Document:

Exhibit 10.11

 

FRAM HOLDINGS, INC.

SECOND AMENDED AND RESTATED

2006 INCENTIVE COMPENSATION PLAN

 

DEFERRED RESTRICTED STOCK AWARD

GRANT NOTICE AND AGREEMENT

 

 

THIS DEFERRED RESTRICTED STOCK AWARD GRANT NOTICE AND AGREEMENT (the “Agreement”), effective as of the Grant Date set forth below (the “Grant Date”), is made by and between Fram Holdings, Inc., a Delaware corporation (the “Company”), and the individual Participant listed below (“Participant”):

 

WHEREAS, the Company wishes to carry out the Fram Holdings, Inc. Second Amended and Restated 2006 Incentive Compensation Plan, as amended from time to time (the “Plan”), attached hereto as Exhibit “A” (the terms of which are hereby incorporated by reference and made a part of this Agreement);

 

WHEREAS, the Administrator of the Plan has determined that it would be to the advantage and best interest of the Company to issue the Deferred Restricted Shares provided for herein to Participant as an inducement to enter into or remain in the service of the Company, ORIX USA, LP, a Delaware limited partnership (“ORIX LP”), or the Company’s Subsidiaries and as an incentive for increased efforts during such service, and other good and valuable consideration provided for herein, and has advised the Company thereof and instructed the undersigned officer to issue Deferred Restricted Shares as of each Vesting Date (as defined below); and

 

WHEREAS, as a condition to the receipt of the Deferred Restricted Shares, Participant has agreed to enter into (a) this Agreement, (b) that certain Third Amended and Restated Stockholders’ Agreement, dated as of February 17, 2009, by and among the Company and certain stockholders of the Company (as amended from time to time, the “Stockholders’ Agreement”), attached hereto as Exhibit “B”, (c) that certain Voting Trust Agreement, dated as of April 10, 2007, by and among the Company and the Stockholders and Trustees identified therein (as amended from time to time, the “Series E Voting Trust Agreement”), attached hereto as Exhibit “C”, and (d) the Amended and Restated Rollover Holders Agreement dated as of January 1, 2009 by and among the Rollover Holders party thereto, the individuals who became parties thereto by joinder pursuant to Section 5 thereof and the individuals who became parties to the Rollover Holders Agreement dated as of January 1, 2006 by joinder (as amended, the “Rollover Holders Agreement”), attached hereto as Exhibit “E”, each of which sets forth the rights and obligations of the parties thereto with respect to the Deferred Restricted Shares to be issued hereunder.

 

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

 

1.         Defined Terms.

 

Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Deferred Restricted Stock Award Grant Notice and Agreement.

 

 

2.         Grant of Deferred Restricted Shares.

 

(a)        The Company hereby grants to Participant, pursuant to the Plan, the right to receive the number of shares of the Company’s Series E Common Stock, par value $.000001 per share (“Series E Common Stock”), determined as hereinafter provided (the “Deferred Restricted Shares”), subject to all of the terms and conditions as set forth herein and in the Plan.

 

	
Participant:
    	
«Name»
    
	
 
    	
 
    
	
Grant   Date`:
    	
April 30,   2014
    
	
 
    	
 
    
	
Total   Dollar Value of the Award:
    	
$«Dollar   Value»
    
	
 
    	
 
    
	
Award   Schedule:
    	
Deferred   Restricted Shares shall be issued to Participant on each vesting date   described below (“Vesting Date”) and in the amounts determined as   follows:
    
	
 
    	
 
    
	
 
    	
Vesting Date
    	
 
    	
Portion of Total Dollar

Value of the Award Vesting
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
(i)
    	
First   Anniversary of  Grant Date
    	
 
    	
One-Third
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
(ii)
    	
Second   Anniversary  of Grant Date
    	
 
    	
One-Third
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
(iii)
    	
Third   Anniversary  of Grant Date
    	
 
    	
One-Third
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
On each Vesting Date, subject to the terms and conditions of the Plan   and those contained in this Agreement, the Company shall issue to Participant   the number of shares of Series E Common Stock determined by dividing   (i) by (ii), where (i) is the dollar amount of the portion of the   Total Dollar Value of the Award vesting on such date (pursuant to the   schedule above), and (ii) is the Fair Market Value of a share of the   Series E Common Stock on such Vesting Date.
    

 

(b)        As a condition to the issuance of the Deferred Restricted Shares on a Vesting Date, if Participant is not already a party to such agreements, Participant must before such Vesting Date become a party to (i) the Stockholders’ Agreement (ii) the Series E Voting Trust Agreement and (iii) the Rollover Holders Agreement.  The Stockholders’ Agreement contains certain Transfer restrictions, drag-along rights and share redemption and repurchase provisions applicable to the Deferred Restricted Shares after they have been issued pursuant to this Agreement (“Restricted Shares”).  Pursuant to the Series E Voting Trust Agreement, Participant will deposit all of his or her Restricted Shares into a voting trust and, although the Restricted

 

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Shares are not entitled to vote, except as required by law and except with respect to the election of directors and then only to the extent Series A common stock and Series B common stock has been redeemed, and do not have the right to consent to any amendment or waiver of the Stockholders’ Agreement, the voting trustees thereunder will be able to vote all of the Restricted Shares on the limited matters (if any) on which Participant may be entitled to vote or consent.  Attached hereto as Exhibit “D” is a summary of the restrictions, rights and provisions applicable to the Restricted Shares under the Stockholders’ Agreement and Series E Voting Trust Agreement.

 

(c)        In no event shall Participant have any further right to issuance of any additional Deferred Restricted Shares following Participant’s Termination of Employment as hereinafter defined; provided, however, that, if shares of Series E Common Stock have not been issued to Participant with respect to the Total Dollar Value of the Award at the time of Participant’s death, the Company shall issue to Participant the number of shares of Series E Common Stock determined by dividing (i) by (ii), where (i) is the dollar amount equal to one-third (1/3) of the Total Value of the Award, and (ii) is the Fair Market Value of a share of Series E Common Stock on the date of Participant’s death.  In addition, if on any scheduled Vesting Date, the Employee is “on probation” or is otherwise not in good standing with the Employer, as evidenced by the Employee’s personnel files, the Deferred Restricted Shares shall not be issued, unless and until the Employee satisfies his or her conditions of probation or the Employee’s status returns to satisfactory.

 

For purposes of this Agreement “Termination of Employment” shall mean the time when the employee-employer relationship between Participant and the Company, ORIX LP or any of the Company’s Subsidiaries is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding terminations where there is a simultaneous reemployment or continuing employment of Participant by the Company, ORIX LP (when it is anticipated that the Participant’s services as an Employee of ORIX LP will be provided primarily to the Company or any of its Subsidiaries) or any of the Company’s Subsidiaries.  Notwithstanding the foregoing, a “Termination of Employment” shall be deemed to have occurred on the date on which the Employee gives or is given notice of termination, even if the Employee is entitled to gardening leave or the Employee’s last day in the office or last day on payroll occurs on a later date.  The Administrator, in its sole discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, all questions regarding the nature and reasons for a Termination of Employment, and all questions of whether particular leaves of absence constitute a Termination of Employment.

 

(d)       The Restricted Shares will be issued in uncertificated form, with the Restricted Shares recorded in Participant’s name (or the name of any relevant Qualified Living Trust, as defined in the Stockholders’ Agreement) in the books and records of the Company (or its transfer agent).  Participant hereby waives any right to request from the Company a certificate representing his or her Restricted Shares registered in certificate form.

 

(e)        Notwithstanding anything to the contrary herein, no Deferred Restricted Shares (prior to issuance as Restricted Shares), or any interest or right therein or part thereof, shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or

 

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shall be subject to Transfer, whether voluntary or involuntary or by operation of law, by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted Transfer thereof shall be null and void and of no effect.

 

3.         Participant’s Representations and Warranties.

 

In connection with the acquisition of the Restricted Shares, Participant represents and warrants to the Company and agrees and acknowledges that:

 

(a)        Participant is acquiring the Restricted Shares for his or her own account, for investment purposes only and not with a present view toward the distribution thereof or with any present intention of distributing or reselling any such Restricted Shares in violation of the Securities Act or any state securities laws and that, irrespective of any other provisions of this Agreement or the Stockholders’ Agreement, any Transfer of the Restricted Shares by Participant shall be made only in compliance with all applicable federal and state securities laws, including, without limitation, the Securities Act.

 

(b)        The Restricted Shares are not registered under the Securities Act or qualified under the securities laws of any other jurisdiction and must be held by Participant until the Restricted Shares are registered under the Securities Act and qualified under such laws or an exemption from such registration and qualification is available.  The Company shall have no obligation to take any action that may be necessary to make available any exemption from registration or qualification under the Securities Act or the securities laws of any other jurisdiction.

 

(c)        Participant has had the opportunity to ask questions and receive answers concerning the terms and conditions of the offering of the Restricted Shares.  Participant has had full access to such information and materials concerning the Company as Participant has requested.  The Company has answered all inquiries that Participant has made to the Company relating to the Company or the sale of the Restricted Shares.  Participant has carefully reviewed and understands the risks of and other considerations relating to an investment in the Restricted Shares.

 

(d)       Participant has such knowledge and experience in financial and business matters such that Participant is capable of evaluating the merits and risks of investment in the Restricted Shares and of making an informed investment decision with respect thereto or has consulted with advisors who possess such knowledge and experience.

 

(e)        Participant is able to bear the economic risk of his or her investment in the Restricted Shares for an indefinite period of time.

 

(f)        Participant is an “accredited investor” as that term is defined under Regulation D of the Securities Act.

 

4.         Administration.

 

(a)        The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are

 

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consistent therewith and to interpret, amend or revoke any such rules.  All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon Participant, the Company and all other interested persons.  No member of the Administrator shall be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan or the Restricted Shares.

 

(b)        For purposes of this Agreement, “Administrator” shall mean the Committee, except that, if the Board elects to exercise any rights or duties of the Committee, the term “Administrator” shall mean the Board as to those rights or duties exercised by the Board.

 

5.         Conditions to Issuance of Stock.

 

The Restricted Shares may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company.  Such shares shall be fully paid and nonassessable.  The Company shall not be required to issue or deliver any Restricted Shares or other stock pursuant to this Agreement prior to fulfillment of all of the following conditions:

 

(a)        The completion of any registration or other qualification of such shares under any state, federal or foreign law, or under rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the Administrator shall, in its sole discretion, deem necessary or advisable, or the receipt of such further representations as to the Participant’s investment intent (including, without limitation, any investment representation letter that may be required from the Participant pursuant to Section 5.12 of the Plan) or completion of other actions necessary to perfect exemptions from such registration or qualification requirements as the Administrator may, in its sole discretion, deem necessary or advisable;

 

(b)        The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its sole discretion, determine to be necessary or advisable;

 

(c)        The execution of such documentation, if any, by the Participant or the Participant’s spouse, if applicable, as the Administrator may deem necessary or advisable to evidence the agreement of the Participant or the Participant’s spouse, as applicable, to be bound by the terms of the Stockholders’ Agreement and Series E Voting Trust Agreement;

 

(d)       The lapse of such reasonable period of time (as may be established by the Administrator from time to time for reasons of administrative convenience) following execution of the Agreement and such other documentation as the Administrator may require consistent with the terms of the Plan (including, without limitation, any investment representation letter required from the Participant pursuant to Section 5.12 of the Plan);

 

(e)        The receipt by the Company of full payment for such shares (which may be in the form of past services or other lawful consideration), including payment of any applicable withholding tax in accordance with Section 5.6 below; and

 

(f)        The admission of such shares to listing on all stock exchanges on which such class of stock is then listed, if any.

 

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6.         Rights as Stockholder.

 

Subject to the Stockholders’ Agreement, upon the issuance of the Restricted Shares to Participant, Participant shall have all the rights of a holder of Series E Common Stock provided in the Company’s certificate of incorporation, including the right to receive all dividends or other distributions paid or made with respect to the Series E Common Stock, but subject to the terms and conditions of the Stockholders’ Agreement, Series E Voting Trust Agreement and any other provisions governing the Series E Common Stock.

 

7.         No Representations.

 

No representation is being made by the Company, ORIX LP or any of the Company’s Subsidiaries, or any Affiliate of the Company, ORIX LP or any of the Company’s Subsidiaries, regarding the present or future value of the Restricted Shares, and no person has been authorized by the Company, ORIX LP or any of the Company’s Subsidiaries, or any Affiliate of the Company, ORIX LP or any of the Company’s Subsidiaries, to make any representation regarding the present or future value of the Restricted Shares.

 

8.         Tax Withholding.

 

(a)        The Company shall be entitled to require payment of any sums required by federal, state, local or foreign tax law to be withheld with respect to the issuance of the Restricted Shares, or any other taxable event related thereto.  The Company may require such payment to be made by the deduction of such amount from other compensation payable to Participant, such as cash incentive bonus payments, or, in the Company’s discretion, the Company may require Participant to make all or any portion of such payment in one or more of the other forms specified below:

 

(i)         by cash or check made payable to the Company;

 

(ii)        by tendering shares of Series E Common Stock which have a then current Fair Market Value not greater than the amount necessary to satisfy the Company’s withholding obligation based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes; or

 

(iii)       in any combination of the foregoing.

 

(b)        In the event Participant fails to provide timely payment of all sums required by the Company pursuant to Section 8(a), the Company shall have the right and option, but not obligation, to treat such failure as an election by Participant to provide all or any portion of such required payment by means of tendering shares of Series E Common Stock in accordance with Section 8(a)(ii) above.

 

9.         Notices.

 

Any notice or communication to be given by Participant under the terms of this Agreement shall be addressed to the Secretary or his or her office.  Any notice to be given to Participant shall be addressed to him or her at the address specified for Participant in the

 

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Company’s records.  Any notice which is required to be given to Participant shall, if Participant is then deceased, be given to Participant’s personal representative if such representative has previously informed the Company of his or her status and address by written notice under this Section.  Any notice shall be deemed duly given upon personal delivery or when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

 

10.       Not a Contract of Employment.

 

Nothing in this Agreement, the Plan or the Stockholders’ Agreement shall confer upon Participant any right to continue in the employ or service of the Company, ORIX LP or any of the Company’s Subsidiaries, or shall interfere with or restrict in any way the rights of the Company, ORIX LP or any of the Company’s Subsidiaries, which rights are hereby expressly reserved, to discharge Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between Participant and the Company, ORIX LP or any of the Company’s Subsidiaries.

 

11.       Further Instruments.

 

Participant agrees, upon request, to execute any further documents or instruments that the Administrator, in its sole discretion, determines to be necessary or desirable to carry out the purposes or intent of this Agreement.

 

12.       Titles.

 

Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

 

13.       Construction.

 

This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware without regard to otherwise governing principles of conflicts of law.

 

14.       Conformity to Securities Laws.

 

Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of all applicable federal and state laws, rules and regulations (including, without limitation, the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder) and to such rules, regulations and other requirements of any listing, regulatory or other governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith.  Notwithstanding anything herein to the contrary, the Plan and this Agreement shall be administered, and the Restricted Shares are granted, only in such a manner as to conform to such laws, rules and regulations.  To the extent permitted by applicable law, the Plan, this Agreement and the Restricted Shares shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

 

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15.       Code Section 409A.

 

This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and applicable regulations and guidance issued thereunder (“Code Section 409A”), to the extent applicable.  Each payment under this Agreement shall be treated as a separate payment for purposes of Code Section 409A.  Any payments or distributions to be made under this Agreement upon a separation from service of amounts classified as “nonqualified deferred compensation” for purposes of Code Section 409A, and not exempt from Code Section 409A, shall in no event be made or commence until six (6) months after Participant’s Separation from Service (as such term is defined in Section 409A).  Where this Agreement provides for a payment of nonqualified deferred compensation subject to Code Section 409A, the date or event upon which such payment is to be made hereunder will be the Code Section 409A “payment date,” but actual payment will be made no later than the latest date permitted under Code Section 409A (generally, by the later of the end of the calendar year in which the payment date occurs, or the 15th day of the third calendar month after the payment date occurs).

 

16.       Notice of Restrictions.

 

In accordance with Sections 151(f) and 202(a) of the General Corporation Law of the State of Delaware, as amended, the Participant is hereby notified that:

 

THE SECURITIES GOVERNED BY THIS AGREEMENT ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND FORFEITURE RESTRICTIONS AS SET FORTH IN THIS AGREEMENT.  SUCH TRANSFER RESTRICTIONS AND FORFEITURE RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.

 

THE SECURITIES GOVERNED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT, AND APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND QUALIFICATION OR AN EXEMPTION THEREFROM.

 

THE SECURITIES GOVERNED BY THIS AGREEMENT ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, REDEMPTIONS OF THE SECURITIES AND OTHER RESTRICTIONS SET FORTH IN THE STOCKHOLDERS’ AGREEMENT.  SUCH TRANSFER RESTRICTIONS AND OTHER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SECURITIES.

 

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THE SECURITIES GOVERNED BY THIS AGREEMENT ARE SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE SERIES E VOTING TRUST AGREEMENT.

 

The Company shall furnish without charge to Participant, if he or she so requests, a statement of the powers, designations, preferences and relative, participating, options or other special rights of the Series E Common Stock and the qualifications, limitations or restrictions of such preferences and/or rights.

 

17.       Amendments.

 

This Agreement and the Plan may be wholly or partially amended or otherwise modified at any time and from time to time by either the Company or the Administrator without the consent of Participant, provided that such amendment shall not impair any rights of Participant under this Agreement without his or her written consent unless the Administrator determines, in its sole discretion, that such amendment is necessary (a) to cure any ambiguity or to correct or supplement any provision herein which may be inconsistent with the Plan or any other provision herein or (b) to correct, supplement or modify any provision herein to eliminate, mitigate or reflect the effect of any change in Generally Accepted Accounting Principles that occurs after the Grant Date.

 

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By his or her signature and the Company’s signature below, Participant agrees to be bound by the terms and conditions of the Plan, this Agreement, the Stockholders’ Agreement and the Series E Voting Trust Agreement.  Participant has reviewed the Plan, this Agreement, the Stockholders’ Agreement and the Series E Voting Trust Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of the Plan, this Agreement, the Stockholders’ Agreement and the Series E Voting Trust Agreement.  Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator of the Plan upon any questions arising under the Plan or this Agreement.  If Participant is married, his or her spouse has signed the Consent of Spouse attached to this Grant Notice as Exhibit “F”.

 

 

	
FRAM   HOLDINGS, INC.:
    	
 
    	
PARTICIPANT:
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
Print   Name:
    	
 
    	
 
    	
 
    	
     «Name»
    
	
Title:
    	
 
    	
 
    	
 
    
	
Address:
    	
1717   Main Street, Suite 900 
    	
 
    	
Address:
    	
 
    
	
 
    	
Dallas,   Texas 75201
    	
 
    	
 
    	
 
    
									

 

10Exhibit 10.12

 

HOULIHAN LOKEY, INC.
 2016 INCENTIVE AWARD PLAN

 

ARTICLE I.
 PURPOSE

 

The Plan’s purpose is to enhance the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing these individuals with equity ownership opportunities.  Capitalized terms used in the Plan are defined in Article XI.

 

ARTICLE II.
 ELIGIBILITY

 

Service Providers are eligible to be granted Awards under the Plan, subject to the limitations described herein.

 

ARTICLE III.
 ADMINISTRATION AND DELEGATION

 

3.1                            Administration.  The Plan is administered by the Administrator.  The Administrator has authority to (a) determine which Service Providers receive Awards, (b) grant Awards and (c)  set Award terms and conditions (including without limitation provisions relating to voting proxies and/or transfer restrictions and lock-up periods), subject to the conditions and limitations in the Plan.  The Administrator also has the authority to take all actions and make all determinations under the Plan, to interpret the Plan and Award Agreements and to adopt, amend and repeal Plan administrative rules, guidelines and practices as it deems advisable.  The Administrator may correct defects and ambiguities, supply omissions and reconcile inconsistencies in the Plan or any Award or Award Agreement as it deems necessary or appropriate to administer the Plan and any Awards.  The Administrator’s determinations under the Plan are in its sole discretion and will be final and binding on all persons having or claiming any interest in the Plan or any Award.

 

3.2                            Appointment of Committees.  To the extent Applicable Laws permit, the Board may delegate any or all of its powers under the Plan to one or more Committees.  The Board may abolish any Committee or re-vest in itself any previously delegated authority at any time.

 

ARTICLE IV.
  STOCK AVAILABLE FOR AWARDS

 

4.1                            Number of Shares.  Subject to adjustment under Article VIII and the terms of this Article IV, Awards may be made under the Plan covering up to the Overall Share Limit.  Shares issued under the Plan may consist of authorized but unissued Shares, Shares purchased on the open market or treasury Shares.

 

4.2                            Share Counting.  If all or any part of an Award expires, lapses or is terminated, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, in any case, in a manner that results in the Company acquiring Shares covered by the Award at a price not greater than the price (as adjusted to reflect any Equity Restructuring) paid by the Participant for such Shares or not issuing any Shares covered by the Award, the unused Shares covered by the Award will again be available for Award grants under the Plan.  Further, Shares delivered (either by actual delivery or

 

 

attestation) to the Company by a Participant to satisfy the applicable exercise or purchase price of an Award and/or to satisfy any applicable tax withholding obligation (including Shares retained by the Company from the Award being exercised or purchased and/or creating the tax obligation) will again be available for Award grants under the Plan.  The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards will not count against the Overall Share Limit.

 

4.3                            Incentive Stock Option Limitations.  Notwithstanding anything to the contrary herein, the maximum number of Shares that may be issued pursuant to the exercise of Incentive Stock Options (any or all of which may be granted with respect to Shares of Class A Common Stock and/or Shares of Class B Common Stock) shall equal the lesser of (a) 15% of the Shares of Class A Common Stock and Class B Common Stock outstanding on the Closing Date, assuming the conversion of any shares of preferred stock, and including shares issuable upon the exercise or payment of stock options, warrants and other equity securities with respect to which shares have not actually been issued and (b) 9,786,208.

 

4.4                            Substitute Awards.  In connection with an entity’s merger or consolidation with the Company or the Company’s acquisition of an entity’s property or stock, the Administrator may grant Awards in substitution for any options or other stock or stock-based awards granted before such merger or consolidation by such entity or its affiliate.  Substitute Awards may be granted on such terms as the Administrator deems appropriate, notwithstanding limitations on Awards in the Plan.  Substitute Awards will not count against the Overall Share Limit, except that Shares acquired by exercise of substitute Incentive Stock Options will count against the maximum number of Shares that may be issued pursuant to the exercise of Incentive Stock Options under the Plan.

 

4.5                            Non-Employee Director Award Limit.  The Administrator may establish compensation for non-employee Directors from time to time, subject to the limitations in the Plan.  The Administrator will from time to time determine the terms, conditions and amounts of all such non-employee Director compensation in its discretion and pursuant to the exercise of its business judgment, taking into account such factors, circumstances and considerations as it shall deem relevant from time to time, provided that the sum of any cash compensation and the grant date fair value of Awards (as determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) granted under the Plan to a non-employee Director as compensation for services as a non-employee Director during any fiscal year of the Company may not exceed $500,000.  The Administrator may make exceptions to this limit for individual non-employee directors in extraordinary circumstances, as the Administrator may determine in its discretion, provided that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation or in other compensation decisions involving non-employee Directors.

 

ARTICLE V.
 STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

 

5.1                            General.  The Administrator may grant Options or Stock Appreciation Rights to Service Providers subject to the limitations in the Plan, including Section 9.9 with respect to Incentive Stock Options.  The Administrator will determine the number of Shares covered by each Option and Stock Appreciation Right, the exercise price of each Option and Stock Appreciation Right and the conditions and limitations applicable to the exercise of each Option and Stock Appreciation Right.  A Stock Appreciation Right will entitle the Participant (or other person entitled to exercise the Stock Appreciation Right) to receive from the Company upon exercise of the exercisable portion of the Stock Appreciation Right an amount determined by multiplying the excess, if any, of the Fair Market Value of one Share on the date of exercise over the exercise price per Share of the Stock Appreciation Right by the number of Shares with respect to which the Stock Appreciation Right is exercised, subject to any limitations of the

 

 

Plan or that the Administrator may impose and payable in cash, Shares valued at Fair Market Value or a combination of the two as the Administrator may determine or provide in the Award Agreement.

 

5.2                            Exercise Price.  The Administrator will establish each Option’s and Stock Appreciation Right’s exercise price and specify the exercise price in the Award Agreement.  The exercise price will not be less than 100% of the Fair Market Value on the grant date of the Option or Stock Appreciation Right.

 

5.3                            Duration of Options.  Each Option or Stock Appreciation Right will be exercisable at such times and as specified in the Award Agreement, provided that the term of an Option or Stock Appreciation Right will not exceed ten years.

 

5.4                            Exercise.  Options and Stock Appreciation Rights may be exercised by delivering to the Company a written notice of exercise, in a form the Administrator approves (which may be electronic), signed by the person authorized to exercise the Option or Stock Appreciation Right, together with, as applicable, payment in full (i) as specified in Section 5.5 for the number of Shares for which the Award is exercised and (ii) as specified in Section 9.5 for any applicable taxes.  Unless the Administrator otherwise determines, an Option or Stock Appreciation Right may not be exercised for a fraction of a Share.

 

5.5                            Payment Upon Exercise.  The exercise price of an Option must be paid in cash, wire transfer of immediately available funds or by check payable to the order of the Company or, subject to Section 10.8, any Company insider trading policy (including blackout periods) and Applicable Laws, by:

 

(a)                               if there is a public market for Shares at the time of exercise, unless the Administrator otherwise determines, (A) delivery (including telephonically to the extent permitted by the Company) of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to pay the exercise price, or (B) the Participant’s delivery to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to pay the exercise price; provided that such amount is paid to the Company at such time as may be required by the Administrator;

 

(b)                              delivery (either by actual delivery or attestation) of Shares owned by the Participant valued at their Fair Market Value;

 

(c)                               surrendering Shares then issuable upon the Option’s exercise valued at their Fair Market Value on the exercise date;

 

(d)                              to the extent permitted by the Administrator, delivery of a promissory note or any other property that the Administrator determines is good and valuable consideration; or

 

(e)                               any combination of the above permitted payment forms (including cash, wire transfer or check).

 

ARTICLE VI.
 RESTRICTED STOCK; RESTRICTED STOCK UNITS

 

6.1                            General.  The Administrator may grant Restricted Stock, or the right to purchase Restricted Stock, to any Service Provider, subject to the Company’s right to repurchase all or part of such shares at their issue price or other stated or formula price from the Participant (or to require forfeiture of such shares) if conditions the Administrator specifies in the Award Agreement are not satisfied before the end of the applicable restriction period or periods that the Administrator establishes for such Award.  In addition, the Administrator may grant to Service Providers Restricted Stock Units, which may be subject

 

 

to vesting and forfeiture conditions during the applicable restriction period or periods, as set forth in an Award Agreement.  The Administrator will determine and set forth in the Award Agreement the terms and conditions for each Restricted Stock and Restricted Stock Unit Award, subject to the conditions and limitations contained in the Plan.

 

6.2                            Restricted Stock.

 

(a)                               Dividends.  Participants holding shares of Restricted Stock will be entitled to all ordinary cash dividends paid with respect to such Shares, unless the Administrator provides otherwise in the Award Agreement.  In addition, unless the Administrator provides otherwise, if any dividends or distributions are paid in Shares, or consist of a dividend or distribution to holders of Common Stock of property other than an ordinary cash dividend, the Shares or other property will be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which they were paid.

 

(b)                              Stock Certificates.  The Company may require that the Participant deposit in escrow with the Company (or its designee) any stock certificates issued in respect of shares of Restricted Stock, together with a stock power endorsed in blank.

 

6.3                            Restricted Stock Units.

 

(a)                               Settlement.  The Administrator may provide that settlement of Restricted Stock Units will occur upon or as soon as reasonably practicable after the Restricted Stock Units vest or will instead be deferred, on a mandatory basis or at the Participant’s election, in a manner intended to comply with Section 409A.

 

(b)                              Stockholder Rights. A Participant will have no rights of a stockholder with respect to Shares subject to any Restricted Stock Unit unless and until the Shares are delivered in settlement of the Restricted Stock Unit.

 

(c)                               Dividend Equivalents.  If the Administrator provides, a grant of Restricted Stock Units may provide a Participant with the right to receive Dividend Equivalents.  Dividend Equivalents may be paid currently or credited to an account for the Participant, settled in cash or Shares and subject to the same restrictions on transferability and forfeitability as the Restricted Stock Units with respect to which the Dividend Equivalents are granted and subject to other terms and conditions as set forth in the Award Agreement.

 

ARTICLE VII.
 OTHER STOCK OR CASH BASED AWARDS

 

Other Stock or Cash Based Awards may be granted to Participants, including Awards entitling Participants to receive Shares to be delivered in the future and including annual or other periodic or long-term cash bonus awards (whether based on specified Performance Criteria or otherwise), in each case subject to any conditions and limitations in the Plan. Such Other Stock or Cash Based Awards will also be available as a payment form in the settlement of other Awards, as standalone payments and as payment in lieu of compensation to which a Participant is otherwise entitled.  Other Stock or Cash Based Awards may be paid in Shares, cash or other property, as the Administrator determines.  Subject to the provisions of the Plan, the Administrator will determine the terms and conditions of each Other Stock or Cash Based Award, including any purchase price, performance goal (which may be based on the Performance

 

 

Criteria), transfer restrictions, and vesting conditions, which will be set forth in the applicable Award Agreement.

 

ARTICLE VIII.
 ADJUSTMENTS FOR CHANGES IN COMMON STOCK 
 AND CERTAIN OTHER EVENTS

 

8.1                            Equity Restructuring.  In connection with any Equity Restructuring, notwithstanding anything to the contrary in this Article VIII, the Administrator will equitably adjust each outstanding Award as it deems appropriate to reflect the Equity Restructuring, which may include adjusting the number and type of securities subject to each outstanding Award and/or the Award’s exercise price or grant price (if applicable), granting new Awards to Participants, and making a cash payment to Participants.  The adjustments provided under this Section 8.1 will be nondiscretionary and final and binding on the affected Participant and the Company; provided that the Administrator will determine whether an adjustment is equitable.

 

8.2                            Corporate Transactions.  In the event of any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), reorganization, merger, consolidation, combination, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or sale or exchange of Common Stock or other securities of the Company, Change in Control, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, other similar corporate transaction or event, other unusual or nonrecurring transaction or event affecting the Company or its financial statements or any change in any Applicable Laws or accounting principles, the Administrator, on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event (except that action to give effect to a change in Applicable Law or accounting principles may be made within a reasonable period of time after such change) and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to (x) prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Award granted or issued under the Plan, (y) to facilitate such transaction or event or (z) give effect to such changes in Applicable Laws or accounting principles:

 

(a)                               To provide for the cancellation of any such Award in exchange for either an amount of cash or other property with a value equal to the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights under the vested portion of such Award, as applicable; provided that, if the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights, in any case, is equal to or less than zero, then the Award may be terminated without payment;

 

(b)                              To provide that such Award shall vest and, to the extent applicable, be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the provisions of such Award;

 

(c)                               To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and/or applicable exercise or purchase price, in all cases, as determined by the Administrator;

 

 

(d)                              To make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards and/or with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Article IV) and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards;

 

(e)                               To replace such Award with other rights or property selected by the Administrator; and/or

 

(f)                                To provide that the Award will terminate and cannot vest, be exercised or become payable after the applicable event.

 

8.3                            Change in Control.  Except as may otherwise be provided in any applicable Award Agreement or other written agreement entered into between the Company (or an Affiliate) and a Participant, if a Change in Control occurs and a Participant’s outstanding Awards are not continued, converted, assumed, or replaced by the surviving or successor entity in such Change in Control, in any case, as determined by the Administrator, then immediately prior to the Change in Control such outstanding Awards, to the extent not continued, converted, assumed, or replaced, shall become fully vested and, as applicable, exercisable and shall be deemed exercised or canceled in exchange for payment of the transaction consideration (net of any applicable exercise or purchase price due) immediately prior to the consummation of such transaction, and all forfeiture, repurchase and other restrictions on such Awards shall lapse immediately prior to such transaction. If an Award vests and, as applicable, is exercised or canceled and paid out in lieu of continuation, conversion, assumption or replacement in connection with a Change in Control, the Administrator shall notify the Participant of such vesting and any applicable deemed exercise or cancellation and payout, and the Award shall terminate upon the Change in Control.

 

8.4                            Administrative Stand Still.  In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other extraordinary transaction or change affecting the Shares or the share price of Common Stock, including any Equity Restructuring or any securities offering or other similar transaction, for administrative convenience, the Administrator may refuse to permit the exercise of any Award for up to sixty days before or after such transaction.

 

8.5                            General.  Except as expressly provided in the Plan or the Administrator’s action under the Plan, no Participant will have any rights due to any subdivision or consolidation of Shares of any class, dividend payment, increase or decrease in the number of Shares of any class or dissolution, liquidation, merger, or consolidation of the Company or other corporation.  Except as expressly provided with respect to an Equity Restructuring under Section 8.1 above or the Administrator’s action under the Plan, no issuance by the Company of Shares of any class, or securities convertible into Shares of any class, will affect, and no adjustment will be made regarding, the number of Shares subject to an Award or the Award’s grant or exercise price.  The existence of the Plan, any Award Agreements and the Awards granted hereunder will not affect or restrict in any way the Company’s right or power to make or authorize (i) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, (ii) any merger, consolidation, dissolution or liquidation of the Company or sale of Company assets or (iii) any sale or issuance of securities, including securities with rights superior to those of the Shares or securities convertible into or exchangeable for Shares.  The Administrator may treat Participants and Awards (or portions thereof) differently under this Article VIII.

 

 

ARTICLE IX.
 GENERAL PROVISIONS APPLICABLE TO AWARDS

 

9.1                            Transferability.  Except as the Administrator may determine or provide in an Award Agreement or otherwise for Awards other than Incentive Stock Options, Awards may not be sold, assigned, transferred, pledged or otherwise encumbered, either voluntarily or by operation of law, except by will or the laws of descent and distribution, or, subject to the Administrator’s consent, pursuant to a domestic relations order, and, during the life of the Participant, will be exercisable only by the Participant.  References to a Participant, to the extent relevant in the context, will include references to a Participant’s authorized transferee that the Administrator specifically approves.

 

9.2                            Documentation.  Each Award will be evidenced in an Award Agreement. Each Award may contain terms and conditions in addition to those set forth in the Plan.

 

9.3                            Discretion.  Except as the Plan otherwise provides, each Award may be made alone or in addition or in relation to any other Award.  The terms of each Award to a Participant need not be identical, and the Administrator need not treat Participants or Awards (or portions thereof) uniformly.

 

9.4                            Termination of Status.  The Administrator will determine how the disability, death, retirement, authorized leave of absence or any other change or purported change in a Participant’s Service Provider status affects an Award and the extent to which, and the period during which, the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award, if applicable.

 

9.5                            Withholding.  Each Participant must pay the Company, or make provision satisfactory to the Administrator for payment of, any taxes required by law to be withheld in connection with such Participant’s Awards by the date of the event creating the tax liability.  The Company may, to the extent Applicable Laws permit, deduct an amount sufficient to satisfy such tax obligations based on the minimum statutory withholding rates from any payment of any kind otherwise due to a Participant. Participants may satisfy such tax obligations in cash, by wire transfer of immediately available funds, by check made payable to the order of the Company, or subject to Section 10.8, any Company insider trading policy (including blackout periods) and Applicable Laws, (i) to the extent permitted by the Administrator, in whole or in part by delivery of Shares, including Shares retained from the Award creating the tax obligation, valued at their Fair Market Value, (ii) if there is a public market for Shares at the time the tax obligations are satisfied, unless the Administrator otherwise determines, (A) delivery (including telephonically to the extent permitted by the Company) of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to satisfy the tax obligations, or (B) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to satisfy the tax withholding; provided that such amount is paid to the Company at such time as may be required by the Administrator, (iii) to the extent permitted by the Administrator, delivery of a promissory note or any other property that the Administrator determines is good and valuable consideration, or (iv) any combination of the foregoing permitted payment forms (including cash, wire transfer or check).  If any tax withholding obligation will be satisfied under clause (i) of the immediately preceding sentence by the Company’s retention of Shares from the Award creating the tax obligation and there is a public market for Shares at the time the tax obligation is satisfied, the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on the applicable Participant’s behalf some or all of the Shares retained and to remit the proceeds of the sale to the Company or its designee, and each Participant’s acceptance of an Award under

 

 

the Plan will constitute the Participant’s authorization to the Company and instruction and authorization to such brokerage firm to complete the transactions described in this sentence.

 

9.6                            Amendment of Award; Repricing.  The Administrator may amend, modify or terminate any outstanding Award, including by substituting another Award of the same or a different type, changing the exercise or settlement date, and converting an Incentive Stock Option to a Non-Qualified Stock Option.  The Participant’s consent to such action will be required unless (i) the action, taking into account any related action, does not materially and adversely affect the Participant’s rights under the Award, or (ii) the change is permitted under Article VIII or pursuant to Section 10.6.  Notwithstanding the foregoing or anything in the Plan to the contrary, the Administrator may, without the approval of the stockholders of the Company, reduce the exercise price per share of outstanding Options or Stock Appreciation Rights or cancel outstanding Options or Stock Appreciation Rights in exchange for cash, other Awards or Options or Stock Appreciation Rights with an exercise price per share that is less than the exercise price per share of the original Options or Stock Appreciation Rights.

 

9.7                            Conditions on Delivery of Stock.  The Company will not be obligated to deliver any Shares under the Plan or remove restrictions from Shares previously delivered under the Plan until (i) all Award conditions have been met or removed to the Company’s satisfaction, (ii) as determined by the Company, all other legal matters regarding the issuance and delivery of such Shares have been satisfied, including any applicable securities laws and stock exchange or stock market rules and regulations, (iii) if so requested by the Company, the Participant has granted any voting proxy and/or power of attorney in favor of a person or persons designated by the Board or the Committee and (iv) the Participant has executed and delivered to the Company such representations or agreements as the Administrator deems necessary or appropriate to satisfy any Applicable Laws.  The Company’s inability to obtain authority from any regulatory body having jurisdiction, which the Administrator determines is necessary to the lawful issuance and sale of any securities, will relieve the Company of any liability for failing to issue or sell such Shares as to which such requisite authority has not been obtained.

 

9.8                            Acceleration.  The Administrator may at any time provide that any Award will become immediately vested and fully or partially exercisable, free of some or all restrictions or conditions, or otherwise fully or partially realizable.

 

9.9                            Additional Terms of Incentive Stock Options.  The Administrator may grant Incentive Stock Options only to employees of the Company, any of its present or future parent or subsidiary corporations, as defined in Sections 424(e) or (f) of the Code, respectively, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code.  If an Incentive Stock Option is granted to a Greater Than 10% Stockholder, the exercise price will not be less than 110% of the Fair Market Value on the Option’s grant date, and the term of the Option will not exceed five years.  All Incentive Stock Options will be subject to and construed consistently with Section 422 of the Code.  By accepting an Incentive Stock Option, the Participant agrees to give prompt notice to the Company of dispositions or other transfers (other than in connection with a Change in Control) of Shares acquired under the Option made within (i) two years from the grant date of the Option or (ii) one year after the transfer of such Shares to the Participant, specifying the date of the disposition or other transfer and the amount the Participant realized, in cash, other property, assumption of indebtedness or other consideration, in such disposition or other transfer.  Neither the Company nor the Administrator will be liable to a Participant, or any other party, if an Incentive Stock Option fails or ceases to qualify as an “incentive stock option” under Section 422 of the Code.  Any Incentive Stock Option or portion thereof that fails to qualify as an “incentive stock option” under Section 422 of the Code for any reason, including becoming exercisable with respect to Shares having a fair market value exceeding the $100,000 limitation under Treasury Regulation Section 1.422-4, will be a Non-Qualified Stock Option.

 

 

9.10                    Cash Settlement.  Without limiting the generality of any other provision of the Plan, the Administrator may provide, in an Award Agreement or subsequent to the grant of an Award, in its discretion, that any Award may be settled in cash, Shares or a combination thereof.

 

ARTICLE X.
 MISCELLANEOUS

 

10.1                    No Right to Employment or Other Status.  No person will have any claim or right to be granted an Award, and the grant of an Award will not be construed as giving a Participant the right to continued employment or any other relationship with the Company.  The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or any Award, except as expressly provided in an Award Agreement.

 

10.2                    No Rights as Stockholder; Certificates.  Subject to the Award Agreement, no Participant or Designated Beneficiary will have any rights as a stockholder with respect to any Shares to be distributed under an Award until becoming the record holder of such Shares.  Notwithstanding any other provision of the Plan, unless the Administrator otherwise determines or Applicable Laws require, the Company will not be required to deliver to any Participant certificates evidencing Shares issued in connection with any Award and instead such Shares may be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).  The Company may place legends on stock certificates issued under the Plan that the Administrator deems necessary or appropriate to comply with Applicable Laws.

 

10.3                    Effective Date and Term of Plan.  The Plan will become effective on the day prior to the Public Trading Date and will remain in effect until the tenth anniversary of such date, unless earlier terminated by the Board.  No Awards may be granted under the Plan during any suspension period or after Plan termination.  Notwithstanding anything in the Plan to the contrary, an Incentive Stock Option may not be granted under the Plan after ten years from the earlier of (i) the date the Board adopted the Plan or (ii) the date the Company’s stockholders approved the Plan, but Awards previously granted may extend beyond that date in accordance with the Plan.  If the Plan is not approved by the Company’s stockholders, (i) it will not become effective and (ii) no Awards will be granted hereunder.

 

10.4                    Amendment of Plan.  The Administrator may amend, suspend or terminate the Plan at any time; provided that no amendment, other than an increase to the Overall Share Limit, may materially and adversely affect any Award outstanding at the time of such amendment without the affected Participant’s consent.  Awards outstanding at the time of any Plan suspension or termination will continue to be governed by the Plan and the Award Agreement, as in effect before such suspension or termination.  The Board will obtain stockholder approval of any Plan amendment to the extent necessary to comply with Applicable Laws.

 

10.5                    Provisions for Foreign Participants.  The Administrator may modify Awards granted to Participants who are foreign nationals or employed outside the United States or establish subplans or procedures under the Plan to address differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.

 

10.6                    Section 409A.

 

(a)                               General.  The Company intends that all Awards be structured to comply with, or be exempt from, Section 409A, such that no adverse tax consequences, interest, or penalties under Section 409A apply.  Notwithstanding anything in the Plan or any Award Agreement to the contrary, the

 

 

Administrator may, without a Participant’s consent, amend this Plan or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and retroactive actions) as are necessary or appropriate to preserve the intended tax treatment of Awards, including any such actions intended to (A) exempt this Plan or any Award from Section 409A, or (B) comply with Section 409A, including regulations, guidance, compliance programs and other interpretative authority that may be issued after an Award’s grant date.  The Company makes no representations or warranties as to an Award’s tax treatment under Section 409A or otherwise.  The Company will have no obligation under this Section 10.6 or otherwise to avoid the taxes, penalties or interest under Section 409A with respect to any Award and will have no liability to any Participant or any other person if any Award, compensation or other benefits under the Plan are determined to constitute noncompliant “nonqualified deferred compensation” subject to taxes, penalties or interest under Section 409A.

 

(b)                              Separation from Service.  If an Award constitutes “nonqualified deferred compensation” under Section 409A, any payment or settlement of such Award upon a termination of a Participant’s Service Provider relationship will, to the extent necessary to avoid taxes under Section 409A, be made only upon the Participant’s “separation from service” (within the meaning of Section 409A), whether such “separation from service” occurs upon or after the termination of the Participant’s Service Provider relationship.  For purposes of this Plan or any Award Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms means a “separation from service.”

 

(c)                               Payments to Specified Employees.  Notwithstanding any contrary provision in the Plan or any Award Agreement, any payment(s) of “nonqualified deferred compensation” required to be made under an Award to a “specified employee” (as defined under Section 409A and as the Administrator determines) due to his or her “separation from service” will, to the extent necessary to avoid taxes under Section 409A(a)(2)(B)(i) of the Code, be delayed for the six-month period immediately following such “separation from service” (or, if earlier, until the specified employee’s death) and will instead be paid (as set forth in the Award Agreement) on the day immediately following such six-month period or as soon as administratively practicable thereafter (without interest).  Any payments of “nonqualified deferred compensation” under such Award payable more than six months following the Participant’s “separation from service” will be paid at the time or times the payments are otherwise scheduled to be made.

 

10.7                    Limitations on Liability.  Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, other employee or agent of the Company or any Subsidiary will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan or any Award, and such individual will not be personally liable with respect to the Plan because of any contract or other instrument executed in his or her capacity as an Administrator, director, officer, other employee or agent of the Company or any Subsidiary.  The Company will indemnify and hold harmless each director, officer, other employee and agent of the Company or any Subsidiary that has been or will be granted or delegated any duty or power relating to the Plan’s administration or interpretation, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Administrator’s approval) arising from any act or omission concerning this Plan unless arising from such person’s own fraud or bad faith.

 

10.8                    Lock-Up Period.  The Company may, at the request of any underwriter representative or otherwise, in connection with registering the offering of any Company securities under the Securities Act, prohibit Participants from, directly or indirectly, selling or otherwise transferring any Shares or other Company securities during a period of up to one hundred eighty days following the effective date of a

 

 

Company registration statement filed under the Securities Act, or such longer period as determined by the underwriter.

 

10.9                    Data Privacy.  As a condition for receiving any Award, each Participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this paragraph by and among the Company and its Subsidiaries and affiliates exclusively for implementing, administering and managing the Participant’s participation in the Plan.  The Company and its Subsidiaries and affiliates may hold certain personal information about a Participant, including the Participant’s name, address and telephone number; birthdate; social security, insurance number or other identification number; salary; nationality; job title(s); any Shares held in the Company or its Subsidiaries and affiliates; and Award details, to implement, manage and administer the Plan and Awards (the “Data”).  The Company and its Subsidiaries and affiliates may transfer the Data amongst themselves as necessary to implement, administer and manage a Participant’s participation in the Plan, and the Company and its Subsidiaries and affiliates may transfer the Data to third parties assisting the Company with Plan implementation, administration and management.  These recipients may be located in the Participant’s country, or elsewhere, and the Participant’s country may have different data privacy laws and protections than the recipients’ country.  By accepting an Award, each Participant authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, to implement, administer and manage the Participant’s participation in the Plan, including any required Data transfer to a broker or other third party with whom the Company or the Participant may elect to deposit any Shares.  The Data related to a Participant will be held only as long as necessary to implement, administer, and manage the Participant’s participation in the Plan.  A Participant may, at any time, view the Data that the Company holds regarding such Participant, request additional information about the storage and processing of the Data regarding such Participant, recommend any necessary corrections to the Data regarding the Participant or refuse or withdraw the consents in this Section 10.9 in writing, without cost, by contacting the local human resources representative.  The Company may cancel Participant’s ability to participate in the Plan and, in the Administrator’s discretion, the Participant may forfeit any outstanding Awards if the Participant refuses or withdraws the consents in this Section 10.9.  For more information on the consequences of refusing or withdrawing consent, Participants may contact their local human resources representative.

 

10.10            Severability.  If any portion of the Plan or any action taken under it is held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provisions had been excluded, and the illegal or invalid action will be null and void.

 

10.11            Governing Documents.  If any contradiction occurs between the Plan and any Award Agreement or other written agreement between a Participant and the Company (or any Subsidiary) that the Administrator has approved, the Plan will govern, unless it is expressly specified in such Award Agreement or other written document that a specific provision of the Plan will not apply.  In addition, the Shares issuable and issued, and Awards granted, pursuant to this Plan are subject to Section 4 of the Charter regarding the conversion of Shares of Class B Common Stock to Class A Common Stock.

 

10.12            Governing Law.  The Plan and all Awards will be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding any state’s choice-of-law principles requiring the application of a jurisdiction’s laws other than the State of Delaware.

 

10.13            Claw-back Provisions.  All Awards (including any proceeds, gains or other economic benefit the Participant actually or constructively receives upon receipt or exercise of any Award or the receipt or resale of any Shares underlying the Award) will be subject to any Company claw-back policy,

 

 

including any claw-back policy adopted to comply with Applicable Laws (including the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder) as set forth in such claw-back policy or the Award Agreement.

 

10.14            Titles and Headings.  The titles and headings in the Plan are for convenience of reference only and, if any conflict, the Plan’s text, rather than such titles or headings, will control.

 

10.15            Conformity to Securities Laws.  Participant acknowledges that the Plan is intended to conform to the extent necessary with Applicable Laws.  Notwithstanding anything herein to the contrary, the Plan and all Awards will be administered only in conformance with Applicable Laws.  To the extent Applicable Laws permit, the Plan and all Award Agreements will be deemed amended as necessary to conform to Applicable Laws.

 

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

 

10.17            Broker-Assisted Sales.  In the event of a broker-assisted sale of Shares in connection with the payment of amounts owed by a Participant under or with respect to the Plan or Awards, including amounts to be paid under the final sentence of Section 9.5: (a) any Shares to be sold through the broker-assisted sale will be sold on the day the payment first becomes due, or as soon thereafter as practicable; (b) such Shares may be sold as part of a block trade with other Participants in the Plan in which all participants receive an average price; (c) the applicable Participant will be responsible for all broker’s fees and other costs of sale, and by accepting an Award, each Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (d) to the extent the Company or its designee receives proceeds of such sale that exceed the amount owed, the Company will pay such excess in cash to the applicable Participant as soon as reasonably practicable; (e) the Company and its designees are under no obligation to arrange for such sale at any particular price; and (f) in the event the proceeds of such sale are insufficient to satisfy the Participant’s applicable obligation, the Participant may be required to pay immediately upon demand to the Company or its designee an amount in cash sufficient to satisfy any remaining portion of the Participant’s obligation.

 

10.18            Arbitration.  Any and all claims, grievances, demands, controversies, causes of action or disputes of any nature whatsoever (collectively, “Claims”), arising out of, in connection with, or in relation to this Plan, or Awards granted hereunder, or the arbitrability of any Claims under this Plan, will be resolved by final and binding arbitration administered by the Los Angeles, California offices of JAMS/Endispute in accordance with the then-existing JAMS/Endispute Arbitration Rules applicable to employment agreements.  The Participant and the Company will select a mutually acceptable neutral arbitrator from the panel of arbitrators serving with any of JAMS/Endispute’s offices, but in the event the parties cannot agree on an arbitrator, the Administrator of JAMS/Endispute will appoint an arbitrator from such panel (the arbitrator so selected or appointed, the “Arbitrator”).  The Arbitrator may provide all appropriate remedies (at law and equity) or judgments that could be awarded by a court of law in Delaware, and that, upon good cause shown, the Arbitrator will afford the parties adequate discovery, including deposition discovery.  Except as provided herein, the Federal Arbitration Act will govern the interpretation, enforcement and all actions pursuant to this Section 10.18.  The Arbitrator will be bound by and will strictly enforce the terms of this Section 10.18 and may not limit, expand or otherwise modify its terms.  The Arbitrator will make a good faith effort to apply the substantive law (and the law of remedies, if applicable) of the state of Delaware, or federal law, or both, as applicable, without reference to its conflicts of laws provisions.  The Arbitrator is without jurisdiction to apply any different substantive

 

 

law.  The Arbitrator will be bound to honor claims of privilege or work-product doctrine recognized at law, but the Arbitrator will have the discretion to determine whether any such claim of privilege or work product doctrine applies.  The Arbitrator will render an award and a written, reasoned opinion in support thereof.  The Arbitrator will have power and authority to award any appropriate remedy (in law or equity) or judgment that could be awarded by a court of law in Delaware, which may include reasonable attorneys’ fees to the prevailing party.  The award rendered by arbitration will be final and binding upon the parties to arbitration, and judgment upon the award may be entered in any court having jurisdiction thereof.  Neither a party nor the Arbitrator will disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all parties.  Adherence to this dispute resolution process will not limit the parties’ right to obtain any provisional remedy, including, without limitation, injunctive or similar relief, from any court of competent jurisdiction as may be necessary to protect their rights and interests.  Notwithstanding the foregoing sentence, this dispute resolution procedure is intended to be the exclusive method of resolving any Claims arising out of or relating to the Plan.  Subject to the Arbitrator’s award, the Company will pay fees and expenses with respect to this dispute resolution process and any action related thereto.

 

ARTICLE XI.
 DEFINITIONS

 

As used in the Plan, the following words and phrases will have the following meanings:

 

11.1                    “2006 Plan” means the Houlihan Lokey, Inc. Amended and Restated 2006 Incentive Compensation Plan.

 

11.2                    “Administrator” means the Board or a Committee to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee.

 

11.3                    “Applicable Laws” means the requirements relating to the administration of equity incentive plans under U.S. federal and state securities, tax and other applicable laws, rules and regulations, the applicable rules of any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws and rules of any foreign country or other jurisdiction where Awards are granted.

 

11.4                    “Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Dividend Equivalents or Other Stock or Cash Based Awards.

 

11.5                    “Award Agreement” means a written agreement evidencing an Award, which may be electronic, that contains such terms and conditions as the Administrator determines, consistent with and subject to the terms and conditions of the Plan.

 

11.6                    “Board” means the Board of Directors of the Company.

 

11.7                    “Change in Control” means and includes each of the following:

 

(a)                               A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission or a transaction or series of transactions that meets the requirements of clauses (i) and (ii) of subsection (c) below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, any

 

 

Permitted Holder, an employee benefit plan maintained by the Company or any of its Subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of equity securities of the Company possessing more than 50% of the total combined voting power of the Company’s equity securities outstanding immediately after such acquisition; or

 

(b)                              During any period of two consecutive years commencing no earlier than the Final Conversion Date (as defined in the Charter), individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in subsections (a) or (c)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

 

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

 

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

 

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

 

Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award (or portion of any Award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (a), (b) or (c) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).

 

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

 

 

11.8                    “Charter” means the Company’s amended and restated certificate of incorporation, as it may be amended from time to time.

 

11.9                    “Class A Common Stock” means the Class A common stock of the Company, par value of $0.001 per share.

 

11.10            “Class B Common Stock” means the Class B common stock of the Company, par value of $0.001 per share.

 

11.11            “Closing Date” means the date on which the Company’s initial public offering closes.

 

11.12            “Code” means the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.

 

11.13            “Committee” means one or more committees or subcommittees of the Board, which may include one or more Company directors or executive officers, to the extent Applicable Laws permit.  To the extent required to comply with the provisions of Rule 16b-3, it is intended that each member of the Committee will be, at the time the Committee takes any action with respect to an Award that is subject to Rule 16b-3, a “non-employee director” within the meaning of Rule 16b-3; however, a Committee member’s failure to qualify as a “non-employee director” within the meaning of Rule 16b-3 will not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.

 

11.14            “Common Stock” means either the Class A Common Stock or Class B Common Stock of the Company.

 

11.15            “Company” means Houlihan Lokey, Inc., a Delaware corporation, or any successor.

 

11.16            “Consultant” means any consultant or advisor of the Company or any Subsidiary who qualifies as a consultant or advisor under the applicable rules of Form S-8 Registration Statement.

 

11.17            “Designated Beneficiary” means the beneficiary or beneficiaries the Participant designates, in a manner the Administrator determines, to receive amounts due or exercise the Participant’s rights if the Participant dies or becomes incapacitated.  Without a Participant’s effective designation, “Designated Beneficiary” will mean the Participant’s estate.

 

11.18            “Director” means a Board member.

 

11.19            “Dividend Equivalents” means a right granted to a Participant under the Plan to receive the equivalent value (in cash or Shares) of dividends paid on Shares.

 

11.20            “Employee” means any employee of the Company or its Subsidiaries.

 

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

 

11.22            “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

 

11.23            “Fair Market Value” means, as of any date, the value of Common Stock determined as follows: (i) if the Common Stock is listed on any established stock exchange, its Fair Market Value will be the closing sales price for such Common Stock as quoted on such exchange for such date, or if no sale occurred on such date, the last day preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; (ii) if the Common Stock is not traded on a stock exchange but is quoted on a national market or other quotation system, the closing sales price on such date, or if no sales occurred on such date, then on the last date preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; or (iii) without an established market for the Common Stock, the Administrator will determine the Fair Market Value in its discretion.

 

11.24            “Greater Than 10% Stockholder” means an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or its parent or subsidiary corporation, as defined in Section 424(e) and (f) of the Code, respectively.

 

11.25            “Incentive Stock Option” means an Option intended to qualify as an “incentive stock option” as defined in Section 422 of the Code.

 

11.26            “Non-Qualified Stock Option” means an Option not intended or not qualifying as an Incentive Stock Option.

 

11.27            “Option” means an option to purchase Shares.

 

11.28            “Other Stock or Cash Based Awards” means cash awards, awards of Shares, and other awards valued wholly or partially by referring to, or are otherwise based on, Shares or other property.

 

11.29            “Overall Share Limit” means the sum of (i) 15% of the Shares of Class A Common Stock and Class B Common Stock outstanding on the Closing Date, assuming the conversion of any shares of preferred stock, and including shares issuable upon the exercise or payment of stock options, warrants and other equity securities with respect to which shares have not actually been issued, (ii) any Shares of Class B Common Stock which, as of the Closing Date, are (a) available for issuance under the 2006 Plan (other than with respect to an award outstanding under the 2006 Plan as of the Closing Date) or (b) underlying awards outstanding under the 2006 Plan that, on or after the Closing Date, terminate, expire or lapse for any reason without the delivery of Shares to the holder thereof, in each case and (iii) an annual increase on the first day of each fiscal year beginning on April 1, 2016 and ending on (and including) April 1, 2025 equal to the lesser of (a) 10% of the Shares of Class A Common Stock and Class B Common Stock outstanding on the Closing Date, assuming the conversion of any shares of preferred stock, and including shares issuable upon the exercise or payment of stock options, warrants and other equity securities with respect to which shares have not actually been issued, (b) 6% of the Shares of Class A Common Stock and Class B Common Stock outstanding on the last day of the immediately preceding fiscal year, assuming the conversion of any shares of preferred stock, and including shares issuable upon the exercise or payment of stock options, warrants and other equity securities with respect to which shares have not actually been issued and (c) such smaller number of Shares as may be determined by the Board, which may be issued as Shares of Class A Common Stock or Shares of Class B Common Stock, as determined by the Administrator in its sole discretion and to the extent such class of Common Stock exists from time to time.

 

11.30            “Participant” means a Service Provider who has been granted an Award.

 

 

11.31            “Performance Criteria” mean the criteria (and adjustments) that the Administrator may select for an Award to establish performance goals for a performance period, which may include the following: net earnings or losses (either before or after one or more of interest, taxes, depreciation, amortization, and non-cash equity-based compensation expense); gross or net sales or revenue or sales or revenue growth; net income (either before or after taxes) or adjusted net income; profits (including but not limited to gross profits, net profits, profit growth, net operation profit or economic profit), profit return ratios or operating margin; budget or operating earnings (either before or after taxes or before or after allocation of corporate overhead and bonus); cash flow (including operating cash flow and free cash flow or cash flow return on capital); return on assets; return on capital or invested capital; cost of capital; return on stockholders’ equity; total stockholder return; return on sales; costs, reductions in costs and cost control measures; expenses; working capital; earnings or loss per share; adjusted earnings or loss per share; price per share or dividends per share (or appreciation in or maintenance of such price or dividends); regulatory achievements or compliance; implementation, completion or attainment of objectives relating to research, development, regulatory, commercial, or strategic milestones or developments; market share; economic value or economic value added models; division, group or corporate financial goals; customer satisfaction/growth; customer service; employee satisfaction; recruitment and maintenance of personnel; human resources management; supervision of litigation and other legal matters; strategic partnerships and transactions; financial ratios (including those measuring liquidity, activity, profitability or leverage); debt levels or reductions; sales-related goals; financing and other capital raising transactions; cash on hand; acquisition activity; investment sourcing activity; and marketing initiatives, any of which may be measured in absolute terms or as compared to any incremental increase or decrease, peer group results, or market performance indicators or indices.

 

11.32            “Permitted Holder” means any of (i) the voting trust established pursuant to the Voting Trust Agreement and (ii) ORIX USA Corporation and any wholly-owned subsidiary thereof.

 

11.33            “Plan” means this 2015 Incentive Award Plan.

 

11.34            “Public Trading Date” means the date on which the Company’s registration statement relating to its initial public offering becomes effective.

 

11.35            “Restricted Stock” means Shares awarded to a Participant under Article VI subject to certain vesting conditions and other restrictions.

 

11.36            “Restricted Stock Unit” means an unfunded, unsecured right to receive, on the applicable settlement date, one Share or an amount in cash or other consideration determined by the Administrator to be of equal value as of such settlement date, subject to certain vesting conditions and other restrictions.

 

11.37            “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act.

 

11.38            “Section 409A” means Section 409A of the Code and all regulations, guidance, compliance programs and other interpretative authority thereunder.

 

11.39            “Securities Act” means the Securities Act of 1933, as amended.

 

11.40            “Service Provider” means an Employee, Consultant or Director.

 

11.41            “Shares” means shares of Common Stock.

 

 

11.42            “Stock Appreciation Right” means a stock appreciation right granted under Article V.

 

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

 

11.44            “Termination of Service” means the date the Participant ceases to be a Service Provider.

 

11.45            “Voting Trust Agreement” means that certain Voting Trust Agreement, by and among the Company, certain holders of Class B Common Stock, Scott Beiser, Irwin Gold and Robert Hotz, as may be amended, modified or supplemented.

 

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