Document:

Exhibit 10.1

 

VOLUNTARY RESIGNATION AGREEMENT AND GENERAL RELEASE

 

This Agreement and General Release (the “Agreement”) is made and entered into on September 4, 2013 by Jeffrey S. Sherman, an individual resident of the State of Tennessee (“Mr. Sherman”), and HSCGP, LLC, a Delaware limited liability company (together with LifePoint Hospitals, Inc., a Delaware corporation, the “Company”).

 

WITNESSETH:

 

WHEREAS, Mr. Sherman was employed at-will by the Company as its Executive Vice President and Chief Financial Officer from April 20, 2009, until his voluntary resignation tendered and accepted on August 21, 2013 (the “Resignation Date”);

 

WHEREAS, Mr. Sherman submitted voluntarily his resignation to the Company to pursue other interests, same to be  effective upon the close of business on September 14, 2013, or such other date as may be mutually agreed upon in writing (the “Effective Date”); and,

 

WHEREAS, Mr. Sherman and the Company recognize, in light of Mr. Sherman’s resignation, the desirability of clarifying the benefits that Mr. Sherman will receive from the Company and each desire to make various, additional mutual covenants.

 

THEREFORE, in consideration of the premises and mutual promises herein contained, the receipt and sufficiency of which are acknowledged, it is agreed as follows:

 

1.             Resignation; Cooperation.

 

(a)           The parties confirm and acknowledge that Mr. Sherman voluntarily resigned as an employee and officer of the Company and all of its subsidiaries and affiliates on the Resignation Date, and such resignation was accepted by the Company, to be effective on the Effective Date.  Mr. Sherman agrees to execute any additional document or documents necessary, if any, to document or reaffirm his resignation from the Company and/or any of its subsidiaries or affiliates within two business days of any written request by the Company to do so.  Mr. Sherman acknowledges and agrees that he holds no claim, right or interest in reinstatement or future employment with the Company and/or any of its subsidiaries or affiliates, although he may re-apply for employment with any such entities.

 

(b)           After the Effective Date, as a material inducement to the Company to make the payments described herein, Mr. Sherman agrees to be available, either in person or telephonically at the Company’s option, to assist and reasonably cooperate with the Company so as to ensure a smooth and seamless transition of the responsibilities held, and information learned, by Mr. Sherman while employed by the Company to one or more persons designated by the Company.  Mr. Sherman also agrees to answer any question(s) asked of him by any officer of the Company that relates to any function of the Company for which Mr. Sherman was responsible while employed by the Company. Further, Mr. Sherman recognizes that the Company is or may be involved in litigation and other business matters unrelated to litigation from time to time, and agrees to provide his full cooperation with any of the Released Parties in the defense or prosecution of one or more existing or future court actions, governmental investigations, arbitrations, mediations or other legal or equitable matters or proceedings, and all business matters, which involve any of them or any of their employees, officers or directors.  Mr. Sherman 

 

 

acknowledges and understands that his obligations of cooperation under this Section 1(b) are not limited in time and may include, but shall not be limited to, the need for or availability for testimony in deposition, affidavit, trial, mediation or arbitration, as well as preparation for that testimony, and consultation for other business matters unrelated to litigation.  Mr. Sherman agrees that he will be available at the Company’s reasonable request for any meetings or conferences deemed necessary in connection with any matters within this Section 1(b), and in preparation for the defense or prosecution of any such other matters or proceedings, and the Company agrees to endeavor to schedule Mr. Sherman’s availability at mutually agreeable times, dates and locations.  Other than the consideration identified in Section 2, Mr. Sherman shall receive no additional compensation for time spent assisting the Company pursuant to this Section 1(b), provided, however, that the Company shall reimburse Mr. Sherman for his reasonable travel, meal and lodging expenses pursuant to its existing policies and procedures for same.

 

2.             Consideration; Release of Claims.

 

(a)           In consideration of and in exchange for Mr. Sherman’s promises and covenants made in this Agreement, i) a pro rata portion of the shares of Restricted Stock granted to Mr. Sherman on February 23, 2011 and February 21, 2012 pursuant to the Amended and Restated 1998 Long-Term Incentive Plan (the “Prior LTIP”) of the Company shall, subject to Mr. Sherman’s full compliance with this Agreement prior to such time, vest and become the property of Mr. Sherman (“the “Consideration”). Mr. Sherman agrees that, but for this Agreement, such Restricted Shares would not otherwise vest and that he would have otherwise forfeited such Restricted Shares on the Resignation Date.  For purposes of this Agreement the pro rata vesting shall be computed as of September 30, 2013, in the manner set forth in Section 1 of the Performance Award Agreements governing the Restricted Shares at issue.  ii)  In addition, as further consideration of and in exchange for Mr. Sherman’s promises and covenants made in this Agreement, and provided that Mr. Sherman remains in full compliance with this Agreement prior to such time, the Company agrees to pay Mr. Sherman, on the same date that any cash bonuses are paid to the Company’s Named Executive Officers for the performance of the Company for fiscal year 2013, an amount equal to the pro rata cash bonus that Mr. Sherman would have received, if any, if he had continued to serve as the Company’s Executive Vice President and Chief Financial Officer through such payment date. For purposes of this Agreement the pro rata bonus to be paid to Mr. Sherman, if any, shall be computed as of September 30, 2013.

 

(b)           Except to the extent provided otherwise herein, Mr. Sherman shall not, from the Effective Date forward, participate in the Company’s 401(k); retirement and/or thrift plan; cafeteria plan; or, any other benefit or stock grant, award or option plan sponsored by the Company.  Mr. Sherman shall, however, be entitled to any funds accrued in such plans prior to the Effective Date (less any outstanding principal loan balance, where applicable), to the extent and in accordance with the terms and conditions of the plans.  Mr. Sherman’s health and welfare plan participation will cease as of the Effective Date, except that Mr. Sherman may elect to exercise his rights under COBRA to continue applicable medical and dental coverage in accordance with the applicable plan and Mr. Sherman shall be solely responsible for the premiums therefore.  Except as herein expressly stated, Mr. Sherman shall not be entitled to any other benefits or compensation from the Company at any time after the Effective Date, including but not limited to any accrued but unused vacation or PTO time.

 

(c)           The parties acknowledge and agree that all of Mr. Sherman’s Options and Restricted Shares (as such terms are defined by the Prior LTIP) that are vested as of the Effective Date remain vested and are exercisable, in the case of Options, no later than three months after the Effective Date, and that all of Mr. Sherman’s Options, Restricted Shares and Restricted Stock Units (except with respect to Restricted Shares, as otherwise set forth in Section 2(b) of this Agreement) that were not vested on the Effective Date are forfeited effective as of the Effective Date. The parties acknowledge and agree that all rights and options to purchase the Company’s stock under the Management Stock Purchase Plan cease and all unvested shares are forfeited as of the Effective Date and that Mr. Sherman shall receive, within thirty days of the date he executes and does not revoke this Agreement, the lesser of the market value of the stock or the amount of salary used to purchase stock.

 

 

(d)           On behalf of and for himself, his estate and any other person he may bind or obligate, Mr. Sherman does hereby expressly acknowledge and agree that he forever settles, releases, compromises, reaches accord and satisfaction, waives, remises, discharges, and acquits the Company and its predecessors, successors, purchasers, subsidiaries, assigns, affiliates, and their respective stockholders, members, partners, officers, agents, directors, employees and contractors (whether, in each case, in their individual or representative capacities), and their respective assigns, successors, purchasers, predecessors or estates (whether by operation of law or otherwise) (collectively, the “Released Parties”) from each and every claim, right, remedy, cause of action or any kind or nature (whether legal, equitable or of some other type or description), which exists through the Effective Date of this Agreement (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated and whether due or to become due), or which Mr. Sherman at any time hereafter may have arising out of or relating to his employment by the Company including, but not limited to the separation of said employment and any right or claim under federal or state law or any political subdivision thereof, including but not limited to Title VII of the Civil Rights Act of 1964 which prohibits discrimination in employment based on race, color, national origin, religion or sex; the Americans with Disabilities Act which prohibits discrimination in employment based upon physical or mental disabilities; the Family and Medical Leave Act; the Age Discrimination in Employment Act; the Older Workers Benefit Protection Act; and any other federal, state or local laws or regulations prohibiting employment discrimination or protecting employee rights, as well as claims for any other tortious or unlawful conduct, including but not limited to slander, defamation and intentional or tortious interference with contract or a prospective business relationship, up to the date of the execution of this Agreement (“the Claims”).   Further, on behalf of and for himself, his estate and any other person he may bind or obligate, Mr. Sherman does hereby expressly acknowledge and agree that, with respect to the Claims, he, his estate, his affiliates, together with any other person that he may bind or obligate is absolutely prohibited from deriving any personal benefit from any Claim, whether directly or indirectly, and whether such benefit is financial, reputational or otherwise.    As used in this Agreement, the term “affiliate” means any “person” that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with another person. Further, as used in this Agreement, the term “person” means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or any other form of entity.  The foregoing release of Claims shall not include Company’s obligations, responsibilities or undertakings pursuant to this Agreement, any D&O insurance policy purchased by the Company, or the Indemnification Agreement executed by the Company in favor of Mr. Sherman, dated September 12, 2012.

 

(e)           Mr. Sherman fully understands and agrees that this Agreement may be pled by the Released Parties as a complete defense to any of the Claims which may be hereafter asserted by him or on his behalf in any suit, claim, or grievance proceeding against the Released Parties, for or on account of any of the Claims up to and including the present time of execution hereof.

 

3.             Restrictive Covenants of Mr. Sherman.

 

(a)           For a period of twenty four (24) months following the Effective Date (“the Identified Period”), Mr. Sherman agrees that he will not, in any capacity (including, but not limited to, as an owner, member, partner, shareholder, consultant, advisor, financier, agent, employee, officer, director, manager or otherwise), whether directly or indirectly, engage in a Competitive Activity (as such term is hereinafter defined).  As used in this Agreement, the term “Competitive Activity” shall mean and refer to: (i) any business enterprise or activity located in Nashville, Tennessee or within a one hundred (100) mile radius of Nashville, Tennessee; (ii) any person or entity (including their successors (including any successor(s) that results from any business combination, sale or merger), assigns and transferees, whether by operation of law or otherwise) that, whether on the Effective Date or at any time within the Identified Period, derives more than fifty percent of its revenues from one or more non-urban acute care hospitals (and associated outpatient healthcare facilities) (together, a “Non-Urban Hospital”) anywhere in the United States; (iii) any person or entity (including their successors (including any successor(s) that results from any

 

 

business combination, sale or merger), assigns and transferees, whether by operation of law or otherwise) that, whether on the Effective Date or at any time within the Identified Period, offers or provides, within a ten (10) mile radius of an acute care hospital operated or managed by a subsidiary of the Company a service offered by such hospital; (iv) any person or entity that derives more than fifty percent of its revenues from physician recruitment services and that may, as a part of its operation, be engaged in the recruitment of physicians from facilities owned or operated by any of the Released Parties (excluding recruitment activities that are conducted by means of general solicitation, such as by way of newspapers or the Internet, and that are not targeted to recruit physicians from a facility that is owned or operated by any of the Released Parties); or (v) any person or entity (including their successors (including any successor(s) that results from any business combination, sale or merger), assigns and transferees, whether by operation of law or otherwise) who, whether on the Effective Date or at any time within the Identified Period, owns or seeks to own, directly or indirectly, whether beneficially, of record or otherwise, any security issued by the Company.  Nothing in this Section 3(a) shall prohibit Mr. Sherman’s ownership of stock in any publicly held company (other than the Company) listed on a national securities exchange or whose shares of stock are regularly traded in the over the counter market as long as such holding at no time exceeds two percent (2%) of the total outstanding stock of such company, nor shall anything in this Section 3(a) prohibit Mr. Sherman from being employed by AccentCare or any of its affiliates (provided that Mr. Sherman is not based in Nashville, Tennessee or within a one hundred (100) mile radius of Nashville, Tennessee.

 

Mr. Sherman  has carefully read and considered the provisions of this Section 3(a) and, having done so, agrees and acknowledges that the terms, conditions, agreements and restrictions set forth herein are fair and reasonable and are reasonably required for the protection of the interests of the Company and its subsidiaries or affiliates and their respective officers, directors, shareholders, agents, representatives and other employees, and will not impose any hardship on Mr. Sherman or affect his ability to earn a living.  Mr. Sherman further acknowledges that the Company’s business is nationwide in character and is not limited to any narrower scope or area except as provided herein.

 

(b)           For a period of twenty four (24) months following the Resignation Date, Mr. Sherman covenants and agrees that he will not directly or indirectly solicit the services of any the Released Parties’ employees or independent contractors who derive more than twenty-five percent of their income from any of the Released Parties, or otherwise induce or attempt to induce any of the Released Parties’ current employees to sever their employment relationship with any of the Released Parties.

 

Mr. Sherman has carefully read and considered the provisions of this Section 3(b) and, having done so, agrees and acknowledges that the terms, conditions, agreements and restrictions set forth herein are fair and reasonable and are reasonably required for the protection of the interests of the Company and its subsidiaries or affiliates and their respective officers, directors, shareholders, agents, representatives and other employees, and will not impose any hardship on Mr. Sherman or affect his ability to earn a living.  Mr. Sherman further acknowledges that the Company’s business is nationwide in character and is not limited to any narrower scope or area except as provided herein.

 

(c)           Mr. Sherman covenants and agrees that he will not use or disclose to any person or entity any information about or regarding any Released Party disclosed, developed by and/or delivered to Mr. Sherman during the term of his employment by the Company including for illustrative purposes, without limitation, information about or regarding any of their respective properties, employees, finances, financial drivers, financial targets, financial performance, financial projections, businesses, operations, plans, legal matters, strategies or business plans or goals (whether under consideration or in some stage of implementation), data, profitability information, know how, manner of conducting business, acquisition targets or plans, and any other information about or regarding the respective business, plans or affairs of any Released Party that is reasonably believed by such Released Party to be confidential, competitive, secret or proprietary, whether about past, current or future matters. All such information, whether disclosed, developed by and/or delivered to Mr. Sherman before or after the date hereof, whether oral, written or in any electronic or other form, and regardless of the manner in which it was or is disclosed, developed by

 

 

and/or delivered, is referred to in this Agreement as “Confidential Information.” The term “Confidential Information” also includes all notes, analyses, summaries, compilations, data, forecasts, studies, interpretations or other documents prepared by, or made available to, Mr. Sherman which contain, reflect or are based upon, in whole or in part, any Confidential Information. Provided, however, that the provisions of this Section 3(c) shall not apply to any information that is (i) received from a third party not under an obligation to the Company to keep such information confidential, (ii) has been or becomes known to the public other than through a breach of this Agreement, or (iii) required to be disclosed by an Order issued by any court or governmental authority having competent jurisdiction.  If Mr. Sherman is required to disclose any of the Confidential Information pursuant to Section 3(c)(iii), he shall notify the Company’s General Counsel in writing via e-mail or overnight mail, within 24 hours of his receipt of such court order or subpoena, and simultaneously provide the Company’s General Counsel with a copy of such court order or subpoena, all of which shall occur prior to such disclosure.  In the event that Mr. Sherman is required by law, regulation, or becomes legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigation, demand, order or similar process) to disclose any Confidential Information, the Company agrees that Mr. Sherman may do so without liability, but Mr. Sherman agrees to (i) except to the extent prohibited by law, promptly notify the Company prior to any such disclosure so that the Company may seek to obtain a protective order and/or waive Mr. Sherman’s compliance with the provisions of this Agreement (and, if the Company seeks such an order, to provide such cooperation as the Company may reasonably request at the Company’s expense) and (ii) if a protective order is not obtained prior to such disclosure becoming required and the Company has not waived Mr. Sherman’s compliance with the provisions of this Agreement, Mr. Sherman shall then disclose only that portion of the Confidential Information that is, based on the advice of his legal counsel, legally required to be disclosed and use his commercially reasonable (at the Company’s expense) efforts to obtain an order or other appropriate assurance that confidential treatment will be afforded to such of the disclosed information which the Company so designates. Mr. Sherman agrees to waive any objection to any request by any of the Released Parties that the document production or testimony be made in camera and under seal.

 

Mr. Sherman shall also, upon execution of this Agreement, return to the Company all records or property of any nature in his possession or control in any way relating to or owned by the Company or the Confidential Information. Without limiting the generality of the forgoing, the Confidential Information shall remain the property of the Company.  No rights to use, license or otherwise exploit the Confidential Information are granted to Mr. Sherman by implication or otherwise.  Mr. Sherman will not, and has not, by virtue of the disclosure to him (or any other person or entity) of the Confidential Information and/or Mr. Sherman’s use of the Confidential Information prior to the Effective Date, acquire any rights with respect thereto, all of which rights shall remain exclusively with the Company.

 

Given the nature of the Confidential Information, Mr. Sherman agrees that any Released Party may be irreparably damaged by a breach of the forgoing confidentiality provisions of this Agreement by Mr. Sherman and that money damages may be an inadequate remedy for an actual or threatened breach of such confidentiality provisions because of the difficulty of ascertaining the amount of damage that will be suffered by the aggrieved party in the event that such confidentiality provisions are breached.  Therefore, without prejudice to the rights and remedies otherwise available to any Released Party, each Released Party shall be entitled, without the requirement of a posting of a bond or other security, to seek equitable relief, including an injunction or specific performance, in the event of any breach of such confidentiality provisions.  Such remedy shall not be deemed to be the exclusive remedy for a breach of such confidentiality provisions, but shall be in addition to all other remedies available at law or equity to the other aggrieved party.

 

(d)           Mr. Sherman covenants and agrees not to discuss with any other person or entity in any manner, or make statements about or relating to, the Company, the Released Parties, or the business or business matters of or relating to the Company and/or its affiliates.  Mr. Sherman covenants and agrees that he will not make any comment, innuendo, gesture, remark or statement that, or omit to make any remark or statement the absence of which, reasonably may be construed as disparaging or critical of or to any of Released Parties. Nothing in this Agreement restricts Mr. Sherman from making any true statements in connection with any legal proceeding or as required by applicable law.

 

 

(e)           If Mr. Sherman has any question as to whether any activity or conduct by him will violate any provision of this Section 3, he may request in writing that the Company provide its opinion regarding same.  All such requests should be sent via e-mail or overnight delivery to the Company’s General Counsel.

 

4.             Remedies for Breach of the Agreement.

 

(a)           In the event of a breach or default by Mr. Sherman of any of his obligations contained in this Agreement, the Company shall have the right to pursue (i) such legal remedies as may be available to it to recover from Mr. Sherman any damages suffered by any of the Released Parties as a result of such breach or default, and/or (ii) an appropriate action in equity, including an action for injunctive relief, as may be appropriate under the circumstances to protect itself or any of the Released Parties against such breach or default.  Mr. Sherman agrees and acknowledges that the Company has the right to seek such relief and that the Company may do so without the necessity of proof of actual damages or posting a bond.  Additionally, in the event Mr. Sherman breaches the Agreement, he agrees to repay immediately all sums paid to him (including the value of the Restricted Shares vested that would have otherwise been forfeited but for this Agreement), and to forfeit any future payments to be paid to him, pursuant to the Agreement.

 

(b)           If a Court determines that Mr. Sherman has violated any of the covenants contained in this Agreement, the parties agree and acknowledge that the period applicable to each obligation that has been violated will be extended automatically by a period of time equal in length to the period during which such violation(s) occurred.

 

(c)           If the Company breaches its obligations to Mr. Sherman under this Agreement, Mr. Sherman may seek any remedies available at law or in equity in connection with such breach.

 

5.             Compliance Program; Financial Statements and Internal Controls.  (a) Mr. Sherman represents that, during the course of his employment with the Company, he read, and signed as having read, a copy of the Common Ground Compliance Program of LifePoint Hospitals, Inc. and the Code of Ethics for Senior Financial Officers and Chief Executive Officer (together, the “Codes”). Mr. Sherman represents that during the course of his employment he complied with the provisions of the Codes.  Mr. Sherman represents that he is not aware of any possible violations by any director, officer, employee, agent of or consultant to the Company or any of its affiliates of any federal, state or local law, rule, regulation, ordinance, order or other legal authority including without limitation those related to governmental reimbursement programs or the “fraud and abuse” statutes and regulations, other than as disclosed by him in any publicly filed report. Further, Mr. Sherman hereby confirms that he has no accounting or financial disputes or disagreements with (or concerns about) the Company.

 

(b) Mr. Sherman hereby confirms that, during his tenure with the Company and through the Effective Date, based on his knowledge, the financial statements of the Company filed with the Securities and Exchange Commission during his tenure with the Company, when filed, fairly presented in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in such financial statements. Mr. Sherman hereby confirms that, during his tenure with the Company and through the Effective Date, he has been (and remains) responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: (i) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to me by others within those entities; (ii) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (iii) evaluated the effectiveness of the Company’s disclosure controls and procedures and consistently concluded that such disclosure controls and procedures were adequate; and (iv) he is not

 

 

aware of any change in the Company’s internal control over financial reporting that occurred during his tenure that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Mr. Sherman hereby confirms that, during his tenure with the Company and through the Effective Date, he has (and will) disclose, based on his most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors: (i) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

 

6.             Voluntary Agreement.  Mr. Sherman has read all of the terms of this Agreement and understands that this Agreement releases the Released Parties forever from any legal action arising from his employment relationship with any of them and the termination of that relationship.  Mr. Sherman acknowledges that he signs this Agreement of his own free will and in exchange for the consideration to be given, which is acknowledged to be adequate and satisfactory.  Mr. Sherman declares that he is competent to execute this Agreement.

 

7.             No Charges or Claims.  Mr. Sherman represents that he has not filed any complaints, claims or charges against any of the Released Parties with any local, state or federal agency or court related to his employment by any of Released Parties, that he will not file any such complaints, claims or charges arising out of or relating to events prior to the execution of this Agreement and that if any such agency or court assumes jurisdiction of any such complaint, claim or charge against any of the Released Parties on behalf of Mr. Sherman, he will request such agency or court to withdraw from the matter and that the complaint, claim or charge be dismissed.

 

8.             Miscellaneous.

 

(a)           This is the entire agreement between the parties and takes the place of any prior agreement, representation or promise, except as identified in this Agreement.  The Agreement cannot be modified except in writing signed by both Mr. Sherman and the Company’s Chief Executive Officer.  If any provision of this Agreement is found to be unenforceable, all other provisions will remain fully enforceable.

 

(b)           This Agreement binds and inures to the benefit of Mr. Sherman’s heirs, administrators, representatives, executors, successors and assigns and binds and inures to the benefit of all Released Parties and their respective heirs, administrators, representatives, executors, successors and assigns.

 

(c)           This Agreement shall be construed as whole according to its fair meaning.  It shall not be construed strictly for or against any Released Party or Mr. Sherman.  Captions are intended solely for the convenience of reference and shall not be used in the interpretation of this Agreement.

 

(d)           This Agreement is assignable by the Company and is binding upon its successors and assigns but such assignment shall not relieve the Company of its obligations hereunder.  Except in the event of Mr. Sherman’s death, this Agreement is personal to and nonassignable by Mr. Sherman but is binding upon his heirs and estate.

 

(e)           This Agreement shall be governed by the laws of the State of Tennessee. Any and all claims relating hereto may be brought only in the federal and/or state courts with jurisdiction over claims arising in Williamson County, Tennessee and the parties expressly agree to personal jurisdiction in those courts.

 

(f)            Should any provision of this Agreement be declared or be determined by any Court to be illegal or invalid, the validity of the remaining parts, terms or provisions shall not be affected thereby and said illegal or invalid part, term or provision shall be deemed not to be a part of this Agreement.  The term, condition or aspect deemed reasonable and enforceable by the court shall be incorporated into the applicable section of this Agreement, shall replace the term, condition or aspect deemed by the court to be unreasonable and unenforceable, and shall remain enforceable to the fullest extent permitted by law.

 

 

(g)           Mr. Sherman further agrees that to the extent that any federal or state taxes of any kind may be due or payable as a result of any payments referred to in this Agreement, he will be responsible for the payment of such taxes and will hold the Released Parties harmless in the event of any claim against any of them for payment of such taxes.  Said agreement to hold the Released Parties harmless shall include Mr. Sherman’s agreement to indemnify the Released Parties for any and all loss, cost, damage, or expense, including, but without limitation, attorneys’ fees associated with defending against such claim for taxes.

 

(h)           If legal action is commenced to enforce any provision of this Agreement, the prevailing party in such action shall be entitled to recover its attorney’s fees and expenses in addition to any other relief that may be granted.

 

(i)            This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

(j)            Pursuant to the terms of the Older Workers Benefit Protection Act of 1990, Mr. Sherman understands that he has twenty-one (21) days in which to consider the ADEA portion of this Agreement.  Even after signing, Mr. Sherman has seven (7) days to revoke the ADEA Release Agreement.  The ADEA portion of this Release Agreement, including the Company’s obligations pursuant to Section 1(a), shall not become effective or enforceable until the day following the expiration of the seven day revocation period.  If revoked, the ADEA Release Agreement shall become null and void, and none of the consideration herein shall be due or payable.

 

Mr. Sherman has been encouraged to consult, if he wishes, with an attorney regarding this Agreement and his decision to do so or not is solely his.

 

THE UNDERSIGNED FURTHER STATES THAT HE HAS CAREFULLY READ THIS AGREEMENT AND UNDERSTANDS THE CONTENTS THEREOF, AND THAT HE EXECUTES THE SAME OF HIS OWN FREE ACT AND DEED.

 

 

Signature page:

 

WHEREFORE, Mr. Sherman and the Company voluntarily enter into this Agreement and General Release by affixing his and its respective signatures hereunto on the dates set forth below.

 

 

	
/s/ Jeffrey S. Sherman
    	
 
    
	
 
    	
 
    
	
Jeffrey   S. Sherman
    	
 
    
	
 
    	
 
    
	
Date:   September 4, 2013
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
HSCGP, LLC
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/   John P. Bumpus
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
John   P. Bumpus
    	
 
    
	
 
    	
 
    	
 
    
	
Its:
    	
Executive   Vice President and Chief Administrative officer
    	
 
    
	
 
    	
 
    
	
Date:   September 4, 2013Exhibit 4.3

 

EVOLVING SYSTEMS, INC.
 AMENDED AND RESTATED

2007 STOCK INCENTIVE PLAN

 

Adopted by the Board of Directors on March 12, 2007

 

Amended and Restated on June 19, 2013

 

1.                                      GENERAL

 

(a)                                 Purpose.  The primary purposes of the Evolving Systems, Inc. Amended and Restated 2007 Stock Incentive Plan are to attract, retain and motivate employees, directors and consultants, to compensate them for their contributions to the growth and profits of the Company and its Affiliates and to encourage them to own Common Stock.

 

(b)                                 Types of Awards.  The Plan permits the award of (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Appreciation Rights, (iv) Restricted Stock, (v) Restricted Stock Units, (vi) Performance Awards, and (vii) Other Stock-Based Awards.

 

2.                                      DEFINITIONS

 

Except as otherwise provided in an applicable Award Agreement, the following capitalized terms shall have the meanings indicated below for purposes of the Plan and any Award:

 

(a)                                 “Affiliate” means a parent or subsidiary of the Company, with “parent” meaning an entity that controls the Company directly or indirectly, through one or more intermediaries, and “subsidiary” meaning an entity that is controlled by the Company directly or indirectly, through one or more intermediaries.  Solely with respect to the grant of an Incentive Stock Option, Affiliate means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.

 

(b)                                 “Award” means any award of an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award, or Other Stock-Based Award.

 

(c)                                  “Award Agreement” means the written or electronic document setting forth the terms and conditions of an Award.  The Award Agreement is subject to the terms and conditions of the Plan.

 

(d)                                 “Board” means the Board of Directors of Evolving Systems, Inc.

 

(e)                                  “Change of Control” means the occurrence of any of the following events:

 

(i)  the date any person or group acquires, or has acquired during the 12-month period ending on the date of the most recent acquisition by the person or group, assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all assets of the Company immediately prior to the acquisition;

 

(ii) the date any person or group within the meaning of the Exchange Act acquires ownership of our stock that, together with stock held by the person or group, constitutes more than 50% of the total fair market value or total voting power entitled to vote in the election of directors or any other change in ownership described in Treas. Reg. Section 1.409A-3(i)(5)(v);

 

(iii) the date any person or group acquires, or has acquired during the 12-month period ending on the date of the most recent acquisition by the person or group, ownership of stock possessing 30% or more of the total voting power of the stock of the Company;

 

(iv) the date a majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of our Board before the date of the appointment or election; or

 

(v) any other change in effective control described in Treas. Reg. Section 1.409A(i)(5)(vi).

 

1

 

(f)                                   “Code” means the Internal Revenue Code of 1986, as amended, and the applicable rulings, regulations and guidance thereunder.

 

(g)                                  “Committee” means the Compensation Committee of the Board which shall consist of three (3) members of the Board, and, so long as the Singer Children’s Management Trust (the “Trust”) is the beneficial owner of no less than twenty percent (20%) of the Company’s issued and outstanding Common Stock, shall further consist of at least two (2) members of the Board that have been nominated by the Trust.

 

(h)                                 “Common Stock” means a share of Evolving Systems, Inc., common stock, $0.001 par value per share.

 

(i)                                     “Company” means Evolving Systems, Inc., a Delaware corporation.

 

(j)                                    “Consultant” means any person, including an advisor, engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services.

 

(k)                                 “Continuous Service” means continuous service as an Employee, Director or Consultant to the Company or an Affiliate.  Unless otherwise stated in the applicable Award Agreement, a Participant’s change in position or duties with the Company or any Affiliate shall not result in interrupted or terminated service, so long as such Participant continues service as an Employee, Director or Consultant.  Whether a termination or interruption in service shall have occurred for purposes of the Plan shall be determined by the Committee (or its designee), which determination shall be final, binding and conclusive.

 

(l)                                     “Covered Employee” means the chief executive officer and other highest compensated officers of the Company for whom total compensation is required to be reported to stockholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code and other employees who may become subject to such reporting.

 

(m)                             “Director” means a member of the Board.

 

(n)                                 “Dividend Equivalents” means any right granted under Section 11 of the Plan.

 

(o)                                 “Employee” means any person employed by the Company or an Affiliate, determined in accordance with the Company’s standard personnel policies and practices.

 

(p)                                 “Exchange Act” means the U.S. Securities Exchange Act of 1934, as it may be amended from time to time, or any successor act thereto.

 

(q)                                 “Fair Market Value” means, as of any date, the value of the Common Stock of the Company determined as follows:

 

(i)                                     If the Common Stock is listed on any established stock exchange, or traded on the Nasdaq Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in Common Stock) on the determination date, as reported in The Wall Street Journal or such other source as the Board deems reliable.  Unless otherwise provided by the Committee, if there is no closing sales price (or closing bid if no sales were reported) for the Common Stock on the determination date, then the Fair Market Value shall be the closing sales price (or closing bid if no sales were reported) on the last preceding date for which such quotation exists.

 

(ii)                                  In the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Committee.

 

(r)                                    “Full-Value Award” means an Award of Restricted Stock, Restricted Stock Units, Performance Award or Other Stock-Based Award.

 

(s)                                   “Incentive Stock Option” means an Option granted under Section 6 of the Plan that is intended to meet the requirements of Section 422 of the Code, or any successor provision thereto.

 

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(t)                                    “Non-statutory Stock Option” means an Option granted under Section 6 of the Plan that is not intended to be an Incentive Stock Option.

 

(u)                                 “Option” or “Stock Option” means a right to purchase one or more shares of Common Stock.

 

(v)                                 “Other Stock-Based Award” means any right granted under Section 10 of the Plan.

 

(w)                               “Participant” means an eligible individual who is granted an Award under the Plan.

 

(x)                                 “Performance Award” means any right granted under Section 9 of the Plan.

 

(y)                                 “Performance Criteria” means any quantitative or qualitative measures, as determined by the Committee, which may be used to measure the level of performance of the Company, an Affiliate or any individual Participant during a Performance Period, including any Qualifying Performance Criteria.

 

(z)                                  “Performance Period” means any period as determined by the Committee in its sole discretion.

 

(aa)                          “Person” means any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, or government or political subdivision thereof.

 

(bb)                          “Qualifying Performance Criteria” means one or more of the following performance criteria applied to the individual, the Company as a whole, an Affiliate, a business unit, or any combination thereof, and measured quarterly, annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to a previous quarter or year’s results or to a designated comparison group, in each case as specified by the Committee in the Award Agreement: (i) revenue (ii) earnings before interest, taxes, depreciation and amortization (EBITDA), (iii) adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, impairment, stock compensation and gain/loss on foreign exchange transaction, (iv) net earnings, (v) net income, (vi) product-related targets and (vii) cash flow, subject to adjustment by the Committee to remove the effect of charges for restructurings, discontinued operations, extraordinary items and all items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence, related to the disposal of a segment or a business, or related to a change in accounting principle or otherwise.

 

(cc)                            “Plan” means this Evolving Systems, Inc. 2007 Stock Incentive Plan.

 

(dd)                          “Restricted Stock” means an Award of shares of Common Stock granted under Section 8 of the Plan.

 

(ee)                            “Restricted Stock Unit” means a right granted under Section 8 of the Plan that is denominated in shares of Common Stock.

 

(ff)                              “Share Reserve” means as defined in Section 4 of the Plan.

 

(gg)                            “Stock Appreciation Right” means any right granted under Section 7 of the Plan.

 

(hh)                          “Substitute Award” means an Award granted in substitution for, or in assumption of, outstanding awards previously granted by an entity acquired by the Company or an Affiliate or with which the Company or Affiliate combines.

 

3.                                      PLAN ADMINISTRATION

 

(a)                                 Authority of the Committee.  Except as otherwise provided herein, the Plan shall be administered by the Committee, which shall have the power to interpret the Plan and to adopt such rules and guidelines for implementing the terms of the Plan as it may deem appropriate.  The Committee shall have the ability to modify the Plan provisions, to the extent necessary, or delegate such authority, to accommodate any changes in law and regulations in jurisdictions in which Participants will receive Awards.  Subject to the terms of the Plan and applicable law, the Committee shall have full power and authority to:

 

(i)                                     designate Participants;

 

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(ii)                                  determine the type or types of Awards to be granted to each Participant under the Plan;

 

(iii)                               determine the number of shares of Common Stock to be covered by (or with respect to which payments, rights, or other matters are to be calculated in connection with) Awards;

 

(iv)                              determine the terms and conditions of any Award;

 

(v)                                 determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, shares of Common Stock, other securities, or other Awards, or canceled, forfeited, or suspended, and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended;

 

(vi)                              determine whether, to what extent, and under what circumstances cash, shares of Common Stock, other securities, other Awards, and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or of the Committee;

 

(vii)                           interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan;

 

(viii)                        establish, amend, suspend, or waive such rules and guidelines;

 

(ix)                              appoint such agents as it shall deem appropriate for the proper administration of the Plan;

 

(x)                                 make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan; and

 

(xi)                              correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect.

 

(b)                                 Administrative Actions.  Unless otherwise expressly provided in the Plan, subject to the limitations described in subsection (a) above, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time, and shall be final, conclusive, and binding upon all Persons, including the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, any stockholder, and any employee of the Company or of any Affiliate.

 

(c)                                  No Liability.  No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan, any Award or any Award Agreement.

 

(d)                                 Action by the Committee.  Notwithstanding anything to the contrary expressed or implied in this Plan, any and all actions by the Committee required or permitted under this Plan shall require the unanimous approval of all Committee members.

 

4.                                      SHARES SUBJECT TO THE PLAN

 

(a)                                 Shares Available.  Subject to adjustment as provided in Section 14 of the Plan, the maximum aggregate number of shares of Common Stock that may be issued pursuant to Awards granted under the Plan (exclusive of shares of Common Stock that have been issued pursuant to Awards (“Existing Awards”) that have been granted under the Plan prior to April 20, 2010 and that have not, prior to such date (x) expired or been cancelled or otherwise terminated, without having been exercised or redeemed in full, (y) been reacquired by the Company prior to vesting or (z) been repurchased by the Company at cost prior to vesting) shall be 1,502,209 shares (“Share Reserve”).  Each share of Common Stock issued pursuant to an Award shall reduce the Share Reserve by one (1) share. To the extent that a distribution pursuant to an Award is made in cash, the Share Reserve shall be reduced by the number of shares of Common Stock subject to the redeemed or exercised portion of the Award. Notwithstanding any other provision of the Plan to the contrary, the maximum aggregate number of shares of Common Stock that may be issued under the Plan pursuant to Incentive Stock Options (exclusive of shares of

 

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Common Stock that have been issued pursuant to Existing Awards) is 1,502,209 shares, subject to adjustment as provided in Section 14 of the Plan.

 

(b)                                 Annual Award Limits.  The following calendar year annual limits apply to grants of Awards unless the conditions described in subsection (iii) apply or the Committee specifically determines at the time of grant that the Award is not intended to qualify as performance-based compensation under the Plan:  (i) 125,000 shares, subject to adjustment as provided in Section 14, for grants of stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance shares and other stock-based awards; and (ii) $0.00 in annual Performance Awards payable in cash or other cash-based awards.  The limit set forth in subsection (i) will not apply in the following circumstances:  (iii) the Company acquires all or substantially all (greater than seventy five percent (75%)) of the fair market value of the assets of another entity or the Company acquires a Controlling Interest (as defined in Section 2(e) of this Plan) of another entity.

 

(c)                                  Changes to the Share Reserve.  If an Award granted under the Plan shall for any reason (i) expire, be canceled or otherwise terminate, in whole or in part, without having been exercised or redeemed in full, (ii) be reacquired by the Company prior to vesting, or (iii) be repurchased at cost by the Company prior to vesting, the shares of Common Stock not acquired by the Participant under such Award shall revert or be added to the Share Reserve and become available for issuance under the Plan; provided, however, that shares of Common Stock shall not revert or be added to the Share Reserve that had been (A) awarded under an Existing Award, (B) tendered in payment of an Option, (C) withheld by the Company to satisfy any tax withholding obligation, or (D) purchased by the Company with the proceeds from the exercise of Options, and provided, further, that shares of Common Stock covered by a Stock Appreciation Right, to the extent the right is exercised and settled in shares of Common Stock, and whether or not shares of Common Stock are actually issued to the Participant upon exercise of the Stock Appreciation Right, shall be considered issued or transferred pursuant to the Plan.

 

(d)                                 Source of Shares.  Any shares of Common Stock delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued shares or reacquired shares, bought on the market or otherwise.

 

(e)                                  Substitute Awards.  In the case of Substitute Awards, the shares of Common Stock subject to the Substitute Award shall not reduce the Share Reserve.  If a Substitute Award shall for any reason expire, be canceled or otherwise terminate, in whole or in part, be settled in cash or otherwise settled by issuance of fewer shares, the shares of Common Stock not acquired by the Participant shall not be added to the Share Reserve.  Further, any shares of Common Stock withheld or delivered to pay tax withholding obligations relating to a Substitute Award shall not reduce the Share Reserve.

 

5.                                      ELIGIBILITY

 

Individuals eligible to participate in this Plan include Employees, Directors and Consultants of the Company, or any Affiliate; provided, however, to the extent required under Section 409A of the Code, an Affiliate of the Company shall include only an entity in which the Company possesses at least twenty percent (20%) of the total combined voting power of the entity’s outstanding voting securities or such other threshold ownership percentage permitted under Section 409A of the Code.

 

6.                                      STOCK OPTIONS

 

(a)                                 Grant of Options.  The Committee is hereby authorized to grant Options to Participants with the following terms and conditions, and any other terms and conditions not inconsistent with the provisions of the Plan, as the Committee shall determine.  Incentive Stock Options may be granted only to eligible Employees of the Company or of any parent corporation or subsidiary corporation (as permitted by Section 422 of the Code).

 

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(b)                                 Award Agreement.  Each Option granted under the Plan shall be evidenced by an Award Agreement.  The Award Agreement shall specify whether the Option is intended to be an Incentive Stock Option or a Nonstatutory Stock Option.

 

(i)                                     Exercise Price.  The purchase price per share of Common Stock that may be purchased by an Option shall be determined by the Committee; provided, however, and except with respect to Substitute Awards or as provided in Section 14, that such purchase price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such Option.

 

(ii)                                  Term.  The term of each Option shall not exceed ten (10) years from the date of grant.

 

(iii)                               Vesting; Restrictions on Exercise.  The Award Agreement shall set forth any installment or other restrictions on exercise of the Option during the term of the Option.  Each Option shall become exercisable and shall vest over such period of time, or upon such events or such Performance Criteria, as determined by the Committee.

 

(iv)                              Time and Method of Exercise.  The Committee shall establish in the applicable Award Agreement the time or times at which an Option may be exercised in whole or in part, and the method or methods by which, and the form or forms, including, without limitation, cash, shares of Common Stock, or other Awards or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price, in which payment of the exercise price with respect thereto may be made or deemed to have been made.

 

(v)                                 Termination of Continuous Service.  Each Award Agreement shall set forth the extent, if any, to which the Participant shall have the right to exercise the Option following termination of the Participant’s Continuous Service.  Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Continuous Service. In the absence of specific provisions in an Award Agreement setting forth rights to exercise following termination of a Participant’s Continuous Service, the following shall apply:

 

(A)                               Termination of Continuous Service Other than as a Result of Disability or Death.  In the event a Participant’s Continuous Service terminates (other than upon the Participant’s death or disability), the Participant may exercise his or her Option (to the extent that the Participant was entitled to exercise it as of the date of termination) but only within such period of time ending on the earlier of (a) the date three (3) months after the termination of the Participant’s Continuous Status as an Employee, Director or Consultant (or such longer or shorter period specified in the Option Agreement), or (b) the expiration of the term of the Option as set forth in the Option Agreement.  If, at the date of termination, the Participant is not entitled to exercise his or her entire Option, the shares covered by the un-exercisable portion of the Option shall revert to and again become available for issuance under the Plan.  If, after termination, the Participant does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate, and the shares covered by such Option shall not become available for issuance under the Plan.

 

(B)                               Disability of a Participant.  In the event a Participant’s Continuous Service terminates as a result of the Participant’s disability, the Participant may exercise his or her Option (to the extent that the Participant was entitled to exercise it as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement.  If, at the date of termination, the Participant is not entitled to exercise his or her entire Option, the shares covered by the un-exercisable portion of the Option shall revert to and again become available for issuance under the Plan. If, after

 

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termination, the Participant does not exercise his or her Option within the time specified herein, the Option shall terminate, and the shares covered by such Option shall not become available for issuance under the Plan.

 

(C)                               Death of a Participant.  In the event of the death of a Participant during, or within a period specified in the Option Agreement after the termination of, the Participant’s Continuous Service, the Option may be exercised (to the extent the Participant was entitled to exercise the Option as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Participant’s death pursuant to subsection 15(b), but only within the period ending on the earlier of (1) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement), or (2) the expiration of the term of such Option as set forth in the Option Agreement.  If, at the time of death, the Participant was not entitled to exercise his or her entire Option, the shares covered by the un-exercisable portion of the Option shall revert to and again become available for issuance under the Plan. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate, and the shares covered by such Option shall not become available for issuance under the Plan.

 

(c)                                  Limitations on Incentive Stock Options.

 

(i)                                     Initial Exercise.  The aggregate Fair Market Value of the shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant in any calendar year, under the Plan or otherwise, shall not exceed $100,000.  For this purpose, the Fair Market Value of the shares of Common Stock shall be determined as of the date of grant and each Incentive Stock Option shall be taken into account in the order granted.

 

(ii)                                  Ten Percent Stockholders.  An Incentive Stock Option granted to a Participant who is the holder of record of more than ten percent (10%) of the combined voting power of all classes of stock of the Company shall have an exercise price at least equal to 110% of the Fair Market Value of a share of Common Stock on the date of grant and the term of the Option shall not exceed five (5) years.

 

(iii)                               Notification of Disqualifying Disposition.  If any Participant shall make any disposition of shares of Common Stock acquired pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), the Participant shall notify the Company of such disposition within ten (10) days thereof.

 

7.                                      STOCK APPRECIATION RIGHTS

 

(a)                                 Grant of Stock Appreciation Rights.  The Committee is hereby authorized to grant Stock Appreciation Rights to Participants.  Subject to the terms of the Plan and any applicable Award Agreement, a Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive, upon exercise thereof, the excess of (i) the Fair Market Value of a share of Common Stock on the date of exercise over (ii) the grant price of the Stock Appreciation Right as specified by the Committee.

 

(b)                                 Award Agreement.  Each Stock Appreciation Right granted under the Plan shall be evidenced by an Award Agreement.

 

(i)                                     Grant Price.  The grant price shall be determined by the Committee; provided, however, and except as provided in Section 14, that such price shall not be less than 100% of the Fair Market Value of one share of Common Stock on the date of grant, except that if a Stock Appreciation Right is at any time granted in tandem with an Option, the grant price of the Stock Appreciation Right shall not be less than the exercise price of such Option.

 

(ii)                                  Term.  The term of each Stock Appreciation Right shall not exceed ten (10) years from the date of grant.

 

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(iii)                               Time and Method of Exercise.  The Committee shall establish in the applicable Award Agreement the time or times at which a Stock Appreciation Right may be exercised in whole or in part.  At the discretion of the Committee, the payment upon exercise may be in cash, shares of Common Stock or any combination thereof, or in any other manner approved by the Committee in its sole discretion.  The Committee’s determination as to the form of settlement shall be set forth in the Award Agreement.

 

(iv)                              Termination of Continuous Service.  Each Award Agreement shall set forth the extent, if any, to which the Participant shall have the right to exercise the Stock Appreciation Right following termination of the Participant’s Continuous Service.  Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Stock Appreciation Rights issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Continuous Service.

 

8.                                      RESTRICTED STOCK AND RESTRICTED STOCK UNITS

 

(a)                                 Grant of Restricted Stock or Restricted Stock Units.  The Committee is hereby authorized to grant Awards of Restricted Stock and Restricted Stock Units to Participants.

 

(b)                                 Award Agreement.  Each grant of Restricted Stock or Restricted Stock Units shall be evidenced by an Award Agreement.

 

(i)                                     Restrictions on Transfer.  Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may establish in the applicable Award Agreement (including, without limitation, any limitation on the right to vote a share of Restricted Stock or the right to receive any dividend or other right), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate.  Unrestricted shares of Common Stock, evidenced in such manner as the Committee shall deem appropriate, shall be delivered to the holder of Restricted Stock promptly after such restrictions have lapsed.

 

(ii)                                  Share Registration.  Any Restricted Stock granted under the Plan may be evidenced in such manner as the Committee may deem appropriate, including, without limitation, book-entry registration or issuance of a stock certificate or certificates.  In the event any stock certificate is issued in respect of shares of Restricted Stock granted under the Plan, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock.

 

(iii)                               Forfeiture.  Upon termination of Continuous Service during the restriction period, except as determined otherwise by the Committee, all shares of Restricted Stock and all Restricted Stock Units that are then subject to restrictions shall be forfeited and reacquired by the Company.

 

9.                                      PERFORMANCE AWARDS

 

(a)                                 Grant of Performance Awards.  The Committee is hereby authorized to grant Performance Awards to Participants.  Performance Awards include arrangements under which the grant, issuance, retention, vesting and/or transferability of any Award is subject to such Performance Criteria and such additional conditions or terms as the Committee may designate.

 

(b)                                 Award Agreement.  Each grant of a Performance Award shall be evidenced by an Award Agreement.  Subject to the terms of the Plan and any applicable Award Agreement, a Performance Award granted under the Plan:

 

(i)                                     may be denominated or payable in cash, shares of Common Stock (including, without limitation, Restricted Stock), other securities, or other Awards; and

 

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(ii)                                  shall confer on the holder thereof rights valued as determined by the Committee and payable to, or exercisable by, the holder of the Performance Award, in whole or in part, upon the achievement of such performance goals during such Performance Periods as the Committee shall establish.

 

(c)                                  Covered Employee.  The Committee may from time to time grant Awards to Covered Employees that are intended to satisfy the performance-based compensation requirements of Section 162(m) of the Code.  For purposes of such Awards, the Committee shall consider all of the requirements of Section 162(m), including the Qualifying Performance Criteria, approvals and certification by solely outside directors, the individual Award limits and any other requirements under Section 162(m) of the Code.

 

10.                               OTHER STOCK-BASED AWARDS

 

The Committee is hereby authorized to grant to Participants such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of Common Stock, as are deemed by the Committee to be consistent with the purposes of the Plan; provided, however, that such grants must comply with applicable law.  Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of such Awards.  Shares of Common Stock or other securities delivered pursuant to a purchase right granted under this Section 10 shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms, including, without limitation, cash, shares of Common Stock, other securities, or other Awards, or any combination thereof, as the Committee shall determine.

 

11.                               DIVIDEND EQUIVALENTS

 

The Committee is hereby authorized to grant to Participants the right, if so determined by the Committee, to receive, currently, or on a deferred basis, dividends or Dividend Equivalents, with respect to the shares of Common Stock covered by the Award.  The Committee may provide that any dividends paid on shares of Common Stock subject to an Award must be reinvested in additional shares of Common Stock, which may or may not be subject to the same vesting conditions and restrictions applicable to the Award.  Notwithstanding the award of Dividend Equivalents or dividends, a Participant shall not be entitled to receive a special or extraordinary dividend or distribution unless the Committee shall have expressly authorized such receipt.  All distributions, if any, received by a Participant with respect to an Award as a result of any split, Common Stock dividend, combination of shares of Common Stock, or other similar transaction shall be subject to the restrictions applicable to the original Award.

 

12.                               TAX WITHHOLDING

 

The Company or any Affiliate shall be authorized to withhold from any Award granted or any payment due or transfer made under any Award or under the Plan the amount (in cash, shares of Common Stock, other securities, or other Awards) of withholding taxes due in respect of an Award, its exercise, or any payment or transfer under such Award or under the Plan and to take such other action as may be necessary in the opinion of the Company or Affiliate to satisfy statutory withholding obligations for the payment of such taxes.

 

13.                               CANCELLATION AND RE-GRANT OF OPTIONS

 

(a)                                 Subject to subsection (b) of this Article 13, the Board shall have the authority to effect, at any time and from time to time (i) the repricing of any outstanding Options under the Plan and/or (ii) with the consent of the affected holders of Options, the cancellation of any outstanding Options and the grant in substitution of new Options under the Plan covering the same or different numbers of shares of Common Stock, but having an exercise price per share not less than 100% of the Fair Market Value, or, in the case of a ten percent (10%) stockholder (as defined in subsection 6(c)), not less than 110% of the Fair Market Value) per share of Common Stock on the new grant date.

 

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(b)                                 Prior to the implementation of any such repricing or cancellation of one or more outstanding Options as described in Section 13(c), the Board shall obtain the approval of the stockholders of the Company to the extent required by the New York Stock Exchange, Nasdaq or other securities exchange listing requirements applicable to the Company, or applicable law.

 

(c)                                  To the extent required by Section 162(m) of the Code, shares subject to an Option canceled under this Section 13 shall continue to be counted against the maximum award of Options permitted to be granted during any calendar year to an individual Participant pursuant to Section 4(b) of the Plan.  The repricing of an Option hereunder resulting in a reduction of the exercise price shall be deemed to be a cancellation of the original Option and the grant of a new Option; in the event of such repricing, both the original and the new Options shall be counted against the maximum awards of Options permitted to be granted during any calendar year to an individual Participant pursuant to Section 4(b) of the Plan.  The provisions of this Section 13(c) shall be applicable only to the extent required by Section 162(m) of the Code.

 

14.                               ADJUSTMENTS UPON CHANGES IN STOCK

 

(a)                                 Changes in Capital.  If any change is made in the Common Stock subject to the Plan, or subject to any Award, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum number of shares subject to the Plan and the maximum number of shares subject to award to any person during any calendar year, and the outstanding Awards will be appropriately adjusted in the class(es) and number of shares and price per share of stock subject to such outstanding Awards. Such adjustments shall be made by the Committee proportionately, so as to put the Participant in the same economic position both prior to and after the change in capital. The determination of the Committee shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a “transaction not involving the receipt of consideration by the Company.”)

 

(b)                                 Change of Control.  In the event of a Change of Control, to the extent permitted by applicable law: (i) any surviving corporation (or an Affiliate thereof) shall assume any Awards outstanding under the Plan or shall substitute similar Awards for those outstanding under the Plan and (ii) such Awards shall continue in full force and effect. In the event any surviving corporation (or an Affiliate) refuses to assume or continue such Awards, or to substitute similar Awards for those outstanding under the Plan, then vesting (or release from the repurchase option) shall accelerate such that such Awards are fully vested at such event and shall be exercisable for a period of 15 days after notice from the Company.  If not so exercised within the 15 day period, then such Awards shall be terminated.

 

15.                               GENERAL PROVISIONS

 

(a)                                 Forms of Payment for Awards.  Subject to the terms of the Plan and any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise, or payment of an Award may be made in such form or forms as the Committee shall determine, including, without limitation, cash, shares of Common Stock, rights in or shares issuable under the Award or other Awards, other securities, or other Awards or any combination thereof, and may be in a single payment or transfer, in installments, or on a deferred basis, in each case in accordance with the rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents in respect of installment or deferred payments.

 

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(b)                                 Limits on Transfer of Awards.  Except as provided by the Committee, no Award, and no right under any such Award, shall be assignable, alienable, saleable, or transferable by a Participant otherwise than by will or by the laws of descent and distribution; provided, however, that, if so determined by the Committee, a Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rights of the Participant with respect to any Award upon the death of a Participant.  Each Award, and each right under any Award, shall be exercisable, during the Participant’s lifetime, only by the Participant or, if permissible under applicable law, by the Participant’s guardian or legal representative. No Award, and no right under any such Award, may be pledged, alienated, attached, or otherwise encumbered, and any purported pledge, alienation, attachment, or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate.

 

(c)                                  Conditions and Restrictions Upon Securities Subject to Awards.  The Committee may provide that the shares of Common Stock issued upon exercise of an Option or Stock Appreciation Right or otherwise subject to or issued under an Award shall be subject to such further agreements, restrictions, conditions or limitations as the Committee in its discretion may specify prior to the exercise of such Option or Stock Appreciation Right or the grant, vesting or settlement of such Award, including without limitation, conditions on vesting or transferability and forfeiture or repurchase provisions or provisions on payment of taxes arising in connection with an Award. Without limiting the foregoing, such restrictions may address the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any shares of Common Stock issued under an Award, including without limitation:  (i) restrictions under an insider trading policy or pursuant to applicable law; (ii) restrictions designed to delay and/or coordinate the timing and manner of sales by Participant and holders of other Company equity compensation arrangements; (iii) restrictions as to the use of a specified brokerage firm for such resales or other transfers; and (iv) provisions requiring shares to be sold on the open market or to the Company in order to satisfy tax withholding or other obligations.

 

(d)                                 Share Certificates.  All shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such shares of Common Stock or other securities are then listed, and any applicable Federal, state, or local securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.  Notwithstanding any other provision of this Plan to the contrary, the Company may elect to satisfy any requirement under this Plan for the registration or delivery of stock certificates through the use of book-entry registration.

 

(e)                                  Changes in Accounting or Tax Rules.  Except as provided otherwise at the time an Award is granted, notwithstanding any other provision of the Plan to the contrary, if, during the term of the Plan, any changes in the financial or tax accounting rules applicable to any Award shall occur which, in the sole judgment of the Committee, may have a material adverse effect on the reported earnings, assets or liabilities of the Company, the Committee shall have the right and power to modify, as necessary, any then outstanding and unexercised Options, Stock Appreciation Rights and other outstanding Awards as to which the applicable services or other restrictions have not been satisfied.

 

(f)                                   Non-exclusivity of the Plan.  The adoption of the Plan shall not be construed as creating any limitations upon the right and authority of the Committee to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular individual or particular individuals) as the Committee in its discretion determines desirable.

 

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(g)                                  Other Award Agreement Provisions.  Each Award Agreement may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Committee, in its sole discretion.

 

(h)                                 Other Employee Benefits.  The amount of any compensation deemed to be received by a Participant as a result of the exercise of an Option or Stock Appreciation Right, the sale of shares received upon such exercise, the vesting of any Restricted Stock, receipt of Performance Shares, distributions with respect to Restricted Stock Units, Performance Awards, or Other Stock-Based Awards shall not constitute “earnings” or “compensation” with respect to which any other employee benefits of such employee are determined, including without limitation, benefits under any pension, profit sharing, 401(k), life insurance or salary continuation plan.

 

(i)                                     Severability.  If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.

 

(j)                                    Governing Law.  The validity and construction of this Plan and the Award Agreements shall be construed in accordance with and governed by the laws of the State of Delaware other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan and the Award Agreements to the substantive laws of any other jurisdiction.

 

(k)                                 Section 409A.  Notwithstanding anything in this Plan to the contrary, the Plan and Awards made under the Plan are intended to comply with the requirements imposed by Section 409A of the Code.  If any Plan provision or Award under the Plan would result in the imposition of an additional tax under Section 409A of the Code, the Company and the Participant intend that the Plan provision or Award will be reformed to avoid imposition, to the extent possible, of the applicable tax and no action taken to comply with Section 409A of the Code shall be deemed to adversely affect the Participant’s rights to an Award.  The Participant further agrees that the Committee, in the exercise of its sole discretion and without the consent of the Participant, may amend or modify an Award in any manner and delay the payment of any amounts payable pursuant to an Award to the minimum extent necessary to meet the requirements of Section 409A of the Code as the Committee deems appropriate or desirable.

 

(l)                                     Stockholder Rights.  No Participant nor any other holder of an Award granted under the Plan shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such Award unless and until such person has satisfied all requirements for exercise of the Award or lapse of restrictions pursuant to its terms.

 

16.                               AMENDMENT, MODIFICATION AND TERMINATION

 

(a)                                 Amendment, Modification, and Termination.  Subject to Sections 3, 15(k) and 16(b), and only upon unanimous approval of the entire Board, the Board may at any time terminate, and from time to time may amend or modify the Plan; provided, however, that no amendment or modification may become effective without approval of the stockholders of the Company if stockholder approval is required to enable the Plan to satisfy any applicable statutory or regulatory requirements, or if the Company, on the advice of counsel, determines that stockholder approval is otherwise necessary or desirable.

 

(b)                                 Awards Previously Granted.  Except as otherwise may be required under Section 15(k), notwithstanding Section 16(a), to the contrary, no amendment, modification or termination of the Plan or Award Agreement shall adversely affect in any material way any previously granted Award, without the written consent of the Participant holding such Award.

 

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17.                               STOCKHOLDER APPROVAL; EFFECTIVE DATE OF PLAN

 

The Plan shall be effective immediately upon approval by the stockholders. Unless sooner terminated by the Board, this Plan shall terminate automatically on March 11, 2017. After the Plan is terminated, no Awards may be granted. Awards outstanding at the time the Plan is terminated shall remain outstanding in accordance with the terms and conditions of the Plan and the Award Agreement.

 

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