exv99w2
Exhibit 99.2
DRUGSTORE.COM, INC.
2008 EQUITY INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Plan are:
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to attract and retain the best available personnel for positions of
substantial responsibility, |
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to provide incentives to individuals who perform services to the Company, and |
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to promote the success of the Company’s business. |
The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units and Performance
Shares as the Administrator may determine.
2. Definitions. As used herein, the following definitions will apply:
(a) “Administrator” means the Board or any of its Committees as will be administering
the Plan, in accordance with Section 4 of the Plan.
(b) “Applicable Laws” means the requirements relating to the administration of
equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the
Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under
the Plan.
(c) “Award” means, individually or collectively, a grant under the Plan of Options,
Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units and
Performance Shares as the Administrator may determine.
(d) “Award Agreement” means the written or electronic agreement setting forth the
terms and provisions applicable to each Award granted under the Plan. The Award Agreement is
subject to the terms and conditions of the Plan.
(e) “Board” means the Board of Directors of the Company.
(f) “Change in Control” means the occurrence of any of the following events:
(i) A change in the ownership of the Company which occurs on the date that any one person, or
more than one person acting as a group, (“Person”) acquires ownership of the stock of the
Company that, together with the stock held by such Person, constitutes more than 50% of the total
voting power of the stock of the Company; provided, however, that for purposes of this subsection
(i), the acquisition of additional stock by any one Person, who is considered to own more
than 50% of the total voting power of the stock of the Company will not be considered a Change
in Control; or
(ii) A change in the effective control of the Company which occurs on the date that a majority
of members of the Board is replaced during any twelve (12) month period by Directors whose
appointment or election is not endorsed by a majority of the members of the Board prior to the date
of the appointment or election. For purposes of this clause (ii), if any Person is considered to
effectively control the Company, the acquisition of additional control of the Company by the same
Person will not be considered a Change in Control; or
(iii) A change in the ownership of a substantial portion of the Company’s assets which occurs
on the date that any Person acquires (or has acquired during the twelve (12) month period ending on
the date of the most recent acquisition by such person or persons) assets from the Company that
have a total gross fair market value equal to or more than 50% of the total gross fair market value
of all of the assets of the Company immediately prior to such acquisition or acquisitions;
provided, however, that for purposes of this subsection (iii), the following will not constitute a
change in the ownership of a substantial portion of the Company’s assets: (A) a transfer to an
entity that is controlled by the Company’s stockholders immediately after the transfer, or (B) a
transfer of assets by the Company to: (1) a stockholder of the Company (immediately before the
asset transfer) in exchange for or with respect to the Company’s stock, (2) an entity, 50% or more
of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a
Person, that owns, directly or indirectly, 50% or more of the total value or voting power of all
the outstanding stock of the Company, or (4) an entity, at least 50% of the total value or voting
power of which is owned, directly or indirectly, by a Person described in this subsection
(iii)(B)(3). For purposes of this subsection (iii), gross fair market value means the value of the
assets of the Company, or the value of the assets being disposed of, determined without regard to
any liabilities associated with such assets.
For purposes of this Section 2(f), persons will be considered to be acting as a group if they
are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of
stock, or similar business transaction with the Company.
Notwithstanding the foregoing, a transaction shall not be deemed a Change in Control unless
the transaction qualifies as a change in the ownership of the Company, change in the effective
control of the Company or a change in the ownership of a substantial portion of the Company’s
assets, each within the meaning of Section 409A of the Code and any proposed or final Treasury
Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated
thereunder from time to time (“Section 409A”).
(g) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a
section of the Code herein will be a reference to any successor or amended section of the Code.
(h) “Committee” means a committee of Directors or of other individuals satisfying
Applicable Laws appointed by the Board in accordance with Section 4 hereof.
(i) “Common Stock” means the common stock of the Company.
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(j) “Company” means Drugstore.com, Inc., a Delaware corporation, or any successor
thereto.
(k) “Consultant” means any person, including an advisor, engaged by the Company or a
Parent or Subsidiary to render services to such entity.
(l) “Determination Date” means the latest possible date that will not jeopardize the
qualification of an Award granted under the Plan as “performance-based compensation” under Section
162(m) of the Code.
(m) “Director” means a member of the Board.
(n) “Disability” means total and permanent disability as defined in Section 22(e)(3)
of the Code, provided that in the case of Awards other than Incentive Stock Options, the
Administrator in its discretion may determine whether a permanent and total disability exists in
accordance with uniform and non-discriminatory standards adopted by the Administrator from time to
time.
(o) “Employee” means any person, including Officers and Directors, employed by the
Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a
director’s fee by the Company will be sufficient to constitute “employment” by the Company.
(p) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(q) “Exchange Program” means a program under which (i) outstanding Awards are
surrendered or cancelled in exchange for Awards of the same type (which may have lower exercise
prices and different terms), Awards of a different type, and/or cash, (ii) Participants would have
the opportunity to sell any outstanding Awards to a financial institution or other person or entity
selected by the Administrator, and/or (iii) the exercise price of an outstanding Award is reduced.
The Administrator will determine the terms and conditions of any Exchange Program in its sole
discretion.
(r) “Fair Market Value” means, as of any date, the value of the Common Stock as the
Administrator may determine in good faith by reference to the price of such stock on any
established stock exchange or a national market system on the day of determination if the Common
Stock is so listed on any established stock exchange or a national market system. If the Common
Stock is not listed on any established stock exchange or a national market system, the value of the
Common Stock will be determined as the Administrator may determine in good faith.
(s) “Fiscal Year” means the fiscal year of the Company.
(t) “Incentive Stock Option” means an Option that by its terms qualifies and is
otherwise intended to qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(u) “Nonstatutory Stock Option” means an Option that by its terms does not qualify or
is not intended to qualify as an Incentive Stock Option.
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(v) “Officer” means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(w) “Option” means a stock option granted pursuant to Section 6 of the Plan.
(x) “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.
(y) “Participant” means the holder of an outstanding Award.
(z) “Performance Goals” will have the meaning set forth in Section 11 of the Plan.
(aa) “Performance Period” means any Fiscal Year of the Company or such other period as
determined by the Administrator in its sole discretion.
(bb) “Performance Share” means an Award denominated in Shares which may be earned in
whole or in part upon attainment of Performance Goals or other vesting criteria as the
Administrator may determine pursuant to Section 10.
(cc) “Performance Unit” means an Award which may be earned in whole or in part upon
attainment of Performance Goals or other vesting criteria as the Administrator may determine and
which may be settled for cash, Shares or other securities or a combination of the foregoing
pursuant to Section 10.
(dd) “Period of Restriction” means the period during which the transfer of Shares of
Restricted Stock are subject to restrictions and therefore, the Shares are subject to a substantial
risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of
target levels of performance, or the occurrence of other events as determined by the Administrator.
(ee) “Plan” means this 2008 Equity Incentive Plan.
(ff) “Restricted Stock” means Shares issued pursuant to an Award of Restricted Stock
under Section 8 of the Plan, or issued pursuant to the early exercise of an Option.
(gg) “Restricted Stock Unit” means a bookkeeping entry representing an amount equal to
the Fair Market Value of one Share, granted pursuant to Section 9. Each Restricted Stock Unit
represents an unfunded and unsecured obligation of the Company.
(hh) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3,
as in effect when discretion is being exercised with respect to the Plan.
(ii) “Section 16(b)” means Section 16(b) of the Exchange Act.
(jj) “Service Provider” means an Employee, Director, or Consultant.
(kk) “Share” means a share of the Common Stock, as adjusted in accordance with Section
14 of the Plan.
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(ll) “Stock Appreciation Right” means an Award, granted alone or in connection with an
Option, that pursuant to Section 7 is designated as a Stock Appreciation Right.
(mm) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing,
as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan.
(a) Subject to the provisions of Section 14 of the Plan, the maximum aggregate number of
Shares that may be awarded and sold under the Plan is thirteen million, two hundred fifty thousand
(13,250,000) Shares plus (i) any Shares subject to stock options or similar awards granted under
the 1998 Plan that expire or otherwise terminate without having been exercised in full and Shares
issued pursuant to awards granted under the 1998 Plan that are forfeited to or repurchased by the
Company, with the maximum number of Shares to be added to the Plan pursuant to clause (i) equal to
fifteen million (15,000,000) Shares. The Shares may be authorized, but unissued, or reacquired
Common Stock.
(b) Full Value Awards. Any Shares subject to Awards granted with an exercise or
purchase price less than the Fair Market Value on the date of grant of such Awards will be counted
against the numerical limits of this Section 3 as one and thirty-three one-hundredths (1.33) Shares
for every one (1) Share subject thereto. Further, if Shares acquired pursuant to any such Award
are forfeited or repurchased by the Company and would otherwise return to the Plan pursuant to
Section 3(c), one and thirty-three one-hundredths (1.33) times the number of Shares so forfeited or
repurchased will return to the Plan and will again become available for issuance.
(c) Lapsed Awards. If an Award expires or becomes unexercisable without having been
exercised in full, is surrendered pursuant to an Exchange Program, or, with respect to Restricted
Stock, Restricted Stock Units, Performance Shares or Performance Units, is forfeited to or
repurchased by the Company, the unpurchased Shares (or for Awards other than Options and Stock
Appreciation Rights, the forfeited or repurchased Shares) which were subject thereto will become
available for future grant or sale under the Plan (unless the Plan has terminated). Upon exercise
of a Stock Appreciation Right settled in Shares, the gross number of Shares covered by the portion
of the Award so exercised will cease to be available under the Plan. Shares that have actually
been issued under the Plan under any Award will not be returned to the Plan and will not become
available for future distribution under the Plan; provided, however, that if unvested Shares of
Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units are repurchased
by the Company or are forfeited to the Company, such Shares will become available for future grant
under the Plan. Shares used to pay the withholding tax related to an Award or to pay for the
exercise price of an Award will not become available for future grant or sale under the Plan. To
the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will
not result in reducing the number of Shares available for issuance under the Plan. Notwithstanding
the foregoing provisions of this Section 3(c), subject to adjustment provided in Section 14, the
maximum number of Shares that may be issued upon the exercise of Incentive Stock Options will equal
the aggregate Share number stated in Section 3(a), plus, to the extent allowable under Section 422
of the Code, any Shares that become available for issuance under the Plan under this Section 3(c).
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(d) Share Reserve. The Company, during the term of this Plan, will at all times
reserve and keep available such number of Shares as will be sufficient to satisfy the requirements
of the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. Different Committees with respect to different
groups of Service Providers may administer the Plan.
(ii) Section 162(m). To the extent that the Administrator determines it to be
desirable to qualify Awards granted hereunder as “performance-based compensation” within the
meaning of Section 162(m) of the Code, the Plan will be administered by a Committee of two (2) or
more “outside directors” within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt
under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the
requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan will be
administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the
case of a Committee, subject to the specific duties delegated by the Board to such Committee, the
Administrator will have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Awards may be granted hereunder;
(iii) to determine the terms and conditions, not inconsistent with the terms of the Plan, of
any Award granted hereunder;
(iv) to determine the terms and conditions of any, and, but only with the prior approval of
the Company’s stockholders, to institute an Exchange Program;
(v) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;
(vi) to prescribe, amend and rescind rules and regulations relating to the Plan, including
rules and regulations relating to sub-plans established for the purpose of satisfying applicable
foreign laws;
(vii) to modify or amend each Award (subject to Section 19(c) of the Plan). Notwithstanding
the previous sentence, the Administrator may not, without the approval of the
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Company’s stockholders: (A) modify or amend an Option or Stock Appreciation Right to
reduce the exercise price of such Option or Stock Appreciation Right after it has been granted
(except for adjustments made pursuant to Section 14), or (B) cancel any outstanding Option or Stock
Appreciation Right and immediately replace it with a new Option or Stock Appreciation Right with a
lower exercise price;
(viii) to authorize any person to execute on behalf of the Company any instrument required to
effect the grant of an Award previously granted by the Administrator;
(ix) to allow a Participant to defer the receipt of the payment of cash or the delivery of
Shares that would otherwise be due to such Participant under an Award pursuant to such procedures
as the Administrator may determine; and
(x) to make all other determinations deemed necessary or advisable for administering the Plan.
(c) Effect of Administrator’s Decision. The Administrator’s decisions,
determinations, and interpretations will be final and binding on all Participants and any other
holders of Awards.
5. Eligibility. Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units,
Stock Appreciation Rights, Performance Units, Performance Shares, and such other cash or stock
awards as the Administrator determines may be granted to Service Providers. Incentive Stock
Options may be granted only to Employees.
6. Stock Options.
(a) Limitations.
(i) Each Option will be designated in the Award Agreement as either an Incentive Stock Option
or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options will be treated as
Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options will be
taken into account in the order in which they were granted. The Fair Market Value of the Shares
will be determined as of the time the Option with respect to such Shares is granted.
(ii) The Administrator will have complete discretion to determine the number of Shares subject
to an Option granted to any Participant, provided that during any Fiscal Year, no Participant will
be granted Option or Stock Appreciation Rights covering more than, in the aggregate, five million
(5,000,000) Shares.
(b) Term of Option. The Administrator will determine the term of each Option in its
sole discretion; provided, however, that the term will be no more than ten (10) years
from the date of grant thereof. Moreover, in the case of an Incentive Stock Option granted to a
Participant who, at the time the Incentive Stock Option is granted, owns stock representing more
than 10% of the total combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term
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of the Incentive Stock Option will be five (5) years from the date of grant or such shorter
term as may be provided in the Award Agreement.
(c) Option Exercise Price and Consideration.
(i) Exercise Price. The per share exercise price for the Shares to be issued pursuant
to exercise of an Option will be determined by the Administrator, but will be no less than 100% of
the Fair Market Value per Share on the date of grant. In addition, in the case of an Incentive
Stock Option granted to an Employee who, at the time the Incentive Stock Option is granted, owns
stock representing more than 10% of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price will be no less than 110% of the Fair Market
Value per Share on the date of grant. Notwithstanding the foregoing provisions of this Section
6(c), Options may be granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a transaction described in, and in a manner
consistent with, Section 424(a) of the Code.
(ii) Waiting Period and Exercise Dates. At the time an Option is granted, the
Administrator will fix the period within which the Option may be exercised and will determine any
conditions that must be satisfied before the Option may be exercised.
(iii) Form of Consideration. The Administrator will determine the acceptable form(s)
of consideration for exercising an Option, including the method of payment, to the extent permitted
by Applicable Laws (and, in the case of an Incentive Stock Option, shall be determined at the time
of grant). Such consideration may consist of, without limitation, (1) cash, (2) check, (3)
promissory note, to the extent permitted by Applicable Laws, (4) other Shares, provided that such
Shares have a Fair Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which such Option shall be exercised and provided that accepting such Shares, in
the sole discretion of the Administrator, shall not result in any adverse accounting consequences
to the Company, (5) consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan, (6) such other consideration and method of
payment for the issuance of Shares to the extent permitted by Applicable Laws, or (7) any
combination of the foregoing methods of payment. In making its determination as to the type of
consideration to accept, the Administrator shall consider if acceptance of such consideration may
be reasonably expected to benefit the Company.
(d) Exercise of Option.
(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder
will be exercisable according to the terms of the Plan and at such times and under such conditions
as determined by the Administrator and set forth in the Award Agreement. An Option may not be
exercised for a fraction of a Share.
An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such
form as the Administrator specifies from time to time) from the person entitled to exercise the
Option, and (ii) full payment for the Shares with respect to which the Option is exercised
(together with any applicable withholding taxes). No adjustment will be made for a
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dividend or other right for which the record date is prior to the date the Shares are issued,
except as provided in Section 14 of the Plan.
(ii) Termination of Relationship as a Service Provider. If a Participant ceases to be
a Service Provider, other than upon the Participant’s termination as the result of the
Participant’s death or Disability, the Participant may exercise his or her Option within such
period of time as is specified in the Award Agreement to the extent that the Option is vested on
the date of termination (but in no event later than the expiration of the term of such Option as
set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the
Option will remain exercisable for three (3) months following the Participant’s termination.
Unless otherwise provided by the Administrator, if on the date of termination the Participant is
not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option
will revert to the Plan. If after termination the Participant does not exercise his or her Option
within the time specified by the Administrator, the Option will terminate, and the Shares covered
by such Option will revert to the Plan.
(iii) Disability of Participant. If a Participant ceases to be a Service Provider as
a result of the Participant’s Disability, the Participant may exercise his or her Option within
such period of time as is specified in the Award Agreement to the extent the Option is vested on
the date of termination (but in no event later than the expiration of the term of such Option as
set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the
Option will remain exercisable for twelve (12) months following the Participant’s termination.
Unless otherwise provided by the Administrator, if on the date of termination the Participant is
not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option
will revert to the Plan. If after termination the Participant does not exercise his or her Option
within the time specified herein, the Option will terminate, and the Shares covered by such Option
will revert to the Plan.
(iv) Death of Participant. If a Participant dies while a Service Provider, the Option
may be exercised following the Participant’s death within such period of time as is specified in
the Award Agreement to the extent that the Option is vested on the date of death (but in no event
may the option be exercised later than the expiration of the term of such Option as set forth in
the Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has
been designated prior to Participant’s death in a form acceptable to the Administrator. If no such
beneficiary has been designated by the Participant, then such Option may be exercised by the
personal representative of the Participant’s estate or by the person(s) to whom the Option is
transferred pursuant to the Participant’s will or in accordance with the laws of descent and
distribution. In the absence of a specified time in the Award Agreement, the Option will remain
exercisable for twelve (12) months following Participant’s death. Unless otherwise provided by the
Administrator, if at the time of death Participant is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If
the Option is not so exercised within the time specified herein, the Option will terminate, and the
Shares covered by such Option will revert to the Plan.
(v) Other Termination. A Participant’s Award Agreement may also provide that if the
exercise of the Option following the termination of Participant’s status as a Service Provider
(other than upon the Participant’s death or Disability) would result in liability under
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Section 16(b), then the Option will terminate on the earlier of (A) the expiration of the term
of the Option set forth in the Award Agreement, or (B) the 10th day after the last date on which
such exercise would result in such liability under Section 16(b), but in no event later than the
original full term of the Option. Finally, a Participant’s Award Agreement may also provide that
if the exercise of the Option following the termination of the Participant’s status as a Service
Provider (other than upon the Participant’s death or Disability) would be prohibited at any time
solely because the issuance of Shares would violate the registration requirements under the
Securities Act, then the Option will terminate on the earlier of (A) the expiration of the term of
the Option, or (B) the expiration of a period of three (3) months after the termination of the
Participant’s status as a Service Provider during which the exercise of the Option would not be in
violation of such registration requirements.
7. Stock Appreciation Rights.
(a) Grant of Stock Appreciation Rights. Subject to the terms and conditions of the
Plan, a Stock Appreciation Right may be granted to Service Providers at any time and from time to
time as will be determined by the Administrator, in its sole discretion.
(b) Number of Shares. The Administrator will have complete discretion to determine
the number of Stock Appreciation Rights granted to any Participant, provided that during any Fiscal
Year, no Participant will be granted Options or Stock Appreciation Rights covering more than, in
the aggregate, five million (5,000,000) Shares.
(c) Exercise Price and Other Terms. The Administrator, subject to the provisions of
the Plan, will have complete discretion to determine the terms and conditions of Stock Appreciation
Rights granted under the Plan, provided, however, that the exercise price will be not less than
100% of the Fair Market Value of a Share on the date of grant.
(d) Stock Appreciation Right Agreement. Each Stock Appreciation Right grant will be
evidenced by an Award Agreement that will specify the exercise price, the term of the Stock
Appreciation Right, the conditions of exercise, and such other terms and conditions as the
Administrator, in its sole discretion, will determine.
(e) Expiration of Stock Appreciation Rights. A Stock Appreciation Right granted under
the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set
forth in the Award Agreement; provided, however, that the term will be no more than ten (10) years
from the date of grant thereof. Notwithstanding the foregoing, the rules of Section 6(d) also will
apply to Stock Appreciation Rights.
(f) Payment of Stock Appreciation Right Amount. Upon exercise of a Stock Appreciation
Right, a Participant will be entitled to receive payment from the Company in an amount determined
by multiplying:
(i) The difference between the Fair Market Value of a Share on the date of exercise over the
exercise price; times
(ii) The number of Shares with respect to which the Stock Appreciation Right is exercised.
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At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may
be in cash, in Shares of equivalent value, or in some combination thereof, as specified in the
Award Agreement.
8. Restricted Stock.
(a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the
Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service
Providers in such amounts as the Administrator, in its sole discretion, will determine.
(b) Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by
an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and
such other terms and conditions as the Administrator, in its sole discretion, will determine.
Notwithstanding the foregoing sentence, during any Fiscal Year no Participant will be granted more
than an aggregate of two million (2,000,000) Shares of Restricted Stock, Restricted Stock Units and
Performance Shares. Unless the Administrator determines otherwise, Shares of Restricted Stock will
be held by the Company as escrow agent until the restrictions on such Shares have lapsed.
(c) Transferability. Except as provided in this Section 8, Shares of Restricted Stock
may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the
end of the applicable Period of Restriction.
(d) Other Restrictions. The Administrator, in its sole discretion, may impose such
other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.
(e) Removal of Restrictions. Except as otherwise provided in this Section 8, Shares
of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released
from escrow as soon as practicable after the last day of the Period of Restriction. The
Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or
be removed.
(f) Voting Rights. During the Period of Restriction, Service Providers holding Shares
of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares,
unless the Administrator determines otherwise.
(g) Dividends and Other Distributions. During the Period of Restriction, Service
Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other
distributions paid with respect to such Shares unless otherwise provided in the Award Agreement.
If any such dividends or distributions are paid in Shares, the Shares will be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect
to which they were paid.
(h) Return of Restricted Stock to Company. On the date set forth in the Award
Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company
and again will become available for grant under the Plan.
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(i) Section 162(m) Performance Restrictions. For purposes of qualifying grants of
Restricted Stock as “performance-based compensation” under Section 162(m) of the Code, the
Administrator, in its discretion, may set restrictions based upon the achievement of Performance
Goals. The Performance Goals will be set by the Administrator on or before the Determination Date.
In granting Restricted Stock which is intended to qualify under Section 162(m) of the Code, the
Administrator will follow any procedures determined by it from time to time to be necessary or
appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in
determining the Performance Goals).
9. Restricted Stock Units.
(a) Grant. Restricted Stock Units may be granted at any time and from time to time as
determined by the Administrator. Each Restricted Stock Unit grant will be evidenced by an Award
Agreement that will specify such other terms and conditions as the Administrator, in its sole
discretion, will determine, including all terms, conditions, and restrictions related to the grant,
the number of Restricted Stock Units and the form of payout, which, subject to Section 9(d), may be
left to the discretion of the Administrator. Notwithstanding anything to the contrary in this
subsection (a), during any Fiscal Year no Participant will be granted more than an aggregate of two
million (2,000,000) Shares of Restricted Stock, Restricted Stock Units and Performance Shares.
(b) Vesting Criteria and Other Terms. The Administrator will set vesting criteria in
its discretion, which, depending on the extent to which the criteria are met, will determine the
number of Restricted Stock Units that will be paid out to the Participant. The Administrator may
set vesting criteria based upon the achievement of Company-wide, business unit, or individual goals
(including, but not limited to, continued employment or status as a Service Provider), or any
other basis determined by the Administrator in its discretion. After the grant of Restricted Stock
Units, the Administrator, in its sole discretion, may reduce or waive any restrictions for such
Restricted Stock Units. Each Award of Restricted Stock Units will be evidenced by an Award
Agreement that will specify the vesting criteria, and such other terms and conditions as the
Administrator, in its sole discretion will determine. The Administrator, in its discretion, may
accelerate the time at which any restrictions will lapse or be removed.
(c) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the
Participant will be entitled to receive a payout as specified in the Award Agreement.
(d) Form and Timing of Payment. Payment of earned Restricted Stock Units will be made
as soon as practicable after the date(s) set forth in the Award Agreement. The Administrator, in
its sole discretion, may pay earned Restricted Stock Units in cash, Shares, or a combination
thereof. Shares represented by Restricted Stock Units that are fully paid in cash again will be
available for grant under the Plan.
(e) Cancellation. On the date set forth in the Award Agreement, all unearned
Restricted Stock Units will be forfeited to the Company.
(f) Section 162(m) Performance Restrictions. For purposes of qualifying grants of
Restricted Stock Units as “performance-based compensation” under Section 162(m) of the Code, the
Administrator, in its discretion, may set restrictions based upon the achievement of Performance
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Goals. The Performance Goals will be set by the Administrator on or before the Determination
Date. In granting Restricted Stock Units which are intended to qualify under Section 162(m) of the
Code, the Administrator will follow any procedures determined by it from time to time to be
necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code
(e.g., in determining the Performance Goals).
10. Performance Units and Performance Shares.
(a) Grant of Performance Units/Shares. Performance Units and Performance Shares may
be granted to Service Providers at any time and from time to time, as will be determined by the
Administrator, in its sole discretion. The Administrator will have complete discretion in
determining the number of Performance Units/Shares granted to each Participant provided that during
any Fiscal Year, for Performance Units or Performance Shares intended to qualify as
“performance-based compensation” within the meaning of Section 162(m) of the Code, (i) no
Participant will receive Performance Units having an initial value greater than five million
dollars ($5,000,000), and (ii) no Participant will be granted more than an aggregate of two million
(2,000,000) Shares of Restricted Stock, Restricted Stock Units and Performance Shares.
(b) Value of Performance Units/Shares. Each Performance Unit will have an initial
value that is established by the Administrator on or before the date of grant. Each Performance
Share will have an initial value equal to the Fair Market Value of a Share on the date of grant.
(c) Performance Objectives and Other Terms. The Administrator will set performance
objectives or other vesting provisions. The Administrator may set vesting criteria based upon the
achievement of Company-wide, business unit, or individual goals (including, but not limited to,
continued employment or status as a Service Provider), or any other basis determined by the
Administrator in its discretion.
(d) Earning of Performance Units/Shares. After the applicable Performance Period has
ended, the holder of Performance Units/Shares will be entitled to receive a payout of the number of
Performance Units/Shares earned by the Participant over the Performance Period, to be determined as
a function of the extent to which the corresponding performance objectives or other vesting
provisions have been achieved. After the grant of a Performance Unit/Share, the Administrator, in
its sole discretion, may reduce or waive any performance objectives or other vesting provisions for
such Performance Unit/Share.
(e) Form and Timing of Payment of Performance Units/Shares. Payment of earned
Performance Units/Shares will be made as soon as practicable after the expiration of the applicable
Performance Period. The Administrator, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the
value of the earned Performance Units/Shares at the close of the applicable Performance Period) or
in a combination thereof, all as specified in the Award Agreement.
(f) Cancellation of Performance Units/Shares. On the date set forth in the Award
Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and
again will be available for grant under the Plan.
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(g) Section 162(m) Performance Restrictions. For purposes of qualifying grants of
Performance Units/Shares as “performance-based compensation” under Section 162(m) of the Code, the
Administrator, in its discretion, may set restrictions based upon the achievement of Performance
Goals. The Performance Goals will be set by the Administrator on or before the Determination Date.
In granting Performance Units/Shares which are intended to qualify under Section 162(m) of the
Code, the Administrator will follow any procedures determined by it from time to time to be
necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code
(e.g., in determining the Performance Goals).
11. Performance Goals. The granting and/or vesting of Awards of Restricted Stock,
Restricted Stock Units, Performance Shares and Performance Units the Plan may be made subject to
the attainment of performance goals relating to one or more business criteria within the meaning of
Section 162(m) of the Code and may provide for a targeted level or levels of achievement
(“Performance Goals”) including (a) earnings per share, (b) operating cash flow, (c)
operating income, (d) profit (e) return on assets, (f) return on equity, (g) return on sales, (h)
revenue, (i) stock Price, (j) growth in stockholder value relative to the moving average of the S&P
500 Index or another index, (k) gross margin, (l) operating expenses or operating expenses as a
percentage of revenue, (m) earnings (which may include earnings before interest and taxes, earnings
before taxes and net earnings), (n) return on capital, (o) return on assets or net assets, (p)
return on investment, (q) operating margin, (r) market share, (s) contract awards or backlog, (t)
overhead or other expense reduction, (u) objective customer indicators, (v) new product invention
or innovation, (w) attainment of research and development milestones, and (x) total stockholder
return. Any Performance Goals may be used to measure the performance of the Company as a whole or
a Subsidiary or other business unit or segment of the Company and may be measured relative to a
peer group or index. Any criteria used may be measured, as applicable (i) in absolute terms, (ii)
against another company or companies, on a per-share basis, and/or (iii) on a pre-tax or post-tax
basis (if applicable). The Performance Goals may differ from participant to participant and from
Award to Award. In establishing the Performance Goals, the Administrator shall determine whether
to determine such goals in accordance with United States Generally Accepted Accounting Principles
(“GAAP”) or to exclude any items otherwise includable under GAAP.
12. Leaves of Absence; Transfer Between Locations. Unless the Administrator provides
otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave of
absence. A Service Provider will not cease to be an Employee in the case of (i) any leave of
absence approved by the Company, or (ii) transfers between locations of the Company or between the
Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may
exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute
or contract. If reemployment upon expiration of a leave of absence approved by the Company is not
so guaranteed, then six (6) months and one day following the commencement of such leave any
Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock
Option and will be treated for tax purposes as a Nonstatutory Stock Option.
13. Transferability of Awards. Unless determined otherwise by the Administrator, an
Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Participant, only by the Participant. If the Administrator makes an Award
transferable, such Award will contain such additional terms and conditions as the Administrator
deems appropriate.
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14. Adjustments; Dissolution or Liquidation; Merger or Change in Control.
(a) Adjustments. In the event that any dividend or other distribution (whether in the
form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or
exchange of Shares or other securities of the Company, or other change in the corporate structure
of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or
enlargement of the benefits or potential benefits intended to be made available under the Plan,
will adjust the number and class of Shares that may be delivered under the Plan and/or the number,
class, and price of Shares covered by each outstanding Award, and the numerical Share limits set
forth in Sections 3, 6, 7, 8, 9, and 10.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator will notify each Participant as soon as practicable
prior to the effective date of such proposed transaction. To the extent it has not been previously
exercised, an Award will terminate immediately prior to the consummation of such proposed action.
(c) Change in Control. In the event of a merger or Change in Control, each
outstanding Award will be treated as the Administrator determines, including, without limitation,
that each Award will be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation (the “Successor
Corporation”). The Administrator will not be required to treat all Awards similarly in the
transaction.
In the event that the Successor Corporation does not assume or substitute for the Award, the
Participant will fully vest in and have the right to exercise all of his or her outstanding Options
and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be
vested or exercisable, all restrictions on Restricted Stock will lapse, and, with respect to
Restricted Stock Units, Performance Shares and Performance Units, all Performance Goals or other
vesting criteria will be deemed achieved at target levels and all other terms and conditions met.
In addition, if an Option or Stock Appreciation Right is not assumed or substituted for in the
event of a Change in Control, the Administrator will notify the Participant in writing or
electronically that the Option or Stock Appreciation Right will be fully vested and exercisable for
a period of time determined by the Administrator in its sole discretion (but in no event longer
than the original full term), and the Option or Stock Appreciation Right will terminate upon the
expiration of such period.
For the purposes of this subsection (c), an Award will be considered assumed if, following the
Change in Control, the Award confers the right to purchase or receive, for each Share subject to
the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or
other securities or property) or, in the case of a Stock Appreciation Right upon the exercise of
which the Administrator determines to pay cash or a Performance Share or Performance Unit which the
Administrator can determine to pay in cash, the fair market value of the consideration received in
the merger or Change in Control by holders of Common Stock for each Share held on the effective
date of the transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares); provided, however,
that if such consideration received in the Change in Control is not solely common stock of the
Successor Corporation, the Administrator may, with the consent of the Successor Corporation,
provide for the consideration to be received upon the exercise of an Option or Stock Appreciation
Right or upon the
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payout of a Restricted Stock Unit, Performance Share or Performance Unit, for each Share
subject to such Award (or in the case of Performance Units, the number of implied shares determined
by dividing the value of the Performance Units by the per share consideration received by holders
of Common Stock in the Change in Control), to be solely common stock of the Successor Corporation
equal in fair market value to the per share consideration received by holders of Common Stock in
the Change in Control.
Notwithstanding anything in this Section 14(c) to the contrary, an Award that vests, is earned
or paid-out upon the satisfaction of one or more Performance Goals or other performance criteria
will not be considered assumed if the Company or its successor modifies any of such Performance
Goals or other performance criteria without the Participant’s consent; provided, however, a
modification to such Performance Goals or other performance criteria only to reflect the Successor
Corporation’s post-Change in Control corporate structure will not be deemed to invalidate an
otherwise valid Award assumption.
15. Tax Withholding
(a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to
an Award (or exercise thereof), the Company will have the power and the right to deduct or
withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy
federal, state, local, foreign or other taxes (including the Participant’s FICA obligation)
required to be withheld with respect to such Award (or exercise thereof).
(b) Withholding Arrangements. The Administrator, in its sole discretion and pursuant
to such procedures as it may specify from time to time, may permit a Participant to satisfy such
tax withholding obligation, in whole or in part by (without limitation) (i) paying cash, (ii)
electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market
Value equal to the minimum amount required to be withheld, (iii) delivering to the Company
already-owned Shares having a Fair Market Value equal to the amount required to be withheld, or
(iv) selling a sufficient number of Shares otherwise deliverable to the Participant through such
means as the Administrator may determine in its sole discretion (whether through a broker or
otherwise) equal to the amount required to be withheld. The amount of the withholding requirement
will be deemed to include any amount which the Administrator agrees may be withheld at the time the
election is made, not to exceed the amount determined by using the minimum statutory federal, state
or local income and employment tax withholding rates applicable to the Participant with respect to
the Award on the date that the amount of tax to be withheld is to be determined. The Fair Market
Value of the Shares to be withheld or delivered will be determined as of the date that the taxes
are required to be withheld.
16. No Effect on Employment or Service. Neither the Plan nor any Award will confer
upon a Participant any right with respect to continuing the Participant’s relationship as a Service
Provider with the Company, nor will they interfere in any way with the Participant’s right or the
Company’s right to terminate such relationship at any time, with or without cause, to the extent
permitted by Applicable Laws.
17. Date of Grant. The date of grant of an Award will be, for all purposes, the date
on which the Administrator makes the determination granting such Award, or such other later date as
is
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determined by the Administrator. Notice of the determination will be provided to each
Participant within a reasonable time after the date of such grant.
18. Term of Plan. Subject to Section 22 of the Plan, the Plan will become effective
upon its adoption by the Board. It will continue in effect for a term of ten (10) years unless
terminated earlier under Section 19 of the Plan.
19. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Administrator may at any time amend, alter,
suspend or terminate the Plan.
(b) Stockholder Approval. The Company will obtain stockholder approval of any Plan
amendment to the extent necessary and desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration, suspension, or
termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise
between the Participant and the Administrator, which agreement must be in writing and signed by the
Participant and the Company. Termination of the Plan will not affect the Administrator’s ability
to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior
to the date of such termination.
20. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares will not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of such Shares will comply with
Applicable Laws and will be further subject to the approval of counsel for the Company with respect
to such compliance.
(b) Investment Representations. As a condition to the exercise of an Award, the
Company may require the person exercising such Award to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
21. Inability to Obtain Authority. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of
any liability in respect of the failure to issue or sell such Shares as to which such requisite
authority will not have been obtained.
22. Stockholder Approval. The Plan will be subject to approval by the stockholders of
the Company within twelve (12) months after the date the Plan is adopted. Such stockholder
approval will be obtained in the manner and to the degree required under Applicable Laws.
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