PROPOSAL 4
On April 7, 2004, our Board of Directors adopted the 2004 Stock Incentive Plan. Our common stockholders approved the 2004 Stock
Incentive Plan at the annual meeting of stockholders on June 3, 2004 and approved an amendment to our 2004 Stock Incentive Plan on each of June 9, 2005, October 11, 2007 and
October 8, 2009 to increase in the reservation of the total shares available for issuance to 12,265,172 shares of common stock. On September 7, 2011, our Board of Directors adopted the
Amended and Restated 2004 Stock Incentive Plan (the "
Restated Stock Plan
"), which was updated with respect to certain provisions and changes in the tax
code since its original adoption, as well as to set the total shares available for issuance under the plan to 6,825,000. Our common stockholders approved the Restated Stock Plan at the annual meeting
of stockholders on October 26, 2011. We now wish to further amend the Restated Stock Plan to increase the total shares of common stock available for issuance under the plan by 5,000,000 shares
of common stock to 11,825,000 (the "
Proposed Amendment
"). As of March 10, 2014, we had an aggregate of 2,975,431 shares of common stock available
for future issuance under the Restated Stock Plan.
Our
Restated Stock Plan provides for an award of options, whether nonqualified or incentive, restricted common stock, restricted common stock units, or RSUs, performance awards (which
may be in the form of performance shares, performance share units or cash performance awards), purchases, share
awards, stock appreciation rights or other awards based on the value of our common stock. The Restated Stock Plan permits the Compensation and Stock Option Committee to grant performance compensation
awards, contingent upon pre-established performance goals to our executives. In order to qualify for deductibility under Section 162(m) of the Internal Revenue Code, or the Code, the Restated
Stock Plan, including, without limitation, the performance goals for determining performance awards set forth in the plan, were approved by our common stockholders at the annual meeting on
October 26, 2011. If the Proposed Amendment is not approved by our common stockholders at the upcoming annual meeting of stockholders on May 8, 2014, we can continue to make awards under
the Restated Stock Plan, which will continue to be effective according to its terms (as in effect without the Proposed Amendment).
-
Q:
-
What is the vote required to approve Proposal 4?
-
A:
-
Pursuant to Delaware corporate law, in order to approve the Proposed Amendment, the affirmative
"
FOR
" vote of a majority of the shares present in person or represented by proxy at the annual meeting and entitled to vote on the proposal is required.
Unless otherwise instructed on the proxy, properly executed proxies will be voted in favor of this proposal. In addition, in order to satisfy NASDAQ's shareholder approval requirement, a majority of
the total votes cast on the proposal must be voted in favor of the proposal.
-
Q:
-
What happens if Proposal 4 is not approved?
-
A:
-
In the event that Proposal 4 is not approved in accordance with Delaware corporate law or the NASDAQ rules, then no change will be
made to the reservation of shares under the Restated Stock Plan and the Restated Stock Plan will continue as in effect without the Proposed Amendment.
-
Q:
-
Why is the Board of Directors recommending this Proposal?
-
A:
-
Our Board of Directors has concluded that the adoption of the Proposed Amendment is in our best interest and the interest of our
common stockholders. Our Board of Directors believes that the Proposed Amendment is necessary to provide us with a sufficient reserve of common stock for future awards of various types needed to
attract, employ and retain employees, directors and consultants of outstanding ability for us, which now includes our Hudson subsidiary.
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-
Q:
-
How would the Restated Stock Plan be amended if the Proposed Amendment is approved?
-
A:
-
If the Proposed Amendment is approved by our common stockholders, the Restated Stock Plan would be amended solely to set the total
shares available for issuance under the plan at 11,825,000 shares of common stock.
We
currently have no specific plans, proposals or arrangements to issue any of the unallocated shares currently available for issuance under the Restated Stock Plan or any of the additional shares
that would become available if the Proposed Amendment is approved by our stockholders.
-
Q:
-
When would the Proposed Amendment become effective?
-
A:
-
If approved by our common stockholders, the Proposed Amendment will become effective upon approval. As soon as reasonably practicable
thereafter, we intend to file a registration statement covering the offering of the additional shares underlying the Proposed Amendment with the SEC pursuant to the Securities Act.
-
Q:
-
What is a general description of the principal terms of the Restated Stock Plan?
-
A:
-
A general description of the principal terms of the Restated Stock Plan is set forth below. However, this summary does not purport to
be a complete description of all of the provisions of the Restated Stock Plan, a copy of which is attached to this proxy statement as
Appendix A
.
General.
The purpose of the Restated Stock Plan is to enhance our ability to attract and retain officers, directors, employees
and consultants of
outstanding ability and to provide selected officers, employees, directors and consultants with an interest in us parallel to that of our stockholders. The Restated Stock Plan provides for the award
of options, whether nonqualified or incentive, restricted common stock, RSUs, performance shares, performance share units, purchases, share awards, stock appreciation rights and other awards based on
the value of our common stock to our officers, employees, directors and consultants, as well as those officers, employees, directors and consultants of our subsidiaries or affiliates.
Effective Date.
The Proposed Amendment will become effective on the date that it is approved by our stockholders in accordance with
this Proposal 4.
Number of Shares.
Subject to adjustment for certain corporate events, the total number of shares of common stock which are
available for the grant of
awards under the Restated Stock Plan cannot exceed 6,825,000 shares of common stock (11,825,000 shares if the Proposed Amendment is approved by our stockholders); provided, that, for purposes of this
limitation, any common stock subject to an option which is canceled or expires without exercise will again become available for award under the Restated Stock Plan. Upon forfeiture of awards in
accordance with the provisions of the Restated Stock Plan and the terms and conditions of the award, such shares will again be available for subsequent awards under the Restated Stock Plan. Subject to
adjustment, no employee will be granted, during any one (1) year period, options to purchase more than 1,250,000 shares of common stock, and the number of shares of common stock subject to any
awards other than options or stock appreciation rights will not exceed 1,250,000 shares of common stock. All shares of common stock reserved for issuance under the Restated Stock Plan may be used for
grants of "incentive stock options," as described below, Common stock available for issue or distribution under the Restated Stock Plan will be authorized and unissued shares or shares reacquired by
us in any manner.
Administration.
The Compensation and Stock Option Committee of our Board of Directors administers the Restated Stock Plan. The
Compensation and Stock
Option Committee is currently comprised of
Messrs. Hoffman and Savage and Ms. Calabrese. All members of the Compensation and Stock Option Committee are non-employee directors within the meaning of Rule 16b-3 as promulgated
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under
Section 16 of the Exchange Act, as amended, are also outside directors within the meaning of Section 162(m) of the Code are "independent directors" within the meaning of
Rule 5605(a)(2) of the Nasdaq Stock Market Rules. The Compensation and Stock Option Committee has the power to (i) approve the selection of participants, (ii) determine the type
of stock awards to be made to participants, (iii) determine the number of shares of common stock subject to awards, (iv) determine the terms and conditions of any awards granted there
under (including, but not limited to, any restriction and forfeiture conditions on such awards) and (v) interpret the Restated Stock Plan, to establish, amend, and rescind any rules and
regulations relating to the Restated Stock Plan, to determine the terms and provisions of any agreements entered into thereunder, and to make all other determinations necessary or advisable for the
administration of the Restated Stock Plan.
Eligibility.
Employees, officers, directors and consultants of us and our subsidiaries or affiliates selected by the Compensation
and Stock Option
Committee are eligible to receive grants of awards under the Restated Stock Plan. As of March 10, 2014, there were approximately 566 employees, four executive officers and five directors
eligible to participate in the Restated Stock Plan.
Awards.
Awards under the Restated Stock Plan may consist of options, restricted common stock, RSUs, performance awards (which may
be in the form of
performance shares, performance share units or cash performance awards), stock purchases, share awards, stock appreciation rights or other share awards based on the value of our common stock.
(1)
Options.
Both "nonqualified stock options", or Nonqualified Stock Options, and "incentive stock options", or
ISOs, may be granted under the Restated Stock Plan, which we will collectively refer to as Options. The terms of any such Option will be set forth in an option agreement and will be consistent with
the following:
Exercise Price.
The exercise price per share of the shares of our common stock to be purchased pursuant to any Option will be fixed by
the Compensation and Stock
Option Committee at the time such Option is granted. In no event will the exercise price for ISOs be less than the fair
market value of a share on the day on which the ISO is granted; provided, however, that in the case of ISOs granted to 10% shareholders, the price per share shall not be less than 110% of the fair
market value of a share on the day on which the ISO is granted. The Compensation and Stock Option Committee may also reduce the Option price of any outstanding Option either through a direct amendment
to such Option or through a cancellation of such Option and immediate grant of a new Option with a lower Option price or in any other manner it deems appropriate.
Option Term.
Subject to termination, the duration of each Option will be determined by the Compensation and Stock Option Committee,
but may not exceed
10 years from the date of grant; provided, however, that in the case of ISOs granted to 10% shareholders, the term of such Option will not exceed 5 years from the date of grant. In the
event of a participant's death (other than ISOs) Options that would otherwise remain exercisable following such death, will remain exercisable for one year following such death irrespective of the
terms of the Option.
Vesting.
An Option will vest and become exercisable at a rate determined by the Compensation and Stock Option Committee on the date of
grant.
(2)
Restricted Awards.
The Restated Stock Plan permits the Compensation and Stock Option Committee to award
restricted common stock under the Restated Stock Plan to eligible participants. The Compensation and Stock Option Committee may also award restricted common stock in the form of RSUs having a value
equal to an identical number of shares of common stock. Payment of RSUs will be made in common stock or in cash or in a combination thereof (based upon the Fair Market Value (as defined in the
Restated Stock Plan) of the common stock on the day the restricted period expires).
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(3)
Performance Compensation Awards.
The Compensation and Stock Option Committee has the authority, at the time
of grant of any award under the Restated Stock Plan (other than Options and stock appreciation rights granted with an exercise price or grant price, as the case may be, equal to or greater than the
fair market value per share of common stock on the date of grant), to designate such award as a performance compensation award in order to qualify the award as "performance-based compensation" under
Section 162(m) of the Code. In addition, the Committee and Stock Option Committee has the authority to make an award of a cash bonus to any participant and designate the ward as a performance
compensation award in order to qualify such Award as "performance-based compensation" under Section 162(m). The Compensation and Stock Option Committee will, in its sole discretion, designate
within the first 90 days of a performance period (or, if shorter, within the maximum period allowed under Section 162(m) of the Code) which participants will be eligible to
receive performance compensation awards in respect of the performance period. However, designation of a participant eligible to receive an award for a performance period will not in any manner entitle
the participant to receive payment in respect of any performance compensation award for the performance period. The determination as to whether or not the participant becomes entitled to payment in
respect of any performance compensation award will be decided solely in accordance with the applicable provisions of the Restated Stock Plan. Performance compensation awards under the Restated Stock
Plan will be subject to achievement of performance goals. Performance goals may be expressed in terms of one or more of the following business criteria: revenue, earnings before interest, taxes,
depreciation and amortization, or EBITDA, funds from operations, funds from operations per share, operating income, pre or after tax income, cash available for distribution, cash available for
distribution per share, net earnings, earnings per share, return on equity, return on assets, share price performance, improvements in our attainment of expense levels, and implementing or completion
of critical projects, or improvement in cash-flow (before or after tax).
Unless
otherwise provided in the applicable award agreement, a participant must be employed on the last day of a performance period to be eligible for payment in respect of a performance
compensation award for that performance period. A participant will be eligible to receive payment in respect of a performance compensation award only to the extent that: (a) the performance
goals for such period are achieved; and (b) the performance formula as applied against such performance goals determines that all or some portion of such participant's performance compensation
award has been earned for the performance period. Following the completion of a performance period, the Compensation and Stock Option Committee will review and certify in writing whether, and to what
extent, the performance goals for the performance period have been achieved and, if so, calculate and certify in writing that amount of the performance compensation awards earned for the period based
upon the performance formula. The Compensation and Stock Option Committee will then determine the actual size of each participant's performance compensation award for the performance period and, in so
doing, may generally apply negative discretion to eliminate or reduce the size of a performance compensation award, if and when it deems appropriate. However, the Compensation and Stock Option
Committee will not have the discretion to (a) grant or provide payment in respect of performance compensation awards for a performance period if the performance goals for that performance
period have not been attained; or (b) increase a performance compensation award above the maximum amount payable under the applicable provisions of the Restated Stock Plan. Performance
compensation awards granted for a performance period will be paid to participants as soon as administratively practicable following completion of the certifications by the Compensation and Stock
Option Committee.
The
maximum performance compensation award payable to any one participant under the Restated Stock Plan for a performance period is 6,825,000 shares of common stock (11,825,000 shares if
the Proposed Amendment is approved by our stockholders) or, in the event the performance compensation award is paid in cash, the equivalent cash value thereof on the first or last day of the
performance period to which the award relates, as determined by the Compensation and Stock Option
33
Table of Contents
Committee.
The maximum amount that can be paid in any calendar year to any participant pursuant to a performance-based cash bonus award is $4,000,000. Furthermore, any performance compensation award
that has been deferred will not (between the date as of which the award is deferred and the payment date) increase (A) with respect to performance compensation award that is payable in cash, by
a measuring factor for each fiscal year greater than a reasonable rate of interest set by the Compensation and Stock Option Committee or (B) with respect to a performance compensation award
that is payable in shares of common stock, by an amount greater than the appreciation of a share of common stock from the date the award is deferred to the payment date.
(4)
Share Purchases.
The Compensation and Stock Option Committee may authorize eligible individuals to purchase
common stock at price equal to, below or above the fair market value of the common stock at the time of grant.
(5)
Share Awards.
Subject to such performance and employment conditions as the Compensation and Stock Option
Committee may determine, awards of common stock or awards based on the value of the common stock may be granted either alone or in addition to other awards granted under the Restated Stock Plan.
(6)
Stock Appreciation Rights.
The Compensation and Stock Option Committee may, either alone or in connection
with the grant of another award grant stock appreciation rights, the terms of which will be set forth in an agreement.
Market Value of our Common Stock Underlying Outstanding Options.
As of March 10, 2014, the approximate market value of our
common stock
underlying outstanding options to be issued was $3,202,000 based upon 775,000 options granted to employees, officers and directors that have not yet been exercised and 1,545,000 shares of restricted
stock or restricted stock units not yet vested under the Restated Stock Plan. For further information regarding shares authorized for issuance under our equity compensation plans, please see below
under "Equity Compensation Plan Information."
Change in Control.
Unless otherwise provided in an award agreement, upon the occurrence of a "Change in Control" (as defined in
the Restated Stock
Plan), all options and stock appreciation rights will automatically become vested and exercisable in full and all restrictions or performance conditions, if any, on any common stock awards, restricted
common stock, RSUs, performance shares or performance share units granted will automatically lapse.
Adjustments.
The Restated Stock Plan provides that in the event of certain corporate events or changes in the common stock,
awards and the number of
shares under the Restated Stock Plan may be adjusted to reflect such event.
Amendment and Termination.
In general, the Restated Stock Plan will expire on October 26, 2021 (except as to awards
outstanding on that date).
The Board of Directors may terminate or amend the Restated Stock Plan in any respect at any time, except that, no amendment will be made without our common stockholder approval, if such approval is
necessary to comply with any applicable law, regulation or stock exchange rule and, no amendment will be made that would adversely affect the rights of a participant without such participant's written
consent, except as provided under Adjustments.
-
Q:
-
What are the federal income tax consequences of options granted under the Restated Stock Plan under the federal tax laws currently in
effect?
-
A:
-
The following is a summary of the material federal tax consequences of receiving options in the Restated Stock Plan and is based upon
an analysis of the present provisions of the Code and the regulations promulgated thereunder, all of which are subject to change. A participant may also be subject to state and local taxes, the
consequences of which are not discussed herein, in the
34
Table of Contents
jurisdiction in which he works and/or resides. This summary is for general information purposes only and is not tax advice.
Section 162(m) Limitation.
Subject to a limited number of exceptions, Section 162(m) of the Code denies
a deduction to a publicly held corporation for payments of remuneration to certain employees to the extent the employee's remuneration for the taxable year exceeds $1,000,000. For this purpose,
remuneration attributable to stock options is included within the $1,000,000 limitation. However, to the extent that certain procedural requirements are met (e.g., the Restated Stock Plan is
approved by our common stockholders, grants are made by the Compensation and Stock Option Committee, the exercise price is equal to the fair market value of the underlying shares upon grant, etc.),
gain from the exercise of stock options should not be subject to the $1,000,000 limitation. We have attempted to structure the Restated Stock Plan in such a manner that the remuneration attributable
to the stock options will not be subject to the $1,000,000 limitation. We have not, however, requested a ruling from the Internal Revenue Service or an opinion of counsel regarding this issue.
Non-Qualified Stock Options.
An individual receiving a non-qualified stock option should not recognize taxable income at the
time of grant. A
participant should generally recognize ordinary compensation income in an amount equal to the excess, if any, in the fair market value of the option shares on exercise of the non-qualified stock
options over the exercise price thereof. In general, subject to the limitations set forth in Section 162(m) and discussed above, we are entitled to deduct from our taxable income the amount
that the participant is required to include in ordinary income at the time of such inclusion.
Incentive Stock Options.
An individual granted an incentive stock option will not generally recognize taxable income at the time
of grant or, subject
to certain conditions, at the time of exercise, although he or she may be subject to alternative minimum tax. In general, if a disqualifying disposition should occur (i.e., the shares acquired
upon exercise of the option are disposed of within the later of two years from the date of grant or one year from the date of exercise), a participant will generally recognize ordinary compensation
income in the year of disposition in an amount equal to the excess, if any, of the fair market value of the option shares at the time of exercise (or, if less, the amount realized on disposition),
over the exercise price thereof. We are not entitled to any deduction on account of the grant of the incentive stock options or the participant's exercise of the option to acquire common stock.
However, in the event of a subsequent disqualifying disposition of such shares of common stock acquired pursuant to the exercise of an incentive stock option under circumstances resulting in taxable
compensation to the participant, subject to the limitations set forth in Section 162(m) and discussed above, in general, we should be entitled to a tax deduction equal to the amount treated as
taxable compensation to the participant.
Section 280G of the Code.
Under certain circumstances, the accelerated vesting or settlement of awards in connection with a
change in control
may be deemed an "excess parachute payment" for purposes of the golden parachute tax provisions of Section 280G of the Code. To the extent it is so considered, the participant may be subject to
a 20% excise tax and we may be denied a federal income tax deduction.
Section 409A of the Code.
In general, awards under the Restated Stock Plan are intended to be exempt from, or to comply
with, the requirements
of Section 409A of the Code, which governs the payment of non-qualified deferred compensation. To the extent that the Restated Stock Plan or awards under the Restated Stock Plan fail to comply
with the requirements of Section 409A of the Code, participants may be subject to a 20% additional tax and premium interest on payments.
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-
Q:
-
What would the Restated Stock Plan benefits have been if the Proposed Amendment had been in effect for the fiscal
2013 year?
-
A:
-
If the Proposed Amendment had been in effect for the fiscal 2013 year, the amounts that would have
been payable for such year under the Restated Stock Plan to each of (a) our executive officers named in the Summary Compensation Table herein, (b) our executive officers as a group, and
(c) our employees who are not executive officers as a group are not currently determinable.
-
Q:
-
How does the Board of Directors recommend I vote?
-
A:
-
Our Board of Directors unanimously recommends a vote "
FOR
" the approval of the
Proposed Amendment.
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REPORT OF THE AUDIT COMMITTEE
In accordance with the written charter of the Audit Committee, which was adopted by our Board of Directors on November 21, 2013,
the Audit Committee assists the Board of Directors in oversight of the quality and integrity of our accounting, auditing, and financial reporting practices. In addition, the Audit Committee recommends
to the full Board of Directors the selection of the independent auditors.
Currently,
all Audit Committee members are "independent" under NASDAQ listing standards and as such term is defined in the rules and regulations of the SEC and Mr. Savage has also
been designated to be an "audit committee financial expert" as such term is defined in the rules and regulations of the SEC.
In
performing its oversight function, the Audit Committee reviewed and discussed our audited consolidated financial statements as of and for the year ended November 30, 2013 with
management and our independent auditors. The Audit Committee also discussed with our independent auditors all matters required by generally accepted auditing standards, including those described in
Statement on
Auditing Standards No. 61, as amended, (Codification of Statement of Auditing Standards, AU 380) as adopted by the Public Company Accounting Oversight Board, or PCAOB, in Rule 3200T,
and, with and without management present, discussed and reviewed the results of the independent auditors' examination of the financial statements.
The
Audit Committee obtained from the independent auditors a formal written statement describing all relationships between the independent auditors and us that might bear on the
independent auditors' independence consistent with PCAOB Rule 3520. The Audit Committee discussed with the independent auditors any relationships that may have an impact on their objectivity
and independence and satisfied itself that the non-audit services provided by the independent accountants are compatible with maintaining their independence.
Based
on the above-mentioned review and discussions with management and the independent auditors, the Audit Committee recommended to the Board of Directors that our audited consolidated
financial statements be included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2013 for filing with the SEC.
The Audit Committee:
Kent
Savage, Chairman of the Audit Committee
Sam Furrow
Kelly Hoffman
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RELATED PARTY TRANSACTIONS
Our Audit Committee charter provides that that all transactions between us and persons or entities affiliated with our officers,
directors or principal common stockholders must be approved by our Audit Committee. We believe that this policy requiring that any material transaction between us and such related parties be approved
by our Audit Committee ensures that such transactions are on terms no less favorable to us than reasonably could have been obtained in arms' length transactions with independent third parties. For
fiscal 2013, our related party transactions, all of which were previously approved by our Audit Committee, are described below.
Joe Dahan
Since the acquisition of the Joe's® brand as a result of a merger in October 2007 through February 18, 2013,
Mr. Dahan was entitled to a certain percentage of our gross profit in any applicable fiscal year until October 2017. At the time of the acquisition, pursuant to ASC
805
Business Combinations,
we assessed this original contingent consideration arrangement as compensatory and expensed such amounts over the
term of the earn out period at the defined percentage amounts. For the fiscal years ended 2013, 2012 and 2011, expenses of $311,000, $1,862,000 and $1,757,000, respectively, were recorded in the
statement of net (loss) income and comprehensive (loss) income related to the contingent consideration expense made to Mr. Dahan under the original agreement.
On
February 18, 2013, we entered into a new agreement with Mr. Dahan that fixed the overall amount to be paid by us for the remaining months of year six through year 10 in
the original merger agreement at $9,168,000 through weekly installment payments beginning on February 22, 2013 until November 27, 2015. In the first quarter of fiscal 2013, we recorded a
charge of $8,732,000 as contingent consideration buy-out expense in connection with this agreement. This amount represented the net present value of the total fixed amount that Mr. Dahan would
receive. The entire amount was expensed during the first quarter of fiscal 2013 as the amount payable represented a present obligation due to Mr. Dahan. On September 30, 2013, in
connection with entry into new credit facilities relating to the acquisition of Hudson, Mr. Dahan, CIT, Garrison and all of our loan parties entered into an earn out subordination agreement,
which provides, among other things, that any payment, whether in cash, in kind, securities or any other property, in connection with the our obligations to Mr. Dahan is expressly junior and
subordinated in right of payment to all amounts due and owing upon any indebtedness outstanding under the revolving credit facility and the term loan facility. We are permitted to make certain amount
of weekly installment payments of our obligations in the absence of an insolvency proceeding or any event of default under the revolving credit agreement or the term loan credit agreement.
Ambre Dahan
In January 2013, we entered in to a consulting arrangement with Ambre Dahan, the spouse of Mr. Joe Dahan, for design director
services that pays her $175,000 per annum on a bi-weekly basis. For the fiscal year ended 2013, we paid Ms. Dahan $155,000 under this arrangement. This arrangement may be terminated at any time
by the parties. Mr. Dahan is not a party to this arrangement, and we do not consider this arrangement material to us.
Albert Dahan
In April 2009, we entered into a commission-based sales agreement with Albert Dahan, brother of Joe Dahan, for the sale of our products
into the off-price channels of distribution. Under the agreement, Mr. Albert Dahan is entitled to a commission for purchase orders entered into by us where he acts as a sales person. The
agreement may be terminated at any time for any reason or no reason
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with
or without notice. For the fiscal years ended 2013, 2012 and 2011, payments of $453,000, $573,000 and $580,000, respectively, were made to Mr. Albert Dahan under this arrangement.
In
October 2011, we entered into an agreement with Ever Blue LLC, or Ever Blue, an entity for which Albert Dahan is the sole member, for the sale of children's products. Ever Blue
has an exclusive right to produce, distribute and sell children's products bearing the Joe's® brand on a worldwide basis, subject to certain limitations on the channels of distribution. In
exchange for the license, Ever Blue pays to us a royalty on net sales with certain guaranteed minimum sales for each term. In connection with this agreement, we provided initial funding to Ever Blue
for inventory purchases, which such amount has been repaid in full. For the fiscal years ended 2013, 2012 and 2011, we recognized $612,000, $296,000 and $0, respectively in royalty income under the
license agreement.
Peter Kim
We have entered into several agreements, including a stock purchase agreement, a convertible note, the Registration Rights Agreement,
an employment agreement and a non-competition agreement with Peter Kim in connection with the acquisition of Hudson. Mr. Kim was not a related person as defined in Item 404 of
Regulation S-K prior to closing of the Acquisition. Pursuant to the terms of the stock purchase agreement, Mr. Kim received approximately $0.5 million in cash and approximately
$14.2 million aggregate principal of Management Notes as consideration for his equity interests in Hudson. In addition, Mr. Kim received approximately $2.1 million in cash as
consideration for debts owed to him by Hudson. See our Annual Report on Form 10-K for the year ended November 30, 2013"Notes to Consolidated Financial
StatementsNote 3Acquisition of Hudson" and "Note 8Debt" for a further discussion of those agreements. In addition, a description of the Management
Notes and the Registration Rights Agreement is included above in "Questions and Answers about the Proxy Materials and the Annual Meeting" under the question "What are the terms of the Buyer Notes?"
and a description of Mr. Kim's employment agreement and non-competition agreement are included above under the heading "Employment Contracts and Termination of Employment and Change in Control
Arrangements."
Tony Kim
In May 2011 and January 2013, our Hudson subsidiary entered into two distributorship agreements with Telos Group L.L.C., an entity that
is owned or controlled by Peter Kim's brother, Tony Kim, for distribution of Hudson's products in South Korea and China. Under these agreements, Tony Kim has purchased $9,000 in product from us in
from September 30, 2013 until the end of fiscal 2013.
Director Independence
Currently, the following members of our Board of Directors are considered "independent" under NASDAQ listing standards and as such term
is defined in the rules and regulations of the SEC:
-
-
Joanne Calabrese
-
-
Sam Furrow
-
-
Kelly Hoffman
-
-
Suhail Rizvi
-
-
Kent Savage
In
making its determination that the foregoing directors are independent, the Board of Directors considered all relevant facts and circumstances. There are no current transactions with
members of the Board of Directors that needed to be considered for any impact on the respective member's independence. We do not have any past or present members serving on our Audit Committee,
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Compensation
Committee and Nominating and Governance Committee that are not considered to be independent based on the applicable rules of NASDAQ and the SEC.
Equity Compensation Plan Information
The following table sets forth certain information about our common stock that may be issued upon the exercise of options, warrants and
rights under all of the our compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance as of November 30, 2013, which
includes our Amended and Restated 2004 Stock Incentive Plan and our 2004 Stock Incentive Plan. We stopped granting options under our 2004 Stock Incentive Plan after the adoption and approval of our
Amended and Restated 2004 Stock Incentive Plan on October 26, 2011.
|
|
|
|
|
|
|
|
|
|
|
Plan category
|
|
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
|
Number of securities remaining
available for future issuance under
equity compensation plans (excluding
securities reflected in column (a))
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity compensation plans approved by security holders(1)
|
|
|
|
|
|
|
|
|
|
|
Amended and Restated Stock Incentive Plan
|
|
|
|
|
$
|
|
|
|
3,544,756
|
|
2004 Incentive Plan
|
|
|
775,000
|
|
$
|
4.03
|
|
|
N/A
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
775,000
|
|
$
|
4.03
|
|
|
3,544,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
See
"Amended and Restated 2004 Stock Incentive Plan" and "2004 Stock Incentive Plan" described in "Notes to Consolidated Financial
StatementsNote 11Stockholders' EquityStock Incentive Plans" in our Annual Report on Form 10-K for the fiscal year ended November 30, 2013
for a further description of our equity compensation plans.
-
(2)
-
While
there are shares available, we no longer grant options under our 2004 Stock Incentive Plan since the adoption and approval of our Amended and Restated
2004 Stock Incentive Plan on October 26, 2011.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, officers and persons who beneficially own more than ten percent of a
registered class of our equity securities, to file reports of beneficial ownership and changes in beneficial ownership with the SEC on a timely basis. Directors, officers and greater than ten percent
beneficial owners are required by the SEC's regulations to furnish us with copies of all Section 16(a) forms they file.
Based
solely on a review of copies of such forms furnished to us and certain of our internal records, or upon written representations from officers, directors and greater than ten
percent beneficial owners that no Form 5 was required, we believe that during the fiscal year ended November 30, 2013, all Section 16(a) filing requirements applicable to our
directors, officers and greater than ten percent beneficial owners were satisfied on a timely basis.
55
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FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
For the fiscal years ended November 30, 2013 and 2012, Ernst &Young LLP, or E&Y, billed the approximate fees as
described below.
Audit Fees
Fees for audit services totaled approximately $600,000 for the year ended November 30, 2013 and $433,000 for the year ended
November 30, 2012 , including fees associated with the annual audit and reviews of our quarterly reports on Form 10-Q and for fiscal 2013, included the additional scope of work due to
the acquisition of Hudson as our subsidiary.
Audit-Related Fees
Fees for audit-related services totaled approximately $354,000 for the year ended November 30, 2013 and included fees associated
with the acquisition of Hudson as our subsidiary. There were no fees for audit-related services for the year ended November 30, 2012.
Tax Fees
Fees for tax services, including tax compliance and return preparation, tax advice, and tax planning and tax matters related to the
acquisition of Hudson as our subsidiary, totaled approximately $464,000 for the year ended November 30, 2013 and $70,000 for the year ended November 30, 2012.
All Other Fees
There were no other fees for the years ended November 30, 2013 and 2012.
The
Audit Committee has adopted a policy which requires the Audit Committee's pre-approval of audit and non-audit services performed by the independent auditor to assure that the
provision of such services does not impair the auditor's independence. The Audit Committee approves such services on an on-going basis prior to the incurrence of any such audit and non-audit services.
The Audit Committee pre-approved all of the audit and non-audit services rendered by E&Y listed above.
The
Audit Committee has determined that the services provided by E&Y were compatible with maintaining E&Y's independence.
OTHER BUSINESS TO BE TRANSACTED
As of the date of this proxy statement, the Board of Directors knows of no other business which may come before the annual meeting. If
any other business is properly brought before the annual meeting, it is the intention of the proxy holders to vote or act in accordance with their best judgment with respect to such matters.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" into this proxy statement documents we file with the SEC. This means that we can
disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this proxy statement, and later information that we
file with the SEC as specified below will update and supersede that information. Except to the extent that information is deemed furnished and not filed pursuant to securities laws and regulations, we
incorporate by reference the following filings which are also being mailed with this proxy statement to stockholders of record and beneficial owners:
-
-
Our 2013 Annual Report on Form 10-K, filed with the SEC on February 13, 2014;
56
Table of Contents
-
-
Our Current Report on Form 8-K, filed with the SEC on October 4, 2013; and
-
-
Our Current Report on Form 8-K/A, filed with the SEC on December 6, 2013.
We
will provide to each person, including any beneficial owner, to whom a proxy statement is delivered, upon written or oral request and without charge, a copy of the documents referred
to above that we have incorporated by reference and the definitive agreements that we have filed as exhibits to various SEC filings, as well as certain agreements that we entered into in connection
with the transactions discussed in this proxy statement. Copies of our 2013 Annual Report and the Hudson Financials are being mailed with this proxy statement. You can request copies of such documents
and agreements if you call or write us at the following address or telephone number:
Joe's
Jeans Inc.
Attention: Corporate Secretary
2340 South Eastern Avenue
Commerce, California 90040
(323) 837-3700
57
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Appendix A
JOE'S JEANS INC.
AMENDED AND RESTATED
2004 STOCK INCENTIVE PLAN
1.
Purpose.
The purpose of the Joe's Jeans Inc. Amended and Restated 2004 Stock Incentive Plan (the
"Plan") is to enhance the ability of Joe's Jeans Inc. (the "Company") and its Subsidiaries and Affiliates to attract and retain officers, employees, directors and consultants of outstanding
ability and to provide selected officers, employees, directors and consultants with an interest in the Company parallel to that
of the Company's shareholders. The term "Company" as used in this Plan with reference to employment shall include the Company and its Subsidiaries and Affiliates, as appropriate.
2.
Definitions.
(a) "Affiliate"
means any parent or subsidiary of the Company; provided, that, with respect to Incentive Stock Options, the term shall only mean "parent corporation" and
"subsidiary corporation" as defined in Sections 424(e) and 424(f) of the Code and further, provided, that, with respect to any "stock right" within the meaning of Section 409A of the
Code, such affiliate must qualify as a "service recipient" within the meaning of Section 409A of the Code and in applying Section 1563(a)(1), (2) and (3) of the Code for
purposes of determining a controlled group of corporations under Section 414(b) of the Code and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining trades or
businesses (whether or not incorporated) that are under common control for purposes of Section 414(c) of the Code, the language "at least 50 percent" is used instead of "at least
80 percent".
(b) "409A
Award" means an Award that is considered "nonqualified deferred compensation" within the meaning of Section 409A of the Code and Section 13 of this
Plan.
(c) "Award"
shall mean an award determined in accordance with the terms of the Plan, including, without limitation, Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, Performance Compensation Awards, and share awards.
(d) "Award
Agreement" shall have the meaning set forth in Section 20 hereof.
(e) "Board"
shall mean the Board of Directors of the Company.
(f) "Cause"
shall mean (i) if a Participant is party to an employment agreement or similar agreement with the Company and such agreement includes a definition of
Cause, the definition contained therein or (ii) if no such employment or similar agreement exists, it shall mean (A) the Participant's failure to perform the duties reasonably assigned
to him or her by the Company, (B) a good faith finding by the Company of the Participant's dishonesty, gross negligence or misconduct, (C) a material breach by the Participant of any
written Company employment policies or rules or (D) the Participant's conviction for, or his or her plea of guilty or nolo contendere to, a felony or for any other crime which involves fraud,
dishonesty or moral turpitude.
(g) "Change
in Control" of the Company means the occurrence of one of the following events
(i) individuals
who, on the Effective Date, constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to the Effective Date whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the
Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be an
Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to
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directors
or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be an Incumbent Director;
(ii) any
"person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and as used in Sections 13(d)(3) and
14(d)(2) of the Exchange Act) is or becomes, after the Effective Date, a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 50% of the combined voting power of the Company's then outstanding securities eligible to vote for the election of the Board (the "Company Voting Securities"); provided,
however, that an event described in this paragraph (ii) shall not be deemed to be a Change in Control if any of following becomes such a beneficial owner: (A) the Company or any
majority-owned subsidiary (provided, that this exclusion applies solely to the ownership levels of the Company or the majority-owned subsidiary), (B) any tax-qualified, broad-based employee
benefit plan sponsored or maintained by the Company or any majority-owned subsidiary, (C) any underwriter temporarily holding securities pursuant to an offering of such securities, or
(D) any person pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii));
(iii) the
consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries that
requires the approval of the Company's stockholders, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such
Business Combination: (A) 60% or more of the total voting power of (x) the corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if
applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent
Corporation"), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company
Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company
Voting Securities among the holders thereof immediately prior to the Business
Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial
owner, directly or indirectly, of more than 50% of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or if there is no Parent Corporation, the Surviving
Corporation) following the consummation of the Business Combination were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business
Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or
(iv) Stockholder
approval of a liquidation or dissolution of the Company, unless the voting common equity interests of an ongoing entity (other than a liquidating trust) are
beneficially owned, directly or indirectly, by the Company's shareholders in substantially the same proportions as such shareholders owned the Company's outstanding voting common equity interests
immediately prior to such liquidation and such ongoing entity assumes all existing obligations of the Company under this Plan.
Notwithstanding
the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 50% of the Company Voting Securities
as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that, if after such acquisition by the Company
such person becomes the beneficial owner of Company Voting Securities that increases the
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percentage
of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.
(h) "Code"
shall mean the Internal Revenue Code of 1986, as amended.
(i) "Committee"
shall mean a committee of at least two members of the Board appointed by the Board to administer the Plan and to perform the functions set forth herein and
who are (i) "non-employee directors" within the meaning of Rule 16b-3 as promulgated under Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
(ii) "outside directors" within the meaning of Section 162(m) of the Code and (iii) "independent directors" within the meaning of Rule 5605(a)(2) of the Nasdaq Stock Market
Rules.
(j) "Common
Stock" shall mean the common stock of the Company.
(k) "Continuous
Service" means that the Participant's service as an employee, director or consultant with the Company or a Subsidiary which is not interrupted or terminated.
The Participant's Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or a Subsidiary as an
employee, director or consultant or a change in the entity for which the Participant renders such service; provided, that, there is no interruption or termination of the Participant's Continuous
Service other than an approved leave of absence. The Committee, in its sole discretion, may determine whether Continuous Service shall be considered interrupted.
(l) "Covered
Employee" shall have the meaning set forth in Section 162(m)(3) of the Code.
(m) "Date
of Grant" means the date on which the Committee adopts a resolution, or takes other appropriate action, expressly granting an Award to a Participant that specifies
the key terms and conditions of the Award and from which the Participant begins to benefit from or be adversely affected by subsequent changes in the Fair Market Value of the Common Stock, or if a
later date in set forth in such resolution, then such date as is set forth in such resolution.
(n) "Disability"
means that (i) the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months or (ii) the Participant is, by reason of any
medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving
income replacement benefits for a period of not less than three (3) months under and accident and health plan covering employees of the Company;
provided
,
however
, for purposes of any Incentive Stock Option, the term Disability shall have the
meaning ascribed to it under Code Section 22(e)(3).
(o) "Fair
Market Value" shall mean, as of any date, the value per share of the Common Stock determined as follows:
(i) If
the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq
SmallCap Market of The Nasdaq Stock Market, the Fair Market Value per share shall be the closing sales price for such share as quoted on such exchange or system for such date, or if no sales price was
reported for such date, the closing sales price for the trading day immediately preceding such date, as reported in The Wall Street Journal or such other source as the Committee deems reliable; or
(ii) In
the absence of an established market for the Common Stock, the Fair Market Value per share thereof shall be determined in good faith by the Committee in accordance
with the requirements of Section 409A of the Code.
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(p) "Immediate
Family Member" shall mean, except as otherwise determined by the Committee, a Participant's spouse, ancestors and descendants.
(q) "Incentive
Stock Option" shall mean a stock option which is intended to meet the requirements of Section 422 of the Code.
(r) "Negative
Discretion" means the discretion authorized by the Plan to be applied by the Administrator to eliminate or reduce the size of a Performance Compensation Award
in accordance with Section 9(d)(iv) of the Plan; provided, that, the exercise of such discretion would not cause the Performance Compensation Award to fail to qualify as "performance-based
compensation" under Section 162(m) of the Code.
(s) "Nonqualified
Stock Option" shall mean a stock option which is not intended to be an Incentive Stock Option.
(t) "Option"
shall mean either an Incentive Stock Option or a Nonqualified Stock Option.
(u) "Participant"
shall mean an officer, employee, director or consultant of the Company or its Subsidiaries who is selected to participate in the Plan in accordance with
Section 5.
(v) "Performance
Compensation Award" shall mean an Award granted pursuant to the terms and conditions set forth in Section 9 of the Plan.
(w) "Performance
Goals" shall mean or may be expressed in terms of any of the following business criteria: revenue, earnings before interest, taxes, depreciation and
amortization ("EBITDA"), funds from operations, funds from operations per share, operating income, pre or after tax income, cash available for distribution, cash available for distribution per share,
net earnings, earnings per share, return on equity, return on assets, share price performance, improvements in the Company's attainment of expense levels, and implementing or completion of critical
projects, or improvement in cash-flow (before or after tax). A Performance Goal may be measured over a Performance Period on a periodic, annual, cumulative or average basis and may be established on a
corporate-wide basis or established with respect to one or more operating units, divisions, subsidiaries, acquired businesses, minority investments, partnerships or joint ventures. Unless otherwise
determined by the Committee by no later than the earlier of the date that is ninety days after the commencement of the Performance Period or the day prior to the date on which twenty-five percent of
the Performance Period has elapsed, the Performance Goals will be determined by not accounting for a change in U.S. generally accepted accounting principles during a Performance Period.
(x) "Performance
Objective" shall mean the level or levels of performance required to be attained with respect to specified Performance Goals in order that a Participant
shall become entitled to specified rights in connection with a Performance Compensation Award.
(y) "Performance
Period" shall mean the one or more periods of time, as the Committee may select, over which the attainment of one or more Performance Goals will be measured
for purposes of determining a Participant's right to and the payment of a Performance Compensation Award.
(z) "Restricted
Stock" shall have the meaning set forth in Section 8 of the Plan.
(aa) "Restricted
Stock Units" shall have the meaning set forth in 8 of the Plan.
(bb) "Stock
Appreciation Rights" shall have the meaning set forth in Section 11 of the Plan.
(cc) "Subsidiary"
shall mean any Affiliate of the Company selected by the Board; provided, that, with respect to Incentive Stock Options, it shall mean any subsidiary of the
Company that is a corporation and which at the time qualifies as a "subsidiary corporation" within the meaning of Section 424(f) of the Code.
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3.
Shares Subject to the Plan.
Subject to adjustment in accordance with Section 19, the total of the
number of shares of Common Stock which shall be available for the grant of Awards under the Plan shall not exceed 11,825,000(1) shares of Common Stock; provided, that, for purposes of this limitation,
any Common Stock subject to an Option which is canceled or expires without exercise shall again become available for Award under the Plan. Upon forfeiture of Awards in accordance with the provisions
of the Plan and the terms and conditions of the Award, such shares shall again be available for subsequent Awards under the Plan. Subject to adjustment in accordance with Section 19, no
Participant shall be granted, during any one (1) year period, Options to purchase more than 1,250,000 shares of Common Stock and, the number of shares of Common Stock subject to any
Awards other than Options or Stock Appreciation Rights shall not exceed 1,250,000 shares of Common Stock. Common Stock available for issue or distribution under the Plan shall be authorized and
unissued shares or shares reacquired by the Company in any manner. All shares of Common Stock reserved for issuance under the Plan may be used for Incentive Stock Options.
4.
Administration
.
(a) The
Plan shall be administered by the Committee. All references to the Committee hereinafter shall mean the Board if no such Committee has been appointed.
Notwithstanding the foregoing, the Board or Committee may (i) delegate to a committee of one or more members of the Board who are not "outside directors" within the meaning of
Section 162(m) of the Code the authority to grant Awards to eligible persons who are either (A) not then Covered Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Award or (B) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code or (ii) delegate to a
committee of one or more members of the Board who are not "non-employee directors" within the meaning of Rule 16b-3 the authority to grant Awards to eligible persons who are not subject to
Section 16 of the Exchange Act.
(b) The
Committee shall (i) approve the selection of Participants, (ii) determine the type of Awards to be made to Participants, (iii) determine the
number of shares of Common Stock subject to Awards, (iv) determine the terms and conditions of any Award granted hereunder (including, but not limited to, any restriction and forfeiture
conditions on such Award) and (v) have the authority to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and
provisions of any agreements entered into hereunder, and to make all other determinations necessary or advisable for the administration of the Plan. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or in any Award in the manner and to the extent it shall deem desirable to carry it into effect.
(c) Any
action of the Committee shall be final, conclusive and binding on all persons, including the Company and its Subsidiaries and shareholders, Participants and persons
claiming rights from or through a Participant.
(d) The
Committee may delegate to officers or employees of the Company or any Subsidiary, and to service providers, the authority, subject to such terms as the Committee
shall determine, to perform administrative functions with respect to the Plan and Award Agreements.
(e) Members
of the Committee and any officer or employee of the Company or any Subsidiary acting at the direction of, or on behalf of, the Committee shall not be personally
liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent
-
(1)
-
This
number assumes approval of Proposal 4 at our annual meeting of stockholders. In the event that this amendment to our Amended and Restated 2004 Stock
Incentive Plan in Proposal 4 is not approved, this number will remain at 6,825,000, of which 2,975,431 remain available for future issuance.
A-5
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permitted
by law, be fully indemnified by the Company with respect to any such action or determination.
5.
Eligibility.
Individuals eligible to receive Awards under the Plan shall be the offices, employees, directors
and consultants of the Company and its Subsidiaries selected by the Committee;
provided, that
, only employees of the Company and its Subsidiaries may be
granted Incentive Stock Options.
6.
Awards.
Awards under the Plan may consist of Options, Restricted Stock, Restricted Stock Units, Performance
Compensation Awards, share awards, Stock Appreciation Rights or other awards based on the value of the Common Stock. Incentive Stock Options may only be granted to employees of the Company and its
Subsidiaries. Awards shall be subject to the terms and conditions of the Plan and shall be evidenced by an Award Agreement containing such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall deem desirable.
7.
Options.
Options may be granted under the Plan in such form as the Committee may from time to time approve
pursuant to terms set forth in an Option agreement.
(a)
Types of Options.
Each Option agreement shall state whether or not the Option will be treated as an
Incentive Stock Option or Nonqualified Stock Option. The aggregate Fair Market Value of the Common Stock for which Incentive Stock Options granted to any one employee under this Plan or any other
incentive stock option plan of the Company or of any of its Subsidiaries may by their terms first become exercisable during any calendar year shall not exceed $100,000, determining Fair Market Value
as of the Date of Grant of each respective Option. In the event such threshold is exceeded in any calendar year, such excess Options shall be automatically deemed to be Nonqualified Stock Options. To
the extent that any Option granted under this Plan which is intended to be an Incentive Stock Option fails for any reason to qualify as such at any time, such Option shall be a Nonqualified Stock
Option. Notwithstanding any of the foregoing to the contrary, the Company shall have no liability to any Participant or any other person is an Option designated as an Incentive Stock Option fails to
qualify as such at any time or if an Option is determined to constitute "nonqualified deferred compensation" within the meaning of Section 409A of the Code and the terms of such Option do not
satisfy the additional conditions applicable to nonqualified deferred compensation under Section 409A of the Code and Section 13 of the Plan.
(b)
Option Price.
The purchase price per share of the Common Stock purchasable under an Option shall be
determined by the Committee; provided, however, the exercise price for Incentive Stock Options will be not less than 100% of the Fair Market Value of the Common Stock on the Date of Grant and in the
case of Incentive Stock Options granted to an employee owning stock possessing more than 10% of the total combined voting power of all classes of shares of the Company and its Subsidiaries (a "10%
Shareholder") the price per share specified in the agreement relating to such Option shall not be less than 110% of the Fair Market Value per share of the Common Stock on the Date of Grant.
Notwithstanding any other provision in this Plan to the contrary, the Committee may reduce the option price of any outstanding Option either through a direct amendment to such Option or through a
cancellation of such Option and immediate grant of a new Option with a lower option price or in any other manner it deems appropriate.
(c)
Option Period.
The term of each Option shall be fixed by the Committee, but no Option shall be exercisable
after the expiration of ten (10) years from the Date of Grant of the Option; provided, that, in the case of Incentive Stock Options granted to 10% Shareholders, the term of such Option shall
not exceed 5 years from the Date of Grant. Notwithstanding the foregoing, unless otherwise provided in an Award Agreement, upon the death of a Participant, Options (other than Incentive Stock
Options) that would otherwise remain exercisable following such death, shall remain exercisable for one year following such death, notwithstanding the term of such Option.
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(d)
Exercisability.
Each Option shall vest and become exercisable at a rate determined
by the Committee on the Date of Grant.
(e)
Method of Exercise.
Options may be exercised, in whole or in part, by giving written notice of exercise to
the Company in a form approved by the Company specifying the number shares of Common Stock to be purchased. Such notice shall be accompanied by the payment in full of the Option exercise price. The
exercise price of the Option may be paid by (i) cash or certified or bank check, (ii) surrender of Common Stock held by the Optionee for at least six (6) months prior to exercise
(or such longer or shorter period as may be required to avoid a charge to earnings for financial accounting purposes) or the attestation of ownership of such shares, in either case, if so permitted by
the Company, where such Common Stock has a Fair Market Value equal to the aggregate exercise price of the Option at the time of exercise, (iii) if established by the Company, through a "same
day sale" commitment from optionee and a broker-dealer that is acceptable to the Company that is a member of the National Association of Securities Dealers (an "NASD Dealer") whereby the optionee
irrevocably elects to exercise the Option and to sell a portion of the shares so purchased sufficient to pay for the total exercise price and whereby the NASD Dealer irrevocably commits upon receipt
of such shares to forward the total exercise price directly to the Company, (iv) through additional methods prescribed by the Committee, all under such terms and conditions as deemed
appropriate by the Committee in its discretion, or (v) by any combination of the foregoing, and, in all instances, to the extent permitted by applicable law. A Participant's subsequent transfer
or disposition of any Common Stock acquired upon exercise of an Option shall be subject to any Federal and state laws then applicable, specifically securities law, and the terms and conditions of this
Plan. Notwithstanding any of the foregoing to the contrary, during any period for which the Common Stock is publicly traded (i.e., the Common Stock is listed on any
established stock exchange or national market system) an exercise by a director or executive officer that involves or may involve a direct or indirect extension of credit or arrangement or an
extension of credit by the Company, directly or indirectly, in violation of Section 402(a) of the Sarbanes-Oxley Act (codified in Section 13(k) of the Exchange Act) shall be prohibited
with respect to any Award under this Plan.
(f)
Additional Requirements Under Section 409A.
Each Award Agreement evidencing the grant of an Option
shall include a provision whereby, notwithstanding any provision of the Plan or the Award Agreement to the contrary, the Option shall satisfy the additional conditions applicable to nonqualified
deferred compensation under Section 409A of the Code, in accordance with Section 13 hereof, in the event any Option under this Plan is granted with an exercise price less than Fair
Market Value of the Common Stock subject to the Option on the date the Option is granted (regardless of whether or not such exercise price is intentionally or unintentionally priced at less than Fair
Market Value, or is materially modified at a time when the Fair Market Value exceeds the exercise price), or is otherwise determined to constitute "nonqualified deferred compensation" within the
meaning of Section 409A of the Code.
8.
Restricted Awards
.
(a) The
Committee may from time to time award to eligible Participants actual shares of Common Stock ("Restricted Stock") or hypothetical Common Stock units ("Restricted
Stock Units") having a value equal to the Fair Market Value of an identical number of shares of Common Stock, which may, but need not, provide that such Restricted Stock or Restricted Stock Units may
not be sold, assigned, transferred or otherwise disposed of, pledged or hypothecated as collateral for a loan or as security for the performance of any obligation or for any other purpose for such
period (the "Restricted Period") as the Committee shall determine. The Committee may define the Restricted Period in terms of the passage of time or in any other manner it deems appropriate. The
Committee may alter or waive at any time any term or condition of Restricted Stock or Restricted Stock Units that is not mandatory under the Plan. Unless otherwise determined by the Committee, upon
termination of a Participant's Continuous Service with the Company for any reason prior to the end of the Restricted
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Period,
any Restricted Stock or Restricted Stock Units shall be forfeited and the Participant shall have no right with respect to the Award. Except as restricted under the terms of the Plan and any
Award Agreement, any Participant awarded Restricted Stock shall have all the rights of a shareholder including, without limitation, the right to vote the Restricted Stock. If a share certificate is
issued in respect of the Restricted Stock, the certificate shall be registered in the name of the Participant, but shall be held by the Company for the account of the Participant until the end of the
Restricted Period. Payment of Restricted Stock Units shall be made in Common Stock or in cash or in a combination thereof (based upon the Fair Market Value of the Common Stock on the day the
Restricted Period expires), all as determined by the Committee in its sole discretion. No shares of Common Stock shall be issued at the time Restricted Stock Units are granted, and the Company will
not be required to set
aside a fund for the payment of any such Award. At the discretion of the Committee, each Restricted Stock Unit (representing one share of Common Stock) may be credited with cash and stock dividends
paid by the Company in respect of one share of Common Stock ("Dividend Equivalents"). At the discretion of the Committee, Dividend Equivalents may be either currently paid to the Participant or
withheld by the Company for the Participant's account, and interest may be credited on the amount of cash Dividend Equivalents withheld at a rate and subject to such terms as determined by the
Committee. Dividend Equivalents credited to a Participant's account and attributable to any particular Restricted Stock Unit (and earnings thereon, if applicable) shall be distributed in cash or, at
the discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such Dividend Equivalents and earnings, if applicable, to the Participant upon settlement
of such Restricted Stock Unit and, if such Restricted Stock Unit is forfeited, the Participant shall have no right to such Dividends Equivalents.
(b)
Delivery of Restricted Stock and Settlement of Restricted Stock Units.
Upon the expiration of the Restricted
Period with respect to any shares of Restricted Stock, the restrictions set forth in Section 8(a) and the applicable Award Agreement shall be of no further force or effect with respect to such
shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant, or his beneficiary, without charge,
the stock certificate evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (to the nearest full share) and any cash
dividends or stock dividends credited to the Participant's account with respect to such Restricted Stock and the interest thereon, if any. Upon the expiration of the Restricted Period with respect to
any outstanding Restricted Stock Units, the Company shall deliver to the Participant, or his beneficiary, without charge, one share of Common Stock for each such outstanding Restricted Stock Unit
("Vested Unit") and cash equal to any Dividend Equivalents credited with respect to each such Vested Unit in accordance with section 8(a) hereof and the interest thereon or, at the discretion
of the Committee, in shares of Common Stock having a Fair Market Value equal to such Dividend Equivalents interest thereon, if any;
provided, however,
that, if explicitly provided in the applicable Award Agreement, the Committee may, in its sole discretion, elect to pay cash or part cash and part Common Stock in lieu of delivering only shares of
Common Stock for Vested Units. If a cash payment is made in lieu of delivering shares of Common Stock, the amount of such payment shall be equal to the Fair Market Value of the Common Stock as of the
date on which the Restricted Period lapsed with respect to such Vested Unit.
9.
Performance Compensation Awards
.
(a)
General.
The Committee shall have the authority, at the time of grant of any Award described in this Plan
(other than Options and Stock Appreciation Rights granted with an exercise price or grant price, as the case may be, equal to or greater than the Fair Market Value per share of Stock on the date of
grant), to designate such Award as a Performance Compensation Award in order to qualify such Award as "performance-based compensation" under Section 162(m) of the Code. In addition, the
Committee shall have the authority to make an award of a cash bonus to any Participant
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and
designate such Award as a Performance Compensation Award in order to qualify such Award as "performance-based compensation" under Section 162(m).
(b)
Eligibility.
The Committee will, in its sole discretion, designate within the first 90 days of a
Performance Period (or, if longer or shorter, within the maximum period allowed under Section 162(m) of the Code) which Participants will be eligible to receive Performance Compensation Awards
in respect of such Performance Period. However, designation of a Participant eligible to receive an Award hereunder for a Performance Period shall not in any manner entitle the Participant to receive
payment in respect of any Performance Compensation Award for such Performance Period. The determination as to whether or not such Participant becomes entitled to payment in respect of any Performance
Compensation Award shall be decided solely in accordance with the provisions of this Section 9(b). Moreover, designation of a Participant eligible to receive an Award hereunder for a particular
Performance Period shall not require designation of such Participant eligible to receive an Award hereunder in any subsequent Performance Period and designation of one person as a Participant eligible
to receive an Award hereunder shall not require designation of any other person as a Participant eligible to receive an Award hereunder in such period or in any other period.
(c)
Discretion of Committee with Respect to Performance Compensation Awards.
With regard to a particular
Performance Period, the Committee shall have full discretion to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the performance criteria that
will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goals(s) that is (are) to apply to the Company and the Performance Formula. Within the first
90 days of a Performance Period (or, if longer or shorter, within the maximum period allowed under Section 162(m) of the Code), the Committee shall, with regard to the Performance
Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence of this Section 9(c)
and record the same in writing.
(d)
Payment of Performance Compensation Awards
.
(i)
Condition to Receipt of Payment.
Unless otherwise provided in the applicable Award Agreement, a Participant
must be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period.
(ii)
Limitation.
A Participant shall be eligible to receive payment in respect of a Performance Compensation
Award only to the extent that: (A) the Performance Goals for such period are achieved; and (B) the Performance Formula as applied against such Performance Goals determines that all or
some portion of such Participant's Performance Compensation Award has been earned for the Performance Period.
(iii)
Certification.
Following the completion of a Performance Period, the Committee shall review and certify in
writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify in writing that amount of the Performance Compensation Awards
earned for the period based upon the Performance Formula. The Committee shall then determine the actual size of each Participant's Performance Compensation Award for the Performance Period and, in so
doing, may apply Negative Discretion in accordance with Section 9(d)(iv) hereof, if and when it deems appropriate.
(iv)
Use of Discretion.
In determining the actual size of an individual Performance Compensation Award for a
Performance Period, the Committee may reduce or eliminate the amount of the Performance Compensation Award earned under the Performance Formula in the Performance Period through the use of Negative
Discretion if, in its sole judgment, such reduction or elimination is appropriate. The Committee shall not have the discretion to (a) grant or provide payment in respect of
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Performance
Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained; or (b) increase a Performance Compensation Award above the
maximum amount payable under Section 9(d)(vi) of the Plan.
(v)
Timing of Award Payments.
Performance Compensation Awards granted for a Performance Period shall be paid to
Participants as soon as administratively practicable following completion of the certifications required by Section 9(d)(iii).
(vi)
Maximum Award Payable.
Notwithstanding any provision contained in this Plan to the contrary, the maximum
Performance Compensation Award payable to any one Participant under the Plan for a Performance Period is 6,825,000 shares of Common Stock or, in the event such Performance Compensation Award is paid
in cash, the equivalent cash value thereof on the first or last day of the Performance Period to which such Award relates, as determined by the Committee. The maximum amount that can be paid in any
calendar year to any Participant pursuant to a cash bonus Award described in the last sentence of Section 9(a) shall be $4,000,000. Furthermore, any Performance Compensation Award that has been
deferred shall not (between the date as of which the Award is deferred and the payment date) increase (A) with respect to Performance Compensation Award that is payable in cash, by a measuring
factor for each fiscal year greater than a reasonable rate of interest set by the Committee or (B) with respect to a Performance Compensation Award that is payable in shares of Common Stock, by
an amount greater than the appreciation of a share of Common Stock from the date such Award is deferred to the payment date.
10.
Share Purchases.
The Committee may authorize eligible individuals to purchase Common Stock in the Company at
a price equal to, below or above the Fair Market Value of the Common Stock at the time of grant. Any such offer may be subject to the conditions and terms the Committee may impose.
11.
Stock Appreciation Rights.
The Committee may in its discretion, either alone or in connection with the grant
of another Award, grant stock appreciation rights ("Stock Appreciation Rights") in accordance with the Plan, the terms and conditions of which shall be set forth in an agreement. If granted in
connection with an Option, a Stock Appreciation Right shall cover the same number of shares of Common Stock covered by the Option (or such lesser number of shares as the Committee may determine) and
shall, except as provided in this Section 11, be subject to the same terms and conditions as the related Option.
(a)
Time of Grant.
A Stock Appreciation Right may be granted (i) at any time if unrelated to an Option,
or (ii) if related to an Option, either at the time of grant, or in the case of Nonqualified Stock Options, at any time thereafter during the term of such Option.
(b)
Stock Appreciation Right Related to an Option
.
(i) A
Stock Appreciation Right granted in connection with an Option shall be exercisable at such time or times and only to the extent that the related Options are
exercisable, and will not be transferable except to the extent the related Option may be transferable. A Stock Appreciation Right granted in connection with an Incentive Stock Option shall be
exercisable only if the Fair Market Value of a share of Common Stock on the date of exercise exceeds the purchase price specified in the related Incentive Stock Option agreement.
(ii) Upon
the exercise of a Stock Appreciation Right related to an Option, the Participant shall be entitled to receive an amount determined by multiplying (A) the
excess of the Fair Market Value of a share of Common Stock on the date preceding the date of exercise of such Stock Appreciation Right over the per share purchase price under the related Option, by
(B) the number of shares of Common Stock as to which such Stock Appreciation Right is being exercised. Notwithstanding the foregoing, the Committee may limit in any manner the amount payable
with respect to any Stock Appreciation Right by including such a limit in the agreement evidencing the Stock Appreciation Right at the time it is granted.
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(iii) Upon
the exercise of a Stock Appreciation Right granted in connection with an Option, the Option shall be canceled to the extent of the number of shares as to which
the Stock Appreciation Right is exercised, and upon the exercise of an Option granted in connection with a Stock Appreciation Right, the Stock Appreciation Right shall be canceled to the extent of the
number of shares of Common Stock as to which the Option is exercised or surrendered.
(c)
Stock Appreciation Right Unrelated to an Option.
The Committee may grant to a Participant Stock Appreciation
Rights unrelated to Options. Stock Appreciation Rights unrelated to Options shall contain such terms and conditions as to exercisability, vesting and duration as the Committee shall determine, but in
no event shall they have a term of greater than ten (10) years; provided, that, unless otherwise provided in an Award Agreement, upon the death of a Participant, Stock Appreciation Rights that
would otherwise remain exercisable for a period of time following such death, shall remain exercisable for one year following death notwithstanding the term of the Award. Upon exercise of a Stock
Appreciation Right unrelated to an Option, the Participant shall be entitled to receive an amount determined by multiplying (i) the excess of the Fair Market Value of a share on the date
preceding the date of exercise of such Stock Appreciation Right over the per share exercise price of the Stock Appreciation Right, by (ii) number of shares of Common Stock as to which the Stock
Appreciation Right is being exercised. Notwithstanding the foregoing, the Committee may limit in any manner the amount payable with respect to any Stock Appreciation Right by including such a limit in
the agreement evidencing the Stock Appreciation Right at the time it is granted.
(d)
Method of Exercise.
Stock Appreciation Rights shall be exercised by a Participant only by a written notice
delivered in person or by mail to the Company at the Company's principal executive office, specifying the number of shares of Common Stock with respect to which the Stock Appreciation Right is being
exercised. If requested by the Committee, the Participant shall deliver the agreement evidencing the Stock Appreciation Right being exercised and the agreement evidencing any related Option to the
Company who shall endorse thereon a notation of such exercise and return such agreement to the Participant.
(e)
Form of Payment.
Payment of the amount determined under this Section 11 may be made in the discretion
of the Committee solely in whole shares of Common Stock in a number determined at their Fair Market Value on the date preceding the date of exercise of the Stock Appreciation Right, or solely in cash,
or in a combination of cash and shares. If the Committee decides to make full payment in shares in Common Stock and the amount payable results in a fractional share, payment for the fractional share
will be made in cash.
(f)
Additional Requirements under Section 409A.
A Stock Appreciation Right that provides for the deferral
of compensation within the meaning of Section 409A of the Code shall satisfy the requirements of this Section 11(f) and the additional conditions applicable to nonqualified deferred
compensation under Section 409A of the Code, in accordance with Section 13 hereof. The requirements herein shall apply in the event any Stock Appreciation Right under this Plan is
granted with an exercise price less than Fair Market Value of the Common Stock underlying the Award on the date the Stock Appreciation Right is granted (regardless of whether or not such exercise
price is intentionally or unintentionally priced at less than Fair Market Value, or is materially modified at a time when the Fair Market Value exceeds the exercise price), provides that it is settled
in cash, or is otherwise determined to constitute
"nonqualified deferred compensation" within the meaning of Section 409A of the Code. Any such Stock Appreciation Right may provide that it is exercisable at any time permitted under the
governing written instrument, but such exercise shall be limited to fixing the measurement of the amount, if any, by which the Fair Market Value of a share of Common Stock on the date of exercise
exceeds the exercise price (the "SAR Amount"). However, once the Stock Appreciation Right is exercised, the SAR Amount may only be paid on the fixed time, payment schedule or other event specified in
the governing written instrument or in Section 13(a) hereof.
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12.
Share Awards.
Subject to such performance and employment conditions as the Committee
may determine, awards of Common Stock or awards based on the value of the Common Stock may be granted either alone or in addition to other Awards granted under the Plan. Any Awards under this
Section 12 and any Common Stock covered by any such Award may be forfeited to the extent so provided in the Award Agreement, as determined by the Committee. Payment of Common Stock awards made
under this Section 12 which are based on the value of Common Stock may be made in Common Stock or in cash or in a combination thereof (based upon the Fair Market Value of the Common Stock on
the date of payment), all as determined by the Committee in its sole discretion.
13.
Additional Conditions Applicable to Nonqualified Deferred Compensation Under Section 409A of the
Code.
In the event any Award under this Plan is granted with an exercise price less than Fair Market Value of the Common Stock subject to the Award on the Date of
Grant (regardless of whether or not such exercise price is intentionally or unintentionally priced at less than Fair Market Value, or such Award is materially modified and deemed a new Award at a time
when the Fair Market Value exceeds the exercise price), or is otherwise determined to constitute a 409A Award, the following additional conditions shall apply and shall supersede any contrary
provisions of this Plan or the terms of any 409A Award agreement.
(a)
Exercise and Distribution.
No 409A Award shall be exercisable or distributable earlier than upon one of the
following:
(i)
Specified Time.
A specified time or a fixed schedule set forth in the written instrument evidencing the 409A
Award, but not later than after the expiration of 10 years from the Date of Grant. If the written grant instrument does not specify a fixed time or schedule, such time shall be the date that is
the fifth anniversary of the Date of Grant.
(ii)
Separation from Service.
Separation from service (within the meaning of Section 409A of the Code) by
the 409A Award recipient;
provided, however
, if the 409A Award recipient is a "key employee" (as defined in Section 416(i) of the Code without
regard to paragraph (5) thereof) and any of the Company's stock is publicly traded on an established securities market or otherwise, exercise or distribution under this Section 13(a)(ii)
may not be made before the date which is six months after the date of separation from service.
(iii)
Death.
The date of death of the 409A Award recipient.
(iv)
Disability.
The date the 409A Award recipient becomes disabled (within the meaning of
Section 13(d)(ii) hereof).
(v)
Unforeseeable Emergency.
The occurrence of an unforeseeable emergency (within the meaning of
Section 13(d)(iii) hereof), but only if the net value (after payment of the exercise price) of the number of shares of Common Stock that become issuable does not exceed the amounts necessary to
satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the exercise, after taking into account the extent to which the emergency is or may be relieved through
reimbursement or compensation by insurance or otherwise or by liquidation of the Participant's other assets (to the extent such liquidation would not itself cause severe financial hardship).
(vi)
Change in Control Event.
The occurrence of a Change in Control Event (within the meaning of
Section 13(d)(i) hereof), including the Company's discretionary exercise of the right to accelerate vesting of such Award upon a Change in Control Event or to terminate the Plan or any 409A
Award granted hereunder within twelve (12) months of the Change in Control Event.
(b)
Term.
Notwithstanding anything to the contrary in this Plan or the terms of any Award Agreement in respect
of a 409A Award, the term of any 409A Award shall expire and such Award shall no longer be exercisable on the date that is the later of: (i) 2-1/2 months after the end of the
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Company's
taxable year in which the 409A Award first becomes exercisable or distributable pursuant to this Section 13 and is not subject to a substantial risk of forfeiture; or
(ii) 2-1/2 months after the end of the 409A Award recipient's taxable year in which the 409A Award first becomes exercisable or distributable pursuant to this Section 13 and is not
subject to a substantial risk of forfeiture, but not later than the earlier of (x) the expiration of 10 years from the date the 409A Award was granted, or (y) the term specified
in the 409A Award agreement.
(c)
No Acceleration.
A 409A Award may not be accelerated or exercised prior to the time specified in this
Section 13, except in the case of one of the following events:
(i)
Domestic Relations Order.
The 409A Award may permit the acceleration of the exercise or distribution time or
schedule to an individual other than the Participant as may be necessary to comply with the terms of a domestic relations order (as defined in Section 414(p)(1)(B) of the Code).
(ii)
Change in Control Event.
The Committee may exercise the discretionary right to accelerate the vesting of
such 409A Award upon a Change in Control Event or to terminate the Plan or any 409A Award granted thereunder within 12 months of the Change in Control Event and cancel the 409A Award for
compensation. In addition, the Committee may exercise the discretionary right to accelerate the vesting of such 409A Award provided that such acceleration does not change the time or schedule of
payment of such Award and otherwise satisfies the requirements of this Section 13 and the requirements of Section 409A of the Code.
(d)
Definitions.
Solely for purposes of this Section 13 and not for other purposes of the Plan, the
following terms shall be defined as set forth below:
(i) "Change
in Control Event" means the occurrence of a change in the ownership of the Company, a change in effective control of the Company, or a change in the ownership
of a substantial portion of the assets of the Company (within the meaning of Treasury Regulation Section 1.409A-3(i)(5).
(ii) "Disabled"
means a Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of
not less than three months under an accident and health plan covering Employees.
(iii) "Unforeseeable
Emergency" means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant's spouse, or a
dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participant's property due to casualty, or similar extraordinary and unforeseeable circumstances arising as
a result of events beyond the control of the Participant.
14.
Change in Control.
Unless otherwise provided in an Award Agreement, upon the occurrence of a Change in
Control, all Options and Stock Appreciation Rights shall automatically become vested and exercisable in full and all restrictions or performance conditions, if any, on any Common Stock awards,
Restricted Stock, Restricted Stock Units, or Performance Compensation Awards granted hereunder shall automatically lapse. The Committee may, in its discretion, include such further provisions and
limitations in any agreement documenting such Awards as it may deem equitable and in the best interests of the Company.
15.
Withholding.
Upon (a) disposition of shares of Common Stock acquired pursuant to the exercise of an
Incentive Stock Option granted pursuant to the Plan within two years of the grant of the
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Incentive
Stock Option or within one year after exercise of the Incentive Stock Option, or (b) exercise of a Nonqualified Stock Option (or an Incentive Stock Option treated as a Nonqualified
Stock Option), exercise of a stock appreciation right or the vesting or payment of any other Award under the Plan, or (c) under any other circumstances determined by the Committee in its sole
discretion, the Company shall have the right to require any Participant, and such Participant by accepting the Awards granted under the Plan agrees, to pay to the Company the amount of any taxes which
the Company shall be required to withhold with respect thereto. In the event of clauses (a), (b) or (c), with the consent of the Committee, at its sole discretion, such Participant may
elect to pay to the Company an amount equal to the amount of the taxes which the Company shall be required to withhold by delivering to the Company shares of Common Stock having a Fair Market Value
equal to the amount of the withholding tax obligation as determined by the Company; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax
required to be withheld by law. Such shares so delivered to satisfy the minimum withholding obligation may be either shares withheld by the Company upon the exercise of the Option or other shares. At
the Committee's sole discretion, a Participant may elect to have additional taxes withheld and satisfy such withholding with cash or shares of Common Stock held for at least six (6) months
prior to exercise, if, in the opinion of the Company's outside accountants, doing so, would not result in a charge against earnings.
16.
Nontransferability, Beneficiaries.
Unless otherwise determined by the Committee with respect to the
transferability of Nonqualified Stock Options by a Participant to his Immediate Family Members (or to trusts or partnerships or limited liability companies established for such family members), no
Award shall be assignable or transferable by the Participant, otherwise than by will or the laws of descent and
distribution or pursuant to a beneficiary designation, and Options shall be exercisable, during the Participant's lifetime, only by the Participant (or by the Participant's legal representatives in
the event of the Participant's incapacity). Each Participant may designate a beneficiary to exercise any Option held by the Participant at the time of the Participant's death or to be assigned any
other Award outstanding at the time of the Participant's death. If no beneficiary has been named by a deceased Participant, any Award held by the Participant at the time of death shall be transferred
as provided in his will or by the laws of descent and distribution. Except in the case of the holder's incapacity, an Option may only be exercised by the holder thereof.
17.
No Right to Continuous Service.
Nothing contained in the Plan or in any Award under the Plan shall confer
upon any Participant any right with respect to the continuation of service with the Company or any of its Subsidiaries, or interfere in any way with the right of the Company or its Subsidiaries to
terminate his or her Continuous Service at any time. Nothing contained in the Plan shall confer upon any Participant or other person any claim or right to any Award under the Plan.
18.
Governmental Compliance.
Each Award under the Plan shall be subject to the requirement that if at any time
the Committee shall determine that the listing, registration or qualification of any shares issuable or deliverable thereunder upon any securities exchange or under any Federal or state law, or the
consent or approval of any governmental regulatory body, is necessary or desirable as a condition thereof, or in connection therewith, no such grant or award may be exercised or shares issued or
delivered unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.
19.
Adjustments; Corporate Events
.
(a) In
the event of (x) any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or
other securities of the Company, or other similar corporate
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transaction
or event (including, without limitation, a Change in Control) (an "Event") that affects the Common Stock or (y) unusual or nonrecurring events (including, without limitation, a
Change in Control) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or changes in applicable rules, rulings, regulations or other requirements of any
governmental body or securities exchange or inter-dealer quotation system, accounting principles or law, such that in either case an adjustment is determined by the Committee in its sole discretion to
be necessary or
appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Award, then the Committee shall, in
such manner as it may deem equitable, including, without limitation, adjust any or all of the following:
(i) adjusting
any or all of (A) the number and kind of shares of Common Stock or other securities of the Company (or number and kind of other securities or other
property) that may be delivered in respect of Awards or with respect to which Awards may be granted under the Plan (including, without limitation, adjusting any or all of the limitations under
Sections 3 and 9 of the Plan) and (B) the terms of any outstanding Award, including, without limitation, (1) the number of shares Common Stock or other securities of the Company
(or number and kind of other securities or other property) subject to outstanding Awards or to which outstanding Awards relate, (2) the grant or exercise price with respect to any Award or
(3) any applicable performance measures (including, without limitation, Performance Objectives and Performance Goals);
(ii) providing
for a substitution or assumption of Awards, accelerating the exercisability of, lapse of restrictions on, or termination of, Awards or providing for a period
of time for exercise prior to the occurrence of such event;
(iii) canceling
any one or more outstanding Awards and causing to be paid to the holders thereof, in cash, shares of Common Stock, other securities or other property, or any
combination thereof, the value of such Awards, if any, as determined by the Committee (which if applicable may be based upon the price per share of Common Stock received or to be received by other
shareholders of the Company in such event), including without limitation, in the case of an outstanding Option, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of
a date specified by the Committee) of the shares Common Stock subject to such Option over the aggregate exercise price of such Option (it being understood that, in such event, any Option having a per
share exercise price equal to, or in excess of, the Fair Market Value of a share of Common Stock subject thereto may be canceled and terminated without any payment or consideration therefor); and
(iv) providing
that any Award shall be exercisable (whether or not vested) as to all shares covered thereby for at least thirty (30) days prior to such Event.
(b) The
existence of the Plan, the Award Agreement and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the
shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the
Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or
the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar character or otherwise.
(c) The
Committee's determination under this Section 19 shall be final, binding and conclusive.
20.
Award Agreement.
Each Award under the Plan shall be evidenced by agreement (the "Award Agreement") setting
forth the terms and conditions, as determined by the Committee, which shall apply to such Award, in addition to the terms and conditions specified in the Plan.
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21.
Amendment.
The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided
that (a) no amendment shall be made without shareholder approval if such approval is necessary to comply with any applicable law, regulation or stock exchange rule and (b) except as
provided in Section 19, no amendment shall be made that would adversely affect the rights of a Participant under an Award theretofore granted, without such Participant's written consent.
22.
General Provisions
.
(a) The
Committee may require each Participant purchasing or acquiring shares pursuant to an Award under the Plan to represent to and agree with the Company in writing that
such Participant is acquiring the shares for investment and without a view to distribution thereof.
(b) All
certificates for Common Stock delivered under the Plan pursuant to any Award shall be subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed, and any applicable
Federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. If the Committee determines that
the issuance of Common Stock hereunder is not in compliance with, or subject to an exemption from, any applicable Federal or state securities laws, such shares shall not be issued until such time as
the Committee determines that the issuance is permissible.
(c) It
is the intent of the Company that the Plan satisfy, and be interpreted in a manner that satisfies, the applicable requirements of Rule 16b- 3 as promulgated
under Section 16 of the Exchange Act so that Participants will be entitled to the benefit of Rule 16b-3, or any other rule promulgated under Section 16 of the Exchange Act, and
will not be subject to short-swing liability under Section 16 of the Exchange Act. Accordingly, if the operation of any provision of the Plan would conflict with the intent expressed in this
Section 22(c), such provision to the extent possible shall be interpreted and/or deemed amended so as to avoid such conflict.
(d) Except
as otherwise provided by the Committee in the applicable grant or Award Agreement, a Participant shall have no rights as a shareholder with respect to any shares
of Common Stocks subject to an Award until a certificate or certificates evidencing shares of Common Stock shall have been issued to the Participant and, subject to Section 19, no adjustment
shall be made for dividends or distributions or other rights in respect of any share for which the record date is prior to the date on which Participant shall become the holder of record thereof.
(e) The
law of the State of Delaware shall apply to all Awards and interpretations under the Plan regardless of the effect of such state's conflict of laws principles.
(f) Where
the context requires, words in any gender shall include any other gender.
(g) Headings
of Sections are inserted for convenience and reference; they do not constitute any part of this Plan.
(h) The
Committee shall have the power to accelerate the time at which an Award shall be exercisable or vest notwithstanding the terms of any Award Agreement.
(i) No
payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance,
welfare or other benefit plan of the Company or any Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.
(j) The
expenses of administering the Plan shall be borne by the Company and its Subsidiaries.
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Table of Contents
(k) No
fractional shares of Common Stock shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or
whether such fractional shares shall be eliminated by rounding up or down as appropriate.
(l) The
Plan is intended to be an "unfunded" plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing
contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary.
23.
Expiration of the Plan.
Subject to earlier termination pursuant to Section 21, no Award may be
granted following the 10-year anniversary of the Effective Date and except with respect to outstanding Awards, this Plan shall terminate.
24.
Effective Date; Approval of Shareholders.
The Plan is effective as of the date it is approved by the
affirmative vote of the holders of a majority of the securities of the Company present, or represented, and entitled to vote at a meeting of stockholders duly held in accordance with the applicable
laws of the State of Delaware (the "Effective Date")*. Unless the Company determines to submit Section 9 of the Plan and the definition of Performance Goal to the Company's stockholders at the
first stockholder meeting that occurs in the fifth year following the year in which the Plan was last approved by stockholders (or any earlier meeting designated by the Board), in accordance with the
requirements of Section 162(m) of the Code, and such stockholder approval is obtained, then no further Performance Compensation Awards shall be made to Covered Employees under Section 9
after the date of such annual meeting, but the remainder of the Plan shall continue in effect.
-
*
-
Approved
by the stockholders on October 26, 2011.
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(continued
from other side)
I/We
hereby revoke any other proxy to vote at the Annual Meeting, and hereby ratify and confirm all that said attorneys and proxies, and each of them, may lawfully do by virtue hereof.
With respect to matters not known at the time of the solicitation hereof, said proxies are authorized to vote in accordance with their best judgment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED IN PROPOSAL 1 AND "FOR" PROPOSALS 2, 3, 4, 5 AND
6.
I/We
hereby acknowledge prior receipt of the notice of annual meeting of stockholders and proxy statement dated March 10, 2014, the Annual Report on Form 10-K for the year
ended November 30, 2013, the Current Report on Form 8-K filed with the SEC on October 4, 2013 and the Current Report on Form 8-K/A filed with the SEC on December 6,
2013 and hereby revoke any proxy or proxies heretofore given. This proxy may be revoked at any time before it is voted by delivering to the Secretary of the Company either a written revocation of
proxy or a duly executed proxy bearing a later date, or by appearing at the 2014 annual meeting of stockholders and voting in person.
If
you receive more than one proxy card, please sign and return all cards in the accompanying envelope.