Attached files
file | filename |
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10-K - FORM 10-K - CALAVO GROWERS INC | v58339e10vk.htm |
EX-32 - EX-32 - CALAVO GROWERS INC | v58339exv32.htm |
EX-31.2 - EX-31.2 - CALAVO GROWERS INC | v58339exv31w2.htm |
EX-23.1 - EX-23.1 - CALAVO GROWERS INC | v58339exv23w1.htm |
EX-31.1 - EX-31.1 - CALAVO GROWERS INC | v58339exv31w1.htm |
Exhibit 10.18
CALAVO GROWERS, INC.
2011 MANAGEMENT INCENTIVE PLAN
2011 MANAGEMENT INCENTIVE PLAN
ARTICLE I
PURPOSE AND EFFECTIVE DATE
PURPOSE AND EFFECTIVE DATE
Section 1.1 Purpose. The purpose of this 2011 Management Incentive Plan is to promote
the interests of Calavo Growers, Inc. and its shareholders by (a) attracting, retaining and
motivating directors, officers, employees and consultants (including prospective directors,
officers, employees and consultants) of the Company and its Affiliates and (b) enabling such
individuals to participate in the growth and financial success of the Company. Capitalized terms
in this Article I and in other Articles of the Plan have the respective meanings for such terms
that are set forth in Article II.
Section 1.2 Effective Date; Shareholder Approval Required. The effective date of the
Plan is December 9, 2010 (the Effective Date), which is the date on which the Plan was
approved and adopted by the Board. Notwithstanding the preceding sentence, the Plan is subject to
approval by the Companys shareholders at the 2011 annual meeting of the Companys shareholders.
Section 1.3 Expiration Date. No Award shall be granted under the Plan after the tenth
anniversary of the Effective Date. All Awards granted on or prior to the tenth anniversary of the
Effective Date will continue in effect after such tenth anniversary subject to the terms of the
Plan and of the Award Agreements pertaining to such Awards.
Section 1.4 Awards Under Other Company Plans. Following approval of the Plan by the
Companys shareholders, no new awards shall be made under the Companys 2005 Stock Incentive Plan
or 2002 Stock Purchase Plan for Officers and Employees, provided that outstanding awards under such
plans will continue in effect.
ARTICLE II
DEFINITIONS AND CONSTRUCTION
DEFINITIONS AND CONSTRUCTION
Section 2.1 Definitions. As used in the Plan, the following terms shall have the
meanings set forth below:
(a) Affiliate means (1) any Subsidiary of the Company or other entity that, directly
or indirectly, is controlled by, controls or is under common control with, the Company or (2) any
other entity in which the Company has a significant equity ownership interest, in either case as
determined by the Committee.
(b) Annual Individual Plan Share Limit has the meaning set forth in Section 4.1(b).
(c) Award means any award that is permitted under Article V and granted under the
Plan.
(d) Award Agreement means any written or electronic agreement or other instrument or
document evidencing any Award, which may (but need not) require execution or acknowledgment by a
Participant.
(e) Beneficial Owner (including all variations of such term) has the meaning set
forth in Rule 13d-3 under the Exchange Act.
(f) Board means the Board of Directors of the Company.
(g) Cash Incentive Award means an Award (1) which is granted pursuant to Section
10.1, (2) which may be settled only in cash, and (3) the potential value of which is set by the
Committee and is not calculated based on the Fair Market Value of a Share.
(h) Change of Control has the meaning set forth in Section 13.1.
(i) Code means the Internal Revenue Code of 1986, as amended from time to time, or
any successor statute, and the Treasury Regulations promulgated under the Code.
(j) Committee means the Compensation Committee of the Board. The Committee shall
consist of two or more members of the Board who are appointed to the Committee by the Board,
subject to the power of the Board to remove Committee members and to appoint new Committee members.
Each member of the Committee shall be (1) an outside director within the meaning of Section
162(m) of the Code, (2) a non-employee director within the meaning of Rule 16b-3 under the
Exchange Act, and (3) an independent director under applicable rules and regulations of NASDAQ or
any other national securities exchange which may subsequently serve as the primary trading market
for the Shares. In addition, each member of the Committee must be independent under any rules
and regulations governing the composition of compensation committees that may be adopted after the
Effective Date by the SEC or by NASDAQ (or any other national securities exchange which may
subsequently serve as the primary trading market for the Shares) pursuant to Section 10C(a) of the
Exchange Act. The failure of the Committee to be comprised in the manner described in the two
preceding sentences shall not, however, affect the validity of any action of the Committee
(including the grant of any Award) that otherwise complies with the terms of the Plan.
(k) Company means Calavo Growers, Inc., a California corporation, together with any
successor under applicable laws, rules and regulations to Calavo Growers, Inc. by reason of a
merger, consolidation or other transaction.
(l) Effective Date has the meaning set forth in Section 1.2.
(m) Exchange Act means the Securities Exchange Act of 1934, as amended from time to
time, or any successor statute, and the rules and regulations promulgated under the Exchange Act.
(n) Exercise Price means (1) in the case of each Option, the price specified in the
applicable Award Agreement as the price-per-Share at which Shares may be purchased pursuant to such
Option or (2) in the case of each SAR, the price specified in the applicable
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Award Agreement as the reference price-per-Share used to calculate the amount payable to the
applicable Participant pursuant to such SAR.
(o) Fair Market Value means, except as otherwise provided in the applicable Award
Agreement, (1) with respect to any property other than Shares, the fair market value of such
property determined by such methods or procedures as shall be established from time to time by the
Committee and (2) with respect to Shares as of any date, (x) the closing per-share sales price of
the Shares as reported by NASDAQ for such date (or, if the Shares are listed on any other national
stock exchange or traded in the over-the-counter market, as reported by such other stock exchange
or over-the-counter market for such date) or, if there were no sales on such date, on the closest
preceding date on which there were sales of Shares, or (y) in the event there is no public market
for the Shares on such date, the fair market value of the Shares as determined in good faith by the
Committee.
(p) Incentive Stock Option means an option to purchase Shares from the Company that
(1) is granted under Section 6.1 of the Plan and (2) is intended to qualify for special federal
income tax treatment pursuant to Sections 421 and 422 of the Code, and which is so designated in
the applicable Award Agreement.
(q) NASDAQ means the NASDAQ Stock Market.
(r) Nonqualified Stock Option means an option to purchase Shares from the Company
that (1) is granted under Section 6.1 of the Plan and (2) is not an Incentive Stock Option.
(s) Option means an Incentive Stock Option or a Nonqualified Stock Option or both,
as the context requires.
(t) Participant means any director, officer, employee or consultant (including any
prospective director, officer, employee or consultant) of the Company or any Affiliate who is
eligible for an Award under Section 5.1 and who is selected by the Committee to receive an Award
under the Plan or who receives a Substitute Award pursuant to Section 4.2(c).
(u) Performance Award means any Award designated by the Committee as a Performance
Award pursuant to Section 11.1 of the Plan.
(v) Performance Criteria means the criterion or criteria that the Committee selects
for purposes of establishing the Performance Goal(s) for a Performance Period with respect to any
Performance Award under the Plan.
(w) Performance Formula means, for a Performance Period, the one or more objective
formulas applied against the relevant Performance Goal to determine, with regard to the Performance
Award of a particular Participant, whether all, some portion but less than all, or none of such
Award has been earned for the Performance Period.
(x) Performance Goal means, for a Performance Period, the one or more goals
established by the Committee for the Performance Period based upon the Performance Criteria.
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(y) Performance Period means the one or more Company fiscal years or other shorter
or longer periods of time as the Committee may select over which the attainment of one or more
Performance Goals shall be measured for the purpose of determining a Participants right to a
Performance Award.
(z) Person means an individual, corporation, limited liability company, partnership,
trust, unincorporated organization or other entity.
(aa) Plan means this 2011 Management Incentive Plan, as it may be amended from time
to time.
(bb) Plan ISO Limit has the meaning set forth in Section 4.1(a).
(cc) Plan Share Limit has the meaning set forth in Section 4.1(a).
(dd) Restricted Share means a Share that is granted under Section 8.1 of the Plan
that is subject to certain transfer restrictions, forfeiture provisions and/or other terms
specified in the Plan or in the applicable Award Agreement.
(ee) Restricted Stock Unit means a restricted stock unit Award that is granted under
Section 8.1 of the Plan and is designated as such in the applicable Award Agreement and that
represents an unfunded and unsecured promise to deliver Shares, cash, other securities, other
Awards or other property in accordance with the terms of the applicable Award Agreement.
(ff) SAR means a stock appreciation right Award that is granted under Section 7.1 of
the Plan and that represents an unfunded and unsecured promise to deliver Shares, cash, other
securities, other Awards or other property equal in value to the excess, if any, of the Fair Market
Value per Share over the Exercise Price per Share of the SAR, subject to the terms of the
applicable Award Agreement.
(gg) SEC means the Securities and Exchange Commission or any successor to the SEC
and includes the staff of the SEC.
(hh) Shares means shares of common stock of the Company, $0.001 par value, or such
other securities of the Company (1) into which such shares shall be changed by reason of a
recapitalization, merger, consolidation, split-up, combination, exchange of shares or other similar
transaction or (2) as may be determined by the Committee pursuant to Section 4.2.
(ii) Subsidiary means any entity in which the Company, directly or indirectly,
possesses fifty percent or more of the total combined voting power of all classes of its stock or
other securities.
(jj) Substitute Awards has the meaning set forth in Section 4.2(c).
(kk) Treasury Regulations means all proposed, temporary and final regulations
promulgated under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
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Section 2.2 Construction. In any interpretation of a provision of the Plan, the
masculine gender may include the feminine, and the singular may include the plural, and vice versa.
Headings are given to the Sections and subsections of the Plan solely as a convenience to
facilitate reference. Such headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision of the Plan. Whenever the words
include, includes or including are used in the Plan, they shall be deemed to be followed by
the words but not limited to.
ARTICLE III
PLAN ADMINISTRATION
PLAN ADMINISTRATION
Section 3.1 Administration of the Plan. The Plan shall be administered by the
Committee, except to the limited extent provided in Sections 3.5 and 3.6.
Section 3.2 Authority of the Committee. Subject to the terms of the Plan and
applicable laws, rules and regulations, and in addition to the other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall have full authority to
administer the Plan, including the authority to (a) designate Participants, (b) determine the type
or types of Awards to be granted to each Participant, (c) determine the number of Shares to be
covered by, or with respect to which payments, rights or other matters are to be calculated in
connection with, Awards, (d) determine the terms of Awards, (e) determine the vesting schedules of
Awards and, if certain performance criteria must be attained in order for an Award to vest or be
settled or paid, establish such performance criteria and certify whether, and to what extent, such
performance criteria have been attained, (f) determine whether, to what extent and under what
circumstances, Awards may be settled or exercised in cash, Shares, other securities, other Awards
or other property, or canceled, forfeited or suspended and the method or methods by which Awards
may be settled, exercised, canceled, forfeited or suspended, (g) determine whether, to what extent
and under what circumstances, cash, Shares, other securities, other Awards, other property and
other amounts payable with respect to an Award shall be deferred either automatically or at the
election of the holder of the Award or of the Committee, (h) interpret, administer, reconcile any
inconsistency in, correct any default in and/or supply any omission in, the Plan, any Award or any
Award Agreement, (i) establish, amend, suspend or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the administration of the Plan, (j) accelerate the vesting
or exercisability of, payment for or lapse of restrictions on, Awards, and (k) make any other
determination and take any other action that the Committee deems necessary or desirable for the
administration of the Plan.
Section 3.3 Committee Decisions. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under or with respect to the Plan
or any Award shall be within the discretion of the Committee, may be made at any time and shall be
final, conclusive and binding upon all Persons, including the Company, any Affiliate, any
Participant, any holder or beneficiary of any Award and any shareholder of the Company. Each
designation, determination, interpretation or other decision by the Committee shall require the
affirmative vote or consent of a majority of the members of the Committee.
Section 3.4 Indemnification. Each Board and Committee member shall be indemnified and
held harmless by the Company from and against (a) any loss, cost, liability or
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expense (including attorneys fees) that may be imposed upon or incurred by such Person in
connection with or resulting from any action, suit or proceeding to which such Person may be a
party or in which such Person may be involved by reason of any action taken or omitted to be taken
under the Plan or any Award Agreement and (b) any and all amounts paid by such Person, with the
Companys approval, in settlement of such action, suit or proceeding, or paid by such Person in
satisfaction of any judgment in any such action, suit or proceeding against such Person. The
Company shall have the right, at its own expense, to assume and defend any such action, suit or
proceeding, and, once the Company gives notice of its intent to assume the defense, the Company
shall have sole control over such defense with counsel of the Companys choice. The foregoing
right of indemnification shall not be available to a Board or Committee member to the extent that a
court of competent jurisdiction in a final judgment or other final adjudication, in either case not
subject to further appeal, determines that the acts or omissions of such Person giving rise to the
indemnification claim resulted from such Persons bad faith, gross misconduct, fraud or willful
criminal act or omission or that such right of indemnification is otherwise prohibited by
applicable laws, rules or regulations or by the Companys Articles of Incorporation or Bylaws, in
each case as may be amended from time to time. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which Board or Committee members may be
entitled under the Companys Articles of Incorporation or Bylaws or under applicable laws, rules
and regulations.
Section 3.5 Delegation of Authority. The Committee may delegate to the Companys
Chief Executive Officer, on such terms as the Committee determines in its discretion, the authority
to make grants of Awards to officers, employees and consultants of the Company and its Affiliates
(including any prospective officer, employee or consultant) and all necessary and appropriate
decisions and determinations with respect to such grants of Awards. Notwithstanding the preceding
sentence, the Chief Executive Officer shall under no circumstances have the authority to make
Awards to any officer or employee who is (or who is expected to be) (a) subject to Section 16 of
the Exchange Act or (b) a covered employee within the meaning of Section 162(m) of the Code. The
Committee may revoke any such delegation of authority at any time.
Section 3.6 Awards by the Board to Non-Employee Directors. Notwithstanding anything
to the contrary contained in the Plan, the Board may, in its discretion, at any time and from time
to time, grant Awards to directors who are not employees of the Company or any of its Affiliates or
administer the Plan with respect to such Awards. In any such case, the Board shall have all of the
authority granted to the Committee under the Plan with respect to such Awards and references in the
Plan to the Committee shall instead refer to the Board with respect to such Awards to non-employee
directors.
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ARTICLE IV
SHARES AND CASH SUBJECT TO THE PLAN
SHARES AND CASH SUBJECT TO THE PLAN
Section 4.1 Shares and Cash Available for Awards.
(a) Subject to adjustment as provided in Section 4.2, the maximum aggregate number of Shares
that may be delivered pursuant to Awards granted under the Plan shall be equal to one million five
hundred thousand (1,500,000) (the Plan Share Limit), of which one million five hundred
thousand (1,500,000) Shares may be delivered pursuant to Incentive Stock Options granted under the
Plan (the Plan ISO Limit). Subject to adjustment as provided in Section 4.2, each Share
with respect to which an Award that can be settled in Shares is granted under the Plan shall reduce
the Plan Share Limit by one Share. Awards that are required to be settled in cash shall not reduce
the Plan Share Limit. If any Award granted under the Plan is forfeited (or otherwise expires,
terminates or is canceled without the delivery of all Shares subject to the Award) or is settled
other than wholly by delivery of Shares (including cash settlement), then, in any such case, any
number of Shares subject to such Award that were not issued with respect to such Award shall not be
treated as issued for purposes of this Section 4.1 and the Plan Share Limit shall be increased by
such number of Shares. If Shares issued upon exercise, vesting or settlement of an Award, or
Shares owned by a Participant, are surrendered or tendered to the Company in payment of the
Exercise Price of an Award or any taxes required to be withheld in respect of an Award, in each
case in accordance with the terms of the Plan and any applicable Award Agreement, the Plan Share
Limit shall be increased by such number of surrendered or tendered Shares; provided that the Plan
ISO Limit shall not increase as a result of such surrender or tendering.
(b) Subject to adjustment as provided in Section 4.2, (1) in the case of Awards that are
settled in Shares, the maximum aggregate number of Shares with respect to which Awards may be
granted to any Participant in any fiscal year of the Company under the Plan shall be one hundred
fifty thousand (150,000) (the Annual Individual Plan Share Limit), and (2) in the case of
Awards that are settled in cash based on the Fair Market Value of a Share, the maximum aggregate
amount of cash that may be paid pursuant to Awards granted to any Participant in any fiscal year of
the Company under the Plan shall be equal to the per-Share Fair Market Value as of the relevant
vesting, payment or settlement date multiplied by the Annual Individual Plan Share Limit. In the
case of all Awards other than those described in the preceding sentence, the maximum aggregate
amount of cash and other property (valued at its Fair Market Value) other than Shares that may be
paid or delivered pursuant to Awards under the Plan to any Participant in any fiscal year of the
Company shall be equal to four million dollars ($4,000,000).
Section 4.2 Adjustments for Changes in Capitalization and Similar Events.
(a) In the event of any extraordinary dividend or other extraordinary distribution (whether in
the form of cash, Shares, other securities or other property), recapitalization, rights offering,
stock split, reverse stock split, split-up or spin-off, the Committee shall, in the manner
determined by the Committee to be appropriate or desirable, adjust any or all of (1) the number of
Shares or other securities of the Company (or number and kind of other securities or property) with
respect to which Awards may be granted, including the
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Plan Share Limit, the Plan ISO Limit and the Annual Individual Plan Share Limit, and (2) the
terms of any outstanding Award, including the number of Shares or other securities of the Company
(or number and kind of other securities or property) subject to outstanding Awards or to which
outstanding Awards relate and the Exercise Price, if applicable, with respect to any Award. The
Companys annual or quarterly cash dividend on Shares shall not be considered an extraordinary
dividend or other distribution that requires an adjustment described in the preceding sentence.
(b) In the event that the Committee determines that any reorganization, merger, consolidation,
combination, repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company, or other similar
corporate transaction or event (including any Change of Control) affects the Shares such that an
adjustment is determined by the Committee in its discretion to be appropriate or desirable, then
the Committee may (1) in such manner as it may deem appropriate or desirable, adjust any or all of
(x) the number of Shares or other securities of the Company (or number and kind of other securities
or property) with respect to which Awards may be granted, including the Plan Share Limit, the Plan
ISO Limit and the Annual Individual Plan Share Limit, and (y) the terms of any outstanding Award,
including the number of Shares or other securities of the Company (or number and kind of other
securities or property) subject to outstanding Awards or to which outstanding Awards relate and the
Exercise Price, if applicable, with respect to any Award, (2) if deemed appropriate or desirable by
the Committee, make provision for a cash payment to the holder of an outstanding Award in
consideration for the cancellation of such Award, including, in the case of an outstanding Option
or SAR, a cash payment to the holder of such Option or SAR in consideration for the cancellation of
such Option or SAR in an amount equal to the excess, if any, of the Fair Market Value (as of a date
specified by the Committee) of the Shares subject to such Option or SAR over the aggregate Exercise
Price of such Option or SAR, and (3) if deemed appropriate or desirable by the Committee, cancel
and terminate any Option or SAR having a per-Share Exercise Price equal to, or in excess of, the
Fair Market Value of a Share subject to such Option or SAR without any payment or consideration
therefor.
(c) Awards may, in the discretion of the Committee, be granted under the Plan in assumption
of, or in substitution for, outstanding awards previously granted by the Company or any of its
Affiliates or an entity acquired by the Company or any of its Affiliates or with which the Company
or any of its Affiliates combines (Substitute Awards). However, in no event may any
Substitute Award be granted in a manner that would violate the prohibitions on repricing of Options
and SARs, as set forth in Section 12.2. The number of Shares underlying any Substitute Awards
shall be counted against the Plan Share Limit.
ARTICLE V
ELIGIBILITY AND TYPES OF AWARDS
ELIGIBILITY AND TYPES OF AWARDS
Section 5.1 Eligibility. Any director, officer, employee or consultant (including any
prospective director, officer, employee or consultant) of the Company or any of its Affiliates
shall be eligible to be designated as a Participant.
Section 5.2 Types of Awards. Awards may be made under the Plan in the form of (a)
Options, (b) SARs, (c) Restricted Shares, (d) Restricted Stock Units, (e) other equity-based or
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equity-related Awards that the Committee determines are consistent with the purpose of the
Plan and the interests of the Company, (f) Cash Incentive Awards, and (g) Performance Awards.
Awards may be granted in tandem with other Awards. No Incentive Stock Option (other than an
Incentive Stock Option that may be assumed or issued by the Company in connection with a
transaction to which Section 424(a) of the Code applies) may be granted to a person who is
ineligible to receive an Incentive Stock Option under the Code.
ARTICLE VI
OPTIONS
OPTIONS
Section 6.1 Grant. Subject to the provisions of the Plan, the Committee shall have
discretion to determine (a) the Participants to whom Options shall be granted, (b) subject to
Section 4.1, the number of Shares subject to each Option to be granted to each Participant, (c)
whether each Option shall be an Incentive Stock Option or a Nonqualified Stock Option, and (d) the
terms of each Option, including the vesting criteria, term, methods of exercise and methods and
form of settlement. In the case of Incentive Stock Options, the terms of such grants shall be
subject to and comply with such rules as may be prescribed by Section 422 of the Code, including
applicable Treasury Regulations and including the requirement that the recipient of an Incentive
Stock Option must be an employee of the Company or a Subsidiary. Each Option granted under the
Plan shall be a Nonqualified Stock Option unless the applicable Award Agreement expressly states
that the Option is intended to be an Incentive Stock Option. If an Option is intended to be an
Incentive Stock Option, and if, for any reason, such Option (or any portion of such Option) shall
not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option
(or portion of such Option) shall be regarded as a Nonqualified Stock Option appropriately granted
under the Plan, provided that such Option (or portion of such Option) otherwise complies with the
Plans requirements relating to Nonqualified Stock Options.
Section 6.2 Exercise Price. The Exercise Price of each Share covered by each Option
shall be not less than 100% of the Fair Market Value of such Share (determined as of the date the
Option is granted). However, in the case of each Incentive Stock Option granted to an employee
who, at the time of the grant of such Option, owns stock representing more than 10% of the voting
power of all classes of stock of the Company, the per-Share Exercise Price shall be no less than
110% of the Fair Market Value per Share on the date of the grant. Each Option is, unless otherwise
specified by the Committee, intended to qualify as performance-based compensation under Section
162(m) of the Code.
Section 6.3 Vesting and Exercise. Each Option shall be vested and exercisable at such
times, in such manner and subject to such terms as the Committee may, in its discretion, specify in
the applicable Award Agreement. Except as otherwise specified by the Committee in the applicable
Award Agreement, each Option may only be exercised to the extent that it has already vested at the
time of exercise. Except as otherwise specified by the Committee in the applicable Award
Agreement, each Option shall become vested and exercisable with respect to twenty percent of the
Shares subject to such Option on each of the first five anniversaries of the date of grant. Each
Option shall be deemed to be exercised when written or electronic notice of such exercise has been
given to the Company in accordance with the terms of the Award by the person entitled to exercise
the Award and full payment pursuant to Section 6.4 for the Shares with respect to which the Award
is exercised has been received by the Company. Exercise of
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each Option in any manner shall result in a decrease in the number of Shares that thereafter
may be available for sale under the Option. The Committee may impose such conditions with respect
to the exercise of each Option, including any conditions relating to the application of federal or
state securities laws, rules and regulations, as it may deem necessary or advisable.
Section 6.4 Payment.
(a) No Shares shall be delivered pursuant to any exercise of an Option until payment in full
of the aggregate Exercise Price of the Shares is received by the Company and the Participant has
paid to the Company (or the Company has withheld in accordance with Section 14.12) an amount equal
to any federal, state, local and foreign income and employment taxes required to be withheld. Such
payments may be made in cash or by check payable to the order of the Company or, in the Committees
discretion, (1) by exchanging Shares owned by the Participant (which are not the subject of any
pledge or other security interest), (2) if there shall be a public market for the Shares at such
time, subject to such rules as may be established by the Committee, through delivery of irrevocable
instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option
and to deliver cash promptly to the Company (commonly referred to as a broker-assisted cashless
Option exercise), (3) by having the Company withhold Shares from the Shares otherwise issuable
pursuant to the exercise of the Option, or (4) through any other method (or combination of methods)
as approved by the Committee; provided that the combined value of all cash and cash equivalents and
the Fair Market Value of any such Shares so tendered to the Company, together with any Shares
withheld by the Company in accordance with this Section 6.4 or Section 14.12, as of the date of
such tender, is at least equal to such aggregate Exercise Price and the amount of any federal,
state, local or foreign income or employment taxes required to be withheld, if applicable.
(b) Wherever in the Plan or any Award Agreement a Participant is permitted to pay the Exercise
Price of an Option or taxes relating to the exercise of an Option by delivering Shares, the
Participant may, subject to procedures satisfactory to the Committee, satisfy such delivery
requirement by presenting proof of beneficial ownership of such Shares, in which case the Company
shall treat the Option as exercised without further payment and shall withhold such number of
Shares from the Shares acquired by the exercise of the Option.
Section 6.5 Termination. Except as otherwise set forth in the applicable Award
Agreement, each Option shall automatically terminate, and shall cease to be exercisable, upon the
earlier of (a) the tenth anniversary of the date the Option is granted and (b) ninety days after
the date the Participant who is holding the Option ceases for any reason to be a director, officer,
employee or consultant of the Company or one of its Affiliates, and vesting of the Option shall
automatically terminate as of the date that the Participants service as a director, officer,
employee or consultant terminates. In no event may an Option be exercisable after the tenth
anniversary of the date the Option is granted.
Section 6.6 Requirement of Notification Upon Disqualifying Disposition Under Section
421(b) of the Code. If any Participant shall make any disposition of Shares delivered pursuant
to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of
the Code (relating to certain disqualifying dispositions), such Participant shall notify the
Company of such disposition within ten days after the disposition.
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ARTICLE VII
STOCK APPRECIATION RIGHTS
STOCK APPRECIATION RIGHTS
Section 7.1 Grant. Subject to the provisions of the Plan, the Committee shall have
discretion to determine (a) the Participants to whom SARs shall be granted, (b) subject to Section
4.1, the number of SARs to be granted to each Participant, (c) the Exercise Price of the SARs, (d)
whether the SARs will be granted in tandem with other Awards, and (e) the terms of each SAR,
including the vesting criteria, term, methods of exercise and methods and form of settlement.
Section 7.2 Exercise Price. The Exercise Price of each Share covered by an SAR shall
be not less than 100% of the Fair Market Value of such Share (determined as of the date the SAR is
granted). Each SAR is, unless otherwise specified by the Committee, intended to qualify as
performance-based compensation under Section 162(m) of the Code.
Section 7.3 Vesting and Exercise. Each SAR shall entitle the Participant to receive
an amount upon exercise equal to the excess, if any, of the Fair Market Value of a Share on the
date of exercise of the SAR over the Exercise Price of the SAR. The Committee shall determine, in
its discretion, whether an SAR shall be settled in cash, Shares, other securities, other Awards,
other property or a combination of any of the foregoing. Each SAR shall be vested and exercisable
at such times, in such manner and subject to such terms as the Committee may, in its discretion,
specify in the applicable Award Agreement or thereafter. Except as otherwise specified by the
Committee in the applicable Award Agreement, each SAR shall become vested with respect to twenty
percent of the Shares subject to such SAR on each of the first five anniversaries of the date of
grant.
Section 7.4 Termination. Except as otherwise set forth in the applicable Award
Agreement, each SAR shall automatically terminate, without any payment, upon the earlier of (a) the
tenth anniversary of the date the SAR is granted and (b) ninety days after the date the Participant
who is holding the SAR ceases for any reason to be a director, officer, employee or consultant of
the Company or one of its Affiliates. In no event may an SAR be exercisable after the tenth
anniversary of the date the SAR is granted.
ARTICLE VIII
RESTRICTED SHARES AND RESTRICTED STOCK UNITS
RESTRICTED SHARES AND RESTRICTED STOCK UNITS
Section 8.1 Grant. Subject to the provisions of the Plan, the Committee shall have
discretion to determine (a) the Participants to whom Restricted Shares and Restricted Stock Units
shall be granted, (b) subject to Section 4.1, the number of Restricted Shares and Restricted Stock
Units to be granted to each Participant, (c) the duration of the period during which, and the
conditions, if any, under which, the Restricted Shares and Restricted Stock Units may vest or may
be forfeited to the Company, and (d) the terms of each such Award, including the vesting criteria,
term, methods of exercise and methods and form of settlement.
Section 8.2 Transfer Restrictions. No Restricted Share may be sold, assigned,
transferred, pledged or otherwise encumbered except as provided in the Plan or as may be provided
in the applicable Award Agreement. Each Restricted Share may be evidenced in such
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manner as the
Committee shall determine. If certificates representing Restricted
Shares are registered in the name of the applicable Participant, such certificates must bear an
appropriate legend referring to the terms and restrictions applicable to such Restricted Shares,
and the Company may, at its discretion, retain physical possession of such certificates until such
time as all applicable restrictions lapse.
Section 8.3 Payment and Lapse of Restrictions.
(a) Each Restricted Stock Unit shall be granted with respect to a specified number of Shares
(or a number of Shares determined pursuant to a specified formula) or shall have a value equal to
the Fair Market Value of a specified number of Shares (or a number of Shares determined pursuant to
a specified formula). Restricted Stock Units shall be paid in cash, Shares, other securities,
other Awards or other property, as determined in the discretion of the Committee, upon the lapse of
applicable restrictions, or otherwise in accordance with the applicable Award Agreement. Except as
otherwise specified by the Committee in the applicable Award Agreement, Restricted Shares and
Restricted Stock Units shall become vested with respect to twenty percent of the Shares subject to
such Awards on each of the first five anniversaries of the date of grant. If a Restricted Share or
a Restricted Stock Unit is intended to qualify as performance-based compensation under Section
162(m) of the Code, all requirements set forth in Article XI must be satisfied in order for the
applicable restrictions to lapse.
(b) Except as otherwise set forth in the applicable Award Agreement, (1) each Restricted Share
and Restricted Stock Unit shall cease to vest on the date that the Participant who holds the
Restricted Share or Restricted Stock Unit ceases for any reason to be a director, officer, employee
or consultant of the Company or one of its Affiliates, and (2) the Participants rights with
respect to the unvested portion of each Restricted Share or Restricted Stock Unit shall terminate
automatically terminate as of the date that the Participants service as a director, officer,
employee or consultant terminates.
Section 8.4 Requirement of Consent and Notification of Election Under Section 83(b) of the
Code. No election under Section 83(b) of the Code (to include in gross income in the year of
transfer the amounts specified in Section 83(b) of the Code) or under a similar provision of law
may be made unless expressly permitted by the terms of the applicable Award Agreement or by action
of the Committee in writing prior to the making of such election. If an Award recipient, in
connection with the acquisition of Shares under the Plan or otherwise, is expressly permitted under
the terms of the applicable Award Agreement or by such Committee action to make such an election
and the Participant makes the election, the Participant shall notify the Committee of such election
within ten days after filing notice of the election with the Internal Revenue Service (or any
successor) or other governmental authority, in addition to any filing and notification required
pursuant to rules and regulations issued under Section 83(b) of the Code or any other applicable
provision.
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ARTICLE IX
OTHER STOCK-BASED AWARDS; DIVIDENDS AND DIVIDEND EQUIVALENTS
OTHER STOCK-BASED AWARDS; DIVIDENDS AND DIVIDEND EQUIVALENTS
Section 9.1 Other Stock-Based Awards. Subject to the provisions of the Plan, the
Committee shall have discretion to grant to Participants other equity-based or equity-related
Awards (including both fully vested Shares and unfunded and unsecured covenants by the Company
to deliver Shares in accordance with the terms of the applicable Award Agreements, and whether
payable in cash, equity or otherwise) in such amounts and subject to such terms as the Committee
shall determine. If such other equity-based or equity-related Awards are intended to qualify as
performance-based compensation under Section 162(m) of the Code, all requirements set forth in
Article XI must be satisfied with respect to such Awards.
Section 9.2 Dividends and Dividend Equivalents. In the discretion of the Committee,
an Award Agreement pertaining to Restricted Shares, Restricted Stock Units or any other Award
(excluding an Option, an SAR or a Cash Incentive Award) may provide the Participant with the right
to receive dividends or dividend equivalents, payable in cash, Shares, other securities, other
Awards or other property, on a current or deferred basis, on such terms as may be specified in the
Award Agreement, including, (a) payment directly to the Participant, (b) withholding of such
amounts by the Company subject to vesting of the Award, or (c) reinvestment in additional Shares,
Restricted Shares or other Awards.
ARTICLE X
CASH INCENTIVE AWARDS
CASH INCENTIVE AWARDS
Section 10.1 Grant. Subject to the provisions of the Plan, the Committee shall have
discretion to determine (a) the Participants to whom Cash Incentive Awards shall be granted, (b)
subject to Section 4.1, the amount of cash that is payable under the Cash Incentive Award granted
to each Participant, (c) the duration of the period during which, and the conditions, if any, under
which, the Cash Incentive Awards may vest or may be forfeited to the Company, and (d) the other
terms of the Cash Incentive Awards. The Committee may, in its discretion, set performance goals or
other payment conditions that, depending on the extent to which they are met during a specified
performance period, shall determine the amount of cash that shall be paid to each Participant under
his or her Cash Incentive Award.
Section 10.2 Earning of Cash Incentive Awards. Subject to the provisions of the Plan,
after any applicable vesting or performance period has ended, the holder of a Cash Incentive Award
shall be entitled to receive a payment of the amount of cash earned by the Participant over the
specified vesting or performance period, to be determined by the Committee in its discretion, as a
function of the extent to which the corresponding performance goals or other conditions to payment
have been achieved.
Section 10.3 Treatment of Cash Incentive Awards as Performance Awards. Each Cash
Incentive Award that is intended to qualify as performance-based compensation under Section
162(m) of the Code must satisfy the Performance Award requirements set forth in Article XI in order
for a Participant to be entitled to payment with respect to the Cash Incentive Award.
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ARTICLE XI
PERFORMANCE AWARDS
PERFORMANCE AWARDS
Section 11.1 General.
(a) Unless otherwise specified by the Committee, each Cash Incentive Award shall be intended
by the Committee to qualify as performance-based compensation under Section 162(m) of the Code
and all requirements set forth in this Article XI for a Performance Award must be satisfied in
order for a Participant to be entitled to payment with respect to a Cash Incentive Award. The
Committee has discretion to specify at the time of the grant of a Cash Incentive Award that it is
not intended to qualify as performance-based compensation under Section 162(m) of the Code, in
which event the requirements of Article XI shall not apply to the Cash Incentive Award.
(b) The Committee shall have the authority, at the time of grant of any Award other than a
Cash Incentive Award, to designate such Award as a Performance Award in order for such Award to
qualify as performance-based compensation under Section 162(m) of the Code, in which event the
requirements set forth in this Article XI must be satisfied with respect to such Award.
Notwithstanding the preceding sentence, in accordance with Section 162(m) of the Code, including
applicable Treasury Regulations, Options and SARs granted under the Plan shall not be required to
satisfy the requirements of this Article XI that are applicable to Performance Awards.
Section 11.2 Eligibility. The Committee shall, in its discretion, designate within
the first ninety days of a Performance Period (or, if shorter, within the maximum period allowed
under Section 162(m) of the Code) which Participants shall be eligible to receive Performance
Awards in respect of such Performance Period. Designation of a Participant as being eligible to
receive a Performance Award for a particular Performance Period shall not require designation of
such Participant as being eligible to receive a Performance Award in any subsequent Performance
Period, and designation of one Person as a Participant eligible to receive a Performance Award
shall not require designation of any other Person as a Participant eligible to receive a
Performance Award in such period or in any other period.
Section 11.3 Discretion of the Committee with Respect to Performance Awards. With
regard to a particular Performance Period, the Committee shall have discretion to select (a) the
length of such Performance Period, (b) the type(s) of Performance Awards to be issued, (c) the
Performance Criteria that shall be used to establish the Performance Goal(s), (d) the kind(s)
and/or level(s) of the Performance Goal(s) that is (are) to apply to the Company or any of its
Subsidiaries, Affiliates, divisions or operational units, or any combination of the foregoing, and
(e) the Performance Formula. Within the first ninety days of a Performance Period (or, if shorter,
within the maximum period allowed under Section 162(m) of the Code), the Committee shall, with
regard to the Performance Awards to be issued for such Performance Period, exercise its discretion
with respect to each of the matters enumerated in the immediately preceding sentence and record the
same in writing.
Section 11.4 Performance Criteria. The Performance Criteria that shall be used to
establish the Performance Goal(s) with respect to Performance Awards shall be based on the
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attainment of specific levels of performance of the Company or any of its Subsidiaries, Affiliates,
divisions or operational units, or any combination of the foregoing, calculated over a period of
one fiscal year or any other shorter or longer period specified by the Committee, and shall be
limited to the following: (a) net income; (b) income before income taxes; (c) net income per
Share; (d) earnings before interest, taxes, depreciation and/or amortization; (e) increases in
Share price; (f) sales (including specified types or categories of sales); (g) gross or net
margin; (h) operating income; (i) reductions in costs and expenses (including specified types or
categories of costs and expenses); (j) cash flow (including specified types or categories of cash
flow); (k) return on shareholders equity or invested capital; (l) return on assets or sales; (m)
working capital; (n) objective measures of productivity or operating efficiency; (o) market share
(in the aggregate or by segment); (p) amount or performance of business acquisitions; (q) market
capitalization; and (r) book value. Such Performance Criteria may be applied on an absolute basis,
be relative to one or more peer companies of the Company or indices or any combination thereof or,
if applicable, be computed on an accrual or cash accounting basis. To the extent required under
Section 162(m) of the Code, the Committee shall, within the first ninety days of the applicable
Performance Period (or, if shorter, within the maximum period allowed under Section 162(m) of the
Code), define in an objective manner the method of calculating the Performance Criteria it selects
to use for such Performance Period.
Section 11.5 Modification of Performance Goals. The Committee is authorized at any
time during the first ninety days of a Performance Period (or, if shorter, within the maximum
period allowed under Section 162(m) of the Code), or any time thereafter (but only to the extent
the exercise of such authority after such ninety-day period, or such shorter period, if applicable,
would not cause the Performance Awards granted to any Participant for the Performance Period to
fail to qualify as performance-based compensation under Section 162(m) of the Code), in its
discretion, to adjust or modify the calculation of a Performance Goal for such Performance Period
to the extent permitted under Section 162(m) of the Code (a) in the event of, or in anticipation
of, any unusual or extraordinary corporate item, transaction, event or development affecting the
Company, or any of its Affiliates, Subsidiaries, divisions or operating units (to the extent
applicable to such Performance Goal) or (b) in recognition of, or in anticipation of, any other
unusual or nonrecurring events affecting the Company or any of its Affiliates, Subsidiaries,
divisions or operating units (to the extent applicable to such Performance Goal), or the financial
statements of the Company or any of its Affiliates, Subsidiaries, divisions or operating units (to
the extent applicable to such Performance Goal), or of changes in applicable rules, rulings,
regulations or other requirements of any governmental body or securities exchange, accounting
principles, law or business conditions.
Section 11.6 Payment of Performance Awards.
(a) Condition to Receipt of Payment. Unless otherwise specified in the applicable
Award Agreement, a Participant must be employed by the Company or one of its Subsidiaries on the
last day of a Performance Period to be eligible for any payment in respect of a Performance Award
for such Performance Period. Notwithstanding the foregoing and to the extent permitted by Section
162(m) of the Code, in the discretion of the Committee, a full or partial Performance Award may be
paid to a Participant who has retired, or has terminated his or her employment due to a long-term
disability, in accordance with Company policies prior to the
15
last day of the Performance Period for
which a Performance Award is made or to the designee or estate of a Participant who has died prior
to the last day of a Performance Period.
(b) Limitation. Except as otherwise permitted by Section 162(m) of the Code, a
Participant shall be eligible to receive payments in respect of a Performance Award only to the
extent that (1) the Performance Goal(s) for the relevant
Performance Period is achieved and certified by the Committee in accordance with Section 11.6(c) and (2) the Performance Formula
as applied against such Performance Goal(s) determines that all or some portion of such
Participants Performance Award has been earned for such Performance Period.
(c) Certification. Following the completion of a Performance Period and prior to the
payment of any Performance Awards, the Committee shall certify in writing whether, and to what
extent, the Performance Goals for the Performance Period have been achieved and, if so, certify in
writing that amount of the Performance Awards earned for the period based upon the Performance
Formula. The Committee shall then determine the actual amount of each Participants Performance
Award for the Performance Period and, in so doing, may apply negative discretion as authorized by
Section 11.6(d).
(d) Negative Committee Discretion. In determining the actual amount of an individual
Performance Award for a Performance Period, the Committee may, in its discretion, reduce or
eliminate the amount of the Award earned in the Performance Period, even if applicable Performance
Goals have been attained, so long as the exercise of such discretion by the Committee would not
cause the Performance Award to fail to qualify as performance-based compensation under Section
162(m) of the Code.
(e) Other Committee Discretion. Except as otherwise permitted by Section 162(m) of
the Code, in no event shall any discretionary authority granted to the Committee by the Plan be
used to (1) grant or provide payment in respect of Performance Awards for a Performance Period if
the Performance Goals for such Performance Period have not been attained, (2) increase a
Performance Award for any Participant at any time after the first ninety days of the Performance
Period (or, if shorter, the maximum period allowed under Section 162(m) of the Code, or (3)
increase the amount of a Performance Award above the maximum amount payable under Section 4.1(b) of
the Plan.
(f) Timing of Performance Award Payments; Shareholder Approval Required.
(i) The Performance Awards earned for a Performance Period shall be paid to Participants as
soon as administratively possible following completion of the certification required by Section
11.6(c). However, in no event shall any Performance Award granted for a Performance Period be paid
later than the fifteenth day of the third month following the end of the Performance Period.
(ii) Notwithstanding the foregoing provisions of this Article XI, no Performance Award shall
be paid to any Participant unless and until the approval by the Companys shareholders regarding
the Plan that is required by Section 162(m) of the Code has been obtained.
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ARTICLE XII
AMENDMENTS AND TERMINATION
AMENDMENTS AND TERMINATION
Section 12.1 Amendment or Termination of the Plan. The Plan (or any portion of it)
may be amended, suspended or terminated by the Board without the approval of the shareholders of
the Company, except that shareholder approval shall be required for any
amendment that would (a) increase the Plan Share Limit or increase the maximum number of
Shares that may be delivered pursuant to Incentive Stock Options granted under the Plan, provided,
however, that any adjustment under Section 4.2 shall not constitute an increase for purposes of
this Section 12.1, (b) change the eligibility requirements set forth in Section 5.1 for
participation in the Plan, (c) result in an amendment, cancellation or other action described in
clause (a), (b) or (c) of the second sentence of Section 12.2, or (d) amend the Plan in any other
manner that requires shareholder approval under Section 162(m) of the Code, under the rules of
NASDAQ (or any successor exchange or quotation system on which the Shares may be listed or quoted)
or under any other applicable laws, rules or regulations. No amendment or termination of the Plan
may, without the consent of the Participant to whom any Award shall have been granted, materially
and adversely affect the rights of such Participant under such Award, unless otherwise provided by
the Committee in the applicable Award Agreement.
Section 12.2 Amendments to Awards; No Repricing of Awards. The Committee may waive
any conditions or rights under, amend any terms or conditions of, or alter, suspend, discontinue,
cancel or terminate any Award that has been granted under the Plan, prospectively or retroactively;
provided, however, that, except as set forth in the Plan or the applicable Award Agreement, any
such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that
would materially and adversely impair the rights of the Participant who holds the Award shall not
to that extent be effective without the consent of the Participant. Notwithstanding the preceding
sentence, in no event may any Option or SAR (a) be amended to decrease the Exercise Price of the
Option or SAR, (b) be cancelled at a time when its Exercise Price exceeds the Fair Market Value of
the underlying Shares in exchange for another Option or SAR or any Restricted Share, Restricted
Stock Unit, other equity-based Award, award under any other equity-compensation plan or any cash
payment, or (c) be subject to any action that would be treated, for accounting purposes, as a
repricing of such Option or SAR, unless such amendment, cancellation or action is approved by the
Companys shareholders. For the avoidance of doubt, an adjustment to the Exercise Price of an
Option or SAR that is made in accordance with Section 4.2 or Section 13.2 shall not be considered a
reduction in the Exercise Price or a repricing of such Option or SAR.
ARTICLE XIII
CHANGE OF CONTROL OF THE COMPANY
CHANGE OF CONTROL OF THE COMPANY
Section 13.1 Definition. Change of Control means the occurrence of any of
the following events, unless a different definition of Change of Control is set forth in the
applicable Award Agreement:
(a) The completion of a merger or consolidation of the Company with any other corporation or
entity, excluding a merger or consolidation which results in the voting securities of the Company
outstanding immediately prior to the completion of such merger or
17
consolidation continuing to
represent (either by remaining outstanding or by being converted into voting securities of the
surviving corporation or other entity or its parent) more than fifty percent of the total voting
power represented by the voting securities of the Company or such surviving corporation or other
entity or its parent outstanding immediately after the completion of the merger or consolidation;
(b) The completion of the sale or other disposition of all, or substantially all, of the
Companys assets (in one or a series of related transactions) to any corporation or other entity or
Person or group (as such term is used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act),
excluding any sale or other disposition of the Companys assets in a merger or consolidation
described in paragraph (a) above that does not constitute a Change of Control; or
(c) Any Person or group (as such term is used in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act), other than the Company, becomes the Beneficial Owner of outstanding securities of
the Company representing more than fifty percent of the total voting power of the then-outstanding
voting securities of the Company if, within two years after such fifty percent ownership threshold
has been exceeded, a merger or consolidation of the Company with or into such Person or group (or
with or into an Affiliate of such Person or group) is completed, with the date of the Change of
Control for purposes of this paragraph (c) to be the date of the completion of such merger or
consolidation.
Section 13.2 Effect of a Change of Control. Unless otherwise provided in the
applicable Award Agreements or unless otherwise determined by the Committee, if a Change of Control
occurs and if the agreements entered into by the Company with respect to the Change of Control do
not provide for, on a basis determined by the Committee to be appropriate, (x) the continuation in
full force and effect of the applicable Awards that are outstanding as of the Change of Control,
(y) the assumption in full by the Companys successor in the Change of Control of such Awards that
are outstanding as of the Change of Control, or (z) the substitution by the Companys successor in
the Change of Control for such Awards of new awards with substantially similar terms, including
securities of the successor corporation or its parent corporation (as defined in Section 424(e)
of the Code) with appropriate adjustments as to the number and kinds of securities and exercise
prices with respect to Options, SARs, Restricted Shares and Restricted Stock Units, then:
(a) Any outstanding Options or SARs then held by Participants that are unexercisable or
otherwise unvested shall automatically be deemed exercisable or otherwise vested, as the case may
be, as of five days prior to the Change of Control and shall terminate on the date of the Change of
Control;
(b) All Awards designated as Performance Awards shall be paid out as if the date of the Change
of Control were the last day of the applicable Performance Period and target performance levels
had been attained; provided, however, that the Committee shall have discretion to cancel, without
payment and effective as of the Change of Control, any or all outstanding Incentive Cash Awards
that constitute Performance Awards if the Change of Control occurs prior to the completion of at
least fifty percent of the Performance Period governing such Incentive Cash Awards; and
18
(c) All other outstanding Awards (i.e., other than Options, SARs and Awards designated as
Performance Awards) then held by Participants that are unexercisable, unvested or still subject to
restrictions or forfeiture, shall automatically be deemed exercisable and vested and all
restrictions and forfeiture provisions related to such Awards shall lapse immediately prior to the
Change of Control.
Section 13.3 Dissolution of the Company. If the Companys shareholders approve the
dissolution of the Company, all then-outstanding Awards under the Plan shall terminate on the date
that the Company files a certificate of dissolution with the California Secretary of State pursuant
to Section 1905 of the California General Corporation Law. At any time after the Companys
shareholders approve the dissolution of the Company but prior to the filing of the certificate of
dissolution, the Committee shall have discretion to make such adjustments to the terms of any or
all outstanding Awards as it determines are appropriate, including providing that (a) any or all
outstanding but unvested Options and SARs shall become vested and exercisable in full for a period
specified by the Committee and (b) any or all outstanding but unvested Restricted Shares and
Restricted Stock Units shall become vested in full.
ARTICLE XIV
GENERAL PROVISIONS
GENERAL PROVISIONS
Section 14.1 Award Agreements. Each Award under the Plan shall be evidenced by an
Award Agreement, in a form approved by the Committee and which shall be delivered to the
Participant and shall specify the terms of the Award including, if so desired by the Committee, the
effect on such Award of the death, disability or termination of employment or service of a
Participant and the effect, if any, of such other events as may be determined by the Committee.
Each Award Agreement shall be subject to, and governed by, all of the terms of the Plan.
Section 14.2 Share Certificates. All certificates for Shares or other securities of
the Company or any Affiliate delivered under the Plan pursuant to any Award or the exercise of any
Award shall be subject to such stop transfer orders and other restrictions as the Committee may
deem advisable under the Plan, the applicable Award Agreement or the rules, regulations and other
requirements of the SEC, NASDAQ or any other stock exchange or quotation system upon which such
Shares or other securities are then listed or quoted and any applicable federal or state laws,
rules and regulations, and the Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions.
Section 14.3 Nontransferability. Except as otherwise specified in the applicable
Award Agreement, during a Participants lifetime each Award (and any rights and obligations under
the Award) shall be exercisable only by the Participant or, if permissible under applicable laws,
rules and regulations, by the Participants legal guardian or representative, and no Award (or any
rights and obligations under the Award) may be assigned, alienated, pledged, attached, sold or
otherwise transferred or encumbered by a Participant otherwise than by will or by the laws of
descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale,
transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate;
provided that (a) the designation of a beneficiary shall not constitute an assignment, alienation,
pledge, attachment, sale, transfer or encumbrance, and (b) the Board or the Committee may adopt
rules permitting the transfer, solely as gifts during the Participants
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lifetime, of Awards to (x)
members of a Participants immediate family or to trusts, family partnerships or similar entities
for the benefit of such immediate family members (such term meaning the Participants spouse,
parent, child, stepchild, grandchild and the spouses of such family members) and (y) charitable
institutions. However, Incentive Stock Options granted under the Plan shall not be transferable in
any way that would violate applicable Treasury Regulations and in no event may any Award (or any
rights and obligations under the Award) be transferred in
any way in exchange for value. All terms of the Plan and all Award Agreements shall be
binding upon any permitted successors and assigns.
Section 14.4 Other Laws; Restrictions on Transfer of Shares. The Committee may refuse
to issue or transfer any Shares or other consideration under an Award if, acting in its discretion,
it determines that the issuance or transfer of such Shares or such other consideration might
violate any applicable law, rule or regulation or entitle the Company to recover a Participants
profits under Section 16(b) of the Exchange Act, and any payment tendered to the Company by a
Participant, other holder or beneficiary in connection with the exercise of such Award shall be
promptly refunded to the relevant Participant, holder or beneficiary. Without limiting the
generality of the foregoing, no Award granted under the Plan shall be construed as an offer to sell
securities of the Company, and no such offer shall be outstanding, unless and until the Committee
in its discretion has determined that any such offer, if made, would be in compliance with all
applicable requirements of federal and state securities laws, rules and regulations.
Section 14.5 No Rights to Awards. No Participant or other Person shall have any claim
to be granted any Award, and there is no obligation for uniformity of treatment of Participants or
holders or beneficiaries of Awards. The terms of Awards and the Committees determinations and
interpretations with respect to Awards need not be the same with respect to each Participant and
may be made selectively among Participants, whether or not such Participants are similarly
situated.
Section 14.6 No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained as a director, officer, employee or consultant of or
to the Company or any Affiliate. Furthermore, the Company or an Affiliate may at any time dismiss
a Participant from employment or discontinue any directorship or consulting relationship, free from
any liability or any claim under the Plan, unless otherwise expressly provided in the applicable
Award Agreement.
Section 14.7 Rights as a Shareholder. No Participant or holder or beneficiary of any
Award shall have any rights as a shareholder with respect to any Shares to be distributed under the
Plan until he or she has become the holder of such Shares. In connection with each grant of
Restricted Shares, except as provided in the applicable Award Agreement, the Participant shall be
entitled to the rights of a shareholder (including the right to vote) in respect of such Restricted
Shares. Except as otherwise provided in Section 4.2 or the applicable Award Agreement, no
adjustments shall be made for dividends or distributions on (whether ordinary or extraordinary, and
whether in cash, Shares, other securities or other property), or other events relating to, Shares
subject to an Award for which the record date is prior to the date such Shares are delivered.
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Section 14.8 No Trust or Fund Created. Neither the Plan nor any Award shall create or
be construed to create a trust or separate fund of any kind or a fiduciary relationship between the
Company or any Affiliate, on the one hand, and a Participant or any other Person, on the other. To
the extent that any Person acquires a right to receive payments from the Company or any Affiliate
pursuant to an Award, such right shall be no greater than the right of any unsecured general
creditor of the Company or such Affiliate.
Section 14.9 No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities
or other property shall be paid or transferred in lieu of any fractional Shares or whether such
fractional Shares or any rights to fractional Shares shall be canceled, terminated or otherwise
eliminated.
Section 14.10 No Limit on Other Compensation Arrangements. Except as provided in
Section 1.4, nothing contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other compensation arrangements, which may, but need not, provide for the
grant of options, restricted stock, shares, other types of equity-based awards and cash incentive
awards (subject to shareholder approval if such approval is required), and such arrangements may be
either generally applicable or applicable only in specific cases.
Section 14.11 Recoupment of Awards.
(a) If, due to the material noncompliance of the Company with any financial reporting
requirement of the United States securities laws, rules and regulations, the Company is required to
prepare an accounting restatement of its financial statements, the Company shall take the following
actions with respect to each Award that was granted under the Plan during the three-year period
preceding the date on which the Company becomes required to prepare such restatement, regardless as
to whether such restatement is attributable to any Participants or other Persons negligence,
fraud or other misconduct:
(i) If an Award is unpaid, unvested or unexercised, the Company shall cancel all or a portion
of the Award, if and to the extent that the Committee determines that the Award to the Participant
was based upon erroneous data contained in the Companys financial statements and was in excess of
the Award that the Participant would have received based upon the Companys restated financial
statements;
(ii) If any Shares have been issued by the Company to the Participant under the Award and have
vested, the Participant shall be required to transfer to the Company, for no consideration, all or
a portion of such Shares or a cash amount equal to the Fair Market Value of such Shares as of the
date of the restated financial statements, if and to the extent that the Committee determines that
the Award of such Shares received by the Participant was based upon erroneous data contained in the
Companys financial statements and was in excess of the Shares that the Participant would have
received based upon the Companys restated financial statements; and
(iii) If an Award has been paid in cash by the Company to the Participant under the Award, the
Participant shall be required to return to the Company, for no
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consideration, all or a portion of
such cash, if and to the extent that the Committee determines that the Award of such cash payment
received by the Participant was based upon erroneous data contained in the Companys financial
statements and was in excess of the cash payment that the Participant would have received based
upon the Companys restated financial statements.
(b) After taking into account any proposed or final rules and regulations that may be issued
by the SEC under Section 10D of the Exchange Act regarding the recovery of
erroneously awarded compensation, the Board shall have the discretion to adopt a written
policy that implements, interprets and enforces the Awards recoupment requirements set forth in
Section 14.11(a), and all Awards made under the Plan shall be subject to any such written policy
that is adopted by the Board. The Board is also authorized to amend any or all of the terms of
Section 14.11(a) following its review of such proposed or final SEC rules and regulations under
Section 10D of the Exchange Act.
(c) An Award Agreement may include restrictive covenants, including non-competition,
non-disparagement and confidentiality conditions or restrictions, that the Participant must comply
with during employment by the Company or an Affiliate or for a specified period thereafter as a
condition to the Participants receipt or retention of all or any portion of an Award.
Section 14.12 Withholding.
(a) Authority to Withhold. A Participant may be required to pay to the Company or any
Affiliate, and the Company or any Affiliate shall have the right and is authorized to withhold from
any Award, from any payment due or transfer made under any Award or under the Plan or from any
compensation or other amount owing to a Participant, the amount (in cash, Shares, other securities,
other Awards or other property) of any applicable withholding taxes in respect of an Award, its
exercise or any payment or transfer under an Award or under the Plan and to take such other action
as may be necessary in the opinion of the Committee or the Company to satisfy all obligations for
the payment of such taxes.
(b) Alternative Ways to Satisfy Withholding Liability. Without limiting the
generality of Section 14.12(a), subject to the Committees discretion, a Participant may satisfy,
in whole or in part, the foregoing withholding liability by delivery of Shares owned by the
Participant (which are not subject to any pledge or other security interest) having a Fair Market
Value equal to such withholding liability or by having the Company withhold from the number of
Shares otherwise issuable pursuant to the exercise of the Option or SAR, or the lapse of the
restrictions on any other Award (in the case of SARs and other Awards, if such SARs and other
Awards are settled in Shares), a number of Shares having a Fair Market Value equal to such
withholding liability.
Section 14.13 Compliance with Section 409A of the Code.
(a) It is intended that the provisions of the Plan shall comply with Section 409A of the Code,
and all provisions of the Plan shall be construed and interpreted in a manner consistent with the
requirements for avoiding taxes or penalties under Section 409A of the Code.
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(b) No Participant or the creditors or beneficiaries of a Participant shall have the right to
subject any deferred compensation (within the meaning of Section 409A of the Code) payable under
the Plan to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment. Except as permitted under Section 409A of the Code, any deferred
compensation (within the meaning of Section 409A of the Code) payable to any Participant or for the
benefit of any Participant under the Plan may not be reduced by, or offset against, any amount
owing by any such Participant to the Company or any of its Affiliates.
(c) If, at the time of a Participants separation from service (within the meaning of Section
409A of the Code), (1) such Participant shall be a specified employee (within the meaning of
Section 409A of the Code and using the identification methodology selected by the Company from time
to time) and (2) the Company shall make a good faith determination that an amount payable pursuant
to an Award constitutes deferred compensation (within the meaning of Section 409A of the Code) the
payment of which is required to be delayed pursuant to the six-month delay rule set forth in
Section 409A of the Code in order to avoid taxes or penalties under Section 409A of the Code, then
the Company shall not pay such amount on the otherwise scheduled payment date but shall instead pay
it on the first business day after such six-month period. Such amount shall be paid without
interest, unless otherwise determined by the Committee, in its discretion, or as otherwise provided
in any applicable employment agreement between the Company and the relevant Participant.
(d) Notwithstanding any provision of the Plan to the contrary, in light of the uncertainty
with respect to the proper application of Section 409A of the Code, the Committee reserves the
right to make amendments to any Award as the Committee deems necessary or desirable to avoid the
imposition of taxes or penalties under Section 409A of the Code. In any case, a Participant shall
be solely responsible and liable for the satisfaction of all taxes and penalties that may be
imposed on such Participant or for such Participants account in connection with an Award
(including any taxes and penalties under Section 409A of the Code), and neither the Company nor any
of its Affiliates shall have any obligation to indemnify or otherwise hold such Participant
harmless from any or all of such taxes or penalties.
Section 14.14 Severability; Successor Statutes.
(a) If any provision of the Plan or any Award is or becomes or is deemed to be invalid,
illegal or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the
Plan or any Award under any law, rule or regulation deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to the applicable law, rule or
regulation, or if it cannot be construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the Award, such provision shall be
construed or deemed stricken as to such jurisdiction, Person or Award and the remainder of the Plan
and any such Award shall remain in full force and effect.
(b) References in the Plan to specific sections of, or rules or regulations under, the Code,
the Exchange Act or any other statute include such sections, rules and regulations as they may be
amended after the Effective Date and include any successor provisions to such cited sections, rules
and regulations.
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Section 14.15 Governing Law. The validity, construction and effect of the Plan and
any rules and regulations relating to the Plan and any Award Agreement shall be determined in
accordance with the internal laws of the State of California, without giving effect to the conflict
of laws provisions of the State of California.
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