As filed with the Securities and Exchange Commission on August 22, 2016.
Registration Statement No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
ALJ REGIONAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
|
Delaware |
13-4082185 |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
|
|
|
244 Madison Avenue, PMB #358 New York, NY |
10016 |
|
(Address of Principal Executive Offices) |
(Zip Code) |
ALJ Regional Holdings, Inc. 2016 Omnibus Equity Plan
Outstanding Options Granted by Registrant
(Full title of the plan(s))
Jess Ravich
Executive Chairman and Chairman of the Board
ALJ Regional Holdings, Inc.
244 Madison Avenue, PMB #358, New York, NY 10016
(Name and address of agent for service)
(212) 883-0083
(Telephone number, including area code, of agent for service)
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
|
Large accelerated filer |
☐ |
|
Accelerated filer |
☐ |
|
Non-accelerated filer |
☐ |
(Do not check if a smaller reporting company) |
Smaller reporting company |
☒ |
CALCULATION OF REGISTRATION FEE
|
Title of each Class of Securities to be Registered |
Amount to be Registered (1) |
Proposed Maximum Offering Price Per Share |
Proposed Maximum Aggregate Offering Price |
Amount of Registration Fee |
|
Common Stock, par value $0.01 per share, to be issued pursuant to the ALJ Regional Holdings, Inc. 2016 Omnibus Equity Plan |
2,000,000 |
$4.745 (2) |
$9,490,000 |
$955.64 |
|
Common Stock, par value $0.01 per share, issued pursuant to outstanding options |
2,284,000 |
$2.15 (3) |
$4,910,600 |
$494.50 |
|
TOTAL |
4,284,000 |
|
|
$1450.14 |
|
|
Statement includes an indeterminate number of additional shares which may be offered to prevent dilution from stock splits, stock dividends, recapitalization or other similar transactions effected without consideration that results in an increase in the number of the Registrant’s outstanding Common Stock. |
|
|
|
(2) |
Pursuant to Rules 457(c) and 457(h) under the Securities Act of 1933, as amended, the registration fee for the shares covered by this Registration Statement has been calculated based on the average of the high and low prices of the Registrant’s common stock as reported by NASDAQ on August 16, 2016. |
|
|
(3) |
Reflects the weighted average exercise price per share of the Outstanding Options. |
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan Information.*
Item 2. Registrant Information and Employee Plan Annual Information.*
* The information called for in Part I of Form S-8 is not being filed with or included in this Form S-8 (by incorporation by reference or otherwise) in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”).
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents previously filed by ALJ Regional Holdings, Inc. (the “Company” or “Registrant”) with the Commission, are incorporated by reference in this Registration Statement:
(a) The Registrant’s registration statement on Form 10-12B/A filed with the Commission on April 22, 2016 (the “Form 10”), which includes audited financial statements for the Registrant’s latest fiscal year;
(b) All other reports filed by the Registrant pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, since the end of the fiscal year covered by the audited financial statements described in (a) above ; and
(c) The description of the Company’s common stock, par value $0.01 per share, contained in the Form 10, and any amendment or report filed for the purpose of updating such description.
All documents subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), prior to the filing of a post-effective amendment to this Registration Statement which indicates that all of the shares of Common Stock offered have been sold or which deregisters all of such shares then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of the filing of such documents, except as to any portion of any future annual or quarterly report to stockholders or document that is not deemed filed under such provisions.
For purposes of this Registration Statement, any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement.
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
Section 102 of the Delaware General Corporations Law (the “DGCL”), permits a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our Restated Certificate of Incorporation (as amended further by that certain First Amendment to Restated Certificate of Incorporation, the “Certificate of Incorporation”), provides that none of our directors will be personally liable to us or our
stock holders for monetary damages for or with respect to any acts or omissions in the performance of such person’s duties as a director, except to the extent required by law.
Section 145 of the DGCL provides that a corporation has the power to indemnify a director, officer, employee, or agent of the corporation, or a person serving at the request of the corporation for another corporation, partnership, joint venture, trust or other enterprise in related capacities, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he was or is a party or is threatened to be made a party to any threatened, ending or completed action, suit or proceeding by reason of such position, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification will be made with respect to any claim, issue or matter as to which such person has been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court deems proper.
Our Certificate of Incorporation provides that we may indemnify, and advance expenses to, our directors and officers with respect to certain liabilities, expenses and other accounts imposed upon them because of having been a director or officer. We have also entered into individual indemnification agreements with each of our directors.
Item 7. Exemption for Registration Claimed
Not applicable.
Item 8. Exhibits.
|
Exhibit Number |
|
Description of Exhibit |
|
|
|
|
|
5.1 |
|
Opinion of Shearman & Sterling LLP regarding the legality of the securities being registered |
|
|
|
|
|
10.1 |
|
ALJ Regional Holdings, Inc. 2016 Omnibus Equity Plan |
|
|
|
|
|
23.1 |
|
Consent of Independent Registered Public Accounting Firm |
|
|
|
|
|
99.1 |
|
Form of Outstanding Option |
|
|
|
|
Item 9. Undertakings.
(a) The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment t hereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;
(iii) To include any material information with respe ct to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
Provided, however, that clauses (1)(i) and (1)(ii) of this section do not apply if the registration statement is on Form S-8, and the information required to be included in a post-effective amendment by those clauses is contained in reports filed with or furnished to the SEC by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.
2. That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement re lating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of the securities being regi stered which remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Pursuant to the requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on the 18th day of August, 2016.
|
ALJ REGIONAL HOLDINGS, INC.
|
|
By:/s/ Jess Ravich |
|
Jess Ravich |
|
Executive Chairman |
KNOW ALL PERSONS BY THESE PRESENTS, that the persons whose signatures appear below constitute and appoint Jess Ravich and T. Robert Christ, and each of them, as true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Form S-8 Registration Statement, and any or all amendments (including post-effective amendments) to said Form S-8 Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
|
|
/s/ Jess Ravich |
|
Chairman of the Board, Executive Chairman |
|
August 18, 2016 |
|
Jess Ravich |
|
and Director (Principal Executive Officer) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ T. Robert Christ |
|
Chief Financial Officer |
|
August 22, 2016 |
|
T. Robert Christ |
|
(Principal Financial Officer) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Michael Borofsky |
|
Director |
|
August 19, 2016 |
|
Michael Borofsky |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Hal Byer |
|
|
|
|
|
Hal Byer |
|
Director |
|
August 18, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Robert Scott Fritz |
|
|
|
|
|
Robert Scott Fritz |
|
Director |
|
August 19, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Margarita Palau Hernandez |
|
|
|
|
|
Margarita Palau Hernandez |
|
Director |
|
August 19, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Rae Ravich |
|
|
|
|
|
Rae Ravich |
|
Director |
|
August 22, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Marc Reisch |
|
|
|
|
|
Marc Reisch |
|
Director |
|
August 22, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ John Scheel |
|
|
|
|
|
John Scheel |
|
Director |
|
August 18, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Anna Van Buren |
|
|
|
|
|
Anna Van Buren |
|
Director |
|
August 19, 2016 |
EXHIBIT 5.1
OPINION OF Shearman & Sterling LLP
August 22, 2016
ALJ Regional Holdings, Inc.
244 Madison Avenue, PMB #358
New York, NY 10016
Re: Registration Statement/Form S-8
ALJ Regional Holdings, Inc. 2016 Omnibus Equity Plan
Gentlemen:
At your request, we have examined the Registration Statement on Form S-8 to be filed with the Securities and Exchange Commission (the “ SEC ”) by ALJ Regional Holdings, Inc. (the “ Company ”) in connection with the registration under the Securities Act of 1933, as amended, of an aggregate of 2,000,000 shares of the Company’s common stock, $0.01 par value (the “ Plan Shares ”), which will be issuable under the ALJ Regional Holdings, Inc. 2016 Omnibus Equity Plan (the “ Plan ”).
In connection with our review, we have examined the proceedings taken by the Company in connection with the adoption of the Plan and the authorization of the issuance of the Plan Shares, and such documents as we have deemed necessary to render this opinion, including the Company’s Bylaws and Articles of Incorporation, as amended. For the purpose of the opinion rendered below, we have assumed that in connection with the issuance of the Plan Shares, the Company will receive consideration in an amount not less than the aggregate par value of the Plan Shares covered by each such issuance.
Based upon and subject to the foregoing, it is our opinion that the Plan Shares, when issued and outstanding pursuant to the terms of the Plan, will be validly issued, fully paid and nonassessable. We consent to the use of this opinion as an exhibit to the Registration Statement.
|
|
Very truly yours, |
||
|
|
|
|
|
|
|
|
By: |
/s/ Shearman & Sterling LLP |
|
|
|
|
Shearman & Sterling LLP |
Exhibit 10.1
ALJ REGIONAL HOLDINGS, INC.
2016 OMNIBUS EQUITY PLAN
The purposes of the ALJ Regional Holdings, Inc. 2016 Omnibus Equity Plan (the “ Plan ”) are to promote the long‑term success of ALJ Regional Holdings, Inc., a Delaware corporation (the “ Company ”), and its Affiliates and to increase shareholder value by providing Eligible Individuals with incentives to contribute to the long‑term growth and profitability of the Company, and to assist the Company in attracting and retaining the best available personnel for positions of substantial responsibility.
The Plan was approved by the Board on May 23, 2016 and will be submitted for the approval of the Company’s stockholders at the first meeting of stockholders following the effective date of the Company’s registration statement on Form 10 (SEC File No. 001-37689) relating to the Company’s common stock, par value $0.01 per share (the “ Common Stock ”). The Plan shall become effective on the Effective Date. In accordance with NASDAQ Listing Rule 5635(c) and the guidance thereunder, on or following the Effective Date but prior to the date that the Plan is approved by the Company’s stockholders, the Company may grant Options (as defined in Section 2), but not shares of Common Stock, under the Plan provided that: (i) no Options can be exercised prior to obtaining stockholder approval, and (ii) the Plan shall be unwound, and the outstanding Options cancelled, if stockholder approval is not obtained.
2. Definitions and Rules of Construction
Definitions
. For purposes of the Plan, the following capitalized words shall have the meanings set forth below:
“ Affiliate ” means any Subsidiary and any person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the Company.
“ Award ” means an Option, Restricted Share, Restricted Share Unit, Unrestricted Share, Stock Appreciation Right, Performance Stock, Performance Stock Unit, Cash Performance Unit or Other Award granted by the Committee pursuant to the terms of the Plan.
“ Award Document ” means an agreement, certificate or other type or form of document or documentation approved by the Committee that sets forth the terms and conditions of an Award. An Award Document may be in written, electronic or other media and, unless the Committee requires otherwise, need not be signed by a representative of the Company or a Participant.
“ Beneficial Owner ” and “ Beneficially Owned ” have the meaning set forth in Rule 13d‑3 under the Exchange Act.
“ Board ” means the Board of Directors of the Company, as constituted from time to time.
“ Cash Performance Unit ” means a right to receive a Target Amount of cash in the future granted pursuant to Section 11(b).
“ Change in Control ” means:
(i) Any Person (other than an Original Significant Shareholder) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 35% or more of the combined voting power of the Company’s then-outstanding securities; or
(ii) The following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including, but not limited to, a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least a majority of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended; or
(iii) There is consummated a merger or consolidation of the Company, other than (A) a merger. consolidation or similar transaction that would result in the voting securities of the Company outstanding immediately prior to the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) a merger, consolidation or similar transaction effected to implement a recapitalization of the Company (or similar transaction) in which no Person (other than an Original Significant Shareholder) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding securities; or
(iv) The stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated a sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.
2
Notwithstanding the foregoing, with respect to an Award that is subject to Section 409A and for which payment or settlement of the Award will accelerate upon a Change in Control, no event set forth herein will constitute a Change in Control for purposes of the Plan or any Award Document unless such event also constitutes a “change in ownership,” “change in effective control,” or “change in the ownership of a substantial portion of the Company’s assets” as defined under Section 409A.
“ Code ” means the Internal Revenue Code of 1986, as amended, and the applicable rulings, regulations and guidance promulgated thereunder as amended from time to time.
“ Committee ” means the Compensation, Nominating and Corporate Governance Committee of the Board, any successor committee thereto, or any other committee appointed from time to time by the Board to administer the Plan. For purposes of the Plan, reference to the Committee shall be deemed to refer to any subcommittee, subcommittees, or other persons or groups of persons to whom the Committee delegates authority pursuant to Section 3(e).
“ Common Share ” means a share of Common Stock, as may be adjusted pursuant to Section 14(b).
“ Disability ” means
(i) for Participants covered by the long term disability plan of the Company or a Subsidiary, disability as defined in such plan; and
(ii) for all other Participants, a physical or mental condition of the Participant resulting from bodily injury, disease or mental disorder which renders the Participant incapable of continuing the Participant’s usual or customary employment with the Participant’s employer for a period of not less than six consecutive months.
The disability of the Participant shall be determined by the Committee in good faith after reasonable medical inquiry, including consultation with a licensed physician as chosen by the Committee, and a fair evaluation of the Employee’s ability to perform the Employee’s duties. Notwithstanding the previous two sentences, with respect to an Award that is subject to Section 409A where the payment or settlement of the Award will accelerate upon termination of employment as a result of the Participant’s Disability, no such termination will constitute a Disability for purposes of the Plan or any Award Document unless such event also constitutes a “disability” as defined under Section 409A.
“ EBITDA ” means earnings before interest, taxes, depreciation and amortization.
“ EBITA ” means the Company’s earnings before interest, taxes and amortization.
“ Effective Date ” means the business day immediately prior to the Registration Date.
“ Eligible Individuals ” means the individuals described in Section 4(a) who are eligible for Awards under the Plan.
3
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as amended from time to time.
“ Fair Market Value ” with respect to a Common Share, means, unless the Committee in its discretion approves an alternative valuation methodology:
(i) the closing price of the Common Stock on NASDAQ at the conclusion of regular trading hours on the relevant date of determination, as reported by NASDAQ (or, if not so reported, as reported by a successor reporting service selected by the Company, or if not reported by any successor service, as reported on any domestic stock exchanges on which the Common Stock is then listed); or
(ii) if the Common Stock is not listed on any domestic stock exchange, the closing price of the Common Stock as reported in the domestic over-the-counter market on such date or the last previous date reported (or, if not so reported, by the system then regarded as the most reliable source of such quotations) or, if there are no reported sales on such date, the mean of the closing bid and asked prices as so reported; or
(iii) if the Common Stock is listed on a domestic exchange or quoted in the domestic over-the-counter market, but there are not reported sales or quotations, as the case may be, on the given date, the value determined pursuant to (i) or (ii) above using the reported closing prices or quotations on the last previous date on which so reported; or
(iv) if none of the foregoing clauses applies, the fair market value of the Common Stock as determined in good faith by the Board or the Committee.
“ Incentive Stock Option ” means an Option that is intended to comply with the requirements of Section 422 of the Code or any successor provision thereto.
“ NASDAQ ” means The Nasdaq Stock Market.
“ Nonemployee Director ” means a member of the Board who is not an officer or employee of the Company or any of its Affiliates.
“ Nonqualified Stock Option ” means an Option that is not intended to comply with the requirements of Section 422 of the Code or any successor provision thereto.
“ Option ” means an Incentive Stock Option or Nonqualified Stock Option granted pursuant to Section 8.
“ Original Significant Shareholder ” means Jess Ravich.
“ Other Award ” means any form of Award (other than an Option, Performance Stock, Performance Stock Unit, Cash Performance Unit, Restricted Share, Restricted Share Unit, Unrestricted Share or Stock Appreciation Right) granted pursuant to Section 12.
“ Participant ” means an Eligible Individual who has been granted an Award under the Plan.
4
“ Performance Period ” means the period established by the Committee and set forth in the applicable Award Document over which Performance Targets are measured.
“ Performance Stock ” means a Target Amount of Common Shares granted pursuant to Section 11(a).
“ Performance Stock Unit ” means a right to receive a Target Amount of Common Shares granted pursuant to Section 11(a).
“ Performance Target ” means the performance goals established by the Committee, from among the performance criteria provided in Section 6(g), and set forth in the applicable Award Document.
“ Person ” means any person, entity or “group” within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, except that such term shall not include (i) the Company or any of its Affiliates, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, or (v) a person or group as used in Rule 13d-1(b) under the Exchange Act.
“ Plan Limit ” means the maximum aggregate number of Common Shares that may be issued for all purposes under the Plan as set forth in Section 5(a).
“ Registration Date ” means the effective date of the first registration statement that is filed by the Company and declared effective pursuant to Section 12 of the Exchange Act, with respect to any class of the Company’s equity securities.
“ Restricted Share ” means a Common Share granted or sold pursuant to Section 9(a).
“ Restricted Share Unit ” means a right to receive one or more Common Shares (or cash, if applicable) in the future granted pursuant to Section 9(b).
“ Section 162(m) ” means Section 162(m) of the Code.
“ Section 409A ” means Section 409A of the Code.
“ Stock Appreciation Right ” means a right to receive all or some portion of the appreciation on Common Shares granted pursuant to Section 10.
“ Subsidiary ” means any foreign or domestic corporation, limited liability company, partnership or other entity of which 50% or more of the outstanding voting equity securities or voting power is Beneficially Owned directly or indirectly by the Company. For purposes of determining eligibility for the grant of Incentive Stock Options under the Plan, the term “Subsidiary” shall be defined in the manner required by Section 424(f) of the Code.
5
“ Substitute Award ” means any Award granted upon assumption of, or in substitution or exchange for, outstanding employee or director equity awards previously granted by a company or other entity acquired by the Company or with which the Company combines in connection with a corporate transaction pursuant to the terms of an equity compensation plan that was approved by the stockholders of such company or other entity.
“ Target Amount ” means the target number of Common Shares, target number of Options or Stock Appreciation rights, or target cash value established by the Committee and set forth in the applicable Award Document.
“ Unrestricted Share ” means a Common Share granted or sold pursuant to Section 9(c).
Rules of Construction
. The masculine pronoun shall be deemed to include the feminine pronoun, and the singular form of a word shall be deemed to include the plural form, unless the context requires otherwise. Unless the text indicates otherwise, references to sections are to sections of the Plan .
. The Plan shall be administered by the Committee, which shall have full power and authority, subject to the express provisions hereof, to:
(i) select the Participants from the Eligible Individuals;
(ii) grant Awards in accordance with the Plan;
(iii) determine the number of Common Shares subject to each Award or the cash amount payable in connection with an Award;
(iv) determine the terms and conditions of each Award, including, without limitation, those related to term, permissible methods of exercise, vesting, cancellation, forfeiture, payment, settlement, exercisability, Performance Periods, Performance Targets, and the effect or occurrence, if any, of a Participant’s termination of employment, separation from service or leave of absence with the Company or any of its Affiliates or, subject to Section 6(d), a Change in Control of the Company;
(v) subject to Sections 16 and 17(e), amend the terms and conditions of an Award after the granting thereof;
(vi) specify and approve the provisions of the Award Documents delivered to Participants in connection with their Awards (which may vary among Participants);
(vii) make factual determinations in connection with the administration or interpretation of the Plan;
(viii) adopt, prescribe, establish, amend, waive and rescind administrative regulations, rules and procedures relating to the Plan;
6
(ix) employ such legal counsel, independent auditors and consultants as it deems desirable for the administration of the Plan and to rely upon any advice, opinion or computation received therefrom;
(x) vary the terms of Awards to take into account tax and securities laws (or change thereto) and other regulatory requirements or to procure favorable tax treatment for Participants;
(xi) correct any defects, supply any omission or reconcile any inconsistency in any Award Document or the Plan;
(xii) suspend the right to exercise during any blackout period, and extend the period of exercise by an equal period of time; and
(xiii) make all other determinations and take any other action desirable or necessary to interpret, construe or implement properly the provisions of the Plan or any Award Document.
Plan Construction and Interpretation
. The Committee shall have full power and authority, subject to the express provisions hereof, to co nstrue and interpret the Plan and any Award Document delivered under the Plan.
Prohibited Actions
. Notwithstanding the authority granted to the Committee pursuant to Section 3(a) and 3(b), the Committee shall not have the authority, without obtaining stockholder approval, to (i) reprice or cancel Options and Stock Appreciation Rights in violation of Section 6(h), (ii) amend Section 5 to increase the Plan Limit or any of the other limits listed therein; or (iii) grant Options or Stock Appreciation Rights with an exercise price that is less than 100% of the Fair Market Value of a Common Share on the date of grant in violation of Section 6(j).
Determinations of Committee Final and Binding
. All determinations by the Committee in carrying out and administering the Plan and in construing and interpreting the Plan shall be made in the Committee’s sole discretion and shall be final, binding and conclusive for all purposes and upon all P ersons interested herein.
. To the extent not prohibited by applicable laws, rules and regulations, the Committee may, from time to time, delegate some or all of its authority under the Plan to a subcommittee or subcommittees thereof or other Persons or groups of Persons as it deems necessary, appropriate or advisable under such conditions or limitations as it may set at the time of such delegation or thereafter; provided , however , that the Committee may not delegate its authority, except to a subcommittee thereof:
(i) to make Awards to individuals who are subject on the date of the Award to the reporting rules under Section 16(a) of the Exchange Act; or
(ii) whose compensation for such fiscal year may be subject to the limit on deductible compensation pursuant to Section 162(m).
7
Notwithstanding the foregoing, no Person to whom authority has been delegated pursuant to this Section 3(e) shall make any Award to himself or herself or to any other Person to whom authority to make Awards has been so delegated.
Liability of Committee and its Delegates
. Subject to applicable laws, rules and regulations: (i) no member of the Board or Committee (or its delegates pursuant to Section 3(e)) shall be liable for any good faith action, omission or determination made in connection with the operation, administration or interpretation of the Plan and (ii) the members of the Board or the Committee (and its delegates) shall be entitled to indemnification and reimbursement in accordance with applicable law in the manner provided in the Company’s by-laws and any indemnification agreements as they may be amended from time to time. In the performance of its responsibilities with respect to the Plan, the Committee shall be entitled to rely upon information and/or advice furnished by the Company’s officers or employees, the Company’s accountants, the Company’s counsel and any other party the Committee deems necessary, and no member of the Committee shall be liable for any action taken or not taken in reliance upon any such information and/or advice.
Action by the Board
. Anything in the Plan to the contrary notwithstanding, subject to applicable laws, rules and regulations, any authority or responsibility that, under the terms of the Plan, may be exercised by the Committee may alternatively be exercised by the Board.
4. Eligibility
. Awards may be granted to officers, employees, directors and consultants of the Company or any of its Affiliates. The Committee shall have the authority to select the persons to whom Awards may be granted and to determine the type, number and terms of Awards to be granted to each such Participant.
. The Committee shall have no obligation to grant any Eligible Individual an Award or to designate an Eligible Individual as a Participant solely by reason of such Eligible Individual having received a prior Award or having been previously designated as a Participant. The Committee may grant more than one Award to a Participant and may designate an Eligible Individual as a Participant for overlapping periods of time.
5. Common Shares Subject to the Plan
. Subject to adjustment in accordance with Section 14, the maximum aggregate number of Common Shares that may be issued for all purposes under the Plan shall be 2,000,000 Common Shares. Common Shares issued pursuant to Awards under the Plan may be either authorized and unissued Common Shares or Common Shares held by the Company in its treasury, or a combination thereof. All of the Common Shares subject to the Plan Limit may be issued pursuant to Incentive Stock Options.
Rules Applicable to Determining Common Shares Available for Issuance
. The number of Common Shares remaining available for issuance shall be reduced by the number of Common Shares subject to outstanding Awards and, for Awards that are not denominated by Common Shares, by the number of Common Shares actually delivered upon settlement or payment of the Award. For purposes of determining the number of Common Shares that remain
8
available for issuance under the Plan, the number of Common Shares corresponding to Awards under the Plan that are forfeited or cancelled or otherwise expire for any reason without having been exercised or settled or that are settled through the issuance of consideration other than Common Shares (including, without limitation, cash) shall be added back to the Plan Limit and again be ava ilable for the grant of Awards; provided , however , that this provision shall not be applicable with respect to (i) the cancellation of a Stock Appreciation Right granted in tandem with an Option upon the exercise of the Option or (ii) the cancellation of an Option granted in tandem with a Stock Appreciation Right upon the exercise of the Stock Appreciation Right. In addition, (i) the number of Common Shares that are tendered by a Participant or withheld by the Company to pay the exercise price of an Award or to satisfy the Participant ’ s tax withholding obligations in connection with the vesting, exercise or settlement of an Award and (ii) shares subject to an Option or Stock Appreciation Right but not issued or delivered as a result of the net settlement of such Option or SAR shall be added back to the Plan Limit and again be available for the grant of Awards.
. Subject to adjustment under Section 14, the following special limits shall apply to Common Shares available for Awards under the Plan to Eligible Individuals other than Nonemployee Directors (to whom the limit set forth in Section 5(d) shall apply) :
(i) No Participant may be granted under the Plan in any calendar year Awards covering more than 500,000 Common Shares; and
(ii) The maximum aggregate cash payment with respect to cash-based Awards (including Cash Performance Units) granted in any one fiscal year that may be made to any Participant shall be $2,000,000.
. Subject to adjustment under Section 14, no Nonemployee Director shall receive regular annual Awards for any calendar year having a grant date fair value, determined using assumptions and methods that are consistent in all material respects with the assumptions used to disclose such grants in the Company’s proxy statement for the year to which such grants relate, that exceeds $1,000,000, or any special or one-time award upon election or appointment to the Board having a grant date fair value, determined as described above, that exceeds $1,000,000.
Substitute Awards
. To the extent not prohibited by applicable laws, rules and regulations, any Common Shares underlying Substitute Awards shall not be counted against the number of Common Shares remaining for issuance and shall not be subject to Section 5(c).
. Awards under the Plan may consist of Options, Restricted Shares, Restricted Share Units, Unrestricted Shares, Stock Appreciation Rights, Performance Stock, Performance Stock Units, Cash Performance Units and Other Awards. Any Award described in Sections 8 through 12 may be granted singly or in combination or tandem with any other Award, as the Committee may determine. Subject to Section 6(g), Awards under the Plan may be made in combination with, in replacement of, or as alternatives to awards or rights under any other compensation or benefit plan of the Company, including the plan of any acquired entity.
9
. The Committee shall set the vesting criteria applicable to an Award, which, depending on the extent to which the criteria are met, will determine the extent to which the Award becomes exercisable or the number of Common Shares or the amount of cash that will be distributed or paid out to the Participant with respect to the Award. The Committee may set vesting criteria based upon the achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment or provision of services), or any other basis determined by the Committee in its discretion.
Terms Set Forth in Award Document
. The terms and conditions of each Award shall be set forth in an Award Document in a form approved by the Committee for such Award, which Award Document shall contain terms and conditions not inconsistent with the Plan. Notwithstanding the foregoing, and subject to applicable laws, rules and regulations, the Committee may at any time following grant (i) accelerate the vesting, exercisability, lapse of restrictions, settlement or payment of any Award, (ii) eliminate the restrictions and conditions applicable to an Award or (iii) extend the post‑termination exercise period of an outstanding Award (subject to the limitations of Section 409A). The terms of Awards may vary among Participants, and the Plan does not impose upon the Committee any requirement to make Awards subject to uniform terms. Accordingly, the terms of individual Award Documents may vary.
. The Committee shall specify at or after the time of grant of an Award the provisions governing the disposition of an Award in the event of a Participant’s termination of employment (including by reason of retirement) with the Company or any of its Affiliates or the Participant’s death, Disability. Subject to applicable laws, rules and regulations, in connection with a Participant’s termination of employment, the Committee shall have the discretion to accelerate the vesting, exercisability or settlement of, eliminate the restrictions or conditions applicable to, or extend the post-termination exercise period of an outstanding Award (subject to the limitations of Section 409A). Such provisions may be specified in the applicable Award Document or determined at a subsequent time.
Dividends and Dividend Equivalents
. The Committee may provide Participants with the right to receive dividends or payments equivalent to dividends or interest with respect to an outstanding Award, which payments can either be paid currently or deemed to have been reinvested in Common Shares, and can be made in Common Shares, cash or a combination thereof, as the Committee shall determine; provided , however , that (i) no payments of dividends or dividend equivalents may be made unless and until the related Award is earned and vested and (ii) the terms of any reinvestment of dividends must comply with all applicable laws, rules and regulations, including, without limitation, Section 409A. Notwithstanding the foregoing, no dividends or dividend equivalents shall be paid with respect to Cash Performance Units, Options or Stock Appreciation Rights.
Rights of a Stockholder
. A Participant shall have no voting rights or other rights as a stockholder with respect to Common Shares covered by an Award until the date the Participant or his nominee becomes the holder of record of such Common Shares. No adjustment shall be made for dividends or other rights for which the record date is prior to such date, except as provided in Section 14 .
.
10
(i) The Committee may determine whether any Award under the Plan is intended to meet the requirements for “qualified performance ‑ based compensation ” as that term is used in Section 162(m) . The following provisions shall apply to any Awards intended to satisfy such requirements:
(1) Any such Awards designated to be “qualified performance‑based compensation” shall be conditioned on the achievement of one or more Performance Targets to the extent required by Section 162(m) and will be subject to all other conditions and requirements of Section 162(m). The Performance Targets may include one or more of the following performance criteria: net income; cash flow or cash flow return on investment or cash flow per share; operating cash flow; pre‑tax or post‑tax profit levels or earnings; profit in excess of cost of capital; operating earnings; return on investment; free cash flow; free cash flow per share; earnings per share; return on assets; return on net assets; return on equity; return on capital; return on invested capital; return on sales; sales growth; growth in managed assets; gross margin; operating margin; operating income; total shareholder return or stock price appreciation; EBITDA; EBITA; revenue; net revenues; market share, market penetration; productivity improvements; inventory turnover measurements; working capital turnover measurements; reduction of losses, loss ratios or expense ratios; reduction in fixed costs; operating cost management; cost of capital; debt reduction; and safety measurements or other operational criteria that are objectively determinable.
(2) The Performance Targets shall be determined in accordance with generally accepted accounting principles (subject to adjustments and modifications for specified types of events or circumstances approved by the Committee in advance) consistently applied on a business unit, divisional, subsidiary or consolidated basis or any combination thereof.
(3) The Performance Targets may be described in terms of objectives that are related to the individual Participant or objectives that are Company‑wide or related to a Subsidiary, business unit, or region and may be measured on an absolute or cumulative basis or on the basis of percentage of improvement over time, and may be measured in terms of Company performance (or performance of the applicable Subsidiary, business unit, or region) or measured relative to selected peer companies or a market index. At the time of grant, the Committee may provide for adjustments to the performance criteria in accordance with Section 162(m).
(4) The Participants will be designated, and the applicable Performance Targets will be established, by the Committee 90 days following the commencement of the applicable Performance Period (or such earlier or later date permitted or required by Section 162(m)). Each Participant will be assigned a Target Amount payable if Performance Targets are achieved. Any payment of an Award granted with Performance Targets shall be conditioned on the written certification of the Committee in each case that the Performance Targets and any other material conditions were satisfied. The Committee may determine, at the time of grant, that if performance exceeds the specified Performance Targets, the Award may be settled with payment greater than the Target Amount, but in no event may such payment exceed the maximum payment amount for such Award established
11
by the Committee at the time Performance Targets are established or the limits set forth in Section 5(c). The Committee retains the right to reduce any Award notwithstanding the attainment of the Performance Targets.
(ii) The Committee may also grant performance-based Awards not intended to qualify as “qualified performance‑based compensation” under Section 162(m). With respect to such Awards, the Committee may establish performance targets and goals based on any criteria it deems appropriate and shall not be required to follow the procedures or schedule specified in Section 6(g)(i).
No Repricing of Options and Stock Appreciation Rights
. Except for adjustments pursuant to Section 14, the per Common Share exercise price of any Option or Stock Appreciation Right may not be decreased after the grant of the Award, and an Option or Stock Appreciation Right whose per share exercise price is greater than the Fair Market Value of a Common Share on the relevant date of determination may not be surrendered as consideration in exchange for cash (for the sake of clarity, including cash buyouts), the grant of a new Option or Stock Appreciation Right with a lower exercise price per Common Share or the grant of a stock award, without stockholder approval.
Recoupment
. Notwithstanding anything in the Plan to the contrary, all Awards granted under the Plan, any payments made under the Plan and any gains realized upon exercise or settlement of an Award shall be subject to claw‑back or recoupment as permitted or mandated by applicable law, rules, regulations or any Company policy as enacted, adopted or modified from time to time.
No Discount Options or Stock Appreciation Rights
. In no event shall the exercise price per Common Share of an Option or the grant price per Common Share of a Stock Appreciation Right be less than 100% of the Fair Market Value of a Common Share on the date of grant; provided , however that the exercise price of a Substitute Award granted as an Option shall be determined in accordance with Section 409A and may be less than 100% of the Fair Market Value.
Term of Options and SARs
. An Option or Stock Appreciation Right shall be effective for such term as shall be determined by the Committee and as set forth in the Award Document relating to such Award. The Committee may extend the term of an Option or Stock Appreciation Right after the time of grant; provided , however , that the term of an Option or Stock Appreciation Right may in no event extend beyond the tenth (10 th ) anniversary of the date of grant of such Award.
Notwithstanding any provisions of this Plan to the contrary, the Committee may, in its sole discretion, at the time an Award is made hereunder or at any time prior to, coincident with or after the time of a Change in Control:
(a) provide for the adjustment of any performance conditions as the Committee deems necessary or appropriate to reflect the Change in Control;
12
(b) provide that upon termination of a Participant’s employment as a result of the Change in Control, any time periods or other conditions relating to the vesting, exercise, payment or distribution of an award will be accelerated or waived;
(c) provide for the purchase of any awards from a Participant whose employment has been terminated as a result of a Change in Control for an amount of cash equal to the amount that could have been obtained upon the exercise, payment or distribution of such rights had such award been currently exercisable or payable; or
(d) cause the Awards outstanding at the time of a Change in Control to be assumed, or new rights substituted therefore, by the surviving entity or acquiring entity in the transaction (or the surviving or acquiring entity’s parent company) or, if the Company is not the surviving entity following the Change in Control and the surviving or acquiring entity (or its parent company) does not agree to assume the Company’s obligations with respect to any awards under the Plan or to replace those awards with new rights of substantially equivalent value (as determined by the Committee), to cause such awards to vest immediately prior to the Change in Control in such a manner that will enable the Participant to participate in the Change in Control with respect to the Common Shares issuable upon vesting, exercise, payment or distribution of such Awards on the same basis as other holders of the Company’s outstanding Common Shares. Any determination made under this Section 7 may be made on an Award-by-Award basis.
For purposes of sub-paragraphs (b) or (c) above, any Participant whose employment is terminated by the Company (including any surviving entity or successor to the Company following a Change in Control) other than for “cause”, or by the Participant for “good reason” (each as defined in the applicable Award Document), upon or within two years following a Change in Control shall be deemed to have been terminated as a result of the Change in Control. Except as provided in sub-paragraph (d) above, the vesting, payment, purchase or distribution of an Award may not be accelerated by reason of a Change in Control for any Participant unless the Participant’s employment terminates as a result of the Change in Control. Notwithstanding any other provision of this Plan or any Award Document, the provisions of this Section 7 may not be terminated, amended, or modified following a Change in Control in a manner that would adversely affect a Participant’s rights with respect to an outstanding Award without the prior written consent of the Participant.
8. Terms and Conditions of Options
General
. The Committee, in its discretion, may grant Options to Eligible Individuals and shall determine whether such Options shall be Incentive Stock Options or Nonqualified Stock Options. Each Option shall be evidenced by an Award Document that shall expressly identify the Option as an Incentive Stock Option or Nonqualified Stock Option, and be in such form and contain such provisions as the Committee shall from time to time deem appropriate.
Payment of Exercise Price
. Subject to the provisions of the applicable Award Document and Company policy in effect from time to time, the exercise price of an Option may be paid: (i) in cash or cash equivalents; (ii) by actual delivery or attestation to ownership of freely transferable Common Shares already owned by the person exercising the Option; (iii) by a combination of cash and Common Shares equal in value to the exercise price; (iv) through net share settlement or similar procedure involving the withholding of Common
13
Shares subject to the Option with a value equal to the exercise price ; or (v) by such other means as the Committee may authorize. In accordance with the rules and procedures authorized by the Committee for this purpose, the Option may also be exercised through a “ cashless exercise ” procedure authorized by the Committee from time to time that permits Participants to exercise Options by delivering irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds necessary to pay the exercise price and the amount of any required tax or other withholding obligations or such other procedures determined by the Company from time to time . The Committee may provide that in-the-money Options will be exercised automatically, with no action required on the part of a Participant, using a net share settlement or similar procedure immediately (or shortly) before their scheduled expiration date where Participants are precluded from using other methods of exercise due to legal restrictions or Company policy (including policies on trading in Common Shares).
Incentive Stock Options
. The exercise price per Common Share of an Incentive Stock Option shall be fixed by the Committee at the time of grant or shall be determined by a method specified by the Committee at the time of grant, but in no event shall the exercise price of an Option be less than the minimum exercise price specified in Section 6(j). No Incentive Stock Option may be issued to any individual who, at the time the Incentive Stock Option is granted, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, unless (i) the exercise price determined as of the date of grant is at least 110% of the Fair Market Value on the date of grant of the Common Shares subject to such Incentive Stock Option and (ii) the Incentive Stock Option is not exercisable more than five (5) years from the date of grant thereof. No Participant shall be granted any Incentive Stock Option which would result in such Participant receiving a grant of Incentive Stock Options that would have an aggregate Fair Market Value in excess of $100,000, determined as of the time of grant, that would be exercisable for the first time by such Participant during any calendar year. Any grants in excess of this limit shall be treated as Non-Qualified Stock Options. No Incentive Stock Option may be granted under the Plan after the tenth anniversary of the Effective Date. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, or any successor provision thereto, as amended from time to time.
Early Exercise of Nonqualified Options
. The Committee, in its discretion, may grant Non-Qualified Stock Options that contain an “early exercise” feature, which shall provide a Participant with the right (but not the obligation) to immediately exercise such portion of the Option for Common Stock that shall be subject to the same vesting schedule as the underlying Option.
9. Terms and Conditions of Restricted Shares, Restricted Share Units and Unrestricted Shares
. The Committee, in its discretion, may grant or sell Restricted Shares to Eligible Individuals. An Award of Restricted Shares shall consist of one or more Common Shares granted or sold to an Eligible Individual, and shall be subject to the terms, conditions and restrictions set forth in the Plan and established by the Committee in connection with the Award and specified in the applicable Award Document. Restricted Shares may, among other things, be subject to restrictions on transferability, vesting requirements or other specified circumstances under which it may be canceled .
14
. The Committee, in its discretion, may grant Restricted Share Units to Eligible Individuals. A Restricted Share Unit shall entitle a Participant to receive, subject to the terms, conditions and restrictions set forth in the Plan and the applicable Award Document, one or more Common Shares. Restricted Share Units may, among other things, be subject to restrictions on transferability, vesting requirements or other specified circumstances under which they may be canceled. If and when the cancellation provisions lapse, the Restricted Share Units shall be settled by the delivery of Common Shares or, at the sole discretion of the Committee, cash, or a combination of cash and Common Shares, with a value equal to the Fair Market Value of the Common Shares at the time of payment.
. The Committee, in its discretion, may grant or sell Unrestricted Shares to Eligible Individuals. An Award of Unrestricted Shares shall consist of one or more Common Shares granted or sold to an Eligible Individual, and shall be subject to the terms, conditions and restrictions set forth in the Plan and established by the Committee in connection with the Award and specified in the applicable Award Document. Unless the Committee specifies otherwise, Unrestricted Shares will not be subject to restrictions on transferability, vesting requirements or cancellation.
The Committee, in its discretion, may grant Stock Appreciation Rights to Eligible Individuals. The Committee may grant Stock Appreciation Rights in tandem with Options or as stand-alone Awards. Each Stock Appreciation Right shall be subject to the terms, conditions and restrictions set forth in the Plan and established by the Committee in connection with the Award and specified in the applicable Award Document. A Stock Appreciation Right shall entitle a Participant to receive, upon satisfaction of the conditions to payment specified in the applicable Award Document, an amount equal to the excess, if any, of the Fair Market Value of a Common Share on the exercise date of the number of Common Shares for which the Stock Appreciation Right is exercised over the per Common Share grant price for such Stock Appreciation Right specified in the applicable Award Document. Payments to a Participant upon exercise of a Stock Appreciation Right may be made in cash or Common Shares, as determined by the Committee on or following the date of grant. The Committee may provide that in-the-money Stock Appreciation Rights will be exercised automatically, with no action required on the part of a Participant, immediately (or shortly) before their scheduled expiration date where Participants are precluded from otherwise exercising such Stock Appreciation Rights due to legal restrictions or Company policy (including policies on trading in Common Shares).
11. Terms and Conditions of Performance Stock, Performance Stock Units and Cash Performance Units
Performance Stock or Performance Stock Units
. The Committee may grant Performance Stock or Performance Stock Units to Eligible Individuals. An Award of Performance Stock or Performance Stock Units shall consist of, or represent a right to receive, a Target Amount of Common Shares granted to an Eligible Individual based on the achievement of Performance Targets over the applicable Performance Period, and shall be subject to the terms, conditions and restrictions set forth in the Plan and established by the Committee in connection with the Award and specified in the applicable Award Document. Payments to a Participant in settlement of an Award of Performance Stock or Performance Stock Units may be made in cash or Common Shares, as determined by the Committee on or following the date of grant.
15
. The Committee, in its discretion, may grant Cash Performance Units to Eligible Individuals. A Cash Performance Unit shall entitle a Participant to receive, subject to the terms, conditions and restrictions set forth in the Plan and established by the Committee in connection with the Award and specified in the applicable Award Document, a Target Amount of cash based upon the achievement of Performance Targets over the applicable Performance Period. Payments to a Participant in settlement of an Award of Cash Performance Units may be made in cash or Common Shares, as determined by the Committee on or following the date of grant.
The Committee shall have the authority to establish the terms and provisions of other forms of Awards (such terms and provisions to be specified in the applicable Award Document) not described above that the Committee determines to be consistent with the purpose of the Plan and the interests of the Company, which Awards may provide for (i) payments in the form of cash, Common Stock, notes or other property as the Committee may determine based in whole or in part on the value or future value of Common Stock or on any amount that the Company pays as dividends or otherwise distributes with respect to Common Stock; (ii) the acquisition or future acquisition of Common Stock; (iii) cash, Common Stock, notes or other property as the Committee may determine (including payment of dividend equivalents in cash or Common Stock) based on one or more criteria determined by the Committee unrelated to the value of Common Stock; or (iv) any combination of the foregoing. Awards pursuant to this Section 12 may, among other things, be made subject to restrictions on transfer, vesting requirements or cancellation under specified circumstances.
. No Award shall be transferable other than pursuant to a beneficiary designation approved by the Company, by last will and testament or by the laws of descent and distribution or, except in the case of an Incentive Stock Option, pursuant to a domestic relations order, as the case may be; provided , however , that the Committee may, subject to applicable laws, rules and regulations and such terms and conditions as it shall specify, permit the transfer of an Award, other than an Incentive Stock Option, for no consideration to a permitted transferee.
Award Exercisable Only by Participant
. During the lifetime of a Participant, an Award shall be exercisable only by the Participant or by a permitted transferee to whom such Award has been transferred in accordance with Section 13(a) above. The grant of an Award shall impose no obligation on a Participant to exercise or settle the Award.
Section 83(b) Election
. If a Participant makes an election under Section 83(b) of the Code to be taxed with respect to any Award as of the date of transfer of the Award rather than as of the date or dates upon which the Participant would otherwise be taxable under Section 83 of the Code, the Participant shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service.
16
14. Recapitalization or Reorganization
Authority of the Company and Stockholders
. The existence of the Plan, the Award Documents and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Shares or the rights thereof or which are convertible into or exchangeable for Common Shares, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
. Notwithstanding any provision of the Plan or any Award Document, the number and kind of Common Shares authorized for issuance under Section 5, including the maximum number of Common Shares available under the special limits provided for in Section 5(c) and 5(d), shall be equitably adjusted in the manner deemed necessary by the Committee in the event of a stock split, reverse stock split, stock dividend, recapitalization, reorganization, partial or complete liquidation, reclassification, merger, consolidation, separation, extraordinary stock or cash dividend, split‑up, spin‑off, combination, exchange of Common Shares, warrants or rights offering to purchase Common Shares at a price substantially below Fair Market Value, or any other corporate event or distribution of stock or property of the Company affecting the Common Shares in order to preserve, but not increase, the benefits or potential benefits intended to be made available under the Plan. In addition, upon the occurrence of any of the foregoing events, the number and kind of Common Shares subject to any outstanding Award and the exercise price per Common Share (or the grant price per Common Share, as the case may be), if any, under any outstanding Award shall be equitably adjusted in the manner deemed necessary by the Committee (including by payment of cash to a Participant) in order to preserve the benefits or potential benefits intended to be made available to Participants. Any such determinations made by the Committee may be made on an Award-by-Award basis. Unless otherwise determined by the Committee, such adjusted Awards shall be subject to the same restrictions and vesting or settlement schedule to which the underlying Award is subject (subject to the limitations of Section 409A).
Unless earlier terminated pursuant to Section 16, the Plan shall terminate on the tenth (10 th ) anniversary of the Effective Date, except with respect to Awards then outstanding. No Awards may be granted under the Plan after the tenth (10 th ) anniversary of the Effective Date.
Subject to applicable laws, rules and regulations, the Board may at any time terminate or, from time to time, amend, modify or suspend the Plan; provided , however , that no termination, amendment, modification or suspension (i) will be effective without the approval of the stockholders of the Company if such approval is required under applicable laws, rules and regulations, including the rules of NASDAQ and such other securities exchanges, if any, as may be designated by the Board from time to time, and (ii) shall materially and adversely alter or impair the rights of a Participant in any Award previously made under the Plan without the consent of the
17
holder thereof. Notwithstanding the foregoing, the Board shall have broad authority to amend the Plan or any Award under the Plan without the consent of a Participant to the extent it deems necessary or desirable:
(a) to comply with, or take into account changes in, or interpretations of, applicable tax laws, securities laws, employment laws, accounting rules and other applicable laws, rules and regulations, including without limitation;
(b) to avoid, in the reasonable, good faith judgment of the Company, the imposition on any Participant of any tax, interest or penalty under Section 409A; or
(c) to take into account unusual or nonrecurring events or market conditions (including, without limitation, the events described in Section 14(b).
17. Miscellaneous
Tax Withholding
. The Company or an Affiliate, as appropriate, may require any individual entitled to receive a payment of an Award to remit to the Company, prior to payment, an amount sufficient to satisfy any applicable tax withholding requirements. In the case of an Award payable in Common Shares, the Company or an Affiliate, as appropriate, may permit or require a Participant to satisfy, in whole or in part, such obligation to remit taxes by directing the Company to withhold shares that would otherwise be received by such individual or to repurchase shares that were issued to the Participant to satisfy the minimum statutory withholding rates for any applicable tax withholding purposes, in accordance with all applicable laws and pursuant to such rules as the Committee may establish from time to time. The Company or an Affiliate, as appropriate, shall also have the right to deduct from all cash payments made to a Participant (whether or not such payment is made in connection with an Award) any applicable taxes required to be withheld with respect to such payments.
No Right to Awards or Employment
. No person shall have any claim or right to receive Awards under the Plan. Neither the Plan, the grant of Awards under the Plan nor any action taken or omitted to be taken under the Plan shall be deemed to create or confer on any Eligible Individual any right to be retained in the employ of the Company or any of its Affiliates, or to interfere with or to limit in any way the right of the Company or any of its Affiliates to terminate the employment of such Eligible Individual at any time. No Award shall constitute salary, recurrent compensation or contractual compensation for the year of grant, any later year or any other period of time. Payments received by a Participant under any Award made pursuant to the Plan shall not be included in, nor have any effect on, the determination of employment‑related rights or benefits under any other employee benefit plan or similar arrangement provided by the Company and its Affiliates, unless otherwise specifically provided for under the terms of such plan or arrangement or by the Committee.
Securities Law Restrictions
. An Award may not be exercised or settled, and no Common Shares may be issued in connection with an Award, unless the issuance of such shares (i) has been registered under the Securities Act of 1933, as amended, (ii) has qualified under applicable state “blue sky” laws (or the Company has determined that an exemption from registration and from qualification under such state “blue sky” laws is available) and (iii) complies with all applicable securities laws. The Committee may require each Participant purchasing or acquiring Common Shares pursuant to an Award under the Plan to represent to
18
and agree with the Company in writing that such Eligible Individual is acquiring the Common Shares for investment purposes and not with a view to the distribution thereof. All certificates for Common Shares delivered under the Plan shall be subject to such stock ‑ transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any exchange upon which the Common Shares are then listed, and any applicable securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
Section 16 of the Exchange Act
. Notwithstanding anything contained in the Plan or any Award Document under the Plan to the contrary, if the consummation of any transaction under the Plan, or the taking of any action by the Committee in connection with a Change in Control of the Company, would result in the possible imposition of liability on a Participant pursuant to Section 16(b) of the Exchange Act, the Committee shall have the right, in its discretion, but shall not be obligated, to defer such transaction or the effectiveness of such action to the extent necessary to avoid such liability, but in no event for a period longer than 180 days.
. To the extent that the Committee determines that any Award granted under the Plan is subject to Section 409A, the Award Document evidencing such Award shall incorporate the terms and conditions required by Section 409A. To the extent applicable, the Plan and Award Documents shall be interpreted in accordance with Section 409A and interpretive guidance issued thereunder. Notwithstanding any contrary provision in the Plan or an Award Document, if the Committee determines that any provision of the Plan or an Award Document contravenes any regulations or guidance promulgated under Section 409A or would cause an Award to be subject to additional taxes, accelerated taxation, interest and/or penalties under Section 409A, the Committee may modify or amend such provision of the Plan or Award Document without consent of the Participant in any manner the Committee deems reasonable or necessary. In making such modifications the Committee shall attempt, but shall not be obligated, to maintain, to the maximum extent practicable, the original intent of the applicable provision without contravening the provisions of Section 409A. Moreover, any discretionary authority that the Committee may have pursuant to the Plan shall not be applicable to an Award that is subject to Section 409A to the extent such discretionary authority would contravene Section 409A.
Awards to Individuals Subject to Laws of a Jurisdiction Outside of the United States
. To the extent that Awards under the Plan are awarded to Eligible Individuals who are domiciled or resident outside of the United States or to persons who are domiciled or resident in the United States but who are subject to the tax laws of a jurisdiction outside of the United States, the Committee may adjust the terms of the Awards granted hereunder to such person (i) to comply with the laws, rules and regulations of such jurisdiction and (ii) to permit the grant of the Award not to be a taxable event to the Participant. The authority granted under the previous sentence shall include the discretion for the Committee to adopt, on behalf of the Company, one or more sub‑plans applicable to separate classes of Eligible Individuals who are subject to the laws of jurisdictions outside of the United States.
References to Termination of Employment
. References to “termination of employment” shall also mean termination of any other service relationship of the Participant with the Company or any of its Subsidiaries, as applicable.
19
No Limitation on Corporate Actions
. Nothing contained in the Plan shall be construed to prevent the Company or any Affiliate from taking any corporate action, whether or not such action would have an adverse effect on any Awards made under the Plan. No Participant, beneficiary or other person shall have any claim against the Company or any Affiliate as a result of any such action.
Unfunded Plan
. The Plan is intended to constitute an unfunded plan for incentive compensation. Prior to the issuance of Common Shares, cash or other form of payment in connection with an Award, nothing contained herein shall give any Participant any rights that are greater than those of a general unsecured creditor of the Company.
Successors
. All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
Application of Funds
. The proceeds received by the Company from the sale of Common Shares pursuant to Awards will be used for general corporate purposes.
Satisfaction of Obligations
. Subject to applicable laws, rules and regulations, the Company may apply any cash, Common Shares, securities or other consideration received upon exercise of settlement of an Award to any obligations a Participant owes to the Company and its Affiliates in connection with the Plan or otherwise.
Award Document
. In the event of any conflict or inconsistency between the Plan and any Award Document, the Plan shall govern and the Award Document shall be interpreted to minimize or eliminate any such conflict or inconsistency.
Headings
. The headings of Sections herein are included solely for convenience of reference and shall not affect the meaning of any of the provisions of the Plan.
Severability
. If any provision of this Plan is held unenforceable, the remainder of the Plan shall continue in full force and effect without regard to such unenforceable provision and shall be applied as though the unenforceable provision were not contained in the Plan.
Governing Law
. Except as to matters of federal law, the Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware.
20
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Registration Statement on Form S-8 of our report dated December 31, 2015, relating to the consolidated financial statements of ALJ Regional Holdings, Inc. and Subsidiaries, included in the Registration Statement on Form 10-12B/A of ALJ Regional Holdings, Inc. filed with the SEC on April 22, 2016.
/s/ Mayer Hoffman McCann P.C.
San Diego, CA
August 22, 2016
Exhibit 99.1
ALJ REGIONAL HOLDINGS, INC.
NOTICE OF STOCK OPTION AWARD
|
Grantee’s Name and Address: |
|
[NAME] |
|
|
|
[ADDRESS] |
You (the “ Grantee ”) have been granted an option to purchase shares of Common Stock, subject to the terms and conditions of this Notice of Stock Option Award (the “ Notice ”) and the Stock Option Award Agreement (the “ Option Agreement ”) attached hereto. Unless otherwise defined herein, the terms defined in the Option Agreement shall have the same defined meanings in this Notice.
|
Date of Award |
|
|
Exercise Price per Share |
$ |
|
Total Number of Shares Subject
|
|
|
Type of Option |
|
|
Expiration Date: |
|
Vesting Schedule :
[ ].
1
IN WITNESS WHEREOF, the Company and the Grantee have executed this Notice and agree that the Option is to be governed by the terms and conditions of this Notice and the Option Agreement.
|
|
|
ALJ Regional Holdings, Inc., |
|
|
|
|
a Delaware corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By: |
|
|
|
|
T itle: |
Chief Financial Officer |
The Grantee acknowledges receipt of a copy of the Option Agreement, and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts the Option subject to all of the terms and provisions hereof and thereof. The Grantee has reviewed this Notice and the Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice, and fully understands all provisions of this Notice and the Option Agreement. The Grantee hereby agrees that all questions of interpretation and administration relating to this Notice and the Option Agreement shall be resolved by the Board in accordance with Section 15 of the Option Agreement. The Grantee further agrees to the venue selection in accordance with Section 16 of the Option Agreement. The Grantee further agrees to notify the Company upon any change in the residence address indicated in this Notice.
|
|
|
|
|
|
|
Dated: |
|
|
Signed: |
|
|
|
|
|
|
Grantee |
2
STOCK OPTION AWARD AGREEMENT
1. Grant of Option . ALJ Regional Holdings, Inc., a Delaware corporation (the “ Company ”), hereby grants to the Grantee (the “ Grantee ”) named in the Notice of Stock Option Award (the “ Notice ”), an option (the “ Option ”) to purchase the Total Number of Shares of Common Stock subject to the Option (the “ Shares ”) set forth in the Notice, at the Exercise Price per Share set forth in the Notice (the “ Exercise Price ”) subject to the terms and provisions of this Stock Option Award Agreement (the “ Option Agreement ”) and the Notice which are incorporated herein by reference.
The Option is intended to qualify as a Non-Qualified Stock Option and not as an Incentive Stock Option as defined in Section 422 of the Code.
2. Exercise of Option .
(a) Right to Exercise . The Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice and with the applicable provisions of this Option Agreement. In no event shall the Company issue fractional Shares.
(b) Method of Exercise . The Option shall be exercisable by delivery of an exercise notice (a form of which is attached as Exhibit A ) or by such other procedure as specified from time to time by the Board which shall state the election to exercise the Option, the whole number of Shares in respect of which the Option is being exercised, and such other provisions as may be required by the Board. The exercise notice shall be delivered in person, by certified mail, or by such other method (including electronic transmission) as determined from time to time by the Board to the Company accompanied by payment of the Exercise Price as provided by Section 4 below, and shall be deemed effective upon delivery to the Company.
(c) Taxes . No Shares will be delivered to the Grantee or other person pursuant to the exercise of the Option until the Grantee or other person has made arrangements acceptable to the Board for the satisfaction of applicable tax and withholding obligations, including, without limitation, obligations incident to the receipt of Shares. Upon exercise of the Option, the Company may offset or withhold (from any amount owed by the Company to the Grantee) or collect from the Grantee or other person an amount sufficient to satisfy such tax withholding obligations.
3. Grantee’s Representations . The Grantee understands that neither the Option nor the Shares exercisable pursuant to the Option have been registered under the Securities Act of 1933 or any United States securities laws. In the event the Shares purchasable pursuant to the exercise of the Option have not been registered under the Securities Act of 1933 at the time the Option is exercised, the Grantee shall, if requested by the Company, concurrently with the exercise of all or any portion of the Option, deliver to the Company his or her Investment Representation Statement in the form attached hereto as Exhibit B .
1
4. Method of Payment . Payment of the Exercise Price shall be made by any of the following, or a combination thereof, at the election of the Grantee; provided , however , that such exercise method does not then violate any Applicable Law and, provided further, that the portion of the Exercise Price equal to the par value of the Shares must be paid in cash or other legal consideration permitted by the Delaware General Corporation Law:
(a) cash;
(b) check;
(c) surrender of Shares held for the requisite period, if any, necessary to avoid a charge to the Company’s earnings for financial reporting purposes, or delivery of a properly executed form of attestation of ownership of Shares as the Board may require which have a Fair Market Value on the date of surrender or attestation equal to the aggregate Exercise Price of the Shares as to which the Option is being exercised;
(d) payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (i) shall provide written instructions to a Company-designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (ii) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction; or
(e) payment through a “net exercise” such that, without the payment of any funds, the Grantee may exercise the Option and receive the net number of Shares equal to (i) the number of Shares as to which the Option is being exercised, multiplied by (ii) a fraction, the numerator of which is the Fair Market Value per Share (on the date of exercise) less the Exercise Price per Share, and the denominator of which is such Fair Market Value per Share (the number of net Shares to be received shall be rounded down to the nearest whole number of Shares).
5. Restrictions on Exercise . The Option may not be exercised if the issuance of the Shares subject to the Option upon such exercise would constitute a violation of any Applicable Laws. In no event shall the Option be exercised later than the Expiration Date set forth in the Notice.
6. Termination of Service . In the event the Grantee’s Continuous Service terminates, the Grantee may exercise the portion of the Option that was vested at the date of such termination until the day immediately prior to the three month anniversary of such termination, or, if earlier, until the Expiration Date set forth in the Notice (and no additional vesting shall occur thereafter).
7. Death of Grantee . Notwithstanding Section 6 to the contrary, in the event of the termination of the Grantee’s Continuous Service as a result of his death, the person who acquired the right to exercise the Option may exercise the Option within twelve (12) months commencing
2
on the date of death (but in no event later than the Expiration Date), subject to the Vesting Schedule set forth in the Notice.
8. Transferability of Option . The Option may not be transferred in any manner other than by will or by the laws of descent and distribution without the prior written consent of the Company, which will not be withheld unreasonably. Notwithstanding the foregoing, the Grantee may designate one or more beneficiaries of the Grantee’s Option in the event of the Grantee’s death. Following the death of the Grantee, the Option may be exercised (a) by the person or persons designated under the deceased Grantee’s beneficiary designation or (b) in the absence of an effectively designated beneficiary, by the Grantee’s legal representative or by any person empowered to do so under the deceased Grantee’s will or under the then applicable laws of descent and distribution. The terms of the Option shall be binding upon the executors, administrators, heirs, successors and transferees of the Grantee.
9. Term of Option . The Option must be exercised no later than the Expiration Date set forth in the Notice or such earlier date as otherwise provided herein. After the Expiration Date or such earlier date, the Option shall be of no further force or effect and may not be exercised.
10. Stop‑Transfer Notices . In order to ensure compliance with the restrictions on transfer set forth in this Option Agreement or the Notice, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
11. Refusal to Transfer . The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Option Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
12. Tax Consequences .
(a) The Grantee may incur tax liability as a result of the Grantee’s purchase or disposition of the Shares. THE GRANTEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.
(b) Notwithstanding the Company’s good faith determination of the Fair Market Value of the Company’s Common Stock for purposes of determining the Exercise Price Per Share of the Option as set forth in the Notice, the taxing authorities may assert that the Fair Market Value of the Common Stock on the Date of Award was greater than the Exercise Price Per Share. In addition, under Section 409A of the Code, if the Exercise Price Per Share of the Option is less than the Fair Market Value of the Common Stock on the Date of Award, the Option may be treated as a form of deferred compensation and the Grantee may be subject to an acceleration of income recognition, an additional 20% tax, plus interest and possible penalties. The Company makes no representation that the Option will comply with Section 409A of the
3
Code and makes no undertaking to prevent Section 409A of the Code from applying to the Option or t o mitigate its effects on any deferrals or payments made in respect of the Option. The Grantee is encouraged to consult a tax adviser regarding the potential impact of Section 409A of the Code.
13. Entire Agreement: Governing Law . The Notice and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee’s interest except by means of a writing signed by the Company and the Grantee. Nothing in the Notice and this Option Agreement (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties. The Notice and this Option Agreement are to be construed in accordance with and governed by the internal laws of the State of Delaware without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Delaware to the rights and duties of the parties. Should any provision of the Notice or this Option Agreement be determined to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.
14. Construction . The captions used in the Notice and this Option Agreement are inserted for convenience and shall not be deemed a part of the Option for construction or interpretation. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
15. Administration and Interpretation . Any question or dispute regarding the administration or interpretation of the Notice or this Option Agreement shall be submitted by the Grantee or by the Company to the Board. The resolution of such question or dispute by the Board shall be final and binding on all persons.
16. Venue . The Company, the Grantee, and the Grantee’s assignees pursuant to Section 8 (the “parties”) agree that any suit, action, or proceeding arising out of or relating to the Notice or this Option Agreement shall be brought in the United States District Court for the ____________ (or should such court lack jurisdiction to hear such action, suit or proceeding, in a ____________ state court) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. If any one or more provisions of this Section 16 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.
17. Notices . Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, upon deposit for delivery by an internationally recognized express mail courier service or upon deposit in the United States mail
4
by certified mail (if the parties are within the United States), with postage and fees prepaid, addressed to the other party at its address as shown in these instruments, or to such other address as such party may designate in writing from time to time to the other party.
18. Adjustments Upon Changes in Capitalization . Subject to any required action by the stockholders of the Company, the number of Shares covered by the Option, the exercise of the Option, as well as any other terms that the Board determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii) any other transaction with respect to Common Stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” In the event of any distribution of cash or other assets to stockholders other than a normal cash dividend, the Board shall also make such adjustments as provided in this Section 18 or substitute, exchange or grant an award to effect such adjustments (collectively “adjustments”). Any such adjustments to the Option will be effected in a manner that precludes the enlargement of rights and benefits under the Option. In connection with the foregoing adjustments, the Board may, in its discretion, prohibit the exercise of the Option or other issuance of Shares, cash or other consideration pursuant to the Option during certain periods of time. Except as the Bo ard determines, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to the Option.
19. Information to the Grantee . To the extent required by Applicable Law, the Company shall provide to the Grantee, during the period for which the Option is outstanding, copies of financial statements at least annually. The Company shall not be required to provide such information to persons whose duties in connection with the Company assure them access to equivalent information.
20. Definitions . As used herein, the following definitions shall apply:
(a) “ Affiliate ” and “ Associate ” shall have the respective meanings ascribed to such terms in Rule 12b‑2 promulgated under the Exchange Act.
(b) “ Applicable Laws ” means the legal requirements relating to the Option under applicable provisions of federal and state securities laws, the corporate laws of Delaware and, to the extent other than Delaware, the corporate law of the state of the Company’s incorporation, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to Options granted to residents therein.
5
(c) “ Board ” means the Board of Directors of the Company and shall include any committee of the Board or Officer of the Company to which the Board has delegated its authority under this Agreement.
(d) “ Change of Control ” means, with respect to an entity, the occurrence of any of the following events:
(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the entity representing fifty percent (50%) or more of the total voting power represented by the entity’s then outstanding voting securities;
(ii) The consummation of the sale or disposition by the entity of all or substantially all of the entity’s assets;
(iii) If the entity is publicly traded, a change in the composition of the board of directors of the entity occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (A) are Directors as of ____________, or (B) are elected, or nominated for election, to the board of directors with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the entity); or
(iv) The consummation of a merger or consolidation of the entity with any other corporation, other than a merger or consolidation which would result in the voting securities of the entity outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the entity or such surviving entity or its parent outstanding immediately after such merger or consolidation.
For the avoidance of doubt, a change in ownership of a Subsidiary of the Company, where the Company, possibly through one or more intermediaries, continues to control at least fifty percent (50%) voting power of the Subsidiary, shall not be a Change of Control.
(e) “ Code ” means the Internal Revenue Code of 1986, as amended.
(f) “ Common Stock ” means the common stock of the Company.
(g) “ Company ” means ALJ Regional Holdings, Inc., a Delaware corporation.
(h) “ Continuous Service ” means that the provision of services to the Company or a Related Entity in any capacity of employee, Director or consultant is not interrupted or terminated. The Grantee’s Continuous Service shall be deemed to have terminated
6
either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services c easing to be a Related Entity. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of employee, Director or consul tant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of employee, Director or consultant (except as otherwise provided in the Option Agreement).
(i) “ Director ” means a member of the Board or the board of directors of any Related Entity.
(j) “ Exchange Act ” means the Securities Exchange Act of 1934.
(k) “ Fair Market Value ” means, as of any date, the value of Common Stock determined by the Board in good faith after considering such factors as the most recent trading activity (including price, volume and volatility) with respect to the Company’s Common Stock, the price at which the Company has recently sold its securities, the Company’s prospects, and such other factors the Board deems relevant.
(l) “ Non-Qualified Stock Option ” means an Option not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.
(m) “ Parent ” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.
(n) “ Related Entity ” means any Parent or Subsidiary of the Company.
(o) “ Share ” means a share of the Common Stock.
(p) “ Subsidiary ” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.
END OF AGREEMENT
1.
7
EXERCISE NOTICE
ALJ Regional Holdings, Inc.
244 Madison Avenue PMB #358
New York, New York 10016
Attention: Secretary
1. Effective as of today, ______________, ___ the undersigned (the “ Grantee ”) hereby elects to exercise the Grantee’s option to purchase ___________ shares of the Common Stock (the “ Shares ”) of ALJ Regional Holdings, Inc. (the “ Company ”) under and pursuant to the Stock Option Award Agreement (the “ Option Agreement ”) and Notice of Stock Option Award (the “ Notice ”) dated ____________, ____. Unless otherwise defined herein, the terms defined in the Option Agreement shall have the same defined meanings in this Exercise Notice.
2. Representations of the Grantee . The Grantee acknowledges that the Grantee has received, read and understood the Notice and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
3. Rights as Stockholder . Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued.
The Grantee shall enjoy rights as a stockholder until such time as the Grantee disposes of the Shares or the Company. Upon such exercise, the Grantee shall have no further rights as a holder of the Shares so purchased except the right to receive payment for the Shares so purchased in accordance with the provisions of the Option Agreement, and the Grantee shall forthwith cause the certificate(s) evidencing the Shares so purchased to be surrendered to the Company for transfer or cancellation.
4. Delivery of Payment . The Grantee herewith delivers to the Company the full Exercise Price for the Shares, which, to the extent selected, shall be deemed to be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in Section 4(d) of the Option Agreement.
5. Tax Consultation . The Grantee understands that the Grantee may suffer adverse tax consequences as a result of the Grantee’s purchase or disposition of the Shares. The Grantee represents that the Grantee has consulted with any tax consultants the Grantee deems advisable
1
in connection with the purchase or disposition of the Shares and that the Grantee is not relying on the Company for any tax advice.
6. Taxes . The Grantee agrees to satisfy all applicable non-U.S., federal, state and local income and employment tax withholding obligations and herewith delivers to the Company the full amount of such obligations or has made arrangements acceptable to the Company to satisfy such obligations.
7. Restrictive Legends . The Grantee understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by the Company or by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
8. Successors and Assigns . The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon the Grantee and his or her heirs, executors, administrators, successors and assigns.
9. Construction . The captions used in this Exercise Notice are inserted for convenience and shall not be deemed a part of this agreement for construction or interpretation. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
10. Administration and Interpretation . The Grantee hereby agrees that any question or dispute regarding the administration or interpretation of this Exercise Notice shall be submitted by the Grantee or by the Company to the Board. The resolution of such question or dispute by the Board shall be final and binding on all persons.
11. Governing Law; Severability . This Exercise Notice is to be construed in accordance with and governed by the internal laws of the State of Delaware without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Delaware to the rights and duties of the parties. Should any
2
provision of this Exercise Notice be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.
12. Notices . Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, upon deposit for delivery by an internationally recognized express mail courier service or upon deposit in the United States mail by certified mail (if the parties are within the United States), with postage and fees prepaid, addressed to the other party at its address as shown below beneath its signature, or to such other address as such party may designate in writing from time to time to the other party.
13. Further Instruments . The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this agreement.
14. Entire Agreement . The Notice and the Option Agreement are incorporated herein by reference and together with this Exercise Notice constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee’s interest except by means of a writing signed by the Company and the Grantee. Nothing in the Notice the Option Agreement and this Exercise Notice (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties.
|
Submitted by: |
Accepted by: |
|
GRANTEE: |
ALJ REGIONAL HOLDINGS, INC. |
|
|
By: |
|
(Signature) |
Title: |
|
Address : |
Address : |
|
|
244 Madison Avenue PMB #358
New York, New York, 10016
|
3
INVESTMENT REPRESENTATION STATEMENT
|
GRANTEE: |
|
|
COMPANY: |
ALJ REGIONAL HOLDINGS, INC. |
|
SECURITY |
COMMON STOCK |
|
AMOUNT: |
|
|
DATE: |
|
In connection with the purchase of the above‑listed Securities, the undersigned Grantee represents to the Company the following:
(a) Grantee is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. Grantee is acquiring these Securities for investment for Grantee’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act of 1933, as amended (the “ Securities Act ”).
(b) Grantee acknowledges and understands that the Securities constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon among other things, the bona fide nature of Grantee’s investment intent as expressed herein. Grantee further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Grantee further acknowledges and understands that the Company is under no obligation to register the Securities. Grantee understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company.
(c) Grantee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non‑public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to the Grantee, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any market stand‑off agreement may require) the Securities exempt under Rule 701 may be resold, except in the case of affiliates,
1
such Securities may be resold subject to the satisfaction of the applicable conditions specified by Rule 144, including: (1) the availability of certain public information about the Company, (2) the amount of Securities being sold during any three month period not exceeding specified limitations, (3) the resale being made in an unsolicited “broker’s transaction,” in transactions directly with a “market maker” or “riskless principal transactions” (as said terms are defined under the Securities Exchange Act of 1934) and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time of sale of the Securities, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which may require: the availability of current public information about the Company; the resale to occur more than a specified period after the purchase and full payment (within the meaning of Rule 144) for the Securities; and, in the case of the sale of Securities by an affiliate, the satisfaction of the conditions set forth in sections (2), (3) and (4) of the paragraph immediately above.
(d) Grantee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Grantee understands that no assurances can be given that any such other registration exemption will be available in such event.
(e) Grantee represents that the Grantee is a resident of the state of ____________.
|
|
Signature of Grantee: |
|
|
|
|
|
|
|
|
|
|
|
Date : |
|
, |
|
|
|
|
|
|
|
|
|
|
|
|
|
2