Document:

Exhibit 4.3

 

ATHLON ENERGY INC.
 2013 INCENTIVE AWARD PLAN

 

ARTICLE 1.

 

PURPOSE

 

The purpose of the Athlon Energy Inc. 2013 Incentive Award Plan (as it may be amended or restated from time to time, the “Plan”) is to promote the success and enhance the value of Athlon Energy Inc. (the “Company”) by linking the individual interests of the members of the Board, Employees, and Consultants to those of Company stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to Company stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board, Employees, and Consultants upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent.

 

ARTICLE 2.

 

DEFINITIONS AND CONSTRUCTION

 

Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.

 

2.1              “Administrator” shall mean the entity that conducts the general administration of the Plan as provided in Article 11. With reference to the duties of the Committee under the Plan which have been delegated to one or more persons pursuant to Section 11.6, or as to which the Board has assumed, the term “Administrator” shall refer to such person(s) unless the Committee or the Board has revoked such delegation or the Board has terminated the assumption of such duties.

 

2.2              “Applicable Accounting Standards” shall mean Generally Accepted Accounting Principles in the United States, International Financial Reporting Standards or such other accounting principles or standards as may apply to the Company’s financial statements under United States federal securities laws from time to time.

 

2.3              “Applicable Law” shall mean any applicable law, including without limitation: (i) provisions of the Code, the Securities Act, the Exchange Act and any rules or regulations thereunder; (ii) corporate, securities, tax or other laws, statutes, rules, requirements or regulations, whether federal, state, local or foreign; and (iii) rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded.

 

2.4          “Automatic Exercise Date” shall mean, with respect to an Option or a Stock Appreciation Right, the last business day of the applicable Option Term or Stock Appreciation Right Term that was established by the Administrator for such Option or Stock Appreciation Right (e.g., the last business day prior to the tenth anniversary of the date of grant of such

 

 

Option or Stock Appreciation Right if the Option or Stock Appreciation Right initially had a ten-year Option Term or Stock Appreciation Right Term, as applicable); provided that with respect to an Option or Stock Appreciation Right that has been amended pursuant to this Plan so as to alter the applicable Option Term or Stock Appreciation Right Term, “Automatic Exercise Date” shall mean the last business day of the applicable Option Term or Stock Appreciation Right Term that was established by the Administrator for such Option or Stock Appreciation Right as amended.

 

2.5              “Award” shall mean an Option, a Restricted Stock award, a Restricted Stock Unit award, a Performance Award, a Dividend Equivalents award, a Stock Payment award or a Stock Appreciation Right, which may be awarded or granted under the Plan (collectively, “Awards”).

 

2.6              “Award Agreement” shall mean any written notice, agreement, terms and conditions, contract or other instrument or document evidencing an Award, including through electronic medium, which shall contain such terms and conditions with respect to an Award as the Administrator shall determine consistent with the Plan.

 

2.7              “Board” shall mean the Board of Directors of the Company.

 

2.8              “Change in Control” shall mean and includes each of the following:

 

(a)           A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, an employee benefit plan maintained by the Company or any of its Subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or

 

(b)           During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in Section 2.8(a) or Section 2.8(c)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

 

(c)           The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related

 

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transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:

 

(i)            which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and

 

(ii)           after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this Section 2.8(c)(ii) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or

 

(d)           The Company’s stockholders approve a liquidation or dissolution of the Company.

 

In addition, if a Change in Control constitutes a payment event with respect to any portion of an Award that provides for the deferral of compensation and is subject to Section 409A of the Code, the transaction or event described in subsection (a), (b), (c) or (d) with respect to such Award (or portion thereof) must also constitute a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5) to the extent required by Section 409A.  Notwithstanding the provisions of subsections (a), (b), (c) and (d) above, no event or occurrence shall constitute a Change in Control if such event or occurrence results in a Permitted Holder beneficially owning voting securities representing 50% or more of the combined voting power of the Company or its successor.

 

The Committee shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.

 

2.9          “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, together with the regulations and official guidance promulgated thereunder.

 

2.10            “Committee” shall mean the Compensation Committee of the Board, or another committee or subcommittee of the Board or the Compensation Committee, appointed as provided in Section 11.1.

 

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2.11            “Common Stock” shall mean the common stock of the Company, par value $0.01 per share.

 

2.12            “Company” shall have the meaning set forth in Article 1.

 

2.13            “Consultant” shall mean any consultant or adviser engaged to provide services to the Company or any Subsidiary that qualifies as a consultant under the applicable rules of the Securities and Exchange Commission for registration of shares on a Form S-8 Registration Statement.

 

2.14            “Director” shall mean a member of the Board, as constituted from time to time.

 

2.15            “Dividend Equivalent” shall mean a right to receive the equivalent value (in cash or Shares) of dividends paid on Shares, awarded under Section 8.2.

 

2.16            “DRO” shall mean a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended from time to time, or the rules thereunder.

 

2.17            “Effective Date” shall mean the day prior to the Public Trading Date.

 

2.18            “Eligible Individual” shall mean any person who is an Employee, a Consultant or a Non-Employee Director, as determined by the Committee.

 

2.19            “Employee” shall mean any officer or other employee (as determined in accordance with Section 3401(c) of the Code) of the Company or of any Subsidiary.

 

2.20            “Equity Restructuring” shall mean a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of Shares (or other securities of the Company) or the share price of Common Stock (or other securities) and causes a change in the per share value of the Common Stock underlying outstanding Awards.

 

2.21            “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

 

2.22            “Expiration Date” shall have the meaning given to such term in Section 12.1.

 

2.23            “Fair Market Value” shall mean, as of any given date, the value of a Share determined as follows:

 

(a)           If the Common Stock is listed on any (i) established securities exchange (such as the New York Stock Exchange, the NASDAQ Global Market and the NASDAQ Global Select Market), (ii) national market system or (iii) automated quotation system, its Fair Market Value shall be the closing sales price for a Share as quoted on such exchange or system for such date or, if there is no closing sales price for a Share on the date in question, the closing sales

 

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price for a Share on the last preceding date for which such quotation exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

 

(b)           If the Common Stock is not listed on an established securities exchange, national market system or automated quotation system, but the Common Stock is regularly quoted by a recognized securities dealer, its Fair Market Value shall be the mean of the high bid and low asked prices for such date or, if there are no high bid and low asked prices for a Share on such date, the high bid and low asked prices for a Share on the last preceding date for which such information exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

 

(c)           If the Common Stock is neither listed on an established securities exchange, national market system or automated quotation system nor regularly quoted by a recognized securities dealer, its Fair Market Value shall be established by the Administrator in good faith.

 

Notwithstanding the foregoing, with respect to any Award granted after the effectiveness of the Company’s registration statement relating to its initial public offering and prior to the Public Trading Date, the Fair Market Value shall mean the initial public offering price of a Share as set forth in the Company’s final prospectus relating to its initial public offering filed with the Securities and Exchange Commission.

 

2.24            “Greater Than 10% Stockholder” shall mean an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any subsidiary corporation (as defined in Section 424(f) of the Code) or parent corporation thereof (as defined in Section 424(e) of the Code).

 

2.25            “Holder” shall mean a person who has been granted an Award.

 

2.26            “Incentive Stock Option” shall mean an Option that is intended to qualify as an incentive stock option and conforms to the applicable provisions of Section 422 of the Code.

 

2.27            “Management Group” shall mean the group consisting of the directors, executive officers and other management personnel of the Company on the Effective Date, together with (1) any new directors whose election to the Board or whose nomination for election to the Board was approved by a vote of a majority of the members of the Board then still in office who were either directors on the Effective Date or whose election or nomination was previously so approved and (2) executive officers and other management personnel of the Company hired at a time when the directors on the Effective Date together with the directors so approved constituted a majority of the members of the Board.

 

2.28            “Non-Employee Director” shall mean a Director of the Company who is not an Employee.

 

2.29            “Non-Employee Director Equity Compensation Policy” shall have the meaning set forth in Section 4.5.

 

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2.30            “Non-Qualified Stock Option” shall mean an Option that is not an Incentive Stock Option.

 

2.31            “Option” shall mean a right to purchase Shares at a specified exercise price, granted under Article 5. An Option shall be either a Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that Options granted to Non-Employee Directors and Consultants shall only be Non-Qualified Stock Options.

 

2.32            “Option Term” shall have the meaning set forth in Section 5.6.

 

2.33            “Parent” shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities ending with the Company if each of the entities other than the Company beneficially owns, at the time of the determination, securities or interests representing at least fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.

 

2.34            “Performance Award” shall mean a cash bonus award, stock bonus award, performance award or other incentive award that is paid in cash, Shares or a combination of both, awarded under Section 8.1.

 

2.35            “Performance Criteria” shall mean the criteria (and adjustments) that the Committee selects for an Award for purposes of establishing the Performance Goal or Performance Goals for a Performance Period, determined as follows:

 

(a)           The Performance Criteria that shall be used to establish Performance Goals may include but are not limited to: (i) net earnings (either before or after one or more of (A) interest, (B) taxes, (C) depreciation and (D) amortization); (ii) gross or net sales or revenue; (iii) net income (either before or after taxes); (iv) adjusted net income; (v) operating earnings or profit or one or more operating ratios; (vi) cash flow (including, but not limited to, operating cash flow and free cash flow); (vii) return on assets; (viii) return on capital; (ix) return on stockholders’ equity; (x) stock price or total stockholder return; (xi) return on sales; (xii) gross or net profit or operating margin; (xiii) costs; (xiv) expenses; (xv) working capital; (xvi) earnings per share; (xvii) adjusted earnings per share; (xviii) price per share; (xix) regulatory body approval for commercialization of a product; (xx) implementation, completion or attainment of objectives relating to research, development, regulatory, commercial, or strategic milestones or developments; (xxi) market share; (xxii) economic value; (xxiii) revenue, (xxiv) revenue growth, (xxv) capital expenditures, (xxvi) net borrowing, debt leverage levels, credit quality or debt ratings, (xxvii) the accomplishment of mergers, acquisitions, dispositions, joint ventures, public or private offerings or other financial transactions or similar extraordinary business transactions, (xxviii) net asset value per share, (xxix) economic value added, (xxx) individual business objectives, (xxxi) growth in production, (xxxii) added reserves, (xxxiii) growth in reserves per share, (xxxiv) inventory growth, (xxxv) environmental, health and safety performance, (xxxvi) effectiveness of hedging programs, (xxxvii) improvements in internal controls and policies and procedures, and (xxxviii) retention and recruitment of employees, any of which may be measured either in absolute terms or as compared to any incremental increase or decrease or as compared to results of a peer group or to market performance indicators or indices.

 

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(b)           The Administrator, in its discretion, may adjust the Performance Criteria for any Performance Period for such factors as the Administrator may determine, including, without limitation, in recognition of unusual or non-recurring events affecting the Company or changes in Applicable Law or Applicable Accounting Standards.

 

2.36            “Performance Goals” shall mean, for a Performance Period, one or more goals established in writing by the Administrator for the Performance Period based upon one or more Performance Criteria. Depending on the Performance Criteria used to establish Performance Goals, Performance Goals may be expressed in terms of overall Company performance or the performance of a Subsidiary, division, business unit, or an individual. The achievement of each Performance Goal shall be determined, to the extent applicable, with reference to Applicable Accounting Standards.

 

2.37            “Performance Period” shall mean one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Holder’s right to, and the payment of, an Award.

 

2.38            “Performance Stock Unit” shall mean a Performance Award awarded under Section 8.1 which is denominated in units of value including dollar value of Shares.

 

2.39            “Permitted Holder” shall mean each of (i) the Sponsors, (ii) the Management Group, (iii) any person that has no material assets other than the capital stock of the Company and, directly or indirectly, holds or acquires 100% of the total voting power of the voting stock of the Company, and of which no other person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), other than any of the other Permitted Holders specified in clauses (i) and (ii) above, holds more than 50% of the total voting power of the voting stock thereof and (iv) any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) the members of which include any of the Permitted Holders specified in clauses (i) and (ii) above and that, directly or indirectly, hold or acquire beneficial ownership of the voting stock of the Company (a “Permitted Holder Group”), so long as (1) each member of the Permitted Holder Group has voting rights proportional to the percentage of ownership interests held or acquired by such member and (2) no person or other ‘‘group’’ (other than Permitted Holders specified in clauses (i) and (ii) above) beneficially owns more than 50% on a fully diluted basis of the voting stock held by the Permitted Holder Group.

 

2.40            “Permitted Transferee” shall mean, with respect to a Holder, any “family member” of the Holder, as defined in the instructions to use the Form S-8 Registration Statement under the Securities Act, or any other transferee specifically approved by the Administrator after taking into account Applicable Law.

 

2.41            “Plan” shall have the meaning set forth in Article 1.

 

2.42            “Public Trading Date” shall mean the first date upon which Common Stock is listed (or approved for listing) upon notice of issuance on any securities exchange or designated

 

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(or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system.

 

2.43            “Restricted Stock” shall mean Common Stock awarded under Article 6 that is subject to certain restrictions and may be subject to risk of forfeiture or repurchase.

 

2.44            “Restricted Stock Unit” shall mean the right to receive Shares awarded under Article 7.

 

2.45            “Securities Act” shall mean the Securities Act of 1933, as amended.

 

2.46            “Shares” shall mean shares of Common Stock.

 

2.47            “Sponsors” shall mean (i) the Apollo Investment Fund VII, L.P. and its parallel funds, Apollo Global Management, LLC and any of their respective affiliates other than any portfolio companies (collectively, the “Equity Investor”) and (ii) any person that forms a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) with the Equity Investor; provided that the Equity Investor (x) owns a majority of the voting power and (y) controls a majority of the Board.

 

2.48            “Stock Appreciation Right” shall mean a stock appreciation right granted under Article 9.

 

2.49            “Stock Appreciation Right Term” shall have the meaning set forth in Section 9.4.

 

2.50            “Stock Payment” shall mean (a) a payment in the form of Shares, or (b) an option or other right to purchase Shares, as part of a bonus, deferred compensation or other arrangement, awarded under Section 8.3.

 

2.51            “Subsidiary” shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least 50% of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.

 

2.52            “Substitute Award” shall mean an Award granted under the Plan upon the assumption of, or in substitution for, outstanding equity awards granted by a company or other entity in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock; provided, however, that in no event shall the term “Substitute Award” be construed to refer to an award made in connection with the cancellation and repricing of an Option or Stock Appreciation Right.

 

2.53            “Termination of Service” shall mean:

 

(a)           As to a Consultant, the time when the engagement of a Holder as a Consultant to the Company or a Subsidiary is terminated for any reason, with or without cause, including, without limitation, by resignation, discharge, death, disability or retirement, but

 

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excluding terminations where the Consultant simultaneously commences or remains in employment or service with the Company or any Subsidiary.

 

(b)           As to a Non-Employee Director, the time when a Holder who is a Non-Employee Director ceases to be a Director for any reason, including, without limitation, a termination by resignation, failure to be elected, death, disability or retirement, but excluding terminations where the Holder simultaneously commences or remains in employment or service with the Company or any Subsidiary.

 

(c)           As to an Employee, the time when the employee-employer relationship between a Holder and the Company or any Subsidiary is terminated for any reason, including, without limitation, a termination by resignation, discharge, death, disability or retirement; but excluding terminations where the Holder simultaneously commences or remains in employment or service with the Company or any Subsidiary.

 

The Administrator, in its discretion, shall determine the effect of all matters and questions relating to any Termination of Service, including, without limitation, the question of whether a Termination of Service resulted from a discharge for cause and all questions of whether particular leaves of absence constitute a Termination of Service; provided, however, that, with respect to Incentive Stock Options, unless the Administrator otherwise provides in the terms of the Award Agreement or otherwise, or as otherwise required by Applicable Law, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Service only if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code. For purposes of the Plan, a Holder’s employee-employer relationship or consultancy relations shall be deemed to be terminated in the event that the Subsidiary employing or contracting with such Holder ceases to remain an Subsidiary following any merger, sale of stock or other corporate transaction or event (including, without limitation, a spin-off).

 

ARTICLE 3.

 

SHARES SUBJECT TO THE PLAN

 

3.1          Number of Shares.

 

(a)           Subject to Sections 3.1(b) and 12.2, the aggregate number of Shares which may be issued or transferred pursuant to Awards under the Plan is the sum of: (i) 8,400,000, and (ii) an annual increase on the first day of each calendar year beginning January 1, 2014 and ending on and including the last January 1 prior to the Expiration Date, equal to the lesser of (A) 12,000,000 Shares, (B) 4% of the Shares outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year and (C) such smaller number of Shares as determined by the Board; provided, however, no more than 8,400,000 Shares may be issued upon the exercise of Incentive Stock Options.

 

(b)           To the extent all or a portion of an Award is forfeited, expires, lapses for any reason, or is settled for cash without the delivery of Shares to the Holder, any Shares subject

 

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to such Award or portion thereof shall, to the extent of such forfeiture, expiration, lapse or cash settlement, again be available for the grant of an Award under the Plan. Any Shares repurchased by or surrendered to the Company under Section 6.4 so that such Shares are returned to the Company shall again be available for the grant of an Award under the Plan. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not be counted against the Shares available for issuance under the Plan. Notwithstanding the provisions of this Section 3.1(b), no Shares may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code.

 

(c)           To the extent permitted by Applicable Law, Substitute Awards shall not reduce the Shares authorized for grant under the Plan.

 

3.2              Stock Distributed. Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Common Stock, treasury Common Stock or Common Stock purchased on the open market.

 

3.3              Limitation on Awards to Non-Employee Directors. Notwithstanding any provision in the Plan to the contrary, and subject to Section 12.2, for any one year no Non-Employee Director shall be granted Awards that have a grant date fair value, as determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto, in excess of $700,000.

 

ARTICLE 4.

 

GRANTING OF AWARDS

 

4.1              Participation. The Administrator may, from time to time, select from among all Eligible Individuals, those to whom an Award shall be granted and shall determine the nature and amount of each Award, which shall not be inconsistent with the requirements of the Plan. Except as provided in Section 4.5 regarding the grant of Awards pursuant to the Non-Employee Director Equity Compensation Policy, no Eligible Individual shall have any right to be granted an Award pursuant to the Plan.

 

4.2              Award Agreement. Each Award shall be evidenced by an Award Agreement that sets forth the terms, conditions and limitations for such Award, which may include the term of the Award, the provisions applicable in the event of the Holder’s Termination of Service, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code.

 

4.3              Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange Act and any amendments thereto) that are requirements for the application of such exemptive rule. To the extent permitted by Applicable Law, the Plan and Awards granted or

 

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awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

 

4.4              At-Will Employment; Voluntary Participation. Nothing in the Plan or Award Agreement shall confer upon any Holder any right to continue in the employ of, or as a Director or Consultant for, the Company or any Subsidiary, or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which rights are hereby expressly reserved, to discharge any Holder at any time for any reason whatsoever, with or without cause, and with or without notice, or to terminate or change all other terms and conditions of employment or engagement, except to the extent expressly provided otherwise in a written agreement between the Holder and the Company or any Subsidiary. Participation by each Holder in the Plan shall be voluntary and nothing in the Plan shall be construed as mandating that any Eligible Individual shall participate in the Plan.

 

4.5              Non-Employee Director Awards. The Administrator, in its discretion, may provide that Awards granted to Non-Employee Directors shall be granted pursuant to a written nondiscretionary formula established by the Administrator (the “Non-Employee Director Equity Compensation Policy”), subject to the limitations of the Plan. The Non-Employee Director Equity Compensation Policy shall set forth the type of Award(s) to be granted to Non-Employee Directors, the number of Shares to be subject to Non-Employee Director Awards, the conditions on which such Awards shall be granted, become exercisable and/or payable and expire, and such other terms and conditions as the Administrator shall determine in its discretion. The Non-Employee Director Equity Compensation Policy may be modified by the Administrator from time to time in its discretion.

 

4.6              Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the discretion of the Administrator, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.

 

ARTICLE 5.

 

OPTIONS

 

5.1              Granting of Options to Eligible Individuals. The Administrator is authorized to grant Options to Eligible Individuals from time to time, in its discretion, on such terms and conditions as it may determine, which shall not be inconsistent with the Plan.

 

5.2              Option Exercise Price. The exercise price per Share subject to each Option shall be set by the Administrator, but shall not be less than 100% of the Fair Market Value of a Share on the date the Option is granted (or, as to Incentive Stock Options, on the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code) unless otherwise determined by the Administrator. In addition, in the case of Incentive Stock Options granted to a Greater Than 10% Stockholder, such price shall not be less than 110% of the Fair Market Value of a Share on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code).

 

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5.3              Option Vesting.

 

(a)           The period during which the right to exercise, in whole or in part, an Option vests in the Holder shall be set by the Administrator and the Administrator may determine that an Option may not be exercised in whole or in part for a specified period after it is granted. Such vesting may be based on service with the Company or any Subsidiary or any other criteria selected by the Administrator, including Performance Goals or Performance Criteria. At any time after the grant of an Option, the Administrator, in its discretion and subject to whatever terms and conditions it selects, may accelerate the period during which an Option vests.

 

(b)           No portion of an Option which is unexercisable at a Holder’s Termination of Service shall thereafter become exercisable, except as may be otherwise provided by the Administrator either in the Award Agreement evidencing the grant of an Option or by action of the Administrator following the grant of the Option. Unless otherwise determined by the Administrator in the Award Agreement or by action of the Administrator following the grant of the Option, the portion of an Option that is unexercisable at a Holder’s Termination of Service shall automatically expire thirty (30) days following such Termination of Service.

 

5.4              Manner of Exercise.  All or a portion of an exercisable Option shall be deemed exercised upon delivery of all of the following to the Secretary of the Company, the stock administrator of the Company or such other person or entity designated by the Administrator, or his, her or its office, as applicable:

 

(a)           A written or electronic notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof, is exercised. The notice shall be signed by the Holder or other person then entitled to exercise the Option or such portion of the Option.

 

(b)           Such representations and documents as the Administrator, in its discretion, deems necessary or advisable to effect compliance with Applicable Law.  The Administrator may, in its discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars.

 

(c)           In the event that the Option shall be exercised by any person or persons other than the Holder, appropriate proof of the right of such person or persons to exercise the Option, as determined in the discretion of the Administrator.

 

(d)           Full payment of the exercise price and applicable withholding taxes for the shares with respect to which the Option, or portion thereof, is exercised, in a manner permitted by Section 10.1 and Section 10.2.

 

5.5              Partial Exercise. An exercisable Option may be exercised in whole or in part. However, an Option shall not be exercisable with respect to fractional Shares unless otherwise determined by the Administrator and the Administrator may require that, by the terms of the Option, a partial exercise must be with respect to a minimum number of shares.

 

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5.6              Option Term.  The term of each Option (the “Option Term”) shall be set by the Administrator in its discretion; provided, however, that the Option Term shall not be more than ten (10) years from the date the Option is granted, or five (5) years from the date an Incentive Stock Option is granted to a Greater Than 10% Stockholder.  The Administrator shall determine the time period, including the time period following a Termination of Service, during which the Holder has the right to exercise the vested Options, which time period may not extend beyond the last day of the Option Term.  Except as limited by the requirements of Section 409A of the Code or the first sentence of this Section 5.6, the Administrator may extend the Option Term of any outstanding Option, and may extend the time period during which vested Options may be exercised, in connection with any Termination of Service of the Holder, and may amend, subject to Section 12.1, any other term or condition of such Option relating to such a Termination of Service.

 

5.7              Expiration of Option Term: Automatic Exercise of In-The-Money Options. Unless otherwise provided by the Administrator (in an Award Agreement or otherwise) or as otherwise directed by an Option Holder in writing to the Company, each Option outstanding on the Automatic Exercise Date with an exercise price per share that is less than the Fair Market Value per share of Common Stock as of such date shall automatically and without further action by the Option Holder or the Company be exercised on the Automatic Exercise Date. In the discretion of the Administrator, payment of the exercise price of any such Option shall be made pursuant to Section 10.1(b) or Section 10.1(c) and the Company or any Subsidiary shall deduct or withhold an amount sufficient to satisfy all taxes associated with such exercise in accordance with Section 10.2. Unless otherwise determined by the Administrator, this Section 5.7 shall not apply to an Option if the Holder of such Option incurs a Termination of Service on or before the Automatic Exercise Date. For the avoidance of doubt, no Option with an exercise price per share that is equal to or greater than the Fair Market Value per share of Common Stock on the Automatic Exercise Date shall be exercised pursuant to this Section 5.7.

 

5.8              Notification Regarding Disposition. The Holder shall give the Company prompt written or electronic notice of any disposition of Shares acquired by exercise of an Incentive Stock Option which occurs within (a) two years from the date of granting (including the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code) such Option to such Holder, or (b) one year after the transfer of such Shares to such Holder.

 

ARTICLE 6.

 

RESTRICTED STOCK

 

6.1          Award of Restricted Stock.

 

(a)           The Administrator is authorized to grant Restricted Stock to Eligible Individuals, and shall determine the terms and conditions, including the restrictions applicable to each award of Restricted Stock, which terms and conditions shall not be inconsistent with the Plan, and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate.

 

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(b)           The Administrator shall establish the purchase price, if any, and form of payment for Restricted Stock; provided, however, that if a purchase price is charged, such purchase price shall be no less than the par value, if any, of the Shares to be purchased, unless otherwise permitted by Applicable Law. In all cases, legal consideration shall be required for each issuance of Restricted Stock.

 

6.2              Rights as Stockholders. Subject to Section 6.4, upon issuance of Restricted Stock, the Holder shall have, unless otherwise provided by the Administrator, all the rights of a stockholder with respect to said Shares, subject to the restrictions in each individual Award Agreement, including the right to receive all dividends and other distributions paid or made with respect to the Shares; provided, however, that, in the discretion of the Administrator, any extraordinary distributions with respect to the Shares shall be subject to the restrictions set forth in Section 6.3.

 

6.3              Restrictions. All shares of Restricted Stock (including any shares received by Holders thereof with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, in the terms of each individual Award Agreement, be subject to such restrictions and vesting requirements as the Administrator shall provide. Such restrictions may include, without limitation, restrictions concerning voting rights and transferability and such restrictions may lapse separately or in combination at such times and pursuant to such circumstances or based on such criteria as selected by the Administrator, including, without limitation, criteria based on the Holder’s duration of employment, directorship or consultancy with the Company, Performance Goals, Performance Criteria, Company performance, individual performance or other criteria selected by the Administrator. By action taken after the Restricted Stock is issued, the Administrator may, on such terms and conditions as it may determine to be appropriate, accelerate the vesting of such Restricted Stock by removing any or all of the restrictions imposed by the terms of the applicable Award Agreement. Unless otherwise determined by the Administrator, Restricted Stock may not be sold or encumbered until all restrictions are terminated or expire.

 

6.4              Repurchase or Forfeiture of Restricted Stock. Except as otherwise determined by the Administrator at the time of the grant of the Award or thereafter, (a) if no price was paid by the Holder for the Restricted Stock, upon a Termination of Service during the applicable restriction period, the Holder’s rights in unvested Restricted Stock then subject to restrictions shall lapse, and such Restricted Stock shall be surrendered to the Company and cancelled without consideration, and (b) if a price was paid by the Holder for the Restricted Stock, upon a Termination of Service during the applicable restriction period, the Company shall have the right to repurchase from the Holder the unvested Restricted Stock then subject to restrictions at a cash price per share equal to the price paid by the Holder for such Restricted Stock or such other amount as may be specified in the applicable Award Agreement.

 

6.5              Certificates for Restricted Stock. Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Administrator shall determine. Certificates or book entries evidencing shares of Restricted Stock shall include an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock. The Company, in its discretion, may (a) retain physical possession of any stock certificate evidencing shares of Restricted Stock until the restrictions thereon shall have lapsed and/or (b) require that the stock

 

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certificates evidencing shares of Restricted Stock be held in custody by a designated escrow agent (which may but need not be the Company) until the restrictions thereon shall have lapsed and that the Holder deliver a stock power, endorsed in blank, relating to such Restricted Stock.

 

6.6              Section 83(b) Election. If a Holder makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Holder would otherwise be taxable under Section 83(a) of the Code, the Holder shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service.

 

ARTICLE 7.

 

RESTRICTED STOCK UNITS

 

7.1              Grant of Restricted Stock Units. The Administrator is authorized to grant Awards of Restricted Stock Units to any Eligible Individual selected by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator.

 

7.2              Purchase Price. The Administrator shall specify the purchase price, if any, to be paid by the Holder to the Company with respect to any Restricted Stock Unit award; provided, however, that value of the consideration shall not be less than the par value of a Share, unless otherwise permitted by Applicable Law.

 

7.3              Vesting of Restricted Stock Units. At the time of grant, the Administrator shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate, including, without limitation, vesting based upon the Holder’s duration of service to the Company or any Subsidiary, Company performance, individual performance or other specific criteria, in each case on a specified date or dates or over any period or periods, as determined by the Administrator.

 

7.4              Maturity and Payment. At the time of grant, the Administrator shall specify the maturity date applicable to each grant of Restricted Stock Units, which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the Holder (if permitted by the applicable Award Agreement); provided that, except as otherwise set forth in an applicable Award Agreement, the maturity date relating to each Restricted Stock Unit shall not occur following the later of (a) the 15th day of the third month following the end of the calendar year in which the applicable portion of the Restricted Stock Unit vests; or (b) the 15th day of the third month following the end of the Company’s fiscal year in which the applicable portion of the Restricted Stock Unit vests. On the maturity date, the Company shall, subject to Section 10.4, transfer to the Holder one unrestricted, fully transferable Share for each Restricted Stock Unit scheduled to be paid out on such date and not previously forfeited, or in the discretion of the Administrator, an amount in cash equal to the Fair Market Value of such Shares on the maturity date or a combination of cash and Common Stock as determined by the Administrator.

 

7.5              No Rights as a Stockholder. Unless otherwise determined by the Administrator, a Holder of Restricted Stock Units shall possess no incidents of ownership with respect to the

 

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Shares represented by such Restricted Stock Units, unless and until such Shares are transferred to the Holder pursuant to the terms of this Plan and the Award Agreement.

 

ARTICLE 8.

 

PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, STOCK PAYMENTS

 

8.1              Performance Awards. The Administrator is authorized to grant Performance Awards, including Awards of Performance Stock Units and other Awards determined in the Administrator’s discretion from time to time, to any Eligible Individual. The value of Performance Awards, including Performance Stock Units, may be linked to the attainment of the Performance Goals or other specific criteria, whether or not objective, determined by the Administrator, in each case on a specified date or dates or over any period or periods and in such amounts as may be determined by the Administrator.

 

8.2              Dividend Equivalents.

 

(a)           Dividend Equivalents may be granted by the Administrator based on dividends declared on the Common Stock, to be credited as of dividend payment dates with respect to dividends with record dates that occur during the period between the date an Award is granted to a Holder and the date such Award vests, is exercised, is distributed or expires, as determined by the Administrator. Such Dividend Equivalents shall be converted to cash or additional Shares by such formula and at such time and subject to such restrictions and limitations as may be determined by the Administrator.

 

8.3              Stock Payments. The Administrator is authorized to make Stock Payments to any Eligible Individual. The number or value of Shares of any Stock Payment shall be determined by the Administrator and may be based upon one or more Performance Goals or any other specific criteria, including service to the Company or any Subsidiary, determined by the Administrator. Shares underlying a Stock Payment which is subject to a vesting schedule or other conditions or criteria set by the Administrator shall not be issued until those conditions have been satisfied. Unless otherwise provided by the Administrator, a Holder of a Stock Payment shall have no rights as a Company stockholder with respect to such Stock Payment until such time as the Stock Payment has vested and the Shares underlying the Award have been issued to the Holder. Stock Payments may, but are not required to, be made in lieu of base salary, bonus, fees or other cash compensation otherwise payable to such Eligible Individual.

 

8.4              Purchase Price. The Administrator may establish the purchase price of a Performance Award or Shares distributed as a Stock Payment award; provided, however, that value of the consideration shall not be less than the par value of a Share, unless otherwise permitted by Applicable Law.

 

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ARTICLE 9.

 

STOCK APPRECIATION RIGHTS

 

9.1              Grant of Stock Appreciation Rights.

 

(a)           The Administrator is authorized to grant Stock Appreciation Rights to Eligible Individuals from time to time, in its discretion, on such terms and conditions as it may determine, which shall not be inconsistent with the Plan.

 

(b)           A Stock Appreciation Right shall entitle the Holder (or other person entitled to exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per share of the Stock Appreciation Right from the Fair Market Value on the date of exercise of the Stock Appreciation Right by the number of Shares with respect to which the Stock Appreciation Right shall have been exercised, subject to any limitations the Administrator may impose. Unless otherwise determined by the Administrator, the exercise price per Share subject to each Stock Appreciation Right shall be set by the Administrator, but shall not be less than 100% of the Fair Market Value on the date the Stock Appreciation Right is granted.

 

9.2              Stock Appreciation Right Vesting.

 

(a)           The period during which the right to exercise, in whole or in part, a Stock Appreciation Right vests in the Holder shall be set by the Administrator, and the Administrator may determine that a Stock Appreciation Right may not be exercised in whole or in part for a specified period after it is granted. Such vesting may be based on service with the Company or any Subsidiary, Performance Criteria, Performance Goals or any other criteria selected by the Administrator. At any time after grant of a Stock Appreciation Right, the Administrator, in its discretion and subject to whatever terms and conditions it selects, may accelerate the period during which a Stock Appreciation Right vests.

 

(b)           No portion of a Stock Appreciation Right which is unexercisable at a Holder’s Termination of Service shall thereafter become exercisable, except as may be otherwise provided by the Administrator in an Award Agreement or by action of the Administrator following the grant of the Stock Appreciation Right. Unless otherwise determined by the Administrator in the Award Agreement or by action of the Administrator following the grant of the Stock Appreciation Right, the portion of a Stock Appreciation Right which is unexercisable at a Holder’s Termination of Service shall automatically expire thirty (30) days following such Termination of Service.

 

9.3              Manner of Exercise. All or a portion of an exercisable Stock Appreciation Right shall be deemed exercised upon delivery of all of the following to the Secretary of the Company, the stock administrator of the Company, or such other person or entity designated by the Administrator, or his, her or its office, as applicable:

 

(a)           A written or electronic notice complying with the applicable rules established by the Administrator stating that the Stock Appreciation Right, or a portion thereof, is exercised. The notice shall be signed by the Holder or other person then entitled to exercise the Stock Appreciation Right or such portion of the Stock Appreciation Right.

 

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(b)           Such representations and documents as the Administrator, in its discretion, deems necessary or advisable to effect compliance with Applicable Law. The Administrator, in its discretion, may also take whatever additional actions it deems appropriate to effect such compliance, including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars.

 

(c)           In the event that the Stock Appreciation Right shall be exercised by any person or persons other than the Holder, appropriate proof of the right of such person or persons to exercise the Stock Appreciation Right, as determined in the discretion of the Administrator.

 

(d)           Full payment of the exercise price and applicable withholding taxes for the Shares with respect to which the Stock Appreciation Right, or portion thereof, is exercised, in a manner permitted by Section 10.1 and Section 10.2.

 

9.4              Stock Appreciation Right Term. The term of each Stock Appreciation Right (the “Stock Appreciation Right Term”) shall be set by the Administrator in its discretion; provided, however, that the Stock Appreciation Right Term shall not be more than ten (10) years from the date the Stock Appreciation Right is granted. The Administrator shall determine the time period, including the time period following a Termination of Service, during which the Holder has the right to exercise the vested Stock Appreciation Rights, which time period may not extend beyond the last day of the Stock Appreciation Right Term applicable to such Stock Appreciation Right. Except as limited by the requirements of Section 409A of the Code or the first sentence of this Section 9.4, the Administrator may extend the Stock Appreciation Right Term of any outstanding Stock Appreciation Right, and may extend the time period during which vested Stock Appreciation Rights may be exercised, in connection with any Termination of Service of the Holder, and may amend, subject to Section 14.1, any other term or condition of such Stock Appreciation Right relating to such a Termination of Service.

 

9.5              Payment. Payment of the amounts payable with respect to Stock Appreciation Rights pursuant to this Article 9 shall be in cash, Shares (based on Fair Market Value as of the date the Stock Appreciation Right is exercised), or a combination of both, as determined by the Administrator.

 

9.6              Expiration of Stock Appreciation Right Term: Automatic Exercise of In-The-Money Stock Appreciation Rights. Unless otherwise provided by the Administrator (in an Award Agreement or otherwise) or as otherwise directed by a Stock Appreciation Right Holder in writing to the Company, each Stock Appreciation Right outstanding on the Automatic Exercise Date with an exercise price per share that is less than the Fair Market Value per share of Common Stock as of such date shall automatically and without further action by the Stock Appreciation Right Holder or the Company be exercised on the Automatic Exercise Date. In the discretion of the Administrator, the Company or any Subsidiary shall deduct or withhold an amount sufficient to satisfy all taxes associated with such exercise in accordance with Section 10.2. Unless otherwise determined by the Administrator, this Section 9.6 shall not apply to a Stock Appreciation Right if the Holder of such Stock Appreciation Right incurs a Termination of Service on or before the Automatic Exercise Date. For the avoidance of doubt, no Stock Appreciation Right with an exercise price per share that is equal to or greater than the Fair

 

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Market Value per share of Common Stock on the Automatic Exercise Date shall be exercised pursuant to this Section 9.6.

 

ARTICLE 10.

 

ADDITIONAL TERMS OF AWARDS

 

10.1            Payment. The Administrator shall determine the methods by which payments by any Holder with respect to any Awards granted under the Plan shall be made, including, without limitation: (a) cash or check, (b) Shares (including, in the case of payment of the exercise price of an Award, Shares issuable pursuant to the exercise of the Award) held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences, in each case, having a Fair Market Value on the date of delivery equal to the aggregate payments required, (c) delivery of a written or electronic notice that the Holder has placed a market sell order with a broker acceptable to the Company with respect to Shares then issuable upon exercise or vesting of an Award, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate payments required; provided that payment of such proceeds is then made to the Company upon settlement of such sale, or (d) any other form of legal consideration acceptable to the Administrator in its discretion. The Administrator shall also determine the methods by which Shares shall be delivered or deemed to be delivered to Holders. Notwithstanding any other provision of the Plan to the contrary, no Holder who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any extension of credit with respect to such payment, with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.

 

10.2            Tax Withholding. The Company or any Subsidiary shall have the authority and the right to deduct or withhold, or require a Holder to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Holder’s FICA, employment tax or other social security contribution obligation) required by law to be withheld with respect to any taxable event concerning a Holder arising as a result of the Plan. The Administrator, in its discretion and in satisfaction of the foregoing requirement, may withhold, or allow a Holder to elect to have the Company withhold, Shares otherwise issuable under an Award (or allow the surrender of Shares). Unless otherwise determined by the Administrator, the number of Shares which may be so withheld or surrendered shall be limited to the number of Shares which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income. The Administrator shall determine the fair market value of the Shares, consistent with applicable provisions of the Code, for tax withholding obligations due in connection with a broker-assisted cashless Option or Stock Appreciation Right exercise involving the sale of Shares to pay the Option or Stock Appreciation Right exercise price or any tax withholding obligation.

 

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10.3            Transferability of Awards.

 

(a)           Except as otherwise provided in Section 10.3(b):

 

(i)            No Award under the Plan may be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a DRO, unless and until such Award has been exercised, or the Shares underlying such Award have been issued, and all restrictions applicable to such Shares have lapsed;

 

(ii)           No Award or interest or right therein shall be liable for the debts, contracts or engagements of the Holder or the Holder’s successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by Section 10.3(a)(i); and

 

(iii)          During the lifetime of the Holder, only the Holder may exercise an Award (or any portion thereof) granted to such Holder under the Plan, unless it has been disposed of pursuant to a DRO; after the death of the Holder, any exercisable portion of an Award may, prior to the time when such portion becomes unexercisable under the Plan or the Award Agreement, be exercised by the Holder’s personal representative or by any person empowered to do so under the deceased Holder’s will or under the then-applicable laws of descent and distribution.

 

(b)           Notwithstanding Section 10.3(a), the Administrator, in its discretion, may determine to permit a Holder to transfer an Award other than an Incentive Stock Option to any one or more Permitted Transferees, subject to the following terms and conditions: (i) an Award transferred to a Permitted Transferee shall not be assignable or transferable by the Permitted Transferee other than by will or the laws of descent and distribution; (ii) an Award transferred to a Permitted Transferee shall continue to be subject to all the terms and conditions of the Award as applicable to the original Holder (other than the ability to further transfer the Award); and (iii) the Holder and the Permitted Transferee shall execute any and all documents requested by the Administrator, including, without limitation documents to (A) confirm the status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer under Applicable Law and (C) evidence the transfer.

 

(c)           Notwithstanding Section 10.3(a), a Holder may, in the manner determined by the Administrator, designate a beneficiary to exercise the rights of the Holder and to receive any distribution with respect to any Award upon the Holder’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Holder, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Administrator. If the Holder is married or a domestic partner in a domestic partnership qualified under Applicable Law and resides in a community property state, a designation of a person other than the Holder’s spouse or domestic

 

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partner, as applicable, as the Holder’s beneficiary with respect to more than 50% of the Holder’s interest in the Award shall not be effective without the prior written or electronic consent of the Holder’s spouse or domestic partner. If no beneficiary has been designated or survives the Holder, payment shall be made to the person entitled thereto pursuant to the Holder’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Holder at any time; provided that the change or revocation is filed with the Administrator prior to the Holder’s death.

 

10.4            Conditions to Issuance of Shares.

 

(a)           Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates or make any book entries evidencing Shares issuable pursuant to any Award, unless and until the Board or the Committee has determined, with advice of counsel, that the issuance of such Shares is in compliance with Applicable Law and the Shares are covered by an effective registration statement or applicable exemption from registration. In addition to the terms and conditions provided herein, the Board or the Committee may require that a Holder make such reasonable covenants, agreements and representations as the Board or the Committee, in its discretion, deems advisable in order to comply with Applicable Law.

 

(b)           All Share certificates delivered pursuant to the Plan and all Shares issued pursuant to book entry procedures are subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with Applicable Law. The Administrator may place legends on any Share certificate or book entry to reference restrictions applicable to the Shares.

 

(c)           The Administrator shall have the right to require any Holder to comply with any timing or other restrictions with respect to the settlement, distribution or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Administrator.

 

(d)           No fractional Shares shall be issued and the Administrator, in its discretion, shall determine whether cash shall be given in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding down.

 

(e)           Notwithstanding any other provision of the Plan, unless otherwise determined by the Administrator or required by Applicable Law, the Company shall not deliver to any Holder certificates evidencing Shares issued in connection with any Award and instead such Shares shall be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).

 

10.5            Forfeiture and Claw-Back Provisions. Pursuant to its general authority to determine the terms and conditions applicable to Awards under the Plan, the Administrator shall have the right to provide, in an Award Agreement or otherwise, or to require a Holder to agree by separate written or electronic instrument, that:

 

(a)           (i) Any proceeds, gains or other economic benefit actually or constructively received by the Holder upon any receipt or exercise of the Award, or upon the

 

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receipt or resale of any Shares underlying the Award, shall be paid to the Company, and (ii) the Award shall terminate and any unexercised portion of the Award (whether or not vested) shall be forfeited, if (x) a Termination of Service occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, or (y) the Holder at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Administrator or (z) the Holder incurs a Termination of Service for “cause” (as such term is defined in the discretion of the Administrator, or as set forth in a written agreement relating to such Award between the Company and the Holder); and

 

(b)           All Awards (including any proceeds, gains or other economic benefit actually or constructively received by the Holder upon any receipt or exercise of any Award or upon the receipt or resale of any Shares underlying the Award) shall be subject to the provisions of any claw-back policy implemented by the Company, including, without limitation, any claw-back policy adopted to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, to the extent set forth in such claw-back policy and/or in the applicable Award Agreement.

 

10.6            Repricing. Subject to Section 12.2, the Administrator shall have the authority, without the approval of the stockholders of the Company, to amend any outstanding Option or Stock Appreciation Right to reduce its price per share or cancel any Option or Stock Appreciation Right in exchange for cash or another Award when the Option or Stock Appreciation Right price per share exceeds the Fair Market Value of the underlying Shares.

 

ARTICLE 11.

 

ADMINISTRATION

 

11.1            Administrator. The Committee (or another committee or a subcommittee of the Board assuming the functions of the Committee under the Plan) shall administer the Plan (except as otherwise permitted herein) and, unless otherwise determined by the Board, shall consist solely of two or more Non-Employee Directors appointed by and holding office at the pleasure of the Board, each of whom is intended to qualify as both a “non-employee director” as defined by Rule 16b-3 of the Exchange Act or any successor rule and an “independent director” under the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded.  Notwithstanding the foregoing, any action taken by the Committee shall be valid and effective, whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section 11.1 or otherwise provided in any charter of the Committee. Except as may otherwise be provided in any charter of the Committee, appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written or electronic notice to the Board. Vacancies in the Committee may only be filled by the Board. Notwithstanding the foregoing, (a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to Awards granted to Non-Employee Directors and, with respect to such Awards, the terms “Administrator” and “Committee” as used in the Plan shall be deemed to refer to the Board and (b) the Board or Committee may delegate its authority hereunder to the extent permitted by Section 11.6.

 

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11.2            Duties and Powers of Committee. It shall be the duty of the Committee to conduct the general administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan and Award Agreements, and to adopt such rules for the administration, interpretation and application of the Plan as are not inconsistent therewith, to interpret, amend or revoke any such rules and to amend any Award Agreement; provided that the rights or obligations of the Holder of the Award that is the subject of any such Award Agreement are not affected adversely by such amendment, unless the consent of the Holder is obtained or such amendment is otherwise permitted under Section 10.5 or Section 12.10. Any such grant or award under the Plan need not be the same with respect to each Holder. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In its discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 under the Exchange Act or any successor rule, or any regulations or rules issued thereunder, or the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded are required to be determined in the discretion of the Committee.

 

11.3            Action by the Committee. Unless otherwise established by the Board or in any charter of the Committee, a majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by all members of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.

 

11.4            Authority of Administrator. Subject to the Company’s Bylaws, the Committee’s Charter and any specific designation in the Plan, the Administrator has the exclusive power, authority and sole discretion to:

 

(a)           Designate Eligible Individuals to receive Awards;

 

(b)           Determine the type or types of Awards to be granted to Eligible Individuals;

 

(c)           Determine the number of Awards to be granted and the number of Shares to which an Award will relate;

 

(d)           Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, purchase price, any Performance Goals or Performance Criteria, any reload provision, any restrictions or limitations on the Award, any schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, and any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Administrator in its sole discretion determines;

 

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(e)           Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in cash, Shares, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;

 

(f)            Prescribe the form of each Award Agreement, which need not be identical for each Holder;

 

(g)           Decide all other matters that must be determined in connection with an Award;

 

(h)           Establish, adopt or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;

 

(i)            Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement;

 

(j)            Make all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable to administer the Plan; and

 

(k)           Accelerate wholly or partially the vesting or lapse of restrictions of any Award or portion thereof at any time after the grant of an Award, subject to whatever terms and conditions it selects and Section 12.2(d).

 

11.5            Decisions Binding. The Administrator’s interpretation of the Plan, any Awards granted pursuant to the Plan, and any Award Agreement and all decisions and determinations by the Administrator with respect to the Plan are final, binding and conclusive on all parties.

 

11.6            Delegation of Authority. To the extent permitted by Applicable Law, the Board or Committee may from time to time delegate to a committee of one or more members of the Board or one or more officers of the Company the authority to grant or amend Awards or to take other administrative actions pursuant to this Article 11; provided, however, that in no event shall an officer of the Company be delegated the authority to grant awards to, or amend awards held by, the following individuals: (a) individuals who are subject to Section 16 of the Exchange Act or (b) officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated hereunder; provided, further, that any delegation of administrative authority shall only be permitted to the extent it is permissible under Applicable Law. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation, and the Board may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 11.6 shall serve in such capacity at the pleasure of the Board and the Committee.

 

ARTICLE 12.

 

MISCELLANEOUS PROVISIONS

 

12.1            Amendment, Suspension or Termination of the Plan. Except as otherwise provided in this Section 12.1, the Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board or the

 

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Committee. However, without approval of the Company’s stockholders given within twelve (12) months before or after the action by the Administrator, no action of the Administrator may, except as provided in Section 12.2, increase the limits imposed in Section 3.1 on the maximum number of Shares which may be issued under the Plan. Except as provided in Section 12.10, no amendment, suspension or termination of the Plan shall, without the consent of the Holder, impair any rights or obligations under any Award theretofore granted or awarded, unless the Award itself otherwise expressly so provides. No Awards may be granted or awarded during any period of suspension or after termination of the Plan, and in no event may any Award be granted under the Plan after the tenth (10th) anniversary of the date the Plan is first adopted by the Board (the “Expiration Date”). Any Awards that are outstanding on the Expiration Date shall remain in force according to the terms of the Plan and the applicable Award Agreement.

 

12.2            Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events.

 

(a)           In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of the Company’s stock or the share price of the Company’s stock other than an Equity Restructuring, the Administrator may make equitable adjustments, if any, to reflect such change with respect to: (i) the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Sections 3.1 and 3.3 on the maximum number and kind of shares which may be issued under the Plan); (ii) the number and kind of Shares (or other securities or property) subject to outstanding Awards; (iii) the number and kind of Shares (or other securities or property) for which automatic grants are subsequently to be made to new and continuing Non-Employee Directors pursuant to Section 4.5; (iv) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (v) the grant or exercise price per share for any outstanding Awards under the Plan.

 

(b)           In the event of any transaction or event described in Section 12.2(a) or any unusual or nonrecurring transactions or events affecting the Company, any Subsidiary of the Company, or the financial statements of the Company or any Subsidiary, or of changes in Applicable Law or accounting principles, the Administrator, in its discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Holder’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:

 

(i)            To provide for either (A) termination of any such Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Holder’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 12.2 the Administrator determines in good faith that no amount would have been attained upon the

 

25

 

exercise of such Award or realization of the Holder’s rights, then such Award may be terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the Administrator, in its discretion, having an aggregate value not exceeding the amount that could have been attained upon the exercise of such Award or realization of the Holder’s rights had such Award been currently exercisable or payable or fully vested;

 

(ii)           To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;

 

(iii)          To make adjustments in the number and type of shares of the Company’s stock (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding Restricted Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards and Awards which may be granted in the future;

 

(iv)          To provide that such Award shall be exercisable or payable or fully vested with respect to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Award Agreement; and

 

(v)           To provide that the Award cannot vest, be exercised or become payable after such event.

 

(c)           In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Section 12.2(a) and 12.2(b), the Administrator shall equitably adjust each outstanding Award, which adjustments may include adjustments to the number and type of securities subject to each outstanding Award and/or the exercise price or grant price thereof, if applicable, the grant of new Awards to Participants, and/or the making of a cash payment to Participants, as the Administrator deems appropriate to reflect such Equity Restructuring. The adjustments provided under this Section 12.2(c) shall be nondiscretionary and shall be final and binding on the affected Holder and the Company; provided that whether an adjustment is equitable shall be determined in the discretion of the Administrator.

 

(d)           Notwithstanding any other provision of the Plan, in the event of a Change in Control, each outstanding Award shall continue in effect or be assumed or an equivalent Award substituted by the successor corporation or a parent or subsidiary of the successor corporation.

 

(e)           In the event that the successor corporation in a Change in Control refuses to assume or substitute for an Award, the Administrator may cause all or any portion of such Award to become fully exercisable immediately prior to the consummation of such transaction and all forfeiture restrictions on all or any portion of such Award to lapse. If an Award is exercisable in lieu of assumption or substitution in the event of a Change in Control, the Administrator shall notify the Holder that the Award shall be fully exercisable for a period of

 

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fifteen (15) days from the date of such notice, contingent upon the occurrence of the Change in Control, and the Award shall terminate upon the expiration of such period.

 

(f)            For the purposes of this Section 12.2, an Award shall be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) received in the Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control was not solely common stock of the successor corporation or its parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Award, for each Share subject to an Award, to be solely common stock of the successor corporation or its parent equal in fair market value to the per-share consideration received by holders of Common Stock in the Change in Control.

 

(g)           The Administrator, in its discretion, may include such further provisions and limitations in any Award, agreement or certificate, as it may deem equitable and in the best interests of the Company that are not inconsistent with the provisions of the Plan.

 

(h)           No adjustment or action described in this Section 12.2 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Plan to violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would result in short-swing profits liability under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the Administrator determines that the Award is not to comply with such exemptive conditions.

 

(i)            The existence of the Plan, the Award Agreement and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

 

(j)            No action shall be taken under this Section 12.2 which shall cause an Award to fail to comply with Section 409A of the Code, to the extent applicable the Award.

 

(k)           In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the Shares or the share price of the Common Stock including any Equity Restructuring, for reasons of administrative convenience, the Company, in its discretion, may refuse to permit the exercise of

 

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any Award during a period of up to thirty (30) days prior to the consummation of any such transaction.

 

12.3            Approval of Plan by Stockholders. The Plan shall be submitted for the approval of the Company’s stockholders within twelve (12) months after the date of the Board’s initial adoption of the Plan.

 

12.4            No Stockholders Rights. Except as otherwise provided herein, a Holder shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Holder becomes the record owner of such Shares.

 

12.5            Paperless Administration. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Holder may be permitted through the use of such an automated system.

 

12.6            Effect of Plan upon Other Compensation Plans. The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company or any Subsidiary. Nothing in the Plan shall be construed to limit the right of the Company or any Subsidiary: (a) to establish any other forms of incentives or compensation for Employees, Directors or Consultants of the Company or any Subsidiary, or (b) except as otherwise provided in the penultimate sentence of Section 3.1(a), to grant or assume options or other rights or awards otherwise than under the Plan in connection with any proper corporate purpose including without limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association.

 

12.7            Compliance with Laws. The Plan, the granting and vesting of Awards under the Plan and the issuance and delivery of Shares and the payment of money under the Plan or under Awards granted or awarded hereunder are subject to compliance with all Applicable Law (including but not limited to state, federal and foreign securities law and margin requirements), and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all Applicable Law. To the extent permitted by Applicable Law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to Applicable Law.

 

12.8            Titles and Headings, References to Sections of the Code or Exchange Act. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. References to sections of the Code or the Exchange Act shall include any amendment or successor thereto.

 

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12.9            Governing Law. The Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof or of any other jurisdiction.

 

12.10          Section 409A. To the extent that the Administrator determines that any Award granted under the Plan is subject to Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan and any Award Agreements shall be interpreted in accordance with Section 409A of the Code, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the event that following the Effective Date the Administrator determines that any Award may be subject to Section 409A of the Code (including Department of Treasury guidance as may be issued after the Effective Date), the Administrator may adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and thereby avoid the application of any penalty taxes under such Section.

 

12.11          No Rights to Awards. No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Administrator is obligated to treat Eligible Individuals, Holders or any other persons uniformly.

 

12.12          Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Holder pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Holder any rights that are greater than those of a general creditor of the Company or any Subsidiary.

 

12.13          Indemnification. To the extent allowable pursuant to Applicable Law, each member of the Committee or of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

 

12.14          Section 83(b) Election.  No Participant may make an election under Section 83(b) of the Code with respect to any Award under the Plan without the consent of the Company, which the Company may grant or withhold in its sole discretion.  If, with the consent of the Company, a Participant makes an election under Section 83(b) of the Code, the Participant shall

 

29

 

be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service.

 

12.15          Relationship to other Benefits. No payment pursuant to the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.

 

12.16          Expenses. The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

 

* * * * *

 

30Exhibit 10.1

 

SEVENTH AMENDMENT

 

THIS SEVENTH AMENDMENT (this “Amendment”) is made and entered into as of August 14, 2013, by and between CA-FOOTHILL RESEARCH CENTER LIMITED PARTNERSHIP, a Delaware limited partnership (“Landlord”), and AFFYMAX, INC., a Delaware corporation (“Tenant”).

 

RECITALS

 

A.                                    Landlord (as successor in interest by conversion to EOP-Foothill Research Center, L.L.C., a Delaware limited liability company, successor in interest to Spieker Properties, L.P., a California limited partnership, successor in interest to Miranda Associates, a California general partnership) and Tenant (as successor in interest to Affymax Research Institute, a California corporation) are parties to that certain Research and Development/Office Lease dated May 30, 1990 (the “Original Lease”), as amended by  that certain Consent to Sublease dated July 30, 1990 (the “Consent”), that certain First Amendment to Lease dated November 16, 1999, that certain Second Amendment to Lease dated December 20, 1999, that certain Third Amendment dated December 31, 2001, and that certain Fourth Amendment dated November 30, 2006 (the “Fourth Amendment”), that certain Fifth Amendment (the “Fifth Amendment”) dated May 20, 2010 and that certain Sixth Amendment dated December 21, 2010 (the “Sixth Amendment”) (as amended, the “Lease”).  Pursuant to the Lease, Landlord has leased to Tenant certain premises (collectively, the “Premises”) containing (1) approximately 53,830 rentable square feet consisting of the entire building located at 4001 Miranda Avenue in Palo Alto, California, (2) approximately 28,709 rentable square feet in the building located at 4009 Miranda Avenue in Palo Alto, California (the “4009 Premises”), and (3) the entire building located at 4015 Miranda Avenue in Palo Alto, California, as well as certain rights pertaining to a Containment Facility (as defined in the first “Witnesseth” paragraph in the Original Lease and defined in the Consent as part of the Premises for all purposes other than with respect to rent and allocation of Property Expenses or other costs to Tenant), all in the project commonly known as Foothill Research Center.

 

B.                                    The Lease will expire by its terms on September 30, 2014 (the “Existing Expiration Date”).  The parties wish to accelerate the expiration date of the Lease on the following terms and conditions.

 

NOW, THEREFORE, in consideration of the above recitals which by this reference are incorporated herein, the mutual covenants and conditions contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:

 

1.                                      Acceleration of Expiration Date.

 

1.1.                            Accelerated Expiration Date.  Subject to the provisions hereof, the term of the Lease shall expire on August 15, 2013 (the “Accelerated Expiration Date”) with the same force and effect as if such term were, by the provisions of the Lease, fixed to expire on the Accelerated Expiration Date.  Without limiting the foregoing:

 

A.                                    The portions of the Base Rent schedules set forth in Section 1.1 of the Sixth Amendment, Sections 5.B and 5.C of the Fifth Amendment and Section III of the Fourth Amendment that apply to the Premises during the period following the Accelerated Expiration Date are hereby deleted from the Lease.

 

B.                                    Tenant shall surrender the Premises to Landlord in accordance with the terms of the Lease, as modified by this Amendment, on or before the Accelerated Expiration Date.

 

C.                                    Landlord acknowledges that as of the date hereof Landlord has received Base Rent and current estimates of Property Expenses due under the Lease up to and including June 30, 2013.  Within one (1) business day following the full execution and delivery of this Amendment, Tenant shall pay, by wire transfer of immediately available funds to an account designated by Landlord, Base Rent and current estimates of Property Expenses for the Premises with respect to the month of July of 2013 in the total amount of $415,129.83 (the “July Rent”) and Base Rent and current estimates of Property Expenses for the Premises with respect to the period commencing on August 1, 2013 and ending on the Accelerated Expiration Date in the total amount of $207,564.92 (the “August Rent”).  Subject to Tenant’s payment of the July Rent and the August Rent, notwithstanding anything in the Lease to the contrary, Landlord and Tenant each hereby waives any claims it may have against the other with respect to any under- or over-payment of Property Expenses under

 

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the Lease, including, without limitation, as the result of any adjustment in any portion of Property Expenses applicable to the Premises prior to the Accelerated Expiration Date determined after the date hereof.

 

D.                                    Notwithstanding anything in the Lease to the contrary, Tenant’s restoration obligations shall be limited to the following (collectively, “Restoration Obligations”):  (i) removal of all of Tenant’s personal property, trade fixtures, office machinery and equipment, furniture and movable partitions from the Premises and the Property, except for any of the foregoing duly transferred to Subtenant (defined in Section 2 below); and (ii) with respect to each of the permits set forth in Exhibit A attached hereto, for unrestricted use of the Premises and Property, the requirements set forth in clause (a) below (collectively, “Closure Requirements”):

 

(a)           Prior to surrender of the Premises to Landlord, Tenant shall comply with all governmental environmental closure requirements applicable to and arising solely from Tenant’s activities on the Premises. Tenant shall provide Landlord with a copy of any closure plan and certificate or other documentation of closure of the Premises prepared by Tenant for submittal to government regulatory agencies pursuant to such requirements. Without limiting the foregoing, any waste and materials from Landlords demolition of Tenant Improvements or Alterations or other Tenant’s Property remaining on the Premises after expiration or termination of this Lease (but excluding any demolition waste from a source other than Tenant) must meet criteria in effect at the date of expiration or termination of this Lease for lawful disposal.

 

Tenant shall use its best efforts to cause the Closure Requirements to be satisfied prior to the Accelerated Expiration Date.

 

E.                                     If Tenant fails to surrender possession of the Premises on or before the Accelerated Expiration Date, Tenant’s tenancy shall be subject to Section 10 of the Lease.  If Landlord is unable to deliver possession of all or any portion of the Premises to a new tenant or to perform improvements for a new tenant as a result of Tenant’s holdover, Tenant shall be liable for all resulting damages, including lost profits, incurred by Landlord.  If Tenant fails to complete any of the Restoration  Obligations on or prior to the Accelerated Expiration Date, such failure shall not in itself result in a holdover, provided that Tenant shall use its best efforts to complete the Restoration Obligations as soon as practicable thereafter, and Landlord shall cooperate with Tenant to provide any access to the Premises necessary for Tenant or any contractors approved by Landlord to pursue such completion (which entry shall be subject to Tenant’s insurance and indemnification obligations under the Lease, which shall survive the Accelerated Expiration Date with respect to any such entry as if the Lease was still in effect), subject to any reasonable conditions imposed by Landlord.  Alternatively, Landlord, at its option, may complete the Restoration Obligations and Tenant shall reimburse Landlord for the cost thereof within 10 days after demand.

 

F.                                      In addition to the surviving Restoration Obligations pursuant to Section 1.1.D and E above, any other rights or obligations of Landlord or Tenant under the Lease that, in the absence of the acceleration of the expiration date of the Lease to the Accelerated Expiration Date (e.g., indemnification provisions), would have survived the Existing Expiration Date, and the provisions of this Amendment, shall survive the Accelerated Expiration Date.

 

G.                                    Promptly following Landlord’s request, Tenant shall execute and deliver an instrument in recordable form confirming the termination of the Lease.

 

1.2.                            Acceleration Fee.   Tenant shall pay to Landlord, as consideration for the acceleration of the expiration date of the Lease as described herein and not as a penalty, the amount (the “Acceleration Fee”) of $1,980,980.42.  The Acceleration Fee shall be payable as follows:  (a) within one (1) business day following the full execution and delivery of this Amendment, Tenant shall pay to Landlord, by wire transfer of immediately available funds to an account designated by Landlord, an amount  equal to $795,980.42; (b) effective as of the date of full execution and delivery of this Amendment, the $50,000.00 Remaining Security Deposit (as defined in Section IV.D of the Fourth Amendment) shall be applied by Landlord to the payment of the Acceleration Fee and Tenant hereby waives any and all of its right, title and

 

2

 

interest in and to the Remaining Security Deposit and authorizes Landlord to apply the entire amount thereof to the Acceleration Fee; and (c) effective as of the date of full execution and delivery of this Amendment, notwithstanding anything in the Lease to the contrary, Tenant hereby irrevocably authorizes Landlord to draw the entire $1,135,000.00 face amount of the Letter of Credit (defined in Section IV.B of the Fourth Amendment) and to apply the proceeds thereof to the Acceleration Fee.  Tenant hereby confirms and agrees that Landlord’s beneficiary’s statement accompanying such draw on the Letter of Credit may be in the following form:  “This draw in the amount of One Million One Hundred Thirty-Five Thousand U.S. Dollars ($1,135,000.00) under your Irrevocable Standby Letter of Credit No. 3085133 represents funds that we are entitled to draw pursuant to the terms of that certain lease by and between CA-Foothill Research Center Limited Partnership, a Delaware limited partnership, as landlord, and Affymax, Inc., a Delaware corporation (as successor in interest to Affymax Research Institute, a California corporation), as tenant, and/or any amendment to the lease or any other agreement between such parties related to the lease”, and that such statement is true and correct.  If Landlord for any reason is unable to draw the full amount of $1,135,000.00 upon the Letter of Credit, or if such draw is not honored for any reason within five (5) days after Landlord’s submittal of its draw request, Tenant shall pay any resulting deficiency in payment of the Acceleration Fee within five (5) business days after demand.

 

1.3.                            Limitations on Tenant’s Rights.  Notwithstanding any contrary provision of the Lease, any unexercised right or option of Tenant to renew or extend the term of the Lease or to expand the Premises (whether in the form of an expansion option, right of first offer or refusal, or any other similar right), and any outstanding tenant improvement allowance or other allowance not claimed and properly used by Tenant in accordance with the Lease as of such date, shall be deemed terminated and no longer available or of any further force or effect as of the date this Amendment is fully executed and delivered.

 

2.                                      Representations and Covenants.  Tenant represents and warrants that, as of the date hereof, and as of the Accelerated Expiration Date:  (a) Tenant is the rightful owner of all of the Tenant’s interest in the Lease; (b) Tenant has not made any disposition, assignment, sublease, or conveyance of the Lease or Tenant’s interest therein, other than the Sublease between Tenant, as sublandlord, and ShareThis, Inc, a Delaware corporation (“Subtenant”), as subtenant, dated March 27, 2012 with respect to 8,160 rentable square feet in the 4009 Premises (the “Sublease”), as consented to by the ground lessor under the Ground Lease pursuant to that certain Consent to Subsublease dated April 4, 2012 (the “Subsublease Consent”); (c) Tenant has no knowledge of any fact or circumstance which would give rise to any claim, demand, obligation, liability, action or cause of action arising out of or in connection with Tenant’s occupancy of the Premises; (d) no other person or entity has an interest in the Lease, collateral or otherwise; (e) no Equipment Lease (defined in Section 12.B of the Lease) exists, and Tenant has not granted or suffered any liens, financing instruments, security interests or encumbrances affecting any personal property, equipment, fixtures, trade fixtures, leasehold improvements or alterations in or about the Premises (including, without limitation, with respect to any Leaseable Nonremovable Tenant Improvements and any Removable Tenant Improvements); (f) there are no outstanding contracts for the supply of labor or material and no work has been done or is being done in, to or about the Premises which has not been fully paid for and for which appropriate waivers of mechanic’s liens have not been obtained; (g) the  Sublease has not been modified since the date of the Subsublease Consent;  (h) Tenant has no knowledge of any fact or circumstance which would give rise to any claim, demand, obligation, liability, action or cause of action, arising out of or in connection with Subtenant’s occupancy of the Premises, or of any default by Subtenant under the Sublease, (i) there exists no default by Tenant under the Sublease, (j) Tenant has not received any rent from Subtenant under the Sublease for any period occurring after the Accelerated Expiration Date, and (k) any personal property of Tenant that remains in the 4009 Premises after the Accelerated Expiration Date has been transferred to Subtenant.  Tenant shall cause the expiration date of the Sublease to be accelerated to a date no later than such Accelerated Expiration Date.

 

3.                                      Confidentiality.  Landlord recognizes that Tenant may be required to file this Amendment with the Securities and Exchange Commission.

 

4.                                      Bankruptcy or Default of Tenant.

 

4.1                               Notwithstanding any contrary provision hereof, if: (a) an Insolvency Proceeding occurs during the Bankruptcy Protection Period (defined below) ); or (b) an Action (defined below) is filed, commenced, or brought against Landlord, then, with or without notice from Landlord to Tenant, the provisions of Section 4.3 below shall apply.  This Amendment shall not be construed as a substitution of an agreement for an obligation, nor as a novation or a substitution of a contract for an obligation, but merely as a mechanism employed by the parties to permit a procedure whereby Landlord and Tenant are afforded the benefits set

 

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forth herein.  For purposes hereof, a “Insolvency Proceeding” shall be deemed to occur if (i) a voluntary petition is filed by or against Tenant under any chapter of the United States Bankruptcy Code; (ii) an involuntary petition is filed by or against Tenant under any chapter of the United States Bankruptcy Code and if such petition is not dismissed within 90 days, or (iii) Tenant executes an assignment for the benefit of creditors under state law.  As used herein, “Bankruptcy Protection Period” means the period of 91 days following Landlord’s receipt of the Acceleration Fee.  As used herein, “Action” means any action, litigation, or other proceeding filed, commenced, or brought by any party based upon an alleged preference or preferential transfer that in any way relates to this Amendment, any portion of the Acceleration Fee, the Remaining Security Deposit, and/or the Letter of Credit, including, but not limited to, actions, claims, or proceedings brought under California Civil Code sections section 1800, Sections 547 or 550 of the United States Bankruptcy Code, or any other similar State of federal laws or statutes.

 

4.2                               Notwithstanding any contrary provision hereof, if Tenant breaches any of its representations, warranties or covenants hereunder, then, at Landlord’s option and upon Landlord’s notice to Tenant, the provisions of Section 4.3 below shall apply.

 

4.3                               Upon the occurrence of an event described in Section 4.1 or 4.2 above, (a) Tenant shall be deemed to have been in default under the Lease (beyond any applicable notice and cure period) as of the date immediately preceding the date of this Amendment and Landlord shall be deemed to have elected to terminate the Lease as of the Accelerated Expiration Date as a result of such default; (b) Landlord shall have all of the rights and remedies against Tenant under applicable law and/or as set forth in the Lease (including, the right to recover any and all damages from Tenant as provided in California Civil Code Section 1951.2) that Landlord had against Tenant immediately before the date of this Amendment, as determined after giving effect to the preceding clause (a); and (c) the Lease shall be deemed to have been terminated as of the Accelerated Expiration Date.  Notwithstanding the foregoing, Tenant shall be entitled to an offset against any damage claim of Landlord in the amount equal to all or such part of the Acceleration Fee actually retained by Landlord after final resolution of any Action, less all attorney’s fees and costs incurred by Landlord in defending such Action.

 

5.                                      Miscellaneous.

 

5.1.                            This Amendment and the attached exhibits, which are hereby incorporated into and made a part of this Amendment, set forth the entire agreement between the parties with respect to the matters set forth herein.  There have been no additional oral or written representations or agreements.

 

5.2.                            Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and in full force and effect.

 

5.3.                            In the case of any inconsistency between the provisions of the Lease and this Amendment, the provisions of this Amendment shall govern and control.

 

5.4.                            Submission of this Amendment by Landlord is not an offer to enter into this Amendment but rather is a solicitation for such an offer by Tenant.  Landlord shall not be bound by this Amendment until Landlord has executed and delivered it to Tenant.

 

5.5.                            The capitalized terms used in this Amendment shall have the same definitions as set forth in the Lease to the extent that such capitalized terms are defined therein and not redefined in this Amendment.

 

5.6                               Tenant shall indemnify, defend and hold Landlord, its members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals and members of any such agents harmless from and against all claims of any brokers claiming to have represented Tenant in connection with this Amendment.

 

5.7                               This Amendment may be executed in one or more counterparts, including any facsimile or other electronic version of same, each of which shall be deemed an original, but all of which when taken together shall constitute one agreement.  Any facsimile or other electronic signature shall constitute a valid and binding method for executing this Amendment. Executed counterparts of this Amendment exchanged by facsimile transmission or other electronic means shall be fully enforceable.

 

[SIGNATURES ARE ON FOLLOWING PAGE]

 

4

 

IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Amendment as of the day and year first above written.

 

	
 
    	
LANDLORD:
    
	
 
    	
 
    
	
 
    	
CA-FOOTHILL   RESEARCH CENTER LIMITED  
    
	
 
    	
PARTNERSHIP,   a Delaware limited partnership 
    
	
 
    	
 
    
	
 
    	
By:
    	
EOP   Owner GP L.L.C., a Delaware limited liability 
    
	
 
    	
company,   its general partner  
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   John Moe 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
John   C. Moe 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    	
Market   Managing Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
TENANT:
    
	
 
    	
 
    
	
 
    	
AFFYMAX, INC.,
    
	
 
    	
a   Delaware corporation 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Mark Thompson 
    
	
 
    	
 
    	
 
    
	
 
    	
Name:   
    	
Mark   Thompson 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:   
    	
CFO
    
						

 

5

 

EXHIBIT A

 

CLOSURE REQUIREMENTS

 

	
License/   Permit
    	
 
    	
Permitting Agency
    	
 
    	
Permit Numbers, Dates
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Radioactive Material License
    	
 
    	
California Dept. of   Public Health, Radiological   Health Branch North
    	
 
    	
License #5297-43,   Amendment # 26,
   Issued 6/11/09, exp. 6/10/19
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Discharge Permit
    	
 
    	
Palo Alto Regional Water   Quality Control Plant
    	
 
    	
Industrial waste discharge permit #12145
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Controlled Subtances Registration Certificate
    	
 
    	
U.S. Dept. of Justice, Drug Enforcement Administration
    	
 
    	
DEA registration # RA0140587
   Issued 12/13/12
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
BAAQMD Permit to Operate
    	
 
    	
Bay Area Air Quality   management District
    	
 
    	
Plant # 18156
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4358 Medical Waste Generator - Other
    	
 
    	
Santa Clara Department   of Environmental Health (SCDEH)
    	
 
    	
Permit # PT0430380,   Program # PR0330331,
   Facility ID# FA0204777, 11/1/12-10/31/13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
2206 - Generates 5 to < 25 Tons/yr
    	
 
    	
SCDEH Permit - Haz Waste   Generator Program
    	
 
    	
Permit # PT0407206,   Program # PR0315122,
   Facility ID# FA0204777, 2/29/12-2/28/13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6403 - Palo Alto Fire - Corrosives
    	
 
    	
Palo Alto Fire   Department Permit
    	
 
    	
Permit # PT0466737,   Program # PR0385378,
   Facility ID# FA0204777, 2/29/12-2/28/13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6429 Palo Alto Fire - Level III Facility
    	
 
    	
Palo Alto Fire   Department Permit
    	
 
    	
Permit # PT0466738,   Program # PR0385379,
   Facility ID# FA0204777, 2/29/12-2/28/13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6402 Palo Alto Fire - Compressed gas (Inert)
    	
 
    	
Palo Alto Fire   Department Permit
    	
 
    	
Permit # PT0466739,   Program # PR0385380,
   Facility ID# FA0204777, 2/29/12-2/28/13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6404 Palo Alto Fire- Cryogenic Fluids
    	
 
    	
Palo Alto Fire   Department Permit
    	
 
    	
Permit # PT0466740,   Program # PR0385381,
   Facility ID# FA0204777, 2/29/12-2/28/13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6419 Palo Alto Fire - Radioactive Materials
    	
 
    	
Palo Alto Fire   Department Permit
    	
 
    	
Permit # PT0466741,   Program # PR0385382,
   Facility ID# FA0204777, 2/29/12-2/28/13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6418 - Palo Alto Fire - Pyrophoric Materials (Liq   and Sol)
    	
 
    	
Palo Alto Fire   Department Permit
    	
 
    	
Permit # PT0466742,   Program # PR0385383,
   Facility ID# FA0204777, 2/29/12-2/28/13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6401 Palo Alto Fire - Business plan (HMBP)
    	
 
    	
Palo Alto Fire   Department Permit
    	
 
    	
Permit # PT0466743,   Program # PR0385384,
   Facility ID# FA0204777, 2/29/12-2/28/13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6406 Palo Alto Fire - Flammable and Combustible   Liquids
    	
 
    	
Palo Alto Fire   Department Permit
    	
 
    	
Permit # PT0466744,   Program # PR0385385,
   Facility ID# FA0204777, 2/29/12-2/28/13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6415 Palo Alto Fire - Oxidizers (Liquids and   Solids)
    	
 
    	
Palo Alto Fire   Department Permit
    	
 
    	
Permit # PT0470326,   Program # PR0392023,
   Facility ID# FA0204777, 2/29/12-2/28/13
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Large Quantity Generator of non-acute haz waste
    	
 
    	
USEPA
    	
 
    	
EPA ID No. CAD009124256

Fed waste codes: D001,   D002, D003, D011,
   D022, D038, F002, F003

State waste codes: 141,   221, 331, 343, 352,
   541, 551, 791
    

 

1

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