Document:

Exhibit 10.3.2

 

RESTRICTED STOCK AGREEMENT

 

IRONWOOD PHARMACEUTICALS, INC.

 

AGREEMENT made as of the [·] day of [·], [·] (the “Grant Date”), between Ironwood Pharmaceuticals, Inc. (the “Company”), a Delaware corporation, and [·] (the “Participant”).

 

WHEREAS, the Company has adopted the Ironwood Pharmaceuticals, Inc. Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan (the “Plan”) to promote the interests of the Company by providing an incentive for employees, directors and consultants of the Company;

 

WHEREAS, the Company has adopted the Director Compensation Plan (the “Director Compensation Plan”), effective January 1, 2014, to provide for annual grants to the Company’s non-employee directors of restricted shares of the Company’s Class A Common Stock, $.001 par value per share (“Common Stock”);

 

WHEREAS, pursuant to the provisions of the Plan and the Director Compensation Plan, the Company desires to offer to the Participant restricted shares of Common Stock in accordance with the provisions of the Plan, all on the terms and conditions hereinafter set forth;

 

WHEREAS, Participant wishes to accept said offer; and

 

WHEREAS, the parties hereto understand and agree that any terms used and not defined herein have the meanings ascribed to such terms in the Plan and except where the context otherwise requires, the term “Company” shall have the meaning set forth in the Plan.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.                                      Terms of Grant.  The Participant hereby accepts the offer of the Company to issue to the Participant, in accordance with the terms of the Plan and this Agreement, [·] ([·]) restricted shares of Common Stock (such shares, subject to adjustment pursuant to Section 20 of the Plan and Subsection 2.1(e) hereof, the “Granted Shares”), receipt of which is hereby acknowledged by the Participant and which will be reported as income on the Participant’s Form 1099 for the applicable calendar year in accordance with the provisions of Section 6 hereof.

 

2.1.                            Forfeiture Provisions.

 

(a)                                 Lapsing Forfeiture Right.  In the event that for any reason the Participant is no longer a director of the Company (such cessation of service, a “Termination”) prior to the day immediately preceding the first annual meeting of the Company’s stockholders after the Grant Date (the “Final Vesting Date”), the Participant (or the Participant’s Survivor) shall, on the date of Termination, immediately forfeit to the Company (or its designee) all of the Granted Shares which have not yet lapsed in accordance with the schedule set forth below (the “Lapsing Forfeiture Right”).

 

The Company’s Lapsing Forfeiture Right is as follows:

 

 

(i)                                     If the Participant’s Termination is prior to the three-month anniversary of the Grant Date, all of the Granted Shares shall be forfeited to the Company.

 

(ii)                                  If the Participant’s Termination is on or after the three-month anniversary of the Grant Date but prior to the six-month anniversary of the Grant Date, twenty-five percent (25%) of the Granted Shares shall no longer be subject to the Lapsing Forfeiture Right.

 

(iii)                               If the Participant’s Termination is on or after the six-month anniversary of the Grant Date but prior to the nine-month anniversary of the Grant Date, fifty percent (50%) of the Granted Shares shall no longer be subject to the Lapsing Forfeiture Right.

 

(iv)                              If the Participant’s Termination is on or after the nine-month anniversary of the Grant Date but prior to the Final Vesting Date, seventy-five percent (75%) of the Granted Shares shall no longer be subject to the Lapsing Forfeiture Right.

 

(v)                                 If the Participant’s Termination is on or after the Final Vesting Date, none of the Granted Shares shall remain subject to the Lapsing Forfeiture Right.

 

Notwithstanding the foregoing provisions of this Subsection 2.1(a), the Compensation and HR Committee of the Board shall have the authority, in its sole discretion, to accelerate the vesting of all or any portion of the Granted Shares subject to the Lapsing Forfeiture Right upon the Participant’s Termination at any time prior to the Final Vesting Date in accordance with Section 3 of the Director Compensation Plan.

 

(b)                             Escrow.  The certificates representing all Granted Shares issued to the Participant hereunder which from time to time are subject to the Lapsing Forfeiture Right shall be delivered to the Company and the Company shall hold such Granted Shares in escrow as provided in this Subsection 2.1(b). The Company shall promptly release from escrow and deliver to the Participant a certificate for the whole number of Granted Shares, if any, as to which the Company’s Lapsing Forfeiture Right has lapsed. In the event of forfeiture to the Company of Granted Shares subject to the Lapsing Forfeiture Right, the Company shall release from escrow and cancel a certificate for the number of Granted Shares so forfeited.  Any securities distributed in respect of the Granted Shares held in escrow, including, without limitation, shares issued as a result of stock splits, stock dividends or other recapitalizations, shall also be held in escrow in the same manner as the Granted Shares.  Notwithstanding any of the foregoing, the Company may, in its sole discretion, elect to evidence any Granted Shares issued to the Participant in book-entry or other electronic form in lieu of the delivery of certificates.

 

(c)                                  Prohibition on Transfer.  The Participant recognizes and agrees that all Granted Shares, while subject to the Lapsing Forfeiture Right, may not be sold, transferred, assigned, hypothecated, pledged, encumbered or otherwise disposed of, whether voluntarily or by operation of law, other than to the Company (or its designee) or as set forth under Subsection 2.2(b) below.  The Company shall not be required to transfer any Granted Shares on its books which shall have been sold, assigned or otherwise transferred in violation of this Subsection 2.1(c), or to treat as the owner of such Granted Shares, or to accord the right to vote as such owner or to pay dividends to, any person or organization to which any such Granted Shares shall have been so sold, assigned or otherwise transferred, in violation of this Subsection 2.1(c).

 

(d)                                 Failure to Deliver Granted Shares to be Forfeited.  In the event that the Granted Shares to be forfeited to the Company under this Agreement are not in the Company’s possession pursuant to Subsection 2.1(b) above or otherwise and the Participant or the Participant’s Survivor fails to deliver such Granted Shares to the Company (or its designee), the Company may immediately take such action as is

 

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appropriate to transfer record title of such Granted Shares from the Participant to the Company (or its designee) and treat the Participant and such Granted Shares in all respects as if delivery of such Granted Shares had been made as required by this Agreement.  The Participant hereby irrevocably grants the Company a power of attorney which shall be coupled with an interest for the purpose of effectuating the preceding sentence.

 

(e)                                  Adjustments.  The Plan contains provisions covering the treatment of Common Stock in a number of contingencies such as stock splits and mergers.  Provisions in the Plan for adjustment with respect to the Granted Shares and the related provisions with respect to successors to the business of the Company are hereby made applicable hereunder and are incorporated herein by reference.

 

2.2                               General Restrictions on Transfer of Granted Shares.

 

(a)                                 The Participant agrees that in the event the Company proposes to offer for sale to the public any of its equity securities and such Participant is requested by the Company and any underwriter engaged by the Company in connection with such offering to sign an agreement restricting the sale or other transfer of Common Stock, then he or she will promptly sign such agreement and will not transfer, whether in privately negotiated transactions or to the public in open market transactions or otherwise, any Common Stock or other securities of the Company held by him or her during such period as is determined by the Company and the underwriters (such period, the “Lock-Up Period”).  Such agreement shall be in writing and in form and substance reasonably satisfactory to the Company and such underwriter and pursuant to customary and prevailing terms and conditions.  Notwithstanding whether the Participant has signed such an agreement, the Company may impose stop-transfer instructions with respect to Common Stock or other securities of the Company subject to the foregoing restrictions until the end of the Lock-Up Period.

 

(b)                                 Notwithstanding anything to the contrary contained in this Agreement, the Participant shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”) any of the Granted Shares, or any interest therein, even when such shares are no longer subject to the Lapsing Forfeiture Right until such time as the Participant is no longer a director of the Company, except that the Participant may transfer (i) Granted Shares to or for the benefit of any spouse, children, parents, uncles, aunts, siblings, grandchildren and any other relatives approved by the Board of Directors (collectively, “Approved Relatives”) or to a trust established solely for the benefit of the Participant and/or Approved Relatives, provided that such Granted Shares shall remain subject to this Agreement (including without limitation the restrictions on transfer set forth in this Subsection 2.2(b)) and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement; (ii) Granted Shares no longer subject to the Lapsing Forfeiture Right in an amount approved by the Company to be required with respect to the Participant’s estimated total federal, state and local tax obligations associated with the termination of the Lapsing Forfeiture Right; (iii) Granted Shares as part of the sale of all or substantially all of the shares of capital stock of the Company (including pursuant to a merger or consolidation); or (iv) Granted Shares as otherwise approved by the Board or Compensation and HR Committee of the Board, provided that such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of the terms and conditions of this Agreement.

 

(c)                                  The Company shall not be required (a) to transfer on its books any of the Granted Shares which shall have been sold or transferred in violation of any of the provisions set forth herein or in the Plan, or (b) to treat as owner of such Granted Shares or to pay dividends to any transferee to whom any such Granted Shares shall have been sold or transferred.

 

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3.                                      Rights as a Stockholder.  The Participant shall have all the rights of a stockholder with respect to the Granted Shares, including voting and dividend rights, subject to the transfer and other restrictions set forth herein and in the Plan.

 

4.                                      Legend.  In addition to any legend required pursuant to the Plan, all certificates representing the Granted Shares to be issued to the Participant pursuant to this Agreement shall have endorsed thereon a legend substantially as follows:

 

“The shares represented by this certificate are subject to restrictions set forth in a Restricted Stock Agreement dated as of [·] [·], [·] with this Company and this Company’s Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan, copies of which are available for inspection at the offices of this Company or will be made available upon request.”

 

5.                                      Incorporation of the Plan.  The Participant specifically understands and agrees that the Granted Shares issued under the Plan are being granted to the Participant pursuant to the Plan, a copy of which Plan the Participant acknowledges he or she has read and understands and by which Plan he or she agrees to be bound.  The provisions of the Plan are incorporated herein by reference.

 

6.                                      Tax Liability of the Participant and Payment of Taxes.

 

(a)                                 The Participant acknowledges and agrees that any income or other taxes due from the Participant with respect to the Granted Shares including, without limitation, the Lapsing Forfeiture Right, shall be the Participant’s responsibility to satisfy and pay.  The Company shall have no liability or obligation relating to the foregoing.

 

(b)                                 Within thirty (30) days of the date of this Agreement, the Participant may file an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”), in substantially the form attached as Exhibit A (the “Election Form”).  The Participant acknowledges that if he or she does not file such an election, as the Granted Shares are released from the Lapsing Forfeiture Right or otherwise in accordance with this Agreement and the Plan, as applicable, the Participant will have income for tax purposes equal to the fair market value of the Granted Shares at such date.  The Participant has been given the opportunity to obtain the advice of his or her tax advisors with respect to the tax consequences of the award of the Granted Shares, the Lapsing Forfeiture Right and the other provisions of this Agreement and the Plan, and the desirability of making an election under Section 83(b) of the Code.  The Participant acknowledges and agrees that, if he or she files an election under Section 83(b) of the Code, he or she will deliver to the Company a copy of the executed Election Form, and the original executed Election Form shall be filed by the Participant with the appropriate Internal Revenue Service office not later than thirty (30) days after the date of this Agreement.

 

7.                                      Equitable Relief.  The Participant specifically acknowledges and agrees that in the event of a breach or threatened breach of the provisions of this Agreement or the Plan, including the attempted transfer of the Granted Shares by the Participant in violation of this Agreement, monetary damages may not be adequate to compensate the Company, and, therefore, in the event of such a breach or threatened breach, in addition to any right to damages, the Company shall be entitled to equitable relief in any court having competent jurisdiction.  Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for any such breach or threatened breach.

 

8.                                      No Obligation to Maintain Relationship.  The Company is not by the Plan or this Agreement obligated to continue the Participant as director of the Company.  The Participant acknowledges:  (i) that the Plan is discretionary in nature and may be suspended or terminated by the

 

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Company at any time; and (ii) that this award of Granted Shares is a one-time benefit which does not create any contractual or other right to receive future grants of Common Stock, or benefits in lieu of Common Stock.

 

9.                                      Notices.  Any notices required or permitted by the terms of this Agreement or the Plan shall be given by recognized courier service, facsimile, registered or certified mail, return receipt requested, addressed as follows:

 

If to the Company:

 

Ironwood Pharmaceuticals, Inc.

301 Binney Street

Cambridge, MA 02142

Attn:  General Counsel

Fax:   (617) 494-0480

 

If to the Participant:

 

[·]

 

or to such other address as either party may designate in writing to the other.  Any such notice shall be deemed to have been given on the earliest of receipt, one business day following delivery by the sender to a recognized courier service, or three business days following mailing by registered or certified mail.

 

10.                               Benefit of Agreement.  Subject to the provisions of the Plan and the other provisions hereof, this Agreement shall be for the benefit of and shall be binding upon the heirs, executors, administrators, successors and assigns of the parties hereto.

 

11.                               Governing Law.  This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware, without giving effect to the conflict of law principles thereof.  For the purpose of litigating any dispute that arises under this Agreement, whether at law or in equity, the parties hereby consent to exclusive jurisdiction in Massachusetts and agree that such litigation shall be conducted in the state courts of Middlesex County or the federal courts of the United States for the District of Massachusetts.

 

12.                               Severability.  If any provision of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, then such provision or provisions shall be modified to the extent necessary to make such provision valid and enforceable, and to the extent that this is impossible, then such provision shall be deemed to be excised from this Agreement, and the validity, legality and enforceability of the rest of this Agreement shall not be affected thereby.

 

13.                               Entire Agreement.  This Agreement, together with the Plan, constitutes the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof.  No statement, representation, warranty, covenant or agreement not expressly set forth in this Agreement shall affect or be used to interpret, change or restrict the express terms and provisions of this Agreement provided, however, in any event, this Agreement shall be subject to and governed by the Plan.

 

14.                               Modifications and Amendments; Waivers and Consents.  The terms and provisions of this Agreement may be modified or amended as provided in the Plan.  Except as provided in the Plan, the terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted,

 

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only by written document executed by the party entitled to the benefits of such terms or provisions.  No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar.  Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.

 

15.                               Consent of Spouse/Domestic Partner.  If the Participant has a spouse or domestic partner as of the date of this Agreement, the Participant’s spouse or domestic partner shall execute a Consent of Spouse/Domestic Partner in the form of Exhibit B hereto, effective as of the date hereof.  Such consent shall not be deemed to confer or convey to the spouse or domestic partner any rights in the Granted Shares that do not otherwise exist by operation of law or the agreement of the parties.  If the Participant subsequent to the date hereof, marries, remarries or establishes a domestic partner relationship, the Participant shall, not later than 60 days thereafter, obtain his or her new spouse/domestic partner’s acknowledgement of and consent to the existence and binding effect of all restrictions contained in this Agreement by having such spouse/domestic partner execute and deliver a Consent of Spouse/Domestic Partner in the form of Exhibit B.

 

16.                               Counterparts.  This Agreement may be executed in one or more counterparts, and by different parties hereto on separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

17.                               Data Privacy.  By entering into this Agreement, the Participant:  (i) authorizes the Company, and any agent of the Company administering the Plan or providing Plan record keeping services, to disclose to the Company such information and data as the Company shall request in order to facilitate the grant of the Granted Shares and the administration of this Agreement and the Plan; (ii) waives any data privacy rights he or she may have with respect to such information; and (iii) authorizes the Company to store and transmit such information in electronic form.

 

[THE NEXT PAGE IS THE SIGNATURE PAGE]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

	
 
    	
IRONWOOD PHARMACEUTICALS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Participant:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[·]
    

 

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EXHIBIT A

 

Election to Include Gross Income in Year

of Transfer Pursuant to Section 83(b)

of the Internal Revenue Code of 1986, as amended

 

In accordance with Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”), the undersigned hereby elects to include in his or her gross income as compensation for services the fair market value of the property (described below) at the time of transfer.

 

The following sets forth the information required in accordance with the Code and the regulations promulgated thereunder:

 

1.                                      The name, address and social security number of the undersigned are:

 

Name:   [·]

 

Address: [·]

 

Social Security No.:  [·]

 

2.                                      The description of the property with respect to which the election is being made is as follows:

 

[·] ([·]) shares (the “Shares”) of Class A Common Stock, $.001 par value per share, of Ironwood Pharmaceuticals, Inc., a Delaware corporation (the “Company”).

 

3.                                      This election is made for the calendar year [·], with respect to the transfer of the property to the Taxpayer on [·] [·],[·] (the “Grant Date”).

 

4.                                      Description of restrictions:  The property is subject to the following restrictions:

 

In the event taxpayer’s service as a director of the Company is terminated, the taxpayer shall forfeit the Shares as set forth below:

 

A.                                    If the termination takes place prior to the three-month anniversary of the Grant Date, all of the Shares will be forfeited.

 

B.                                    If the termination takes place on or after the three-month anniversary of the Grant Date but prior to the six-month anniversary of the Grant Date, seventy-five percent (75%) of the Shares will be forfeited.

 

C.                                    If the termination takes place on or after the six-month anniversary of the Grant Date but prior to the nine-month anniversary of the Grant Date, fifty percent (50%) of the Shares will be forfeited.

 

D.                                    If the termination takes place on or after the nine-month anniversary of the Grant Date but prior to the day immediately preceding the first annual meeting of the Company’s stockholders after the Grant Date (the “Final Vesting Date”), twenty-five percent (25%) of the Shares will be forfeited.

 

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E.                                     If the termination takes place on or after the Final Vesting Date, none of the Shares will be forfeited.

 

5.                                      The fair market value at time of transfer (determined without regard to any restrictions other than restrictions which by their terms will never lapse) of the property with respect to which this election is being made was not more than $[·] per Share.

 

6.                                      A copy of this statement has been furnished to the Company.

 

Signed this              day of                                 ,           .

 

	
 
    	
 
    
	
 
    	
[·]
    

 

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EXHIBIT B

 

CONSENT OF SPOUSE/DOMESTIC PARTNER

 

I,                                                             , spouse or domestic partner of [·] acknowledge that I have read the RESTRICTED STOCK AGREEMENT dated as of [·] [·], [·] (the “Agreement”) to which this Consent is attached as Exhibit B and that I know its contents.  Capitalized terms used and not defined herein shall have the meanings assigned to such terms in the Agreement.  I am aware that by its provisions the Granted Shares granted to my spouse/domestic partner pursuant to the Agreement are subject to a Lapsing Forfeiture Right and certain other restrictions in favor of Ironwood Pharmaceuticals, Inc. (the “Company”) and that, accordingly, I may be required to forfeit to the Company any or all of the Granted Shares of which I may become possessed as a result of a gift from my spouse/domestic partner or a court decree and/or any property settlement in any domestic litigation.

 

I hereby agree that my interest, if any, in the Granted Shares subject to the Agreement shall be irrevocably bound by the Agreement and the Plan and further understand and agree that any community property interest I may have in the Granted Shares shall be similarly bound by the Agreement and the Plan.

 

I agree to the Lapsing Forfeiture Right and the other terms of the Agreement and I hereby consent to the forfeiture of the Granted Shares to the Company by my spouse/domestic partner or my spouse/domestic partner’s legal representative in accordance with the provisions of the Agreement.  Further, as part of the consideration for the Agreement, I agree that at my death, if I have not disposed of any interest of mine in the Granted Shares by an outright bequest of the Granted Shares to my spouse or domestic partner, then the Company shall have the same rights against my legal representative to exercise its rights to the Granted Shares with respect to any interest of mine in the Granted Shares as it would have had pursuant to the Agreement if I had acquired the Granted Shares pursuant to a court decree in domestic litigation.

 

I AM AWARE THAT THE LEGAL, FINANCIAL AND RELATED MATTERS CONTAINED IN THE AGREEMENT AND THE PLAN ARE COMPLEX AND THAT I AM FREE TO SEEK INDEPENDENT PROFESSIONAL GUIDANCE OR COUNSEL WITH RESPECT TO THIS CONSENT.  I HAVE EITHER SOUGHT SUCH GUIDANCE OR COUNSEL OR DETERMINED AFTER REVIEWING THE AGREEMENT AND THE PLAN CAREFULLY THAT I WILL WAIVE SUCH RIGHT.

 

Dated as of the          day of                 ,           .

 

	
 
    	
 
    
	
 
    	
Signature
    

 

B-1Exhibit 10.6

 

DIRECTOR COMPENSATION PLAN

 

1.              Applicable Persons

 

·                  Each director of Ironwood Pharmaceuticals, Inc. (the “Company”) who is not an employee of the Company (each, an “Outside Director”).

 

2.              Restricted Stock Grant for Board Service

 

·                  For the period of service from January 1, 2014 to the 2014 Annual Meeting Date (the “2014 Service Period”), on January 2, 2014, the Company shall grant to each Outside Director a number of restricted shares of the Company’s Class A common stock equal to the Peer Group Amount (i) multiplied by the number of days in the 2014 Service Period divided by 365, and (ii) divided by the Average Stock Price.  Beginning with the 2014 Annual Meeting of Stockholders, on each Annual Meeting Date the Company shall grant to each Outside Director a number of restricted shares of the Company’s Class A common stock equal to the Peer Group Amount divided by the Average Stock Price.

 

·                  The shares of restricted stock granted with respect to the 2014 Service Period shall vest in two equal installments, on March 31, 2014 and on the day before the 2014 Annual Meeting Date.  Beginning with the shares of restricted stock granted at the 2014 Annual Meeting of Stockholders, such shares shall vest in four equal installments commencing on the Annual Meeting Date, as follows: 25% of the shares shall vest on each three-month anniversary of the Annual Meeting Date over a nine-month period and the remaining 25% of the shares shall vest on the day before the Annual Meeting Date for the next calendar year.  In each case, vesting is contingent on such Outside Director continuing to serve as a member of the Board of Directors on the last day of each applicable vesting period.

 

·                  If such Outside Director ceases serving as a member of the Board of Directors at any time during the vesting period, unvested shares will be forfeited on the date of such Outside Director’s termination of service.

 

·                  Unless otherwise established by the Compensation and HR Committee, if an Outside Director is elected as a member of the Board of Directors other than at an annual meeting of stockholders, on the start date of such Outside Director’s service on the Board of Directors (the “Start Date”), the Company shall grant such Outside Director a number of restricted shares of the Company’s Class A common stock equal to the number of restricted shares granted to Outside Directors on the last Annual Meeting Date preceding the Start Date multiplied by the Ratio. Such shares shall vest equally over the number of vesting periods remaining for the restricted shares granted to Outside Directors on the last Annual Meeting Date preceding the Start Date.

 

·                  In each case, the number of restricted shares granted shall be rounded down to the nearest whole number so that no fractional shares shall be issued.

 

·                  For purposes of this section, the following definitions apply:

 

·                  “Annual Meeting Date” is the date of the annual meeting of stockholders of the Company for a calendar year.

 

 

·                  “Average Stock Price” is the average closing price of the Company’s Class A common stock on the NASDAQ Global Select Market (or the stock exchange on which the Company’s Class A common stock is being actively traded) for the six months preceding the month in which the annual meeting of stockholders or a Start Date occurs, as applicable (or, in the case of the 2014 Service Period, for the period July 1, 2013 — December 31, 2013).  For example, if the Annual Meeting Date is June 3, 2014, the Average Stock Price is the average closing price of the Company’s Class A common stock on the NASDAQ Global Select Market (or the stock exchange on which the Company’s Class A common stock is being actively traded) from December 1, 2013 — May 31, 2014.

 

·                  “Peer Group Amount” shall mean the dollar amount for total director compensation approximating the 25th percentile of the Company’s current peer group (i.e., the Company’s peer group as of the date of grant of the restricted shares of the Company’s Class A common stock), as determined by the Compensation and HR Committee.

 

·                  “Ratio” equals (i) 365 minus the number of days elapsed between the last Annual Meeting Date preceding the Start Date and the Start Date, (ii) divided by 365.

 

3.              Purchase Price and Other Provisions Applicable to All Stock Grants

 

·                  Shares issued shall be issued at no cash cost and shall be subject to the terms and conditions of the Company’s stock plan then in effect (which, at the time of implementation of this Director Compensation Plan, is the Company’s Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan).

 

·                  The terms of each such grant shall be evidenced by a restricted stock agreement.  Such restricted stock agreement shall contain a restriction on the transfer of any shares during the term that the director serves on the Board of Directors with the following exceptions: (i) shares sold to cover tax liabilities; (ii) vested shares transferred to immediate family members or trusts for their benefit, (iii) vested shares transferred or sold upon a change of control, or (iv) as otherwise approved by the Board of Directors or Compensation and HR Committee.

 

·                  Directors will be responsible for payment of any state or federal income taxes resulting from the award.

 

·                  The Compensation and HR Committee shall have the authority to accelerate all or a portion of any unvested restricted shares in the event that an Outside Director’s service to the Board of Directors ends prior to completion of a vesting period.  In making this decision, the Compensation and HR Committee shall take into account the following factors: (i) the cumulative contributions made by the Outside Director to the Company, (ii) his or her length of service on the Board of Directors, and (iii) all the facts and circumstances associated with the Outside Director’s departure including the economic consequences of early departure.

 

 

4.              Annual Board Chairman and Board Committee Compensation

 

·                  Each Outside Director shall also receive an additional $10,000 annually for his or her service as Chairman of the Board of Directors and/or as Chairman of a committee of the Board of Directors, commencing on January 1, 2014; provided that, if an Outside Director ceases or commences service as Chairman of the Board of Directors and/or as Chairman of a committee of the Board of Directors, the amount of such fee shall be prorated through (i) the date the Outside Director ceases to hold such chairperson position, or (ii) from the date the Outside Director begins serving in such chairperson position, respectively.

 

·                  Payment of such fees shall be made in cash or a grant of Class A common stock at the election of such Outside Director, quarterly in arrears as follows:  March 15, June 15, September 15 and December 15 (or if such date is not a trading day, the last trading day preceding such date) (each, a “Grant Date”).  If stock is elected, the shares shall automatically be issued to an Outside Director without further action of the Board of Directors as of the applicable Grant Date, and the number of shares of stock to be issued shall be calculated by dividing $2,500 (or a prorated amount thereof if an Outside Director ceases or commences holding a chairperson position during such period) by the fair market value of a share of Class A common stock of the Company on such Grant Date.  The number of such shares granted shall be rounded down to the nearest whole number so that no fractional shares shall be issued.

 

·                  Each Outside Director shall make an election, indicating the type of compensation to be received for such annual chairperson compensation, prior to January 1 of each year.  In the event that an Outside Director has not submitted his or her election for the applicable year by December 31, then the election of such Outside Director shall be deemed to be the same as the election made by such Outside Director for the prior year.  If an Outside Director has never made an election, such fees shall be paid in cash.

 

The Board of Directors shall review this Director Compensation Plan from time to time to assess whether any amendments in the type and amount of compensation provided herein should be adjusted.

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