UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

CURRENT REPORT

 

FORM 8-K

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act

 

Date of Report (Date of Earliest Event Reported): May 19, 2017

 

Hanger, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware
(State or other jurisdiction of
incorporation)

 

1-10670
(Commission File Number)

 

84-0904275
(IRS Employer Identification
No.)

 

10910 Domain Drive, Suite 300
Austin, Texas 78758

(Address of principal executive offices (zip code))

 

(512) 777-3800

(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a - 12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13d-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company    o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     o

 

 

 



 

Item 5.02                                            Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

Special Equity Plan

 

The Compensation Committee of  the Board of Directors (the “Board”) of Hanger, Inc. (the “Company”), with the advice of its compensation consultants, developed the terms of a special equity plan, which was adopted by the Board on May 19, 2017. The Hanger, Inc. Special Equity Plan (the “Special Equity Plan ”) has the purpose of retaining and incentivizing key employees and officers.  The Special Equity Plan will provide participants the opportunity to acquire shares of the Company’s common stock (“Common Stock”) and is intended to operate completely independent from the Company’s 2016 Omnibus Incentive Plan.

 

The Special Equity Plan authorizes the issuance of up to 1,500,000 shares of Common Stock.  All awards under the Special Equity Plan were made on May 19, 2017, and no further grants of awards will be authorized under the Special Equity Plan.  Details regarding awards that were granted to the executive officers of the Company who are expected to be the Company’s named executive officers for purposes of 2016 compensation are included below.  The total number of awards issued to all Company officers and employees under the Special Equity Plan was 1,117,228.  The maximum number of shares issuable under these awards is 1,436,436 shares of Common Stock.

 

The Special Equity Plan will be administered by the Compensation Committee (the “Committee”) of the Board.  The Committee determined the amounts, forms and terms of the awards granted to participants on May 19, 2017.  The Committee will have the authority to interpret the Special Equity Plan and any agreement covering any award under the Special Equity Plan; make, change and rescind rules and regulations relating to the Special Equity Plan; and make changes to, or reconcile any inconsistency in, any award or agreement covering an award.

 

The Committee had the ability to grant one or more of the following types of awards under the Special Equity Plan to any officers or other employees of the Company and its affiliates: (1) options to purchase shares of Common Stock (“Options”) and (2) rights to receive shares of Common Stock (“Restricted Stock Units”) based on either performance-based or time-based vesting requirements.  The Committee approved the following form of agreements for use in making awards under the Special Equity Plan: a non-qualified stock option agreement for executives (the “Executive Option Agreement”), a non-qualified stock option agreement for employees (the “Employee Option Agreement”), a restricted stock unit agreement for executives (the “Executive Restricted Stock Unit Agreement”) and a restricted stock unit agreement for employees (the “Employee Restricted Stock Unit Agreement”).

 

The Options granted pursuant to the Executive Option Agreement and the Employee Option Agreement have an exercise price of $12.77, the last reported sale price of the Common Stock on the OTC pink market on May 18, 2017, the day prior to the grant date.

 

With respect to the performance-based Restricted Stock Units granted pursuant to the Executive Restricted Stock Unit Agreement and the Employee Restricted Stock Unit Agreement, the performance period will be May 19, 2017, which was the grant date of such performance-based Restricted Stock Units, through the third anniversary of the grant date.  The performance measure will be the three year absolute Common Stock price compounded annual growth rate (“CAGR”).  Pursuant to the Executive Restricted Stock Unit Agreement and the Employee Restricted Stock Unit Agreement, participants will be eligible to earn performance-based Restricted Stock Units based on the following achievement of the performance measure:

 

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CAGR Result on 3 rd
Anniversary of Grant Date

 

Percent of Target Performance-Based
Restricted Stock Units Earned

Threshold

 

10%

 

50%

Target

 

20%

 

100%

Maximum

 

30% or above

 

200%

 

On May 19, 2017, the Committee approved the issuance of awards pursuant to the Special Equity Plan to the following executive officers of the Company in the nature and amounts described below:

 

Participant

 

Title

 

Options

 

Performance-
Based Restricted
Stock Units

Vinit K. Asar

 

President and Chief Executive Officer

 

159,982

 

63,993

Samuel M. Liang

 

President of Hanger Clinic

 

72,231

 

28,892

Thomas E. Kiraly

 

Executive Vice President and Chief Financial Officer

 

94,167

 

37,667

Kenneth W. Wilson

 

President of Southern Prosthetic Supply, Inc.

 

54,834

 

21,934

Thomas E. Hartman

 

Senior Vice President and General Counsel

 

70,818

 

28,327

 

The foregoing descriptions of the Special Equity Plan, the Executive Option Agreement, the Employee Option Agreement, the Executive Restricted Stock Unit Agreement and the Employee Restricted Stock Unit Agreement are qualified in their entirety by reference to the full text of the Special Equity Plan, the Executive Option Agreement, the Employee Option Agreement, the Executive Restricted Stock Unit Agreement and the Employee Restricted Stock Unit Agreement, which are attached as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5, respectively, to this Current Report on Form 8-K and incorporated herein by reference.

 

Item 7.01 Regulation FD Disclosure

 

Certain Annual Cash Bonus Information

 

For each of the 2014, 2015 and 2016 fiscal years, the Company’s President and Chief Executive Officer, Mr. Vinit Asar, declined to receive any annual cash bonus compensation under the Company’s annual incentive plan.

 

For each of the 2015 and 2016 fiscal years, the Company’s Executive Vice President and Chief Financial Officer, Mr. Thomas Kiraly, declined to receive any annual cash bonus compensation under the Company’s annual incentive plan.  Mr. Kiraly did receive a special discretionary bonus of $25,000 in October 2016.

 

Certain Equity Compensation Plan Award Information

 

In February 2017, the Compensation Committee of the Board of Directors determined that the targets for the performance-based Restricted Stock Units awarded in March of 2016 to the Named Executive Officers and certain other officers were not met, resulting in the forfeiture of those awards without issuance of common shares.

 

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Summary Table Regarding Incentive Equity Plans

 

In April 2016, the Company adopted the Hanger, Inc. 2016 Omnibus Incentive Plan (the “2016 Plan”).  The table below sets forth information regarding the Special Equity Plan, the 2016 Plan and equity awards outstanding.

 

On May 22, 2017, the Company had 36,193,611 common shares outstanding.

 

 

 

 

 

Activity for Year-To-Date Period
Ended May 22, 2017

 

 

 

 

 

Balance as
of
December
31, 2016

 

Additional
shares
authorized
for
issuance

 

Granted

 

Vested

 

Forfeited
and other

 

Balance as
of May 22,
2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares available for grant under equity compensation plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016 Omnibus Incentive Plan

 

1,742,671

(a)

 

(927,867

)

 

344,738

(b)

1,159,542

 

Special Equity Plan

 

 

1,500,000

 

(1,436,436

)

 

(63,564

)(c)

 

Total

 

1,742,671

 

1,500,000

 

(2,364,303

)

 

281,174

 

1,159,542

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding equity award amounts:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unvested equity awards

 

1,552,692

 

 

2,364,303

 

(364,668

)

(344,738

)

3,207,589

 

Vested but unissued equity awards(d)

 

81,227

 

 

 

(15,566

)(e)

 

65,661

 

 


(a)                                  The amount listed updates and corrects the amount disclosed in the Equity Compensation Plan table located in Item 12 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

 

(b)                                  The amount listed represents shares related to forfeited awards, including 288,900 shares related to the forfeited March 2016 performance-based Restricted Stock Unit awards.  In accordance with the terms of the 2016 Plan, these shares are available for future award grants.

 

(c)                                   Because all awards under the Special Equity Plan were made on May 19, 2017 and no further grants of awards are permitted under the Special Equity Plan, the remaining 63,564 shares authorized under the Special Equity Plan are not available for future issuance and are deemed forfeited for purposes of this table.

 

(d)                                  The amount listed represents vested restricted stock units that non-employee directors have elected to defer.

 

(e)                                   The amount listed represents shares issued to non-employee directors upon the expiration of previous deferral elections.

 

Item 9.01                                            Financial Statements and Exhibits.

 

(d) Exhibits.

 

(10.1)                                              Hanger, Inc. Special Equity Plan

 

(10.2)                                              Form of Non-Qualified Stock Option Agreement for Executives

 

(10.3)                                              Form of Non-Qualified Stock Option Agreement for Employees

 

(10.4)                                              Form of Restricted Stock Unit Agreement for Executives

 

(10.5)                                              Form of Restricted Stock Unit Agreement for Employees

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

HANGER, INC.

 

 

 

 

 

 

 

By:

/s/ Thomas E. Hartman

 

 

Thomas E. Hartman

Dated: May 23, 2017

 

Senior Vice President and General Counsel

 

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EXHIBIT INDEX

 

Exhibit No.

 

Description

 

 

 

(10.1)

 

Hanger, Inc. Special Equity Plan

 

 

 

(10.2)

 

Form of Non-Qualified Stock Option Agreement for Executives

 

 

 

(10.3)

 

Form of Non-Qualified Stock Option Agreement for Employees

 

 

 

(10.4)

 

Form of Restricted Stock Unit Agreement for Executives

 

 

 

(10.5)

 

Form of Restricted Stock Unit Agreement for Employees

 

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Exhibit 10.1

 

HANGER, INC.
SPECIAL EQUITY PLAN

 

1.      Purposes and Effective Date.

 

(a)   Purpose . The Hanger, Inc. Special Equity Plan has the purpose of retaining and incentivizing key employees and officers.  The Plan will provide participants the opportunity to acquire shares of the Company’s common stock on the potentially favorable terms that this Plan provides.

 

(b)   Effective Date . This Plan will become effective, and Awards may be granted under this Plan, on and after the Effective Date.  This Plan will terminate as provided in Section 10.

 

2.      Definitions. Capitalized terms used and not otherwise defined in this Plan or in any Award agreement have the following meanings:

 

(a)   “Administrator” means the Committee.

 

(b)   “Affiliate” has the meaning ascribed to such term in Rule 12b-2 under the Exchange Act. Notwithstanding the foregoing, for purposes of determining those individuals to whom an Option may be granted, the term “Affiliate” means any entity that, directly or through one or more intermediaries, is controlled by or is under common control with, the Company within the meaning of Code Sections 414(b) or (c); provided that, in applying such provisions, the phrase “at least 20 percent” shall be used in place of “at least 80 percent” each place it appears therein.

 

(c)   “Award” means a grant of Options, Restricted Stock Units or Performance Share Units.

 

(d)   “Board” means the Board of Directors of the Company.

 

(e)   “Cause” (i) has the meaning given in a Participant’s employment, retention, change of control, severance or similar agreement with the Company or any Affiliate, or (ii) if no such agreement is in effect, then (A) if the determination of Cause is being made prior to a Change of Control, Cause has the meaning given in the Company’s employment policies, if any, as in effect at the time of the determination or (B) if the determination of Cause is being made following a Change of Control, Cause has the meaning given in the Company’s employment policies, if any, as in effect immediately prior to the Change of Control, or (iii) if no such agreement or policies are in effect, then Cause shall mean the occurrence of any of the following: (x) the repeated failure or refusal of the Participant to follow the lawful directives of the Company or an Affiliate (except due to sickness, injury or disabilities), (y) gross inattention to duty or any other willful, reckless or grossly negligent act (or omission to act) by the Participant, which, in the good faith judgment of the Company, could result in a material injury to the Company or an Affiliate including but not limited to the repeated failure to follow the policies and procedures of the Company, or (z) the commission by the Participant of a felony or other crime involving moral turpitude or the commission by the Participant of an act of financial dishonesty against the Company or an Affiliate.

 

(f)    A “Change of Control” shall be deemed to exist if:

 

(i)            a Person either (A) acquires twenty percent (20%) or more of the combined voting power of the outstanding securities of the Company having the right to

 



 

vote in elections of directors and such acquisition shall not have been approved within sixty (60) days following such acquisition by a majority of the Continuing Directors (as hereinafter defined) then in office, or (B) acquires fifty percent (50%) or more of the combined voting power of the outstanding securities of the Company having a right to vote in elections of directors; or

 

(ii)           Continuing Directors shall for any reason cease to constitute a majority of the Board; or

 

(iii)          the Company disposes of all or substantially all of the business of the Company to a party or parties other than a subsidiary or other affiliate of the Company pursuant to a partial or complete liquidation of the Company, sale of assets (including stock of a subsidiary of the Company) or otherwise; or

 

(iv)          there is consummated a merger, consolidation or share exchange of the Company with any other corporation or the issuance of voting securities of the Company in connection with a merger, consolidation or share exchange of the Company (or any direct or indirect subsidiary of the Company), other than (A) a merger, consolidation or share exchange which would result in the voting securities of the Company outstanding immediately prior to such merger, consolidation or share exchange continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger, consolidation or share exchange, or (B) a merger, consolidation or share exchange effected to implement a recapitalization of the Company (or similar transaction) in which no Person (other than an Excluded Person) is or becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates after the Effective Date pursuant to express authorization by the Board that refers to this exception) representing twenty percent (20%) or more of either the then outstanding shares of Stock or the Company or the combined voting power of the Company’s then outstanding voting securities.

 

For purposes of this Plan, (1) the term “Continuing Director” shall mean a member of the Board who either was a member of the Board on the Effective Date or who subsequently became a Director and whose election, or nomination for election, was approved by a vote of at least two-thirds (2/3) of the Continuing Directors then in office, and (2) the term “Excluded Person” shall mean (A) the Company or its subsidiaries, (B) a trustee or other fiduciary holding securities under any employee benefit plan of the Company or its subsidiaries, (C) an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock in the Company.

 

If an Award is considered deferred compensation subject to the provisions of Code Section 409A, then the foregoing definition shall be deemed amended to the minimum extent necessary to comply with Code Section 409A, and the Administrator may include such amended definition in the Award agreement issued with respect to such Award.

 

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(g)   “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a specific provision of the Code includes any successor provision and the regulations promulgated under such provision.

 

(h)   “Committee” means the Compensation Committee of the Board, any successor committee thereto or such other committee of the Board that is designated by the Board with the same or similar authority. The Committee shall consist only of Non-Employee Directors (not fewer than two (2)) who also qualify as Non-Employee Directors to the extent necessary for the Plan to comply with Rule 16b-3 promulgated under the Exchange Act.

 

(i)    “Company” means Hanger, Inc., a Delaware corporation, or any successor thereto.

 

(j)    “Director” means a member of the Board.

 

(k)   “Effective Date” means the date the Board approves this Plan.

 

(l)    “Exchange Act” means the Securities Exchange Act of 1934, as amended. Any reference to a specific provision of the Exchange Act includes any successor provision and the regulations and rules promulgated under such provision.

 

(m)  “Fair Market Value” means, per Share on a particular date, (i) if the Shares are listed on a national securities exchange, the last sales price on the immediately preceding day on the national securities exchange on which the Stock is then traded, as reported in The Wall Street Journal, or if no sales of Stock occur on such immediately preceding day, then on the last preceding date on which there was a sale on such exchange; or (ii) if the Shares are not listed on a national securities exchange, but are traded in an over-the-counter market, the last sales price (or, if there is no last sales price reported, the average of the closing bid and asked prices) for the Shares on the immediately preceding day, or on the last preceding date on which there was a sale of Shares on that market; or (iii) if the Shares are neither listed on a national securities exchange nor traded in an over-the-counter market, the price determined by the Administrator, in its discretion. Notwithstanding the foregoing, in the case of the sale of Shares, the actual sale price shall be the Fair Market Value of such Shares.

 

(n)   “Non-Employee Director” means a Director who is not also an employee of the Company or its Subsidiaries.

 

(o)   “Option” means the right to purchase Shares at a stated price for a specified period of time.  All Options granted under this Plan shall be nonqualified stock options not intended to meet the requirements of Code Section 422.

 

(p)   “Participant” means an individual selected by the Administrator to receive an Award.

 

(q)   “Performance Goals” means any goals the Administrator establishes.

 

(r)    “Performance Share Units” means the right to receive Shares, or the Fair Market Value equivalent in cash, to the extent Performance Goals are achieved (and/or other requirements are met).

 

(s)    “Person” has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, or any group of Persons acting in concert that

 

3



 

would be considered “persons acting as a group” within the meaning of Treas. Reg. § 1.409A-3(i)(5).

 

(t)    “Plan” means this Hanger, Inc. Special Equity Plan, as it may be amended from time to time.

 

(u)   “Restricted Stock Unit” means the right to receive a cash payment and/or Shares the value of which is equal to the Fair Market Value of one Share.

 

(v)   “Section 16 Participants” means Participants who are subject to the provisions of Section 16 of the Exchange Act.

 

(w)  “Share” means a share of Stock.

 

(x)   “Stock” means the Common Stock of the Company, $.01 par value.

 

3.      Administration.

 

(a)   Administration . The Committee has the authority to determine the amounts, forms and terms of the Awards granted to Participants; provided that the Committee shall make all Awards under the Plan on a single grant date of its choosing.  Subject to the foregoing, the Administrator has full discretionary authority to administer this Plan, including but not limited to the authority to: (i) interpret the provisions of this Plan or any agreement covering an Award; (ii) prescribe, amend and rescind rules and regulations relating to this Plan; (iii) correct any defect, supply any omission, or reconcile any inconsistency in the Plan, any Award or any agreement covering an Award in the manner and to the extent it deems desirable to carry this Plan or such Award into effect; and (iv) make all other determinations necessary or advisable for the administration of this Plan. All Administrator determinations shall be made in the sole discretion of the Administrator and are final and binding on all interested parties.

 

(b)   No Liability; Indemnification . No member of the Board or the Committee will be liable for any act done, or determination made, by the individual in good faith with respect to the Plan or any Award. The Company will indemnify and hold harmless each such individual as to any acts or omissions, or determinations made, in each case done or made in good faith, with respect to this Plan or any Award to the maximum extent that the law and the Company’s By-Laws permit.

 

4.      Eligibility. The Administrator may designate any officer or other employee of the Company or its Affiliates as a Participant to the extent of the Administrator’s authority. The Administrator’s granting of a particular type of Award to a Participant will not require the Administrator to grant any other type of Award to such individual.

 

5.      Types of Awards. Subject to the terms of this Plan, the Administrator may grant any type of Award or combination of Award types to any Participant.

 

6.      Shares Reserved under this Plan.

 

(a)   Plan Reserve . Subject to adjustment as provided in Section 12, an aggregate of one million five hundred thousand (1,500,000) Shares are reserved for issuance under this Plan. The aggregate number of Shares reserved under this Section 6(a) shall be depleted on the date of grant of the Awards by the maximum number of Shares with respect to which such Award is

 

4



 

granted.  All Awards under the Plan shall be made on a single grant date of the Committee’s choosing.

 

(b)   No Replenishment of Shares Under this Plan . If an Award lapses, expires, terminates or is cancelled without the issuance of Shares thereunder, such Shares shall not be available for future grants under the Plan.

 

7.      Options. Subject to the terms of this Plan, the Administrator will determine all terms and conditions of each Option, including but not limited to: (a) the grant date, which shall be a single date of the Administrator’s choosing for all Awards under the Plan and may not be any day prior to the date that the Administrator approves the grant; (b) the number of Shares subject to the Option; (c) the exercise price, which may never be less than the Fair Market Value of the Shares subject to the Option as determined on the date of grant; (d) the terms and conditions of vesting and exercise; (e) the term, except that an Option must terminate no later than ten (10) years after the date of grant; and (f) the manner of payment of the exercise price. To the extent permitted by the Administrator, and subject to such procedures as the Administrator may specify, the payment of the exercise price of Options may be made by (w) delivery of cash or other Shares or other securities of the Company (including by attestation) having a then Fair Market Value equal to the purchase price of such Shares, (x) by delivery (including by fax) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions to a broker-dealer to sell or margin a sufficient portion of the Shares and deliver the sale or margin loan proceeds directly to the Company to pay for the exercise price, (y) by surrendering the right to receive Shares otherwise deliverable to the Participant upon exercise of the Award having a Fair Market Value at the time of exercise equal to the total exercise price, or (z) by any combination of (w), (x) and/or (y). Except to the extent otherwise set forth in an Award agreement, a Participant shall have no rights as a holder of Stock as a result of the grant of an Option until the Option is exercised, the exercise price and applicable withholding taxes are paid and the Shares subject to the Option are issued thereunder.

 

8.      Restricted Stock Units and Performance Share Units.  Subject to the terms of this Plan, the Administrator will determine all terms and conditions of each award of Restricted Stock Units and Performance Share Units, including but not limited to: (a) the grant date, which shall be a single date of the Administrator’s choosing for all Awards under the Plan; (b) the number of Shares and/or units to which such Award relates; (c) the Performance Goals, if any, that must be achieved during such period as the Administrator specifies to earn the Award; (d) the length of the vesting and/or performance period; (e) whether such Restricted Stock Units or  Performance Share Units will be settled in Shares, cash or a combination thereof; and (f) the date on which payment of the benefit provided under the Award will be made.

 

9.      Transferability .    Awards are not transferable other than by will or the laws of descent and distribution, unless and to the extent the Administrator allows a Participant to: (a) designate in writing a beneficiary to exercise the Award or receive payment under the Award after the Participant’s death; (b) transfer an Award to the former spouse of the Participant as required by a domestic relations order incident to a divorce; or (c) transfer an Award; provided, however, that with respect to clause (c) above the Participant may not receive consideration for such a transfer of an Award.

 

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10.   Termination and Amendment of Plan; Amendment, Modification or Cancellation of Awards.

 

(a)   Term of Plan . Unless the Board earlier terminates this Plan pursuant to Section 10(b), this Plan will terminate when all Awards granted hereunder have been settled, forfeited or otherwise terminated.

 

(b)   Termination and Amendment . The Board or the Administrator may amend, alter, suspend, discontinue or terminate this Plan at any time, subject to the following limitations:

 

(i)            the Board must approve any amendment of this Plan to the extent the Company determines such approval is required by: (A) prior action of the Board,  (B) applicable corporate law, or (C) any other applicable law;

 

(ii)           shareholders must approve any amendment of this Plan (which may include an amendment to materially increase any number of Shares specified in Section 6(a), except as permitted by Section 12) to the extent the Company determines such approval is required by: (A) Section 16 of the Exchange Act, (B) the Code, (C) the listing requirements of any principal securities exchange or market on which the Shares are then traded, or (D) any other applicable law; and

 

(iii)          shareholders must approve an amendment that would diminish the protections afforded by Section 10(e).

 

(c)           Amendment, Modification, Cancellation and Disgorgement of Awards .

 

(i)            Except as provided in Section 10(e) and subject to the requirements of this Plan, the Administrator may modify, amend or cancel any Award, or waive any restrictions or conditions applicable to any Award or the exercise of the Award; provided that, except as otherwise provided in the Plan or the Award agreement, any modification or amendment that materially diminishes the rights of the Participant, or the cancellation of an Award, shall be effective only if agreed to by the Participant or any other person(s) as may then have an interest in such Award, but the Administrator need not obtain Participant (or other interested party) consent for the modification, amendment or cancellation of an Award pursuant to the provisions of subsection (ii) or Section 12 or as follows: (A) to the extent the Administrator deems such action necessary to comply with any applicable law or the listing requirements of any principal securities exchange or market on which the Shares are then traded; (B) to the extent the Administrator deems necessary to preserve favorable accounting or tax treatment of any Award for the Company; or (C) to the extent the Administrator determines that such action does not materially and adversely affect the value of an Award or that such action is in the best interest of the affected Participant (or any other person(s) as may then have an interest in the Award). Notwithstanding the foregoing, unless determined otherwise by the Administrator, any such amendment shall be made in a manner that will enable an Award intended to be exempt from Code Section 409A to continue to be so exempt, or to enable an Award intended to comply with Code Section 409A to continue to so comply.

 

(ii)           Notwithstanding anything to the contrary in an Award agreement, the Administrator shall have full power and authority to terminate or cause the Participant to forfeit the Award, and require the Participant to disgorge to the Company any gains attributable to the Award, if the Participant engages in any action constituting, as determined by the Administrator in its discretion, Cause for termination, or a breach of any Award agreement or any other agreement between the Participant and the

 

6



 

Company or an Affiliate concerning noncompetition, nonsolicitation, confidentiality, trade secrets, intellectual property, nondisparagement or similar obligations.

 

(iii)          Any Awards granted pursuant to this Plan, and any Stock issued or cash paid pursuant to an Award, shall be subject to any recoupment or clawback policy that is adopted by, or any recoupment or similar requirement otherwise made applicable by law, regulation or listing standards to, the Company from time to time.

 

(d)   Survival of Authority and Awards . Notwithstanding the foregoing, the authority of the Board and the Administrator under this Section 10 and to otherwise administer the Plan with respect to then-outstanding Awards will extend beyond the date of this Plan’s termination. In addition, termination of this Plan will not affect the rights of Participants with respect to Awards previously granted to them, and all unexpired Awards will continue in force and effect after termination of this Plan except as they may lapse or be terminated by their own terms and conditions.

 

(e)   Repricing and Backdating Prohibited . Notwithstanding anything in this Plan to the contrary, and except for the adjustments provided for in Section 12, neither the Administrator nor any other person may (i) amend the terms of outstanding Options to reduce the exercise price of such outstanding Options; (ii) cancel outstanding Options in exchange for Options with an exercise price that is less than the exercise price of the original Options; or (iii) cancel outstanding Options with an exercise price above the current Fair Market Value of a Share in exchange for cash or other securities. In addition, the Administrator may not make a grant of an Option with a grant date that is effective prior to the date the Administrator takes action to approve such Award.

 

11.   Taxes .

 

(a)   Withholding . In the event the Company or one of its Affiliates is required to withhold any Federal, state or local taxes or other amounts in respect of any income recognized by a Participant as a result of the grant, vesting, payment or settlement of an Award or disposition of any Shares acquired under an Award, the Company may deduct (or require an Affiliate to deduct) from any payments of any kind otherwise due the Participant cash, or with the consent of the Administrator, Shares otherwise deliverable or vesting under an Award, to satisfy such tax or other obligations. Alternatively, the Company or its Affiliate may require such Participant to pay to the Company or its Affiliate, in cash, promptly on demand, or make other arrangements satisfactory to the Company or its Affiliate regarding the payment to the Company or its Affiliate of the aggregate amount of any such taxes and other amounts. If Shares are deliverable upon exercise or payment of an Award, then the Administrator may permit a Participant to satisfy all or a portion of the Federal, state and local withholding tax obligations arising in connection with such Award by electing to (i) have the Company or its Affiliate withhold Shares otherwise issuable under the Award, (ii) tender back Shares received in connection with such Award or (iii) deliver other previously owned Shares, in each case having a Fair Market Value equal to the amount to be withheld; provided that the amount to be withheld may not exceed the total minimum federal, state and local tax withholding obligations associated with the transaction to the extent needed for the Company and its Affiliates to avoid an accounting charge until Accounting Standards Update 2016-09 applies to the Company, after which time the amount to be withheld may not exceed the total maximum statutory tax rates associated with the transaction. If an election is provided, the election must be made on or before the date as of which the amount of tax to be withheld is determined and otherwise as the Administrator

 

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requires. In any case, the Company and its Affiliates may defer making payment or delivery under any Award if any such tax may be pending unless and until indemnified to its satisfaction.

 

(b)          No Guarantee of Tax Treatment . Notwithstanding any provisions of this Plan to the contrary, the Company does not guarantee to any Participant or any other Person with an interest in an Award that (i) any Award intended to be exempt from Code Section 409A shall be so exempt, (ii) any Award intended to comply with Code Section 409A shall so comply, or (iii) any Award shall otherwise receive a specific tax treatment under any other applicable tax law, nor in any such case will the Company or any Affiliate be required to indemnify, defend or hold harmless any individual with respect to the tax consequences of any Award.

 

12.        Adjustment and Change of Control Provisions.

 

(a)          Adjustment of Shares . If (i) the Company shall at any time be involved in a merger or other transaction in which the Shares are changed or exchanged; (ii) the Company shall subdivide or combine the Shares or the Company shall declare a dividend payable in Shares, other securities (other than stock purchase rights issued pursuant to a shareholder rights agreement) or other property; (iii) the Company shall effect a cash dividend the amount of which, on a per Share basis, exceeds ten percent (10%) of the Fair Market Value of a Share at the time the dividend is declared, or the Company shall effect any other dividend or other distribution on the Shares in the form of cash, or a repurchase of Shares, that the Board determines by resolution is special or extraordinary in nature or that is in connection with a transaction that the Company characterizes publicly as a recapitalization or reorganization involving the Shares; or (iv) any other event shall occur, which, in the case of this clause (iv), in the judgment of the Administrator necessitates an adjustment to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, then the Administrator shall, in such manner as it may deem equitable to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, adjust any or all of: (A) the number and type of Shares subject to this Plan (including the number and type of Shares described in Section 6(a)) and which may after the event be made the subject of Awards; (B) the number and type of Shares subject to outstanding Awards; (C) the exercise price with respect to any Award; and (D) the Performance Goals of an Award. In any such case, the Administrator may also (or in lieu of the foregoing) make provision for a cash payment to the holder of an outstanding Award in exchange for the cancellation of all or a portion of the Award (without the consent of the holder of an Award) in an amount determined by the Administrator effective at such time as the Administrator specifies (which may be the time such transaction or event is effective). Further, the number of Shares subject to any Award payable or denominated in Shares must always be a whole number. In any event, previously granted Options are subject to only such adjustments as are necessary to maintain the relative proportionate interest the Options represented immediately prior to any such event and to preserve, without exceeding, the value of such Options.

 

Without limitation, in the event of any reorganization, merger, consolidation, combination or other similar corporate transaction or event, whether or not constituting a Change of Control (other than any such transaction in which the Company is the continuing corporation and in which the outstanding Stock is not being converted into or exchanged for different securities, cash or other property, or any combination thereof), the Administrator may substitute, on an equitable basis as the Administrator determines, for each Share then subject to an Award and the Shares subject to this Plan (if the Plan will continue in effect), the number and kind of shares of stock, other securities, cash or other property to which holders of Stock are or will be entitled in respect of each Share pursuant to the transaction.

 

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Notwithstanding the foregoing, in the case of a stock dividend (other than a stock dividend declared in lieu of an ordinary cash dividend) or subdivision or combination of the Shares (including a reverse stock split), if no action is taken by the Administrator, adjustments contemplated by this subsection that are proportionate shall nevertheless automatically be made as of the date of such stock dividend or subdivision or combination of the Shares.

 

(b)          Issuance or Assumption . Notwithstanding any other provision of this Plan, and without affecting the number of Shares otherwise reserved or available under this Plan, in connection with any merger, consolidation, acquisition of property or stock, or reorganization, the Administrator may authorize the issuance or assumption of awards under this Plan upon such terms and conditions as it may deem appropriate.

 

(c)           Effect of Change of Control and Termination of Employment . The Administrator may designate in the agreement representing an Award the effect of a Change of Control or the termination of the Participant’s employment upon such Award.  To the extent such agreement does not address the effect of a Change of Control or termination of the Participant’s employment, the Administrator may determine the effect (if any) in its discretion upon such Change of Control or termination of employment.  Notwithstanding anything to the contrary in this Plan or an Award agreement, upon a Change of Control, the Administrator may elect to cancel some or all Awards that are outstanding upon the date of such Change of Control, whether or not then vested, in exchange for cash or property equal to the Fair Market Value of such cancelled Awards, as determined by the Administrator in its discretion; provided that Options the exercise price per Share of which exceeds the Fair Market Value of a Share in the Change of Control may be cancelled for no payment.

 

(d)          Application of Limits on Payments .

 

(i)                                      Determination of Cap or Payment . Except to the extent the Participant has in effect an employment or similar agreement with the Company or any Affiliate or is subject to a policy that provides for a more favorable result to the Participant upon a Change of Control, if any payments or benefits paid by the Company pursuant to this Plan, including any accelerated vesting or similar provisions (“Plan Payments”), would cause some or all of the Plan Payments in conjunction with any other payments made to or benefits received by a Participant in connection with a Change of Control (such payments or benefits, together with the Plan Payments, the “Total Payments”) to be subject to the tax (“Excise Tax”) imposed by Code Section 4999 but for this Section 12(d), then, notwithstanding any other provision of this Plan to the contrary, the Total Payments shall be delivered either (A) in full or (B) in an amount such that the value of the aggregate Total Payments that the Participant is entitled to receive shall be One Dollar ($1.00) less than the maximum amount that the Participant may receive without being subject to the Excise Tax, whichever of (A) or (B) results in the receipt by the Participant of the greatest benefit on an after-tax basis (taking into account applicable federal, state and local income taxes and the Excise Tax).

 

(ii)                                   Procedures .

 

(A)        If a Participant or the Company believes that a payment or benefit due the Participant will result in some or all of the Total Payments being subject to the Excise Tax, then the Company, at its expense, shall obtain the opinion (which need not be unqualified) of nationally recognized tax counsel (“National Tax Counsel”) selected by the

 

9



 

Company (which may be regular outside counsel to the Company), which opinion sets forth (1) the amount of the Base Period Income (as defined below), (2) the amount and present value of the Total Payments, (3) the amount and present value of any excess parachute payments determined without regard to any reduction of Total Payments pursuant to Section 12(d)(i), and (4) the net after-tax proceeds to the Participant, taking into account applicable federal, state and local income taxes and the Excise Tax if (x) the Total Payments were delivered in accordance with Section 12(d)(i)(A) or (y) the Total Payments were delivered in accordance with Section 12(d)(i)(B). The opinion of National Tax Counsel shall be addressed to the Company and the Participant and shall be binding upon the Company and the Participant. If such National Tax Counsel opinion determines that Section 12(d)(i)(B) applies, then the Plan Payments or any other payment or benefit determined by such counsel to be includable in the Total Payments shall be reduced or eliminated so that under the bases of calculations set forth in such opinion there will be no excess parachute payment. In such event, payments or benefits included in the Total Payments shall be reduced or eliminated by applying the following principles, in order: (1) the payment or benefit with the higher ratio of the parachute payment value to present economic value (determined using reasonable actuarial assumptions) shall be reduced or eliminated before a payment or benefit with a lower ratio; (2) the payment or benefit with the later possible payment date shall be reduced or eliminated before a payment or benefit with an earlier payment date; and (3) cash payments shall be reduced prior to non-cash benefits; provided that if the foregoing order of reduction or elimination would violate Code Section 409A, then the reduction shall be made pro rata among the payments or benefits included in the Total Payments (on the basis of the relative present value of the parachute payments).

 

(B)        For purposes of this Section 12: (1) the terms “excess parachute payment” and “parachute payments” shall have the meanings given in Code Section 280G and such “parachute payments” shall be valued as provided therein; (2) present value shall be calculated in accordance with Code Section 280G(d)(4); (3) the term “Base Period Income” means an amount equal to the Participant’s “annualized includible compensation for the base period” as defined in Code Section 280G(d)(1); (4) for purposes of the opinion of National Tax Counsel, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company’s independent auditors in accordance with the principles of Code Sections 280G(d)(3) and (4); and (5) the Participant shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income and employment taxation, and state and local income taxes at the highest marginal rate of taxation in the state or locality of the Participant’s domicile, net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes.

 

(C)        If National Tax Counsel so requests in connection with the opinion required by this Section 12(d)(ii), the Company shall obtain, at the Company’s expense, and the National Tax Counsel may rely on, the

 

10



 

advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by the Participant solely with respect to its status under Code Section 280G.

 

(D)        The Company agrees to bear all costs associated with, and to indemnify and hold harmless the National Tax Counsel from, any and all claims, damages and expenses resulting from or relating to its determinations pursuant to this Section 12, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of such firm.

 

(E)         This Section 12 shall be amended to comply with any amendment or successor provision to Code Section 280G or Code Section 4999. If such provisions are repealed without successor, then this Section 12 shall be cancelled without further effect.

 

13.        Miscellaneous.

 

(a)          Other Terms and Conditions . The Administrator may provide in any Award agreement such other provisions (whether or not applicable to the Award granted to any other Participant) as the Administrator determines appropriate to the extent not otherwise prohibited by the terms of the Plan.

 

(b)          Employment and Service . The issuance of an Award shall not confer upon a Participant any right with respect to continued employment or service with the Company or any Affiliate. Unless determined otherwise by the Administrator, for purposes of the Plan and all Awards, the following rules shall apply:

 

(i)                                      a Participant who transfers employment between the Company and its Affiliates, or between Affiliates, will not be considered to have terminated employment;

 

(ii)                                   a Participant who ceases to be employed by the Company or an Affiliate and immediately thereafter becomes a Non-Employee Director, a non-employee director of an Affiliate, or a consultant to the Company or any Affiliate shall not be considered to have terminated employment until such Participant’s service as a director of, or consultant to, the Company and its Affiliates has ceased; and

 

(iii)                                a Participant employed by an Affiliate will be considered to have terminated employment when such entity ceases to be an Affiliate.

 

Notwithstanding the foregoing, for purposes of an Award that is subject to Code Section 409A, if a Participant’s termination of employment or service triggers the payment of compensation under such Award, then the Participant will be deemed to have terminated employment or service upon his or her “separation from service” within the meaning of Code Section 409A. Notwithstanding any other provision in this Plan or an Award to the contrary, if any Participant is a “specified employee” within the meaning of Code Section 409A as of the date of his or her “separation from service” within the meaning of Code Section 409A, then, to the extent required by Code Section 409A, any payment made to the Participant on account of such separation from service shall not be made before a date that is six months after the date of the separation from service.

 

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(c)           No Fractional Shares . No fractional Shares or other securities may be issued or delivered pursuant to this Plan, and the Administrator may determine whether cash, other securities or other property will be paid or transferred in lieu of any fractional Shares or other securities, or whether such fractional Shares or other securities or any rights to fractional Shares or other securities will be canceled, terminated or otherwise eliminated.

 

(d)          Unfunded Plan; Awards Not Includable for Benefits Purposes . This Plan is unfunded and does not create, and should not be construed to create, a trust or separate fund with respect to this Plan’s benefits. This Plan does not establish any fiduciary relationship between the Company and any Participant or other person. To the extent any person holds any rights by virtue of an Award granted under this Plan, such rights are no greater than the rights of the Company’s general unsecured creditors. Income recognized by a Participant pursuant to an Award shall not be included in the determination of benefits under any employee pension benefit plan (as such term is defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended) or group insurance or other benefit plans applicable to the Participant which are maintained by the Company or any Affiliate, except as may be provided under the terms of such plans or determined by resolution of the Board.

 

(e)           Requirements of Law and Securities Exchange . The granting of Awards and the issuance of Shares in connection with an Award are subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required. Notwithstanding any other provision of this Plan or any award agreement, the Company has no liability to deliver any Shares under this Plan or make any payment unless such delivery or payment would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity, and unless and until the Participant has taken all actions required by the Company in connection therewith. The Company may impose such restrictions on any Shares issued under the Plan as the Company determines necessary or desirable to comply with all applicable laws, rules and regulations or the requirements of any national securities exchanges.

 

(f)            Governing Law; Venue . This Plan, and all agreements under this Plan, will be construed in accordance with and governed by the laws of the State of Delaware, without reference to any conflict of law principles. Any legal action or proceeding with respect to this Plan, any Award or any award agreement, or for recognition and enforcement of any judgment in respect of this Plan, any Award or any award agreement, may only be brought and determined in (i) a court sitting in the State of Texas, and (ii) a “bench” trial, and any party to such action or proceeding shall agree to waive its right to a jury trial.

 

(g)           Limitations on Actions . Any legal action or proceeding with respect to this Plan, any Award or any award agreement, must be brought within one year (365 days) after the day the complaining party first knew or should have known of the events giving rise to the complaint.

 

(h)          Construction . Whenever any words are used herein in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are used in the singular or plural, they shall be construed as though they were used in the plural or singular, as the case may be, in all cases where they would so apply. Titles of sections are for general information only, and this Plan is not to be construed with reference to such titles.

 

(i)              Severability . If any provision of this Plan or any award agreement or any Award (a) is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any

 

12



 

person or Award, or (b) would cause this Plan, any award agreement or any Award to violate or be disqualified under any law the Administrator deems applicable, then such provision should be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Administrator, materially altering the intent of this Plan, award agreement or Award, then such provision should be stricken as to such jurisdiction, person or Award, and the remainder of this Plan, such award agreement and such Award will remain in full force and effect.

 

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Exhibit 10.2

 

HANGER, INC.

Non-Qualified Stock Option Agreement for Executives

 

THIS AGREEMENT (this “Agreement”) is made as by and between HANGER, INC., a Delaware corporation (the “Company”), and the optionee (“Optionee”) identified on the Company’s online electronic list of persons to whom an option has been granted by the Company.

 

WHEREAS, the Company desires to grant to Optionee a non-qualified stock option under the Company’s Special Equity Plan (the “Plan”) to purchase shares of the Company’s common stock, par value $.01 per share (the “Common Stock”), in consideration for the Optionee’s service to the Company.

 

NOW, THEREFORE, the parties hereto, intending to be legally bound, do agree as follows:

 

1.             Grant of Option .  Subject to the terms and conditions of this Agreement and the Plan, the Company hereby grants to Optionee the right and option to purchase from the Company all or part of the number of shares of Common Stock as set forth on the Company’s online electronic list as being granted to the Optionee effective as of the date shown on the Company’s online electronic list as being the date of grant to the Optionee (the “Grant Date”).  This option is not intended to constitute an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

 

2.             Option Price and Time of Exercise .  The per-share purchase price at which the shares subject to option hereunder may be purchased by Optionee pursuant to his exercise of this option shall be the Fair Market Value of a share of Common Stock on the Grant Date.  The Optionee’s right to exercise this option shall vest as to one-third (1/3) of the shares of Common Stock underlying the option at the end of each of the first three (3) years following the Grant Date.  The right to exercise the option shall be cumulative to the extent not theretofore exercised.  The option shall also vest at such times and in such amounts as is required by the terms of Optionee’s employment agreement with the Company and shall become exercisable in full upon a Change of Control if the Optionee remains employed until the Change of Control.  The right to exercise the option shall in all events expire, except as provided in Paragraph 5 below, on the tenth anniversary of the Grant Date (the “Grant Expiration Date”).

 

3.             Method of Exercise and Payment for Shares .  This option shall be exercised by the methods set forth in the instructions relating thereto as contained on the Company’s online website from which the Optionee has received notice as to the grant of this option by the Company to the Optionee.  No fractional shares of Common Stock shall be issued pursuant to the grant of this option, but in lieu therefore, the cash value of such fraction shall be paid.

 

4.             Non-transferability .  This option is not transferable by Optionee except as otherwise provided in Paragraph 5 below, and during Optionee’s lifetime is exercisable only by him.

 

5.             Exercise After Death or Termination of Service to the Company . In the event

 



 

of termination of the employment of Optionee with the Company and its Affiliates by reason of total and permanent disability or death, termination of employment by the Company without “Cause” or retirement (as defined by Optionee’s Employment Agreement with the Company), this option shall become fully vested and exercisable with respect to all of the shares of Common Stock subject to this option upon such termination of employment and shall remain exercisable until twelve (12) months following such termination (and may be exercisable by Optionee’s estate in the event of a termination as a result of death); provided that in no event shall the option be exercisable after the Grant Expiration Date.  Upon the expiration of the foregoing exercise period, or immediately upon a termination of employment for Cause or a voluntary resignation (other than retirement), any portion of the option that has not been exercised shall be forfeited and cancelled.  Notwithstanding the foregoing, to the extent the Optionee’s Employment Agreement provides for terms relating to vesting and exercisability that are more favorable to the Optionee upon a termination of employment, such terms shall apply.

 

6.             Limitation of Rights .

 

(a)           No Right to Continue as an Employee .  Neither the Plan nor the grant of the option shall constitute or be evidence of any agreement or understanding, express or implied, that the Optionee has a right to continue as an employee of the Company or any of its Affiliates for any period of time, or at any particular rate of compensation.

 

(b)           No Stockholder’s Rights for Options .  The Optionee shall have no rights as a stockholder with respect to the shares covered by this option until the date of the issuance of a stock certificate therefor, and no adjustment will be made for any dividends or other rights for which the record date is prior to the date such certificate is issued.

 

(c)           Restrictions on Sales of Shares .  By accepting the grant of this option, the Optionee agrees not to sell any shares of Common Stock acquired upon exercise of this option other than as set forth in the Plan and at a time when applicable laws, Company policies or an agreement between the Company and its underwriters do not prohibit a sale.

 

7.             Taxes .  The Optionee (and not the Company or any Affiliate) shall be responsible for the Optionee’s federal, state, local or foreign tax liability and any of the Optionee’s other tax consequences that may arise as a result of the transactions contemplated by this Agreement.  The Optionee shall rely solely on the determinations of the Optionee’s own tax advisors or the Optionee’s own determinations, and not on any statements or representations by the Company or any of its agents, with regard to all such tax matters.  To the extent that the receipt, vesting or exercise of this option, or other event, results in income to the Optionee for federal, state or local income tax purposes, the Optionee shall deliver to the Company or its Affiliate at the time the Company or its Affiliate is obligated to withhold taxes in connection with such receipt, vesting, exercise or other event, as the case may be, such amount as the Company or its Affiliate requires to meet its withholding obligation under applicable tax laws or regulations, and if the Optionee fails to do so, the Company shall not be obligated to deliver any shares of Common Stock to the Optionee and shall have the right and authority to deduct or withhold from other compensation payable to the Optionee an amount sufficient to satisfy its withholding obligations.

 



 

8.             Incorporation by Reference .  The terms of the Plan to the extent not stated herein are expressly incorporated herein by reference and in the event of any conflict between this Agreement and the Plan, the terms of the Plan shall govern, control and supersede over the provisions of this Agreement.  Capitalized terms used in this Agreement and not defined shall have the meanings given in the Plan.

 

All of the terms and conditions of this Agreement are hereby confirmed, ratified, approved and accepted by the Company and by the Optionee, who has accepted this Agreement and its terms pursuant to Optionee’s electronic submission of Optionee’s confirmation of this Agreement in accordance with the online instructions relating thereto as set forth on the Company’s online website relating to options.

 


Exhibit 10.3

 

HANGER, INC.

Non-Qualified Stock Option Agreement for Employees

 

THIS AGREEMENT (this “Agreement”) is made by and between HANGER, INC., a Delaware corporation (the “Company”), and the optionee (“Optionee”) identified on the Company’s online electronic list of persons to whom an option has been granted by the Company.

 

W I T N E S S E T H :

 

WHEREAS, the Company desires to grant to Optionee a non-qualified stock option under the Company’s Special Equity Plan (the “Plan”) to purchase shares of the Company’s common stock, par value $.01 per share (the “Common Stock”), in consideration for Optionee’s service to the Company.

 

NOW, THEREFORE, the parties hereto, intending to be legally bound, do agree as follows:

 

1.             Grant of Option .  Subject to the terms and conditions of this Agreement and the Plan, the Company hereby grants to Optionee the right and option to purchase from the Company all or part of the number of shares of Common Stock as set forth on the Company’s online electronic list as being granted to the Optionee effective as of the date shown on the Company’s online electronic list as being the date of grant to the Optionee (the “Grant Date”).  This option is not intended to constitute an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

 

2.             Option Price and Time of Exercise .  The per-share purchase price at which the shares subject to option hereunder may be purchased by Optionee pursuant to the exercise of this option shall be the Fair Market Value of a share of Common Stock on the Grant Date.  Optionee’s right to exercise this option shall vest as to one-third (1/3) of the shares of Common Stock underlying the option at the end of each of the first three (3) years following the Grant Date.  The right to exercise this option shall be cumulative to the extent not theretofore exercised.  The option shall also become exercisable at such times and in such amounts as is required by the terms of Optionee’s employment agreement with the Company, if any, and shall become exercisable in full upon a Change of Control if the Optionee remains employed until the Change of Control.  The right to exercise the option shall in all events expire, except as provided in Paragraph 5 below, on the day preceding the tenth anniversary of the Grant Date (the “Grant Expiration Date”).

 

3.             Method of Exercise and Payment for Shares .  This option shall be exercised by the methods set forth in the instructions relating thereto as contained on the online website from which the Optionee has received notice as to the grant of this option by the Company to the Optionee.  No fractional shares of Common Stock shall be issued pursuant to the grant of this option, but in lieu therefore, the cash value of such fraction shall be paid.

 

4.             Non-transferability .  This option is not transferable by Optionee except as otherwise provided in Paragraph 5 below, and during Optionee’s lifetime is exercisable only by Optionee.

 



 

5.             Exercise After Death or Termination of Service to the Company .  In the event Optionee dies before the expiration of this option, Optionee’s estate, or the person or persons to whom Optionee’s rights under this option shall pass by will or the laws of descent and distribution, may exercise this option, to the extent exercisable at the date of death, at any time within six (6) months following Optionee’s death (but in any event before the Grant Expiration Date).  In the event that the Optionee’s employment is terminated as a result of the Optionee’s permanent and total disability (as determined under the terms of the Company’s long term disability plan), the Optionee may exercise this option, to the extent exercisable on the date of such termination, at any time within six (6) months following such termination (but in any event before the Grant Expiration Date).  In the event Optionee ceases to be employed by the Company or an Affiliate by reason of termination of employment other than for Cause (as defined in the Plan), other than for permanent or total disability or other than for the voluntary termination of employment by Optionee, the Optionee may exercise this option, to the extent exercisable on the date of such termination of employment, at any time within thirty (30) days following the date of such termination of employment (but in any event before the Grant Expiration Date).  If Optionee’s employment is otherwise terminated for Cause or by reason of the voluntary termination of employment by Optionee, this option shall immediately terminate on the date of such termination of employment.

 

6.             Limitation of Rights .

 

(a)           No Right to Continue as an Employee .  Neither the Plan nor the grant of the option shall constitute or be evidence of any agreement or understanding, express or implied, that the Optionee has a right to continue as an employee of the Company or any of its Affiliates for any period of time, or at any particular rate of compensation.

 

(b)           No Stockholder’s Rights for Options .  The Optionee shall have no rights as a stockholder with respect to the shares covered by this option until the date of the issuance of a stock certificate therefor, and no adjustment will be made for any dividends or other rights for which the record date is prior to the date such certificate is issued.

 

(c)           Restrictions on Sales of Shares .  By accepting the grant of this option, the Optionee agrees not to sell any shares of Common Stock acquired upon exercise of this option other than as set forth in the Plan and at a time when applicable laws, Company policies or an agreement between the Company and its underwriters do not prohibit a sale.

 

7.             Taxes .  The Optionee (and not the Company or any Affiliate) shall be responsible for the Optionee’s federal, state, local or foreign tax liability and any of the Optionee’s other tax consequences that may arise as a result of the transactions contemplated by this Agreement.  The Optionee shall rely solely on the determinations of the Optionee’s own tax advisors or the Optionee’s own determinations, and not on any statements or representations by the Company or any of its agents, with regard to all such tax matters.  To the extent that the receipt, vesting or exercise of this option, or other event, results in income to the Optionee for federal, state or local income tax purposes, the Optionee shall deliver to the Company or its Affiliate at the time the Company or its Affiliate is obligated to withhold taxes in connection with such receipt, vesting,

 



 

exercise or other event, as the case may be, such amount as the Company or its Affiliate requires to meet its withholding obligation under applicable tax laws or regulations, and if the Optionee fails to do so, the Company shall not be obligated to deliver any shares of Common Stock to the Optionee and shall have the right and authority to deduct or withhold from other compensation payable to the Optionee an amount sufficient to satisfy its withholding obligations.

 

8.             Incorporation by Reference .  The terms of the Plan to the extent not stated herein are expressly incorporated herein by reference and in the event of any conflict between this Agreement and the Plan, the terms of the Plan shall govern, control and supersede over the provisions of this Agreement.  Capitalized terms used in this Agreement and not defined shall have the meanings given in the Plan.

 

All of the terms and conditions of this Agreement are hereby confirmed, ratified, approved and accepted by the Company and by the Optionee, who has accepted this Agreement and its terms pursuant to Optionee’s electronic submission of Optionee’s confirmation of this Agreement in accordance with the instructions contained on the online website maintained for the benefit of the Company for options.

 


Exhibit 10.4

 

HANGER, INC.

Performance Share Unit Agreement for Executives

 

THIS AGREEMENT (this “Agreement”) is made by and between HANGER, INC., a Delaware corporation (the “Company”), and the employee (“Employee”) identified on the Company’s online electronic list of persons to whom a grant of Performance Share Units has been made by the Company.

 

W I T N E S S E T H :

 

WHEREAS, the Company desires to award to the Employee Performance Share Units relating to the Company’s common stock, par value $.01 per share (the “Common Stock”), under the Company’s Special Equity Plan (the “Plan”) in consideration for the Employee’s service to the Company and its Affiliates.

 

NOW, THEREFORE, the parties hereto, intending to be legally bound, do agree as follows:

 

1.                                       Award of Performance Share Units .   Subject to the terms and conditions of this Agreement and the Plan, the Employee is granted Performance Share Units relating to the number of shares of Common Stock as set forth on the Company’s online electronic list as being granted to the Employee (hereinafter such units are referred to as the “Target Performance Share Units”) as of the date shown on the Company’s online electronic list as being the date of grant to the Employee (the “Grant Date”).

 

2.                                       Performance Share Units Non-Assignable and Non-Transferable .  Each Performance Share Unit and all rights under this Agreement shall be non-assignable and non-transferable other than by will or the laws of descent and distribution in accordance with the Plan and may not be sold, pledged, hypothecated, assigned or transferred, except only as to such shares of Common Stock, if any, which have been issued in settlement of the Performance Share Units upon vesting pursuant to the terms of the Plan and this Agreement.  The foregoing prohibition against transfer or assignment, together with the obligation to forfeit the Performance Share Units upon (i) termination of service with the Company and/or its Affiliates as set forth in Section 3 of this Agreement, (ii) failure to achieve the performance goal set forth in Section 4 of this Agreement and/or (iii) a breach by Employee of the confidentiality provisions as set forth in Section 10 of this Agreement, are herein collectively referred to as the “Forfeiture Restrictions.”  The Forfeiture Restrictions shall be binding upon and enforceable against any transferee of the Performance Share Units.

 

3.                                       Termination of Employment.   In the event of the Employee’s termination of employment with the Company and its Affiliates prior to the date shares of Common Stock are issued in settlement of any Performance Share Units (i) by reason of total and permanent disability (within the meaning of Code Section 409A) or death, (ii) by the Company without “Cause” (as defined by the Employee’s Employment Agreement with the Company), or (iii) by reason of “Retirement” (as defined by Employee’s Employment Agreement with the Company), the Employee shall remain eligible to become vested in the Performance Share Units in accordance with Section 4 of this Agreement.  In the event of the Employee’s termination of employment

 



 

with the Company and its Affiliates prior to the date shares of Common Stock are issued in settlement of any Performance Share Units (i) by the Employee for any reason other than Retirement or (ii) by the Company for Cause, all Performance Share Units shall be forfeited and cancelled as of the date of such termination of employment.  Notwithstanding the foregoing, to the extent the Employee’s Employment Agreement provides for more favorable treatment to the Employee upon a termination of employment, the Employment Agreement shall govern the treatment of the Performance Share Units.

 

4.                                       Vesting of Performance Share Units.   Subject to Section 3, the Employee may vest in up to the maximum number of Performance Share Units listed below on the third anniversary of the Grant Date based on the level of achievement of the 3-year absolute Common Stock price compounded annual growth rate (“CAGR”).  The percentage of Performance Share Units that vest will be interpolated on a linear basis for CAGR results between the Threshold and Target and Target and Maximum.  If achievement is below the Threshold level, no Performance Share Units will vest. The achievement of the 3-year CAGR and the number of Performance Share Units that vest shall be determined by the Committee.

 

 

 

CAGR Result on 3 rd
Anniversary of Grant Date

 

Percent of Target Performance
Share Units that Vest

Threshold

 

10%

 

50%

Target

 

20%

 

100%

Maximum

 

30% or above

 

200%

 

5.                                       Issuance of Shares .  As soon as practicable (but not more than thirty (30) days) after Performance Share Units vest under this Agreement (subject to any six-month delay to the extent required to comply with the provisions of Code Section 409A applicable to specified employees), the Company shall issue a number of shares of Common Stock to the Employee equal to the number of Performance Share Units that have vested.  The Company shall issue a certificate or certificates evidencing such shares of Common Stock in the name of the Employee or shall make an appropriate book entry.

 

6.                                       Change of Control . If a Change of Control occurs prior to the settlement of the Performance Share Units, then the Performance Share Units shall be treated as provided in Employee’s Employment Agreement with the Company, or, if (a) the Employee does not have an Employment Agreement or (b) the Employee’s Employment Agreement does not address the treatment of the Performance Share Units on the Change of Control, then the Target Performance Share Units shall vest or, if greater, the number of Performance Share Units corresponding to the performance result calculated as of immediately prior to the Change of Control.  Any Performance Share Units not deemed vested upon the Change of Control shall be cancelled.

 

7.                                       Limitation of Rights .

 

(a)  No Right to Continue as an Employee .  Neither the Plan nor the grant of the Performance Share Units shall constitute or be evidence of any agreement or understanding, express or implied, that the Employee has a right to continue as an employee of the Company or any of its subsidiaries for any period of time, or at any particular rate of compensation.

 



 

(b)  No Stockholder’s Rights as to Performance Share Units .  The Employee shall have no rights as a stockholder with respect to the shares of Common Stock subject to Performance Share Units granted hereunder until the date such shares are issued to the Employee, and no adjustment will be made for any dividends or other rights for which the record date is prior to the date of the vesting of the Performance Share Units.  After Performance Share Units have vested, the Employee will be entitled to receive shares of Common Stock subject to the Performance Share Units that have vested and shall be entitled to receive a payment equal to any dividends or other rights for which the record date is on or after the vesting of the Performance Share Units.

 

(c)  Restrictions on Sales of Shares .  By accepting the grant of the Performance Share Units, the Employee agrees not to sell any shares of Common Stock acquired in connection with the Performance Share Units other than as set forth in the Plan and at a time when applicable laws, Company policies or an agreement between the Company and its underwriters do not prohibit a sale.

 

8.                                       Taxes .  The Employee (and not the Company or any Affiliate) shall be responsible for the Employee’s federal, state, local or foreign tax liability and any of the Employee’s other tax consequences that may arise as a result of the transactions contemplated by this Agreement.  The Employee shall rely solely on the determinations of the Employee’s own tax advisors or the Employee’s own determinations, and not on any statements or representations by the Company or any of its agents, with regard to all such tax matters.  To the extent that the receipt, vesting or settlement of the Performance Share Units, or other event, results in income to the Employee for federal, state or local income tax purposes, the Employee shall deliver to the Company or its Affiliate at the time the Company or its Affiliate is obligated to withhold taxes in connection with such receipt, vesting, settlement or other event, as the case may be, such amount as the Company or its Affiliate requires to meet its withholding obligation under applicable tax laws or regulations, and if the Employee fails to do so, the Company shall not be obligated to deliver any shares of Common Stock to the Employee and shall have the right and authority to deduct or withhold from other compensation payable to the Employee an amount sufficient to satisfy its withholding obligations.

 

9.                                       Incorporation by Reference.   The terms of the Plan to the extent not stated herein are expressly incorporated herein by reference and in the event of any conflict between this Agreement and the Plan, the terms of the Plan shall govern, control and supersede over the provisions of this Agreement.  Capitalized terms used in this Agreement and not defined shall have the meanings given in the Plan.

 

10.                                Confidentiality.   The Employee acknowledges that the information, observations, data and trade secrets (collectively, “Confidential Information”) obtained or created by him or her during the course of his or her employment with the Company or its Affiliates concerning the business or affairs of the Company or any of its Subsidiaries or Affiliates are the property of the Company.  For purposes of this Agreement, “trade secret” means any method, program or compilation of information which is used in the business of the Company or any of its Subsidiaries or Affiliates, including but not limited to:  (a) techniques, plans and materials used by the Company or any of its Subsidiaries or Affiliates, (b) marketing methods and strategies employed by the Company or any of its Subsidiaries or Affiliates, and (c) all lists of past, present or prospective patients, customers, suppliers and referral sources of the Company or any of its Subsidiaries or Affiliates. 

 



 

The Employee agrees that he or she will not disclose to any unauthorized person or entity nor use for his or her own account any of such Confidential Information without the prior written consent of the Chairman or President of the Company, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of the Employee’s acts or omissions to act or become known to the Employee lawfully outside the scope of his or her employment with the Company or its Affiliates.  The Employee agrees to deliver to the Company at the termination of his or her employment, or at any other time the Company may request, all memoranda, notes, plans, records, reports and other documents (and copies thereof) relating to the business of the Company or any of its Subsidiaries or Affiliates which the Employee may then possess or have under his or her control.

 

All of the terms and conditions of this Agreement are hereby confirmed, ratified, approved and accepted by the Company and by the Employee, who has accepted this Agreement and its terms pursuant to Employee’s electronic submission of Employee’s confirmation of this Agreement in accordance with the instructions contained on the online website maintained for the benefit of the Company for grants of Performance Share Units by the Company.

 


Exhibit 10.5

 

HANGER, INC.

Performance Share Unit Agreement for Employees

 

THIS AGREEMENT (this “Agreement”) is made by and between HANGER, INC., a Delaware corporation (the “Company”), and the employee (“Employee”) identified on the Company’s online electronic list of persons to whom a grant of Performance Share Units has been made by the Company.

 

W I T N E S S E T H :

 

WHEREAS, the Company desires to award to the Employee Performance Share Units relating to the Company’s common stock, par value $.01 per share (the “Common Stock”), under the Company’s Special Equity Plan (the “Plan”) in consideration for the Employee’s service to the Company and its Affiliates.

 

NOW, THEREFORE, the parties hereto, intending to be legally bound, do agree as follows:

 

1.             Award of Performance Share Units .   Subject to the terms and conditions of this Agreement and the Plan, the Employee is granted Performance Share Units relating to the number of shares of Common Stock as set forth on the Company’s online electronic list as being granted to the Employee (hereinafter such units are referred to as the “Target Performance Share Units”) as of the date shown on the Company’s online electronic list as being the date of grant to the Employee (the “Grant Date”).

 

2.             Performance Share Units Non-Assignable and Non-Transferable .  Each Performance Share Unit and all rights under this Agreement shall be non-assignable and non-transferable other than by will or the laws of descent and distribution in accordance with the Plan and may not be sold, pledged, hypothecated, assigned or transferred, except only as to such shares of Common Stock, if any, which have been issued in settlement of the Performance Share Units upon vesting pursuant to the terms of the Plan and this Agreement.  The foregoing prohibition against transfer or assignment, together with the obligation to forfeit the Performance Share Units upon (i) termination of service with the Company and/or its Affiliates as set forth in Section 3 of this Agreement, (ii) failure to achieve the performance goal set forth in Section 4 of this Agreement and/or (iii) a breach by Employee of the confidentiality provisions as set forth in Section 10 of this Agreement, are herein collectively referred to as the “Forfeiture Restrictions.”  The Forfeiture Restrictions shall be binding upon and enforceable against any transferee of the Performance Share Units.

 

3.             Termination of Employment.   In the event of the Employee’s termination of employment with the Company and its Affiliates (i) by reason of total and permanent disability or death at any time prior to the date shares of Common Stock are issued in settlement of any Performance Share Units or (ii) by the Company without Cause on a date that is fewer than ninety (90) days prior to the third anniversary of the Grant Date, the Employee shall remain eligible to become vested in the Performance Share Units in accordance with Section 4 of this Agreement.  In the event of the Employee’s termination of employment with the Company and its Affiliates (i) by

 



 

the Company without Cause on a date that is ninety (90) days or more prior to the third anniversary of the Grant Date, (ii) by the Company for Cause at any time, or (iii) by the Employee prior to the date shares of Common Stock are issued in settlement of the Performance Share Units, all Performance Share Units shall be forfeited and canceled as of the date of such termination of employment.

 

4.   Vesting of Performance Share Units.   Subject to Section 3, the Employee may vest in up to the maximum number of Performance Share Units listed below on the third anniversary of the Grant Date based on the level of achievement of the 3-year absolute Common Stock price compounded annual growth rate (“CAGR”).  The percentage of Performance Share Units that vest will be interpolated on a linear basis for CAGR results between the Threshold and Target and Target and Maximum.  If achievement is below the Threshold level, no Performance Share Units will vest. The achievement of the 3-year CAGR and the number of Performance Share Units that vest shall be determined by the Committee.

 

 

 

CAGR Result on 3 rd
Anniversary of Grant Date

 

Percent of Target Performance
Share Units that Vest

Threshold

 

10%

 

50%

Target

 

20%

 

100%

Maximum

 

30% or above

 

200%

 

5.             Issuance of Shares .  As soon as practicable (but not more than thirty (30) days) after Performance Share Units vest under this Agreement (subject to any six-month delay to the extent required to comply with the provisions of Code Section 409A applicable to specified employees), the Company shall issue a number of shares of Common Stock to the Employee equal to the number of Performance Share Units that have vested.  The Company shall issue a certificate or certificates evidencing such shares of Common Stock in the name of the Employee or shall make an appropriate book entry.

 

6.             Change of Control . If a Change of Control occurs prior to the settlement of the Performance Share Units, then the Performance Share Units shall be treated as provided in Employee’s Employment Agreement with the Company, or, if (a) the Employee does not have an Employment Agreement or (b) the Employee’s Employment Agreement does not address the treatment of the Performance Share Units on the Change of Control, then the Target Performance Share Units shall vest or, if greater, the number of Performance Share Units corresponding to the performance result calculated as of immediately prior to the Change of Control.  Any Performance Share Units not deemed vested upon the Change of Control shall be cancelled.

 

7.             Limitation of Rights .

 

(a)  No Right to Continue as an Employee .  Neither the Plan nor the grant of the Performance Share Units shall constitute or be evidence of any agreement or understanding, express or implied, that the Employee has a right to continue as an employee of the Company or any of its subsidiaries for any period of time, or at any particular rate of compensation.

 

(b)  No Stockholder’s Rights as to Performance Share Units .  The Employee shall have

 



 

no rights as a stockholder with respect to the shares of Common Stock subject to Performance Share Units granted hereunder until the date such shares are issued to the Employee, and no adjustment will be made for any dividends or other rights for which the record date is prior to the date of the vesting of the Performance Share Units.  After Performance Share Units have vested, the Employee will be entitled to receive shares of Common Stock subject to the Performance Share Units that have vested and shall be entitled to receive a payment equal to any dividends or other rights for which the record date is on or after the vesting of the Performance Share Units.

 

(c)  Restrictions on Sales of Shares .  By accepting the grant of the Performance Share Units, the Employee agrees not to sell any shares of Common Stock acquired in connection with the Performance Share Units other than as set forth in the Plan and at a time when applicable laws, Company policies or an agreement between the Company and its underwriters do not prohibit a sale.

 

8.             Taxes .  The Employee (and not the Company or any Affiliate) shall be responsible for the Employee’s federal, state, local or foreign tax liability and any of the Employee’s other tax consequences that may arise as a result of the transactions contemplated by this Agreement.  The Employee shall rely solely on the determinations of the Employee’s own tax advisors or the Employee’s own determinations, and not on any statements or representations by the Company or any of its agents, with regard to all such tax matters.  To the extent that the receipt, vesting or settlement of the Performance Share Units, or other event, results in income to the Employee for federal, state or local income tax purposes, the Employee shall deliver to the Company or its Affiliate at the time the Company or its Affiliate is obligated to withhold taxes in connection with such receipt, vesting, settlement or other event, as the case may be, such amount as the Company or its Affiliate requires to meet its withholding obligation under applicable tax laws or regulations, and if the Employee fails to do so, the Company shall not be obligated to deliver any shares of Common Stock to the Employee and shall have the right and authority to deduct or withhold from other compensation payable to the Employee an amount sufficient to satisfy its withholding obligations.

 

9.             Incorporation by Reference.   The terms of the Plan to the extent not stated herein are expressly incorporated herein by reference and in the event of any conflict between this Agreement and the Plan, the terms of the Plan shall govern, control and supersede over the provisions of this Agreement.  Capitalized terms used in this Agreement and not defined shall have the meanings given in the Plan.

 

10.          Confidentiality.   The Employee acknowledges that the information, observations, data and trade secrets (collectively, “Confidential Information”) obtained or created by him or her during the course of his or her employment with the Company or its Affiliates concerning the business or affairs of the Company or any of its Subsidiaries or Affiliates are the property of the Company.  For purposes of this Agreement, “trade secret” means any method, program or compilation of information which is used in the business of the Company or any of its Subsidiaries or Affiliates, including but not limited to:  (a) techniques, plans and materials used by the Company or any of its Subsidiaries or Affiliates, (b) marketing methods and strategies employed by the Company or any of its Subsidiaries or Affiliates, and (c) all lists of past, present or prospective patients, customers, suppliers and referral sources of the Company or any of its Subsidiaries or Affiliates.  The

 



 

Employee agrees that he or she will not disclose to any unauthorized person or entity nor use for his or her own account any of such Confidential Information without the prior written consent of the Chairman or President of the Company, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of the Employee’s acts or omissions to act or become known to the Employee lawfully outside the scope of his or her employment with the Company or its Affiliates.  The Employee agrees to deliver to the Company at the termination of his or her employment, or at any other time the Company may request, all memoranda, notes, plans, records, reports and other documents (and copies thereof) relating to the business of the Company or any of its Subsidiaries or Affiliates which the Employee may then possess or have under his or her control.

 

All of the terms and conditions of this Agreement are hereby confirmed, ratified, approved and accepted by the Company and by the Employee, who has accepted this Agreement and its terms pursuant to Employee’s electronic submission of Employee’s confirmation of this Agreement in accordance with the instructions contained on the online website maintained for the benefit of the Company for grants of Performance Share Units by the Company.