As filed with the Securities and Exchange Commission on August 16, 2013

Registration No. 333-         

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM S-8

 

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

 

 

 

DTS, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

 

77-0467655

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification No.)

 

5220 Las Virgenes Road, Calabasas, CA 91302
(Address of Principal Executive Offices)

 

2013 EMPLOYEE STOCK PURCHASE PLAN, AS AMENED AND RESTATED
2013 FOREIGN SUBSIDIARY EMPLOYEE STOCK PURCHASE PLAN, AS AMENED AND RESTATED
(Full Title of the Plan)

 

Jon E. Kirchner
Chairman and Chief Executive Officer
DTS, Inc.
5220 Las Virgenes Road,
Calabasas, CA 91302
(Name and Address of Agent For Service)

 

(818) 436-1000
(Telephone Number, Including Area Code, of Agent For Service)

 

Copies to:

 

Michael S. Kagnoff
DLA Piper LLP (US)
4365 Executive Drive, Suite 1100
San Diego, California 92121
Telephone: (858) 677-1400
Facsimile: (858) 677-1401

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o

 

Accelerated filer  x

 

Non-accelerated filer  o
(Do not check if a smaller reporting
company)

 

Smaller reporting company  o

 

 

CALCULATION OF REGISTRATION FEE

 

 

 

Proposed Maximum

 

Proposed Maximum

 

 

 

 

 

 

 

Amount to be

 

Offering Price per

 

Aggregate Offering

 

Amount of

 

Title of Securities to be Registered

 

Registered(1)(2)

 

Share (3)

 

Price

 

Registration Fee

 

Common Stock $0.0001 par value per share

 

452,246

 

$

20.26

 

$

9,162,503.96

 

$

1,250

 

(1)                                   The 452,246 shares being registered under the 2013 Employee Stock Purchase Plan, as amended and restated, and the 2013 Foreign Subsidiary Employee Stock Purchase Plan, as amended and restated, (collectively the “ Plans ”) represent additional shares authorized to be issued under the Plans.

 

(2)                                   Pursuant to Rule 416(c) of the Securities Act of 1933, as amended (the “ Securities Act ”), this Registration Statement also covers any additional shares of common stock, $0.0001 par value per share (the “ Common Stock ”), that become issuable under the Plans by reason of any stock dividend, stock split, recapitalization or any other similar transaction effected without the receipt of consideration that results in an increase in the number of the outstanding shares of Common Stock.

 

(3)                                   Proposed Maximum Offering Price Per Share has been estimated in accordance with Rules 457(c) and (h) under the Securities Act solely for the purpose of calculating the registration fee. The computation is based upon 85% (see explanation in following sentence) of the average of the high and low prices of the Common Stock as reported on the Nasdaq Global Select Market on August 13, 2013. Pursuant to the Plans, the purchase price of a share of Common Stock is an amount equal to 85% of the fair market value of a share of Common Stock on the Offering Date or the Purchase Date (as such terms are defined in the Plans), whichever is lower.

 

 

 


 

EXPLANATORY NOTE

 

This Registration Statement registers 452,246 additional shares of common stock, par value $0.0001 per share (the “ Common Stock ”), of DTS, Inc. (the “ Registrant ”) issuable pursuant to the Registrant’s 2013 Employee Stock Purchase Plan, as amended and restated, and 2013 Foreign Subsidiary Employee Stock Purchase Plan, as amended and restated, (collectively the “ Plans ”). The shares of Common Stock registered on this Registration Statement, along with previously registered shares, amount to a total of 750,000 shares of Common Stock authorized to be issued under the Plans as of November 13, 2012, the effective date of the Plans. The previously registered shares were registered pursuant to the Registrant’s Registration Statements on Form S-8 (File Nos. 333-152995, 333-136519, 333-129606 and 333-107046).

 

PART I

 

INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS

 

The documents containing the information specified in Part I, Items 1 and 2, will be sent or given to participants in accordance with Form S-8 and Rule 428(b)(1) under the Securities Act of 1933, as amended (the “ Securities Act ”). In accordance with the rules and regulations of the Securities and Exchange Commission (the “ Commission ”) and the instructions to Form S-8, such documents are not being filed with the Commission either as part of this Registration Statement or as prospectuses or prospectus supplements pursuant to Rule 424 under the Securities Act.

 

PART II

 

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

 

Item 3. Incorporation of Documents by Reference.

 

The following documents filed with the Commission by the Registrant are incorporated by reference in this Registration Statement:

 

(a) The Registrant’s Annual Report on Form 10-K (Commission file number 000-50335-13698275) for the year ended December 31, 2012;

 

(b) All other reports filed by the Registrant pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), since the end of the fiscal year covered by the annual report referred to in (a) above (in each case, except for the information furnished under Items 2.02 or 7.01 in any current report on Form 8-K); and

 

(c) The description of the Common Stock of the Registrant contained in the Registration Statement on Form 8-A (Commission file number 000-50335-03776600) filed with the Commission on July 7, 2003, pursuant to Section 12 under the Exchange Act, including any amendment or report filed for the purpose of updating such description.

 

In addition, all documents subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the filing of a post-effective amendment to this Registration Statement which indicates that all of the shares of Common Stock offered under this Registration Statement have been sold or which deregisters all of such shares then remaining unsold shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of the filing of such document, except as to any portion of any future annual, quarterly or current report to stockholders or document that is not deemed filed under such provisions. For the purposes of this Registration Statement, any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement.

 

Item 4. Description of Securities.

 

Not applicable.

 

2


 

Item 5. Interests of Named Experts and Counsel.

 

Craig S. Andrews, one of our directors, has been Of Counsel to the law firm of DLA Piper LLP (US) since January 2010. In connection with this Registration Statement, DLA Piper LLP (US) is rendering an opinion on the legality of the securities being registered hereunder.

 

Item 6. Indemnification of Directors and Officers.

 

Our Restated Certificate of Incorporation, as amended (our “ Certificate of Incorporation ”), provides that, except to the extent prohibited by Delaware law, our directors shall not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty by our directors. Under Delaware law, our directors have a fiduciary duty to us which is not eliminated by this provision in the certificate and, in appropriate circumstances, equitable remedies such as injunctive or other forms of non-monetary relief will remain available. In addition, each of our directors will continue to be subject to liability under Delaware law for breach of the director’s duty of loyalty to us for acts or omissions which are found by a court of competent jurisdiction to be not in good faith or which involve intentional misconduct or knowing violations of law, for actions leading to improper personal benefit to the director, and for payment of dividends or approval of stock repurchases or redemptions that are prohibited by Delaware law. This provision does not affect the directors’ responsibilities under any other laws, such as the Federal securities laws or state or Federal environmental laws.

 

Section 145 of the Delaware General Corporation Law empowers a corporation to indemnify its directors and officers and to purchase insurance with respect to liability arising out of their capacity or status as directors and officers, provided that this provision shall not eliminate or limit the liability of a director for the following:

 

· any breach of the director’s duty of loyalty to us or our stockholders;

 

· acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

 

· unlawful payments of dividends or unlawful stock purchases or redemptions; or

 

· for any transaction from which the director derived an improper personal benefit.

 

Delaware law provides further that the indemnification permitted thereunder shall not be deemed exclusive of any other rights to which the directors and officers may be entitled under our Restated Bylaws, as amended (the “ Restated Bylaws ”), any agreement, a vote of stockholders or disinterested directors or otherwise. Our Certificate of Incorporation eliminates the personal liability of directors to the fullest extent permitted by Delaware law. In addition, our Certificate of Incorporation and our Restated Bylaws provide that we may fully indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative), by reason of the fact that such person is or was one of our directors, officers, employees or other agents, against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding.

 

We have also entered into agreements to indemnify our directors and executive officers, to provide contractual indemnification in addition to the indemnification provided for in our Certificate of Incorporation and Restated Bylaws. We believe that these provisions and agreements are necessary to attract and retain qualified directors and executive officers. Our Restated Bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions, regardless of whether Delaware law would permit indemnification. We have obtained liability insurance for our officers and directors.

 

At present, there is no pending litigation or proceeding involving any director, officer, employee or agent as to which indemnification will be required or permitted under our Certificate of Incorporation. We are not aware of any threatened litigation or proceeding that may result in a claim for such indemnification.

 

Item 7. Exemption from Registration Claimed.

 

Not Applicable.

 

Item 8. Exhibits.

 

See the Exhibits Index attached hereto, which is incorporated into this Item 8 by reference.

 

3


 

Item 9. Undertakings.

 

(a) The undersigned Registrant hereby undertakes:

 

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

 

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;

 

(ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

 

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the Registration Statement;

 

Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the Registration Statement.

 

(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

(b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

 

4


 

SIGNATURES

 

Pursuant to the requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Calabasas, State of California, on this 16th day of August, 2013.

 

 

DTS, INC.

 

 

 

By:

/s/ Jon E. Kirchner

 

 

Jon E. Kirchner

 

 

Chairman and Chief Executive Officer

 

POWER OF ATTORNEY

 

We, the undersigned directors and/or officers of DTS, Inc., hereby severally constitute and appoint Jon E. Kirchner, Chairman and Chief Executive Officer, and Melvin L. Flanigan, Executive Vice President, Finance and Chief Financial Officer, and each of them individually, with full powers of substitution and resubstitution, our true and lawful attorneys, with full powers to them and each of them to sign for us, in our names and in the capacities indicated below, the Registration Statement on Form S-8 filed with the Commission, and any and all amendments to said Registration Statement (including post-effective amendments), and any registration statement filed pursuant to Rule 462(b) under the Securities Act in connection with the registration under the Securities Act of the Registrant’s equity securities, and to file or cause to be filed the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as each of them might or could do in person, and hereby ratifying and confirming all that said attorneys, and each of them, or their substitute or substitutes, shall do or cause to be done by virtue of this Power of Attorney.

 

Pursuant to the requirements of the Securities Act of 1933 this Registration Statement has been signed by the following persons in the capacities indicated on this 16th day of August, 2013:

 

Signature

 

Title(s)

 

 

 

/s/ Jon E. Kirchner

 

Chairman, Chief Executive Officer, and Director

Jon E. Kirchner

 

(principal executive officer)

 

 

 

/s/ Melvin L. Flanigan

 

Executive Vice President, Finance and Chief Financial Officer

Melvin L. Flanigan

 

(principal financial and accounting officer)

 

 

 

/s/ Joerg D. Agin

 

 

Joerg D. Agin

 

Lead Independent Director

 

 

 

/s/ Craig S. Andrews

 

 

Craig S. Andrews

 

Director

 

 

 

/s/ L. Gregory Ballard

 

 

L. Gregory Ballard

 

Director

 

 

 

/s/ Bradford D. Duea

 

 

Bradford D. Duea

 

Director

 

 

 

/s/ V. Sue Molina

 

 

V. Sue Molina

 

Director

 

 

 

/s/ Ronald N. Stone

 

 

Ronald N. Stone

 

Director

 

5


 

INDEX TO EXHIBITS

 

DTS, INC.

EXHIBIT INDEX

 

Exhibit

 

 

 

Filed

 

Incorporated by Reference

Number

 

Exhibit Title

 

Herewith

 

Form

 

File No.

 

Date Filed

4.1

 

 

Composite Certificate of Incorporation

 

 

 

10-K

 

000-50335-13698275

 

3/18/13

4.2

 

 

Composite Bylaws

 

 

 

10-K

 

000-50335-13698275

 

3/18/13

5.1

 

 

Opinion of DLA Piper LLP (US)

 

X

 

 

 

 

 

 

23.1

 

 

Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm, with respect to the Registrant

 

X

 

 

 

 

 

 

23.2

 

 

Consent of DLA Piper LLP (US) (filed as part of Exhibit 5.1)

 

X

 

 

 

 

 

 

24.1

 

 

Powers of Attorney (included on signature page)

 

X

 

 

 

 

 

 

99.1

 

 

2013 Employee Stock Purchase Plan, as amended and restated effective November 13, 2012

 

X

 

 

 

 

 

 

99.2

 

 

2013 Foreign Subsidiary Employee Stock Purchase Plan, as amended and restated effective November 13, 2012

 

X

 

 

 

 

 

 

 

6

Exhibit 5.1

 

 

DLA Piper LLP (US)

 

4365 Executive Drive, Suite 1100

 

San Diego, California 92121-2133

 

www.dlapiper.com

 

 

 

www.dlapiper.com

 

T

858.677.1400

 

F

858.677.1401

 

August 16, 2013

 

 

DTS, Inc.

5220 Las Virgenes Road

Calabasas, CA 91302

 

Re:          Registration Statement on Form S-8

 

Ladies and Gentlemen:

 

We have acted as counsel for DTS, Inc., a Delaware corporation (the “Company”), in connection with the preparation and filing of the Registration Statement on Form S-8 (the “Registration Statement”) filed by the Company with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), for the registration of an aggregate of 452,246 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), which may be granted under the Company’s 2013 Employee Stock Purchase Plan, as amended and restated, and the Company’s 2013 Foreign Subsidiary Employee Stock Purchase Plan, as amended and restated (collectively, the “Plans”). The shares of Common Stock referred to in the foregoing sentence shall be collectively referred to herein as the “Shares.”

 

In connection herewith, we have examined and relied without independent investigation as to matters of fact upon such certificates of public officials, such statements and certificates of officers of the Company and originals or copies certified to our satisfaction of the Registration Statement, the Plans, the Restated Certificate of Incorporation, as amended, and the Restated Bylaws of the Company as now in effect and minutes of all pertinent meetings and actions of the Board of Directors of the Company.

 

In rendering this opinion, we have assumed the genuineness of all signatures on all documents examined by us, the due authority of the parties signing such documents, the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as copies and that the issuance of the Shares complies in all respects with the terms, conditions and restrictions set forth in the Registration Statement and the Plans. The Company has represented to us and we have also assumed that the Company has reserved from its duly authorized capital stock a sufficient number of shares of Common Stock as were approved by the Company’s stockholders for issuance under the Plans. The Company has also covenanted and we have also assumed that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue the Shares in accordance with the Plans, the number of Shares which are then issuable and deliverable upon the settlement of awards under the Plans.

 

We are members of the Bar of the State of California, and we do not express any opinion herein concerning any law other than the Delaware General Corporation Law (including the statutory provisions, all applicable provisions of the Delaware Constitution and the reported judicial decisions interpreting the foregoing) and the federal law of the United States of America. To the extent that any applicable document is stated to be governed by the laws of another jurisdiction, we have assumed for purposes of this opinion that the laws of such jurisdiction are identical to the aforementioned state laws of the State of Delaware. No opinion is expressed herein with respect to the qualification of the Shares under the securities or blue sky laws of any state or any non-U.S. jurisdiction.

 


 

This opinion speaks only at and as of its date and is based solely on the facts and circumstances known to us and as of such date. In addition, in rendering this opinion, we assume no obligation to revise, update or supplement this opinion (i) should the present aforementioned laws of the State of Delaware or federal laws of the United States of America be changed by legislative action, judicial decision or otherwise, or (ii) to reflect any facts or circumstances which may hereafter come to our attention.

 

Based upon, subject to and limited by the foregoing, we are of the opinion and so advise you that the Shares have been duly authorized and, when issued and delivered and fully paid for in accordance with the terms of the Plans, will be validly issued, fully paid and nonassessable.

 

We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement. In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission promulgated thereunder.

 

Very truly yours,

 

/s/ DLA PIPER LLP (US)

DLA PIPER LLP (US)

 

Exhibit 23.1

 

Consent of Independent Registered Public Accounting Firm

 

We have issued our reports dated March 18, 2013 with respect to the consolidated financial statements, schedule and internal control over financial reporting included in the Annual Report on Form 10-K for the year ended December 31, 2012 of DTS, Inc., which are incorporated by reference in this Registration Statement. We consent to the incorporation by reference in the Registration Statement of the aforementioned reports.

 

/s/ Grant Thornton LLP

 

 

 

Irvine, California

 

August 16, 2013

 

 

Exhibit 99.1

 

DTS, INC.

 

2013 EMPLOYEE STOCK PURCHASE PLAN

As Amended and Restated Effective November 13, 2012

 

1.   ESTABLISHMENT OF PLAN.

 

DTS, Inc. (the “COMPANY”) has previously adopted the Digital Theater Systems, Inc. 2003 Employee Stock Purchase Plan (the “PLAN”) for the proposes of granting options for purchase of the Company’s Common Stock (the “COMMON STOCK”) to eligible employees of the Company and its Participating Subsidiaries (as hereinafter defined). Effective as November 13, 2012 (the “EFFECTIVE DATE”), the Plan is hereby amended and restated, renamed the DTS, Inc. 2013 Employee Stock Purchase Plan, and its term is extended as provided below, provided that the stockholders of the Company approve the Plan at the next regularly scheduled annual meeting of the stockholders following the Effective Date. For the purposes of this Plan, “Parent Corporation” and “Subsidiary” shall have the same meanings as “parent corporation” and “subsidiary corporation” in Sections 424(e) and 424(f), respectively, of the Internal Revenue Code of 1986, as amended (the “CODE”). “Participating Subsidiaries” are Parent Corporations or Subsidiaries that the Board of Directors of the Company (the “BOARD”), or the Committee (as defined below), designates from time to time as corporations that shall participate in this Plan. The Company intends this Plan to qualify as an “employee stock purchase plan” under Section 423 of the Code (including any amendments to or replacements of such Section), and this Plan shall be so construed. Any term not expressly defined in this Plan but defined for purposes of Section 423 of the Code shall have the same definition herein.

 

2.   NUMBER OF SHARES.

 

The total number of shares of Common Stock initially reserved and available for issuance pursuant to this Plan shall be seven hundred fifty thousand (750,000) (the “SHARE LIMIT”), subject to adjustments effected in accordance with Section 15 of this Plan. The Share Limit shall be reduced by the number of shares issued under the DTS, Inc. 2013 Foreign Subsidiary Employee Stock Purchase Plan (the “FOREIGN PLAN”). Shares issued under this Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares reacquired in private transactions or open market purchases, but all shares issued under this Plan and the Foreign Plan shall be counted against the Share Limit.

 

3.   PURPOSE.

 

The purpose of this Plan is to provide eligible employees of the Company and Participating Subsidiaries with a convenient means of acquiring an equity interest in the Company through payroll deductions, to enhance such employees’ sense of participation in the affairs of the Company and Participating Subsidiaries, and to provide an incentive for continued employment. For the purposes of this Plan, “employee” shall mean any individual who is an employee of the Company or a Participating Subsidiary. Whether an individual qualifies as an employee shall be determined by the Committee, in its sole discretion. The Committee (as defined below) shall be guided by the provisions of Treasury Regulation Section 1.421-7 and Section 3401(c) of the Code and the Treasury Regulations thereunder, with the intent that the Plan cover all “employees” within the meaning of those provisions other than those who are not eligible to participate in the Plan, provided, however, that any determinations regarding whether an individual is an “employee” shall be prospective only, unless otherwise determined by the Committee (as hereinafter defined). Unless the Committee makes a contrary determination, the employees of the Company shall, for all purposes of this Plan, be those individuals who are carried as employees of the Company or a Participating Subsidiary for regular payroll purposes or are on a leave of absence for not more than 90 days. Any inquiries regarding eligibility to participate in the Plan shall be directed to the Committee, whose decision shall be final.

 

4.   ADMINISTRATION.

 

This Plan shall be administered by the Compensation Committee of the Board (the “COMMITTEE”). Subject to the provisions of this Plan and the limitations of Section 423 of the Code or any successor provision in the Code, all questions of interpretation or application of this Plan shall be determined by the Committee and its decisions shall be final and binding upon all participants. Members of the Committee shall receive no compensation for their services in connection with the administration of this Plan, other than standard fees as established from time to time by the Board for services rendered by Board members serving on Board committees. All expenses incurred in connection with the administration of this Plan shall be paid by the Company.

 


 

5.   ELIGIBILITY.

 

Any employee of the Company or the Participating Subsidiaries is eligible to participate in an Offering Period (as hereinafter defined) under this Plan except the following:

 

a)            employees who are not employed by the Company or a Participating Subsidiary prior to the beginning of such Offering Period or prior to such other time period as specified by the Committee;

 

b)            employees who are customarily employed for twenty (20) hours or less per week;

 

c)             employees who are customarily employed for five (5) months or less in a calendar year;

 

d)            employees who, together with any other person whose stock would be attributed to such employee pursuant to Section 424(d) of the Code, own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any of its Participating Subsidiaries or who, as a result of being granted an option under this Plan with respect to such Offering Period, would own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any of its Participating Subsidiaries;

 

e)             individuals who provide services to the Company or any of its Participating Subsidiaries as independent contractors who are reclassified as common law employees for any reason except for federal income and employment tax purposes; and

 

f)             employees who reside in countries for whom such employees’ participation in the Plan would result in a violation under any corporate or securities laws of such country of residence.

 

6.   OFFERING DATES.

 

The offering periods of this Plan (each, an “OFFERING PERIOD”) shall be of twenty-four (24) months duration commencing on May 15 and November 15 of each year and ending on May 14 and November 14 of each year. Each Offering Period shall consist of four (4) six month purchase periods (individually, a “PURCHASE PERIOD”) during which payroll deductions of the participants are accumulated under this Plan. The first business day of each Offering Period is referred to as the “OFFERING DATE.” The last business day of each Purchase Period is referred to as the “PURCHASE DATE.” The Committee shall have the power to change the Offering Dates, the Purchase Dates and the duration of Offering Periods or Purchase Periods without stockholder approval if such change is announced prior to the relevant Offering Period or prior to such other time period as specified by the Committee; provided that no Offering Period may have a duration of more than twenty-seven (27) months.

 

7.   PARTICIPATION IN THIS PLAN.

 

Eligible employees may become participants in an Offering Period under this Plan on the Offering Date, after satisfying the eligibility requirements, by delivering a subscription agreement, and/or other application documents required by the Company in order to enroll in an Offering Period, to the Company prior to such Offering Date, or such other time period as specified by the Committee. Notwithstanding the foregoing, the Committee may set a later time for filing such documents for all eligible employees with respect to a given Offering Period. An eligible employee who does not deliver a subscription agreement to the Company after becoming eligible to participate in an Offering Period shall not participate in that Offering Period or any subsequent Offering Period unless such employee enrolls in this Plan by filing the appropriate documents with the Company prior to such Offering Period, or such other time period as specified by the Committee. Once an employee becomes a participant in an Offering Period by filing a subscription agreement, such employee shall automatically participate in the Offering Period commencing immediately following the last day of the prior Offering Period unless the employee withdraws or is deemed to withdraw from this Plan or terminates further participation in the Offering Period as set forth in Section 12 below. Such participant is not required to file any additional documents in order to continue participation in this Plan.

 


 

8.   GRANT OF OPTION ON ENROLLMENT.

 

Enrollment by an eligible employee in this Plan with respect to an Offering Period shall constitute the grant (as of the Offering Date) by the Company to such employee of an option to purchase on the Purchase Date up to that number of shares of Common Stock determined by a fraction, the numerator of which is the amount accumulated in such employee’s payroll deduction account during such Purchase Period and the denominator of which is the lower of (i) eighty-five percent (85%) of the fair market value of a share of the Company’s Common Stock on the Offering Date (but in no event less than the par value of a share Common Stock), or (ii) eighty-five percent (85%) of the fair market value of a share of Common Stock on the Purchase Date (but in no event less than the par value of a share of the Company’s Common Stock), provided, further, that the number of shares of Common Stock subject to any option granted pursuant to this Plan shall not exceed the lesser of (x) the maximum number of shares set by the Committee pursuant to Section 11(c) below with respect to the applicable Purchase Date, or (y) the maximum number of shares which may be purchased pursuant to Section 11(b) below with respect to the applicable Purchase Date. The fair market value of a share of the Company’s Common Stock shall be determined as provided in Section 9 below.

 

9.   PURCHASE PRICE.

 

Except as otherwise determined by the Committee prior to the commencement of an Offering Period, the purchase price per share at which a share of Common Stock shall be sold in any Offering Period shall be eighty-five percent (85%) of the lesser of:

 

a)            the fair market value on the Offering Date; or

 

b)            the fair market value on the Purchase Date.

 

For the purposes of this Plan, the term “FAIR MARKET VALUE” means, as of any date, the value of a share of the Company’s Common Stock determined as follows:

 

a)            if such Common Stock is listed or quoted on a national or regional securities exchange or quotation system, the closing price of such Common Stock as quoted on such national or regional securities exchange or quotation system constituting the primary market for the Common Stock on the date of determination as reported in The Wall Street Journal ; provided, however, that if the relevant date does not fall on a day on which the Common Stock has traded on such securities exchange or quotation system, the date on which the Fair Market Value is established shall be the last day on which the Common Stock was so traded or quoted; and

 

b)            if on the determination date, the Common Stock is not then listed on a national or regional exchange or quotation system, the Fair Market Value shall be determined in good faith by the Committee.

 

10.   PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE OF SHARES.

 

a)            The purchase price of the shares is accumulated by regular payroll deductions made during each Offering Period. The deductions are made as a percentage of the participant’s compensation in one percent (1%) increments, not less than one percent (1%), nor greater than fifteen percent (15%), or such lower limit set by the Committee. Compensation shall mean all W-2 cash compensation, including, but not limited to, base salary, wages, bonuses, incentive compensation, commissions, overtime, shift premiums, plus draws against commissions, provided, however that compensation shall not include any long term disability or workers compensation payments, car allowances, relocation payments or expense reimbursements and further provided, however, that for purposes of determining a participant’s compensation, any election by such participant to reduce his or her regular cash remuneration under Sections 125 or 401(k) of the Code shall be treated as if the participant did not make such election. Payroll deductions shall commence on the first payday of the Offering Period and shall continue to the end of the Offering Period unless sooner altered or terminated as provided in this Plan.

 

b)            A participant may increase or decrease the rate of payroll deductions during an Offering Period by filing with the Company a new authorization for payroll deductions, in which case the new rate shall become effective for the next payroll period commencing after the Company’s receipt of the authorization and shall continue for the remainder of the Offering Period unless changed as described below. Such change in the rate of payroll deductions may be made at any time during an Offering Period, but not more than one (1) change may be made effective during any Purchase Period. A participant may increase or decrease the rate of payroll deductions for any subsequent Offering Period by filing with the Company a new authorization for payroll deductions prior to the beginning of such Offering Period, or such other time period as specified by the Committee.

 


 

c)             A participant may reduce his or her payroll deduction percentage to zero during an Offering Period by filing with the Company a request for cessation of payroll deductions. Such reduction shall be effective as soon as practicable after the Company’s receipt of the request and no further payroll deductions shall be made for the duration of the Offering Period. Payroll deductions credited to the participant’s account prior to the effective date of the request shall be used to purchase shares of Common Stock of the Company in accordance with Section (e) below. A participant may not resume making payroll deductions during the Offering Period in which he or she reduced his or her payroll deductions to zero.

 

d)            All payroll deductions made for a participant are credited to his or her account under this Plan and are deposited with the general funds of the Company. No interest accrues on the payroll deductions. All payroll deductions received or held by the Company may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.

 

e)             On each Purchase Date, for so long as this Plan remains in effect and provided that the participant has not submitted a signed and completed withdrawal form before that date, which notifies the Company that the participant wishes to withdraw from that Offering Period under this Plan and have all payroll deductions accumulated in the account maintained on behalf of the participant, as of that date returned to the participant, the Company shall apply the funds then in the participant’s account to the purchase of whole shares of Common Stock reserved under the option granted to such participant with respect to the Offering Period to the extent that such option is exercisable on the Purchase Date. The purchase price per share shall be as specified in Section 9 of this Plan. Any cash remaining in a participant’s account after such purchase of shares shall be refunded to such participant in cash, without interest, provided, however, that any amount remaining in such participant’s account on a Purchase Date which is less than the amount necessary to purchase a full share of Common Stock shall be carried forward, without interest, into the next Purchase Period or Offering Period, as the case may be. In the event that this Plan has been oversubscribed, all funds not used to purchase shares on the Purchase Date shall be returned to the participant, without interest. No Common Stock shall be purchased on a Purchase Date on behalf of any employee whose participation in this Plan has terminated prior to such Purchase Date.

 

f)             As soon as practicable after the Purchase Date, the Company shall issue shares for the participant’s benefit representing the shares purchased.

 

g)             During a participant’s lifetime, his or her option to purchase shares hereunder is exercisable only by him or her. The participant shall have no interest or voting rights in shares until the shares are purchased and issued to the participant.

 

11.   LIMITATIONS ON SHARES TO BE PURCHASED.

 

a)            No participant shall be entitled to purchase stock under this Plan at a rate which, when aggregated with his or her rights to purchase stock under all other employee stock purchase plans of the Company or any Subsidiary, exceeds $25,000 in fair market value, determined as of the Offering Date (or such other limit as may be imposed by the Code) for each calendar year in which the employee participates in this Plan. The Company shall automatically suspend the payroll deductions of any participant as necessary to enforce such limit provided that when the Company automatically resumes such payroll deductions, the Company must apply the rate in effect immediately prior to such suspension.

 

b)            The maximum number of shares that may be purchased during any Offering Period (hereinafter, the “MAXIMUM SHARE AMOUNT”) may not exceed the lesser of 10, 000 shares (subject to adjustment pursuant to Section 15) or such lesser amount established by the Committee. In addition, no participant shall be entitled to purchase more than 2,500 shares (subject to adjust pursuant to Section 15) on any single Purchase Date unless the Committee designates a lesser number prior to the commencement of an Offering Period. If a new Maximum Share Amount is set, then all participants must be notified of such Maximum Share Amount prior to the commencement of the next Offering Period. The Maximum Share Amount shall continue to apply with respect to all succeeding Purchase Dates and Offering Periods unless revised by the Committee as set forth above.

 

c)             If the number of shares to be purchased on a Purchase Date by all employees participating in this Plan exceeds the number of shares then available for issuance under this Plan, then the Company shall make a pro rata allocation of the remaining shares in as uniform a manner as shall be reasonably practicable and as the Committee shall determine to be equitable. In such event, the Company shall give written notice of such reduction of the number of shares to be purchased under a participant’s option to each participant affected.

 


 

d)            Any payroll deductions accumulated in a participant’s account which are not used to purchase stock due to the limitations in this Section 11 shall be returned to the participant as soon as practicable after the end of the applicable Purchase Period, without interest.

 

12.   WITHDRAWAL.

 

a)            Each participant may withdraw from an Offering Period under this Plan by signing and delivering to the Company a written notice to that effect on a form provided for such purpose. Such withdrawal may be elected at any time prior to the end of an Offering Period, or such other time period as specified by the Committee.

 

b)            Upon withdrawal from this Plan, the accumulated payroll deductions shall be returned to the withdrawn participant, without interest, and his or her interest in this Plan shall terminate. In the event a participant voluntarily elects to withdraw from this Plan, he or she may not resume his or her participation in this Plan during the same Offering Period, but he or she may participate in any Offering Period under this Plan which commences on a date subsequent to such withdrawal by filing a new authorization for payroll deductions in the same manner as set forth in Section 7 above for initial participation in this Plan.

 

c)             If the Fair Market Value on the first day of the current Offering Period in which a participant is enrolled is higher than the Fair Market Value on the first day of any subsequent Offering Period, the Company shall automatically enroll such participant in the subsequent Offering Period. Any funds accumulated in a participant’s account prior to the first day of such subsequent Offering Period shall be applied to the purchase of shares on the Purchase Date immediately prior to the first day of such subsequent Offering Period, if any.

 

13.   TERMINATION OF EMPLOYMENT.

 

Termination of a participant’s employment for any reason, including retirement, death or the failure of a participant to remain an eligible employee of the Company or of a Participating Subsidiary, shall immediately terminate his or her participation in this Plan. In such event, the payroll deductions credited to the participant’s account shall be returned to him or her or, in the case of his or her death, to his or her legal representative, without interest. For purposes of this Section 13, an employee shall not be deemed to have terminated employment or failed to remain in the continuous employ of the Company or of a Participating Subsidiary in the case of sick leave, military leave, or any other leave of absence approved by the Board, provided, however that such leave is for a period of not more than ninety (90) days or reemployment upon the expiration of such leave is guaranteed by contract or statute.

 

14.   RETURN OF PAYROLL DEDUCTIONS.

 

In the event a participant’s interest in this Plan is terminated by withdrawal, termination of employment or otherwise, or in the event this Plan is terminated by the Board, the Company shall deliver to the participant all payroll deductions credited to such participant’s account. No interest shall accrue on the payroll deductions of a participant in this Plan.

 

15.   CAPITAL CHANGES.

 

Subject to any required action by the stockholders of the Company, the number and type of shares of Common Stock covered by each option under this Plan which has not yet been exercised and the number and type of shares of Common Stock which have been authorized for issuance under this Plan, but have not yet been placed under option (collectively, the “RESERVES”), as well as the price per share of Common Stock covered by each option under this Plan which has not yet been exercised, shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock of the Company resulting from a stock split or the payment of a stock dividend (but only on the Common Stock), any other increase or decrease in the number of issued and outstanding shares of Common Stock effected without receipt of any consideration by the Company or other change in the corporate structure or capitalization affecting the Company’s present Common Stock, provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Committee, whose determination shall be final, binding and conclusive. Except as expressly provided herein, no issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option.

 


 

In the event of the proposed dissolution or liquidation of the Company, the Offering Period shall terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Committee. The Committee may, in the exercise of its sole discretion in such instances, declare that this Plan shall terminate as of a date fixed by the Committee and give each participant the right to purchase shares under this Plan prior to such termination. In the event of (i) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different jurisdiction, or other transaction in which there is no substantial change in the stockholders of the Company or their relative stock holdings and the options under this Plan are assumed, converted or replaced by the successor corporation, which assumption shall be binding on all participants), (ii) a merger in which the Company is the surviving corporation but after which the stockholders of the Company immediately prior to such merger (other than any stockholder that merges, or which owns or controls another corporation that merges, with the Company in such merger) cease to own their shares or other equity interest in the Company, (iii) the sale of all or substantially all of the assets of the Company, or (iv) the acquisition, sale, or transfer of more than 50% of the outstanding shares of the Company by tender offer or similar transaction, the Plan shall continue with regard to Offering Periods that commenced prior to the closing of the proposed transaction and shares shall be purchased based on the Fair Market Value of the surviving corporation’s stock on each Purchase Date, unless otherwise provided by the Committee.

 

The Committee may, if it so determines in the exercise of its sole discretion, also make provision for adjusting the Reserves, as well as the price per share of Common Stock covered by each outstanding option, in the event that the Company effects one or more reorganizations, recapitalizations, rights offerings or other increases or reductions of shares of its outstanding Common Stock, or in the event of the Company being consolidated with or merged into any other corporation.

 

16.   NONASSIGNABILITY.

 

Neither payroll deductions credited to a participant’s account nor any rights with regard to the exercise of an option or to receive shares under this Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by shall, the laws of descent and distribution or as provided in Section 23 below) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be void and without effect.

 

17.   REPORTS.

 

Individual accounts shall be maintained for each participant in this Plan. Each participant shall receive, as soon as practicable after the end of each Purchase Period, a report of his or her account setting forth the total payroll deductions accumulated, the number of shares purchased, the per share price thereof and the remaining cash balance, if any, carried forward to the next Purchase Period or Offering Period, as the case may be.

 

18.   NOTICE OF DISPOSITION.

 

Each participant shall notify the Company in writing if the participant disposes of any of the shares purchased in any Offering Period pursuant to this Plan if such disposition occurs within two (2) years from the Offering Date or within one (1) year from the Purchase Date on which such shares were purchased (the “NOTICE PERIOD”). The Company may, at any time during the Notice Period, place a legend or legends on any certificate representing shares acquired pursuant to this Plan requesting the Company’s transfer agent to notify the Company of any transfer of the shares. The obligation of the participant to provide such notice shall continue notwithstanding the placement of any such legend on the certificates.

 

19.   NO RIGHTS TO CONTINUED EMPLOYMENT.

 

Neither this Plan nor the grant of any option hereunder shall confer any right on any employee to remain in the employ of the Company or any Participating Subsidiary, or restrict the right of the Company or any Participating Subsidiary to terminate such employee’s employment.

 

20.   EQUAL RIGHTS AND PRIVILEGES.

 

All eligible employees shall have equal rights and privileges with respect to this Plan so that this Plan qualifies as an “employee stock purchase plan” within the meaning of Section 423 or any successor provision of the Code and the related regulations. Any provision of this Plan which is inconsistent with Section 423 or any successor provision of the Code shall, without further act or amendment by the Company, the Committee or the Board, be reformed to comply with the requirements of Section 423. This Section 20 shall take precedence over all other provisions in this Plan.

 


 

21.   NOTICES.

 

All notices or other communications by a participant to the Company under or in connection with this Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

 

22.   TERM; STOCKHOLDER APPROVAL.

 

After this Plan, as amended and restated, is adopted by the Board, the amended and restated Plan shall be subject to approval by the stockholders of the Company, in any manner permitted by applicable corporate law, within twelve (12) months before or after the date this Plan, as amended and restated, is adopted by the Board. This amended and restated Plan shall continue until the earlier to occur of (a) termination of this Plan by the Board (which termination may be effected by the Board at any time), (b) issuance of all of the shares of Common Stock reserved for issuance under this Plan, or (c) ten (10) years from the Effective Date.

 

23.   DESIGNATION OF BENEFICIARY.

 

A participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant’s account under this Plan in the event of such participant’s death subsequent to the end of a Purchase Period but prior to delivery to him of such shares and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant’s account under this Plan in the event of such participant’s death prior to a Purchase Date.

 

Such designation of beneficiary may be changed by the participant at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under this Plan who is living at the time of such participant’s death, the Company shall deliver such shares or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

 

24.   CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES.

 

Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange or automated quotation system upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

 

25.   APPLICABLE LAW.

 

The Plan shall be governed by the substantive laws (excluding the conflict of laws rules) of the State of Delaware.

 

26.   AMENDMENT OR TERMINATION.

 

The Board may at any time amend, terminate or extend the term of this Plan, except that any such termination cannot affect options previously granted under this Plan, nor may any amendment make any change in an option previously granted which would adversely affect the right of any participant, nor may any amendment be made without approval of the stockholders of the Company obtained in accordance with Section 22 above within twelve (12) months of the adoption of such amendment (or earlier if required by Section 22) if such amendment would:

 

a)            increase the number of shares that may be issued under this Plan; or

 

b)            change the designation of the employees (or class of employees) eligible for participation in this Plan.

 

Notwithstanding the foregoing, the Board may make such amendments to the Plan as the Board determines to be advisable, if the continuation of the Plan or any Offering Period would result in financial accounting treatment for the Plan that is different from the financial accounting treatment in effect on the date this Plan is adopted by the Board.

 

Exhibit 99.2

 

DTS, INC.

 

2013 FOREIGN SUBSIDIARY EMPLOYEE STOCK PURCHASE PLAN

As Amended and Restated Effective November 13, 2012

 

1.   ESTABLISHMENT OF PLAN.

 

DTS, Inc. (the “COMPANY”) has previously adopted the Digital Theatre Systems, Inc. 2003 Foreign Subsidiary Employee Stock Purchase Plan (this “PLAN”) for the proposes of granting options for purchase of the Company’s Common Stock (the “COMMON STOCK”) to eligible employees of the Company and its Participating Subsidiaries as designated by the board of directors of the Company (the “BOARD”). Effective as of November 13, 2012 (the “EFFECTIVE DATE”), the Plan is hereby amended and restated, and renamed the DTS, Inc. 2013 Foreign Subsidiary Employee Stock Purchase Plan, and its term is extended as provided below; for the purposes of this Plan, “Parent Corporation” and “Subsidiary” shall have the same meanings as “parent corporation” and “subsidiary corporation” in Sections 424(e) and 424(f), respectively, of the Internal Revenue Code of 1986, as amended (the “CODE”). “Participating Subsidiaries” are Parent Corporations or Subsidiaries that the Board of Directors of the Company (the “BOARD”), or the Committee (as defined below), designates from time to time as corporations that shall participate in this Plan. The Company intends this Plan to qualify, to the extent permitted by applicable law, as an “employee stock purchase plan” under Section 423 of the Code (including any amendments to or replacements of such Section), and this Plan shall be so construed. Any term not expressly defined in this Plan but defined for purposes of Section 423 of the Code shall have the same definition herein.

 

2.   NUMBER OF SHARES.

 

The total number of shares of Common Stock initially reserved and available for issuance pursuant to this Plan shall be seven hundred fifty thousand (750,000) (the “SHARE LIMIT”), subject to adjustments effected in accordance with Section 15 of this Plan. The Share Limit shall be reduced by the number of shares issued under the DTS, Inc. 2013 Employee Stock Purchase Plan (the “DOMESTIC PLAN”). Shares issued under this Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares reacquired in private transactions or open market purchases, but all shares issued under this Plan and the Domestic Plan shall be counted against the Share Limit.

 

3.   PURPOSE.

 

The purpose of this Plan is to provide eligible employees of the Company and Participating Subsidiaries with a convenient means of acquiring an equity interest in the Company through payroll deductions, to enhance such employees’ sense of participation in the affairs of the Company and Participating Subsidiaries, and to provide an incentive for continued employment. For the purposes of this Plan, “employee” shall mean any individual who is an employee of the Company or a Participating Subsidiary and who is not ordinarily a resident of the United States of America. Whether an individual qualifies as an “employee” shall be determined by the Committee (as defined below), in its sole discretion, provided, however, that any determinations regarding whether an individual is an “employee” shall be prospective only, unless otherwise determined by the Committee. Unless the Committee makes a contrary determination, the employees of the Company shall, for all purposes of this Plan, be those individuals who are carried as employees of the Company or a Participating Subsidiary for regular payroll purposes or are on a leave of absence for not more than 90 days. Any inquiries regarding eligibility to participate in the Plan shall be directed to the Committee, whose decision shall be final.

 

4.   ADMINISTRATION.

 

This Plan shall be administered by the Compensation Committee of the Board (the “COMMITTEE”). Subject to the provisions of this Plan, all questions of interpretation or application of this Plan shall be determined by the Committee and its decisions shall be final and binding upon all participants. Members of the Committee shall receive no compensation for their services in connection with the administration of this Plan, other than standard fees as established from time to time by the Board for services rendered by Board members serving on Board committees. All expenses incurred in connection with the administration of this Plan shall be paid by the Company.

 


 

5.   ELIGIBILITY.

 

Any employee of the Company or the Participating Subsidiaries who are not ordinarily a resident of the United States of America is eligible to participate in an Offering Period (as hereinafter defined) under this Plan, to the extent permitted by applicable law, except the following:

 

a)            employees who are excluded by the Committee;

 

b)            employees who are not employed by the Company or a Participating Subsidiary prior to the beginning of such Offering Period or prior to such other time period as specified by the Committee;

 

c)             employees who are customarily employed for twenty (20) hours or less per week;

 

d)            employees who are customarily employed for five (5) months or less in a calendar year;

 

e)             employees who, together with any other person whose stock would be attributed to such employee pursuant to Section 424(d) of the Internal Revenue Code of 1986, as amended (the “CODE”), own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any of its Participating Subsidiaries or who, as a result of being granted an option under this Plan with respect to such Offering Period, would own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any of its Participating Subsidiaries;

 

f)             individuals who provide services to the Company or any of its Participating Subsidiaries as independent contractors who are reclassified as common law employees for any reason except for federal income and employment tax purposes; and

 

g)             employees who reside in countries for whom such employees’ participation in the Plan would result in a violation under any applicable laws of such country of residence.

 

6.   OFFERING DATES.

 

The offering periods of this Plan (each, an “OFFERING PERIOD”) shall be of twenty-four (24) months duration commencing on May 15 and November 15 of each year and ending on May 14 and November 14 of each year. Each Offering Period shall consist of four (4) six month purchase periods (individually, a “PURCHASE PERIOD”) during which payroll deductions of the participants are accumulated under this Plan. The first business day of each Offering Period is referred to as the “OFFERING DATE.” The last business day of each Purchase Period is referred to as the “PURCHASE DATE.” The Committee shall have the power to change the Offering Dates, the Purchase Dates and the duration of Offering Periods or Purchase Periods without stockholder approval if such change is announced prior to the relevant Offering Period or prior to such other time period as specified by the Committee; provided that no Offering Period may have a duration of more than twenty-seven (27) months.

 

7.   PARTICIPATION IN THIS PLAN.

 

Eligible employees may become participants in an Offering Period under this Plan on the Offering Date, after satisfying the eligibility requirements, by delivering a subscription agreement, and/or other application documents required by the Company in order to enroll in an Offering Period, to the Company prior to such Offering Date, or such other time period as specified by the Committee. Notwithstanding the foregoing, the Committee may set a later time for filing such documents for all eligible employees with respect to a given Offering Period. An eligible employee who does not deliver a subscription agreement to the Company after becoming eligible to participate in an Offering Period shall not participate in that Offering Period or any subsequent Offering Period unless such employee enrolls in this Plan by filing the appropriate documents with the Company prior to such Offering Period, or such other time period as specified by the Committee. Once an employee becomes a participant in an Offering Period by filing a subscription agreement, such employee shall automatically participate in the Offering Period commencing immediately following the last day of the prior Offering Period unless the employee withdraws or is deemed to withdraw from this Plan or terminates further participation in the Offering Period as set forth in Section 12 below. Such participant is not required to file any additional documents in order to continue participation in this Plan.

 

2


 

8.   GRANT OF OPTION ON ENROLLMENT.

 

Enrollment by an eligible employee in this Plan with respect to an Offering Period shall constitute the grant (as of the Offering Date) by the Company to such employee of an option to purchase on the Purchase Date up to that number of shares of Common Stock determined by a fraction, the numerator of which is the amount accumulated in such employee’s payroll deduction account during such Purchase Period and the denominator of which is the lower of (i) eighty-five percent (85%) of the fair market value of a share of the Company’s Common Stock on the Offering Date (but in no event less than the par value of a share Common Stock), or (ii) eighty-five percent (85%) of the fair market value of a share of Common Stock on the Purchase Date (but in no event less than the par value of a share of the Company’s Common Stock), provided, that the number of shares of Common Stock subject to any option granted pursuant to this Plan shall not exceed the lesser of (x) the maximum number of shares set by the Committee pursuant to Section 11(c) below with respect to the applicable Purchase Date, or (y) the maximum number of shares which may be purchased pursuant to Section 11(b) below with respect to the applicable Purchase Date. The fair market value of a share of the Company’s Common Stock shall be determined as provided in Section 9 below.

 

9.   PURCHASE PRICE.

 

Except as otherwise determined by the Committee prior to the commencement of an Offering Period, the purchase price per share at which a share of Common Stock shall be sold in any Offering Period shall be eighty-five percent (85%) of the lesser of:

 

a)            the fair market value on the Offering Date; or

 

b)            the fair market value on the Purchase Date.

 

For the purposes of this Plan, the term “FAIR MARKET VALUE” means, as of any date, the value of a share of the Company’s Common Stock determined as follows:

 

a)            if such Common Stock is listed or quoted on a national or regional securities exchange or quotation system, the closing price of such Common Stock as quoted on such national or regional securities exchange or quotation system constituting the primary market for the Common Stock on the date of determination as reported in The Wall Street Journal ; provided, however, that if the relevant date does not fall on a day on which the Common Stock has traded on such securities exchange or quotation system, the date on which the Fair Market Value is established shall be the last day on which the Common Stock was so traded or quoted; and

 

b)            if on the determination date, the Common Stock is not then listed on a national or regional exchange or quotation system, the Fair Market Value shall be determined in good faith by the Committee.

 

10.   PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE OF SHARES.

 

a)            The purchase price of the shares is accumulated by regular payroll deductions made during each Offering Period. The deductions are made as a percentage of the participant’s compensation in one percent (1%) increments, not less than one percent (1%), nor greater than fifteen percent (15%), or such lower limit set by the Committee. Compensation shall mean all cash compensation that would be included as wages in an eligible employee’s W-2 if he or she were a U.S. taxpayer, including, but not limited to, base salary, wages, bonuses, incentive compensation, commissions, overtime, shift premiums, plus draws against commissions, provided, however that compensation shall not include any long term disability or workers compensation payments, car allowances, relocation payments or expense reimbursements. Payroll deductions shall commence on the first payday of the Offering Period and shall continue to the end of the Offering Period unless sooner altered or terminated as provided in this Plan.

 

b)            A participant may increase or decrease the rate of payroll deductions during an Offering Period by filing with the Company a new authorization for payroll deductions, in which case the new rate shall become effective for the next payroll period commencing after the Company’s receipt of the authorization and shall continue for the remainder of the Offering Period unless changed as described below. Such change in the rate of payroll deductions may be made at any time during an Offering Period, but not more than one (1) change may be made effective during any Purchase Period. A participant may increase or decrease the rate of payroll deductions for any subsequent Offering Period by filing with the Company a new authorization for payroll deductions prior to the beginning of such Offering Period, or such other time period as specified by the Committee.

 

c)             A participant may reduce his or her payroll deduction percentage to zero during an Offering Period by filing with the Company a request for cessation of payroll deductions. Such reduction shall be effective as soon as practicable after the Company’s receipt of the request and no further payroll deductions shall be made for the duration of the Offering Period. Payroll deductions credited to the participant’s account prior to the effective date of the request shall be used to

 

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purchase shares of Common Stock of the Company in accordance with Section (e) below. A participant may not resume making payroll deductions during the Offering Period in which he or she reduced his or her payroll deductions to zero.

 

d)            All payroll deductions made for a participant are credited to his or her account under this Plan and are deposited with the general funds of the Company. No interest accrues on the payroll deductions. All payroll deductions received or held by the Company may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.

 

e)             On each Purchase Date, for so long as this Plan remains in effect and provided that the participant has not submitted a signed and completed withdrawal form before that date, which notifies the Company that the participant wishes to withdraw from that Offering Period under this Plan and have all payroll deductions accumulated in the account maintained on behalf of the participant, as of that date returned to the participant, the Company shall convert each participant’s account balance, including amounts carried forward to U.S. Dollars, determined as of the Purchase Date, and shall apply the funds to the purchase of whole shares of Common Stock, reserved under the option granted to such participant with respect to the Offering Period, to the extent that such option is exercisable on the Purchase Date. The purchase price per share shall be as specified in Section 9 of this Plan. Any cash remaining in a participant’s account after such purchase of shares shall be refunded to such participant in cash, without interest, provided, however, that any amount remaining in such participant’s account on a Purchase Date which is less than the amount necessary to purchase a full share of Common Stock shall be carried forward, without interest, into the next Purchase Period or Offering Period, as the case may be. In the event that this Plan has been oversubscribed, all funds not used to purchase shares on the Purchase Date shall be returned to the participant, without interest. No Common Stock shall be purchased on a Purchase Date on behalf of any employee whose participation in this Plan has terminated prior to such Purchase Date.

 

f)             As soon as practicable after the Purchase Date, the Company shall issue shares for the participant’s benefit representing the shares purchased.

 

g)             During a participant’s lifetime, his or her option to purchase shares hereunder is exercisable only by him or her. The participant shall have no interest or voting rights in shares until the shares are purchased and issued to the participant.

 

11.   LIMITATIONS ON SHARES TO BE PURCHASED.

 

a)            No participant shall be entitled to purchase stock under this Plan at a rate which, when aggregated with his or her rights to purchase stock under all other employee stock purchase plans of the Company or any Subsidiary, exceeds US$25,000 in fair market value, determined as of the Offering Date (or such other limit as may be imposed by the Code) for each calendar year in which the employee participates in this Plan. The Company shall automatically suspend the payroll deductions of any participant as necessary to enforce such limit provided that when the Company automatically resumes such payroll deductions, the Company must apply the rate in effect immediately prior to such suspension.

 

b)            The maximum number of shares that may be purchased during any Offering Period (hereinafter, the “MAXIMUM SHARE AMOUNT”) may not exceed the lesser of 10, 000 shares (subject to adjustment pursuant to Section 15) or such lesser amount established by the Committee. In addition, no participant shall be entitled to purchase more than 2,500 shares (subject to adjust pursuant to Section 15) on any single Purchase Date unless the Committee designates a lesser number prior to the commencement of an Offering Period. If a new Maximum Share Amount is set, then all participants must be notified of such Maximum Share Amount prior to the commencement of the next Offering Period. The Maximum Share Amount shall continue to apply with respect to all succeeding Purchase Dates and Offering Periods unless revised by the Committee as set forth above.

 

c)             If the number of shares to be purchased on a Purchase Date by all employees participating in this Plan exceeds the number of shares then available for issuance under this Plan, then the Company shall make a pro rata allocation of the remaining shares in as uniform a manner as shall be reasonably practicable and as the Committee shall determine to be equitable. In such event, the Company shall give written notice of such reduction of the number of shares to be purchased under a participant’s option to each participant affected.

 

d)            Any payroll deductions accumulated in a participant’s account which are not used to purchase stock due to the limitations in this Section 11 shall be returned to the participant as soon as practicable after the end of the applicable Purchase Period, without interest.

 

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12.   WITHDRAWAL.

 

a)            Each participant may withdraw from an Offering Period under this Plan by signing and delivering to the Company a written notice to that effect on a form provided for such purpose. Such withdrawal may be elected at any time prior to the end of an Offering Period, or such other time period as specified by the Committee.

 

b)            Upon withdrawal from this Plan, the accumulated payroll deductions shall be returned to the withdrawn participant, without interest, and his or her interest in this Plan shall terminate. In the event a participant voluntarily elects to withdraw from this Plan, he or she may not resume his or her participation in this Plan during the same Offering Period, but he or she may participate in any Offering Period under this Plan which commences on a date subsequent to such withdrawal by filing a new authorization for payroll deductions in the same manner as set forth in Section 7 above for initial participation in this Plan.

 

c)             If the Fair Market Value on the first day of the current Offering Period in which a participant is enrolled is higher than the Fair Market Value on the first day of any subsequent Offering Period, the Company shall automatically enroll such participant in the subsequent Offering Period. Any funds accumulated in a participant’s account prior to the first day of such subsequent Offering Period shall be applied to the purchase of shares on the Purchase Date immediately prior to the first day of such subsequent Offering Period, if any.

 

13.   TERMINATION OF EMPLOYMENT.

 

Termination of a participant’s employment for any reason, including retirement, death or the failure of a participant to remain an eligible employee of the Company or of a Participating Subsidiary, shall immediately terminate his or her participation in this Plan. In such event, the payroll deductions credited to the participant’s account shall be returned to him or her or, in the case of his or her death, to his or her legal representative, without interest. For purposes of this Section 13, an employee shall not be deemed to have terminated employment or failed to remain in the continuous employ of the Company or of a Participating Subsidiary in the case of sick leave, military leave, or any other leave of absence approved by the Board, provided, however that such leave is for a period of not more than ninety (90) days or reemployment upon the expiration of such leave is guaranteed by contract or statute.

 

14.   RETURN OF PAYROLL DEDUCTIONS.

 

In the event a participant’s interest in this Plan is terminated by withdrawal, termination of employment or otherwise, or in the event this Plan is terminated by the Board, the Company shall deliver to the participant all payroll deductions credited to such participant’s account. No interest shall accrue on the payroll deductions of a participant in this Plan.

 

15.   CAPITAL CHANGES.

 

Subject to any required action by the stockholders of the Company, the number and type of shares of Common Stock covered by each option under this Plan which has not yet been exercised and the number and type of shares of Common Stock which have been authorized for issuance under this Plan, including the Annual Increase, but have not yet been placed under option (collectively, the “RESERVES”), as well as the price per share of Common Stock covered by each option under this Plan which has not yet been exercised, shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock of the Company resulting from a stock split or the payment of a stock dividend (but only on the Common Stock), any other increase or decrease in the number of issued and outstanding shares of Common Stock effected without receipt of any consideration by the Company or other change in the corporate structure or capitalization affecting the Company’s present Common Stock, provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Committee, whose determination shall be final, binding and conclusive. Except as expressly provided herein, no issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option.

 

In the event of the proposed dissolution or liquidation of the Company, the Offering Period shall terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Committee. The Committee may, in the exercise of its sole discretion in such instances, declare that this Plan shall terminate as of a date fixed by the Committee and give each participant the right to purchase shares under this Plan prior to such termination. In the event of (i) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different jurisdiction, or other transaction in which there is no substantial change in the stockholders of the Company or their relative stock holdings and the options under this Plan are assumed, converted or replaced by the successor corporation, which assumption shall be binding on all participants), (ii) a merger in which the Company is the surviving corporation but after which the stockholders of the Company immediately prior to such merger (other than any stockholder that merges, or which owns or controls another corporation that merges, with the Company in such merger) cease to own their shares or other equity interest

 

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in the Company, (iii) the sale of all or substantially all of the assets of the Company, or (iv) the acquisition, sale, or transfer of more than 50% of the outstanding shares of the Company by tender offer or similar transaction, the Plan shall continue with regard to Offering Periods that commenced prior to the closing of the proposed transaction and shares shall be purchased based on the Fair Market Value of the surviving corporation’s stock on each Purchase Date, unless otherwise provided by the Committee.

 

The Committee may, if it so determines in the exercise of its sole discretion, also make provision for adjusting the Reserves, as well as the price per share of Common Stock covered by each outstanding option, in the event that the Company effects one or more reorganizations, recapitalizations, rights offerings or other increases or reductions of shares of its outstanding Common Stock, or in the event of the Company being consolidated with or merged into any other corporation.

 

16.   NONASSIGNABILITY.

 

Neither payroll deductions credited to a participant’s account nor any rights with regard to the exercise of an option or to receive shares under this Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by shall, the laws of descent and distribution or as provided in Section 23 below) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be void and without effect.

 

17.   REPORTS.

 

Individual accounts shall be maintained for each participant in this Plan. Each participant shall receive, as soon as practicable after the end of each Purchase Period, a report of his or her account setting forth the total payroll deductions accumulated, the number of shares purchased, the per share price thereof and the remaining cash balance, if any, carried forward to the next Purchase Period or Offering Period, as the case may be.

 

18.   NOTICE OF DISPOSITION.

 

To the extent applicable so that proper income tax reporting may occur with respect to sales of shares acquired under the Plan, each participant shall notify the Company in writing if the participant disposes of any of the shares purchased in any Offering Period pursuant to this Plan if such disposition occurs within two (2) years from the Offering Date or within one (1) year from the Purchase Date on which such shares were purchased (the “NOTICE PERIOD”). The Company may, at any time during the Notice Period, place a legend or legends on any certificate representing shares acquired pursuant to this Plan requesting the Company’s transfer agent to notify the Company of any transfer of the shares. The obligation of the participant to provide such notice shall continue notwithstanding the placement of any such legend on the certificates.

 

19.   NO RIGHTS TO CONTINUED EMPLOYMENT.

 

Neither this Plan nor the grant of any option hereunder shall confer any right on any employee to remain in the employ of the Company or any Participating Subsidiary, or restrict the right of the Company or any Participating Subsidiary to terminate such employee’s employment.

 

20.   COMPLIANCE WITH THE LAWS OF LOCAL JURISDICTIONS.

 

Notwithstanding anything in this Plan to the contrary, the Committee may take such actions as it deems necessary so that this Plan shall comply with all applicable law, including local law. Thus, for example, grants can be conditioned on same day sales, withholding can be accomplished by personal check, awards may be paid in cash or participation may be denied. In addition, the Committee shall have the power, in its discretion, to adopt one or more sub-plans of the Plan as the Committee deems necessary or desirable to comply with the laws or regulations, tax policy, accounting principles or custom of foreign jurisdictions applicable to employees of the Company, or a Participating Subsidiary. Any of the provisions of any such sub-plan may supersede the provisions of this Plan, other than Section 2. Except as superseded by the provisions of a sub-plan, the provisions of this Plan shall govern such sub-plan.

 

21.   NOTICES.

 

All notices or other communications by a participant to the Company under or in connection with this Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

 

22.   TERM; STOCKHOLDER APPROVAL.

 

After this Plan, as amended and restated, is adopted by the Board, the amended and restated Plan shall be subject to approval by the stockholders of the Company, in any manner permitted by applicable corporate law, within twelve (12) months before or after the date this Plan, as amended and restated, is adopted by the Board. This amended and restated Plan shall continue until the earlier to occur of (a) termination of this Plan by the Board (which termination may be effected by the Board at any time), (b) issuance of all of the shares of Common Stock reserved for issuance under this Plan, or (c) ten (10) years from the Effective Date.

 

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23.   DESIGNATION OF BENEFICIARY.

 

a)            A participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant’s account under this Plan in the event of such participant’s death subsequent to the end of a Purchase Period but prior to delivery to him of such shares and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant’s account under this Plan in the event of such participant’s death prior to a Purchase Date.

 

b)            Such designation of beneficiary may be changed by the participant at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under this Plan who is living at the time of such participant’s death, the Company shall deliver such shares or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

 

24.   CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES.

 

Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange or automated quotation system upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

 

25.   APPLICABLE LAW.

 

The Plan shall be governed by the substantive laws (excluding the conflict of laws rules) of the State of Delaware.

 

26.   AMENDMENT OR TERMINATION.

 

The Board may at any time amend, terminate or extend the term of this Plan, except that any such termination cannot affect options previously granted under this Plan, nor may any amendment make any change in an option previously granted which would adversely affect the right of any participant, nor may any amendment be made without approval of the stockholders of the Company obtained in accordance with Section 22 above within twelve (12) months of the adoption of such amendment (or earlier if required by Section 22) if such amendment would:

 

a)            increase the number of shares that may be issued under this Plan; or

 

b)            change the designation of the employees (or class of employees) eligible for participation in this Plan.

 

Notwithstanding the foregoing, the Board may make such amendments to the Plan as the Board determines to be advisable, if the continuation of the Plan or any Offering Period would result in financial accounting treatment for the Plan that is different from the financial accounting treatment in effect on the date this Plan is adopted by the Board.

 

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