The Company does not
utilize compensation policies or practices creating risks that are reasonably
likely to have a material adverse effect on the Company. This Compensation
Discussion and Analysis section describes generally our compensation policies
and practices that are applicable for executive and management
employees.
We provide what we
believe is a competitive total compensation package to our executive management
team through a combination of base salary, an annual cash incentive plan, a
long-term equity incentive compensation plan and broad-based benefits programs.
We place emphasis on pay for performance-based incentive compensation programs,
which make payments when certain company or revenue goals are achieved. This
Compensation Discussion and Analysis explains our compensation philosophy,
policies and practices with respect to our CEO, CFO, and the other three most
highly-compensated executive officers, which are collectively referred to as the
named executive officers.
Compensation Committee
We have established a
Compensation Committee (the “Compensation Committee”), the primary
responsibilities of which are to periodically review and approve the
compensation and other benefits for our employees, officers and independent
directors, including reviewing and approving corporate goals and objectives
relevant to the compensation of our executive officers in light of those goals
and objectives, and setting compensation for these officers based on those
evaluations. Our Compensation Committee also administers and has discretionary
authority over the issuance of stock awards under our stock compensation
plans.
The Compensation
Committee has in the past, and may in the future, delegate authority to review
and approve the compensation of our employees to certain of our executive
officers, including with respect to stock option grants issued under our Stock
Option Plan. Even where the Compensation Committee has not delegated authority,
our executive officers typically make recommendations to the Compensation
Committee regarding compensation to be paid to our employees and the size of
stock options and stock grants.
The Compensation
Committee is comprised of three members, Tery Larrew, Robert Majteles and Steven
Whiteman. Mr. Larrew is the chairperson of the Compensation Committee. None of
the members of the Compensation Committee is a current or former officer or
employee of our Company. The Board has determined that Mr. Larrew meets the
independence requirements of the NASDAQ Marketplace Rules.
The Objectives of Our Executive Compensation
Program
Our Compensation
Committee is responsible for establishing and administering our policies
governing the compensation for our executive officers. Our Compensation
Committee is composed entirely of non-employee independent directors. The
primary goals of the Compensation Committee with respect to executive
compensation are to attract and retain the most talented and dedicated
executives possible, to tie annual and long-term cash and equity incentives to
achievement of specified performance objectives, and to align executives’
incentives with stockholder value creation. To achieve these goals, the
Compensation Committee intends to implement and maintain compensation plans that
tie a substantial portion of executives’ overall compensation to our financial
and operational performance, as measured by metrics such as revenue, revenue
growth and profitability. The Compensation Committee evaluates individual
executive performance with a goal of setting compensation at levels the
Compensation Committee believes are comparable with executives in other
companies of similar size and stage of development operating in the software
industry while taking into account our relative performance and our own
strategic goals. In March 2010, we retained a compensation consultant to review
our policies and procedures with respect to executive and board compensation and
update a market compensation study that was originally completed in March 2007.
The Compensation Committee used the results of the consultant’s analysis to
evaluate the appropriateness of compensation levels for our executives compared
to other companies of similar size.
Our Compensation
Committee meets outside the presence of all of our executive officers, including
the named executive officers, to consider appropriate compensation for our CEO.
For all other named executive officers, the Compensation Committee meets outside
the presence of all executive officers except our CEO, Mr. Wille, who reviews
each other named executive officer’s performance with the Compensation Committee
and makes recommendations to the Compensation Committee with respect to the
appropriate base salary, cash bonus incentives and equity incentives. The
Compensation Committee considers the annual performance of the executive
officer, the importance of the executive position to the Company, the past
salary history of the executive officer and the contributions to be made by the
executive officer to us. The Compensation Committee also reviews the analyses
and recommendations of the executive compensation consultant retained by the
Compensation Committee. After considering the relevant information, the
Compensation Committee establishes the annual compensation package for our
executive officers.
12
We use the following
principles to guide our decisions regarding executive compensation:
Allocation between long-term and currently paid out
compensation.
The compensation we currently pay consists of base pay and annual cash
incentive compensation. The long-term compensation consists entirely of stock
awards or stock options pursuant to our 2001 Stock Option Plan. The allocation
between long-term and currently paid out compensation is based on an analysis of
how the enterprise software industry and companies of similar size in the
general technology market use long-term and currently paid compensation to pay
their executive officers.
Allocation between cash and non-cash
compensation.
It is our intent to allocate
all currently paid compensation and annual incentive pay in the form of cash and
all long-term compensation in the form of stock awards and/or stock options to
purchase our common stock. We consider competitive market analyses when
determining the allocation between cash and non-cash compensation.
Provide compensation opportunities targeted at market median
levels.
To attract and retain
executives with the ability and the experience necessary to lead us and deliver
strong performance to our stockholders, we strive to provide a total
compensation package that is competitive with total compensation provided by our
industry peer group. We benchmark our salary and target incentive levels and
practices as well as our performance results in relation to other comparable
general technology and enterprise software companies of similar size in terms of
revenue and market capitalization. In fiscal 2010, we engaged a compensation
consultant to provide us with a comprehensive evaluation of our executive
compensation program. The consultant used multiple data sources, including
confidential market compensation surveys and public survey data to enable them
to compare our company to fourteen others with similar attributes, including
Bitstream, NetSole Technologies, Pervasive Software and Versant.
We target base salaries
and target total compensation to result in annual salaries equal to the market
median (50th percentile) pay level. We believe our executive compensation
packages are reasonable when considering our business strategy, our compensation
philosophy and the competitive market pay data.
Require performance goals to be substantially achieved in order for the
majority of the target pay levels to be earned.
Our executive compensation program emphasizes pay for performance.
Performance is measured based on the achievement of company and divisional
performance goals established by our Board of Directors relative to our Board of
Director approved annual business plan. The goals for our company and divisional
measures are established so that target attainment is not assured. The
attainment of these company and divisional goals will require significant effort
on the part of our executives.
Offer the same comprehensive benefits package to all full-time
employees.
We provide a competitive
benefits package to all full-time employees which includes health and welfare
benefits, such as medical, dental, vision care, disability insurance, life
insurance benefits, and a 401(k) savings plan. We have no structured executive
perquisite benefits (e.g., club memberships or company vehicles) for any
executive officer, including the named executive officers, and we currently do
not provide any deferred compensation programs or supplemental pensions to any
executive officer, including the named executive officers.
Provide fair and equitable compensation.
We provide a total compensation program that we believe will be perceived
by both our executive officers and our stockholders as fair and equitable. In
addition to conducting analyses of market pay levels and considering individual
circumstances related to each executive officer, we also consider the pay of
each executive officer relative to each other executive officer and relative to
other members of the management team. We have designed our total compensation
programs to be consistent for our executive management team.
13
Our Executive Compensation Program
Elements
Overall, our executive
compensation programs are designed to be consistent with the objectives and
principles set forth above. For each fiscal year, the Compensation Committee
will select, in its discretion, the executive officers of the Company or its
subsidiaries who are to participate in the Company’s incentive plans. The
Compensation Committee will establish the terms and conditions applicable to any
award granted under the plan and a participant will be eligible to receive an
award under the plan in accordance with such terms and conditions. Awards will
be paid in whole or in part in cash, common stock or other property and will
generally be paid in the first quarter following completion of a given fiscal
year. The actual amount of any discretionary bonus payment will be determined
following a review of each executive’s individual performance and contribution
to our strategic goals. The plan does not fix a maximum payout for any officer’s
annual discretionary incentive payment. With the exception of the Company’s CEO,
no other executive officers have an employment agreement. The basic elements of
our executive compensation programs are summarized below:
Base Salary. Base salaries for our executives are
established based on the scope of their responsibilities, taking into account
competitive market compensation paid by other companies for similar positions.
Generally, we believe that executive base salaries should be targeted near the
median of the range of salaries for executives in similar positions with similar
responsibilities at comparable companies, in line with our compensation
philosophy. Base salaries are reviewed annually, and adjusted from time to time
to realign salaries with market levels after taking into account individual
responsibilities, performance and experience. For fiscal 2010, this review
occurred at the beginning of the first quarter.
Management Incentive Plan. The Company, through the Compensation
Committee, maintains an annual Management Incentive Plan (“MIP”) such that executives of the Company can
receive an incentive payment based on the achievement of pre-defined objectives.
The incentive plan awards are intended to compensate officers for achieving
financial and operational goals and for achieving individual annual performance
objectives. These objectives vary depending on the individual executive, but
relate generally to the Company’s financial results. The Company’s financial
performance did not meet the MIP pre-defined objective for fiscal 2010,
therefore, no MIP cash incentive bonuses were paid for fiscal 2010.
Long-Term Equity Incentive
Program. We believe that
long-term performance is achieved through an ownership culture that encourages
such performance by our executive officers through the use of stock and
stock-based awards. Our stock compensation guidelines have been established to
provide certain of our employees, including our executive officers, with
incentives to help align those employees’ interests with the interests of
stockholders. The Compensation Committee believes that the use of stock and
stock-based awards is a significant component in enabling the company to achieve
its compensation goals. We do maintain stock award guidelines and all stock
awards are made at the direction of the Compensation Committee. Based on
information provided to us by a third party compensation consultant, we believe
that the aggregate equity ownership levels for our executive officers should be
set near competitive median levels for comparable companies. For fiscal 2010,
this review occurred at the beginning of the first quarter.
Options and Stock Awards. Our 2001 Stock Option Plan authorizes us to
grant options to purchase shares of common stock to our employees, directors and
consultants. Our Compensation Committee is the administrator of the stock option
plan. Stock option grants are made at the commencement of employment and,
occasionally, following a significant change in job responsibilities or to meet
other special retention or performance objectives. The Compensation Committee
reviews and approves stock option awards to executive officers based upon a
review of competitive compensation data, its assessment of individual
performance, a review of each executive’s existing long-term incentives, and
retention considerations. Periodic stock option grants are made at the
discretion of the Compensation Committee to eligible employees and, in
appropriate circumstances, the Compensation Committee considers the
recommendations of members of management, such as Mr. Wille, our Chief Executive
Officer. In fiscal 2010, certain named executive officers were awarded stock
options in the amounts indicated in the section entitled “Grants of Plan Based
Awards.” These grants included stock option grants made in May
2009.
Other Compensation. In accordance with our compensation
philosophy, the Compensation Committee may, in its discretion, revise, amend or
authorize any changes to the executive officer’s compensation or benefits as
deemed necessary. There were no discretionary incentive awards made during
fiscal 2010.
14
Retirement Savings
Opportunity. The Company
maintains a 401(k) employee retirement savings plan. Eligible employees may
contribute up to 100% of their pre-tax salary, but not more than statutory
limits. We match a portion of
employee contributions, currently 50% of the first 6% of compensation deferred.
We do not provide an option for our employees to invest in our common stock in
the 401(k) plan.
Health and Welfare
Benefits. All full-time
employees, including our named executive officers, may participate in our health
and welfare benefit programs, including medical, dental and vision care
coverage, disability insurance and life insurance.
Tax Deductibility of Executive Compensation
Limitations on
deductibility of compensation may occur under Section 162(m) of the Internal
Revenue Code which generally limits the tax deductibility of compensation paid
by a public company to its chief executive officer and certain other highly
compensated executive officers to $1 million in the year the compensation
becomes taxable to the executive officer. There is an exception to the limit on
deductibility for performance-based compensation that meets certain
requirements.
Compensation Committee Report
The Compensation
Committee is comprised entirely of independent directors. The Compensation
Committee has reviewed the Compensation Discussion and Analysis required by Item
402(b) of Regulation S-K with management and, based on such review and
discussions, the Committee recommended to our Board of Directors that the
Compensation Discussion and Analysis be included in this annual
report.
Submitted by the
Compensation Committee: Tery R. Larrew, Robert J. Majteles, Steven D.
Whiteman.
15
SUMMARY COMPENSATION TABLE
The following table sets
forth information concerning the compensation earned during the fiscal years
ended April 30, 2010, 2009 and 2008 by our President and Chief Executive
Officer, our Chief Financial Officer and our three other most highly compensated
executive officers for the last three (3) fiscal years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Option |
|
|
Commission |
|
All Other |
|
|
|
Name and Principal |
|
|
|
Salary |
|
Bonus |
|
|
Awards |
|
Awards |
|
|
Compensation |
|
Compensation |
|
|
Total |
Position |
|
Year |
|
$ (1) |
|
$ (2) |
|
|
$ (3) |
|
$ (4) |
|
|
$ (5) |
|
$ |
|
|
$ |
Todd E. Wille (6) |
|
2010 |
|
270,000 |
|
40,000 |
(11) |
|
|
|
147,781 |
(7) |
|
|
|
|
|
|
457,781 |
President and Chief |
|
2009 |
|
250,000 |
|
55,000 |
|
|
|
|
348,525 |
(8) |
|
|
|
|
|
|
653,525 |
Executive Officer |
|
2008 |
|
250,000 |
|
180,000 |
|
|
|
|
320,231 |
(9) |
|
|
|
|
|
|
750,231 |
|
Steven D. Bonham (10) |
|
2010 |
|
192,500 |
|
30,000 |
(11) |
|
|
|
64,177 |
(12) |
|
|
|
|
|
|
286,677 |
Chief Financial Officer |
|
2009 |
|
185,000 |
|
42,500 |
|
|
|
|
69,705 |
(13) |
|
|
|
|
|
|
297,205 |
|
|
2008 |
|
185,000 |
|
138,000 |
|
|
|
|
38,641 |
(14) |
|
|
|
|
|
|
361,641 |
|
Frank Verardi (15) |
|
2010 |
|
150,000 |
|
|
|
|
|
|
42,343 |
(16) |
|
91,248 |
|
|
|
|
283,591 |
Vice President of Sales - |
|
2009 |
|
140,000 |
|
3,500 |
|
|
|
|
|
|
|
121,679 |
|
|
|
|
265,179 |
Americas and Asia Pacific |
|
2008 |
|
125,000 |
|
15,000 |
|
|
|
|
|
|
|
157,352 |
|
|
|
|
297,352 |
|
Mark Bygraves (17) |
|
2010 |
|
158,254 |
|
|
|
|
|
|
88,669 |
(18) |
|
134,493 |
|
16,956 |
(19) |
|
398,372 |
Vice President of Sales - |
|
2009 |
|
149,664 |
|
5,000 |
|
|
|
|
116,175 |
(20) |
|
115,780 |
|
13,736 |
(21) |
|
400,355 |
Europe, Middle East, Africa |
|
2008 |
|
170,985 |
|
12,000 |
|
|
|
|
96,220 |
(22) |
|
163,130 |
|
19,311 |
(23) |
|
461,646 |
|
Duane George (24) |
|
2010 |
|
165,000 |
|
|
|
|
|
|
65,506 |
(25) |
|
26,157 |
|
|
|
|
256,663 |
Chief Technical Officer |
|
2009 |
|
160,000 |
|
8,750 |
|
|
|
|
69,705 |
(26) |
|
30,692 |
|
|
|
|
269,147 |
|
|
2008 |
|
160,000 |
|
42,000 |
|
|
|
|
60,577 |
(27) |
|
31,867 |
|
|
|
|
294,444 |
(1) |
|
Includes amounts,
if any, deferred at the named executive officer’s option under Unify
Corporation’s 401(k) plan. |
|
(2) |
|
Includes amounts,
if any, paid under the Company’s Management Incentive Plan
(“MIP”). |
|
(3) |
|
No stock awards
have been granted been awarded in the last three fiscal
years. |
|
(4) |
|
The amounts in
this column equal the grant date fair value of each award as computed in
accordance with FASB Accounting Standards Codification Topic 718 – Stock
Compensation. A discussion of the assumptions used in calculating the
grant date fair value of these stock options can be found in Note 1 to the
Consolidated Financial Statements in the Company’s Annual Report on Form
10-K for the fiscal year ended April 30, 2010 under the heading
“Stock-Based Compensation”. Amounts shown reflect accounting expenses and
do not reflect whether the recipient has actually realized a financial
benefit from the awards. |
|
(5) |
|
Represents
commissions earned and paid pursuant to the Company’s sales commission
plans. |
|
(6) |
|
Mr. Wille was
appointed President and CEO in November 2000. |
|
(7) |
|
Relates to stock
option grants of 87,500 and 12,500 shares of common stock to Mr. Wille on
May 5, 2009. |
|
(8) |
|
Relates to stock
option grant of 75,000 shares of common stock to Mr. Wille on May 2,
2008. |
|
(9) |
|
Relates to stock option
grants of 54,000 and 60,000 shares of common stock to Mr. Wille on May 1,
2007 and November 27, 2007
respectively.
|
16
(10) |
|
Mr. Bonham joined
the Company in June 2005 as CFO. |
|
(11) |
|
Represents a
management incentive bonus awarded by the Compensation Committee under the
Management Incentive Plan relative to the acquisition of AXS-One
Inc. |
|
(12) |
|
Relates to stock
option grants of 10,000 and 35,000 shares of common stock to Mr. Bonham on
May 5, 2009. |
|
(13) |
|
Relates to stock
option grant of 15,000 shares of common stock to Mr. Bonham on May 2,
2008. |
|
(14) |
|
Relates to stock
option grants of 14,400 and 6,000 shares of common stock to Mr. Bonham on
May 1, 2007 and November 27, 2007 respectively. |
|
(15) |
|
Mr. Verardi was
appointed to the position of Vice President, Sales for the Americas and
Asia Pacific in May 2007. Prior to that, he held the position of Vice
President and General Manager of the Unify Business Solutions
division. |
|
(16) |
|
Relates to stock
option grants of 7,500 and 22,500 shares of common stock to Mr. Verardi on
May 5, 2009. |
|
(17) |
|
Mr. Bygraves was
appointed to the position of Vice President, Sales – Europe, Middle East
and Africa in May 2007. He joined the company in November 2006 upon the
acquisition of Gupta Technologies. |
|
(18) |
|
Relates to stock
option grants of 7,500 and 52,500 shares of common stock to Mr. Bygraves
on May 5, 2009. |
|
(19) |
|
Represents the
amount received by Mr. Bygraves under the car allowance
program. |
|
(20) |
|
Relates to stock
option grants of 25,000 shares of common stock to Mr. Bygraves on May 2,
2008. |
|
(21) |
|
Represents the
amount received by Mr. Bygraves under the car allowance
program. |
|
(22) |
|
Relates to stock
option grants of 20,000 and 20,000 shares of common stock to Mr. Bygraves
on May 1, 2007 and November 27, 2007 respectively. |
|
(23) |
|
Represents the
amount received by Mr. Bygraves under the car allowance
program. |
|
(24) |
|
Mr. George was
appointed to the position of Vice President of Product Development and
Chief Technology Officer in May 2007. Prior to that, he held the position
of Senior Director of Product Development. |
|
(25) |
|
Relates to stock
option grants of 7,500 and 37,500 shares of common stock to Mr. George on
May 5, 2009. |
|
(26) |
|
Relates to stock
option grant of 15,000 shares of common stock to Mr. George on May 2,
2008. |
|
(27) |
|
Relates to stock
option grants of 17,400 and 10,000 shares of common stock to Mr. George on
May 1, 2007 and November 27, 2007
respectively. |
17
Grants of Plan-Based Awards
The Compensation
Committee approved option awards under our 2001 Stock Option Plan to certain of
our named executives in fiscal 2008, 2009 and 2010. Set forth below is
information regarding awards granted during fiscal 2008, 2009 and 2010.
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
All Other Stock |
|
Option Awards: |
|
Exercise or |
|
|
|
|
|
|
|
Awards: |
|
Number of |
|
Base |
|
Grant Date Fair |
|
|
|
|
Number of |
|
Securities |
|
Price of Options |
|
Value of Stock |
|
|
|
|
Shares of |
|
Underlying |
|
or Awards |
|
and Option |
Name |
|
Grant Date |
|
Stock (#) |
|
Options (#) |
|
($/share) (1) |
|
Awards ($) (2) |
Todd E. Wille |
|
5/1/2007 |
|
|
|
54,000 |
|
$ |
2.55 |
|
$ |
101,393 |
|
|
11/27/2007 |
|
|
|
60,000 |
|
$ |
5.20 |
|
$ |
218,838 |
|
|
5/2/2008 |
|
|
|
75,000 |
|
$ |
6.40 |
|
$ |
348,525 |
|
|
5/5/2009 |
|
|
|
87,500 |
|
$ |
2.60 |
|
$ |
135,118 |
|
|
5/5/2009 |
|
|
|
12,500 |
|
$ |
2.60 |
|
$ |
12,663 |
|
Steven D. Bonham |
|
5/1/2007 |
|
|
|
14,400 |
|
$ |
2.55 |
|
$ |
16,757 |
|
|
11/27/2007 |
|
|
|
6,000 |
|
$ |
5.20 |
|
$ |
21,884 |
|
|
5/2/2008 |
|
|
|
15,000 |
|
$ |
6.40 |
|
$ |
69,705 |
|
|
5/5/2009 |
|
|
|
35,000 |
|
$ |
2.60 |
|
$ |
54,047 |
|
|
5/5/2009 |
|
|
|
10,000 |
|
$ |
2.60 |
|
$ |
10,130 |
|
Mark Bygraves |
|
5/1/2007 |
|
|
|
20,000 |
|
$ |
2.55 |
|
$ |
23,274 |
|
|
11/27/2007 |
|
|
|
20,000 |
|
$ |
5.20 |
|
$ |
72,946 |
|
|
5/2/2008 |
|
|
|
25,000 |
|
$ |
6.40 |
|
$ |
116,175 |
|
|
5/5/2009 |
|
|
|
52,500 |
|
$ |
2.60 |
|
$ |
81,071 |
|
|
5/5/2009 |
|
|
|
7,500 |
|
$ |
2.60 |
|
$ |
7,598 |
|
Frank Verardi |
|
5/5/2009 |
|
|
|
22,500 |
|
$ |
2.60 |
|
$ |
34,745 |
|
|
5/5/2009 |
|
|
|
7,500 |
|
$ |
2.60 |
|
$ |
7,598 |
|
Duane George |
|
5/1/2007 |
|
|
|
17,400 |
|
$ |
2.55 |
|
$ |
44,370 |
|
|
11/27/2007 |
|
|
|
10,000 |
|
$ |
5.20 |
|
$ |
52,000 |
|
|
5/2/2008 |
|
|
|
15,000 |
|
$ |
6.40 |
|
$ |
69,705 |
|
|
5/5/2009 |
|
|
|
37,500 |
|
$ |
2.60 |
|
$ |
57,908 |
|
|
5/5/2009 |
|
|
|
7,500 |
|
$ |
2.60 |
|
$ |
7,598 |
(1) |
|
All options were
granted with an exercise price equal to the fair market value per share of
the common stock on the date of grant, as determined by the fair market
value of the Company’s common stock on that day. |
|
(2) |
|
The amounts in
this column equal the grant date fair value of each award as computed in
accordance with FASB Accounting Standards Codification Topic 718 – Stock
Compensation. A discussion of the assumptions used in calculating the
grant date fair value of these stock options can be found in Note 1 to the
Consolidated Financial Statements in the Company’s Annual Report on Form
10-K for the fiscal year ended April 30, 2010, under the heading
“Stock-Based Compensation”. Amounts shown reflect accounting expenses and
do not reflect whether the recipient has actually realized a financial
benefit from the awards. |
18
The supplemental table below compares the grant date fair value to the
intrinsic value for each of the fiscal 2010 option awards.
Option Awards Fair Value v. Intrinsic Value
(supplemental table)
|
|
|
|
|
Intrinsic Value of Stock Option to
Executive |
|
|
|
Number |
|
Cash Paid by |
Current market |
Option Award |
|
|
|
of Option |
Fair Value of |
Executive to |
value of Option |
Economic |
|
|
|
Shares |
Option Award |
Exercise Option |
Award |
Gain/(Loss) to |
|
|
Executive Officer |
Granted |
(1) |
(2) |
(3) |
Executive (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Todd E. Wille |
100,000 |
$ |
147,781 |
$ |
260,000 |
$ |
360,000 |
$ |
100,000 |
|
|
Steven D. Bonham |
45,000 |
$ |
64,177 |
$ |
117,000 |
$ |
162,000 |
$ |
45,000 |
|
|
Mark T. Bygraves |
60,000 |
$ |
88,669 |
$ |
156,000 |
$ |
216,000 |
$ |
60,000 |
|
|
Frank Verardi |
30,000 |
$ |
42,343 |
$ |
78,000 |
$ |
108,000 |
$ |
30,000 |
|
|
Duane V. George |
45,000 |
$ |
65,506 |
$ |
117,000 |
$ |
162,000 |
$ |
45,000 |
|
|
(1) |
|
The Fair Value of
the Option Award represents the total compensation expense the Company
will record over the vesting period in accordance with the grant-date fair
value-based compensation expense calculated under FASB Accounting
Standards Board Accounting Standards Codification Topic 718 - Stock
Compensation. This is the amount reported in the Summary Compensation
Table above. |
|
|
|
(2) |
|
The total cash
amount the executive will be required to pay to the Company to buy the
stock represented by the option award at the time of exercise. The
exercise price for these option awards is $2.60 which was the closing
price of the Company’s common stock on the date of grant. |
|
|
|
(3) |
|
The current
market value is based on the April 30, 2010 closing price of
$3.60. |
|
|
|
(4) |
|
The economic gain
or loss to the executive officer is calculated as the difference between
the market value of the option award at $3.60 per share and the cash cost
to exercise these shares at $2.60 per share. |
Stock Option Plans
Our 2001 Stock Option
Plan (the “2001 Option Plan”) is administered by our Compensation Committee. The
objectives of the plan include attracting, motivating and retaining key
personnel and promoting our success by linking the interests of our employees,
directors and consultants with our success.
Prior to the 2001 Option
Plan, the Company had a 1991 Stock Options Plan (the “1991 Option Plan”) which
expired as of March 2001. Under the 1991 Option Plan, the Company was able to
grant options to eligible employees, directors and consultants at prices not
less than the fair market value at the date of grant for incentive stock options
and not less than 85% of the fair market value at the date of grant for
non-statutory stock options. Options granted under the 1991 Option Plan
generally vest over four years, are exercisable to the extent vested, and expire
10 years from the date of grant.
Options Available for Issuance
Under the 2001 Stock Option Plan, the Company
may grant options to purchase up to 2,000,000 shares of common stock to eligible
employees, directors, and consultants at prices not less than the fair market
value at the date of grant for incentive stock options and not less than 85% of
the fair market value at the date of grant for non-statutory stock options. As
of April 30, 2010 there were 509,965 options available under the 2001 Option
Plan.
Term of Options
The term of each option is ten years from the date of the grant of the
option, unless a shorter period is established for incentive stock options or
the administrator of the 2001 Stock Option Plan establishes a shorter
period.
19
Vesting Schedule
Options granted under our 2001 Stock Option Plan, unless waived or
modified in a particular option agreement or by action of the Compensation
Committee, vest over a four year period. The options generally have no vesting
until the end of one year at which time they become 25% vested. Following the
first year, the options generally vest monthly on a ratable basis over the next
three years. At the end of four years the options are fully vested.
Administration
The Compensation Committee has full discretionary authority to determine
all matters relating to options granted under the plan. The Compensation
Committee has the authority to determine the persons eligible to receive
options, the number of shares subject to each option, the exercise price of each
option, any vesting schedule, any acceleration of the vesting schedule and any
extension of the exercise period.
Amendment and Termination
Our Board of Directors has authority to
suspend, amend or terminate the plan, except as would adversely affect
participants’ rights to outstanding awards without their consent. As the plan
administrator, our Compensation Committee has the authority to interpret the
plan and options granted under the plan and to make all other determinations
necessary or advisable for plan administration.
Other Stock Options
In fiscal 2003, the
Board authorized the issuance of non-registered non-plan stock options
(“Non-Plan Options”) for individual senior level executive recruitment. These
Non-Plan Options are granted pursuant to written agreements that are not subject
to the terms of the 2001 Option Plan, but have similar terms and conditions. The
options and shares issuable under the Non-Plan Options are restricted securities
under the Securities Act and may not be issued or sold except under an effective
registration statement or an applicable exemption therefrom. The Non-Plan Option
agreements contain substantially similar terms as options issued under our 2001
Option Plan, including vesting schedule and option term.
Employment Agreements and Termination and
Change of Control Agreements
We have an employment
agreement with Mr. Wille, our President and CEO, which became effective October
1, 2000. Under the agreement, he originally received an annual salary of
$220,000, subject to Board adjustment, and is eligible to receive bonuses upon
Unify achieving certain benchmarks in its business plan. Following a merger of
the Company or sale of substantially all of its assets, the unvested portion of
all options held by Mr. Wille as of the date of the transaction will
automatically vest. Should Mr. Wille be terminated without cause or resign for
good reason, all options held by Mr. Wille will have the benefit of twelve (12)
additional months of vesting and he will receive an amount equal to twelve (12)
months’ salary and the continuation of health benefits for 12 months following
termination.
We also have an employment agreement
with Mr. Jensen, our Executive Vice President and COO, which became effective
June 30, 2010. The agreement has a three-year term, which may be extended year
to year upon expiration. Under the agreement, Mr. Jensen is entitled to a base
salary of $325,000 with a performance bonus up to 55% of base salary, and
guaranteed additional payments of $175,000 and $87,500 for the first and second
years, respectively, of his employment with the Company. Mr. Jensen will also be
eligible to participate in the Company’s employee benefit programs, including
the Company’s stock option plans. If the Company terminates Mr. Jensen’s
employment for any reason, other than cause, or if Mr. Jensen terminates his
employment for good reason, Mr. Jensen shall receive his base salary, bonus, and
benefits for the twelve months following termination. If Mr. Jensen terminates
his employment for any reason, other than death, disability, or good reason,
prior to the first anniversary of Mr. Jensen’s employment, Mr. Jensen shall pay
the Company a buy-out and release fee of $500,000.
20
Change in Control
Under our 1991 and 2001
Stock Option Plans, should we merge with or otherwise be acquired by another
company in a transaction where our stockholders do not retain a majority of the
voting stock, such event would constitute a “Change of Control.” If there is a
Change of Control and the successor company fails to either assume the
outstanding options or substitute substantially equivalent options for its own
stock, the vesting of all outstanding Unify options shall accelerate to become
fully vested and immediately exercisable. Any outstanding options will terminate
if they are not exercised upon consummation of the merger or assumed or replaced
by the successor corporation.
Outstanding Equity Awards at April 30,
2010
The following table
summarizes the outstanding equity award holdings by our named executive
officers.
21
|
|
Number of |
|
Number of |
|
|
|
|
|
|
Securities |
|
Securities |
|
|
|
|
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
Unexercised |
|
Unexercised |
|
|
|
|
|
|
Options |
|
Options |
|
Option Exercise |
|
|
|
|
Exercisable |
|
Unexercisable |
|
Price |
|
Option Expiration |
Name |
|
(#) |
|
(#) |
|
($) |
|
Date |
Todd E. Wille |
|
30,000 |
|
|
|
$ |
1.25 |
|
9/26/2011 |
|
|
30,000 |
|
|
|
|
1.30 |
|
11/16/2011 |
|
|
30,000 |
|
|
|
|
2.75 |
|
5/9/2012 |
|
|
45,875 |
|
8,125 |
|
|
2.55 |
|
5/1/2017 |
|
|
36,250 |
|
23,750 |
|
|
5.20 |
|
11/27/2017 |
|
|
35,937 |
|
39,063 |
|
|
6.40 |
|
5/2/2018 |
|
|
20,052 |
|
67,448 |
|
|
2.60 |
|
5/5/2019 |
|
|
|
|
12,500 |
|
|
2.60 |
|
5/5/2019 |
|
Steven D. Bonham |
|
40,000 |
|
|
|
|
1.85 |
|
6/27/2015 |
|
|
14,400 |
|
|
|
|
2.55 |
|
5/1/2017 |
|
|
3,625 |
|
2,375 |
|
|
5.20 |
|
11/27/2017 |
|
|
7,187 |
|
7,813 |
|
|
6.40 |
|
5/2/2018 |
|
|
8,020 |
|
26,980 |
|
|
2.60 |
|
5/5/2019 |
|
|
|
|
10,000 |
|
|
2.60 |
|
5/5/2019 |
|
Mark Bygraves |
|
12,812 |
|
2,188 |
|
|
1.20 |
|
11/20/2016 |
|
|
20,000 |
|
|
|
|
2.55 |
|
5/1/2017 |
|
|
12,083 |
|
7,917 |
|
|
5.20 |
|
11/27/2017 |
|
|
11,979 |
|
13,021 |
|
|
6.40 |
|
5/2/2018 |
|
|
12,031 |
|
40,469 |
|
|
2.60 |
|
5/5/2019 |
|
|
|
|
7,500 |
|
|
2.60 |
|
5/5/2019 |
|
Frank Verardi |
|
8,000 |
|
|
|
|
1.25 |
|
9/26/2011 |
|
|
10,000 |
|
|
|
|
1.30 |
|
11/16/2011 |
|
|
15,000 |
|
|
|
|
2.75 |
|
5/9/2012 |
|
|
4,000 |
|
|
|
|
2.30 |
|
2/2/2015 |
|
|
5,156 |
|
17,344 |
|
|
2.60 |
|
5/5/2019 |
|
|
|
|
7,500 |
|
|
2.60 |
|
5/5/2019 |
|
Duane George |
|
5,000 |
|
|
|
|
1.30 |
|
11/16/2011 |
|
|
2,000 |
|
|
|
|
2.75 |
|
5/9/2012 |
|
|
2,000 |
|
|
|
|
3.35 |
|
11/3/2013 |
|
|
3,000 |
|
|
|
|
4.70 |
|
5/3/2014 |
|
|
1,400 |
|
|
|
|
2.05 |
|
12/10/2014 |
|
|
12,812 |
|
2,188 |
|
|
1.10 |
|
11/16/2016 |
|
|
16,587 |
|
813 |
|
|
2.55 |
|
5/1/2017 |
|
|
6,041 |
|
3,959 |
|
|
5.20 |
|
11/27/2007 |
|
|
7,187 |
|
7,813 |
|
|
6.40 |
|
5/2/2018 |
|
|
8,593 |
|
28,907 |
|
|
2.60 |
|
5/5/2019 |
|
|
|
|
7,500 |
|
|
2.60 |
|
5/5/2019 |
|
Kurt Jensen |
|
|
|
|
|
|
|
|
|
22
Option Exercises and Stock Vested
There have been no
exercises of stock options by our named executive officers during the last
fiscal year.
Compensation of Directors
The compensation for
each individual non-employee (“Independent”) Director is assessed by the other
members of the Board and is generally based upon the degree and quality of
his/her participation in Board activities. Directors receive an annual cash
retainer and an annual stock option. For the year ended April 30, 2010 each
director was awarded 6,500 options to purchase common stock. A summary of the
compensation for each Independent Director is included on the following table.
|
|
Based Upon |
|
Annual Maximum |
|
How Paid |
Annual Cash Retainer (1) |
|
Board participation |
|
$25,000 in cash |
|
$6,250 per quarter |
|
Annual Stock Option Grant (2) |
|
Board determination of award to be made
pursuant to the 2001 Stock Option Plan |
|
Up to 10,000 shares of common
stock |
|
An option to purchase Unify common stock
at FMV at the date of grant with a one year vesting
period |
(1) |
|
Unify
pays non-employee directors an annual cash retainer fee of $25,000 which
is paid in four quarterly payments of $6,250 each. Payments are to be made
in the middle of each fiscal quarter. Directors also receive compensation
for their participation or chairing of committees. These payments are paid
in four quarterly payments are to be made in the middle of each fiscal
quarter. The Chairman of the Board, Chairman of the Audit Committee and
Chairman of the M&A Committee are paid $10,000 annually. The Chairman
of the Compensation Committee is paid an annual fee of $5,000. An annual
fee of $2,000 is paid for participation in the Compensation Committee and
an annual fee of $3,000 is paid for participation on the Audit
Committee. |
|
(2) |
|
Directors can receive an annual stock option grant of up to 10,000
shares of Unify common stock. Eligibility is determined by the Board and
is based on several factors from the prior fiscal year, including the
financial performance of the Company, the Director’s personal contribution
to the Company and any other relevant factors or events. The stock option
grant, if any, is made in May of each year and the exercise price shall be
equivalent to the fair market value of the stock at the time of the option
grant. Any such option grant will vest monthly over a period of twelve
(12) months. |
23
The following table sets
forth certain information with respect to our non-employee director compensation
during the fiscal year ended April 30, 2010.
Director Compensation Table
|
|
Fees Earned or |
|
Stock |
|
Option |
|
|
|
|
|
Paid in Cash |
|
Awards |
|
Awards |
|
|
Total |
Name |
|
($) |
|
($) |
|
($) |
|
|
($) |
Timothy P. Bacci |
|
12,500 |
|
|
|
14,778 |
(1) |
|
27,278 |
Robert M. Bozeman |
|
35,000 |
|
|
|
10,037 |
(2) |
|
45,037 |
Richard M. Brooks |
|
35,000 |
|
|
|
10,037 |
(2) |
|
45,037 |
Tery R. Larrew |
|
33,000 |
|
|
|
10,037 |
(2) |
|
43,037 |
Robert J. Majteles |
|
27,000 |
|
|
|
10,037 |
(2) |
|
37,037 |
Steven D. Whiteman |
|
40,000 |
|
|
|
10,037 |
(2) |
|
50,037 |
(1) |
|
Represents the aggregate grant date fair market value of options to
purchase 8,000 shares of common stock on August 20, 2009 with an exercise
price of $3.46 per share calculated in accordance with FASB Accounting
Standards Codification Topic 718 – Stock Compensation. |
|
(2) |
|
Represents the aggregate grant
date fair market value of options to purchase 6,500 shares of common stock
on May 5, 2009 with an exercise price of $2.60 per share calculated in
accordance with FASB Accounting Standards Codification Topic 718 – Stock
Compensation. |
Director Restricted Stock
Plan
In fiscal 2003, the
Board adopted, without a need for shareholder approval, the 2002 Director
Restricted Stock Plan (the “Director Restricted Stock Plan”) as part of a
program to provide compensation we felt was necessary to attract, retain and
reward members of our Board of Directors who were willing to provide the time
and energy that we believe is required to meet our business goals. At the end of
fiscal 2007, the Board changed the Director Compensation such that there is no
longer a stock award component. Since the sole purpose of the Director
Restricted Stock Plan was to provide stock awards to the Directors, this plan is
no longer used. Consequently, there were no shares awarded in the fiscal 2010
under the Director Restricted Stock Plan and there is a balance of 3,862 shares
available at April 30, 2010.
Indemnification of Officer and Directors
Unify’s Restated
Certificate of Incorporation (the “Certificate”) limits the liability of our
directors to the maximum extent permitted by Delaware law. Delaware law provides
that a corporation’s certificate of incorporation may contain a provision
eliminating or limiting the personal liability of a director for monetary
damages for breach of their fiduciary duties as directors, except for liability
for (i) any breach of their duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payments of
dividends or unlawful stock repurchases or redemptions as provided in Section
174 of the Delaware General Corporation Law, or (iv) any transactions from which
the director derived an improper personal benefit. Our bylaws call for us to
indemnify our directors, executive officers, and trustees to the fullest extent
permitted by law. We believe that such indemnification covers negligence and
gross negligence. Our bylaws also permit us to secure insurance on behalf of any
executive officer, director, employee or other agent for any liability arising
out of his or her actions in such capacity (subject to certain exclusions),
regardless of whether the bylaws permit indemnification.
24
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Section 16(a) of the
Securities Exchange Act of 1934, as amended, requires our executive officers,
directors and persons who beneficially own more than ten percent (10%) of
Unify’s common stock to file initial reports of ownership and reports of changes
in ownership with the Securities and Exchange Commission (“SEC”). Such persons
are required by SEC regulations to furnish us with copies of all Section 16(a)
reports filed by them.
Based solely upon our
review of such reports furnished to us and written representations from certain
reporting persons, we believe that all filing requirements applicable to our
executive officers, directors and more than ten percent (10%) stockholders for
the fiscal year ended April 30, 2010, were met.
25
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets
forth certain information as of June 30, 2010 with respect to the beneficial
ownership of our common stock by: (i) each member of our Board of Directors;
(ii) each of our named executives; (iii) all of our directors and executive
officers as a group; and (iv) each stockholder who is known to us to own
beneficially more than 5% of our outstanding common stock. The following
beneficial ownership table assumes full conversion of the convertible term notes
resulting from the debt financing in conjunction with the acquisition of Gupta.
|
|
Shares Owned (1) |
|
|
Number of |
|
Percentage of |
Name of Beneficial Owner |
|
Shares |
|
Class |
Directors |
|
|
|
|
Steven D. Whiteman
(2) |
|
59,648 |
|
* |
Tery R. Larrew (3) |
|
60,498 |
|
* |
Richard M. Brooks
(4) |
|
24,700 |
|
* |
Robert J. Majteles (5) |
|
22,011 |
|
* |
Robert M. Bozeman
(6) |
|
17,444 |
|
* |
Timothy P. Bacci (7) (18) |
|
879,137 |
|
6.95% |
|
Executive Officers |
|
|
|
|
Todd E. Wille (8) |
|
351,118 |
|
2.72% |
Steven D. Bonham (9) |
|
87,305 |
|
* |
Kurt A. Jensen (10) |
|
1,996,605 |
|
14.72% |
Mark T. Bygraves (11) |
|
79,217 |
|
* |
Frank Verardi (12) |
|
76,826 |
|
* |
Duane V. George (13) |
|
75,547 |
|
* |
All Directors and Executive Officers as a group (12 persons)
(14) |
|
3,730,056 |
|
26.24% |
|
5% Stockholders |
|
|
|
|
AWM Investment Company, Inc. (15) |
|
2,437,809 |
|
18.62% |
c/o Special Situations
Funds |
|
|
|
|
153 East 53rd St., 55th
Floor |
|
|
|
|
New York, NY
10022-4611 |
|
|
|
|
|
Don R. Carmignani (16) |
|
1,268,160 |
|
9.59% |
1420 Rocky Ridge Road |
|
|
|
|
Roseville, CA 95661 |
|
|
|
|
|
Jurika Family Trust (17) |
|
981,556 |
|
7.76% |
42
Glen Alpine Rd. |
|
|
|
|
Piedmont, CA 94611 |
|
|
|
|
|
BlueLine Partners, LLC (18) |
|
870,084 |
|
6.88% |
402
Railroad Avenue, Suite 201 |
|
|
|
|
Danville, CA 94526 |
|
|
|
|
26
(1) |
|
Number
of shares beneficially owned and the percentage of shares beneficially
owned are based on 12,644,327 shares of the Company’s common stock
outstanding as of June 30, 2010. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission. In
computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of common stock subject to
options or warrants held by that person that are currently exercisable, or
will become exercisable within 60 days of June 30, 2010, are deemed
outstanding. Such shares, however, are not deemed outstanding for purposes
of computing the percentage ownership of any other person. Except as
indicated in the footnotes to this table, the persons named in the table
have sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them, subject to community property
laws where applicable. Unless otherwise indicated, the individuals in the
table may be contacted in care of Unify Corporation, 1420 Rocky Ridge
Drive, Suite 380, Roseville, CA 95661. |
|
(2) |
|
Includes 35,000 shares subject to options held by Mr. Whiteman
exercisable within 60 days of June 30, 2010. |
|
(3) |
|
Includes 28,000 shares subject to options held by Mr. Larrew
exercisable within 60 days of June 30, 2010. |
|
(4) |
|
Includes 21,000 shares subject to options held by Mr. Brooks
exercisable within 60 days of June 30, 2010. |
|
(5) |
|
Includes 16,000 shares subject to options held by Mr. Majteles
exercisable within 60 days of June 30, 2010. |
|
(6) |
|
Includes 17,444 shares subject to options held by Mr. Bozeman
exercisable within 60 days of June 30, 2010. |
|
(7) |
|
Includes 5,166 shares subject to options held by Mr. Bacci
exercisable within 60 days of June 30, 2010. Mr. Bacci also indirectly
owns 870,084 as a managing director of BlueLine Capital, LLC. See note
(18) below. |
|
(8) |
|
Includes 253,139 shares subject to options held by Mr. Wille
exercisable within 60 days of June 30, 2010. |
|
(9) |
|
Includes 79,305 shares subject to options held by Mr. Bonham
exercisable within 60 days of June 30, 2010. |
|
(10) |
|
Kurt
A. Jensen, the Company’s Chief Operating Officer, beneficially owns The
Jensen Revocable Trust along with his wife, Carolyn L. Jensen, who
collectively are co-settlors, co-trustees, and co-beneficiaries of The
Jensen Revocable Trust. Kurt A. Jensen, and Carolyn L. Jensen share sole
voting and investment power over all the foregoing shares. These
shares were issued as part of the Company’s acquisition of Daegis in June
2010. Mr. Jensen had been the president and chief executive officer of
Daegis. |
|
(11) |
|
Includes 79,217 shares subject to options held by Mr. Bygraves
exercisable within 60 days of June 30, 2010. |
|
(12) |
|
Includes 45,437 shares subject to options held by Mr. Verardi
exercisable within 60 days of June 30, 2010. |
|
(13) |
|
Includes 73,204 shares subject to options held by Mr. George
exercisable within 60 days of June 30, 2010. |
|
(14) |
|
Includes 652,912 shares subject to options and exercisable within
60 days of June 30, 2010. |
|
(15) |
|
AWM
Investment Company, Inc. is a hedge fund management firm based in New
York. The firm is owned by David Greenhouse and Austin Marxe. They manage
the Special Situations Fund III, L.P., Special Situations Cayman Fund
L.P., Special Situations Private Equity Fund, L.P., and Special Situations
Tech. Fund, L.P. |
|
(16) |
|
Don R.
Carmignani is a private investor and has sole voting and dispositive power
over all the foregoing shares. |
|
(17) |
|
Consists of: (i) 971,805 shares of common stock held by Jurika
Family Trust U/A 3/17/1989, (ii) 9,699 shares of common stock held by
William K. Jurika IRA, and (iii) 52 shares held by Michelle Jurika IRA.
Mr. Jurika is a private investor. |
|
(18) |
|
BlueLine Capital, LLC is the investment manager for a variety of
private investment funds and is based in California. Timothy Bacci and
Scott Shuda are the Managing Directors of BlueLine Partners, LLC and they
manage BlueLine Capital Partners, L.P., BlueLine Capital Partners II,
L.P., BlueLine Capital Partners III, L.P., BlueLine Capital Partners
L.L.C., and BlueLine Capital Partners II, L.L.C. Mr. Bacci also directly
owns 9,053 shares. See note (7) above. |
27
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Amounts Due from Officers, Directors and
Principal Stockholders.
Except for advances of reimbursable expenses, we have made no other loans to
executive officers, directors, stockholders or other affiliates. Any such loan
must be approved by a majority of those Board members who are independent of and
have no interest in the transaction.
Upon consummation of
Unify’s 2004 equity financing, the investors affiliated with Special Situations
Funds (“SSF”) exercised their right to designate a director nominee and
designated Robert J. Majteles to serve as a member of our Board of Directors.
Mr. Majteles joined the Board of Directors in 2004. Mr. Majteles is the founder
of Treehouse Capital, LLC (“Treehouse”), an investment firm. SSF has entered
into an agreement with Mr. Majteles and Treehouse pursuant to which Treehouse,
through Mr. Majteles, provides certain management and financial advisory
services for SSF on request. If Mr. Majteles’ services are requested by SSF with
respect to a particular portfolio investment, Treehouse is entitled to ten
percent of SSF’s net gain (as defined) or net loss (as defined) on the
investment during the term of the agreement, offset by certain fees that may be
paid by the portfolio company to Treehouse or Mr. Majteles directly. Under the
agreement, Mr. Majteles is required to act independently of SSF in discharging
his fiduciary duties to stockholders of any company for which he serves as a
member of the board of directors and also is obligated not to disclose to the
funds or use for his own benefit any confidential information he obtains in
connection with his service for a particular portfolio company. Mr. Majteles
does not have or share voting or dispositive power over any securities held by
SSF. Mr. Majteles has agreed to serve as a member of Unify’s Board of Directors
pursuant to this agreement.
Director Independence. Six of our seven directors are independent
under the rules of the NASDAQ Marketplace. Only our CEO, Mr. Wille, is not
considered independent under such rules.
28
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF
GRANT
THORNTON LLP AS INDEPENDENT AUDITOR
FOR FISCAL YEAR 2011
The Company’s Audit
Committee has appointed Grant Thornton LLP as the Company’s independent auditors
for the fiscal year 2011. A representative of Grant Thornton is expected to be
present at the Annual Meeting and available to respond to questions. An
affirmative vote of a majority of the outstanding shares of the Company present
or represented by proxy and entitled to vote at the Annual Meeting, at which a
quorum is present, will ratify the appointment of Grant Thornton as our
independent auditors for the fiscal year 2011.
PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
Fees billed by our
principal accountant, Grant Thornton LLP, for fiscal 2010 and fiscal 2009 audit
services totaled approximately $260,000 and $250,000, respectively. This
includes fees associated with the annual audit, review of the Company’s
quarterly reports on Form 10-Q and the statutory audit required for our French
subsidiary.
Audit-Related Fees
Audit-related service
fees billed by Grant Thornton for fiscal 2010 and fiscal 2009 were approximately
$7,000 and $9,000, respectively. The fiscal fees primarily related to
registration statements and other filings required to be filed with the
SEC.
Other Fees
Our principal
accountant, Grant Thornton LLP, had no other fees for fiscal year 2010 and
fiscal year 2009.
Pre-Approval Policies and Procedures
The Audit Committee has
adopted a policy that requires advance approval of all audit, audit-related, tax
services, and other services performed by the independent auditor. The policy
provides for pre-approval by the Audit Committee of specifically defined audit
and non-audit services. Unless the specific service has been pre-approved with
respect to that year, the Audit Committee must approve the permitted service
before the independent auditor is engaged to perform it. All of the services
provided by the independent auditor in fiscal 2010 and 2009 were
pre-approved.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” THE PROPOSAL TO RATIFY THE APPOINTMENT OF GRANT THORNTON LLP AS THE
COMPANY’S INDEPENDENT AUDITOR.
29
PROPOSAL 3
APPROVE ADOPTION OF
2010 STOCK PLAN
At the annual meeting,
the stockholders will be asked to approve the Unify Corporation 2010 Stock Plan
(the “2010 Plan”). The Board of Directors adopted the 2010 Plan on June 21,
2010, subject to and effective upon its approval by stockholders. The 2010 Plan
is intended to replace our Unify Corporation 2001 Stock Option Plan (the “2001
Plan”). If the stockholders approve the 2010 Plan, it will become effective on
the day of the annual meeting, and no further awards will be granted under the
2001 Plan, which will be terminated.
We operate in a
challenging marketplace in which our success depends to a great extent on our
ability to attract and retain employees, directors and other service providers
of the highest caliber. One of the tools our Board of Directors regards as
essential in addressing these human resource challenges is a competitive equity
incentive program. Our employee stock incentive program provides a range of
incentive tools and sufficient flexibility to permit the Board’s Compensation
Committee to implement them in ways that will make the most effective use of the
shares our stockholders authorize for incentive purposes. We intend to use these
incentives to attract new key employees and to continue to retain existing key
employees, directors and other service providers for the long-term benefit of
the Company and its stockholders.
The 2010 Plan authorizes
the Compensation Committee to provide incentive compensation in the form of
stock options, stock appreciation rights, restricted stock and stock units,
performance shares and units, other stock-based awards, cash-based awards and
deferred compensation awards. Under the 2010 Plan, we will be authorized to
issue up to 1,500,000 shares.
The 2010 Plan is
designed to preserve the Company’s ability to deduct in full for federal income
tax purposes the compensation recognized by its executive officers in connection
with certain types of awards. Section 162(m) of the Internal Revenue Code (the
“Code”) generally denies a corporate tax deduction for annual compensation
exceeding $1 million paid to the chief executive officer or any of the three
other most highly compensated officers of a publicly held company other than the
chief financial officer. However, qualified performance-based compensation is
excluded from this limit. To enable compensation in connection with stock
options, stock appreciation rights, certain restricted stock and restricted
stock unit awards, performance shares, performance units and certain other
stock-based awards and cash-based awards granted under the 2010 Plan to qualify
as “performance-based” within the meaning of Section 162(m), the stockholders
are being asked to approve certain material terms of the 2010 Plan. By approving
the 2010 Plan, the stockholders will be specifically approving, among other
things:
- the eligibility requirements for
participation in the 2010 Plan;
- the maximum numbers of shares for
which stock-based awards may be granted to an employee in any fiscal year;
- the maximum dollar amount that a
participant may receive under a cash-based award for each fiscal year
contained in the performance period; and
- the performance measures that may
be used by the Compensation Committee to establish the performance goals
applicable to the grant or vesting of awards of restricted stock, restricted
stock units, performance shares, performance units, other stock-based awards
and cash-based awards that are intended to result in qualified
performance-based compensation.
While we believe that
compensation provided by such awards under the 2010 Plan generally will be
deductible by the Company for federal income tax purposes, under certain
circumstances, such as a change in control of the Company, compensation paid in
settlement of certain awards may not qualify as performance-based.
30
The Board of Directors
believes that the 2010 Plan will serve a critical role in attracting and
retaining the high caliber employees, consultants and directors essential to our
success and in motivating these individuals to strive to meet our goals.
Therefore, the Board urges you to vote to approve the adoption of the 2010 Plan.
Summary of the 2010
Plan
The following summary of
the 2010 Plan is qualified in its entirety by the specific language of the 2010
Plan, a copy of which is attached to this proxy statement as Appendix A.
General. The
purpose of the 2010 Plan is to advance the interests of the Company and its
stockholders by providing an incentive program that will enable the Company to
attract and retain employees, consultants and directors and to provide them with
an equity interest in the growth and profitability of the Company. These
incentives are provided through the grant of stock options, stock appreciation
rights, restricted stock, restricted stock units, performance shares,
performance units, other stock-based awards, cash-based awards and deferred
compensation awards.
If any award granted
under the 2010 Plan expires or otherwise terminates for any reason without
having been exercised or settled in full, or if shares subject to forfeiture or
repurchase are forfeited or repurchased by the Company for not more than the
participant’s purchase price, any such shares reacquired or subject to a
terminated award will again become available for issuance under the 2010 Plan.
Shares will not be treated as having been issued under the 2010 Plan and will
therefore not reduce the number of shares available for issuance to the extent
an award is settled in cash. Shares that are withheld or reacquired by the
Company in satisfaction of a tax withholding obligation or that are tendered in
payment of the exercise price of an option will not be made available for new
awards under the 2010 Plan. Upon the exercise of a stock appreciation right or
net-exercise of an option, the number of shares available under the 2010 Plan
will be reduced by the gross number of shares for which the award is exercised.
Adjustments for Capital Structure Changes. Appropriate and proportionate adjustments will
be made to the number of shares authorized under the 2010 Plan, to the numerical
limits on certain types of awards described below, and to outstanding awards in
the event of any change in our common stock through merger, consolidation,
reorganization, reincorporation, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, split-up, split-off, spin-off,
combination of shares, exchange of shares or similar change in our capital
structure, or if we make a distribution to our stockholders in a form other than
common stock (excluding normal cash dividends) that has a material effect on the
fair market value of our common stock. In such circumstances, the Compensation
Committee also has the discretion under the 2010 Plan to adjust other terms of
outstanding awards as it deems appropriate.
Other Award Limits. To enable compensation provided in connection with certain types of
awards intended to qualify as “performance-based” within the meaning of Section
162(m) of the Code, the 2010 Plan establishes a limit on the maximum aggregate
number of shares or dollar value for which such awards may be granted to an
employee in any fiscal year, as follows:
- No more than 500,000 shares under
stock-based awards.
- No more than $1,000,000 for each
full fiscal year contained in the performance period under cash-based awards.
Administration. The 2010 Plan generally will be administered by the Compensation
Committee of the Board of Directors, although the Board of Directors retains the
right to appoint another of its committees to administer the 2010 Plan or to
administer the 2010 Plan directly. In the case of awards intended to qualify for
the performance-based compensation exemption under Section 162(m) of the Code,
administration of the 2010 Plan must be by a compensation committee comprised
solely of two or more “outside directors” within the meaning of Section 162(m).
(For purposes of this summary, the term “Committee” will refer to either such
duly appointed committee or the Board of Directors.) Subject to the provisions
of the 2010 Plan, the Committee determines in its discretion the persons to whom
and the times at which awards are granted, the types and sizes of awards, and
all of their terms and conditions. The Committee may, subject to certain
limitations on the exercise of its discretion required by Section 162(m) or
otherwise provided by the 2010 Plan, amend, cancel or renew any award, waive any
restrictions or conditions applicable to any award, and accelerate, continue,
extend or defer the vesting of any award. The 2010 Plan provides, subject to
certain limitations, for indemnification by the Company of any director, officer
or employee against all reasonable expenses, including attorneys’ fees, incurred
in connection with any legal action arising from such person’s action or failure
to act in administering the 2010 Plan. All awards granted under the 2010 Plan
will be evidenced by a written or digitally signed agreement between the Company
and the participant specifying the terms and conditions of the award, consistent
with the requirements of the 2010 Plan. The Committee will interpret the 2010
Plan and awards granted thereunder, and all determinations of the Committee
generally will be final and binding on all persons having an interest in the
2010 Plan or any award.
31
Prohibition of Option and SAR Repricing. The 2010 Plan expressly provides that, without
the approval of a majority of the votes cast in person or by proxy at a meeting
of our stockholders, the Committee may not provide for any of the following with
respect to underwater options or stock appreciation rights: (1) either the
cancellation of such outstanding options or stock appreciation rights in
exchange for the grant of new options or stock appreciation rights at a lower
exercise price or the amendment of outstanding options or stock appreciation
rights to reduce the exercise price, (2) the issuance of new full value awards
in exchange for the cancellation of such outstanding options or stock
appreciation rights, or (3) the cancellation of such outstanding options or
stock appreciation rights in exchange for payments in cash.
Eligibility. Awards may be granted to employees, directors and consultants of the
Company or any present or future parent or subsidiary corporation or other
affiliated entity of the Company. Incentive stock options may be granted only to
employees who, as of the time of grant, are employees of the Company or any
parent or subsidiary corporation of the Company. As of June 30, 2010, had
approximately 210 employees, including 5 executive officers, and 6 non-employee
directors who would be eligible under the 2010 Plan.
Stock Options. The Committee may grant nonstatutory stock options, incentive stock
options within the meaning of Section 422 of the Code, or any combination of
these. The exercise price of each option may not be less than the fair market
value of a share of our common stock on the date of grant. However, any
incentive stock option granted to a person who at the time of grant owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary corporation of the Company (a
“10% Stockholder”) must have an exercise price equal to at least 110% of the
fair market value of a share of common stock on the date of grant. On June 30,
2010, the closing price of our common stock as reported on the NASDAQ Global
Market was $3.45 per share.
The 2010 Plan provides
that the option exercise price may be paid in cash, by check, or cash
equivalent; by means of a broker-assisted cashless exercise; by means of a
net-exercise procedure; to the extent legally permitted, by tender to the
Company of shares of common stock owned by the participant having a fair market
value not less than the exercise price; by such other lawful consideration as
approved by the Committee; or by any combination of these. Nevertheless, the
Committee may restrict the forms of payment permitted in connection with any
option grant. No option may be exercised unless the participant has made
adequate provision for federal, state, local and foreign taxes, if any, relating
to the exercise of the option, including, if permitted or required by the
Company, through the participant’s surrender of a portion of the option shares
to the Company.
Options will become
vested and exercisable at such times or upon such events and subject to such
terms, conditions, performance criteria or restrictions as specified by the
Committee. The maximum term of any option granted under the 2010 Plan is ten
years, provided that an incentive stock option granted to a 10% Stockholder must
have a term not exceeding five years. Unless otherwise permitted by the
Committee, an option generally will remain exercisable for three months
following the participant’s termination of service, provided that if service
terminates as a result of the participant’s death or disability, the option
generally will remain exercisable for 12 months, but in any event the option
must be exercised no later than its expiration date, and provided further that
an option will terminate immediately upon a participant’s termination for cause
(as defined by the 2010 Plan).
Options are
nontransferable by the participant other than by will or by the laws of descent
and distribution, and are exercisable during the participant’s lifetime only by
the participant. However, an option may be assigned or transferred to certain
family members or trusts for their benefit to the extent permitted by the
Committee and, in the case of an incentive stock option, only to the extent that
the transfer will not terminate its tax qualification.
32
Stock Appreciation Rights. The Committee may grant stock appreciation
rights either in tandem with a related option (a “Tandem SAR”) or independently
of any option (a “Freestanding SAR”). A Tandem SAR requires the option holder to
elect between the exercise of the underlying option for shares of common stock
or the surrender of the option and the exercise of the related stock
appreciation right. A Tandem SAR is exercisable only at the time and only to the
extent that the related stock option is exercisable, while a Freestanding SAR is
exercisable at such times or upon such events and subject to such terms,
conditions, performance criteria or restrictions as specified by the Committee.
The exercise price of each stock appreciation right may not be less than the
fair market value of a share of our common stock on the date of grant.
Upon the exercise of any
stock appreciation right, the participant is entitled to receive an amount equal
to the excess of the fair market value of the underlying shares of common stock
as to which the right is exercised over the aggregate exercise price for such
shares. Payment of this amount upon the exercise of a Tandem SAR may be made
only in shares of common stock whose fair market value on the exercise date
equals the payment amount. At the Committee’s discretion, payment of this amount
upon the exercise of a Freestanding SAR may be made in cash or shares of common
stock. The maximum term of any stock appreciation right granted under the 2010
Plan is ten years.
Stock appreciation
rights are generally nontransferable by the participant other than by will or by
the laws of descent and distribution, and are generally exercisable during the
participant’s lifetime only by the participant. If permitted by the Committee, a
Tandem SAR related to a nonstatutory stock option and a Freestanding SAR may be
assigned or transferred to certain family members or trusts for their benefit to
the extent permitted by the Committee. Other terms of stock appreciation rights
are generally similar to the terms of comparable stock options.
Restricted Stock Awards. The Committee may grant restricted stock
awards under the 2010 Plan either in the form of a restricted stock purchase
right, giving a participant an immediate right to purchase common stock, or in
the form of a restricted stock bonus, in which stock is issued in consideration
for services to the Company rendered by the participant. The Committee
determines the purchase price payable under restricted stock purchase awards,
which may be less than the then current fair market value of our common stock.
Restricted stock awards may be subject to vesting conditions based on such
service or performance criteria as the Committee specifies, including the
attainment of one or more performance goals similar to those described below in
connection with performance awards. Shares acquired pursuant to a restricted
stock award may not be transferred by the participant until vested. Unless
otherwise provided by the Committee, a participant will forfeit any shares of
restricted stock as to which the vesting restrictions have not lapsed prior to
the participant’s termination of service. Unless otherwise determined by the
Committee, participants holding restricted stock will have the right to vote the
shares and to receive any dividends paid, except that dividends or other
distributions paid in shares will be subject to the same restrictions as the
original award and dividends paid in cash may be subject to such restrictions.
Restricted Stock Units. The Committee may grant restricted stock units
under the 2010 Plan, which represent rights to receive shares of our common
stock at a future date determined in accordance with the participant’s award
agreement. No monetary payment is required for receipt of restricted stock units
or the shares issued in settlement of the award, the consideration for which is
furnished in the form of the participant’s services to the Company. The
Committee may grant restricted stock unit awards subject to the attainment of
one or more performance goals similar to those described below in connection
with performance awards, or may make the awards subject to vesting conditions
similar to those applicable to restricted stock awards. Unless otherwise
provided by the Committee, a participant will forfeit any restricted stock units
which have not vested prior to the participant’s termination of service.
Participants have no voting rights or rights to receive cash dividends with
respect to restricted stock unit awards until shares of common stock are issued
in settlement of such awards. However, the Committee may grant restricted stock
units that entitle their holders to dividend equivalent rights, which are rights
to receive additional restricted stock units for a number of shares whose value
is equal to any cash dividends the Company pays.
Performance Awards. The Committee may grant performance awards subject to such conditions and
the attainment of such performance goals over such periods as the Committee
determines in writing and sets forth in a written agreement between the Company
and the participant. These awards may be designated as performance shares or
performance units, which consist of unfunded bookkeeping entries generally
having initial values equal to the fair market value determined on the grant
date of a share of common stock in the case of performance shares and a monetary
value established by the Committee at the time of grant in the case of
performance units. Performance awards will specify a predetermined amount of
performance shares or performance units that may be earned by the participant to
the extent that one or more performance goals are attained within a
predetermined performance period. To the extent earned, performance awards may
be settled in cash, shares of common stock (including shares of restricted stock
that are subject to additional vesting) or any combination thereof.
33
Prior to the beginning
of the applicable performance period or such later date as permitted under
Section 162(m) of the Code, the Committee will establish one or more performance
goals applicable to the award. Performance goals will be based on the attainment
of specified target levels with respect to one or more measures of business or
financial performance of the Company and each subsidiary corporation
consolidated with the Company for financial reporting purposes, or such division
or business unit of the Company as may be selected by the Committee. The
Committee, in its discretion, may base performance goals on one or more of the
following such measures: revenue; sales; expenses; operating income; gross
margin; operating margin; earnings before any one or more of: stock-based
compensation expense, interest, taxes, depreciation and amortization; pre-tax
profit; net operating income; net income; economic value added; free cash flow;
operating cash flow; balance of cash, cash equivalents and marketable
securities; stock price; earnings per share; return on stockholder equity;
return on capital; return on assets; return on investment; total stockholder
return, employee satisfaction; employee retention; market share; customer
satisfaction; product development; research and development expense; completion
of an identified special project; and completion of a joint venture or other
corporate transaction.
The target levels with
respect to these performance measures may be expressed on an absolute basis or
relative to an index, budget or other standard specified by the Committee. The
degree of attainment of performance measures will be calculated in accordance
with generally accepted accounting principles, if applicable, but prior to the
accrual or payment of any performance award for the same performance period,
and, according to criteria established by the Committee, excluding the effect
(whether positive or negative) of changes in accounting standards or any
extraordinary, unusual or nonrecurring item occurring after the establishment of
the performance goals applicable to a performance award.
Following completion of
the applicable performance period, the Committee will certify in writing the
extent to which the applicable performance goals have been attained and the
resulting value to be paid to the participant. The Committee retains the
discretion to eliminate or reduce, but not increase, the amount that would
otherwise be payable on the basis of the performance goals attained to a
participant who is a “covered employee” within the meaning of Section 162(m) of
the Code. However, no such reduction may increase the amount paid to any other
participant. The Committee may make positive or negative adjustments to
performance award payments to participants other than covered employees to
reflect the participant’s individual job performance or other factors determined
by the Committee. In its discretion, the Committee may provide for a participant
awarded performance shares of to receive dividend equivalent rights with respect
to cash dividends paid on the Company’s common stock. The Committee may provide
for performance award payments in lump sums or installments. If any payment is
to be made on a deferred basis, the Committee may provide for the payment of
dividend equivalent rights or interest during the deferral period.
Unless otherwise
provided by the Committee, if a participant’s service terminates due to the
participant’s death or disability prior to completion of the applicable
performance period, the final award value will be determined at the end of the
performance period on the basis of the performance goals attained during the
entire performance period but will be prorated for the number of months of the
participant’s service during the performance period. If a participant’s service
terminates prior to completion of the applicable performance period for any
other reason, the 2010 Plan provides that, unless otherwise determined by the
Committee, the performance award will be forfeited. No performance award may be
sold or transferred other than by will or the laws of descent and distribution
prior to the end of the applicable performance period.
Cash-Based Awards and Other Stock-Based Awards.
The Committee may
grant cash-based awards or other stock-based awards in such amounts and subject
to such terms and conditions as the Committee determines. Cash-based awards will
specify a monetary payment or range of payments, while other stock-based awards
will specify a number of shares or units based on shares or other equity-related
awards. Such awards may be subject to vesting conditions based on continued
performance of service or subject to the attainment of one or more performance
goals similar to those described above in connection with performance awards.
Settlement of awards may be in cash or shares of common stock, as determined by
the Committee. A participant will have no voting rights with respect to any such
award unless and until shares are issued pursuant to the award. The committee
may grant dividend equivalent rights with respect to other stock-based awards.
The effect on such awards of the participant’s termination of service will be
determined by the Committee and set forth in the participant’s award
agreement.
34
Deferred Compensation Awards. The 2010 Plan authorizes the Committee to
establish a deferred compensation award program. If and when implemented,
participants designated by the Committee, who may be limited to directors or
members of a select group of management or highly compensated employees, may
make an advance election to receive an award of stock options, stock
appreciation rights, restricted stock or restricted stock units in lieu of
director fees or bonuses otherwise payable in cash. The Committee will determine
basis on which the number of shares subject to an equity award granted in lieu
of cash compensation will be determined. Such awards will be subject to the
applicable provisions of the 2010 Plan.
Change in Control. Unless otherwise defined in a participant’s award or other agreement with
the Company, the 2010 Plan provides that a “Change in Control” occurs upon (a) a
person or entity (with certain exceptions described in the 2010 Plan) becoming
the direct or indirect beneficial owner of more than 50% of the Company’s voting
stock; (b) stockholder approval of a liquidation or dissolution of the Company;
or (c) the occurrence of any of the following events upon which the stockholders
of the Company immediately before the event do not retain immediately after the
event direct or indirect beneficial ownership of more than 50% of the voting
securities of the Company, its successor or the entity to which the assets of
the company were transferred: (i) a sale or exchange by the stockholders in a
single transaction or series of related transactions of more than 50% of the
Company’s voting stock; (ii) a merger or consolidation in which the Company is a
party; or (iii) the sale, exchange or transfer of all or substantially all of
the assets of the Company (other than a sale, exchange or transfer to one or
more subsidiaries of the Company).
If a Change in Control
occurs, the surviving, continuing, successor or purchasing entity or its parent
may, without the consent of any participant, either assume or continue
outstanding awards or substitute substantially equivalent awards for its stock.
If so determined by the Committee, stock-based awards will be deemed assumed if,
for each share subject to the award prior to the Change in Control, its holder
is given the right to receive the same amount of consideration that a
stockholder would receive as a result of the Change in Control. Any awards which
are not assumed or continued in connection with a Change in Control or exercised
or settled prior to the Change in Control will terminate effective as of the
time of the Change in Control. Subject to the restrictions of Section 409A of
the Code, the Committee may provide for the acceleration of vesting or
settlement of any or all outstanding awards upon such terms and to such extent
as it determines. The 2010 Plan also authorizes the Committee, in its discretion
and without the consent of any participant, to cancel each or any award
denominated in shares of stock upon a Change in Control in exchange for a
payment to the participant with respect each vested share (and each unvested
share if so determined by the Committee) subject to the cancelled award of an
amount equal to the excess of the consideration to be paid per share of common
stock in the Change in Control transaction over the exercise price per share, if
any, under the award.
Awards Subject to Section 409A of the Code. Certain awards granted under the 2010 Plan may
be deemed to constitute “deferred compensation” within the meaning of Section
409A of the Code, providing rules regarding the taxation of nonqualified
deferred compensation plans, and the regulations and other administrative
guidance issued pursuant to Section 409A. Any such awards will be required to
comply with the requirements of Section 409A. Notwithstanding any provision of
the 2010 Plan to the contrary, the Committee is authorized, in its sole
discretion and without the consent of any participant, to amend the 2010 Plan or
any award agreement as it deems necessary or advisable to comply with Section
409A.
Amendment, Suspension or Termination. The 2010 Plan will continue in effect until
its termination by the Committee, provided that no awards may be granted under
the 2010 Plan following the tenth anniversary of the 2010 Plan’s effective date,
which will be the date on which it is approved by the stockholders. The
Committee may amend, suspend or terminate the 2010 Plan at any time, provided
that no amendment may be made without stockholder approval that would increase
the maximum aggregate number of shares of stock authorized for issuance under
the 2010 Plan, change the class of persons eligible to receive incentive stock
options or require stockholder approval under any applicable law. No amendment,
suspension or termination of the 2010 Plan may affect any outstanding award
unless expressly provided by the Committee, and, in any event, may not have a
materially adverse affect an outstanding award without the consent of the
participant unless necessary to comply with any applicable law, regulation or
rule, including, but not limited to, Section 409A of the Code, or unless
expressly provided in the terms and conditions governing the award.
35
Summary of U.S. Federal Income Tax
Consequences
The following summary is
intended only as a general guide to the U.S. federal income tax consequences of
participation in the 2010 Plan and does not attempt to describe all possible
federal or other tax consequences of such participation or tax consequences
based on particular circumstances.
Incentive Stock Options. A participant recognizes no taxable income for
regular income tax purposes as a result of the grant or exercise of an incentive
stock option qualifying under Section 422 of the Code. Participants who neither
dispose of their shares within two years following the date the option was
granted nor within one year following the exercise of the option will normally
recognize a capital gain or loss upon the sale of the shares equal to the
difference, if any, between the sale price and the purchase price of the shares.
If a participant satisfies such holding periods upon a sale of the shares, we
will not be entitled to any deduction for federal income tax purposes. If a
participant disposes of shares within two years after the date of grant or
within one year after the date of exercise (a “disqualifying disposition”), the
difference between the fair market value of the shares on the option exercise
date and the exercise price (not to exceed the gain realized on the sale if the
disposition is a transaction with respect to which a loss, if sustained, would
be recognized) will be taxed as ordinary income at the time of disposition. Any
gain in excess of that amount will be a capital gain. If a loss is recognized,
there will be no ordinary income, and such loss will be a capital loss. Any
ordinary income recognized by the participant upon the disqualifying disposition
of the shares generally should be deductible by us for federal income tax
purposes, except to the extent such deduction is limited by applicable
provisions of the Code.
In general, the
difference between the option exercise price and the fair market value of the
shares on the date of exercise of an incentive stock option is treated as an
adjustment in computing the participant’s alternative minimum taxable income and
may be subject to an alternative minimum tax which is paid if such tax exceeds
the regular tax for the year. Special rules may apply with respect to certain
subsequent sales of the shares in a disqualifying disposition, certain basis
adjustments for purposes of computing the alternative minimum taxable income on
a subsequent sale of the shares and certain tax credits which may arise with
respect to participants subject to the alternative minimum tax.
Nonstatutory Stock Options. Options not designated or qualifying as
incentive stock options are nonstatutory stock options having no special tax
status. A participant generally recognizes no taxable income upon receipt of
such an option. Upon exercising a nonstatutory stock option, the participant
normally recognizes ordinary income equal to the difference between the exercise
price paid and the fair market value of the shares on the date when the option
is exercised. If the participant is an employee, such ordinary income generally
is subject to withholding of income and employment taxes. Upon the sale of stock
acquired by the exercise of a nonstatutory stock option, any gain or loss, based
on the difference between the sale price and the fair market value of the shares
on the exercise date, will be taxed as capital gain or loss. We generally should
be entitled to a tax deduction equal to the amount of ordinary income recognized
by the participant as a result of the exercise of a nonstatutory stock option,
except to the extent such deduction is limited by applicable provisions of the
Code.
Stock Appreciation Rights. A Participant recognizes no taxable income
upon the receipt of a stock appreciation right. Upon the exercise of a stock
appreciation right, the participant generally will recognize ordinary income in
an amount equal to the excess of the fair market value of the underlying shares
of common stock on the exercise date over the exercise price. If the participant
is an employee, such ordinary income generally is subject to withholding of
income and employment taxes. We generally should be entitled to a deduction
equal to the amount of ordinary income recognized by the participant in
connection with the exercise of the stock appreciation right, except to the
extent such deduction is limited by applicable provisions of the Code.
Restricted Stock. A participant acquiring restricted stock generally will recognize
ordinary income equal to the excess of the fair market value of the shares on
the “determination date” over the price paid, if any, for such shares. The
“determination date” is the date on which the participant acquires the shares
unless the shares are subject to a substantial risk of forfeiture and are not
transferable, in which case the determination date is the earlier of (i) the
date on which the shares become transferable or (ii) the date on which the
shares are no longer subject to a substantial risk of forfeiture (e.g., when
they become vested). If the determination date follows the date on which the
participant acquires the shares, the participant may elect, pursuant to Section
83(b) of the Code, to designate the date of acquisition as the determination
date by filing an election with the Internal Revenue Service no later than 30
days after the date on which the shares are acquired. If the participant is an
employee, such ordinary income generally is subject to withholding of income and
employment taxes. Upon the sale of shares acquired pursuant to a restricted
stock award, any gain or loss, based on the difference between the sale price
and the fair market value of the shares on the determination date, will be taxed
as capital gain or loss. We generally should be entitled to a deduction equal to
the amount of ordinary income recognized by the participant on the determination
date, except to the extent such deduction is limited by applicable provisions of
the Code.
36
Restricted Stock Unit, Performance, Cash-Based and Other Stock-Based
Awards. A
participant generally will recognize no income upon the receipt of a restricted
stock unit, performance share, performance unit, cash-based or other stock-based
award. Upon the settlement of such awards, participants normally will recognize
ordinary income in the year of settlement in an amount equal to the cash
received and the fair market value of any substantially vested shares of stock
received. If the participant is an employee, such ordinary income generally is
subject to withholding of income and employment taxes. If the participant
receives shares of restricted stock, the participant generally will be taxed in
the same manner as described above under “Restricted Stock.” Upon the sale of
any shares received, any gain or loss, based on the difference between the sale
price and the fair market value of the shares on the determination date (as
defined above under “Restricted Stock”), will be taxed as capital gain or loss.
We generally should be entitled to a deduction equal to the amount of ordinary
income recognized by the participant on the determination date, except to the
extent such deduction is limited by applicable provisions of the Code.
New 2010 Plan
Benefits
Required Vote and Board of Directors
Recommendation
Approval of this
proposal requires the affirmative vote of a majority of the shares present or
represented by proxy and entitled to vote on this proposal. If you hold your
shares in your own name and abstain from voting on this matter, your abstention
will have the same effect as a negative vote. If you hold your shares through a
broker and you do not instruct the broker on how to vote on this proposal, your
broker will not have authority to vote your shares. Broker non-votes will have
no effect on the outcome of this vote. Abstentions and broker non-votes will
each be counted as present for purposes of determining the presence of a quorum.
The Board believes that
the proposed adoption of the 2010 Plan is in the best interests of the Company
and its stockholders for the reasons stated above.
THEREFORE, THE BOARD UNANIMOUSLY RECOMMENDS A
VOTE “FOR” APPROVAL OF THE ADOPTION OF THE 2010 PLAN.
37
STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS
Any proposal to conduct
business (other than nominations) at a meeting of stockholders that a
stockholder desires to have included in our proxy materials for the 2011 annual
meeting of stockholders must comply with the applicable rules and regulations of
the SEC, including that any such proposal must be received by our Secretary at
our principal office no later than April 5, 2011 and must otherwise comply with
Rule 14a-8 under the Exchange Act and the applicable procedures set forth in our
bylaws.
Our bylaws require a
stockholder to give advance notice of any proposal to conduct business, or to
present a nomination of one or more candidates for election to the Board of
Directors, that the stockholder wishes to bring before a meeting of our
stockholders. In general, for business proposals or nominations to be brought
before an annual meeting by a stockholder, written notice of the stockholder
proposal or nomination must be received by our Secretary during the period
beginning 120 days and ending 90 days before the anniversary of the last annual
meeting. However, if the date of the upcoming annual meeting is more than 30
days before or more than 60 days after the anniversary of the last annual
meeting, notice must be received by the Secretary during the period beginning
120 days before the upcoming annual meeting and ending on the later of 90 days
before the upcoming annual meeting or 10 days after the first public
announcement of such meeting date.
If a stockholder desires
to have a proposal to conduct business (other than nominations) included in our
proxy materials for the 2011 annual meeting of our stockholders and desires to
have such proposal brought before the same annual meeting, the stockholder must
comply with the applicable rules and regulations of the SEC and the applicable
procedures set forth in our bylaws. Any stockholder proposals should be sent to:
Nominating and Governance Committee, c/o Secretary, 1420 Rocky Ridge Drive,
Suite 380, Roseville, California, 95661.
Director Nominations
Under our bylaws,
stockholder recommendations of nominees to the Board of Directors must also
comply with the advance notice requirements in our bylaws, including the
requirement that a stockholder notice must be delivered to or mailed and
received by the Company not later than thirty (30) days prior to the annual
meeting. to submit such recommendations not later than thirty (30) days prior to
such meeting; however, in the event that less than forty (40) days’ notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the 10th day following the date on which such
notice of the date of such meeting was mailed or such public disclosure was
made.
Any such recommendation
must include the following information:
- the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated;
- a representation that the
stockholder is a holder of record of stock of the corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice;
- a description of all arrangements
or understandings between the stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder;
- such other information regarding
each nominee proposed by such stockholder as would be required to be included
in a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had the nominee been nominated, or intended to be
nominated, by the Board of Directors; and
- the consent of each nominee to
serve as a director of the corporation if so elected.
Recommendations for
director candidates should be sent to: Nominating and Governance Committee, c/o
Secretary, 1420 Rocky Ridge Drive, Suite 380, Roseville, California, 95661.
TRANSACTION OF OTHER BUSINESS
At the date of this
Proxy Statement, the only business which the Board of Directors intends to
present or knows that others will present at this Annual Meeting is as set forth
above. If any other matter or matters are properly brought before the meeting,
or any adjournment thereof, it is the intention of the persons named in the
accompanying form of proxy to vote the proxy on such matters in accordance with
their best judgment.
|
Sincerely, |
|
|
|
Todd E. Wille |
Roseville,
California |
President and Chief
Executive Officer |
August 3, 2010 |
|
38
DIRECTIONS TO THE LOCATION OF THE MEETING
The meeting will be held
at our corporate headquarters which is located at 1420 Rocky Ridge Drive, Suite
380, Roseville, CA 95661.
From Bay Area (heading
east)
Take I-80 towards
Reno (east).
Exit at Eureka Road in Roseville.
Turn right onto Eureka
Road.
Turn left onto Rocky Ridge Drive.
From Sacramento Metropolitan Field (SMF)
Airport
Exit the
airport onto I-5 South.
Take
I-80 exit towards Reno (east).
Exit at Eureka Road in Roseville.
Turn
right onto Eureka Road.
Turn left onto Rocky Ridge Drive.
From Reno (heading
west)
Take I-80 towards
Sacramento (west).
Exit at
Eureka Road/Taylor Road in Roseville.
Turn right onto Eureka
Road.
Turn left onto Rocky
Ridge Drive.
39
UNIFY CORPORATION
2010 STOCK PLAN
TABLE OF CONTENTS |
|
|
|
|
|
|
Page |
1. |
|
Establishment, Purpose and Term of
Plan |
1 |
|
|
1.1 |
|
Establishment |
1 |
|
|
1.2 |
|
Purpose |
1 |
|
|
1.3 |
|
Term of Plan |
1 |
|
2. |
|
Definitions and Construction |
1 |
|
|
2.1 |
|
Definitions |
1 |
|
|
2.2 |
|
Construction |
8 |
|
3. |
|
Administration |
8 |
|
|
3.1 |
|
Administration by the Committee |
8 |
|
|
3.2 |
|
Authority of Officers |
9 |
|
|
3.3 |
|
Administration with Respect to Insiders |
9 |
|
|
3.4 |
|
Committee Complying with Section
162(m) |
9 |
|
|
3.5 |
|
Powers of the Committee |
9 |
|
|
3.6 |
|
Option or SAR Repricing |
10 |
|
|
3.7 |
|
Indemnification |
10 |
|
4. |
|
Shares Subject to Plan |
11 |
|
|
4.1 |
|
Maximum Number of Shares Issuable |
11 |
|
|
4.2 |
|
Adjustments for Changes in Capital
Structure |
11 |
|
|
4.3 |
|
Assumption or Substitution of Awards |
12 |
|
5. |
|
Eligibility, Participation and Award
Limitations |
12 |
|
|
5.1 |
|
Persons Eligible for Awards |
12 |
|
|
5.2 |
|
Participation in the Plan |
12 |
|
|
5.3 |
|
Award Limitations |
12 |
|
6. |
|
Stock Options |
13 |
|
|
6.1 |
|
Exercise Price |
13 |
|
|
6.2 |
|
Exercisability and Term of
Options |
13 |
|
|
6.3 |
|
Payment of Exercise Price |
14 |
|
|
6.4 |
|
Effect of Termination of
Service |
14 |
|
|
6.5 |
|
Transferability of Options |
15 |
|
7. |
|
Stock Appreciation Rights |
16 |
|
|
7.1 |
|
Types of SARs Authorized |
16 |
|
|
7.2 |
|
Exercise Price |
16 |
|
|
7.3 |
|
Exercisability and Term of SARs |
16 |
|
|
7.4 |
|
Exercise of SARs |
17 |
|
|
7.5 |
|
Deemed
Exercise of SARs |
17 |
|
|
7.6 |
|
Effect of
Termination of Service |
17 |
|
|
7.7 |
|
Transferability of SARs |
17 |
i
TABLE OF CONTENTS |
(continued) |
|
|
|
|
|
Page |
8. |
|
Restricted Stock Awards |
18 |
|
|
8.1 |
|
Types of Restricted Stock Awards Authorized |
18 |
|
|
8.2 |
|
Purchase Price |
18 |
|
|
8.3 |
|
Purchase Period |
18 |
|
|
8.4 |
|
Payment of Purchase Price |
18 |
|
|
8.5 |
|
Vesting and Restrictions on Transfer |
18 |
|
|
8.6 |
|
Voting Rights; Dividends and
Distributions |
19 |
|
|
8.7 |
|
Effect of Termination of Service |
19 |
|
|
8.8 |
|
Nontransferability of Restricted Stock
Award Rights |
20 |
|
9. |
|
Restricted Stock Unit Awards |
20 |
|
|
9.1 |
|
Grant of Restricted Stock Unit Awards |
20 |
|
|
9.2 |
|
Purchase Price |
20 |
|
|
9.3 |
|
Vesting |
20 |
|
|
9.4 |
|
Voting Rights, Dividend Equivalent
Rights and Distributions |
21 |
|
|
9.5 |
|
Effect of Termination of Service |
21 |
|
|
9.6 |
|
Settlement of Restricted Stock Unit
Awards |
21 |
|
|
9.7 |
|
Nontransferability of Restricted Stock Unit Awards |
22 |
|
10. |
|
Performance Awards |
22 |
|
|
10.1 |
|
Types of Performance Awards Authorized |
22 |
|
|
10.2 |
|
Initial Value of Performance Shares and
Performance Units |
22 |
|
|
10.3 |
|
Establishment of Performance Period, Performance Goals and
Performance Award Formula |
22 |
|
|
10.4 |
|
Measurement of Performance
Goals |
23 |
|
|
10.5 |
|
Settlement of Performance Awards |
24 |
|
|
10.6 |
|
Voting Rights; Dividend Equivalent
Rights and Distributions |
26 |
|
|
10.7 |
|
Effect of Termination of Service |
26 |
|
|
10.8 |
|
Nontransferability of Performance
Awards |
27 |
|
11. |
|
Cash-Based Awards and Other Stock-Based
Awards |
27 |
|
|
11.1 |
|
Grant of Cash-Based Awards |
27 |
|
|
11.2 |
|
Grant of Other Stock-Based
Awards |
27 |
|
|
11.3 |
|
Value of Cash-Based and Other Stock-Based Awards |
28 |
|
|
11.4 |
|
Payment or Settlement of Cash-Based
Awards and Other Stock-Based Awards |
28 |
|
|
11.5 |
|
Voting Rights; Dividend Equivalent Rights and
Distributions |
28 |
|
|
11.6 |
|
Effect of Termination of
Service |
28 |
|
|
11.7 |
|
Nontransferability of Cash-Based Awards and Other Stock-Based
Awards |
29 |
ii
TABLE OF CONTENTS |
(continued) |
|
|
|
|
|
Page |
12. |
|
Standard Forms of Award
Agreement |
29 |
|
|
12.1 |
|
Award Agreements |
29 |
|
|
12.2 |
|
Authority to Vary Terms |
29 |
|
13. |
|
Change in Control |
29 |
|
|
13.1 |
|
Effect of Change in Control on Awards |
29 |
|
|
13.2 |
|
Federal Excise Tax Under Section 4999 of
the Code |
31 |
|
14. |
|
Compliance with Securities Law |
31 |
|
15. |
|
Compliance with Section 409A |
31 |
|
|
15.1 |
|
Awards Subject to Section 409A |
31 |
|
|
15.2 |
|
Deferral and/or Distribution
Elections |
32 |
|
|
15.3 |
|
Subsequent Elections |
32 |
|
|
15.4 |
|
Payment of Section 409A Deferred
Compensation |
33 |
|
16. |
|
Tax Withholding |
35 |
|
|
16.1 |
|
Tax Withholding in General |
35 |
|
|
16.2 |
|
Withholding in or Directed Sale of
Shares |
35 |
|
17. |
|
Amendment, Suspension or Termination of
Plan |
35 |
|
18. |
|
Miscellaneous Provisions |
36 |
|
|
18.1 |
|
Repurchase Rights |
36 |
|
|
18.2 |
|
Forfeiture Events |
36 |
|
|
18.3 |
|
Provision of Information |
37 |
|
|
18.4 |
|
Rights as Employee, Consultant or
Director |
37 |
|
|
18.5 |
|
Rights as a Stockholder |
37 |
|
|
18.6 |
|
Delivery of Title to Shares |
37 |
|
|
18.7 |
|
Fractional Shares |
37 |
|
|
18.8 |
|
Retirement and Welfare Plans |
37 |
|
|
18.9 |
|
Beneficiary Designation |
37 |
|
|
18.10 |
|
Severability |
38 |
|
|
18.11 |
|
No Constraint on Corporate Action |
38 |
|
|
18.12 |
|
Unfunded Obligation |
38 |
|
|
18.13 |
|
Choice of Law |
38 |
iii
Unify Corporation
2010 Stock Plan
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 Establishment. The Unify
Corporation 2010 Stock Plan (the “Plan”) is hereby
established effective as of _________________, 2010, the date of its approval by
the stockholders of the Company (the “Effective Date”).
1.2 Purpose. The
purpose of the Plan is to advance the interests of the Participating Company
Group and its stockholders by providing an incentive to attract, retain and
reward persons performing services for the Participating Company Group and by
motivating such persons to contribute to the growth and profitability of the
Participating Company Group. The Plan seeks to achieve this purpose by providing
for Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
Purchase Rights, Restricted Stock Bonuses, Restricted Stock Units, Performance
Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards.
1.3 Term of Plan. The
Plan shall continue in effect until its termination by the Committee; provided,
however, that all Awards shall be granted, if at all, within ten (10) years from
the Effective Date.
2. DEFINITIONS AND CONSTRUCTION.
2.1 Definitions. Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) “Affiliate” means (i) a
parent entity, other than a Parent Corporation, that directly, or indirectly
through one or more intermediary entities, controls the Company or (ii) a
subsidiary entity, other than a Subsidiary Corporation, that is controlled by
the Company directly or indirectly through one or more intermediary entities.
For this purpose, the terms “parent,” “subsidiary,” “control” and “controlled
by” shall have the meanings assigned such terms for the purposes of registration
of securities on Form S-8 under the Securities Act.
(b) “Award” means any Option,
Stock Appreciation Right, Restricted Stock Purchase Right, Restricted Stock
Bonus, Restricted Stock Unit, Performance Share, Performance Unit, Cash-Based
Award or Other Stock-Based Award granted under the Plan.
(c) “Award Agreement” means a written
or electronic agreement between the Company and a Participant setting forth the
terms, conditions and restrictions applicable to an Award.
(d) “Board” means the Board
of Directors of the Company.
(e) “Cash-Based Award” means an Award
denominated in cash and granted pursuant to Section 11.
1
(f) “Cause” means, unless
such term or an equivalent term is otherwise defined by the applicable Award
Agreement or other written agreement between a Participant and a Participating
Company applicable to an Award, any of the following: (i) the Participant’s
theft, dishonesty, willful misconduct, breach of fiduciary duty for personal
profit, or falsification of any Participating Company documents or records; (ii)
the Participant’s material failure to abide by a Participating Company’s code of
conduct or other policies (including, without limitation, policies relating to
confidentiality and reasonable workplace conduct); (iii) the Participant’s
unauthorized use, misappropriation, destruction or diversion of any tangible or
intangible asset or corporate opportunity of a Participating Company (including,
without limitation, the Participant’s improper use or disclosure of a
Participating Company’s confidential or proprietary information); (iv) any
intentional act by the Participant which has a material detrimental effect on a
Participating Company’s reputation or business; (v) the Participant’s repeated
failure or inability to perform any reasonable assigned duties after written
notice from a Participating Company of, and a reasonable opportunity to cure,
such failure or inability; (vi) any material breach by the Participant of any
employment, service, non-disclosure, non-competition, non-solicitation or other
similar agreement between the Participant and a Participating Company, which
breach is not cured pursuant to the terms of such agreement; or (vii) the
Participant’s conviction (including any plea of guilty or nolo contendere) of
any criminal act involving fraud, dishonesty, misappropriation or moral
turpitude, or which impairs the Participant’s ability to perform his or her
duties with a Participating Company.
(g) “Change in Control” means, unless
such term or an equivalent term is otherwise defined by the applicable Award
Agreement or other written agreement between the Participant and a Participating
Company applicable to an Award, the occurrence of any of the following:
(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes the “beneficial owner” (as such term is defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the total Fair Market
Value or total combined voting power of the Company’s then-outstanding
securities entitled to vote generally in the election of Directors; provided,
however, that a Change in Control shall not be deemed to have occurred if such
degree of beneficial ownership results from any of the following: (A) an
acquisition by any person who on the Effective Date is the beneficial owner of
more than fifty percent (50%) of such voting power, (B) any acquisition directly
from the Company, including, without limitation, pursuant to or in connection
with a public offering of securities, (C) any acquisition by the Company, (D)
any acquisition by a trustee or other fiduciary under an employee benefit plan
of a Participating Company or (E) any acquisition by an entity owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of the voting securities of the Company; or
(ii) an Ownership Change Event or series of related Ownership Change Events
(collectively, a “Transaction”) in which the
stockholders of the Company immediately before the Transaction do not retain
immediately after the Transaction direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding securities entitled to vote generally in the election of Directors
or, in the case of an Ownership Change Event described in Section 2.1(cc)(iii),
the entity to which the assets of the Company were transferred (the “Transferee”), as the case may
be; or
2
(iii) approval by the stockholders of a plan of complete liquidation or
dissolution of the Company;
provided, however, that
a Change in Control shall be deemed not to include a transaction described in
subsections (i) or (ii) of this Section 2.1(g) in which a majority of the
members of the board of directors of the continuing, surviving or successor
entity, or parent thereof, immediately after such transaction is comprised of
Incumbent Directors.
For purposes of the preceding
sentence, indirect beneficial ownership shall include, without limitation, an
interest resulting from ownership of the voting securities of one or more
corporations or other business entities which own the Company or the Transferee,
as the case may be, either directly or through one or more subsidiary
corporations or other business entities. The Committee shall determine whether
multiple sales or exchanges of the voting securities of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
(h) “Code” means the
Internal Revenue Code of 1986, as amended, and any applicable regulations or
administrative guidelines promulgated thereunder.
(i) “Committee” means the
Compensation Committee and such other committee or subcommittee of the Board, if
any, duly appointed to administer the Plan and having such powers in each
instance as shall be specified by the Board. If, at any time, there is no
committee of the Board then authorized or properly constituted to administer the
Plan, the Board shall exercise all of the powers of the Committee granted
herein, and, in any event, the Board may in its discretion exercise any or all
of such powers.
(j) “Company” means Unify
Corporation, a Delaware corporation, or any successor corporation thereto.
(k) “Consultant” means a person
engaged to provide consulting or advisory services (other than as an Employee or
a member of the Board) to a Participating Company, provided that the identity of
such person, the nature of such services or the entity to which such services
are provided would not preclude the Company from offering or selling securities
to such person pursuant to the Plan in reliance on registration on Form S-8
under the Securities Act.
(l) “Covered Employee” means, at any
time the Plan is subject to Section 162(m), any Employee who is or may
reasonably be expected to become a “covered employee” as defined in Section
162(m), or any successor statute, and who is designated, either as an individual
Employee or a member of a class of Employees, by the Committee no later than the
earlier of (i) the date that is ninety (90) days after the beginning of the
Performance Period, or (ii) the date on which twenty-five percent (25%) of the
Performance Period has elapsed, as a “Covered Employee” under this Plan for such
applicable Performance Period.
(m) “Director” means a member of
the Board.
3
(n) “Disability” means the
permanent and total disability of the Participant, within the meaning of Section
22(e)(3) of the Code.
(o) “Dividend Equivalent Right” means the right
of a Participant, granted at the discretion of the Committee or as otherwise
provided by the Plan, to receive a credit for the account of such Participant in
an amount equal to the cash dividends paid on one share of Stock for each share
of Stock represented by an Award held by such Participant.
(p) “Employee” means any person
treated as an employee (including an Officer or a member of the Board who is
also treated as an employee) in the records of a Participating Company and, with
respect to any Incentive Stock Option granted to such person, who is an employee
for purposes of Section 422 of the Code; provided, however, that neither service
as a member of the Board nor payment of a director’s fee shall be sufficient to
constitute employment for purposes of the Plan. The Company shall determine in
good faith and in the exercise of its discretion whether an individual has
become or has ceased to be an Employee and the effective date of such
individual’s employment or termination of employment, as the case may be. For
purposes of an individual’s rights, if any, under the terms of the Plan as of
the time of the Company’s determination of whether or not the individual is an
Employee, all such determinations by the Company shall be final, binding and
conclusive as to such rights, if any, notwithstanding that the Company or any
court of law or governmental agency subsequently makes a contrary determination
as to such individual’s status as an Employee.
(q) “Exchange Act” means the
Securities Exchange Act of 1934, as amended.
(r) “Fair Market Value” means, as of any
date, the value of a share of Stock or other property as determined by the
Committee, in its discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein, subject to the
following:
(i) Except as otherwise determined by the Committee, if, on such date, the
Stock is listed or quoted on a national or regional securities exchange or
quotation system, the Fair Market Value of a share of Stock shall be the closing
price of a share of Stock as quoted on the national or regional securities
exchange or quotation system constituting the primary market for the Stock, as
reported in The Wall Street Journal or such other source as the Company deems
reliable. If the relevant date does not fall on a day on which the Stock has
traded on such securities exchange or quotation system, the date on which the
Fair Market Value shall be established shall be the last day on which the Stock
was so traded or quoted prior to the relevant date, or such other appropriate
day as shall be determined by the Committee, in its discretion.
(ii) Notwithstanding the foregoing, the Committee may, in its discretion,
determine the Fair Market Value of a share of Stock on the basis of the opening,
closing, or average of the high and low sale prices of a share of Stock on such
date or the preceding trading day, the actual sale price of a share of Stock
received by a Participant, any other reasonable basis using actual transactions
in the Stock as reported on a national or regional securities exchange or
quotation system, or on any other basis consistent with the requirements of
Section 409A. The Committee may vary its method of determination of the Fair
Market Value as provided in this Section for different purposes under the Plan
to the extent consistent with the requirements of Section 409A.
4
(iii) If, on such date, the Stock is not listed or quoted on a national or
regional securities exchange or quotation system, the Fair Market Value of a
share of Stock shall be as determined by the Committee in good faith without
regard to any restriction other than a restriction which, by its terms, will
never lapse, and in a manner consistent with the requirements of Section 409A.
(s) “Full Value Award” means any Award
settled in Stock, other than (i) an Option, (ii) a Stock Appreciation Right, or
(iii) a Restricted Stock Purchase Right or an Other Stock-Based Award under
which the Company will receive monetary consideration equal to the Fair Market
Value (determined on the effective date of grant) of the shares subject to such
Award.
(t) “Incentive Stock Option” means an Option
intended to be (as set forth in the Award Agreement) and which qualifies as an
incentive stock option within the meaning of Section 422(b) of the Code.
(u) “Incumbent Director” means a director
who either (i) is a member of the Board as of the Effective Date or (ii) is
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but excluding a director who was elected or nominated in connection
with an actual or threatened proxy contest relating to the election of directors
of the Company).
(v) “Insider” means an Officer,
Director or any other person whose transactions in Stock are subject to Section
16 of the Exchange Act.
(w) “Net Exercise” means a procedure
pursuant to which (i) the Company will reduce the number of shares otherwise
issuable to a Participant upon the exercise of an Option by the largest whole
number of shares having a Fair Market Value that does not exceed the aggregate
exercise price for the shares with respect to which the Option is exercised, and
(ii) the Participant shall pay to the Company in cash the remaining balance of
such aggregate exercise price not satisfied by such reduction in the number of
whole shares to be issued.
(x) “Nonemployee Director” means a Director
who is not an Employee.
(y) “Nonstatutory Stock Option” means an Option
not intended to be (as set forth in the Award Agreement) or which does not
qualify as an incentive stock option within the meaning of Section 422(b) of the
Code.
(z) “Officer” means any person
designated by the Board as an officer of the Company.
(aa) “Option” means an
Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the
Plan.
5
(bb) “Other Stock-Based Award” means an Award
denominated in shares of Stock and granted pursuant to Section 11.
(cc) “Ownership Change Event” means the
occurrence of any of the following with respect to the Company: (i) the direct
or indirect sale or exchange in a single or series of related transactions by
the stockholders of the Company of securities of the Company representing more
than fifty percent (50%) of the total combined voting power of the Company’s
then-outstanding securities entitled to vote generally in the election of
Directors; (ii) a merger or consolidation in which the Company is a party; or
(iii) the sale, exchange, or transfer of all or substantially all of the assets
of the Company (other than a sale, exchange or transfer to one or more
subsidiaries of the Company).
(dd) “Parent Corporation” means any present
or future “parent corporation” of the Company, as defined in Section 424(e) of
the Code.
(ee) “Participant” means any
eligible person who has been granted one or more Awards.
(ff) “Participating Company” means the Company
or any Parent Corporation, Subsidiary Corporation or Affiliate.
(gg) “Participating Company Group” means, at any
point in time, the Company and all other entities collectively which are then
Participating Companies.
(hh) “Performance Award” means an Award of
Performance Shares or Performance Units.
(ii) “Performance Award Formula” means, for any
Performance Award, a formula or table established by the Committee pursuant to
Section 10.3 which provides the basis for computing the value of a Performance
Award at one or more levels of attainment of applicable Performance Goal(s)
measured as of the end of the applicable Performance Period.
(jj) “Performance-Based Compensation” means compensation under an Award that
satisfies the requirements of Section 162(m) for certain performance-based
compensation paid to Covered Employees.
(kk) “Performance Goal” means a
performance goal established by the Committee pursuant to Section 10.3.
(ll) “Performance Period” means a period
established by the Committee pursuant to Section 10.3 at the end of which one or
more Performance Goals are to be measured.
(mm) “Performance Share” means a right
granted to a Participant pursuant to Section 10 to receive a payment equal to
the value of a Performance Share, as determined by the Committee, based upon
attainment of applicable Performance Goal(s).
6
(nn) “Performance Unit” means a right
granted to a Participant pursuant to Section 10 to receive a payment equal to
the value of a Performance Unit, as determined by the Committee, based upon
attainment of applicable Performance Goal(s).
(oo) “Restricted Stock Award” means an Award of
a Restricted Stock Bonus or a Restricted Stock Purchase Right.
(pp) “Restricted Stock Bonus” means Stock
granted to a Participant pursuant to Section 8.
(qq) “Restricted Stock Purchase Right” means a right to
purchase Stock granted to a Participant pursuant to Section 8.
(rr) “Restricted Stock Unit” means a right
granted to a Participant pursuant to Section 9 to receive on a future date or
event a share of Stock or cash in lieu thereof, as determined by the Committee.
(ss) “Rule 16b-3” means Rule 16b-3
under the Exchange Act, as amended from time to time, or any successor rule or
regulation.
(tt) “SAR” or “Stock Appreciation Right” means a right
granted to a Participant pursuant to Section 7 to receive payment, for each
share of Stock subject to such Award, of an amount equal to the excess, if any,
of the Fair Market Value of a share of Stock on the date of exercise of the
Award over the exercise price thereof.
(uu) “Section 162(m)” means Section
162(m) of the Code.
(vv) “Section 409A” means Section
409A of the Code.
(ww) “Section 409A Deferred Compensation” means
compensation provided pursuant to an Award that constitutes nonqualified
deferred compensation within the meaning of Section 409A.
(xx) “Securities Act” means the
Securities Act of 1933, as amended.
(yy) “Service” means a
Participant’s employment or service with the Participating Company Group,
whether as an Employee, a Director or a Consultant. Unless otherwise provided by
the Committee, a Participant’s Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Participant renders such
Service or a change in the Participating Company for which the Participant
renders such Service, provided that there is no interruption or termination of
the Participant’s Service. Furthermore, a Participant’s Service shall not be
deemed to have been interrupted or terminated if the Participant takes any
military leave, sick leave, or other bona fide leave of absence approved by the
Company. However, unless otherwise provided by the Committee, if any such leave
taken by a Participant exceeds ninety (90) days, then on the ninety-first (91st)
day following the commencement of such leave the Participant’s Service shall be
deemed to have terminated, unless the Participant’s right to return to Service
is guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company or required by law, an unpaid leave of
absence shall not be treated as Service for purposes of determining vesting
under the Participant’s Award Agreement. A Participant’s Service shall be deemed
to have terminated either upon an actual termination of Service or upon the
business entity for which the Participant performs Service ceasing to be a
Participating Company. Subject to the foregoing, the Company, in its discretion,
shall determine whether the Participant’s Service has terminated and the
effective date of such termination.
7
(zz) “Stock” means the common
stock of the Company, as adjusted from time to time in accordance with Section
4.2.
(aaa) “Subsidiary Corporation” means any present
or future “subsidiary corporation” of the Company, as defined in Section 424(f)
of the Code.
(bbb) “Ten Percent Owner” means a
Participant who, at the time an Option is granted to the Participant, owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of a Participating Company (other than an Affiliate) within the
meaning of Section 422(b)(6) of the Code.
(ccc) “Trading Compliance Policy” means the written
policy of the Company pertaining to the purchase, sale, transfer or other
disposition of the Company’s equity securities by Directors, Officers, Employees
or other service providers who may possess material, nonpublic information
regarding the Company or its securities.
(ddd) “Vesting Conditions” mean those
conditions established in accordance with the Plan prior to the satisfaction of
which shares subject to an Award remain subject to forfeiture or a repurchase
option in favor of the Company exercisable for the Participant’s monetary
purchase price, if any, for such shares upon the Participant’s termination of
Service.
2.2 Construction.
Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of the Plan. Except when
otherwise indicated by the context, the singular shall include the plural and
the plural shall include the singular. Use of the term “or” is not intended to
be exclusive, unless the context clearly requires otherwise.
3. ADMINISTRATION.
3.1 Administration by the Committee. The Plan shall be administered by the
Committee. All questions of interpretation of the Plan, of any Award Agreement
or of any other form of agreement or other document employed by the Company in
the administration of the Plan or of any Award shall be determined by the
Committee, and such determinations shall be final, binding and conclusive upon
all persons having an interest in the Plan or such Award, unless fraudulent or
made in bad faith. Any and all actions, decisions and determinations taken or
made by the Committee in the exercise of its discretion pursuant to the Plan or
Award Agreement or other agreement thereunder (other than determining questions
of interpretation pursuant to the preceding sentence) shall be final, binding
and conclusive upon all persons having an interest therein. All expenses
incurred in the administration of the Plan shall be paid by the
Company.
8
3.2 Authority of Officers. Any Officer shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, determination or election which
is the responsibility of or which is allocated to the Company herein, provided
the Officer has apparent authority with respect to such matter, right,
obligation, determination or election. To the extent permitted by applicable
law, the Committee may, in its discretion, delegate to a committee comprised of
one or more Officers the authority to grant one or more Awards, without further
approval of the Committee, to any Employee, other than a person who, at the time
of such grant, is an Insider or a Covered Employee, and to exercise such other
powers under the Plan as the Committee may determine; provided, however, that
(a) the Committee shall fix the maximum number of shares subject to Awards that
may be granted by such Officers, (b) each such Award shall be subject to the
terms and conditions of the appropriate standard form of Award Agreement
approved by the Board or the Committee and shall conform to the provisions of
the Plan, and (c) each such Award shall conform to such other limits and
guidelines as may be established from time to time by the
Committee.
3.3 Administration with Respect to Insiders. With respect to participation by Insiders in
the Plan, at any time that any class of equity security of the Company is
registered pursuant to Section 12 of the Exchange Act, the Plan shall be
administered in compliance with the requirements, if any, of Rule 16b-3.
3.4 Committee Complying with Section 162(m). If the Company is a “publicly held
corporation” within the meaning of Section 162(m), the Board may establish a
Committee of “outside directors” within the meaning of Section 162(m) to approve
the grant of any Award intended to result in the payment of Performance-Based
Compensation.
3.5 Powers of the Committee. In
addition to any other powers set forth in the Plan and subject to the provisions
of the Plan, the Committee shall have the full and final power and authority, in
its discretion:
(a) to determine the persons to whom, and the time or times at which, Awards
shall be granted and the number of shares of Stock, units or monetary value to
be subject to each Award;
(b) to determine the type of Award granted;
(c) to determine the Fair Market Value of shares of Stock or other property;
(d) to determine the terms, conditions and restrictions applicable to each
Award (which need not be identical) and any shares acquired pursuant thereto,
including, without limitation, (i) the exercise or purchase price of shares
pursuant to any Award, (ii) the method of payment for shares purchased pursuant
to any Award, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with any Award, including by the withholding or
delivery of shares of Stock, (iv) the timing, terms and conditions of the
exercisability or vesting of any Award or any shares acquired pursuant thereto,
(v) the Performance Measures, Performance Period, Performance Award Formula and
Performance Goals applicable to any Award and the extent to which such
Performance Goals have been attained, (vi) the time of the expiration of any
Award, (vii) the effect of the Participant’s termination of Service on any of
the foregoing, and (viii) all other terms, conditions and restrictions
applicable to any Award or shares acquired pursuant thereto not inconsistent
with the terms of the Plan;
9
(e) to determine whether an Award will be settled in shares of Stock, cash,
other property, or in any combination thereof;
(f) to approve one or more forms of Award Agreement;
(g) to amend, modify, extend, cancel or renew any Award or to waive any
restrictions or conditions applicable to any Award or any shares acquired
pursuant thereto;
(h) to accelerate, continue, extend or defer the exercisability or vesting of
any Award or any shares acquired pursuant thereto, including with respect to the
period following a Participant’s termination of Service;
(i) to prescribe, amend or rescind rules, guidelines and policies relating to
the Plan, or to adopt sub-plans or supplements to, or alternative versions of,
the Plan, including, without limitation, as the Committee deems necessary or
desirable to comply with the laws or regulations of or to accommodate the tax
policy, accounting principles or custom of, foreign jurisdictions whose citizens
may be granted Awards; and
(j) to correct any defect, supply any omission or reconcile any inconsistency
in the Plan or any Award Agreement and to make all other determinations and take
such other actions with respect to the Plan or any Award as the Committee may
deem advisable to the extent not inconsistent with the provisions of the Plan or
applicable law.
3.6 Option or SAR Repricing. Without the affirmative vote of holders of a majority of the shares of
Stock cast in person or by proxy at a meeting of the stockholders of the Company
at which a quorum representing a majority of all outstanding shares of Stock is
present or represented by proxy, the Committee shall not approve a program
providing for either (a) the cancellation of outstanding Options or SARs having
exercise prices per share greater than the then Fair Market Value of a share of
Stock (“Underwater Awards”) and the grant in
substitution therefore of new Options or SARs having a lower exercise price,
Full Value Awards or payments in cash, or (b) the amendment of outstanding
Underwater Awards to reduce the exercise price thereof. This Section shall not
apply to adjustments pursuant to the assumption of or substitution for an Option
or SAR in a manner that would comply with Section 424(a) or Section 409A of the
Code or to an adjustment pursuant to Section 4.2.
3.7 Indemnification. In
addition to such other rights of indemnification as they may have as members of
the Board or the Committee or as officers or employees of the Participating
Company Group, members of the Board or the Committee and any officers or
employees of the Participating Company Group to whom authority to act for the
Board, the Committee or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys’ fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or
in connection with the Plan, or
any right granted hereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such person is liable
for gross negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such action, suit
or proceeding, such person shall offer to the Company, in writing, the
opportunity at its own expense to handle and defend the same.
10
4. SHARES SUBJECT TO P
font>LAN.
4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Section
4.2, the maximum aggregate number of shares of Stock that may be issued under
the Plan shall be one million five hundred thousand (1,500,000) and shall
consist of authorized but unissued or reacquired shares of Stock or any
combination thereof.
4.2 Adjustments for Changes in Capital Structure. Subject to
any required action by the stockholders of the Company and the requirements of
Sections 409A and 424 of the Code to the extent applicable, in the event of any
change in the Stock effected without receipt of consideration by the Company,
whether through merger, consolidation, reorganization, reincorporation,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of shares,
or similar change in the capital structure of the Company, or in the event of
payment of a dividend or distribution to the stockholders of the Company in a
form other than Stock (excepting regular, periodic cash dividends) that has a
material effect on the Fair Market Value of shares of Stock, appropriate and
proportionate adjustments shall be made in the number and kind of shares subject
to the Plan and to any outstanding Awards, in the Award limits set forth in
Section 5.3 and in the exercise or purchase price per share under any
outstanding Award in order to prevent dilution or enlargement of Participants’
rights under the Plan. For purposes of the foregoing, conversion of any
convertible securities of the Company shall not be treated as “effected without
receipt of consideration by the Company.” If a majority of the shares which are
of the same class as the shares that are subject to outstanding Awards are
exchanged for, converted into, or otherwise become (whether or not pursuant to
an Ownership Change Event) shares of another corporation (the “New Shares”), the Committee
may unilaterally amend the outstanding Awards to provide that such Awards are
for New Shares. In the event of any such amendment, the number of shares subject
to, and the exercise or purchase price per share of, the outstanding Awards
shall be adjusted in a fair and equitable manner as determined by the Committee,
in its discretion. Any fractional share resulting from an adjustment pursuant to
this Section shall be rounded down to the nearest whole number, and in no event
may the exercise or purchase price under any Award be decreased to an amount
less than the par value, if any, of the stock subject to such Award. The
Committee in its discretion, may also make such adjustments in the terms of any
Award to reflect, or related to, such changes in the capital structure of the
Company or distributions as it deems appropriate, including modification of
Performance Goals, Performance Award Formulas and Performance Periods. The
adjustments determined by the Committee pursuant to this Section shall be final,
binding and conclusive.
11
4.3 Assumption or Substitution of Awards. The Committee may, without affecting the
number of shares of Stock available pursuant to Section 4.1, authorize the
issuance or assumption of benefits under this Plan in connection with any
merger, consolidation, acquisition of property or stock, or reorganization upon
such terms and conditions as it may deem appropriate, subject to compliance with
Section 409A and any other applicable provisions of the Code.
5. ELIGIBILITY, P
ARTICIPATION AND AWARD LIMITATIONS.
5.1 Persons Eligible for Awards. Awards may be granted only to Employees,
Consultants and Directors.
5.2 Participation in the Plan. Awards are granted solely at the discretion of the Committee. Eligible
persons may be granted more than one Award. However, eligibility in accordance
with this Section shall not entitle any person to be granted an Award, or,
having been granted an Award, to be granted an additional Award.
5.3 Award Limitations.
(a) Incentive Stock Option Limitations.
(i) Maximum Number of Shares Issuable Pursuant to Incentive Stock
Options. Subject to
adjustment as provided in Section 4.2, the maximum aggregate number of shares of
Stock that may be issued under the Plan pursuant to the exercise of Incentive
Stock Options shall not exceed one million five hundred thousand (1,500,000).
The maximum aggregate number of shares of Stock that may be issued under the
Plan pursuant to all Awards other than Incentive Stock Options shall be the
number of shares determined in accordance with Section 4.1.
(ii) Persons Eligible. An Incentive Stock Option may be granted only to a person who, on the
effective date of grant, is an Employee of the Company, a Parent Corporation or
a Subsidiary Corporation (each being an “ISO-Qualifying Corporation”). Any person who is not
an Employee of an ISO-Qualifying Corporation on the effective date of the grant
of an Option to such person may be granted only a Nonstatutory Stock Option.
(iii) Fair Market Value Limitation. To the extent that options designated as
Incentive Stock Options (granted under all stock option plans of the
Participating Company Group, including the Plan) become exercisable by a
Participant for the first time during any calendar year for stock having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portion
of such options which exceeds such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section, options designated as Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of stock shall be determined as of the time the option
with respect to such stock is granted. If the Code is amended to provide for a
limitation different from that set forth in this Section, such different
limitation shall be deemed incorporated herein effective as of the date and with
respect to such Options as required or permitted by such amendment to the Code.
If an Option is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section, the Participant may designate which portion of such Option the
Participant is exercising. In the absence of such designation, the Participant
shall be deemed to have exercised the Incentive Stock Option portion of the
Option first. Upon exercise, shares issued pursuant to each such portion shall
be separately identified.
12
(b) Section 162(m) Award Limits. Subject to
adjustment as provided in Section 4.2, no Employee shall be granted within any
fiscal year of the Company one or more Awards intended to qualify for treatment
as Performance-Based Compensation which in the aggregate are for more than five
hundred thousand (500,000) shares or, if applicable, which could result in such
Employee receiving more than one million dollars ($1,000,000) for each full
fiscal year of the Company contained in the Performance Period for such Award.
6. STOCK OPTIONS.
Options shall be evidenced by Award Agreements
specifying the number of shares of Stock covered thereby, in such form as the
Committee shall from time to time establish. Award Agreements evidencing Options
may incorporate all or any of the terms of the Plan by reference and shall
comply with and be subject to the following terms and conditions:
6.1 Exercise Price. The
exercise price for each Option shall be established in the discretion of the
Committee; provided, however, that (a) the exercise price per share shall be not
less than the Fair Market Value of a share of Stock on the effective date of
grant of the Option and (b) no Incentive Stock Option granted to a Ten Percent
Owner shall have an exercise price per share less than one hundred ten percent
(110%) of the Fair Market Value of a share of Stock on the effective date of
grant of the Option. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than the minimum exercise price set forth above if such
Option is granted pursuant to an assumption or substitution for another option
in a manner that would qualify under the provisions of Section 409A or 424(a) of
the Code.
6.2 Exercisability and Term of Options. Options shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria and restrictions as shall be determined by the Committee
and set forth in the Award Agreement evidencing such Option; provided, however,
that (a) no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option, (b) no Incentive Stock Option
granted to a Ten Percent Owner shall be exercisable after the expiration of five
(5) years after the effective date of grant of such Option and (c) no Option
granted to an Employee who is a non-exempt employee for purposes of the Fair
Labor Standards Act of 1938, as amended, shall be first exercisable until at
least six (6) months following the date of grant of such Option (except in the
event of such Employee’s death, disability or retirement, upon a Change in
Control, or as otherwise permitted by the Worker Economic Opportunity Act).
Subject to the foregoing, unless otherwise specified by the Committee in the
grant of an Option, each Option shall terminate ten (10) years after the
effective date of grant of the Option, unless earlier terminated in accordance
with its provisions.
13
6.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise provided below, payment
of the exercise price for the number of shares of Stock being purchased pursuant
to any Option shall be made (i) in cash, by check or in cash equivalent, (ii) by
tender to the Company, or attestation to the ownership, of shares of Stock owned
by the Participant having a Fair Market Value not less than the exercise price
(a “Stock Tender Exercise”), (iii) by
delivery of a properly executed notice of exercise together with irrevocable
instructions to a broker providing for the assignment to the Company of the
proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System) (a
“Cashless Exercise”), (iv) by
delivery of a properly executed notice electing a Net Exercise, (v) by such
other consideration as may be approved by the Committee from time to time to the
extent permitted by applicable law, or (vi) by any combination thereof. The
Committee may at any time or from time to time grant Options which do not permit
all of the foregoing forms of consideration to be used in payment of the
exercise price or which otherwise restrict one or more forms of
consideration.
(b) Limitations on Forms of Consideration.
(i) Stock Tender Exercise. Notwithstanding the foregoing, a Stock Tender Exercise shall not be
permitted if it would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company’s stock. If
required by the Company, an Option may not be exercised by tender to the
Company, or attestation to the ownership, of shares of Stock unless such shares
either have been owned by the Participant for a period of time required by the
Company (and not used for another option exercise by attestation during such
period) or were not acquired, directly or indirectly, from the
Company.
(ii) Cashless Exercise. The Company reserves, at any and all times, the right, in the Company’s
sole and absolute discretion, to establish, decline to approve or terminate any
program or procedures for the exercise of Options by means of a Cashless
Exercise, including with respect to one or more Participants specified by the
Company notwithstanding that such program or procedures may be available to
other Participants.
6.4 Effect of Termination of Service.
(a) Option Exercisability. Subject to earlier termination of the Option
as otherwise provided herein and unless otherwise provided by the Committee, an
Option shall terminate immediately upon the Participant’s termination of Service
to the extent that it is then unvested and shall be exercisable after the
Participant’s termination of Service to the extent it is then vested only during
the applicable time period determined in accordance with this Section and
thereafter shall terminate.
(i) Disability. If the
Participant’s Service terminates because of the Disability of the Participant,
the Option, to the extent unexercised and exercisable for vested shares on the
date on which the Participant’s Service terminated, may be exercised by the
Participant (or the Participant’s guardian or legal representative) at any time
prior to the expiration of twelve (12) months after the date on which the
Participant’s Service terminated, but in any event no later than the date of
expiration of the Option’s term as set forth in the Award Agreement evidencing
such Option (the “Option Expiration Date”).
14
(ii) Death. If the
Participant’s Service terminates because of the death of the Participant, then
(A) the Option, to the extent unexercised and exercisable for vested shares on
the date on which the Participant’s Service terminated, may be exercised by the
Participant’s legal representative or other person who acquired the right to
exercise the Option by reason of the Participant’s death at any time prior to
the expiration of twelve (12) months after the date on which the Participant’s
Service terminated, but in any event no later than the Option Expiration Date,
and (B) solely for the purposes of determining the number of vested shares
subject to the Option as of the date on which the Participant’s Service
terminated, the Participant shall be credited with an additional twelve (12)
months of Service. The Participant’s Service shall be deemed to have terminated
on account of death if the Participant dies within three (3) months after the
Participant’s termination of Service; provided, however, that the Participant
shall not be credited with additional months of Service if the Participant dies
after the Participant’s Service has otherwise terminated.
(iii) Termination for Cause. Notwithstanding any other provision of the Plan to the contrary, if the
Participant’s Service is terminated for Cause or if, following the Participant’s
termination of Service and during any period in which the Option otherwise would
remain exercisable, the Participant engages in any act that would constitute
Cause, the Option shall terminate in its entirety and cease to be exercisable
immediately upon such termination of Service or act.
(iv) Other Termination of Service. If the Participant’s Service terminates for
any reason, except Disability, death or Cause, the Option, to the extent
unexercised and exercisable for vested shares on the date on which the
Participant’s Service terminated, may be exercised by the Participant at any
time prior to the expiration of thirty (30) days after the date on which the
Participant’s Service terminated, but in any event no later than the Option
Expiration Date.
(b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other than
termination of Service for Cause, if the exercise of an Option within the
applicable time periods set forth in Section 6.4(a) is prevented by the
provisions of Section 14 below, the Option shall remain exercisable until the
later of (i) thirty (30) days after the date such exercise first would no longer
be prevented by such provisions or (ii) the end of the applicable time period
under Section 6.4(a), but in any event no later than the Option Expiration Date.
6.5 Transferability of Options. During the lifetime of the Participant, an Option shall be exercisable
only by the Participant or the Participant’s guardian or legal representative.
An Option shall not be subject in any manner to anticipation, alienation, sale,
exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
of the Participant or the Participant’s beneficiary, except transfer by will or
by the laws of descent and distribution. Notwithstanding the foregoing, to the
extent permitted by the Committee, in its discretion, and set forth in the Award
Agreement evidencing such Option, an Option shall be assignable or transferable
subject to the applicable limitations, if any, described in the General
Instructions to Form S-8 under the Securities Act or, in the case of an
Incentive Stock Option, only as permitted by applicable regulations under
Section 421 of the Code in a manner that does not disqualify such Option as an
Incentive Stock Option.
15
7. STOCK APPRECIATION R<
/font>IGHTS.
Stock Appreciation Rights shall be evidenced
by Award Agreements specifying the number of shares of Stock subject to the
Award, in such form as the Committee shall from time to time establish. Award
Agreements evidencing SARs may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the following terms and
conditions:
7.1 Types of SARs Authorized. SARs may be granted in tandem with all or any portion of a related Option
(a “Tandem SAR”) or may be
granted independently of any Option (a “Freestanding SAR”). A Tandem SAR
may only be granted concurrently with the grant of the related Option.
7.2 Exercise Price. The
exercise price for each SAR shall be established in the discretion of the
Committee; provided, however, that (a) the exercise price per share subject to a
Tandem SAR shall be the exercise price per share under the related Option and
(b) the exercise price per share subject to a Freestanding SAR shall be not less
than the Fair Market Value of a share of Stock on the effective date of grant of
the SAR. Notwithstanding the foregoing, a an SAR may be granted with an exercise
price lower than the minimum exercise price set forth above if such SAR is
granted pursuant to an assumption or substitution for another stock appreciation
right in a manner that would qualify under the provisions of Section 409A of the
Code.
7.3 Exercisability and Term of SARs.
(a) Tandem SARs.
Tandem SARs shall be exercisable only at the time and to the extent, and only to
the extent, that the related Option is exercisable, subject to such provisions
as the Committee may specify where the Tandem SAR is granted with respect to
less than the full number of shares of Stock subject to the related Option. The
Committee may, in its discretion, provide in any Award Agreement evidencing a
Tandem SAR that such SAR may not be exercised without the advance approval of
the Company and, if such approval is not given, then the Option shall
nevertheless remain exercisable in accordance with its terms. A Tandem SAR shall
terminate and cease to be exercisable no later than the date on which the
related Option expires or is terminated or canceled. Upon the exercise of a
Tandem SAR with respect to some or all of the shares subject to such SAR, the
related Option shall be canceled automatically as to the number of shares with
respect to which the Tandem SAR was exercised. Upon the exercise of an Option
related to a Tandem SAR as to some or all of the shares subject to such Option,
the related Tandem SAR shall be canceled automatically as to the number of
shares with respect to which the related Option was exercised.
16
(b) Freestanding SARs. Freestanding SARs shall be exercisable at such time or times, or upon
such event or events, and subject to such terms, conditions, performance
criteria and restrictions as shall be determined by the Committee and set forth
in the Award Agreement evidencing such SAR; provided, however, that (i) no
Freestanding SAR shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such SAR and (b) no Freestanding SAR
granted to an Employee who is a non-exempt employee for purposes of the Fair
Labor Standards Act of 1938, as amended, shall be first exercisable until at
least six (6) months following the date of grant of such SAR (except in the
event of such Employee’s death, disability or retirement, upon a Change in
Control, or as otherwise permitted by the Worker Economic Opportunity Act).
Subject to the foregoing, unless otherwise specified by the Committee in the
grant of a Freestanding SAR, each Freestanding SAR shall terminate ten (10)
years after the effective date of grant of the SAR, unless earlier terminated in
accordance with its provisions.
7.4 Exercise of SARs.
Upon the exercise (or deemed exercise pursuant to Section 7.5) of an SAR, the
Participant (or the Participant’s legal representative or other person who
acquired the right to exercise the SAR by reason of the Participant’s death)
shall be entitled to receive payment of an amount for each share with respect to
which the SAR is exercised equal to the excess, if any, of the Fair Market Value
of a share of Stock on the date of exercise of the SAR over the exercise price.
Payment of such amount shall be made (a) in the case of a Tandem SAR, solely in
shares of Stock in a lump sum upon the date of exercise of the SAR and (b) in
the case of a Freestanding SAR, in cash, shares of Stock, or any combination
thereof as determined by the Committee, in a lump sum upon the date of exercise
of the SAR. When payment is to be made in shares of Stock, the number of shares
to be issued shall be determined on the basis of the Fair Market Value of a
share of Stock on the date of exercise of the SAR. For purposes of Section 7, an
SAR shall be deemed exercised on the date on which the Company receives notice
of exercise from the Participant or as otherwise provided in Section 7.5.
7.5 Deemed Exercise of SARs. If, on the date on which an SAR would otherwise terminate or expire, the
SAR by its terms remains exercisable immediately prior to such termination or
expiration and, if so exercised, would result in a payment to the holder of such
SAR, then any portion of such SAR which has not previously been exercised shall
automatically be deemed to be exercised as of such date with respect to such
portion.
7.6 Effect of Termination of Service. Subject to earlier termination of the SAR as
otherwise provided herein and unless otherwise provided by the Committee, an SAR
shall be exercisable after a Participant’s termination of Service only to the
extent and during the applicable time period determined in accordance with
Section 6.4 (treating the SAR as if it were an Option) and thereafter shall
terminate.
7.7 Transferability of SARs. During the lifetime of the Participant, an SAR shall be exercisable only
by the Participant or the Participant’s guardian or legal representative. An SAR
shall not be subject in any manner to anticipation, alienation, sale, exchange,
transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participant’s beneficiary, except transfer by will or by the
laws of descent and distribution. Notwithstanding the foregoing, to the extent
permitted by the Committee, in its discretion, and set forth in the Award
Agreement evidencing such Award, a Tandem SAR related to a Nonstatutory Stock
Option or a Freestanding SAR shall be assignable or transferable subject to the
applicable limitations, if any, described in the General Instructions to Form
S-8 under the Securities Act.
17
8. RESTRICTED STOCK AWARDS.
Restricted Stock Awards shall be evidenced by
Award Agreements specifying whether the Award is a Restricted Stock Bonus or a
Restricted Stock Purchase Right and the number of shares of Stock subject to the
Award, in such form as the Committee shall from time to time establish. Award
Agreements evidencing Restricted Stock Awards may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
8.1 Types of Restricted Stock Awards Authorized. Restricted Stock Awards may be granted in the
form of either a Restricted Stock Bonus or a Restricted Stock Purchase Right.
Restricted Stock Awards may be granted upon such conditions as the Committee
shall determine, including, without limitation, upon the attainment of one or
more Performance Goals described in Section 10.4. If either the grant of or
satisfaction of Vesting Conditions applicable to a Restricted Stock Award is to
be contingent upon the attainment of one or more Performance Goals, the
Committee shall follow procedures substantially equivalent to those set forth in
Sections 10.3 through 10.5(a).
8.2 Purchase Price. The
purchase price for shares of Stock issuable under each Restricted Stock Purchase
Right shall be established by the Committee in its discretion. No monetary
payment (other than applicable tax withholding) shall be required as a condition
of receiving shares of Stock pursuant to a Restricted Stock Bonus, the
consideration for which shall be services actually rendered to a Participating
Company or for its benefit. Notwithstanding the foregoing, if required by
applicable state corporate law, the Participant shall furnish consideration in
the form of cash or past services rendered to a Participating Company or for its
benefit having a value not less than the par value of the shares of Stock
subject to a Restricted Stock Award.
8.3 Purchase Period. A
Restricted Stock Purchase Right shall be exercisable within a period established
by the Committee, which shall in no event exceed thirty (30) days from the
effective date of the grant of the Restricted Stock Purchase Right.
8.4 Payment of Purchase Price. Except as otherwise provided below, payment of the purchase price for the
number of shares of Stock being purchased pursuant to any Restricted Stock
Purchase Right shall be made (a) in cash, by check or in cash equivalent, (b) by
such other consideration as may be approved by the Committee from time to time
to the extent permitted by applicable law, or (c) by any combination thereof.
8.5 Vesting and Restrictions on Transfer. Shares issued pursuant to any Restricted
Stock Award may (but need not) be made subject to Vesting Conditions based upon
the satisfaction of such Service requirements, conditions, restrictions or
performance criteria, including, without limitation, Performance Goals as
described in Section 10.4, as shall be established by the Committee and set
forth in the Award Agreement evidencing such Award.
18
During
any period in which shares acquired pursuant to a Restricted Stock Award remain
subject to Vesting Conditions, such shares may not be sold, exchanged,
transferred, pledged, assigned or otherwise disposed of other than pursuant to
an Ownership Change Event or as provided in Section 8.8. The Committee, in its
discretion, may provide in any Award Agreement evidencing a Restricted Stock
Award that, if the satisfaction of Vesting Conditions with respect to any shares
subject to such Restricted Stock Award would otherwise occur on a day on which
the sale of such shares would violate the provisions of the Trading Compliance
Policy, then satisfaction of the Vesting Conditions automatically shall be
determined on the next trading day on which the sale of such shares would not
violate the Trading Compliance Policy. Upon request by the Company, each
Participant shall execute any agreement evidencing such transfer restrictions
prior to the receipt of shares of Stock hereunder and shall promptly present to
the Company any and all certificates representing shares of Stock acquired
hereunder for the placement on such certificates of appropriate legends
evidencing any such transfer restrictions.
8.6 Voting Rights; Dividends and Distributions. Except as provided in this Section, Section
8.5 and any Award Agreement, during any period in which shares acquired pursuant
to a Restricted Stock Award remain subject to Vesting Conditions, the
Participant shall have all of the rights of a stockholder of the Company holding
shares of Stock, including the right to vote such shares and to receive all
dividends and other distributions paid with respect to such shares; provided,
however, that if so determined by the Committee and provided by the Award
Agreement, such dividends and distributions shall be subject to the same Vesting
Conditions as the shares subject to the Restricted Stock Award with respect to
which such dividends or distributions were paid, and otherwise shall be paid no
later than the end of the calendar year in which such dividends or distributions
are paid to stockholders (or, if later, the 15th day of the third month
following the date such dividends or distributions are paid to stockholders). In
the event of a dividend or distribution paid in shares of Stock or other
property or any other adjustment made upon a change in the capital structure of
the Company as described in Section 4.2, any and all new, substituted or
additional securities or other property (other than regular, periodic cash
dividends) to which the Participant is entitled by reason of the Participant’s
Restricted Stock Award shall be immediately subject to the same Vesting
Conditions as the shares subject to the Restricted Stock Award with respect to
which such dividends or distributions were paid or adjustments were made.
8.7 Effect of Termination of Service. Unless otherwise provided by the Committee in
the Award Agreement evidencing a Restricted Stock Award, if a Participant’s
Service terminates for any reason, whether voluntary or involuntary (including
the Participant’s death or disability), then (a) the Company shall have the
option to repurchase for the purchase price paid by the Participant any shares
acquired by the Participant pursuant to a Restricted Stock Purchase Right which
remain subject to Vesting Conditions as of the date of the Participant’s
termination of Service and (b) the Participant shall forfeit to the Company any
shares acquired by the Participant pursuant to a Restricted Stock Bonus which
remain subject to Vesting Conditions as of the date of the Participant’s
termination of Service. The Company shall have the right to assign at any time
any repurchase right it may have, whether or not such right is then exercisable,
to one or more persons as may be selected by the Company.
19
8.8 Nontransferability of Restricted Stock Award Rights. Rights to acquire shares of Stock pursuant to
a Restricted Stock Award shall not be subject in any manner to anticipation, alienation, sale, exchange,
transfer, assignment, pledge, encumbrance or garnishment by creditors of the
Participant or the Participant’s beneficiary, except transfer by will or the
laws of descent and distribution. All rights with respect to a Restricted Stock
Award granted to a Participant hereunder shall be exercisable during his or her
lifetime only by such Participant or the Participant’s guardian or legal
representative.
9. RESTRICTED STOCK UNIT AWARDS.
Restricted Stock Unit Awards shall be
evidenced by Award Agreements specifying the number of Restricted Stock Units
subject to the Award, in such form as the Committee shall from time to time
establish. Award Agreements evidencing Restricted Stock Units may incorporate
all or any of the terms of the Plan by reference and shall comply with and be
subject to the following terms and conditions:
9.1 Grant of Restricted Stock Unit Awards.
Restricted Stock Unit
Awards may be granted upon such conditions as the Committee shall determine,
including, without limitation, upon the attainment of one or more Performance
Goals described in Section 10.4. If either the grant of a Restricted Stock Unit
Award or the Vesting Conditions with respect to such Award is to be contingent
upon the attainment of one or more Performance Goals, the Committee shall follow
procedures substantially equivalent to those set forth in Sections 10.3 through
10.5(a).
9.2 Purchase Price. No monetary payment (other than applicable
tax withholding, if any) shall be required as a condition of receiving a
Restricted Stock Unit Award, the consideration for which shall be services
actually rendered to a Participating Company or for its benefit. Notwithstanding
the foregoing, if required by applicable state corporate law, the Participant
shall furnish consideration in the form of cash or past services rendered to a
Participating Company or for its benefit having a value not less than the par
value of the shares of Stock issued upon settlement of the Restricted Stock Unit
Award.
9.3 Vesting. Restricted Stock Unit Awards may (but need
not) be made subject to Vesting Conditions based upon the satisfaction of such
Service requirements, conditions, restrictions or performance criteria,
including, without limitation, Performance Goals as described in Section 10.4,
as shall be established by the Committee and set forth in the Award Agreement
evidencing such Award. The Committee, in its discretion, may provide in any
Award Agreement evidencing a Restricted Stock Unit Award that, if the
satisfaction of Vesting Conditions with respect to any shares subject to the
Award would otherwise occur on a day on which the sale of such shares would
violate the provisions of the Trading Compliance Policy, then the satisfaction
of the Vesting Conditions automatically shall be determined on the first to
occur of (a) the next trading day on which the sale of such shares would not
violate the Trading Compliance Policy or (b) the later of (i) last day of the
calendar year in which the original vesting date occurred or (ii) the last day
of the Company’s taxable year in which the original vesting date
occurred.
20
9.4 Voting Rights, Dividend Equivalent Rights and Distributions.
Participants shall have no
voting rights with respect to shares of Stock represented by Restricted Stock
Units until the date of the issuance of such shares (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company). However, the Committee, in its discretion, may
provide in the Award Agreement evidencing any Restricted Stock Unit Award that
the Participant shall be entitled to Dividend Equivalent Rights with respect to
the payment of cash dividends on Stock during the period beginning on the date
such Award is granted and ending, with respect to each share subject to the
Award, on the earlier of the date the Award is settled or the date on which it
is terminated. Such Dividend Equivalent Rights, if any, shall be paid by
crediting the Participant with additional whole Restricted Stock Units as of the
date of payment of such cash dividends on Stock. The number of additional
Restricted Stock Units (rounded to the nearest whole number) to be so credited
shall be determined by dividing (a) the amount of cash dividends paid on such
date with respect to the number of shares of Stock represented by the Restricted
Stock Units previously credited to the Participant by (b) the Fair Market Value
per share of Stock on such date. Such additional Restricted Stock Units shall be
subject to the same terms and conditions and shall be settled in the same manner
and at the same time as the Restricted Stock Units originally subject to the
Restricted Stock Unit Award. In the event of a dividend or distribution paid in
shares of Stock or other property or any other adjustment made upon a change in
the capital structure of the Company as described in Section 4.2, appropriate
adjustments shall be made in the Participant’s Restricted Stock Unit Award so
that it represents the right to receive upon settlement any and all new,
substituted or additional securities or other property (other than regular,
periodic cash dividends) to which the Participant would be entitled by reason of
the shares of Stock issuable upon settlement of the Award, and all such new,
substituted or additional securities or other property shall be immediately
subject to the same Vesting Conditions as are applicable to the Award.
9.5 Effect of Termination of Service. Unless otherwise provided by the Committee
and set forth in the Award Agreement evidencing a Restricted Stock Unit Award,
if a Participant’s Service terminates for any reason, whether voluntary or
involuntary (including the Participant’s death or disability), then the
Participant shall forfeit to the Company any Restricted Stock Units pursuant to
the Award which remain subject to Vesting Conditions as of the date of the
Participant’s termination of Service.
9.6 Settlement of Restricted Stock Unit Awards. The Company shall issue to a Participant on
the date on which Restricted Stock Units subject to the Participant’s Restricted
Stock Unit Award vest or on such other date determined by the Committee, in its
discretion, and set forth in the Award Agreement one (1) share of Stock (and/or
any other new, substituted or additional securities or other property pursuant
to an adjustment described in Section 9.4) for each Restricted Stock Unit then
becoming vested or otherwise to be settled on such date, subject to the
withholding of applicable taxes, if any. If permitted by the Committee, the
Participant may elect, consistent with the requirements of Section 409A, to
defer receipt of all or any portion of the shares of Stock or other property
otherwise issuable to the Participant pursuant to this Section, and such
deferred issuance date(s) and amount(s) elected by the Participant shall be set
forth in the Award Agreement. Notwithstanding the foregoing, the Committee, in
its discretion, may provide for settlement of any Restricted Stock Unit Award by
payment to the Participant in cash of an amount equal to the Fair Market Value
on the payment date of the shares of Stock or other property otherwise issuable
to the Participant pursuant to this Section.
21
9.7 Nontransferability of Restricted Stock Unit
Awards. The right to
receive shares pursuant to a Restricted Stock Unit Award shall not be subject in
any manner to anticipation, alienation, sale, exchange, transfer, assignment,
pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant’s beneficiary, except transfer by will or by the laws of descent and
distribution. All rights with respect to a Restricted Stock Unit Award granted
to a Participant hereunder shall be exercisable during his or her lifetime only
by such Participant or the Participant’s guardian or legal representative.
10. PERFORMANCE AWARDS.
Performance Awards shall be evidenced by Award
Agreements in such form as the Committee shall from time to time establish.
Award Agreements evidencing Performance Awards may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:
10.1 Types of Performance Awards Authorized.
Performance Awards may be
granted in the form of either Performance Shares or Performance Units. Each
Award Agreement evidencing a Performance Award shall specify the number of
Performance Shares or Performance Units subject thereto, the Performance Award
Formula, the Performance Goal(s) and Performance Period applicable to the Award,
and the other terms, conditions and restrictions of the Award.
10.2 Initial Value of Performance Shares and
Performance Units. Unless
otherwise provided by the Committee in granting a Performance Award, each
Performance Share shall have an initial monetary value equal to the Fair Market
Value of one (1) share of Stock, subject to adjustment as provided in Section
4.2, on the effective date of grant of the Performance Share, and each
Performance Unit shall have an initial monetary value established by the
Committee at the time of grant. The final value payable to the Participant in
settlement of a Performance Award determined on the basis of the applicable
Performance Award Formula will depend on the extent to which Performance Goals
established by the Committee are attained within the applicable Performance
Period established by the Committee.
10.3 Establishment of Performance Period,
Performance Goals and Performance Award Formula. In granting each Performance Award, the
Committee shall establish in writing the applicable Performance Period,
Performance Award Formula and one or more Performance Goals which, when measured
at the end of the Performance Period, shall determine on the basis of the
Performance Award Formula the final value of the Performance Award to be paid to
the Participant. Unless otherwise permitted in compliance with the requirements
under Section 162(m) with respect to each Performance Award intended to result
in the payment of Performance-Based Compensation, the Committee shall establish
the Performance Goal(s) and Performance Award Formula applicable to each
Performance Award no later than the earlier of (a) the date ninety (90) days
after the commencement of the applicable Performance Period or (b) the date on
which 25% of the Performance Period has elapsed, and, in any event, at a time
when the outcome of the Performance Goals remains substantially uncertain. Once
established, the Performance Goals and Performance Award Formula applicable to a
Covered Employee shall not be changed during the Performance Period. The Company
shall notify each Participant granted a Performance Award of the terms of such
Award, including the Performance Period, Performance Goal(s) and Performance
Award Formula.
22
10.4 Measurement of Performance
Goals. Performance Goals
shall be established by the Committee on the basis of targets to be attained
(“Performance Targets”) with respect to
one or more measures of business or financial performance (each, a “Performance Measure”), subject to the
following:
(a) Performance Measures. Performance Measures shall be calculated in
accordance with the Company’s financial statements, or, if such terms are not
used in the Company’s financial statements, they shall be calculated in
accordance with generally accepted accounting principles, a method used
generally in the Company’s industry, or in accordance with a methodology
established by the Committee prior to the grant of the Performance Award.
Performance Measures shall be calculated with respect to the Company and each
Subsidiary Corporation consolidated therewith for financial reporting purposes
or such division or other business unit as may be selected by the Committee.
Unless otherwise determined by the Committee prior to the grant of the
Performance Award, the Performance Measures applicable to the Performance Award
shall be calculated prior to the accrual of expense for any Performance Award
for the same Performance Period and excluding the effect (whether positive or
negative) on the Performance Measures of any change in accounting standards or
any extraordinary, unusual or nonrecurring item, as determined by the Committee,
occurring after the establishment of the Performance Goals applicable to the
Performance Award. Each such adjustment, if any, shall be made solely for the
purpose of providing a consistent basis from period to period for the
calculation of Performance Measures in order to prevent the dilution or
enlargement of the Participant’s rights with respect to a Performance Award.
Performance Measures may be one or more of the following, as determined by the
Committee:
(i) revenue;
(ii) sales;
(iii) expenses;
(iv) operating income;
(v) gross margin;
(vi) operating margin;
(vii) earnings before any one or more of: stock-based compensation expense,
interest, taxes, depreciation and amortization;
(viii) pre-tax
profit;
(ix) net operating income;
(x) net income;
23
(xi) economic value added;
(xii) free cash flow;
(xiii) operating cash flow;
(xiv) balance of cash, cash
equivalents and marketable securities;
(xv) stock price;
(xvi) earnings per share;
(xvii) return on stockholder equity;
(xviii) return on capital;
(xix) return on assets;
(xx) return on investment;
(xxi) total stockholder return;
(xxii) employee satisfaction;
(xxiii) employee retention;
(xxiv) market share;
(xxv) customer satisfaction;
(xxvi) product development;
(xxvii) research and development expenses;
(xxviii) completion of an identified special project; and
(xxix) completion of a joint venture or other corporate transaction.
(b) Performance Targets. Performance Targets may include a minimum, maximum, target level and
intermediate levels of performance, with the final value of a Performance Award
determined under the applicable Performance Award Formula by the level attained
during the applicable Performance Period. A Performance Target may be stated as
an absolute value, a growth or reduction in a value, or as a value determined
relative to an index, budget or other standard selected by the Committee.
10.5 Settlement of Performance Awards.
(a) Determination of Final Value. As soon as practicable following the
completion of the Performance Period applicable to a Performance Award, the
Committee shall certify in writing the extent to which the applicable
Performance Goals have been attained and the resulting final value of the Award
earned by the Participant and to be paid upon its settlement in accordance with
the applicable Performance Award Formula.
24
(b) Discretionary Adjustment of Award Formula. In its discretion, the Committee may, either
at the time it grants a Performance Award or at any time thereafter, provide for
the positive or negative adjustment of the Performance Award Formula applicable
to a Performance Award granted to any Participant who is not a Covered Employee
to reflect such Participant’s individual performance in his or her position with
the Company or such other factors as the Committee may determine. If permitted
under a Covered Employee’s Award Agreement, the Committee shall have the
discretion, on the basis of such criteria as may be established by the
Committee, to reduce some or all of the value of the Performance Award that
would otherwise be paid to the Covered Employee upon its settlement
notwithstanding the attainment of any Performance Goal and the resulting value
of the Performance Award determined in accordance with the Performance Award
Formula. No such reduction may result in an increase in the amount payable upon
settlement of another Participant’s Performance Award that is intended to result
in Performance-Based Compensation.
(c) Effect of Leaves of Absence. Unless otherwise required by law or a
Participant’s Award Agreement, payment of the final value, if any, of a
Performance Award held by a Participant who has taken in excess of thirty (30)
days in unpaid leaves of absence during a Performance Period shall be prorated
on the basis of the number of days of the Participant’s Service during the
Performance Period during which the Participant was not on an unpaid leave of
absence.
(d) Notice to Participants. As soon as practicable following the
Committee’s determination and certification in accordance with Sections 10.5(a)
and (b), the Company shall notify each Participant of the determination of the
Committee.
(e) Payment in Settlement of Performance Awards. As soon as practicable following the
Committee’s determination and certification in accordance with Sections 10.5(a)
and (b), but in any event within the Short-Term Deferral Period described in
Section 15.1 (except as otherwise provided below or consistent with the
requirements of Section 409A), payment shall be made to each eligible
Participant (or such Participant’s legal representative or other person who
acquired the right to receive such payment by reason of the Participant’s death)
of the final value of the Participant’s Performance Award. Payment of such
amount shall be made in cash, shares of Stock, or a combination thereof as
determined by the Committee. Unless otherwise provided in the Award Agreement
evidencing a Performance Award, payment shall be made in a lump sum. If
permitted by the Committee, the Participant may elect, consistent with the
requirements of Section 409A, to defer receipt of all or any portion of the
payment to be made to the Participant pursuant to this Section, and such
deferred payment date(s) elected by the Participant shall be set forth in the
Award Agreement. If any payment is to be made on a deferred basis, the Committee
may, but shall not be obligated to, provide for the payment during the deferral
period of Dividend Equivalent Rights or interest.
(f) Provisions Applicable to Payment in Shares. If payment is to be made in shares of Stock,
the number of such shares shall be determined by dividing the final value of the
Performance Award by the Fair Market Value of a share of Stock determined by the
method specified in the Award Agreement. Shares of Stock issued in payment of
any Performance Award may be fully vested and freely transferable shares or may
be shares of Stock subject to Vesting Conditions as provided in Section 8.5. Any
shares subject to Vesting Conditions shall be evidenced by an appropriate Award
Agreement and shall be subject to the provisions of Sections 8.5 through 8.8
above.
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10.6 Voting Rights; Dividend Equivalent Rights and Distributions.
Participants shall have no
voting rights with respect to shares of Stock represented by Performance Share
Awards until the date of the issuance of such shares, if any (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company). However, the Committee, in its discretion, may
provide in the Award Agreement evidencing any Performance Share Award that the
Participant shall be entitled to Dividend Equivalent Rights with respect to the
payment of cash dividends on Stock during the period beginning on the date the
Award is granted and ending, with respect to each share subject to the Award, on
the earlier of the date on which the Performance Shares are settled or the date
on which they are forfeited. Such Dividend Equivalent Rights, if any, shall be
credited to the Participant in the form of additional whole Performance Shares
as of the date of payment of such cash dividends on Stock. The number of
additional Performance Shares (rounded to the nearest whole number) to be so
credited shall be determined by dividing (a) the amount of cash dividends paid
on the dividend payment date with respect to the number of shares of Stock
represented by the Performance Shares previously credited to the Participant by
(b) the Fair Market Value per share of Stock on such date. Dividend Equivalent
Rights may be paid currently or may be accumulated and paid to the extent that
Performance Shares become nonforfeitable, as determined by the Committee.
Settlement of Dividend Equivalent Rights may be made in cash, shares of Stock,
or a combination thereof as determined by the Committee, and may be paid on the
same basis as settlement of the related Performance Share as provided in Section
10.5. Dividend Equivalent Rights shall not be paid with respect to Performance
Units. In the event of a dividend or distribution paid in shares of Stock or
other property or any other adjustment made upon a change in the capital
structure of the Company as described in Section 4.2, appropriate adjustments
shall be made in the Participant’s Performance Share Award so that it represents
the right to receive upon settlement any and all new, substituted or additional
securities or other property (other than regular, periodic cash dividends) to
which the Participant would be entitled by reason of the shares of Stock
issuable upon settlement of the Performance Share Award, and all such new,
substituted or additional securities or other property shall be immediately
subject to the same Performance Goals as are applicable to the Award.
10.7 Effect of Termination of
Service. Unless otherwise
provided by the Committee and set forth in the Award Agreement evidencing a
Performance Award, the effect of a Participant’s termination of Service on the
Performance Award shall be as follows:
(a) Death or Disability. If the Participant’s Service terminates because of the death or
Disability of the Participant before the completion of the Performance Period
applicable to the Performance Award, the final value of the Participant’s
Performance Award shall be determined by the extent to which the applicable
Performance Goals have been attained with respect to the entire Performance
Period and shall be prorated based on the number of months of the Participant’s
Service during the Performance Period. Payment shall be made following the end
of the Performance Period in any manner permitted by Section 10.5.
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(b) Other Termination of Service. If the Participant’s Service terminates for
any reason except death or Disability before the completion of the Performance
Period applicable to the Performance Award, such Award shall be forfeited in its
entirety; provided, however, that in the event of an involuntary termination of
the Participant’s Service, the Committee, in its discretion, may waive the
automatic forfeiture of all or any portion of any such Award and determine the
final value of the Performance Award in the manner provided by Section 10.7(a).
Payment of any amount pursuant to this Section shall be made following the end
of the Performance Period in any manner permitted by Section 10.5.
10.8 Nontransferability of Performance
Awards. Prior to
settlement in accordance with the provisions of the Plan, no Performance Award
shall be subject in any manner to anticipation, alienation, sale, exchange,
transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participant’s beneficiary, except transfer by will or by the
laws of descent and distribution. All rights with respect to a Performance Award
granted to a Participant hereunder shall be exercisable during his or her
lifetime only by such Participant or the Participant’s guardian or legal
representative.
11. CASH-BASED A<
/font>WARDS AND OTHER STOCK-BASED AWARDS.
Cash-Based Awards and Other Stock-Based Awards
shall be evidenced by Award Agreements in such form as the Committee shall from
time to time establish. Award Agreements evidencing Cash-Based Awards and Other
Stock-Based Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:
11.1 Grant of Cash-Based Awards. Subject to the provisions of the Plan, the
Committee, at any time and from time to time, may grant Cash-Based Awards to
Participants in such amounts and upon such terms and conditions, including the
achievement of performance criteria, as the Committee may determine.
11.2 Grant of Other Stock-Based
Awards. The Committee may
grant other types of equity-based or equity-related Awards not otherwise
described by the terms of this Plan (including the grant or offer for sale of
unrestricted securities, stock-equivalent units, stock appreciation units,
securities or debentures convertible into common stock or other forms determined
by the Committee) in such amounts and subject to such terms and conditions as
the Committee shall determine. Other Stock-Based Awards may be made available as
a form of payment in the settlement of other Awards or as payment in lieu of
compensation to which a Participant is otherwise entitled. Other Stock-Based
Awards may involve the transfer of actual shares of Stock to Participants, or
payment in cash or otherwise of amounts based on the value of Stock and may
include, without limitation, Awards designed to comply with or take advantage of
the applicable local laws of jurisdictions other than the United
States.
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11.3 Value of Cash-Based and Other Stock-Based
Awards. Each Cash-Based
Award shall specify a monetary payment amount or payment range as determined by
the Committee. Each Other Stock-Based Award shall be expressed in terms
of shares of Stock or units based on such shares of Stock, as determined by the
Committee. The Committee may require the satisfaction of such Service
requirements, conditions, restrictions or performance criteria, including,
without limitation, Performance Goals as described in Section 10.4, as shall be
established by the Committee and set forth in the Award Agreement evidencing
such Award. If the Committee exercises its discretion to establish performance
criteria, the final value of Cash-Based Awards or Other Stock-Based Awards that
will be paid to the Participant will depend on the extent to which the
performance criteria are met. The establishment of performance criteria with
respect to the grant or vesting of any Cash-Based Award or Other Stock-Based
Award intended to result in Performance-Based Compensation shall follow
procedures substantially equivalent to those applicable to Performance Awards
set forth in Section 10.
11.4 Payment or Settlement of Cash-Based Awards and
Other Stock-Based Awards.
Payment or settlement, if any, with respect to a Cash-Based Award or an Other
Stock-Based Award shall be made in accordance with the terms of the Award, in
cash, shares of Stock or other securities or any combination thereof as the
Committee determines. The determination and certification of the final value
with respect to any Cash-Based Award or Other Stock-Based Award intended to
result in Performance-Based Compensation shall comply with the requirements
applicable to Performance Awards set forth in Section 10. To the extent
applicable, payment or settlement with respect to each Cash-Based Award and
Other Stock-Based Award shall be made in compliance with the requirements of
Section 409A.
11.5 Voting Rights; Dividend Equivalent Rights and Distributions.
Participants shall have no
voting rights with respect to shares of Stock represented by Other Stock-Based
Awards until the date of the issuance of such shares of Stock (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), if any, in settlement of such Award. However,
the Committee, in its discretion, may provide in the Award Agreement evidencing
any Other Stock-Based Award that the Participant shall be entitled to Dividend
Equivalent Rights with respect to the payment of cash dividends on Stock during
the period beginning on the date such Award is granted and ending, with respect
to each share subject to the Award, on the earlier of the date the Award is
settled or the date on which it is terminated. Such Dividend Equivalent Rights,
if any, shall be paid in accordance with the provisions set forth in Section
9.4. Dividend Equivalent Rights shall not be granted with respect to Cash-Based
Awards. In the event of a dividend or distribution paid in shares of Stock or
other property or any other adjustment made upon a change in the capital
structure of the Company as described in Section 4.2, appropriate adjustments
shall be made in the Participant’s Other Stock-Based Award so that it represents
the right to receive upon settlement any and all new, substituted or additional
securities or other property (other than regular, periodic cash dividends) to
which the Participant would be entitled by reason of the shares of Stock
issuable upon settlement of such Award, and all such new, substituted or
additional securities or other property shall be immediately subject to the same
Vesting Conditions and performance criteria, if any, as are applicable to the
Award.
11.6 Effect of Termination of
Service. Each Award
Agreement evidencing a Cash-Based Award or Other Stock-Based Award shall set
forth the extent to which the Participant shall have the right to retain such
Award following termination of the Participant’s Service. Such provisions shall
be determined in the discretion of the Committee, need not be uniform among all
Cash-Based Awards or Other Stock-Based Awards, and may reflect distinctions
based on the reasons for termination, subject to the requirements of Section
409A, if applicable.
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11.7 Nontransferability of Cash-Based Awards and
Other Stock-Based Awards. Prior to the payment or settlement of a Cash-Based Award or Other
Stock-Based Award, the Award shall not be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or
garnishment by creditors of the Participant or the Participant’s beneficiary,
except transfer by will or by the laws of descent and distribution. The
Committee may impose such additional restrictions on any shares of Stock issued
in settlement of Cash-Based Awards and Other Stock-Based Awards as it may deem
advisable, including, without limitation, minimum holding period requirements,
restrictions under applicable federal securities laws, under the requirements of
any stock exchange or market upon which such shares of Stock are then listed
and/or traded, or under any state securities laws or foreign law applicable to
such shares of Stock.
12. STANDARD FORMS OF AWARD AGREEMENT.
12.1 Award Agreements. Each Award
shall comply with and be subject to the terms and conditions set forth in the
appropriate form of Award Agreement approved by the Committee and as amended
from time to time. No Award or purported Award shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Award Agreement,
which execution may be evidenced by electronic means. Any Award Agreement may
consist of an appropriate form of Notice of Grant and a form of Agreement
incorporated therein by reference, or such other form or forms, including
electronic media, as the Committee may approve from time to time.
12.2 Authority to Vary Terms. The
Committee shall have the authority from time to time to vary the terms of any
standard form of Award Agreement either in connection with the grant or
amendment of an individual Award or in connection with the authorization of a
new standard form or forms; provided, however, that the terms and conditions of
any such new, revised or amended standard form or forms of Award Agreement are
not inconsistent with the terms of the Plan.
13. CHANGE IN CONTROL.
13.1 Effect of Change in Control on Awards.
Subject to the
requirements and limitations of Section 409A, if applicable, the Committee may
provide for any one or more of the following:
(a) Accelerated Vesting. In its discretion, the Committee may provide
in the grant of any Award or at any other time may take such action as it deems
appropriate to provide for acceleration of the exercisability, vesting and/or
settlement in connection with a Change in Control of each or any outstanding
Award or portion thereof and shares acquired pursuant thereto upon such
conditions, including termination of the Participant’s Service prior to, upon,
or following such Change in Control, and to such extent as the Committee shall
determine.
29
(b) Assumption, Continuation or Substitution. In the event of a Change in Control, the
surviving, continuing, successor, or purchasing corporation or other business
entity or parent thereof, as the case may be (the “Acquiror”), may, without
the consent of any Participant, either assume or continue the Company’s rights
and obligations under each or any Award or portion thereof outstanding
immediately prior to the Change in Control or substitute for each or any such
outstanding Award or portion thereof a substantially equivalent award with
respect to the Acquiror’s stock, as applicable. For purposes of this Section, if
so determined by the Committee in its discretion, an Award denominated in shares
of Stock shall be deemed assumed if, following the Change in Control, the Award
confers the right to receive, subject to the terms and conditions of the Plan
and the applicable Award Agreement, for each share of Stock subject to the Award
immediately prior to the Change in Control, the consideration (whether stock,
cash, other securities or property or a combination thereof) to which a holder
of a share of Stock on the effective date of the Change in Control was entitled
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares of
Stock); provided, however, that if such consideration is not solely common stock
of the Acquiror, the Committee may, with the consent of the Acquiror, provide
for the consideration to be received upon the exercise or settlement of the
Award, for each share of Stock subject to the Award, to consist solely of common
stock of the Acquiror equal in Fair Market Value to the per share consideration
received by holders of Stock pursuant to the Change in Control. Any Award or
portion thereof which is neither assumed or continued by the Acquiror in
connection with the Change in Control nor exercised or settled as of the time of
consummation of the Change in Control shall terminate and cease to be
outstanding effective as of the time of consummation of the Change in Control.
(c) Cash-Out of Outstanding Stock-Based Awards. The Committee may, in its discretion and
without the consent of any Participant, determine that, upon the occurrence of a
Change in Control, each or any Award denominated in shares of Stock or portion
thereof outstanding immediately prior to the Change in Control and not
previously exercised or settled shall be canceled in exchange for a payment with
respect to each vested share (and each unvested share, if so determined by the
Committee) of Stock subject to such canceled Award in (i) cash, (ii) stock of
the Company or of a corporation or other business entity a party to the Change
in Control, or (iii) other property which, in any such case, shall be in an
amount having a Fair Market Value equal to the Fair Market Value of the
consideration to be paid per share of Stock in the Change in Control, reduced
(but not below zero) by the exercise or purchase price per share, if any, under
such Award. In the event such determination is made by the Committee, an Award
having an exercise or purchase price per share equal to or greater than the Fair
Market Value of the consideration to be paid per share of Stock in the Change in
Control may be canceled without payment of consideration to the holder thereof.
Payment pursuant to this Section (reduced by applicable withholding taxes, if
any) shall be made to Participants in respect of the vested portions of their
canceled Awards as soon as practicable following the date of the Change in
Control and in respect of the unvested portions of their canceled Awards in
accordance with the vesting schedules applicable to such Awards.
30
13.2 Federal Excise Tax Under Section 4999 of the Code.
(a) Excess Parachute Payment. In the event that any acceleration of vesting
pursuant to an Award and any other payment or benefit received or to be received
by a Participant would subject
the Participant to any excise tax pursuant to Section 4999 of the Code due to
the characterization of such acceleration of vesting, payment or benefit as an
“excess parachute payment” under Section 280G of the Code, the Participant may
elect to reduce the amount of any acceleration of vesting called for under the
Award in order to avoid such characterization.
(b) Determination by Independent Accountants. To aid the Participant in making any election
called for under Section 13.2(a), no later than the date of the occurrence of
any event that might reasonably be anticipated to result in an “excess parachute
payment” to the Participant as described in Section 13.2(a), the Company shall
request a determination in writing by independent public accountants selected by
the Company (the “Accountants”). As soon as
practicable thereafter, the Accountants shall determine and report to the
Company and the Participant the amount of such acceleration of vesting, payments
and benefits which would produce the greatest after-tax benefit to the
Participant. For the purposes of such determination, the Accountants may rely on
reasonable, good faith interpretations concerning the application of Sections
280G and 4999 of the Code. The Company and the Participant shall furnish to the
Accountants such information and documents as the Accountants may reasonably
request in order to make their required determination. The Company shall bear
all fees and expenses the Accountants charge in connection with their services
contemplated by this Section.
14. COMPLIANCE WITH SECURITIES LAW.
The grant of Awards and the issuance of shares
of Stock pursuant to any Award shall be subject to compliance with all
applicable requirements of federal, state and foreign law with respect to such
securities and the requirements of any stock exchange or market system upon
which the Stock may then be listed. In addition, no Award may be exercised or
shares issued pursuant to an Award unless (a) a registration statement under the
Securities Act shall at the time of such exercise or issuance be in effect with
respect to the shares issuable pursuant to the Award, or (b) in the opinion of
legal counsel to the Company, the shares issuable pursuant to the Award may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company’s legal counsel to be necessary to the lawful issuance and
sale of any shares hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to issuance of any Stock,
the Company may require the Participant to satisfy any qualifications that may
be necessary or appropriate, to evidence compliance with any applicable law or
regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.
15. COMPLIANCE WITH SECTION 409A.
15.1 Awards Subject to Section 409A. The Company intends that Awards granted
pursuant to the Plan shall either be exempt from or comply with Section 409A,
and the Plan shall be so construed. The provisions of this Section 15 shall
apply to any Award or portion thereof that constitutes or provides for payment
of Section 409A Deferred Compensation. Such Awards may include, without
limitation:
(a) A Nonstatutory Stock Option or SAR
that includes any feature for the deferral of compensation other than the
deferral of recognition of income until the later of (i) the exercise or
disposition of the Award or (ii) the time the stock acquired pursuant to the
exercise of the Award first becomes substantially vested.
(b) Any Restricted Stock Unit Award, Performance Award, Cash-Based Award
or Other Stock-Based Award that either (i) provides by its terms for settlement
of all or any portion of the Award at a time or upon an event that will or may
occur later than the end of the Short-Term Deferral Period (as defined below) or
(ii) permits the Participant granted the Award to elect one or more dates or
events upon which the Award will be settled after the end of the Short-Term
Deferral Period.
31
Subject to the provisions of Section 409A, the term “Short-Term Deferral Period” means the 2½
month period ending on the later of (i) the 15th day of the third month
following the end of the Participant’s taxable year in which the right to
payment under the applicable portion of the Award is no longer subject to a
substantial risk of forfeiture or (ii) the 15th day of the third month following
the end of the Company’s taxable year in which the right to payment under the
applicable portion of the Award is no longer subject to a substantial risk of
forfeiture. For this purpose, the term “substantial risk of forfeiture” shall
have the meaning provided by Section 409A.
15.2 Deferral and/or Distribution Elections. Except as otherwise permitted or required by
Section 409A, the following rules shall apply to any compensation deferral
and/or payment elections (each, an “Election”)
that may be permitted or required by the Committee pursuant to an Award
providing Section 409A Deferred Compensation:
(a) Elections must be in writing and specify the amount of the payment in
settlement of an Award being deferred, as well as the time and form of payment
as permitted by this Plan.
(b) Elections shall be made by the end of the Participant’s taxable year
prior to the year in which services commence for which an Award may be granted
to such Participant.
(c) Elections shall continue in effect until a written revocation or change
in Election is received by the Company, except that a written revocation or
change in Election must be received by the Company prior to the last day for
making the Election determined in accordance with paragraph (b) above or as
permitted by Section 15.3.
15.3 Subsequent Elections. Except as
otherwise permitted or required by Section 409A, any Award providing Section
409A Deferred Compensation which permits a subsequent Election to delay the
payment or change the form of payment in settlement of such Award shall comply
with the following requirements:
(a) No subsequent Election may take effect until at least twelve (12) months
after the date on which the subsequent Election is made.
32
(b) Each subsequent Election related to a payment in settlement of an Award
not described in Section 15.4(a)(ii), 15.4(a)(iii) or 15.4(a)(vi) must result in
a delay of the payment for a period of not less than five (5) years from the
date on which such payment would otherwise have been made.
(c) No subsequent Election related to a payment pursuant to Section
15.4(a)(iv) shall be made less than twelve (12) months before the date on which
such payment would otherwise have been made.
(d) Subsequent Elections shall continue in effect until a written revocation
or change in the subsequent Election is received by the Company, except that a
written revocation or change in a subsequent Election must be received by the
Company prior to the last day for making the subsequent Election determined in
accordance the preceding paragraphs of this Section 15.3.
15.4 Payment of Section 409A Deferred Compensation.
(a) Permissible Payments. Except as otherwise permitted or required by
Section 409A, an Award providing Section 409A Deferred Compensation must provide
for payment in settlement of the Award only upon one or more of the following:
(i) The Participant’s “separation from service” (as such term is defined by
Section 409A);
(ii) The Participant’s becoming “disabled” (as such term is defined by Section
409A);
(iii) The Participant’s death;
(iv) A time or fixed schedule that is either (i) specified by the Committee
upon the grant of an Award and set forth in the Award Agreement evidencing such
Award or (ii) specified by the Participant in an Election complying with the
requirements of Section 15.2 or 15.3, as applicable;
(v) A change in the ownership or effective control or the Company or in the
ownership of a substantial portion of the assets of the Company determined in
accordance with Section 409A; or
(vi) The occurrence of an “unforeseeable emergency” (as such term is defined
by Section 409A).
(b) Installment Payments. It is the intent of this Plan that any right
of a Participant to receive installment payments (within the meaning of Section
409A) shall, for all purposes of Section 409A, be treated as a right to a series
of separate payments.
(c) Required Delay in Payment to Specified Employee Pursuant to Separation
from Service. Notwithstanding any provision of the Plan or an Award Agreement to the
contrary, except as otherwise permitted by Section 409A, no payment pursuant to
Section 15.4(a)(i) in settlement of an Award providing for Section 409A Deferred
Compensation may be made to a Participant who is a “specified employee” (as such
term is defined by Section 409A) as of the date of the Participant’s separation
from service before the date (the “Delayed Payment Date”) that
is six (6) months after the date of such Participant’s separation from service,
or, if earlier, the date of the Participant’s death. All such amounts that
would, but for this paragraph, become payable prior to the Delayed Payment Date
shall be accumulated and paid on the Delayed Payment Date.
33
(d) Payment Upon Disability. All distributions payable by reason of a
Participant becoming disabled shall be paid in a lump sum or in periodic
installments as established by the Participant’s Election. If the Participant
has made no Election with respect to distributions upon becoming disabled, all
such distributions shall be paid in a lump sum upon the determination that the
Participant has become disabled.
(e) Payment Upon Death. If a Participant
dies before complete distribution of amounts payable upon settlement of an Award
subject to Section 409A, such undistributed amounts shall be distributed to his
or her beneficiary under the distribution method for death established by the
Participant’s Election upon receipt by the Committee of satisfactory notice and
confirmation of the Participant’s death. If the Participant has made no Election
with respect to distributions upon death, all such distributions shall be paid
in a lump sum upon receipt by the Committee of satisfactory notice and
confirmation of the Participant’s death.
(f) Payment Upon Change in Control. Notwithstanding any provision of the Plan or
an Award Agreement to the contrary, to the extent that any amount constituting
Section 409A Deferred Compensation would become payable under this Plan by
reason of a Change in Control, such amount shall become payable only if the
event constituting a Change in Control would also constitute a change in
ownership or effective control of the Company or a change in the ownership of a
substantial portion of the assets of the Company within the meaning of Section
409A. Any Award which constitutes Section 409A Deferred Compensation and which
would vest and otherwise become payable upon a Change in Control as a result of
the failure of the Acquiror to assume, continue or substitute for such Award in
accordance with Section 13.1(b) shall vest to the extent provided by such Award
but shall be converted automatically at the effective time of such Change in
Control into a right to receive, in cash on the date or dates such award would
have been settled in accordance with its then existing settlement schedule (or
as required by Section 15.4(c)), an amount or amounts equal in the aggregate to
the intrinsic value of the Award at the time of the Change in Control.
(g) Payment Upon Unforeseeable Emergency. The Committee shall have the authority to
provide in the Award Agreement evidencing any Award providing for Section 409A
Deferred Compensation for payment in settlement of all or a portion of such
Award in the event that a Participant establishes, to the satisfaction of the
Committee, the occurrence of an unforeseeable emergency. In such event, the
amount(s) distributed with respect to such unforeseeable emergency cannot exceed
the amounts reasonably necessary to satisfy the emergency need plus amounts
necessary to pay taxes reasonably anticipated as a result of such
distribution(s), after taking into account the extent to which such emergency
need is or may be relieved through reimbursement or compensation by insurance or
otherwise, by liquidation of the Participant’s assets (to the extent the
liquidation of such assets would not itself cause severe financial hardship) or
by cessation of deferrals under the Award. All distributions with respect to an
unforeseeable emergency shall be made in a lump sum upon the Committee’s
determination that an unforeseeable emergency has occurred. The Committee’s
decision with respect to whether an unforeseeable emergency has occurred and the
manner in which, if at all, the payment in settlement of an Award shall be
altered or modified, shall be final, conclusive, and not subject to approval or
appeal.
34
(h) Prohibition of Acceleration of Payments. Notwithstanding
any provision of the Plan or an Award Agreement to the contrary, this Plan does
not permit the acceleration of the time or schedule of any payment under an
Award providing Section 409A Deferred Compensation, except as permitted by
Section 409A.
(i) No Representation Regarding Section 409A Compliance.
Notwithstanding any
other provision of the Plan, the Company makes no representation that Awards
shall be exempt from or comply with Section 409A. No Participating Company shall
be liable for any tax, penalty or interest imposed on a Participant by Section
409A.
16. TAX WITHHOLDING.
16.1 Tax Withholding in General. The Company shall have the right to deduct from any and all payments
made under the Plan, or to require the Participant, through payroll withholding,
cash payment or otherwise, to make adequate provision for, the federal, state,
local and foreign taxes (including social insurance), if any, required by law to
be withheld by any Participating Company with respect to an Award or the shares
acquired pursuant thereto. The Company shall have no obligation to deliver
shares of Stock, to release shares of Stock from an escrow established pursuant
to an Award Agreement, or to make any payment in cash under the Plan until the
Participating Company Group’s tax withholding obligations have been satisfied by
the Participant.
16.2 Withholding in or Directed Sale of Shares. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable to a Participant upon
the exercise or settlement of an Award, or to accept from the Participant the
tender of, a number of whole shares of Stock having a Fair Market Value, as
determined by the Company, equal to all or any part of the tax withholding
obligations of any Participating Company. The Fair Market Value of any shares of
Stock withheld or tendered to satisfy any such tax withholding obligations shall
not exceed the amount determined by the applicable minimum statutory withholding
rates. The Company may require a Participant to direct a broker, upon the
vesting, exercise or settlement of an Award, to sell a portion of the shares
subject to the Award determined by the Company in its discretion to be
sufficient to cover the tax withholding obligations of any Participating Company
and to remit an amount equal to such tax withholding obligations to the Company
in cash.
17. AMENDMENT, S<
/font>USPENSION OR TERMINATION OF PLAN.
The Committee may amend, suspend or terminate
the Plan at any time. However, without the approval of the Company’s
stockholders, there shall be (a) no increase in the maximum aggregate number of
shares of Stock that may be issued under the Plan (except by operation of the provisions of Section 4.2),
(b) no change in the class of persons eligible to receive Incentive Stock
Options, and (c) no other amendment of the Plan that would require approval of
the Company’s stockholders under any applicable law, regulation or rule,
including the rules of any stock exchange or quotation system upon which the
Stock may then be listed or quoted. No amendment, suspension or termination of
the Plan shall affect any then outstanding Award unless expressly provided by
the Committee. Except as provided by the next sentence, no amendment, suspension
or termination of the Plan may adversely affect any then outstanding Award
without the consent of the Participant. Notwithstanding any other provision of
the Plan to the contrary, the Committee may, in its sole and absolute discretion
and without the consent of any Participant, amend the Plan or any Award
Agreement, to take effect retroactively or otherwise, as it deems necessary or
advisable for the purpose of conforming the Plan or such Award Agreement to any
present or future law, regulation or rule applicable to the Plan, including, but
not limited to, Section 409A.
35
18. MISCELLANEOUS PROVISIONS.
18.1 Repurchase Rights. Shares
issued under the Plan may be subject to one or more repurchase options, or other
conditions and restrictions as determined by the Committee in its discretion at
the time the Award is granted. The Company shall have the right to assign at any
time any repurchase right it may have, whether or not such right is then
exercisable, to one or more persons as may be selected by the Company. Upon
request by the Company, each Participant shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder and
shall promptly present to the Company any and all certificates representing
shares of Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions.
18.2 Forfeiture Events.
(a) The Committee may specify in an Award Agreement that the Participant’s
rights, payments, and benefits with respect to an Award shall be subject to
reduction, cancellation, forfeiture, or recoupment upon the occurrence of
specified events, in addition to any otherwise applicable vesting or performance
conditions of an Award. Such events may include, but shall not be limited to,
termination of Service for Cause or any act by a Participant, whether before or
after termination of Service, that would constitute Cause for termination of
Service.
(b) If the Company is required to prepare an accounting restatement due to
the material noncompliance of the Company, as a result of misconduct, with any
financial reporting requirement under the securities laws, any Participant who
knowingly or through gross negligence engaged in the misconduct, or who
knowingly or through gross negligence failed to prevent the misconduct, and any
Participant who is one of the individuals subject to automatic forfeiture under
Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company for
(i) the amount of any payment in settlement of an Award received by such
Participant during the twelve- (12-) month period following the first public
issuance or filing with the United States Securities and Exchange Commission
(whichever first occurred) of the financial document embodying such financial
reporting requirement, and (ii) any profits realized by such Participant from
the sale of securities of the Company during such twelve- (12-) month
period.
36
18.3 Provision of Information. Each Participant shall be given access to information concerning the
Company equivalent to that information generally made available to the Company’s
common stockholders.
18.4 Rights as Employee, Consultant or Director. No person, even though eligible pursuant to
Section 5, shall have a right to be selected as a Participant, or, having been
so selected, to be selected again as a Participant. Nothing in the Plan or any
Award granted under the Plan shall confer on any Participant a right to remain
an Employee, Consultant or Director or interfere with or limit in any way any
right of a Participating Company to terminate the Participant’s Service at any
time. To the extent that an Employee of a Participating Company other than the
Company receives an Award under the Plan, that Award shall in no event be
understood or interpreted to mean that the Company is the Employee’s employer or
that the Employee has an employment relationship with the Company.
18.5 Rights as a Stockholder. A Participant shall have no rights as a stockholder with respect to any
shares covered by an Award until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). No adjustment shall be made for
dividends, distributions or other rights for which the record date is prior to
the date such shares are issued, except as provided in Section 4.2 or another
provision of the Plan.
18.6 Delivery of Title to Shares. Subject to any governing rules or
regulations, the Company shall issue or cause to be issued the shares of Stock
acquired pursuant to an Award and shall deliver such shares to or for the
benefit of the Participant by means of one or more of the following: (a) by
delivering to the Participant evidence of book entry shares of Stock credited to
the account of the Participant, (b) by depositing such shares of Stock for the
benefit of the Participant with any broker with which the Participant has an
account relationship, or (c) by delivering such shares of Stock to the
Participant in certificate form.
18.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the
exercise or settlement of any Award.
18.8 Retirement and Welfare Plans. Neither Awards made under this Plan nor
shares of Stock or cash paid pursuant to such Awards may be included as
“compensation” for purposes of computing the benefits payable to any Participant
under any Participating Company’s retirement plans (both qualified and
non-qualified) or welfare benefit plans unless such other plan expressly
provides that such compensation shall be taken into account in computing a
Participant’s benefit.
18.9 Beneficiary Designation. Subject to local laws and procedures, each Participant may file with the
Company a written designation of a beneficiary who is to receive any benefit
under the Plan to which the Participant is entitled in the event of such
Participant’s death before he or she receives any or all of such benefit. Each
designation will revoke all prior designations by the same Participant, shall be
in a form prescribed by the Company, and will be effective only when filed by
the Participant in writing with the Company during the Participant’s lifetime.
If a married Participant designates a beneficiary other than the Participant’s
spouse, the effectiveness of such designation may be subject to the consent of
the Participant’s spouse. If a Participant dies without an effective designation
of a beneficiary who is living at the time of the Participant’s death, the
Company will pay any remaining unpaid benefits to the Participant’s legal
representative.
37
18.10 Severability. If
any one or more of the provisions (or any part thereof) of this Plan shall be
held invalid, illegal or unenforceable in any respect, such provision shall be
modified so as to make it valid, legal and enforceable, and the validity,
legality and enforceability of the remaining provisions (or any part thereof) of
the Plan shall not in any way be affected or impaired thereby.
18.11 No Constraint on Corporate Action. Nothing in this Plan shall be construed to:
(a) limit, impair, or otherwise affect the Company’s or another Participating
Company’s right or power to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell, or transfer all or any part of its
business or assets; or (b) limit the right or power of the Company or another
Participating Company to take any action which such entity deems to be necessary
or appropriate.
18.12 Unfunded Obligation. Participants shall have the status of general unsecured creditors of the
Company. Any amounts payable to Participants pursuant to the Plan shall be
considered unfunded and unsecured obligations for all purposes, including,
without limitation, Title I of the Employee Retirement Income Security Act of
1974. No Participating Company shall be required to segregate any monies from
its general funds, or to create any trusts, or establish any special accounts
with respect to such obligations. The Company shall retain at all times
beneficial ownership of any investments, including trust investments, which the
Company may make to fulfill its payment obligations hereunder. Any investments
or the creation or maintenance of any trust or any Participant account shall not
create or constitute a trust or fiduciary relationship between the Committee or
any Participating Company and a Participant, or otherwise create any vested or
beneficial interest in any Participant or the Participant’s creditors in any
assets of any Participating Company. The Participants shall have no claim
against any Participating Company for any changes in the value of any assets
which may be invested or reinvested by the Company with respect to the Plan.
18.13 Choice of Law. Except to the extent governed by applicable federal law, the validity,
interpretation, construction and performance of the Plan and each Award
Agreement shall be governed by the laws of the State of California, without
regard to its conflict of law rules
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing sets forth the Unify Corporation 2010 Stock Plan as duly
adopted by the Board on June 21, 2010.
|
/s/ Steven D. Bonham |
|
Corporate Secretary |
38
IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD ON SEPTEMBER 9, 2010: A complete set of proxy materials relating
to our annual meeting is available on the Internet. These materials,
consisting of the Notice of Annual Meeting, Proxy Statement, Proxy Card
and Annual Report, may be viewed at
www.proxyvote.com.
|
UNIFY CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby
appoints Steven Bonham and Lisa Waddell with full power of substitution to
represent the undersigned and to vote all the shares of the common stock of
Unify Corporation (the “Company”) which the undersigned is entitled to vote at
the 2010 Annual Meeting of Stockholders of the Company to be held at Unify
Corporation, 1420 Rocky Ridge Drive., Suite 380, Roseville, California 95661, on
September 9, 2010, at 9:00 a.m. Pacific time, and at any adjournment thereof:
(1) as hereinafter specified upon the proposals listed below and as more
particularly described in the Company’s Proxy Statement, and (2) in their
discretion, upon such other matters as may properly come before the meeting.
The undersigned hereby
acknowledges receipt of: (1) Notice of Annual Meeting of Stockholders of the
Company, (2) accompanying Proxy Statement, and (3) Annual Report of the Company
for the fiscal year ended April 30, 2010.
VOTE BY INTERNET -
www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time the day before the meeting date.
Have your proxy card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic voting
instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY
MATERIALS
If you would
like to reduce the costs incurred by our company in mailing proxy materials, you
can consent to receiving all future proxy statements, proxy cards and annual
reports electronically via e-mail or the Internet. To sign up for electronic
delivery, please follow the instructions above to vote using the Internet and,
when prompted, indicate that you agree to receive or access proxy materials
electronically in future years.
VOTE BY PHONE -
1-800-690-6903
Use any
touch-tone telephone to transmit your voting instructions up until 11:59 P.M.
Eastern Time the day before the meeting date. Have your proxy card in hand when
you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return
it in the postage-paid envelope.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS
The shares represented hereby shall be voted
as specified. If no specification is made, such shares
shall be voted FOR
proposals 1, 2, and 3.
1. |
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Election of the following
directors: |
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Nominees: |
Steven D. Whiteman |
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Timothy P.
Bacci |
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Robert M. Bozeman |
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Richard M. Brooks |
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Tery R. Larrew |
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Robert J. Majteles |
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Todd E.
Wille |
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o FOR |
o
WITHHELD |
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o |
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For all nominees
except as noted above |
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2. |
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To ratify the
appointment of Grant Thornton LLP as the Company’s independent auditors
for the fiscal year ending April 30, 2011. |
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o
FOR |
o
AGAINST
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o
ABSTAIN |
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3. |
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Approve the
adoption of the 2010 Stock Plan. |
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o
FOR |
o
AGAINST |
o ABSTAIN |
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With discretionary
authority, upon such other matters as may properly come before the Annual
Meeting. At this time, the Board knows of no other matters to be presented
at the meeting.
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o |
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MARK HERE FOR ADDRESS CHANGE AND NOTE
BELOW.
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o |
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MARK HERE IF YOU PLAN TO ATTEND THE ANNUAL
MEETING. |
Sign exactly as your
name(s) appears on your stock certificate. If shares of stock stand of record in
the names of two or more persons or in the name of husband and wife, whether as
joint tenants or otherwise, both or all of such persons should sign the Proxy.
If shares of stock are held of record by a corporation, the Proxy should be
executed by the President or Vice President and the Secretary or Assistant
Secretary, and the corporate seal should be affixed thereto. Executors or
administrators or other fiduciaries who execute the above Proxy for a deceased
stockholder should give their full title. Please date the Proxy.