as that term is defined in the Stockholders Agreement,
except that transferees under Section 2.2(a)(x) of the Stockholders
6.
Agreement (which includes, without limitation, Participants) shall not be Permitted Holders
for purposes of this Plan.
(mm)
Person
means any individual, corporation, company (including any limited liability
company), association, partnership, joint venture, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
(nn)
Plan
means this Levi Strauss & Co. 2006 Equity Incentive Plan.
(oo)
Restricted Stock Award
means an award of shares of Common Stock which is granted
pursuant to Section 7(a).
(pp)
Restricted Stock Award Agreement
means a written agreement between the Company and a
holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award
grant. Each Restricted Stock Award Agreement shall be subject to the terms and conditions of the
Plan.
(qq)
Restricted Stock Unit Award
means a right to receive shares of Common Stock which is
granted pursuant to Section 7(b).
(rr)
Restricted Stock Unit Award Agreement
means a written agreement between the Company and
a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock
Unit Award grant. Each Restricted Stock Unit Award Agreement shall be subject to the terms and
conditions of the Plan.
(ss)
Retirement
means the termination of a Participants Continuous Service on or after the
date on which such Participant has met the age and service requirements as defined and determined
under the Company retirement plan applicable to the Participant.
(tt)
Rule 16b-3
means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule
16b-3, as in effect from time to time.
(uu)
Securities Act
means the Securities Act of 1933, as amended.
(vv)
Stock Appreciation Right
means a right to receive the appreciation on Common Stock that
is granted pursuant to the terms and conditions of Section 7(c).
(ww)
Stock Appreciation Right Agreement
means a written agreement between the Company and a
holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation
Right grant. Each Stock Appreciation Right Agreement shall be subject to the terms and conditions
of the Plan.
(xx)
Stock Award
means any right granted under the Plan, including an Option, a Restricted
Stock Award, a Stock Appreciation Right, a Restricted Stock Unit Award, an Other Stock Award, or a
Performance Stock Award.
7.
(yy)
Stock Award Agreement
means a written agreement between the Company and a Participant
evidencing the terms and conditions of a Stock Award grant. Each Stock Award Agreement shall be
subject to the terms and conditions of the Plan.
(zz)
Stockholders Agreement
means the Stockholders Agreement dated as of April 15, 1996
between the Company and the stockholders of the Company party thereto.
(aaa)
Subsidiary
means, with respect to the Company, (i) any corporation of which more than
fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether, at the time, stock
of any other class or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company,
and (ii) any partnership in which the Company has a direct or indirect interest (whether in the
form of voting or participation in profits or capital contribution) of more than fifty percent
(50%).
(bbb)
Ten Percent Stockholder
means a person who Owns (or is deemed to Own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Affiliate.
(ccc)
Voting Stock
means all classes of the Companys capital stock (including Common Stock
and voting trust certificates issued under the Voting Trust Agreement) outstanding at the time of
reference and normally entitled (without regard to the occurrence of any contingency) to vote in
the election of directors of the Company.
(ddd)
Voting Trust Agreement
means the Voting Trust Agreement dated as of April 15, 1996 by
and among the voting trustees named therein and the stockholders of the Company who are parties
thereto.
3.
Administration.
(a) Administration by Board.
The Board shall administer the Plan unless and until the Board
delegates administration of the Plan to a Committee, as provided in Section 3(c).
(b) Powers of Board.
The Board or the Committee, to the extent delegated to the Committee
pursuant to Section 3(c), shall have the power, subject to, and within the limitations of, the
express provisions of the Plan:
(i)
To construe and interpret the Plan and Awards granted under it, and to establish, amend
and revoke rules and regulations for its administration. The Board, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement or in
the written terms of a Performance Cash Award, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.
(ii)
To determine from time to time (1) which of the persons eligible under the Plan shall be
granted Awards; (2) when and how each Award shall be granted; (3) what type or combination of
types of Awards shall be granted; (4) the provisions of each Award granted (which need not be
identical), including the time or times when a person shall be permitted to
8.
receive cash or Common Stock pursuant to an Award; (5) the number of shares of Common Stock
with respect to which a Stock Award shall be granted to each such person; and (6) the Fair Market
Value applicable to a Stock Award.
(iii)
To accelerate the time at which a Stock Award may first be exercised or the time during
which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the
provisions in the Stock Award stating the time at which it may first be exercised or the time
during which it will vest.
(iv)
To effect, at any time and from time to time, (1) the reduction of the exercise price of
any outstanding Option or the strike price of any outstanding Stock Appreciation Right under the
Plan; or (2) the cancellation of any outstanding Option or Stock Appreciation Right under the Plan
and the grant in substitution therefor of (a) a new Option or Stock Appreciation Right under the
Plan or another equity plan of the Company covering the same or a different number of shares of
Common Stock, (b) a Restricted Stock Award, (c) a Restricted Stock Unit Award, (d) an Other Stock
Award, (e) cash, and/or (f) other valuable consideration (as determined by the Board, in its sole
discretion);
provided, however
, that no such reduction or cancellation may be effected if it is
determined, in the Companys sole discretion, that such reduction or cancellation would result in
any such outstanding Option or Stock Appreciation Right becoming subject to the requirements of
Section 409A of the Code.
(v)
Prior to an IPO Date, to cancel an Award, to the extent not vested, with or without
substitution of consideration pursuant to Section 3(b)(iv).
(vi)
To amend the Plan or an Award as provided in Section 12.
(vii)
To terminate or suspend the Plan as provided in Section 13.
(viii)
Generally, to exercise such powers and to perform such acts as the Board deems
necessary or expedient to promote the best interests of the Company which are not in conflict with
the provisions of the Plan.
(ix)
To adopt such procedures and sub-plans as are necessary or appropriate to permit
participation in the Plan by individuals who are foreign nationals or employed outside the United
States.
(c) Delegation to Committee.
(i) General.
The Board may delegate some or all of the administration of the Plan to a
Committee or Committees. If administration is delegated to a Committee, the Committee shall have,
in connection with the administration of the Plan, the powers theretofore possessed by the Board
that have been delegated to the Committee, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or subcommittee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time
by the Board. The Board may retain the authority to concurrently administer the Plan with the
Committee and may, at any time, revest in the Board some or all of the powers previously delegated.
9.
(ii) Section 162(m) and Rule 16b-3 Compliance.
In the sole discretion of the Board and
whether or not such statutes or rules are applicable to the Company, the Committee may consist
solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, and/or
solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. In addition, the
Board or the Committee, in its sole discretion, may (1) delegate to a committee of one or more
members of the Board who need not be Outside Directors the authority to grant Awards to eligible
persons who are either (a) not then Covered Employees and are not expected to be Covered Employees
at the time of recognition of income resulting from such Award, or (b) not persons with respect to
whom the Company wishes to comply with Section 162(m) of the Code, and/or (2) delegate to a
committee of one or more members of the Board who need not be Non-Employee Directors the authority
to grant Stock Awards to eligible persons who are not then subject to Section 16 of the Exchange
Act.
(d) Effect of Boards Decision.
All determinations, interpretations and constructions made by
the Board in good faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.
4.
Shares Subject to the Plan.
(a) Share Reserve.
Subject to the provisions of Section 11(a) relating to Capitalization
Adjustments, the number of shares of Common Stock that may be issued pursuant to Stock Awards shall
not exceed, in the aggregate, 418,175 shares of Common Stock,
provided, however
, that such number shall be increased automatically to the extent necessary to satisfy the exercise of
Stock Awards that were granted or authorized on July 13, 2006.
(b) Reversion of Shares to the Share Reserve
. If any (i) Stock Award shall for any reason
expire or otherwise terminate, in whole or in part, without having been exercised in full, (ii)
shares of Common Stock issued to a Participant pursuant to a Stock Award are forfeited to or
repurchased by the Company pursuant to the Companys reacquisition or repurchase rights under the
Plan, including any forfeiture or repurchase caused by the failure to meet a contingency or
condition required for the vesting of such shares, (iii) Stock Award is settled in cash, or (iv)
shares of Common Stock are cancelled in accordance with the cancellation and regrant provisions of
Section 3(b)(iv), then the shares of Common Stock not issued under such Stock Award, or forfeited
to or repurchased by the Company, shall revert to and again become available for issuance under the
Plan. If any shares subject to a Stock Award are not delivered to a Participant because the Stock
Award is exercised through a reduction of shares subject to the Stock Award (
i.e.
, net exercised)
or an appreciation distribution in respect of a Stock Appreciation Right is paid in shares of
Common Stock, the number of shares subject to the Stock Award that are not delivered to the
Participant shall remain available for subsequent issuance under the Plan. If any shares subject
to a Stock Award are not delivered to a Participant because such shares are withheld in
satisfaction of the withholding of taxes incurred in connection with the exercise of an Option or
Stock Appreciation Right or the issuance of shares under a Restricted Stock Award, Restricted Stock
Unit Award or Other Stock Award, the number of shares that are not delivered to the Participant
shall remain available for subsequent issuance under the Plan. If the exercise price of any Stock
Award is satisfied by tendering shares of Common Stock held by the Participant (either by actual
delivery or attestation), then the number of shares so tendered shall remain available for
subsequent issuance under the Plan.
10.
(c) Incentive Stock Option Limit
. Notwithstanding anything to the contrary in this Section
4(c), subject to the provisions of Section 11(a) relating to Capitalization Adjustments, the
aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of
Incentive Stock Options shall be 418,175 shares of Common Stock.
(d) Source of Shares.
The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the Company on the open
market.
5.
Eligibility.
(a) Eligibility for Specific Awards
. Incentive Stock Options may be granted only to
Employees. Stock Awards other than Incentive Stock Options may be granted to Employees, Directors
and Consultants. Performance Cash Awards may be granted to Employees, Directors and Consultants.
(b) Ten Percent Stockholders.
A Ten Percent Stockholder shall not be granted an Incentive
Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of
the Fair Market Value of the Common Stock on the date of grant and the Option is not exercisable
after the expiration of five (5) years from the date of grant.
6.
Option Provisions.
Each Option shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. All Options shall be separately designated Incentive Stock Options or
Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate
certificate or certificates shall be issued for shares of Common Stock purchased on exercise of
each type of Option. The provisions of separate Options need not be identical;
provided, however
,
that each Option Agreement shall include (through incorporation of provisions hereof by reference
in the Option or otherwise) the substance of each of the following provisions:
(a) Term.
No Option shall be exercisable after the expiration of ten (10) years from the date
of grant, or such shorter period specified in the Option Agreement;
provided, however,
that an
Incentive Stock Option granted to a Ten Percent Stockholder shall be subject to the provisions of
Section 5(b).
(b) Exercise Price of an Incentive Stock Option.
Subject to the provisions of Section 5(b)
regarding Ten Percent Stockholders, the exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option
may be granted with an exercise price lower than that set
11.
forth in the preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner consistent with the provisions of Section 424(a) of the
Code.
(c) Exercise Price of a Nonstatutory Stock Option.
The exercise price of each Nonstatutory
Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, a Nonstatutory Stock Option may be granted with an exercise price lower than that set
forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution
for another option in a manner consistent with the provisions of Section 424(a) of the Code.
(d) Consideration.
The purchase price of Common Stock acquired pursuant to the exercise of an
Option shall be paid, to the extent permitted by applicable law and as determined by the Board in
its sole discretion, by any combination of the methods of payment set forth below. The Board shall
have the authority to grant Options that do not permit all of the following methods of payment (or
otherwise restrict the ability to use certain methods) and to grant Options that require the
consent of the Company to utilize a particular method of payment. The methods of payment permitted
by this Section 6(d) are:
(i)
by cash or check;
(ii)
pursuant to a program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds;
(iii)
by delivery to the Company (either by actual delivery or attestation) of shares of
Common Stock;
(iv)
by a net exercise arrangement pursuant to which the Company will reduce the number of
shares of Common Stock issued upon exercise by the largest whole number of shares with a Fair
Market Value that does not exceed the aggregate exercise price;
provided, however,
the Company
shall accept a cash or other payment from the Participant to the extent of any remaining balance of
the aggregate exercise price not satisfied by such reduction in the number of whole shares to be
issued;
provided further, however,
that shares of Common Stock will no longer be outstanding under
an Option and will not be exercisable thereafter to the extent that (i) shares are used to pay the
exercise price pursuant to the net exercise, (ii) shares are delivered to the Participant as a
result of such exercise, and (iii) shares are withheld to satisfy tax withholding obligations; or
(v)
in any other form of legal consideration that may be acceptable to the Board.
(e) Transferability of Options.
The Board may, in its sole discretion, impose such
limitations on the transferability of Options as the Board shall determine. In the absence of such
a determination by the Board to the contrary, the following restrictions on the transferability of
Options shall apply:
12.
(i) Restrictions on Transfer.
An Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder.
(ii) Domestic Relations Orders.
Notwithstanding the foregoing, an Option may be transferred
pursuant to a domestic relations order;
provided, however
, that if an Option is an Incentive Stock
Option, such Option shall be deemed to be a Nonstatutory Stock Option as a result of such transfer.
(iii) Beneficiary Designation.
Notwithstanding the foregoing, the Optionholder may, by
delivering written notice to the Company, in a form provided by or otherwise satisfactory to the
Company, designate a third party who, in the event of the death of the Optionholder, shall
thereafter be entitled to exercise the Option. In the absence of such a designation, the executor
or administrator of the Optionholders estate shall be entitled to exercise the Option.
(f) Vesting of Options Generally.
The total number of shares of Common Stock subject to an
Option may vest and therefore become exercisable in periodic installments that may or may not be
equal. The Option may be subject to such other terms and conditions on the time or times when it
may or may not be exercised (which may be based on performance or other criteria) as the Board may
deem appropriate, including, without limitation, the provisions of Section 9(a). The vesting
provisions of individual Options may vary. The provisions of this Section 6(f) are subject to any
Option provisions governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(g) Termination of Continuous Service.
Subject to the provisions of Section 8(a), if an
Optionholders Continuous Service terminates (other than for Cause or upon the Optionholders
death, Retirement or Disability), the Optionholder may exercise his or her Option (to the extent
that the Optionholder was entitled to exercise such Option as of the date of termination of
Continuous Service), but only within such period of time ending on the earlier of (i) the date
three (3) months following the termination of the Optionholders Continuous Service (or such longer
or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination of Continuous Service, the
Optionholder does not exercise his or her Option within the time specified herein or in the Option
Agreement (as applicable), the Option shall terminate.
(h) Extension of Termination Date.
An Optionholders Option Agreement may provide that if the
exercise of the Option following the termination of the Optionholders Continuous Service (other
than upon the Optionholders death, Retirement or Disability) would be prohibited at any time
solely because the issuance of shares of Common Stock would violate the registration requirements
under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a
period of three (3) months after the termination of the Optionholders Continuous Service during
which the exercise of the Option would not be in violation of such registration requirements, or
(ii) the expiration of the term of the Option as set forth in the Option Agreement.
13.
(i) Retirement or Disability of Optionholder.
Subject to the provisions of Section 8(a), if
an Optionholders Continuous Service terminates as a result of the Optionholders Retirement or
Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination of Continuous Service), but only
within such period of time ending on the earlier of (i) the date eighteen (18) months following
such termination of Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination of Continuous Service, the Optionholder does not exercise his or her Option
within the time specified herein or in the Option Agreement (as applicable), the Option shall
terminate.
(j) Death of Optionholder.
Subject to the provisions of Section 8(a), if (i) an
Optionholders Continuous Service terminates as a result of the Optionholders death, or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement after the
termination of the Optionholders Continuous Service for a reason other than death, the Option may
be exercised (to the extent that the Optionholder was entitled to exercise such Option as of the
date of death) by the Optionholders estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the option upon the
Optionholders death, but only within the period ending on the earlier of (i) the date eighteen
(18) months following the date of death (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of such Option as set forth in the Option Agreement.
If, after the Optionholders death, the Option is not exercised within the time specified herein
or in the Option Agreement (as applicable), the Option shall terminate.
(k) Termination for Cause.
If an Optionholders Continuous Service is terminated for Cause,
(i) the Option shall terminate upon the termination date of such Optionholders Continuous Service,
and the Optionholder shall be prohibited from exercising the Option from and after the time of such
termination of Continuous Service; and (ii) the Company may rescind any transfer of Common Stock to
the Optionholder that occurred within six (6) months prior to such termination of Continuous
Service or demand that the Optionholder pay over to the Company the proceeds received by the
Optionholder upon the sale, transfer or other transaction involving the Common Stock in such manner
and on such terms and conditions as the Company may require, and the Company shall be entitled to
set-off against the amount of such proceeds any amount owed to the Company by the Optionholder to
the fullest extent permitted by law.
(l) Early Exercise.
The Option may include a provision whereby the Optionholder may elect at
any time before the Optionholders Continuous Service terminates to exercise the Option as to any
part or all of the shares of Common Stock subject to the Option prior to the full vesting of the
Option. Any unvested shares of Common Stock so purchased may be subject to a repurchase option in
favor of the Company or to any other restriction the Board determines to be appropriate. The
Company shall not be required to exercise its repurchase option until at least six (6) months (or
such longer or shorter period of time required to avoid a charge to earnings for financial
accounting purposes) have elapsed following exercise of the Option unless the Board otherwise
specifically provides in the Option.
14.
7.
Provisions of Awards other than Options.
(a) Restricted Stock Award.
Each Restricted Stock Award Agreement shall be in such form and
shall contain such terms and conditions as the Board shall deem appropriate. To the extent
consistent with the Companys Bylaws, at the Boards election, shares of Common Stock may be (i)
held in book entry form subject to the Companys instructions until any restrictions relating to
the Restricted Stock Award lapse; or (ii) evidenced by a certificate, which certificate shall be
held in such form and manner as determined by the Board. The terms and conditions of Restricted
Stock Award Agreements may change from time to time, and the terms and conditions of separate
Restricted Stock Award Agreements need not be identical;
provided, however
, that each Restricted
Stock Award Agreement shall include (through incorporation of provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:
(i) Consideration.
A Restricted Stock Award may be awarded in consideration for (i) past or
future services rendered to the Company or an Affiliate, or (ii) any other form of legal
consideration that may be acceptable to the Board, in its sole discretion, and permissible under
applicable law.
(ii) Vesting.
Shares of Common Stock awarded under a Restricted Stock Award Agreement may be
subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the
Board.
(iii) Termination of Continuous Service.
If Participants Continuous Service terminates, the
Company may receive, pursuant to a forfeiture condition, any or all of the shares of Common Stock
held by the Participant which have not vested as of the date of termination of Continuous Service
under the terms of the Restricted Stock Award Agreement. If such termination is for Cause, the
Company may rescind the transfer of shares of Common Stock awarded to a Participant that ceased to
be subject to a forfeiture condition within six (6) months prior to such termination of Continuous
Service or demand that the Participant pay over to the Company the proceeds received by the
Participant upon the sale, transfer or other transaction involving the Common Stock in such manner
and on such terms and conditions as the Company may require, and the Company shall be entitled to
set-off against the amount of such proceeds any amount owed to the Company by the Optionholder to
the fullest extent permitted by law.
(iv) Transferability.
Rights to acquire shares of Common Stock under the Restricted Stock
Award Agreement shall be transferable by the Participant only upon such terms and conditions as are
set forth in the Restricted Stock Award Agreement, as the Board shall determine in its sole
discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains
subject to the terms of the Restricted Stock Award Agreement.
(b) Restricted Stock Unit Awards.
Each Restricted Stock Unit Award Agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem appropriate. The terms
and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the
terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical;
provided, however,
that each Restricted Stock Unit Award
15.
Agreement shall include (through incorporation of the provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:
(i) Consideration.
At the time of grant of a Restricted Stock Unit Award, the Board will
determine the consideration, if any, to be paid by the Participant upon delivery of each share of
Common Stock subject to the Restricted Stock Unit Award. The consideration to be paid (if any) by
the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid
in any form of legal consideration that may be acceptable to the Board in its sole discretion and
permissible under applicable law.
(ii) Vesting.
At the time of the grant of a Restricted Stock Unit Award, the Board may impose
such restrictions or conditions to the vesting of the Restricted Stock Unit Award as it, in its
sole discretion, deems appropriate.
(iii) Payment
. A Restricted Stock Unit Award may be settled by the delivery of shares of
Common Stock, their cash equivalent, any combination thereof or in any other form of consideration,
as determined by the Board and contained in the Restricted Stock Unit Award Agreement.
(iv) Additional Restrictions.
At the time of the grant of a Restricted Stock Unit Award, the
Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery
of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award
after the vesting of such Restricted Stock Unit Award.
(v) Dividend Equivalents.
Dividend equivalents may be credited in respect of shares of Common
Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the
Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend
equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock
Unit Award in such manner as determined by the Board. Any additional shares covered by the
Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all
the terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they
relate.
(vi) Termination of Continuous Service.
Except as otherwise provided in the applicable
Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not
vested will be forfeited upon the Participants termination of Continuous Service. If such
termination is for Cause, the Company may rescind the transfer of any shares of Common Stock (or
their cash equivalent) in respect of Restricted Stock Units that vested within six (6) months prior
to such termination of Continuous Service or demand that the Participant pay over to the Company
the proceeds received by the Participant upon the sale, transfer or other transaction involving the
Common Stock in such manner and on such terms and conditions as the Company may require, and the
Company shall be entitled to set-off against the amount of such proceeds any amount owed to the
Company by the Participant to the fullest extent permitted by law.
(c) Stock Appreciation Rights.
Each Stock Appreciation Right Agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
16.
Stock Appreciation Rights may be granted as stand-alone Stock Awards or in tandem with other
Stock Awards;
provided, however
, that a Stock Appreciation Right shall not be granted in tandem
with any other Stock Award if it is determined, in the Companys sole discretion, that such grant
would be subject to the requirements of Section 409A of the Code. The terms and conditions of
Stock Appreciation Right Agreements may change from time to time, and the terms and conditions of
separate Stock Appreciation Right Agreements need not be identical;
provided, however
, that each
Stock Appreciation Right Agreement shall include (through incorporation of the provisions hereof by
reference in the agreement or otherwise) the substance of each of the following provisions:
(i) Term
. No Stock Appreciation Right shall be exercisable after the expiration of ten (10)
years from the date of grant, or such shorter period specified in the Stock Appreciation Right
Agreement.
(ii) Strike Price
. Each Stock Appreciation Right will be denominated in shares of Common
Stock equivalents. The strike price of each Stock Appreciation Right granted as a stand-alone or
tandem Stock Award shall not be less than one hundred percent (100%) of the Fair Market Value of
the Common Stock equivalents subject to the Stock Appreciation Right on the date of grant.
(iii) Calculation of Appreciation.
The appreciation distribution payable on the exercise of a
Stock Appreciation Right will be not greater than an amount equal to the excess of (i) the
aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right) of a
number of shares of Common Stock equal to the number of share of Common Stock equivalents in which
the Participant is vested under such Stock Appreciation Right, and with respect to which the
Participant is exercising the Stock Appreciation Right on such date, over (ii) the strike price
that will be determined by the Board at the time of grant of the Stock Appreciation Right.
(iv) Vesting.
At the time of the grant of a Stock Appreciation Right, the Board may impose
such restrictions or conditions to the vesting of such Stock Appreciation Right as it, in its sole
discretion, deems appropriate.
(v) Exercise.
To exercise any outstanding Stock Appreciation Right, the Participant must
provide written notice of exercise to the Company in compliance with the provisions of the Stock
Appreciation Right Agreement evidencing such Stock Appreciation Right, which provisions may
include, without limitation, a restriction on the periods during which a vested Stock Appreciation
Right may be exercised pursuant to Section 8(a).
(vi) Payment
. The appreciation distribution in respect of a Stock Appreciation Right may be
paid in Common Stock, in cash, in any combination of the two or in any other form of consideration,
as determined by the Board and set forth in the Stock Appreciation Right Agreement evidencing such
Stock Appreciation Right.
(vii) Termination of Continuous Service.
Subject to the provisions of Section 8(a), if a
Participants Continuous Service terminates (other than for Cause or upon the Participants death,
Retirement or Disability), the Participant may exercise his or her Stock
17.
Appreciation Right (to the extent that the Participant was entitled to exercise such Stock
Appreciation Right as of the date of termination of Continuous Service), but only within such
period of time ending on the earlier of (i) the date three (3) months following the termination of
the Participants Continuous Service (or such longer or shorter period specified in the Stock
Appreciation Right Agreement), or (ii) the expiration of the term of the Stock Appreciation Right
as set forth in the Stock Appreciation Right Agreement. If, after termination of Continuous
Service, the Participant does not exercise his or her Stock Appreciation Right within the time
specified herein or in the Stock Appreciation Right Agreement (as applicable), the Stock
Appreciation Right shall terminate.
(viii) Extension of Termination Date.
A Participants Stock Appreciation Right Agreement may
provide that if the exercise of the Stock Appreciation Right following the termination of the
Participants Continuous Service (other than upon the Participants death, Retirement or
Disability) would be prohibited at any time solely because the issuance of shares of Common Stock
would violate the registration requirements under the Securities Act, then the Stock Appreciation
Right shall terminate on the earlier of (i) the expiration of a period of three (3) months after
the termination of the Participants Continuous Service during which the exercise of the Stock
Appreciation Right would not be in violation of such registration requirements, or (ii) the
expiration of the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right
Agreement.
(ix) Retirement or Disability of Participant.
Subject to the provisions of Section 8(a), if a
Participants Continuous Service terminates as a result of the Participants Retirement or
Disability, the Participant may exercise his or her Stock Appreciation Right (to the extent that
the Participant was entitled to exercise such Stock Appreciation Right as of the date of
termination of Continuous Service), but only within such period of time ending on the earlier of
(i) the date eighteen (18) months following such termination of Continuous Service (or such longer
or shorter period specified in the Stock Appreciation Right Agreement), or (ii) the expiration of
the term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement.
If, after termination of Continuous Service, the Participant does not exercise his or her Stock
Appreciation Right within the time specified herein or in the Stock Appreciation Right Agreement
(as applicable), the Stock Appreciation Right shall terminate.
(x) Death of Participant.
Subject to the provisions of Section 8(a), if (i) a Participants
Continuous Service terminates as a result of the Participants death, or (ii) the Participant dies
within the period (if any) specified in the Stock Appreciation Right Agreement after the
termination of the Participants Continuous Service for a reason other than death, the Stock
Appreciation Right may be exercised (to the extent that the Participant was entitled to exercise
such Stock Appreciation Right as of the date of death) by the Participants estate, by a person who
acquired the right to exercise the Stock Appreciation Right by bequest or inheritance or by a
person designated to exercise the option upon the Participants death, but only within the period
ending on the earlier of (i) the date eighteen (18) months following the date of death (or such
longer or shorter period specified in the Stock Appreciation Right Agreement), or (ii) the
expiration of the term of such Stock Appreciation Right as set forth in the Stock Appreciation
Right Agreement. If, after the Participants death, the Stock Appreciation Right is not exercised
within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the
Stock Appreciation Right shall terminate.
18.
(xi) Termination for Cause.
If a Participants Continuous Service is terminated for Cause,
(i) the Stock Appreciation Right shall terminate upon the termination date of such Participants
Continuous Service, and the Participant shall be prohibited from exercising the Stock Appreciation
Right from and after the time of such termination of Continuous Service; and (ii) the Company may
rescind any transfer of Common Stock (or its cash equivalent) to the Participant that occurred
within six (6) months prior to such termination of Continuous Service or demand that the
Participant pay over to the Company the proceeds received by the Participant upon the sale,
transfer or other transaction involving the Common Stock in such manner and on such terms and
conditions as the Company may require, and the Company shall be entitled to set-off against the
amount of such proceeds any amount owed to the Company by the Participant to the fullest extent
permitted by law.
(d) Performance Awards
.
(i) Performance Stock Awards
. A Performance Stock Award is either a Restricted Stock Award or
Restricted Stock Unit Award that may be granted, may vest, or may be exercised based upon the
attainment during a Performance Period of certain Performance Goals. A Performance Stock Award
may, but need not, require the completion of a specified period of Continuous Service. The length
of any Performance Period, the Performance Goals to be achieved during the Performance Period, and
the measure of whether and to what degree such Performance Goals have been attained shall be
conclusively determined by the Committee, in its sole discretion.
(ii) Performance Cash Awards
. A Performance Cash Award is a cash award that may be granted
upon the attainment during a Performance Period of certain Performance Goals. A Performance Cash
Award may, but need not, require the completion of a specified period of Continuous Service. The
length of any Performance Period, the Performance Goals to be achieved during the Performance
Period, and the measure of whether and to what degree such Performance Goals have been attained
shall be conclusively determined by the Committee, in its sole discretion.
(e) Other Stock Awards
. Other forms of Stock Awards valued in whole or in part by reference
to, or otherwise based on, Common Stock may be granted either alone or in addition to Stock Awards
provided for under Section 6 and the preceding provisions of this Section 7. Subject to the
provisions of the Plan, the Board shall have sole and complete authority to determine the persons
to whom and the time or times at which such Other Stock Awards will be granted, the number of
shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock
Awards and all other terms and conditions of such Other Stock Awards.
19.
8.
Exercise Procedures Prior to IPO Date; Participant Put Rights; Company Call Rights;
Agreements Relating to Common Stock.
(a) Limitation on Exercise of Options and Stock Appreciation Rights Prior to IPO Date.
Prior
to an IPO Date, a Participant shall be permitted to exercise an Option or a Stock Appreciation
Right, to the extent vested, as provided in the applicable provisions of Section 6 or Section 7(c),
but the period during which such exercise shall be permitted shall be further limited to the period
or periods, as the case may be, of (i) two (2) months following the later of (A) the Companys
receipt of the independent appraisal as of December 31 referred to in Section 2(s)(ii), and (B) the
date of the most recent filing of the Companys Form 10-K following such December 31; and (ii) two
(2) months following the later of (A) the Companys receipt of the independent appraisal as of June
30 referred to in Section 2(s)(ii), and (B) the date of the most recent filing of the Companys
Form 10-Q following such June 30. If the termination of a Participants Continuous Service for a
reason other than Retirement, Disability or death occurs at a time when, as a result of the
foregoing limitation, exercise thereafter would not be permitted for a period of at least two (2)
weeks during the three (3) months following such termination, then such Participant (or such
Participants estate or other beneficiary in the event of death, or other permitted transferee) may
also exercise the Option or Stock Appreciation Right during the next following 2-month permitted
exercise period;
provided, however,
that such exercise in no event shall be permitted following the
expiration date of the Option or Stock Appreciation Right.
(b) Participant Put Rights.
Prior to an IPO Date, a Participant (or such Participants estate
or other beneficiary in the event of death) shall have the right to require the Company to
repurchase shares of Common Stock acquired pursuant to a Stock Award in accordance with the
following provisions:
(i) Defined Terms.
For purposes of this Section 8(b), the following definitions shall apply
to the capitalized terms indicated below:
(1)
Put Period
means each of the periods of (i) two (2) months following the later of (A)
the Companys receipt of the independent appraisal as of December 31 referred to in Section
2(s)(ii), and (B) the date of the most recent filing of the Companys Form 10-K following such
December 31; and (ii) two (2) months following the later of (A) the Companys receipt of the
independent appraisal as of June 30 referred to in Section 2(s)(ii), and (B) the date of the most
recent filing of the Companys Form 10-Q following such June 30.
(2)
Put Notice
means the written notice (which may be delivered electronically) by which a
Participant (or such Participants estate or other beneficiary in the event of death) indicates a
decision to require the Company to purchase shares of Common Stock pursuant to the provisions of
this Section 8(b).
(ii) Application of Put Period.
During a Put Period, a Participant (or such Participants
estate or other beneficiary in the event of death) may require the Company to, and the Company will
be obligated to, repurchase shares of Common Stock then held by such person;
provided, however,
that only shares of Common Stock that have been held by a Participant for at least six (6) months
following their date of issuance (including, for this purpose, the period
20.
during which such shares were held by such Participants estate or other beneficiary in the
event of death) shall be subject to such put right.
(iii) Purchase Price.
The purchase price in all of the transactions described in this Section
8(b) shall be Fair Market Value, determined pursuant to Section 2(s)(ii) based on the independent
appraisal most recently received by the Company before the commencement of the applicable Put
Period.
(iv) Put Right Mechanics.
The Participant (or such Participants estate or other beneficiary
in the event of death) may exercise a put right pursuant to this Section 8(b) by delivering to the
Company, during any of the Put Periods provided in this Section 8(b), a Put Notice, signed by such
holder; the stock certificate(s) representing the shares of Common Stock subject to the Put Notice,
properly endorsed for transfer; and any other documents that the Company may reasonably request.
Following the Companys receipt and approval of such documents, the Company shall issue to such
Participant, estate or other beneficiary its check in payment of the purchase price for the shares
of Common Stock. Once submitted to the Company, a Put Notice is irrevocable.
(v) Put Rights Personal.
Except as described below in this Section 8(b)(v), the put rights
created by the Plan are personal to a Participant; that is, they do not run with the Stock Awards
or with the shares of Common Stock acquired pursuant thereto. In general, if a Stock Award or
shares of Common Stock acquired pursuant thereto are transferred to another person, as permitted by
the Stockholders Agreement or any other agreement that may relate to the transfer of such shares,
that person will
not
be entitled to exercise the put rights and to sell the shares of
Common Stock under this Section 8(b). Notwithstanding the foregoing limitation, the estate or
other beneficiary of a deceased Participant shall be permitted to exercise put rights to the same
extent as the Participant, and in selling shares of Common Stock pursuant to this Section 8(b), all
limitations and document delivery conditions shall apply to the estate or other beneficiary of a
deceased Participant.
(vi) Termination for Cause.
If a Participants Continuous Service is terminated for Cause,
all put rights shall terminate.
(c) Company Call Rights.
Prior to an IPO Date, the Company shall have the right, but not the
obligation, to repurchase all shares of Common Stock acquired pursuant to a Stock Award, in
accordance with the following provisions:
(i) Defined Terms.
For purposes of this Section 8(c), the following definitions shall apply
to the capitalized terms indicated below:
(1)
Call Period
means each of the periods of (i) three (3) months following the later of (A)
the Companys receipt of the independent appraisal as of December 31 referred to in Section
2(s)(ii), and (B) the date of the most recent filing of the Companys Form 10-K following such
December 31; and (ii) three (3) months following the later of (A) the Companys receipt of the
independent appraisal as of June 30 referred to in Section 2(s)(ii), and (B) the date of the most
recent filing of the Companys Form 10-Q following such June 30.
21.
(2)
Call Notice
means the written notice (which may be delivered in electronic form) by
which the Company indicates its decision to repurchase shares of Common Stock pursuant to the
provisions of this Section 8(c).
(ii) Application of Call Period.
During a Call Period, the Company, subject to the rules set
forth herein, shall be entitled to repurchase any or all of the shares of Common Stock then held by
a Participant (or such Participants estate or other beneficiary in the event of death, or other
permitted transferee);
provided, however,
that only shares that have been held for at least six (6)
months following their date of issuance (including, for this purpose, the period such shares were
held by the estate or other beneficiary of a deceased Participant, or other permitted transferee)
may be repurchased.
(iii) Unilateral Right.
The Company may exercise its call rights under this Section 8(c)
whether or not the Participant (or such Participants estate or other beneficiary in the event of
death, or other permitted transferee) wishes to sell, and such holders of Common Stock will be
obligated to sell on delivery of a Call Notice. The Company may make its decision in its sole
discretion, without regard to the tax or other financial consequences to the holder of the Common
Stock and without regard to decisions it may make with respect to other holders of Common Stock who
are subject to the provisions of this Section 8(c).
(iv) Purchase Price.
The purchase price in all of the transactions described in this Section
8(c) shall be Fair Market Value, determined pursuant to Section 2(s)(ii) based on the independent
appraisal most recently received by the Company before the commencement of the applicable Call
Period.
(v) Call Right Mechanics.
The Company may exercise a call right pursuant to this Section 8(c)
by delivering, during any of the Call Periods provided in this Section 8(c), to the Participant (or
such Participants estate or other beneficiary in the event of death, or other permitted
transferee) a Call Notice. Within fifteen (15) business days after receiving such Call Notice,
such holder of Common Stock shall deliver to the Company the stock certificate(s) representing the
shares of Common Stock subject to the Call Notice, properly endorsed for transfer, a copy of the
Call Notice signed by such holder and any other documents that the Company may reasonably request.
Following the Companys receipt and approval of such documents, the Company shall issue and deliver
to such Participant, estate, other beneficiary, or other permitted transferee its check in payment
of the purchase price for the shares of Common Stock. The Company shall be free to complete such
purchase transaction even if the Participant, estate, other beneficiary, or other permitted
transferee fails to deliver the stock certificate(s) for the shares of Common Stock to be
purchased; in that case, the Participant, estate, other beneficiary, or other permitted transferee
shall supply the Company, at its request, with the lost certificate assurance contemplated by the
Companys Bylaws.
(vi) Waiver.
The Company may waive any of the limitations on the exercise of its call rights
under this Section 8(c), other than those relating to the time such rights may be exercised and the
purchase price for Common Stock.
(vii) Future Transferees Bound.
The call rights created by this Plan shall bind any
transferee of the Common Stock; that is, they will run with the Stock Awards and with
22.
the shares of Common Stock acquired pursuant thereto. Should a Participant transfer Common
Stock to another person (whether before or after a termination of Continuous Service), the Company
will be entitled to exercise the call rights and purchase the Common Stock from such transferee (or
any subsequent transferees of such transferee) under this Section 8(c). For example, if a
Participant transfers Common Stock to his or her children, the Company would be entitled to
purchase the Common Stock from such children (or their transferees) as provided in this Section
8(c). Certificates representing the Common Stock will bear a conspicuous legend describing the
Companys call right, and a Participant may not transfer Common Stock without first providing to
the Company a document, in a form satisfactory to the Company, signed by the transferee and
confirming the continuing effectiveness of the Companys call rights after the transfer and the
transferees obligations to provide the documents described in Section 8(f).
(d) Interrelationship of Put Rights and Call Rights.
A Participants put right and the
Companys call right shall both be exercisable concurrently;
provided, however,
that put rights and
call rights exercised during a Put Period and Call Period that commence on the same date shall be
given effect as to the total number of shares of Common Stock (not to exceed the total number then
held by the Participant, such Participants estate or other beneficiary in the event of death, or
other permitted transferee) subject to the Put Notice and the Call Notice.
(e) Limitation on Repurchases of Common Stock.
The Company shall not be obligated to complete
a repurchase of its Common Stock from any person, whether pursuant to a put right or a call right,
if:
(i)
the repurchase would, as determined by the Company in its sole discretion: (A) result in
the violation of any applicable law, including, without limitation, those laws limiting the
Companys ability to repurchase its capital stock, fraudulent conveyance laws and securities laws,
or (B) violate or conflict with the provisions of the certificate of incorporation of the Company
or of any agreement or instrument to which the Company or any Affiliate is a party or by which it
is bound (including, without limitation, any credit agreement or bond indenture with respect to the
debt securities of the Company or an Affiliate), whether now or in the future, it being understood
that the Company is free to create or bind itself to any provision that limits or restricts its
ability to purchase shares of Common Stock pursuant to the Plan;
(ii)
there shall have been threatened, instituted, or pending any action or proceeding by any
governmental, regulatory, or administrative agency or authority or tribunal, domestic or foreign,
or by any other person, domestic or foreign, before any court or governmental, regulatory, or
administrative authority or agency or tribunal, domestic or foreign, which challenges or seeks to
make illegal, or to delay or otherwise directly or indirectly to restrain, prohibit, or otherwise
affect the repurchase, or in the Companys sole discretion, and irrespective of whether it is
directed at or affects the repurchase as such, could materially affect the Companys business,
financial condition, income, operations, or prospects or otherwise materially impair in any way the
contemplated future conduct of the Companys business;
(iii)
there shall have been any action threatened, pending, or taken, or any approval
withheld, or any statute, rule, regulation, judgment, order, or injunction threatened, invoked,
proposed, sought, promulgated, enacted, entered, amended, enforced, or considered to
23.
apply to the repurchase, the Plan or the Company, by any court or any government or
governmental, regulatory, or administrative agency or authority or tribunal, domestic or foreign,
which, in the Companys sole discretion, would or might directly or indirectly result in any of the
consequences referred to in this Section 8(e);
(iv)
there shall have occurred or be continuing: (A) the declaration of any banking moratorium
or suspension of payments in respect of banks in the United States (whether or not mandatory); (B)
any general suspension of trading in, or limitation on prices for, securities on any United States
national securities exchange or in the over-the-counter market; (C) the commencement of a war,
armed hostilities, or any other national or international crisis directly or indirectly involving
the United States; (D) any limitation (whether or not mandatory) by any governmental, regulatory,
or administrative agency or authority on, or any event which, in the Companys sole discretion,
might affect, the extension of credit by banks or other lending institutions in the United States;
or (E) any change in the general political, market, economic, or financial conditions in the United
States or abroad that could have a material adverse effect on the business, condition (financial or
otherwise), income, operations, or prospects of the Company;
(v)
a tender or exchange offer for any or all of the shares of Common Stock, or any merger,
business combination, or other similar transaction with or involving the Company, shall have been
proposed, announced, or made by any person;
(vi)
the person fails to deliver the documents contemplated by Sections 8(b)(iv) or 8(c)(v),
as the case may be;
(vii)
the Company concludes, in its sole discretion, that the repurchase will be treated as a
dividend, rather than as an exchange, under Section 302(b)(2) or 302(b)(3) of the Code;
(viii)
the Company concludes, in its sole discretion, that the repurchase would be inadvisable
in view of (A) a pending or planned initial underwritten public offering of the Common Stock or
other financing transaction, (B) pending or planned dividends, redemptions or other distributions
to the Companys stockholders or (C) any change that has occurred or has been threatened in the
business, condition (financial or otherwise), income, operations, liquidity, stock ownership, or
prospects of the Company; or
(ix)
an IPO Date shall have occurred prior to the completion of such repurchase.
The Company in its sole discretion shall decide whether any of the foregoing events or
circumstances has occurred or is occurring. If it so concludes, then, in its sole discretion, it
may reject, in whole or in part, a pending or later-issued Put Notice or revoke, in whole or in
part, a pending Call Notice, as the case may be. These rules are for the Companys sole benefit.
It may assert them regardless of the circumstances giving rise to the event (including its own
action or inaction), or it may ignore them and proceed with the repurchase. In addition, the
Company may assert or ignore them with respect to a repurchase, regardless of whether it makes the
same decision with respect to repurchases (contemporaneous or not) involving other persons.
24.
The Companys exercise of certain of its rights under this Section 8(e) shall have the
following consequences:
(i)
If the Company has rejected a Put Notice and the person otherwise would have no further
opportunities to exercise that put right, then the person (again subject to this Section 8(e))
shall be entitled to exercise the put right during the next Put Period. If the person does not
exercise the put right at that time, then it shall expire.
(ii)
If the Company has rejected a Put Notice and the person otherwise would have later
opportunities to exercise that put right, then the rejection shall have no special effect.
(iii)
If the Company has revoked a Call Notice and the Company otherwise would no have further
opportunities to exercise that call right, then the Company (again subject to this Section 8(e))
shall be entitled to exercise the call right during the next Call Period.
(iv)
If the Company has revoked a Call Notice and the Company otherwise would have later
opportunities to exercise the call right, then the revocation shall have no special effect.
(f) Agreements Relating to Common Stock.
The Company may require a Participant (or such
Participants estate or other beneficiary in the event of death, or other permitted transferee), as
a condition to exercising or acquiring Common Stock under any Stock Award, (i) to enter into the
Stockholders Agreement (or any successor to that agreement), the Voting Trust Agreement (or any
successor to that agreement) or any other agreement relating to stock transfers or voting as the
Company may determine in its sole discretion; and (ii) to enter into a written understanding and
acknowledgement that the Participant (or such Participants estate or other beneficiary in the
event of death, or other permitted transferee) will have no entitlement to: (A) participate in any
secondary offering or other share sale that may be executed as part of an initial public offering,
private equity issuance or other transaction; (B) obtain registration or qualification of shares of
Common Stock under the Securities Act or any state securities laws; (C) participate in any
registration rights, stock transfer, right of first offer, right of first refusal or other
agreement that may be entered into by Permitted Holders in connection with an initial public
offering, private equity issuance, other transaction or otherwise; or (D) receive any right to have
such Common Stock repurchased by the Company upon termination of Continuous Service for any reason
or at any other time.
9.
Covenants of the Company.
(a) Availability of Shares.
During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of Common Stock required to satisfy such Stock Awards.
(b) Securities Law Compliance.
The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be required to grant
Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards;
provided, however,
that this undertaking shall not require the Company to register under the
Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable
25.
to obtain from any such regulatory commission or agency the authority that counsel for the
Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell Common Stock upon
exercise of such Stock Awards unless and until such authority is obtained.
10.
Miscellaneous.
(a) Use of Proceeds from Sales of Common Stock.
Proceeds from the sale of shares of Common
Stock pursuant to Stock Awards shall constitute general funds of the Company.
(b) Stockholder Rights.
No Participant shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award
unless and until (i) such Participant has satisfied all requirements for exercise of the Stock
Award pursuant to its terms, (ii) such Participant has paid any amount that may be owed in
connection with such exercise and (iii) shares of Common Stock shall have been issued to such
Participant.
(c) No Employment or Other Service Rights.
Nothing in the Plan, any Stock Award Agreement or
other instrument executed thereunder or in connection with any Award granted thereto shall confer
upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in
effect at the time the Stock Award was granted or shall affect the right of the Company or an
Affiliate to terminate (i) the employment of an Employee with or without notice and with or without
cause, (ii) the service of a Consultant pursuant to the terms of such Consultants agreement with
the Company or an Affiliate, or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of the state in which
the Company or the Affiliate is incorporated, as the case may be.
(d) Incentive Stock Option $100,000 Limitation.
To the extent that the aggregate Fair Market
Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionholder during any calendar year (under all
plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000), the
Options or portions thereof that exceed such limit (according to the order in which they were
granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of
the applicable Option Agreement(s).
(e) Investment Assurances.
The Company may require a Participant, as a condition of
exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances
satisfactory to the Company as to the Participants knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably satisfactory to the Company
who is knowledgeable and experienced in financial and business matters and that he or she is
capable of evaluating, alone or together with the purchaser representative, the merits and risks of
exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating
that the Participant is acquiring Common Stock subject to the Stock Award for the Participants own
account and not with any present intention of selling or otherwise distributing the Common Stock.
The foregoing requirements, and any assurances given pursuant
26.
to such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise
or acquisition of Common Stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act, or (ii) as to any particular
requirement, a determination is made by counsel for the Company that such requirement need not be
met in the circumstances under the then applicable securities laws. The Company may, upon advice
of counsel to the Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the Common Stock.
(f) Withholding Obligations.
To the extent provided by the terms of a Stock Award Agreement,
the Company may, in its sole discretion, satisfy any federal, state or local tax withholding
obligation relating to a Stock Award by any of the following means (in addition to the Companys
right to withhold from any compensation paid to the Participant by the Company) or by a combination
of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of
Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in
connection with the Stock Award; or (iii) by such other method as may be set forth in the Stock
Award Agreement. For purposes of the foregoing sentence, the Companys withholding obligation and
the satisfaction of such obligation through the withholding of shares of Common Stock shall be
based upon Fair Market Value.
(g) Electronic Delivery
. Any reference herein to a written agreement or document shall
include any agreement or document delivered electronically or posted on the Companys intranet.
11.
Adjustments upon Changes in Common Stock; Corporate Transactions.
(a) Capitalization Adjustments
. If any change is made in, or other events occur with respect
to, the Common Stock subject to the Plan or subject to any Stock Award after the effective date of
the Plan set forth in Section 14 without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend
in property other than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the receipt of
consideration by the Company (each a
Capitalization Adjustment
)), the Board shall appropriately
adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section
4(a); (ii) the class(es) and maximum number of securities that may be issued pursuant to the
exercise of Incentive Stock Options pursuant to Section 4(c); and (iii) the class(es) and number of securities and price per share of stock subject to outstanding Stock
Awards. The Board shall make such adjustments, and its determination shall be final, binding and
conclusive. (Notwithstanding the foregoing, the conversion of any convertible securities of the
Company shall not be treated as a transaction without receipt of consideration by the Company.)
(b) Dissolution or Liquidation
. In the event of a dissolution or liquidation of the Company,
all outstanding Stock Awards shall terminate immediately prior to the completion of such
dissolution or liquidation;
provided, however,
that the Board may, in its sole discretion, cause
some or all Stock Awards to become fully vested, exercisable and/or no longer subject to
27.
repurchase or forfeiture (to the extent such Stock Awards have not previously expired or
terminated) before the dissolution or liquidation is completed but contingent on its completion.
(c) Corporate Transaction
. The following provisions shall apply to Stock Awards in the event
of a Corporate Transaction unless otherwise provided in a written agreement between the Company or
any Affiliate and the holder of the Stock Award:
(i) Stock Awards May Be Assumed.
In the event of a Corporate Transaction, any surviving
corporation or acquiring corporation (or the surviving or acquiring corporations parent company)
may assume or continue any or all Stock Awards outstanding under the Plan or may substitute similar
stock awards for Stock Awards outstanding under the Plan (including, but not limited to, awards to
acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate
Transaction), and any reacquisition or repurchase rights held by the Company in respect of Common
Stock issued pursuant to Stock Awards may be assigned by the Company to the successor of the
Company (or the successors parent company, if any), in connection with such Corporate Transaction.
A surviving corporation or acquiring corporation may choose to assume or continue only a portion
of a Stock Award or substitute a similar stock award for only a portion of a Stock Award. The
terms of any assumption, continuation or substitution shall be set by the Board in accordance with
the provisions of Section 3(b).
(ii) Stock Awards Held by Current Participants.
In the event of a Corporate Transaction in
which the surviving corporation or acquiring corporation (or its parent company) does not assume or
continue any or all outstanding Stock Awards or substitute similar stock awards for such
outstanding Stock Awards, then with respect to Stock Awards that have not been assumed, continued
or substituted and that are held by Participants whose Continuous Service has not terminated prior
to the effective time of the Corporate Transaction (referred to as the
Current Participants
), the
vesting of such Stock Awards (and, if applicable, the time at which such Stock Awards may be
exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in
full to a date prior to the effective time of such Corporate Transaction as the Board shall
determine (or, if the Board shall not determine such a date, to the date that is five (5) days
prior to the effective time of the Corporate Transaction), and such Stock Awards shall terminate if
not exercised (if applicable) at or prior to the effective time of the Corporate Transaction, and
any reacquisition or repurchase rights held by the Company with respect to such Stock Awards shall
lapse (contingent upon the effectiveness of the Corporate Transaction). No vested Restricted Stock
Unit Award shall terminate pursuant to this Section 11(c)(ii) without being settled by delivery of
shares of Common Stock, their cash equivalent, any combination thereof, or in any other form of
consideration, as determined by the Board, prior to the effective time of the Corporate
Transaction. Notwithstanding anything in this Section 11(c)(ii) to the contrary, any put rights
and call rights pursuant to Section 8 shall survive the Corporate Transaction, unless the shares of
Common Stock acquired pursuant to the Stock Award are converted into securities of a surviving
corporation or acquiring corporation (or its parent company) that are listed or traded on any
established stock exchange or market.
(iii) Stock Awards Held by Others.
In the event of a Corporate Transaction in which the
surviving corporation or acquiring corporation (or its parent company) does not assume or continue
any or all outstanding Stock Awards or substitute similar stock awards for
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such outstanding Stock Awards, then with respect to Stock Awards that have not been assumed,
continued or substituted and that are held by persons other than Current Participants, the vesting
of such Stock Awards (and, if applicable, the time at which such Stock Award may be exercised)
shall not be accelerated and such Stock Awards (other than a Stock Award consisting of vested and
outstanding shares of Common Stock not subject to the Companys right of repurchase) shall
terminate if not exercised (if applicable) prior to the effective time of the Corporate
Transaction;
provided, however,
that any reacquisition or repurchase rights held by the Company
with respect to such Stock Awards shall not terminate and may continue to be exercised
notwithstanding the Corporate Transaction. No vested Restricted Stock Unit Award shall terminate
pursuant to this Section 11(c)(iii) without being settled by delivery of shares of Common Stock,
their cash equivalent, any combination thereof, or in any other form of consideration, as
determined by the Board, prior to the effective time of the Corporate Transaction. Notwithstanding
anything in this Section 11(c)(iii) to the contrary, any put rights and call rights pursuant to
Section 8 shall survive the Corporate Transaction, unless the shares of Common Stock acquired
pursuant to the Stock Award are converted into securities of a surviving corporation or acquiring
corporation (or its parent company) that are listed or traded on any established stock exchange or
market.
(iv) Payment for Stock Awards in Lieu of Exercise.
Notwithstanding the foregoing, in the
event a Stock Award will terminate if not exercised prior to the effective time of a Corporate
Transaction, the Board may provide, in its sole discretion, that the holder of such Stock Award may
not exercise such Stock Award but will receive a payment, in such form as may be determined by the
Board, equal in value to the excess, if any, of (i) the value of the property the holder of the
Stock Award would have received upon the exercise of the Stock Award, over (ii) any exercise price
payable by such holder in connection with such exercise.
(v) Corporate Transactions Not Precluded.
Nothing in this Section 11 or elsewhere in the Plan
shall preclude the Company from entering into a Corporate Transaction or shall require the Company
to enter into a Corporate Transaction or negotiate any particular terms for a Corporate
Transaction.
12.
Amendment of the Plan and Awards.
(a) Amendment of Plan.
Subject to the limitations, if any, of applicable law, the Board at
any time, and from time to time, may amend the Plan. However, except as provided in Section 11(a)
relating to Capitalization Adjustments, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary to satisfy applicable
law.
(b) Stockholder Approval.
The Board, in its sole discretion, may submit any other amendment
to the Plan for stockholder approval, including, but not limited to, amendments to the Plan
intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder
regarding the exclusion of performance-based compensation from the limit on corporate deductibility
of compensation paid to Covered Employees.
(c) Contemplated Amendments.
It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems necessary or advisable to provide eligible Employees with the
maximum benefits provided or to be provided under the provisions of the
29.
Code and the regulations promulgated thereunder relating to Incentive Stock Options and/or to
bring the Plan and/or Incentive Stock Options granted under it into compliance therewith.
(d) No Impairment of Rights.
With the exception of actions taken pursuant to Section
3(b)(iv)and 3(b)(v), rights under any Award granted before amendment of the Plan shall not be
impaired by any amendment of the Plan unless (i) the Company requests the consent of the affected
Participant, and (ii) such Participant consents in writing.
(e) Amendment of Awards.
The Board, at any time and from time to time, may amend the terms of
any one or more Awards, including, but not limited to, amendments to provide terms more favorable
than previously provided in the Stock Award Agreement or the written terms of a Performance Cash
Award, subject to any specified limits in the Plan that are not subject to Board discretion;
provided, however,
that with the exception of actions taken pursuant to Section 3(b)(iv) and
3(b)(v), the rights under any Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the affected Participant, and (ii) such Participant consents in
writing.
13.
Termination or Suspension of the Plan.
(a) Plan Term.
The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on the day before the tenth (10th) anniversary of the
effective date specified in Section 14. No Awards may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) No Impairment of Rights.
Suspension or termination of the Plan shall not impair rights
and obligations under any Award granted while the Plan is in effect except with the written consent
of the affected Participant.
14.
Effective Date of Plan.
The Plan shall become effective on
July 13, 2006
, but no Stock Award shall be
exercised (or, in the case of a Restricted Stock Award, Restricted Stock Unit Award, or Other Stock
Award shall be granted) unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the date the Plan is
adopted by the Board.
15.
Choice of Law.
The law of the State of Delaware shall govern all questions concerning the construction,
validity and interpretation of this Plan, without regard to that states conflict of laws rules.
30.
Exhibit 99.2
Levi Strauss & Co.
2006 Equity Incentive Plan
Stock Appreciation Right Grant Notice
Levi Strauss & Co. (the
Company
), pursuant to its 2006 Equity Incentive Plan (the
Plan
),
hereby grants to Participant a Stock Appreciation Right covering the number of Common Stock
equivalents (the
Stock Appreciation Rights
) set forth below (the
Award
). This Award is
evidenced by a Stock Appreciation Right Agreement (the
Award Agreement
). The Award is subject to
all of the terms and conditions as set forth herein and in the Award Agreement, the Plan, and the
Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.
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Participant:
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Date of Grant:
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Vesting Commencement Date:
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Number of Stock Appreciation Rights:
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Strike Price (Per Stock Appreciation Right):
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Expiration Date:
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Vesting Schedule
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One Twenty-Fourth (1/24) of the Award shall vest on the first day of each month
commencing January 1, 2008 and ending December 1, 2009.
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Additional Terms/Acknowledgements:
The undersigned Participant acknowledges receipt of, and
understands and agrees to, this Stock Appreciation Right Grant Notice, the Award Agreement, and the
Plan. Participant further acknowledges that as of the Date of Grant, this Stock Appreciation Right
Grant Notice, the Award Agreement, and the Plan set forth the entire understanding between
Participant and the Company regarding the award of the Stock Appreciation Rights and supersede all
prior oral and written agreements on that subject with the exception of (i) awards previously
granted and delivered to Participant under the Plan, and (ii) the following agreements only:
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Levi Strauss & Co.
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Participant:
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By:
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Signature
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Signature
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Title:
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Date:
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Date:
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Attachments
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Stock Appreciation Right Agreement, 2006 Equity Incentive Plan, and Notice
of Exercise
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Levi Strauss & Co.
2006 Equity Incentive Plan
Stock Appreciation Right Agreement
Pursuant to your Stock Appreciation Right Grant Notice (
Grant Notice
) and this Stock
Appreciation Right Agreement (the
Award Agreement
), Levi Strauss & Co. (the
Company
) has
granted you a Stock Appreciation Right under its 2006 Equity Incentive Plan (the
Plan
) covering
the number of Common Stock equivalents (
Stock Appreciation Rights
) as indicated in your Grant
Notice (collectively, the
Award
). Defined terms not explicitly defined in this Award Agreement
but defined in the Plan shall have the same definitions as in the Plan.
The details of your Award are as follows:
1.
Vesting.
Subject to the conditions and limitations contained herein, your Award
shall vest as provided in your Grant Notice, provided that vesting shall cease upon the termination
of your Continuous Service.
2.
Number of Shares and Strike Price.
The number of Common Stock equivalents subject
to your Award and your strike price per share are set forth in your Grant Notice and may be
adjusted from time to time for Capitalization Adjustments.
3.
Calculation of Appreciation
. The amount payable upon exercise of each vested
Award shall be equal to the excess of (i) the Fair Market Value per share of Common Stock on the
date of exercise, over (ii) the Fair Market Value per share of Common Stock on the date of grant of
the Award (as indicated in your Grant Notice).
4.
Payment.
Subject to Section 12, the amount payable upon exercise of your Award
shall be settled in whole shares of Common Stock rounded down to the nearest whole share based on
the Fair Market Value of such shares at the time of exercise.
5.
Term.
You may not exercise your Award before the commencement or after the
expiration of its term. The term of your Award commences on the Date of Grant and expires upon the
earliest of the following:
(a)
immediately upon the termination of your Continuous Service for Cause;
(b)
three (3) months after the termination of your Continuous Service for any reason other
than Cause or your Retirement, Disability, or death;
provided, however,
(i) that if during any part
of such three (3) month period your Award is not exercisable solely because of a condition set
forth in Section 6, your Award shall not expire until the earlier of (A) the Expiration Date, or
(B) the date it shall have been exercisable for an aggregate period of three (3) months after the
termination of your Continuous Service, and (ii) that prior to an IPO Date, the provisions of
Section 8(a) of the Plan will have the effect of either limiting or extending the period during
which exercise is permitted, depending upon the date on which the termination of your Continuous
Services occurs;
1.
(c)
eighteen (18) months after the termination of your Continuous Service due to your
Retirement or Disability;
provided, however,
that prior to an IPO Date, the provisions of Section
8(a) of the Plan will have the effect of limiting the period during which exercise is permitted;
(d)
eighteen (18) months after your death if you die either during your Continuous Service or
within three (3) months after your Continuous Service terminates;
provided, however,
that prior to
an IPO Date, the provisions of Section 8(a) of the Plan will have the effect of limiting the period
during which exercise is permitted;
(e)
the Expiration Date indicated in your Grant Notice; or
(f)
the day before the tenth (10th) anniversary of the Date of Grant.
6.
Securities Law Compliance.
Notwithstanding anything to the contrary contained
herein, you may not exercise your Award unless either (i) the shares of Common Stock issuable upon
such exercise are then registered under the Securities Act, or (ii) the Company has determined that
such exercise and issuance would be exempt from the registration requirements of the Securities
Act. The exercise of your Award also must comply with other applicable laws and regulations
governing your Award, and you may not exercise your Award if the Company determines that such
exercise would not be in material compliance with such laws and regulations.
7.
Exercise.
(a)
You may exercise the vested portion of your Award during its term by delivering a Notice
of Exercise to the Secretary of the Company, or to such other person as the Company may designate,
during regular business hours, together with such additional documents as the Company may then
require. The exercise date shall be the business day on which your signed Notice of Exercise is
received by the Company. If the Notice of Exercise is received after normal business hours for a
given day, then the exercise date shall be considered to be the following business day.
Notwithstanding the foregoing, prior to an IPO Date, you may exercise a vested Award only during
the period or periods and subject to the further conditions set forth in Section 8(a) of the Plan.
(b)
As a condition of exercise of the vested portion of your Award for shares of Common Stock,
you will be required to enter into the Stockholders Agreement (or any successor to that agreement)
and the Voting Trust Agreement (or any successor to that agreement), and such other agreements as
the Company may require pursuant to Section 8(f) of the Plan.
(c)
By exercising your Award you agree that you shall not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging or similar
transaction with the same economic effect as a sale, any shares of Common Stock or other securities
of the Company held by you, for a period of time specified by the managing underwriter(s) (not to
exceed one hundred eighty (180) days) following the effective date of a registration statement of
the Company filed under the Securities Act (the
Lock Up Period
) in connection with an initial
public offering of Common Stock, if any;
provided, however
, that
2.
nothing contained in this section shall prevent the exercise of a repurchase right, if any, in
favor of the Company during the Lock Up Period. You further agree to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are
consistent with the foregoing or that are necessary to give further effect thereto. In order to
enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to
your shares of Common Stock until the end of such period. The underwriters of the Companys stock
are intended third party beneficiaries of this Section 7(c) and shall have the right, power and
authority to enforce the provisions hereof as though they were a party hereto.
8.
Transferability.
Your Award is not transferable, except by will or by the laws of
descent and distribution, and is exercisable during your life only by you. Notwithstanding the
foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you
may designate a third party who, in the event of your death, shall thereafter be entitled to
exercise your Award.
9.
Put Right.
Prior to an IPO Date, you, pursuant to the provisions of Section 8 of
the Plan, shall have the right, but not the obligation, to require the Company to repurchase any or
all of the shares of Common Stock acquired pursuant to the exercise of your Award.
10.
Call Right.
Upon and after any termination of your Continuous Service but prior
to an IPO Date, the Company, pursuant to the provisions of Section 8 of the Plan, shall have the
right, but not the obligation, to repurchase all of the shares of Common Stock theretofore or
thereafter acquired pursuant to the exercise of your Award.
11.
Award not a Service Contract.
Your Award is not an employment or service
contract, and nothing in your Award shall be deemed to create in any way whatsoever any obligation
on your part to continue in the employ of the Company or any Affiliate, or of the Company or an
Affiliate to continue your employment or service. In addition, nothing in your Award shall
obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, officers
or employees to continue any relationship that you might have as a Director or Consultant for the
Company or any Affiliate.
12.
Withholding Obligations.
(a)
At the time you exercise your Award, in whole or in part, or at any time thereafter as
requested by the Company, you hereby authorize withholding from payroll and any other amounts
payable to you, and otherwise agree to make adequate provision for, any sums required to satisfy
the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate,
if any, which arise in connection with the exercise of your Award.
(b)
Upon your request and subject to approval by the Company, in its sole discretion, and
compliance with any applicable legal conditions or restrictions, the Company may withhold from
shares of Common Stock otherwise issuable to you upon the exercise of your Award a number of whole
shares of Common Stock having a Fair Market Value, determined by the Company as of the date of
exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lesser
amount as may be necessary to avoid variable award accounting).
3.
(c)
You may not exercise your Award unless the tax withholding obligations of the Company
and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your Award when
desired even though your Award is vested, and the Company shall have no obligation to issue a
certificate for such shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein unless such obligations are satisfied.
13.
Personal Data
. You understand that your employer, the Company, or an Affiliate
hold certain personal information about you, including but not limited to your name, home address,
telephone number, date of birth, national social insurance number, salary, nationality, job title,
and details of all shares of Common Stock granted, cancelled, vested, unvested, or outstanding (the
Personal Data
). Certain Personal Data may also constitute
Sensitive Personal Data
within the
meaning of applicable local law. Such data include but are not limited to Personal Data and any
changes thereto, and other appropriate personal and financial data about you. You hereby provide
express consent to the Company or an Affiliate to process any such Personal Data and Sensitive
Personal Data. You also hereby provide express consent to the Company and/or an Affiliate to
transfer any such Personal Data and Sensitive Personal Data outside the country in which you are
employed or retained, including the United States. The legal persons for whom such Personal Data
are intended are the Company and any broker company providing services to the Company in connection
with the administration of the Plan. You have been informed of your right to access and correct
your Personal Data by applying to the Company representative identified on the Grant Notice.
14.
Additional Agreements and Acknowledgements.
You hereby agree and acknowledge
that:
(a)
The rights and obligations of the Company with respect to your Award shall be transferable
to any one or more persons or entities, and all covenants and agreements hereunder shall inure to
the benefit of, and be enforceable by the Companys successors and assigns.
(b)
You agree upon request to execute any further documents or instruments necessary or
desirable in the sole determination of the Company to carry out the purposes or intent of your
Award.
(c)
You have reviewed your Award in its entirety, have had an opportunity to obtain the advice
of counsel prior to executing and accepting your Award and fully understand all provisions of your
Award.
(d)
You will not question or contest in any way, whether pursuant to legal proceedings or
otherwise, the Boards determination of the Fair Market Value of Common Stock, whether for purposes
of determining the strike price of your Award, the number of shares of Common Stock payable on
exercise of your Award, or the amount payable on exercise of your put right or the Companys call
right pursuant to Section 8 of the Plan.
(e)
You will not question or contest in any way, whether pursuant to legal proceedings or
otherwise, the Companys determination, pursuant to Section 8(e) of the Plan, to (i) reject, in
whole or in part, your exercise of a put right or (ii) not exercise, in whole or in part, the
Companys call right.
4.
(f)
This Agreement shall be subject to all applicable laws, rules, and regulations, and to
such approvals by any governmental agencies or national securities exchanges as may be required.
(g)
All obligations of the Company under the Plan and this Agreement shall be binding on any
successor to the Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
(h)
Participation in the Plan is voluntary, and therefore, you must accept the terms and
conditions of the Plan and this Award as a condition to participate in the Plan and receive this
Award.
(i)
The Plan is discretionary in nature and the Company can amend, cancel, or terminate it at
any time.
(j)
This Award and any other awards under the Plan are voluntary and occasional and do not
create any contractual or other right to receive future awards or other benefits in lieu of future
awards, even if similar awards have been granted repeatedly in the past.
(k)
All determinations with respect to any such future awards, including, but not limited to,
the time or times when such awards are made, the number of shares of Common Stock, and performance
and other conditions applied to the awards, will be at the sole discretion of the Company.
(l)
The value of the shares of Common Stock and this Award is an extraordinary item of
compensation, which is outside the scope of your employment or service contract, if any.
(m)
The shares of Common Stock, this Award, or any income derived therefrom are a potential
bonus payment not paid in lieu of any cash salary compensation and not part of normal or expected
compensation or salary for any purposes, including, but not limited to, calculating any
termination, severance, resignation, redundancy, end of service payments, bonuses, long-service
awards, life or accident insurance benefits, pension or retirement benefits or similar payments.
(n)
In the event of the termination of your Continuous Service, your eligibility to receive
shares of Common Stock or payments under this Award or the Plan, if any, will terminate effective
as of the date that you are no longer actively employed or retained regardless of any reasonable
notice period mandated under local law, except as expressly provided in this Award.
(o)
In the event of the termination of your Continuous Service for Cause, the Company, in its
sole discretion, may rescind any transfer of Common Stock to you that occurred within six (6)
months prior to such termination of Continuous Service or demand that you pay over to the Company
the proceeds received by you upon the sale, transfer or other transaction involving the Common
Stock in such manner and on such terms and conditions as the Company may require, and the Company
shall be entitled to set-off against the amount of such proceeds any amount you owe to the Company
to the fullest extent permitted by law.
5.
(p)
The future value of the shares of Common Stock is unknown and cannot be predicted with
certainty.
(q)
No claim or entitlement to compensation or damages arises from the termination of this
Award or diminution in value of the shares of Common Stock and you irrevocably release the Company
and its Affiliates, from any such claim that may arise.
(r)
The Plan and this Award set forth the entire understanding between you, the Company and
any Affiliate regarding the acquisition of the shares of Common Stock and supersede all prior oral
and written agreements pertaining to this Award.
15.
Notices.
Any notices provided for in your Award or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by
mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid,
addressed to you at the last address you provided to the Company.
16.
Headings
.
The headings of the Sections in this Agreement are inserted for
convenience only and shall not be deemed to constitute a part of this Agreement or to affect the
meaning of this Agreement.
17.
Severability
.
If all or any part of this Agreement or the Plan is declared by
any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity
shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or
invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or
invalid shall, if possible, be construed in a manner which will give effect to the terms of such
Section or part of a Section to the fullest extent possible while remaining lawful and valid.
18.
Governing Plan Document.
Your Award is subject to all the provisions of the
Plan, the provisions of which are hereby made a part of your Award, and is further subject to all
interpretations, amendments, rules and regulations, which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the provisions of your Award
and those of the Plan, the provisions of the Plan shall control.
6.
Notice of Exercise
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Levi Strauss & Co.
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1155 Battery St.
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San Francisco, CA 94111
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Date of Exercise:
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Ladies and Gentlemen:
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This constitutes notice that I elect to exercise my Stock Appreciation Right.
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Stock appreciation right dated:
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Number of Common Stock
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equivalents as to which stock
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appreciation right is exercised:
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Certificates to be issued in name of:
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By this exercise, I agree (i) to provide such additional documents as you may require pursuant
to the terms of the Levi Strauss & Co. 2006 Equity Incentive Plan, and (ii) to provide for the
payment by me to you (in the manner designated by you) of your withholding obligation, if any,
relating to the exercise of this stock appreciation right.