As filed with the Securities and Exchange Commission on November 17, 2011
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
QUEST SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
Delaware | 33-0231678 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
5 Polaris Way Aliso Viejo, California |
92656 | |
(Address of Principal Executive Offices) | (Zip Code) |
VKernel Corporation 2007 Equity Incentive Plan
(Full title of the plan)
David P. Cramer
Vice President, General Counsel and Secretary
Quest Software, Inc.
5 Polaris Way
Aliso Viejo, California 92656
(Names and address of agent for service)
(949) 754-8000
(Telephone number, including area code, of agent for service)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large Accelerated filer | x | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
CALCULATION OF REGISTRATION FEE
Title of Securities to be Registered |
Amount to be Registered (1) |
Proposed Maximum Offering Price Per Share (3) |
Proposed Maximum Offering Price (3) |
Amount of Registration Fee | ||||
Common Stock, par value $.001 per share, to be issued upon the exercise of assumed stock options (2) |
136,862 shares (2) | $3.17 | $433,852.54 | $49.72 |
(1) | Pursuant to Rule 416 of the Securities Act of 1933, as amended (the Securities Act), this Registration Statement also covers such additional shares of common stock, par value $.001 per share (the Common Stock), of Quest Software, Inc., a Delaware corporation (the Registrant), that become issuable in respect of the shares identified in the above table by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the Registrants receipt of consideration which results in an increase in the number of the Registrants outstanding shares of Common Stock. |
(2) | Represents shares of Common Stock issuable upon the exercise of outstanding stock options granted under the VKernel Corporation 2007 Equity Incentive Plan (the Plan) and assumed by the Registrant pursuant to the Agreement and Plan of Merger among the Registrant, VKernel Corporation, Hurricane Merger Sub, Inc. (a wholly-owned subsidiary of the Registrant), and the securityholders representative party thereto, dated as of November 10, 2011 (the Merger Agreement). |
(3) | Estimated solely for purposes of calculating the registration fee. Calculated pursuant to Rule 457(h) based on the weighted average exercise price (rounded up to the nearest cent) of the outstanding stock options granted under the Plan. |
EXPLANATORY NOTE
The Registrant is filing this Registration Statement on Form S-8 in connection with stock options granted under the Plan, which the Registrant assumed upon the closing of its acquisition of VKernel Corporation pursuant to the terms of the Merger Agreement.
PART I
Information Required in the Section 10(a) Prospectus
The information called for in Part I of Form S-8 is not being filed with or included in this Form S-8 (by incorporation by reference or otherwise) in accordance with the rules and regulations of the Securities and Exchange Commission (the Commission).
PART II
Information Required in the Registration Statement
Item 3. Incorporation of Documents by Reference
The following documents filed with the Commission by the Registrant are incorporated herein by reference:
(a) | The Registrants Annual Report on Form 10-K for the year ended December 31, 2010, filed with the Commission on February 24, 2011; |
(b) | The Registrants Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2011, June 30, 2011 and September 30, 2011, filed with the Commission on May 6, 2011, August 9, 2011 and November 9, 2011, respectively; |
(c) | The Registrants Current Reports on Form 8-K filed with the Commission on February 23, 2011, March 16, 2011, March 18, 2011 and June 10, 2011; and |
(d) | The description of the Registrants Common Stock contained in its Registration Statement on Form 8-A filed on August 4, 1999 under Section 12 of the Securities Exchange Act of 1934, as amended (the Exchange Act), as amended by the Registrants Current Report on Form 8-K filed with the Commission on April 30, 2009 (including the description incorporated therein by reference), including any amendment or report filed for the purpose of updating such description. |
All documents subsequently filed by the Registrant pursuant to Section 13(a), 13(c), 14 and 15(d) of the Exchange Act, and prior to the filing of a post-effective amendment which indicates that all securities offered hereby have been sold or which de-registers all securities then remaining unsold, shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing of such documents. The Registrant will not, however, incorporate by reference any documents or portions thereof that are not deemed filed with the Commission, including any information furnished pursuant to Item 2.02 or Item 7.01 of the Registrants Current Reports on Form 8-K unless, and except to the extent, specified in such reports.
Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any subsequently filed document which also is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement.
The Registrants Annual Report on Form 10-K for the year ended December 31, 2010 reported two operating segments, Licenses and Services. During the first quarter of 2011, the Registrant increased the number of its reportable operating segments from two to three by separating the Services segment into a Professional Services segment and a Maintenance Services segment. The Registrant separated these two previously aggregated segments
because the Professional Services component had experienced significant growth and had become more distinct and robust relative to all Services, and also had become more separately managed and analyzed. This change was reflected prospectively beginning with the Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 (filed on May 6, 2011 and incorporated by reference in this Registration Statement), but was not reflected in the Registrants Annual Report on Form 10-K for the year ended December 31, 2010 (filed on February 24, 2011 and incorporated by reference in this registration statement). This change had no impact on the Registrants consolidated balance sheets or its statements of operations, cash flows or changes in stockholders equity for any periods.
Item 4. Description of Securities
Not Applicable.
Item 5. Interests of Named Experts and Counsel
The validity of the issuance of the shares of Common Stock registered hereby has been passed upon for the Registrant by David P. Cramer, Vice President, General Counsel and Secretary of the Registrant. Mr. Cramer has participated in the Registrants equity incentive plans.
Item 6. Indemnification of Directors and Officers
The Registrants Certificate of Incorporation eliminates the personal liability of its directors for monetary damages to the fullest extent permitted by applicable law, including Delaware General Corporation Law (the DGCL). Under Section 102(b) of the DGCL, a directors liability to a corporation or its stockholders may not be limited:
| for any breach of the directors duty of loyalty to the corporation or its stockholders; |
| for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; |
| under Section 174 of the DGCL relating to certain unlawful dividend payments or stock redemptions or repurchases; or |
| for any transaction from which the director derived an improper personal benefit. |
Section 145 of the DGCL provides that a corporation may indemnify its directors and officers as well as other employees and individuals against expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party or who is threatened to be made a party by reason of such person being or having been a director, officer, employee of or agent to the registrant. The statute provides that it is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. The Registrants Bylaws provide for indemnification of its directors to the fullest extent not prohibited by the DGCL or any other applicable law, and also empower the Registrant to indemnify its officers, employees or agents as set forth in the DGCL or other applicable law.
The Registrants Bylaws authorize it to enter into individual indemnification agreements with any or all of its directors, officers, employees and agents and to purchase insurance on behalf of any person required or permitted to be indemnified pursuant to the Bylaws, in each case to the fullest extent not prohibited by the DGCL or by other applicable law. The Registrant has entered into indemnification agreements with present and former directors and officers under which the Registrant is generally required to indemnify each such individual against expenses, including attorneys fees, judgments, fines and settlements, arising from certain legal proceedings and investigations (subject to certain exceptions, including liabilities arising from willful misconduct or conduct that is knowingly fraudulent or deliberately dishonest or results in improper personal benefit). The Registrant also currently maintains directors and officers liability insurance. The Registrant pays the premiums for such insurance.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
The Exhibits listed on the accompanying Exhibit Index are filed as a part of, and incorporated by reference into, this Registration Statement.
Item 9. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrants annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plans annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Aliso Viejo, State of California on this 17th day of November, 2011.
QUEST SOFTWARE, INC. | ||
By: | /s/ Scott J. Davidson | |
Scott J. Davidson, | ||
Senior Vice President and | ||
Chief Financial Officer |
POWER OF ATTORNEY
The undersigned officers and directors of Quest Software, Inc., a Delaware corporation, do hereby constitute and appoint Douglas F. Garn, Scott J. Davidson and David P. Cramer, and each of them, the lawful attorneys-in-fact and agents with full power and authority to do any and all acts and things and to execute any and all instruments which said attorneys and agents, and any one of them, determine may be necessary or advisable or required to enable said corporation to comply with the Securities Act of 1933, as amended, and any rules or regulations or requirements of the Securities and Exchange Commission in connection with this Registration Statement. Without limiting the generality of the foregoing power and authority, the powers granted include the power and authority to sign the names of the undersigned officers and directors in the capacities indicated below to this Registration Statement, to any and all amendments, both pre-effective and post-effective, and supplements to this Registration Statement, and to any and all instruments or documents filed as part of or in conjunction with this Registration Statement or amendments or supplements thereof, and each of the undersigned hereby ratifies and confirms that all said attorneys and agents, or any one of them, shall do or cause to be done by virtue hereof. This Power of Attorney may be signed in several counterparts.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature |
Title |
Date | ||
/s/ Douglas F. Garn |
President, Chief Executive Officer and | November 17, 2011 | ||
Douglas F. Garn | Director | |||
(Principal Executive Officer) | ||||
/s/ Scott J. Davidson |
Senior Vice President and | November 17, 2011 | ||
Scott J. Davidson | Chief Financial Officer | |||
(Principal Financial Officer) | ||||
/s/ Scott H. Reasoner |
Vice President, Corporate Controller | November 17, 2011 | ||
Scott H. Reasoner | (Principal Accounting Officer) | |||
/s/ Vincent C. Smith |
Executive Chairman | November 17, 2011 | ||
Vincent C. Smith | Of the Board of Directors | |||
/s/ Augustine L. Nieto II |
Director | November 17, 2011 | ||
Augustine L. Nieto II | ||||
/s/ Kevin M. Klausmeyer |
Director | November 17, 2011 | ||
Kevin M. Klausmeyer | ||||
/s/ Paul A. Sallaberry |
Director | November 17, 2011 | ||
Paul A. Sallaberry | ||||
/s/ H. John Dirks |
Director | November 17, 2011 | ||
H. John Dirks |
EXHIBIT INDEX
Exhibit |
Exhibit | |
5.1 | Opinion of General Counsel | |
23.1 | Consent of Independent Registered Public Accounting Firm | |
23.2 | Consent of General Counsel (included in Exhibit 5.1) | |
24.1 | Power of Attorney (included on the signature page) | |
99.1 | VKernel Corporation 2007 Equity Incentive Plan |
Exhibit 5.1
OPINION AND CONSENT OF GENERAL COUNSEL
QUEST SOFTWARE, INC.
5 Polaris Way
Aliso Viejo, California 92656
Phone (949) 754-8000
November 17, 2011
Quest Software, Inc.
5 Polaris Way
Aliso Viejo, CA 92656
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
As General Counsel of Quest Software, Inc., a Delaware corporation (the Company), I have participated in the corporate and other proceedings taken by the Company in connection with the registration on Form S-8 (the Registration Statement) under the Securities Act of 1933, as amended (the Securities Act), of 136,862 shares of the Companys common stock, par value $.001 per share (the Shares), for issuance upon the exercise of stock options that were granted under the VKernel Corporation 2007 Equity Incentive Plan (the Plan) and assumed by the Company pursuant to the Agreement and Plan of Merger among the Company, VKernel Corporation, Hurricane Merger Sub, Inc. (a wholly-owned subsidiary of the Registrant), and the securityholders representative party thereto, dated as of November 10, 2011.
I have reviewed the Companys charter documents and the corporate proceedings taken by the Company in connection with the Plan, and have examined such documents as I have deemed necessary for purposes of this opinion. Based on such review, and subject to the limitations and qualifications set forth herein, I am of the opinion that, if, as and when the Shares have been issued and sold (and the consideration therefor received) pursuant to the provisions of the stock option agreements duly authorized under the Plan and in accordance with the Registration Statement, such Shares will be legally issued, fully paid and nonassessable.
The opinion expressed herein is limited to the General Corporation Law of the State of Delaware, including the applicable provisions of the Delaware Constitution and the reported judicial decisions interpreting such law, in each case as currently in effect, and I express no opinion as to the effect of the laws of any other jurisdiction.
I consent to the filing of this opinion letter as Exhibit 5.1 to the Registration Statement. In giving such consent, I do not thereby admit that I am in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours, |
/s/ David P. Cramer |
David P. Cramer, Vice President, General Counsel and Secretary |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Registration Statement on Form S-8 of our reports dated February 23, 2011, relating to the consolidated financial statements and financial statement schedule of Quest Software, Inc. and subsidiaries (the Company) and the effectiveness of the Companys internal control over financial reporting, appearing in the Annual Report on Form 10-K of the Company for the year ended December 31, 2010.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
November 17, 2011
Exhibit 99.1
V-KERNEL CORPORATION
2007 Equity Incentive Plan
This Plan (the Plan) of V-Kernel Corporation (the Company) provides that Awards, as defined below, for up to 15,391,529 shares (the Shares) of the Companys Common Stock, par value $.01 per share (the Stock), may be granted to employees of the Company and its subsidiaries, as defined below, and to others who are in a position to make significant contributions to the success of the Company and its subsidiaries. Options as defined below granted pursuant to the Plan may be either incentive stock options (Incentive Options) as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the Code), or options that are not Incentive Options (Nonqualified Options, and together with the Incentive Options, the Options), or both.
1. DEFINITIONS.
As used in the Plan:
Award means any Option or Restricted Stock awarded under the Plan.
Board shall have the meaning assigned thereto in Section 3(a) hereof.
Code shall have the meaning assigned thereto in the preamble hereof.
Committee shall have the meaning assigned thereto in Section 3(b) hereof.
Incentive Options shall have the meaning assigned thereto in the preamble hereof.
Nonqualified Options shall have the meaning assigned thereto in the preamble hereof.
Options shall have the meaning assigned thereto in the preamble hereof.
Plan means this 2007 Equity Incentive Plan, as the same may be amended from time to time.
Participant means a person selected by the Board to receive an Award under the Plan.
Restricted Stock means shares of Common Stock awarded to a Participant under Section 14.
Shares shall have the meaning assigned thereto in the preamble hereof.
Stock shall have the meaning assigned thereto in the preamble hereof.
2. PURPOSE. The purpose of the Plan is to attract and retain employees and others who are in a position to contribute significantly to the success of the Company, to reward such contributions, and to encourage Participants to advance the long term interests of the Company through ownership of its Stock.
3. ADMINISTRATION.
(a) Board of Directors. The Plan shall be administered by the Board of Directors of the Company (the Board). The Board, subject to the express provisions of the Plan, shall determine those persons to be granted Awards, the times when Awards shall be granted, the number of Shares subject to each Award, and the terms and conditions of each Award, including whether each Option is an Incentive Option or a Nonqualified Option. The Board shall establish the form of instruments granting Awards and any other instruments under the Plan, and the rules and regulations for the administration of the Plan, and may amend and rescind such instruments, rules and regulations. The Board shall interpret the Plan and decide any questions and settle all controversies and disputes that may arise in connection with the Plan, and such determinations of the Board shall be conclusive and shall bind all parties. Subject to Section 18, the Board may, both generally and in particular instances, (i) waive compliance by a Participant with any obligation to be performed under an Award and waive any condition or provision of an Award, and (ii) accelerate the exercisability of any Option granted under the Plan, except that in the case of an Incentive Option the Board may not (other than in accordance with Section 6) grant any such waiver if such waiver would cause the Incentive Option to no longer qualify as an Incentive Option under Section 422 of the Code.
(b) Committee. The Board may, in its discretion, delegate its powers with respect to the Plan to an Equity Incentive Plan Committee (the Committee), in which event all references to the Board hereunder shall be deemed to refer to the Committee. The Committee shall be appointed by the Board and shall consist of at least two persons. A majority of the members of the Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee by a writing signed by all of the members of the Committee.
(c) Public Company Committee. From and after the date that is six months prior to the date of the first registration of an equity security of the Company under Section 12 of the Securities and Exchange Act of 1934, as amended, and with respect to the participation of any officer or director in the Plan, his or her selection as a Participant, the number of Option shares or Restricted Stock shares to be allocated to such officer or director, the award price and exercise price of such Award, as applicable, and all other terms and conditions of such Award shall be determined by, or only in accordance with, the recommendations of a Committee, each of the members of which shall be a director of the Company and each of whom shall be disinterested, as such term is defined from time to time in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, and each of whom shall be an outside Director, as defined in Section 162(m) of the Code and related legislative history.
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4. EFFECTIVE DATE AND TERM. The Plan shall become effective upon adoption by the Board or approval by the stockholders by at least a majority vote at a duly held meeting (or by written consent as provided by applicable law), whichever is earlier, but shall not become effective unless stockholder approval is obtained within twelve (12) months before or after the adoption of the Plan by the Board. The Board may grant Awards under the Plan prior to such approval, but any such Award shall become effective as of the date of grant only upon such approval and, accordingly, no Option may be exercisable prior to such approval. The Plan shall terminate ten years after its effective date.
5. SHARES SUBJECT TO THE PLAN. The Shares shall be reserved for issuance upon the exercise of Options and issuance of Restricted Stock granted under the Plan. Shares subject to an Award which expires or is terminated may again be subjected to an Award under the Plan. Shares delivered under the Plan may be authorized but unissued Stock or treasury Stock. No fractional Shares shall be issued under the Plan.
6. CHANGES IN CAPITAL STOCK. In the event of a stock dividend, stock split or combination of shares, recapitalization or other change in the Companys capital stock, the number and kind of shares of stock or securities of the Company subject to Awards then outstanding or subsequently granted under the Plan, the maximum number of shares or securities that may be delivered under the Plan, the award and exercise price, and other relevant provisions shall be adjusted appropriately in a manner determined by the Board to be equitable, whose determination shall be binding. The Board may also adjust the number of Shares subject to outstanding Awards, the award and exercise price of any outstanding Award and the terms of outstanding Awards to take into consideration material changes in accounting practices or principles, consolidations or mergers, acquisitions or dispositions of stock or property or any other event if it is determined by the Board that such adjustment is appropriate to avoid distortion in the operation of the Plan, provided that no such adjustment shall be made in the case of an Incentive Option if it would constitute a modification, extension or renewal of the option within the meaning of Section 424(h) of the Code, unless the Participant consents.
7. ELIGIBILITY. All employees of the Company and its subsidiaries, as well as those other persons or entities who, in the opinion of the Board, are in a position to contribute significantly to the success of the Company or its subsidiaries, shall be eligible to receive Awards under the Plan. A subsidiary for purposes of the Plan shall be a subsidiary corporation as defined in Section 424(f) of the Code. Incentive Options shall be granted only to employees as defined in the applicable provisions of the Code and regulations thereunder. Receipt of Awards under the Plan or of awards under any other employee benefit plan of the Company or any of its subsidiaries shall not preclude an employee from receiving Awards or additional Awards under the Plan. In granting Awards the Board may include or exclude previous participants in the Plan as the Board may determine.
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8. TERMS AND CONDITIONS OF OPTIONS.
(a) Number of Options. The aggregate fair market value (determined as of the time of grant) of the Shares with respect to which Incentive Options are exercisable for the first time by an employee during any calendar year (under the Plan and all other stock option plans of the Company or its subsidiaries or any parent corporation) shall not exceed $ 100,000.00.
(b) Exercise Price. The exercise price of each Option shall be determined by the Board but, in the case of an Incentive Option, shall not be less than 100% (110% in the case of an Incentive Option granted to a ten-percent stockholder) of the fair market value of the stock subject to the Option on the date of grant; nor shall the exercise price of any Option be less, in the case of an original issue of authorized stock, than par value. For this purpose, (i) fair market value shall be determined by the Board in good faith on a basis consistent with the provisions of Section 422 of the Code and the regulations promulgated thereunder, and (ii) ten percent stockholder shall mean any employee who at the time of grant owns directly, or is deemed to own by reason of the attribution rules set forth in Section 424(d) of the Code, more than 10% of the total combined voting power of all classes of stock of the Company or of any of its parent or subsidiary corporations.
(c) Duration, Vesting and Conditions of Exercise. Each Option shall be exercisable during such period or periods as the Board may determine, but in no case after the expiration of ten years (five years in the case of an Incentive Option granted to a ten percent stockholder as defined in (b) above) from the date of grant. In the discretion of the Board, Options may be exercisable (i) in full upon grant or (ii) over or after a period of time conditioned on satisfaction of certain Company, division, group, office, individual or other performance criteria, including the continued performance of services to the Company or its subsidiaries. In the case of an Option not immediately exercisable in full, the Board may at any time accelerate the time at which all or any part of the Option may be exercised.
9. EXERCISE OF OPTIONS. Any exercise of an Option shall be in writing pursuant to a written instrument in the form prescribed by the Board, signed by the proper person and delivered to the Company, accompanied by (a) such documents as may be required by the Plan, by such written instrument, or by the Board, and (b) payment as required by such written instrument for the number of Shares for which the Option is exercised. In addition, each exercise of an Option shall be subject to such additional conditions as may be required by the Board, including without limitation those described in Section 10 of the Plan. No exercise of an Option shall be effective, and the Company shall not be obligated to deliver any Shares, until all requirements and conditions for exercise have been met to the satisfaction of the Board.
10. PAYMENT FOR SHARES.
(a) Exercise Price. The exercise price for Shares purchased under an option shall be paid as follows: (i) in cash or by certified check, bank draft or money order payable to the order of the Company; (ii) if permitted by the terms of the instrument granting the option, by the delivery of shares of Stock having a fair market value (as determined by the Board in good faith in its reasonable discretion) on the date of exercise equal to the exercise price; or (iii) by a
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combination of cash and Stock; provided, however, that payment of the exercise price by delivery of shares of Common Stock of the Company owned by such optionholder may be made only if such payment does not result in a charge to earnings for financial accounting purposes as determined by the Board, unless the Board otherwise permits such payment by delivery of shares of Common Stock.
Effective beginning as of November 16, 2011, provided that at the time of exercise the Stock is publicly traded and quoted regularly in The Wall Street Journal, an Option may be exercised pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay to the Company from the sale proceeds the aggregate exercise price and any required federal, state, local or foreign tax withholding obligations of the Company or an affiliate thereof, which arise in connection with the exercise of the Option.
(b) Promissory Note. To the extent permitted by any applicable margin regulations of the Board of Governors of the Federal Reserve System and other provisions of applicable law, the instrument granting an Option may, in the discretion of the Board, permit the exercise price for Shares to be paid by payment of at least the par value by a combination of cash and Stock as provided above, and delivery to the Company of the Participants promissory note for the balance of the exercise price. Unless otherwise specified by the Board in the instrument granting the Option, such note (i) shall bear interest at least equal to the Applicable Federal Rate, as determined under Section 1274(d) of the Code and published by the Service on a monthly basis, in effect for the month of exercise, (ii) shall be a fully recourse note, (iii) shall be secured by a pledge of the Shares acquired by exercising the Option, and (iv) shall be payable in equal annual installments of principal and interest over a period of not more than five years after the exercise date (except that any such note shall be payable on demand in the event of termination of employment). Any such promissory note shall be in a form satisfactory to the Company.
11. NO RIGHTS AS STOCKHOLDER. Participants shall not have the rights of stockholders with regard to Options granted under the Plan, except as to Shares actually purchased pursuant to such Options.
12. NON TRANSFERABILITY OF OPTIONS. Each Option granted under the Plan shall be transferable only by will or the laws of descent and distribution and shall be exercisable during the lifetime of the person to whom the Option is granted only by such person. Except as permitted by the preceding sentence, no Option granted under the Plan or any of the rights and privileges thereby conferred shall be transferred, assigned, pledged, hypothecated or otherwise disposed of in any way (by operation of law or otherwise), and no such Option, right or privilege shall be subject to execution, attachment or similar process. Upon any attempt so to transfer, assign, pledge, hypothecate or otherwise dispose of any such Option, right or privilege contrary to the provisions hereof, or upon the levy of any attachment or similar process upon such Option, right or privilege, the Option and such rights and privileges shall immediately become null and void. Notwithstanding the above provisions of this Section 12, any Option granted under the Plan may be pledged or hypothecated to secure an obligation to the Company.
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13. TERMINATION OF EMPLOYMENT; DEATH OR DISABILITY.
(a) Termination In General. Upon termination of the employment of a Participant, any unexercised Options shall terminate immediately, except as provided in Subsections (b), (c) and (d) below. For purposes of this Section 13, employment shall not be considered terminated (i) in the case of sick leave or other bona fide leave of absence approved for purposes of the Plan by the Board, so long as the employees right to re-employment is guaranteed either by statute or by contract, or (ii) in the case of a transfer of employment among the Company and its subsidiaries, or to the employment of a corporation (or a parent or subsidiary corporation of such corporation) issuing or assuming an option, which in the case of an Incentive Option is a transaction to which Section 424(a) of the Code applies. For all purposes of this Section 13, the term employment shall include the relationships of Participants to the Company as directors, consultants and professional advisors.
(b) Termination Not For Cause. Subject to Section 13(c), if such termination was not for cause (as hereinafter defined), the Participant may exercise any Option which was otherwise exercisable on the date of termination for a period ending on the earlier of (i) the last day of the third month after such termination and (ii) the expiration date of such Option pursuant to the first sentence of Section 8(c). For purposes hereof, the term for cause shall mean only (i) the willful or reckless failure by the Participant to perform his duties under or willful or reckless violation of any written employment or consulting agreement (other than a failure resulting from the Participants death or disability), which failure or violation shall not have been cured within fifteen (15) days after the receipt by the Participant of written notice thereof from the Board specifying with reasonable particularity such alleged failure or violation; (ii) the commission by the Participant of an act of fraud or theft against the Company or any of its subsidiaries; or (iii) the conviction of the Participant of (or the plea by the Participant of nolo contendere to) any felony.
(c) Death. If termination of employment results from the Participants death, any Option which was otherwise exercisable by such Participant as of the time immediately before his or her death shall be exercisable by the Participants estate or by any person who acquired the Options by bequest or inheritance for a period ending on the earlier of (i) one year after the death of the Participant and (ii) the expiration date of such Option pursuant to the first sentence of Section 8(c). The Board may permit any option to be exercised for up to the total number of Shares subject to the Option, or grant an Option which by its terms is exercisable at any time within one year after the death of the Participant, for up to the total number of Shares subject to the Option, consistent with the above provisions.
(d) Disability. If the termination of employment results from the Participants disability, any Option which was otherwise exercisable by such Participant immediately prior to the termination of his employment shall be exercisable by him or her (or his or her legal
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representative) for a period ending on the earlier of (i) one year after such termination and (ii) the expiration date of such Option pursuant to the first sentence of Section 8(c). The Board may permit any Option to be exercised for up to the total number of Shares subject to the Option, or grant an Option which by its terms is exercisable at any time within one year after termination of employment, for up to the total number of Shares subject to the Option, consistent with the above provisions. The term disability shall for this purpose be defined as such term is defined in Section 22(e)(3) of the Code.
14. TERMS AND CONDITIONS OF RESTRICTED STOCK.
(a) Generally. A Restricted Stock Award is an Award entitling the Participant to acquire shares of Stock for a specified purchase price, or solely in consideration of past services rendered, subject to such conditions and restrictions as the Committee shall determine.
(b) Awards, Purchase Price and Consideration. Subject to the provisions of the Plan, the Board may award shares of Restricted Stock and determine the purchase price (if any) therefor, and the other terms and conditions of such Awards. Shares of Restricted Stock may be issued for no cash consideration or such minimum consideration as may be required by applicable law.
(c) Certificates. Shares of Restricted Stock shall be evidenced in such a manner as the Board may determine. Any certificates issued in respect of shares of Restricted Stock shall be registered in the name of the Participant and delivered to the Participant.
(d) Rights of Holder. A Participant shall have all the rights of a shareholder with respect to the Restricted Stock, including voting and dividend rights, subject to restrictions on transferability and subject to any other conditions, determined by the Board and contained in the Award.
15. CONDITIONS TO EXERCISE OF OPTIONS AND GRANT OF AWARDS. Except as waived by the Board in a particular case, all the following conditions shall be complied with as a condition to the exercise of each Option granted under the Plan, and Sections 15(a), (b), (c) and (e) shall be complied with as a condition to the issuance of Restricted Stock under the Plan:
(a) Legal Matters. In the opinion of the Companys counsel all applicable federal and state laws and regulations, including securities laws and regulations, shall have been complied with, and legal matters in connection with the issuance and delivery of such Shares shall have been approved by the Companys counsel.
(b) Listing and Registration of Shares. If at any time the Board shall determine that the listing, registration or qualification of the Shares covered by any Award upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of or in connection with the granting of
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such Award or the issuance or purchase of Shares thereunder, such Award may not be granted, and any Shares covered thereby may not be issued, in whole or in part unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board.
(c) Tax Undertakings. In the case of (i) an Option that is not an Incentive Option, or (ii) the issuance of Restricted Stock, the Board may require the Participant to remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements (or make other arrangements satisfactory to the Company with regard to such taxes, including withholding from regular cash compensation, giving of security to the Company adequate to meet the potential liability of the Company for withholding of tax, or, with respect to Options, reducing the number of shares otherwise issuable upon the exercise of the Option by a number of shares having a fair market value (as determined by the Board in good faith in its discretion) on the date of exercise sufficient to meet such potential liability) prior to the delivery of any Shares pursuant to the exercise of the Option, or the issuance of any Shares pursuant to a grant of Restricted Stock, as the case may be. With the approval of the Board, the employee may, in lieu of cash, remit Stock having a fair market value (as determined by the Board in good faith in its discretion) on the date of exercise sufficient to meet such potential liability). In the case of an Incentive Option, if at the time the Option is exercised the Board determines that under applicable law and regulations the Company could be liable for the withholding of any federal or state tax with respect to a disposition of the Shares received upon exercise, the Board may require the Participant to agree (i) to inform the Company promptly of any disposition (within the meaning of Section 424(c) of the Code and the regulations thereunder) of Shares received upon exercise, and (ii) to give such security as the Board deems adequate to meet the potential liability of the Company for the withholding of tax, and to augment such security from time to time in any amount reasonably deemed necessary by the Board to preserve the adequacy of such security.
(d) Evidence of Authority. If an Option is exercised by the legal representative of a deceased Participant or by a person to whom the Option has been transferred by the Participants will or by applicable laws of descent and distribution, the Company shall not be obligated to deliver Shares until satisfied as to the authority of the person exercising the Option.
(e) Restrictions on Transfer of Stock. If the sale of Shares has not been registered under the Securities Act of 1933, as amended, or under applicable state securities laws, the Company may require, as a condition to exercise of an Option or grant of Restricted Stock, such representations or agreements from the Participant as counsel for the Company may consider appropriate to avoid violation of such Act or such state securities laws and may require that the certificates evidencing such Shares bear an appropriate legend restricting transfer. In addition, the Board may require as conditions to the grant or exercise of any Award that the Participant agree in writing to (i) restrictions on the transfer of Shares and (ii) a right of first refusal of the Company to repurchase Shares in the event the holder desires to sell such Shares. Such restrictions and rights on the part of the Company shall be identified in the instrument granting the Award.
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16. REORGANIZATIONS; DISSOLUTION.
(a) Substitute Options. If by reason of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization, or liquidation the Board shall authorize the issuance or assumption of a stock option in a transaction to which Section 424(a) of the Code applies, then, notwithstanding any other provision of the Plan, the Board may grant an option upon such terms and conditions as it may deem appropriate for the purpose of assumption of the old option, or substitution of a new option for the old option, in conformity with the provisions of said Section 424(a) of the Code and the Regulations thereunder, and any such option shall not reduce the number of shares otherwise available for issuance under the Plan.
(b) Termination of Options. In the event of a Change in Control of the Company (as defined in subsection (c), below), and in anticipation thereof if required by the circumstances, the Board, in its sole discretion, may (i) accelerate the exercisability, prior to the effective date of such Change in Control, of all outstanding options granted under this Plan (and redesignate as Nonqualified Options any options or portions thereof that were originally designated as Incentive Options but that no longer so qualify under Section 422 of the Code), (ii) arrange, if there is a surviving or acquiring corporation, subject to the consummation of a Change of Control, to have that corporation or an affiliate of that corporation grant to employees and other optionholders replacement options with substantially similar or, if not adverse to the optionholders, different provisions with respect to exercisability (upon which grant the options granted under this Plan shall immediately terminate and be of no further force or effect) which, however, in the case of Incentive Options, satisfy, in the determination of the Board, the requirements of Section 424(a) of the Code, (iii) cancel all outstanding options in exchange for consideration in cash or in kind in an amount equal to the value of the Shares, as determined by the Board in good faith, the optionholder would have received had the option been exercised (to the extent then exercisable or to a greater extent, including in full, as the Board may determine) less the option price therefor (upon which cancellation such options shall immediately terminate and be of no further force or effect), (iv) permit the purchaser of the Companys stock or assets to deliver to the optionholders the same kind of consideration that is delivered to the stockholders of the Company in cancellation of such options in an amount equal to the value of the Shares, as determined by the Board in good faith, the optionholder would have received had the option been exercised (to the extent then exercisable or to a greater extent, including in full, as the Board may determine), less the option price therefor, or (v) take any combination (or none) of the foregoing actions.
(c) Definition of Change of Control. For purposes of this Plan, a Change in Control shall mean and include any of the following:
(i) a merger or consolidation of the Company with or into any other corporation or other business entity in which the Company is the surviving corporation (except one in which the holders of capital stock of the Company immediately prior to such merger or consolidation continue to hold at least a majority of the outstanding securities having the right to vote in an election of the Board of Directors (Voting Stock) of the Company); or any such merger or consolidation in which the Company is not the surviving corporation;
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(ii) a sale, lease, exchange or other transfer (in one transaction or a related series of transactions) of all or substantially all of the Companys assets;
(iii) the acquisition by any person or any group of persons (other than the Company, any of its direct or indirect subsidiaries, or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its direct or indirect subsidiaries) acting together in any transaction or related series of transactions, of such number of shares of the Companys Voting Stock as causes such person, or group of persons, to own beneficially, directly or indirectly, as of the time immediately after such transaction or series of transactions, 51% or more of the combined voting power of the Voting Stock of the Company other than as a result of an acquisition of securities directly from the Company, or solely as a result of an acquisition of securities by the Company which by reducing the number of shares of the Voting Stock outstanding increases the proportionate voting power represented by the Voting Stock owned by any such person to 51% or more of the combined voting power of such Voting Stock; and
(iv) a change in the composition of the Companys Board of Directors following a tender offer or proxy contest, as a result of which persons who, immediately prior to a tender offer or proxy contest, constituted the Companys Board of Directors shall cease to constitute at least a majority of the members of the Board of Directors.
(d) Dissolution or Liquidation. Upon the dissolution or liquidation of the Company, all outstanding options granted under this Plan shall terminate, but each optionholder shall have the right, immediately prior to such dissolution or liquidation, to exercise his or her options to the extent then exercisable.
17. EMPLOYMENT RIGHTS AND OTHER BENEFITS. Neither the adoption of the Plan nor the grant of Awards shall confer upon any employee any right to continued employment with the Company or any parent or subsidiary or affect in any way the right of the Company or such parent or subsidiary to terminate the employment of an employee at any time. Except as specifically provided by the Board in any particular case, the loss of existing or potential profit in Awards granted under the Plan shall not constitute an element of damages in the event of termination of the employment of an employee even if the termination is in violation of an obligation of the Company to the employee by contract or otherwise. Nothing in the Plan shall restrict the authority of the Board to grant stock options or to award bonuses or other benefits to employees or others otherwise than pursuant to the Plan.
18. DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION. The Board may at any time abandon the Plan or discontinue granting Awards under the Plan. With the consent of the Participant, the Board may at any time cancel an existing Award in whole or in part and grant another Award for such number of shares as the Board
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specifies. The Board may at any time amend the Plan for the purpose of satisfying the requirements of Section 422 of the Code or of any changes in applicable laws or regulations or for any other purpose which may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards, provided that (except to the extent expressly required or permitted herein above) no such amendment shall, without the approval of the stockholders of the Company by at least a majority vote at a duly held meeting (or by written consent as provided by applicable law), (a) increase the maximum number of shares for which Options or Restricted Stock may be granted under the Plan, (b) change the group of employees eligible to receive Options under the Plan, (c) reduce the price at which Incentive Options may be granted, (d) extend the time within which Options may be granted, (e) alter the Plan in such a way that Incentive Options already granted hereunder would not be considered Incentive Options under Section 422 of the Code, (f) amend the provisions of this Section 16, or (g) make any other change in the Plan which requires stockholder approval under applicable law or regulations, including any approval requirement which is a prerequisite for exemptive relief under Section 18 of the Securities and Exchange Act of 1934. The termination or any modification or amendment of the Plan shall not adversely affect the rights of any Participant under any Award previously granted without his or her consent.
19. COMPLIANCE WITH RULE 16b-3. It is intended that the provisions of the Plan and any Award granted thereunder to a person subject to the reporting requirements of Section 16(a) of the Securities and Exchange Act of 1934, as amended, shall comply in all respects with the terms and conditions of Rule 16b-3 promulgated under such Act or any successor provisions thereto. Any agreement granting Awards shall contain such provisions as are necessary or appropriate to assure such compliance. To the extent that any provision hereof is found not to be in compliance with such Rule, such provision shall be deemed to be modified so as to be in compliance with such Rule or, if such modification is not possible, shall be deemed to be null and void, as it relates to a recipient subject to Section 16(a) of the Securities and Exchange Act of 1934, as amended.
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