Washington, D.C. 20549
PROPOSAL 3
APPROVAL OF RUDOLPH TECHNOLOGIES, INC. 2018 STOCK PLAN
The Board of Directors is requesting that our stockholders approve a new stock plan, the Rudolph Technologies, Inc. 2018 Stock Plan (the “2018 Plan”). The Board has adopted the 2018 Plan, subject to stockholder approval at the Annual Meeting. If approved by our stockholders, the 2018 Plan will become effective as of May 16, 2018 and will expire 10 years from such date, unless terminated earlier.
The 2018 Plan is structured to allow the Board to award equity incentives to eligible directors, officers, employees and consultants in order to assist the Company in attracting, retaining and motivating the best available personnel for the successful conduct of the Company’s business. The Company believes that linking compensation to corporate performance motivates employees and consultants to improve stockholder value. The Company has, therefore, consistently included equity incentives as a significant component of compensation for its officers, employees, directors and consultants. With the high demand for highly skilled employees and consultants, especially in the technology industries, management believes it is critical to the Company’s success to maintain competitive compensation programs. The Board believes that the approval of the 2018 Plan would be in the best interests of the Company and its stockholders.
We currently maintain the Rudolph Technologies, Inc. 2009 Stock Plan (the “2009 Plan”). The 2009 Plan currently expires on January 27, 2019 which is before our regularly scheduled 2019 annual meeting of stockholders. If the 2018 Plan is not approved by our stockholders at the 2018 Annual Meeting, no new awards may be granted under the Plan after January 27, 2019. We are seeking stockholder approval of the 2018 Plan with a term that expires in May 2028 to continue to provide our officers, employees, directors and consultants with equity-based compensation that aligns their interests with the interests of our stockholders.
In addition, the number of shares remaining available under the 2009 Plan is insufficient to meet the Company’s compensation goals in future years. To ensure that the Company has an adequate number of shares available for compensation to its directors, executive officers and other employees and consultants, we are asking our stockholders to approve the 2018 Plan with a total share reserve of 3,240,000 shares, as described below under “Share Reserve Under the 2018 Plan”.
Key Governance Highlights Of The 2018 Plan
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The following are key governance highlights of the 2018 Plan:
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Minimum Vesting Requirements
. Minimum one-year vesting period for all awards subject to certain limited carve-outs.
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No Dividends on Unvested Awards
. Prohibition on payment of dividends and dividend equivalents while an award is unvested.
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No Liberal Share Recycling
. Shares of common stock not issued as the result of a net settlement of options or stock appreciation rights (“SARs”) as well as shares tendered or withheld to pay the exercise price of withholding taxes relating to awards will not again be made available for issuance as awards under the 2018 Plan.
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Individual Annual Award Limits for Directors
. Limitations apply to the value of awards an individual non-employee director (“outside director”) may receive in a given calendar year.
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Individual Annual Award Limits for Other Participants
. Limitations apply to the value of awards an individual officer, employee or consultant may receive in a given calendar year.
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No Liberal Change-in-Control Definition
. The change-in-control definition under the 2018 Plan is not considered “liberal” and, for example, is not triggered by shareholder approval of a transaction.
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Clawback
. Awards are subject to potential cancellation or clawback in certain circumstances in accordance with the Company’s clawback policy.
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No Repricing
. The 2018 Plan prohibits, without shareholder approval, the cancellation of underwater options or SARs for cash or other awards, the reduction of the exercise price of options or SARs, or any other action that would be treated as a repricing, without shareholder approval.
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Share Reserve Under The 2018 Plan
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Under the 2018 Plan, the number of shares of Company common stock available for issuance to eligible participants will be 3,240,000 shares, subject to stockholder approval. As of the effective date of the 2018 Plan, no additional grants may thereafter be issued under the 2009 Plan. As of March 29, 2018, 1,949,577 shares remained available for grant under the 2009 Plan.
The following table presents information about the number of shares that were subject to various outstanding equity awards under the 2009
Plan and the shares remaining available for issuance under the 2009 Plan. On March 29, 2018, the total number of shares outstanding was 31,741,645 and our closing stock price was $27.70.
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Number of outstanding stock options as of March 29, 2018.
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65,000
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Weighted average exercise price of the outstanding stock options as of March 29, 2018.
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$12.22
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Weighted average remaining contractual term of the outstanding stock options as of March 29, 2018.
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4.7 years
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Number of outstanding serviced-based restricted stock units
(1)
as of March 29, 2018.
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864,759
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Number of outstanding performance-based restricted stock units (at target) as of March 29, 2018.
(1)
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89,262
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Shares remaining available under the 2009 Plan as of March 29, 2018.
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1,949,577
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Number of shares available for issuance under the 2018 Plan
(2)
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3,240,000
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(1)
Includes earned performance-based restricted stock units that
have been earned and remain subject to service-based vesting requirements.
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(2)
As may be increased after the effective date of the 2018 Plan as a result of awards granted under the 2009 Plan that expire unexercised, terminate, are forfeited or repurchased by the Company, are surrendered pursuant to an exchange program, are settled in cash in lieu of stock or released from a reserve for failure to meet vesting conditions, or shares used to satisfy an exercise price or tax withholding obligation subject to the terms of the 2009 Plan.
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In determining whether to approve the 2018 Plan, including the share reserve under the 2018 Plan, the following considerations were taken into account:
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We expect the share reserve under the 2018 Plan to provide us with enough shares for awards for approximately 5.7 years. However, this expectation assumes that we continue to grant awards consistent with our current practices and historical usage as reflected in our historical burn rate, and is dependent on our stock price and hiring activity during the next few years and forfeitures of outstanding awards under the 2009 Plan. We cannot predict our future equity grant practices, the future price of our stock or future hiring activity with any degree of certainty at this time and, as a result, the share reserve under the 2018 Plan could last for a shorter or longer time.
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The potential dilution to our stockholders that may result from the issuance of shares pursuant to outstanding awards: our overhang rate as of March 29, 2018 (calculated by dividing (x) the number of shares subject to equity awards outstanding plus shares remaining available for issuance for future awards by (y) the number of common shares outstanding plus the number of shares subject to equity awards outstanding plus the remaining shares available for issuance was 8.6%. Our overhang rate on a pro forma basis, assuming that the 3,240,000 share reserve under the 2018 Plan was authorized as of that date, would have been 12.0%.
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Over the past three calendar years, our “burn rate,” or annual share usage expressed as a percentage of weighted average shares outstanding, was 7.7%, 3.5% and 2.2% (for the years ended December 31, 2015, December 31, 2016 and December 31, 2017, respectively). Our average 3-year burn rate of 4.5% is lower than the 6.3% burn rate cap for companies in our industry, as established by certain major proxy advisory firms.
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Analysis by our compensation consultant, which was based on generally accepted evaluation methodologies used by proxy advisory firms, that the number of shares to be reserved under the 2018 Plan is within generally accepted standards as measured by an analysis of the 2018 Plan cost relative to industry standards.
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The following is a summary of the principal features of the 2018 Plan and its operation. This summary is qualified in its entirety by reference to the 2018 Plan itself set forth in Appendix A.
The 2018 Plan provides for the grant of equity awards to employees, directors and consultants. Options granted under the 2018 Plan may either be “incentive stock options” as defined in Code Section 422 or nonstatutory stock options, as determined by the Board.
The general purposes of the 2018 Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to the employees, directors and consultants of the Company and to promote the success of the Company’s business.
The 2018 Plan will be administered by the Compensation Committee (“Committee”) or the Board, as applicable (in either case, the “Administrator”).
The 2018 Plan provides that nonstatutory stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance units and performance shares may be granted to employees, directors and consultants of the Company and any parent or subsidiary. Incentive stock options may be granted only to employees of the Company and any parent or subsidiary. The Administrator will determine which eligible persons will be granted awards.
Shares Available Under The 2018 Plan
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The maximum aggregate number of shares that may be awarded and sold under the 2018 Plan is 3,240,000 shares. If, after the effective date of the 2018 Plan, any shares subject to awards granted under the 2009 Plan would again become available for new awards under the terms of the 2009 Plan if it were still in effect and without regard to any termination of such plan, then those shares will be available for the purpose of granting awards under the 2018 Plan. The shares issued pursuant to awards under the 2018 Plan may be authorized but unissued or reacquired Common Stock. No awards have been granted under the 2018 Plan.
If an award terminates, expires or becomes unexercisable without having been exercised in full without being exercised in full, or, with respect to restricted stock, restricted stock units, performance units or performance shares, is terminated or forfeited in whole or in part due to failure to vest, the shares (or forfeited shares) which were subject to such terminated, expired, unexercised, surrendered or forfeited award will become available for future issuance under the 2018 Plan. To the extent that an award under the 2018 Plan is paid out in cash, rather than shares, such cash payment will not result in reduction of the shares available for issuance under the 2018 Plan.
Shares used to pay the exercise price of an award or to satisfy the tax withholding obligations related to an award will not again become available for future grant under the 2018 Plan. Upon exercise of a SAR settled in shares, all shares subject to the SAR (not the number of net shares actually issued pursuant to the SAR upon any exercise) will cease to be available under the 2018 Plan.
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For any calendar year, (i) the value of awards granted to an outside director under the 2018 Plan may not exceed $600,000 and (ii) the value of awards granted to any individual participant other than an outside director under the 2018 Plan may not exceed $5,000,000, in each case calculating the value of any such awards based on the grant date fair value of such awards for financial reporting purposes. For purposes of applying this annual limit, any award of performance units, performance shares or any other award subject to performance-based vesting criteria will be taken into account assuming target performance achievement under the terms of such award.
All awards granted to all participants under the 2018 Plan will be subject to a minimum vesting period of not less than 1 year from the date of grant; provided, the Administrator may provide for the grant of awards to participants without regard to the minimum vesting requirement with respect to a maximum of five percent (5%) of the total number of shares authorized for issuance under the 2018 Plan.
In connection with an entity’s merger or consolidation with the Company or any subsidiary or the direct or indirect acquisition by the Company or any subsidiary of an entity’s property or stock, the Committee may grant awards in substitution or exchange for any options or other stock or stock-based awards granted before such merger or consolidation by such entity or its affiliate. Substitute awards may be granted on such terms and conditions as the Committee deems appropriate, notwithstanding any limitations on awards in the 2018 Plan. Substitute awards will generally not count against the aggregate share reserve. Additionally, in the event that a company acquired by the Company or any subsidiary, or with which the Company or any subsidiary otherwise combines, has shares available under a pre-existing plan approved by its stockholders and not adopted in contemplation of such acquisition or combination as determined by the Administrator, the shares available for grant pursuant to the terms of such pre-existing plan may be used under certain circumstances for awards under the 2018 Plan and shall not reduce the shares authorized for grant under the 2018 Plan.
Types Of Awards Under The 2018 Plan
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Stock option awards may be granted to employees, directors or consultants of the Company at any time and from time to time as determined by the Administrator in its discretion, except incentive stock options may be granted only to employees of the Company. The exercise price of options granted under the 2018 Plan is determined by the Administrator and must not be less than 100% of the fair market value of the Common Stock at the time of grant. Options granted under the 2018 Plan expire as determined by the Administrator, but in no event later than 10 years from date of grant. No option may be exercised by any person after its expiration. Incentive stock options granted to stockholders owning more than 10% of the voting stock of the Company must have an exercise price per share no less than 110% of the fair market value at the time of grant and the term of such option may be no more than five years from the date of grant. The fair market value of the Common Stock is generally determined with reference to the closing sale price for the Common Stock (or the closing bid if no sales were reported) on the day of determination.
Options become exercisable at such times as are determined by the Administrator and as set forth in the individual award agreements. An option is exercised by giving notice to the Company in the form determined by the Administrator, specifying the number of full shares of Common Stock to be purchased and tendering payment of the purchase price. The 2018 Plan permits payment to be made by cash, check, other shares of Common Stock, delivery of a properly executed exercise notice together with any other documentation as the Administrator and the participant’s broker (if applicable) may require to effect an exercise of the option and delivery to the Company of the sale or other proceeds (as permitted by applicable law) required to pay the exercise price, withholding shares otherwise issuable in connection with the exercise of the option, such other consideration and method of payment authorized by the Administrator in its discretion or permitted by the award agreement, or any combination thereof.
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Restricted stock awards may be granted to employees, directors or consultants of the Company at any time and from time to time as determined by the Administrator in its discretion. Each restricted stock grant will be evidenced by an award agreement that will specify the number of shares granted and such other terms and conditions as the Administrator will determine in accordance with the terms of the 2018 Plan.
Subject to the terms of the 2018 Plan, the Administrator will have complete discretion to determine (i) the number of shares subject to a restricted stock award granted to any participant, and (ii) any vesting conditions that must be satisfied. The Administrator may provide that awards of restricted stock earn dividends paid with respect to such shares. Any such dividends will be accumulated and credited to an account for the participant, with interest in the Administrator’s discretion, and will be subject to the same terms and conditions, including vesting restrictions, as the award with respect to which the dividends are credited. To the extent an award of restricted stock is forfeited in whole or in part, any accrued dividends with respect to such award will be forfeited at the same time and to the same extent as such award.
No dividends or accrued interest, if any, earned with respect to an award of restricted stock may be paid before the underlying award vests.
Restricted stock units may be granted to employees, directors or consultants of the Company at any time and from time to time as determined by the Administrator. Each restricted stock unit grant will be evidenced by an award agreement that will specify such terms and conditions as the Administrator will determine in accordance with the terms of the 2018 Plan.
Restricted stock units result in a payment to a participant only if the vesting criteria the Administrator establishes are satisfied. The Administrator may set vesting criteria based on the achievement of Company-wide, business unit, or individual goals (including continued employment), or any other basis determined by the Administrator in its discretion. The restricted stock units will vest at a rate determined by the Administrator. Upon satisfying the applicable vesting criteria, the participant will be entitled to a payout as specified in the award agreement or as otherwise determined by the Administrator. The Administrator, in its sole discretion, may pay earned restricted stock units in shares, cash, or a combination thereof. On the date set forth in, and otherwise subject to the terms and conditions of the award agreement, or as provided by the Administrator, all unearned restricted stock units will be terminated and forfeited to the Company. Additionally, the Administrator is authorized to grant participants dividend equivalents based on the dividends declared on shares that are subject to any outstanding restricted stock unit. Any such dividend equivalents will be accumulated and credited to an account for the participant, with interest in the Administrator’s discretion, and will be subject to the same terms and conditions, including vesting restrictions, as the award with respect to which the dividend equivalents are credited. To the extent an award of restricted stock units is forfeited in whole or in part, any accrued dividend equivalents with respect to such award will be forfeited at the same time and to the same extent as such award.
No dividend equivalents or accrued interest, if any, earned with respect to restricted stock units may be paid before the underlying award vests.
Stock Appreciation Rights
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SARs may be granted to employees, directors or consultants of the Company at any time and from time to time as determined by the Administrator in its discretion. Each SAR grant will be evidenced by an award agreement that will specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Administrator will determine in accordance with the terms of the 2018 Plan.
The Administrator will have discretion to determine the terms and conditions of SARs granted under the 2018 Plan; provided that no SAR may have a term of more than 10 years from the date of grant and that the exercise price of a SAR may not have an exercise price below 100% of the fair market value of the Common Stock on the grant date. No SAR can be exercised by any person after its expiration.
Upon exercise of a SAR, the holder of the SAR will be entitled to receive payment from us in an amount determined by multiplying (i) the difference between the fair market value of a share on the date of exercise over the exercise price, times (ii) the number of shares with respect to which the SAR is exercised.
At the discretion of the Administrator and as set forth in the applicable award agreement, payment to the holder of a SAR may be in cash, shares of Common Stock or a combination thereof.
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Grant Of Performance Units And/Or Performance Shares
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Performance units and performance shares may be granted to employees, directors or consultants of the Company at any time and from time to time, as determined by the Administrator in its sole discretion. The Administrator will have complete discretion in determining the number of performance units/shares granted to each participant.
The Administrator may provide that awards of performance shares and performance units earn dividends or dividend equivalents, as applicable, and accrued interest in its discretion. To the extent an award of performance units or performance shares is terminated, cancelled or forfeited in whole or in part, due to failure to meet performance conditions or otherwise, any dividends, dividend equivalents and accrued interest will be terminated, cancelled or forfeited at the same time and to the same extent as such award. No dividends, dividend equivalents or accrued interest, if any, earned with respect to a performance unit award or a performance share award may be paid before the underlying award vests.
The Administrator will set performance objectives or other vesting provisions (including, without limitation, continued status as a service provider to the Company) in its discretion which, depending on the extent to which they are met, will determine the number or value of performance units or performance shares that will be paid out. Each award of performance units and performance shares will be evidenced by an award agreement that will specify the time period during which the performance objectives or other vesting provisions must be met (the “performance period”), vesting period and such other terms and conditions as the Administrator will determine in its discretion in accordance with the terms of the 2018 Plan. The Administrator may set performance objectives based upon the achievement of Company-wide, divisional, or individual goals, or any other basis determined by the Administrator in its discretion.
After the applicable performance period has ended, the holder of performance units or performance shares will be entitled to receive a payout of the number of performance units or performance shares earned by the participant over the performance period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved. The Administrator may pay earned performance units and performance shares in the form of cash, in shares, or in a combination thereof. After the grant of performance units or performance shares, the Administrator may reduce or waive any performance objectives or other vesting provisions for such performance unit or performance share.
On the date set forth in, and otherwise subject to the terms and conditions of, the award agreement, or as otherwise provided by the Administrator, all unearned or unvested performance units and performance shares will be forfeited to the Company.
Termination Of Employment
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The 2018 Plan gives the Administrator the authority to vary the terms of the individual award agreements. Under the 2018 Plan, unvested awards granted will generally be forfeited or expire upon a participant’s termination of employment unless the Committee exercises its discretion to modify the time at which stock options and SARs may be exercised or any restrictions will lapse or be removed, notwithstanding any provision of the 2018 Plan to the contrary. Generally, with respect to stock options and SARs, if a participant ceases to provide ongoing service as an employee, director or consultant for any reason other than death or disability or termination for cause, then the participant will generally have the right to exercise his or her outstanding options and SARs for three months after the date of termination, but only to the extent that the participant was entitled to exercise such option or SAR at the date of such termination. If such termination is due to death or disability, the participant (or the participant’s legal representative) will generally have the right to exercise any existing unexercised option or SAR at any time within 12 months following the termination date, but only to the extent that the participant was entitled to exercise such option or SAR at the date of such termination. In no event will an option or SAR be exercisable beyond its term. In the event of a participant’s termination for cause, then the participant’s options, whether vested or unvested, will immediately be forfeited upon termination.
A participant’s rights with respect to any award granted under the 2018 Plan shall in all events be subject to (i) any right that the Company may have under any clawback or recoupment policy as may be in effect from time to time or any other clawback or recoupment agreement or arrangement applicable to a participant; or (ii) any right or obligation that the Company may have regarding the recoupment of incentive-based compensation under Exchange Act Section 10D and any applicable rules and regulations issued by the SEC.
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Compliance With Code Section 409A
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Awards are intended to operate in such a manner that they are either exempt from the application of, or comply with, the requirements of Code Section 409A such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A, except as otherwise determined in the sole discretion of the Administrator, provided that no warranty of such exemption or compliance is made. The 2018 Plan and each award Agreement under the 2018 Plan is intended to meet the requirements of Code Section 409A and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator.
Non-Transferability Of Awards
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Unless determined otherwise by the Administrator, an award granted under the 2018 Plan may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution or as otherwise permitted in the 2018 Plan and may be exercised, during the lifetime of the participant, only by the participant. If the Administrator makes an award granted under the 2018 Plan transferable, such award shall be subject to the terms of the 2018 Plan and the award agreement and will contain such additional terms and conditions as the Administrator deems appropriate. Notwithstanding the foregoing, under no circumstance may unvested or unexercised awards be transferred for value or consideration.
In the event that any dividend (other than ordinary cash dividends) or other distribution (whether in the form of cash, shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of shares or other securities of the Company, or other change in the corporate structure of the Company affecting the shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the 2018 Plan, will adjust, in such equitable manner as the Administrator deems appropriate, the number and class of shares issuable under the 2018 Plan and/or the number, class and, if applicable, exercise price of shares subject to each outstanding award.
Dissolution Or Liquidation
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In the event of a liquidation or dissolution, the Administrator will notify each participant as soon as practicable prior to the effective date of such proposed transaction. To the extent that an award has not been previously exercised (with respect to options and SARs) or vested (with respect to other awards), an award will terminate immediately prior to the consummation of such proposed action.
In the event of a Change-in-Control, notwithstanding any other provision of the 2018 Plan or an award, each outstanding award shall be treated as the Administrator determines in its discretion without a participant’s consent, including, without limitation, that awards may be assumed, or substantially equivalent awards may be substituted, by the acquiring or succeeding entity or an affiliate thereof (a “successor”) with appropriate adjustments as to the number and kind of shares and prices; upon written notice to a participant, the participant’s awards will terminate immediately prior to the consummation of such Change-in-Control; awards will vest and become exercisable, realizable, or payable, or restrictions applicable to an award will lapse, in whole or in part, prior to or upon consummation of such Change-in-Control, and, to the extent the Administrator determines, terminate upon the effectiveness of such Change-in-Control; awards will terminate in exchange for an amount of cash and/or property, if any, equal to the amount (if any) that would have been attained upon the exercise of such award or realization of the participant’s rights as of the date of the occurrence of the transaction; the replacement of such award with other rights or property selected by the Administrator in its sole discretion; or any combination of the foregoing.
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In the event of a Change-in-Control, with respect to awards held by participants other than outside directors, if the successor elects not to assume or sub
stitute an Award, as determined by the Administrator in accordance with the terms of the 2018 Plan, the participant will fully vest in and have the right to exercise all of his or her outstanding stock options and SARs; all restrictions on restricted stock
and restricted stock units will lapse; and, with respect to performance units, performance shares and any other awards subject to performance-based vesting conditions, all performance goals or other vesting conditions will be deemed achieved at target.
With respect to awards granted to an outside director that are assumed or substituted by a successor, if, on the date of or following such assumption or substitution, the participant’s status as a Director or a director of the successor, as applicable, is terminated other than upon a voluntary resignation by the participant (unless such resignation is at the request of the successor), then the participant will fully vest in and have the right to exercise options and/or SARs as to all of the shares underlying such award for a period of one year following such termination (but in no event later than the expiration of the term of such option as set forth in the award agreement; all restrictions on restricted stock and restricted stock units will lapse; and, with respect to performance units, performance shares and any other awards subject to performance-based vesting conditions, all performance goals or other vesting conditions will be deemed achieved at target.
Plan Term; Amendment Or Termination Of The 2018 Plan
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The 2018 Plan will become effective on the date approved by stockholders and will have a ten-year term commencing on that date, subject to any earlier termination by the Board. The Board may amend, alter, suspend or terminate the 2018 Plan or any part thereof from time to time, except that stockholder approval will be required for any amendment to the 2018 Plan to the extent required by any applicable laws, regulations of the securities exchange on which the shares are then listed, or otherwise in the Board’s discretion. The Administrator may waive any conditions or restrictions of or amend, modify or terminate outstanding awards under the 2018 Plan notwithstanding any plan provision to the contrary. As a general matter, no amendment, alteration, suspension or termination of the 2018 Plan or an outstanding award may impair the rights of any participant under any then outstanding award without the participant’s written consent, with the exception of certain compliance amendments.
Future grants under the 2018 Plan will be made at the discretion of the Administrator and, accordingly, are not yet determinable. In addition, the value of the awards granted under the 2018 Plan will depend on a number of factors, including the fair market value of our common stock on future dates and the exercise decisions made by the participants. Consequently, it is not possible to determine the benefits that might be received by participants receiving discretionary grants under the Plan.
We granted awards under the 2009 Plan in 2017 to the named executive officers, outside directors and to other eligible employees. The 2017 grants to our named executive officers and to our outside directors are reflected in the 2017 Grants of Plan-Based Awards Table and the 2017 Director Compensation Table, respectively, in this proxy statement. The closing market price of a share of Company common stock as reported on the New York Stock Exchange on December 29, 2017 was $23.90.
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Equity Compensation Plan Information
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The following table sets forth, as of December 31, 2017, certain information related to our equity compensation plans.
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(a)
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(b)
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(c)
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Number
of Securities
to be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights (1)
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Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
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Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a)) (2)
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Equity compensation plans approved by security holders
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1,087,224
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$0.82
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4,299,341
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Equity compensation plans not approved by security holders
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n/a
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n/a
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n/a
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Total
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1,087,224
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$0.82
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4,299,341
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(1)
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Includes 1,014,224 shares issuable upon vesting of outstanding restricted stock units.
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(2)
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As of December 31, 2017, 2,048,647 of these shares were available under the 2009 Stock Plan. As of December 31, 2017 there were 2,250,694 shares available under the 2009 Employee Stock Purchase Plan (“2009 ESPP”). Pursuant to its terms, there is an annual increase to the number of shares available under the 2009 ESPP on the first day of each fiscal year during which the 2009 ESPP is in effect equal to the lesser of (i) 300,000 shares; (ii) 2% of the outstanding shares of Common Stock on such date; or (iii) a lesser amount determined by the Board.
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Federal Income Tax Information
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Nonstatutory Sock Options
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No taxable income is reportable by the recipient when a nonstatutory stock option with an exercise price equal to the fair market value of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the excess of the fair market value (on the exercise date) of the shares purchased over the exercise price of the option. Any taxable income recognized in connection with an option exercise by an employee of the Company is subject to tax withholding by the Company. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.
No taxable income is generally reportable by the recipient when an incentive stock option is granted or exercised. If the participant exercises the option and then later sells or otherwise disposes of the shares more than two years after the grant date and more than one year after the exercise date, the difference between the sale price and the exercise price will be taxed as capital gain or loss. If the participant exercises the option and then later sells or otherwise disposes of the shares before the end of the two or one year holding periods described above, he or she generally will have ordinary income at the time of the sale equal to the fair market value of the shares on the exercise date (or the sale price, if less) minus the exercise price of the option.
Stock Appreciation Rights
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No taxable income is reportable by the recipient when a stock appreciation right with an exercise price equal to the fair market value of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the amount of cash received and the fair market value of any shares received. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.
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Restricted Stock And Restricted Stock Units
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A participant generally will not have taxable income at the time an award of restricted stock or restricted stock units is granted. Instead, he or she will recognize ordinary income in the first taxable year in which his or her interest in the shares underlying the Award becomes either (i) freely transferable or (ii) no longer subject to substantial risk of forfeiture. However, the recipient of a restricted stock award may elect to recognize income at the time he or she receives the award in an amount equal to the fair market value of the shares underlying the award (less any cash paid for the shares) on the date the award is granted.
Performance Units And Performance Shares
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A participant generally will not have taxable income at the time an award of performance units or performance shares is granted. Instead, he or she will recognize ordinary income in the first taxable year in which his or her interest in the shares underlying the award becomes either (i) freely transferable or (ii) no longer subject to substantial risk of forfeiture.
Tax Effect For The Company
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The Company generally will be entitled to a tax deduction in connection with an award under the 2018 Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonstatutory stock option). Code Section 162(m) places a $1 million limit on the deductibility of compensation paid to certain covered employees. Based on recent legislation effective for tax years commencing after December 31, 2017, this limit on deductibility now applies to the Company’s chief executive officer, its chief financial officer, its three most highly compensated executive officers included as named executive officers in the proxy statement, and any individual who was a named executive officer for fiscal 2017 or thereafter. In addition, the recent legislation eliminates the exception to limit on deductibility for certain performance-based compensation.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON THE PARTICIPANT AND THE COMPANY AS OF THE DATE HEREOF WITH RESPECT TO AWARDS UNDER THE 2018 PLAN AND DOES NOT PURPORT TO BE COMPLETE, AND REFERENCE SHOULD BE MADE TO THE APPLICABLE PROVISIONS OF THE INTERNAL REVENUE CODE. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS THE TAX CONSEQUENCES OF A PARTICIPANT’S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
The affirmative vote, in person or by proxy, of a majority of the shares present or represented at the meeting and entitled to vote will be required to approve the adoption of the 2018 Stock Plan.
The Board recommends a vote “FOR” the adoption of the
Rudolph Technologies, Inc. 2018 Stock Plan.
34
OTHER MATTERS
The Company knows of no other matters to be submitted to the Annual Meeting. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the enclosed Proxy to vote the shares they represent as the Board of Directors may recommend.
82
ADDITIONAL INFORMATION
Stockholders may obtain a copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, including financial statements and schedules included in the annual report on Form 10-K, without charge, by visiting the Company’s website at www.rudolphtech.com and clicking on Investors or by writing to:
Michael Sheaffer, Sr. Director, Investor Relations & Market Research
16 Jonspin Road
Wilmington, Massachusetts 01887
Upon written request to the Company, at the above address for Investor Relations, the exhibits set forth on the exhibit index of the Company’s Annual Report on Form 10-K will be made available at reasonable charge (which will be limited to our reasonable expenses in furnishing such exhibits).
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BY ORDER OF THE BOARD OF DIRECTORS
Steven R. Roth
Secretary
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Dated: April 18, 2018
83
Appendix A
RUDOLPH TECHNOLOGIES, INC.
2018 STOCK PLAN
1.
|
Purposes of the Plan
. The purposes of this 2018 Stock Plan are:
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•
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to attract and retain the best available personnel for positions of substantial responsibility,
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•
|
to provide additional incentive to Employees, Directors and Consultants, and
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•
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to promote the success of the Company’s business.
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The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units and Performance Shares.
2.
|
Definitions
. As used herein, the following definitions shall apply:
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(a)
“
Administrator
” means the Committee or the Board, as applicable.
(b)
“
Affiliate
” means any corporation or any other entity (including, but not limited to, partnerships and joint ventures) controlling, controlled by, or under common control with the Company.
(c)
“
Applicable Laws
” means any applicable law, including without limitation, provisions of the Code, the Securities Act, the Exchange Act and any rules or regulations thereunder; corporate, securities, tax or other laws, statutes, rules, requirements or regulations, whether federal, state or local; and rules of any securities exchange or automated quotation system on which the Stock is listed, quoted or traded; and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.
(d)
“
Award
” means a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Shares pursuant to Section 4(e), Performance Units or Performance Shares.
(e)
“
Award Agreement
” means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.
(f)
“
Board
” means the Board of Directors of the Company.
(g)
“
Cause
” means, in the absence of any employment agreement then in effect between a Participant and the Company (or the Affiliate employing Participant) otherwise defining Cause:
(i)
acts of personal dishonesty, gross negligence or willful misconduct on the part of a Participant in the course of his or her employment or services;
(ii)
a Participant’s engagement in conduct that results, or could reasonably be expected to result, in material injury to the reputation or business of the Company or its Affiliates;
(iii)
misappropriation by a Participant of the assets or business opportunities of the Company or its Affiliates;
(iv)
embezzlement or fraud committed by a Participant, or at his or her direction, or with his or her personal knowledge;
(v)
a Participant’s conviction by a court of competent jurisdiction of, or pleading “guilty” or “no contest” to:
(A)
a felony (or its state law equivalent); or
(B)
any other criminal charge (other than minor traffic violations) that has, or could be reasonably expected to have, an adverse impact on the performance of the Participant’s duties to the Company or its Affiliates; or
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(vi)
failure by a Participant to follow the lawful directions of a superior officer or manager or the Board.
In the event there is then in effect an employment agreement between a Participant and the Company or Affiliate employing Participant defining Cause, “Cause” will have the meaning provided in such agreement.
(h)
“
Change-in-Control
” means the occurrence of any of the following events:
(i)
A change in the ownership of the Company which occurs on the date that any one person or more than one person acting as a group (“Person”) acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company; provided, however, that for purposes of this subsection 2(h)(i), the acquisition of additional stock by any Person, who is considered to own more than fifty percent (50%) of the total voting power of the stock of the Company, will not be considered a Change-in-Control; or
(ii)
A change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not approved by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this subsection 2(h)(ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change-in-Control; or
(iii)
A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition; provided, however, that for purposes of this subsection 2(h)(iii), the following will not constitute a change in the ownership of a substantial portion of the Company’s assets:
(A)
a transfer to an entity that is controlled by the Company’s stockholders immediately after the transfer; or
(B)
a transfer of assets by the Company to:
(1)
a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock;
(2)
an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company;
(3)
a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company; or
(4)
an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person described in subsection 2(h)(iii)(B)(3).
For purposes of this subsection 2(h)(iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
For purposes of this definition, “group” shall have the meaning under Section 13 of the Exchange Act.
In the event that this Section 2(h) is inconsistent with the definition of Change-in-Control under Section 409A of the Code and the Regulations thereunder, the definition under Section 409A of the Code and Regulations shall apply.
(i)
“
Code
” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.
(j)
“
Committee
”
means
the Compensation Committee of the Board or other committee appointed by the Board to administer the Plan, in either case, the composition of which shall at all times satisfy the provisions of Rule 16b-3 and
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applicable stock exchange rules, except that, if for any reason the Committee does not meet the requirements of Rule 16b-3, such nonco
mpliance with the requirements of Rule 16b-3 shall not affect the validity of the Awards, interpretations or other actions of the Committee.
If no committee of the Board has been established to administer the Plan, the Board shall exercise all of the power
s of the Committee granted herein, and, in any
event, the Board may in its discretion exercise any or all of such powers.
(k)
“
Common Stock
” means the common stock of the Company, $0.001 par value per share.
(l)
“
Company
” means Rudolph Technologies, Inc., a Delaware corporation, and its Subsidiaries, successors and assigns.
(m)
“
Consultant
” means any person, including an advisor, engaged by the Company or its Affiliates to render services to such entity.
(n)
“
Director
” means a member of the Board.
(o)
“
Disability
” means a determination that the Participant or Service Provider 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, as determined by the Administrator upon the basis of such evidence as the Administrator deems appropriate or necessary. A determination that a Participant or Service Provider is eligible for full long-term disability under any long-term disability plan, as may then be in effect at the Company, will be conclusive evidence of Disability.
(p)
“
Effective Date
” has the meaning set forth in Section 18.
(q)
“
Employee
” means any person, including Officers and Directors, employed by the Company or its Affiliates. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.
(r)
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended.
(s)
“
Exchange Program
” means a program, which may be applicable to a single Award or Participant or multiple Awards or Participants, under which, subject to stockholder approval thereof:
(i)
outstanding Options or Stock Appreciation Rights are surrendered or cancelled when the exercise price per Share exceeds the Fair Market Value of one Share in exchange for Awards of the same type, Awards of a different type, and/or cash (other than in connection with a merger, acquisition or similar transaction);
(ii)
the exercise price of an outstanding Option or Stock Appreciation Right is reduced; and/or
(iii)
any other action is taken with respect to an Award that would be treated as a repricing under the rules and regulations of the national securities exchange on which the Shares are then listed.
(t)
“
Fair Market Value
” means, as of any date, the value of Common Stock determined as follows:
(i)
If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the New York Stock Exchange, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;
(ii)
If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or
(iii)
In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.
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(u)
“
Family Member
” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (includin
g adoptive relationships) of the Employee, any person sharing the Employee’s household (other than a tenant or employee), a trust in which these persons (or the Employee) have more than fifty percent (50%) of the beneficial interest, a foundation in which
these persons (or the Employee) control the management of assets, and any other entity in which these persons (or the Employee) own more than fifty percent (50%) of the voting interests.
(v)
“
Fiscal Year
” means the fiscal year of the Company.
(w)
“
Incentive Stock Option
” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(x)
“
Nonstatutory Stock Option
” means an Option not intended to qualify as an Incentive Stock Option.
(y)
“
Officer
” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(z)
“
Option
” means a stock option granted pursuant to the Plan.
(aa)
“
Outside Director
” means a Director who is not an Employee.
(bb)
“
Parent
” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.
(cc)
“
Participant
” means the holder of an outstanding Award.
(dd)
“
Performance Share
” means an Award denominated in Shares which may be earned in whole or in part upon attainment of performance goals or other vesting criteria as the Administrator may determine pursuant to Section 10 and which may be settled for Shares.
(ee)
“
Performance Period
” shall have the meaning set forth in Section 10(b) of the Plan.
(ff)
“
Performance Unit
” means an Award denominated in units, which may be earned in whole or in part upon attainment of performance goals or other vesting criteria as the Administrator may determine and which may be settled for cash, Shares or other securities or a combination of the foregoing pursuant to Section 10.
(gg)
“
Period of Restriction
” means the period during which the transfer of Shares of Restricted Stock is subject to restrictions, and therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Administrator, subject to Section 4(d) of the Plan.
(hh)
“
Plan
” means this 2018 Stock Plan.
(ii)
“
Prior Plan
” means the Rudolph Technologies, Inc. 2009 Stock Plan.
(jj)
“
Restricted Stock
” means shares of Common Stock issued pursuant to Section 7 of the Plan subject to certain restrictions and risk of forfeiture.
(kk)
“
Restricted Stock Unit
” means a bookkeeping entry representing one Share, granted pursuant to Section 8. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.
(ll)
“
Rule 16b-3
” means Rule 16b-3 of the Exchange Act or any successor to Rule l6b-3.
(mm)
“
Section 16(b)
” means Section 16(b) of the Exchange Act.
(nn)
“
Service Provider
” means an Employee, Director or Consultant.
(oo)
“
Share
” means a share of the Common Stock, as may be adjusted in accordance with Section 14 of the Plan.
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(pp)
“
Specified Employee
” is a Participant or Service Provider who, as of the Participant's or Service Provider’s date of termination, is a key employee of the Company within the meaning of Section 416(i)(1)(A)(i), (ii), or (iii) of the Code (applied in accordance with the regula
tions thereunder and disregarding Section 416(i)(5)) at any time during the twelve (12) month period ending on a Specified Employee Identification Date. If a Participant or Service Provider is a key employee as of a Specified Employee Identification Date,
the Participant or Service Provider is treated as a key employee for purposes of the Plan for the entire twelve (12) month period beginning on the Specified Employee Effective Date.
(qq)
“
Specified Employee Effective Date
” is the date as set forth in Treasury Regulation Section 1.409A-1(i)(4).
(rr)
“
Specified Employee Identification Date
” shall mean December 31 of each year.
(ss)
“
Stock Appreciation Right
” means an Award, granted alone or in connection with an Option, that pursuant to Section 9 is designated as a Stock Appreciation Right.
(tt)
“
Subsidiary
” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.
(uu)
“
Substitute Awards
” has the meaning set forth in Section 3(e) of the Plan.
3.
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Stock Subject to the Plan
.
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(a)
Share Reserve
. Subject to the provisions of Section 14 of the Plan, the maximum number of Shares that may be issued under the Plan is 3,240,000 Shares. Upon the Effective Date, no further awards shall be granted under the Prior Plan. If, after the Effective Date, any Shares subject to awards granted under the Prior Plan would again become available for new awards under the terms of such plan if such plan were still in effect and without regard to any termination thereof, then those Shares will be available for the purpose of granting Awards under this Plan, thereby increasing the limit in the preceding sentence. The Shares issued pursuant to Awards under the Plan may be authorized, but unissued, or reacquired Common Stock.
(b)
Certain Adjustments to Share Reserve
.
(i)
To the extent that an Award terminates, expires or becomes unexercisable without having been exercised in full, is surrendered pursuant to an Exchange Program approved by stockholders, or, with respect to Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares, is terminated or forfeited in whole or in part due to failure to vest, the Shares (or for Awards other than Options or Stock Appreciation Rights, the forfeited Shares) which were subject to such terminated, expired, unexercised, surrendered or forfeited Award shall become available for future grant or issuance under the Plan. To the extent that the full number of Shares subject to an Award of Performance Units, Performance Shares or other Award subject to performance-based vesting criteria is not issued by reason of failure to achieve maximum performance goals, the number of Shares not issued shall be shall become available for future grant or issuance under the Plan.
(ii)
All Shares subject to a Stock Appreciation Right (not the number of net Shares actually issued pursuant to a Stock Appreciation Right upon any exercise) will be counted against the number of Shares available for issuance under Section 3(a).
(iii)
Shares used to pay the exercise price of an Award or to satisfy the tax withholding obligations related to an Award will not again become available for future grant or sale under the Plan.
(iv)
To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan.
(v)
Any dividend equivalent denominated in Shares will be counted against the number of Shares available for issuance under Section 3(a) in such amount and at such time as the dividend equivalent first constitutes an unconditional obligation to
issue Shares.
(c)
Incentive Stock Option Limit
. Notwithstanding the foregoing and, subject to adjustment as provided in Section 14, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options will equal
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the aggregate Share number stated in the first sentence of subsection 3(a) above, plus, to the extent allowable under Section 422 of the Code and the Treasury Regulations promulgated thereunder, any Shares that become available for issuance under th
e Plan pursuant to Sections 3(a) and 3(b) above.
(d)
Individual Award Limits.
(i)
Outside Directors
. For any calendar year, the value of Awards granted to an individual Outside Director may not exceed $600,000, calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes.
(ii)
All Service Providers Other than Outside Directors
. For any calendar year, the value of all Awards granted to any individual Service Provider other than an Outside Director may not exceed $5,000,000, calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes. Notwithstanding the foregoing, any Award of Performance Units or Performance Shares or any other Award subject to performance-based vesting criteria shall be taken into account assuming target performance achievement under the terms of such Award for purposes of applying this annual limit.
(e)
Substitute Awards
.
(i)
In connection with an entity’s merger or consolidation with the Company or any Subsidiary or the direct or indirect acquisition by the Company or any Subsidiary of an entity’s property or stock, the Committee may grant Awards in substitution or exchange for any options or other stock or stock-based awards granted before such merger or consolidation by such entity or its affiliate (“Substitute Awards”). Substitute Awards may be granted on such terms and conditions as the Committee deems appropriate, notwithstanding any limitations on Awards in the Plan, including, but not limited to, the limitation under Section 4(d). Substitute Awards will not count against the aggregate Share reserve in Section 3(a), except that Shares acquired by exercise of substitute Incentive Stock Options will count against the maximum number of Shares that may be issued pursuant to the exercise of Incentive Stock Options under the Plan.
(ii)
Additionally, in the event that a company acquired by the Company or any Subsidiary, or with which the Company or any Subsidiary combines by merger, consolidation or otherwise, has shares available under a pre-existing plan approved by its stockholders and not adopted in contemplation of such acquisition or combination as determined by the Administrator, the shares available for grant pursuant to the terms of such pre-existing plan (as appropriately adjusted to reflect the transaction) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan under Section 3(a) (and shares subject to such Awards, which, for the avoidance of doubt, excludes Substitute Awards, may again become available for Awards under the Plan as provided under Section 3(b) above); provided that Awards using such available Shares (or any Shares that again become available for issuance under the Plan under Section 3(b) above) shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan absent the acquisition or combination, and shall only be made to individuals who were employees or directors of such acquired or combined company or any of its subsidiaries prior to such acquisition or combination.
4.
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Administration of the Plan
.
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(a)
Powers of the Administrator
. Subject to the provisions of the Plan, the Administrator shall have the authority, in its discretion:
(i)
to determine the Fair Market Value;
(ii)
to select the Service Providers to whom Awards may be granted hereunder;
(iii)
to determine the number of Shares to be covered by each Award granted hereunder;
(iv)
to approve forms of Award Agreements for use under the Plan;
(v)
to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions may include, but are not limited to, the exercise price; the vesting period of Awards or the time or times when Awards may be exercised (which may be based in whole or in part on performance criteria), which shall be established in accordance with Section 4(d); any vesting acceleration or waiver of forfeiture restrictions
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(notwithstanding Section 4(d) to the contrary); any restriction or limitation regarding any Award or the Shares relating thereto;
and any and all other Award terms and conditions;
(vi)
to interpret, construe and administer the Plan and Awards granted pursuant to the Plan, including the adoption of rules, modifications, procedures and sub-plans as may be necessary or desirable for administration of the Plan, including for purposes of granting Awards to Participants in foreign countries and qualifying any such Awards for preferential tax treatment under Applicable Law; the Administrator may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Award in the manner and to the extent the Administrator deems necessary or desirable to carry it into effect. Any action or decision of the Administrator in the interpretation or administration of the Plan, as described herein, shall be within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned;
(vii)
to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws;
(viii)
to modify or amend each Award (subject to Section 19 of the Plan), including, but not limited to, the discretionary authority to extend the post-termination exercisability or vesting period of Awards (but in no event shall such period of exercisability be extended beyond the expiration of the term of the Award);
(ix)
to allow Participants to satisfy withholding tax obligations in such a manner as prescribed in Section 15;
(x)
to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;
(xi)
delegate to a committee of one or more Outside Directors or, to the extent permitted by Applicable Law, to one or more officers or a committee of officers, the authority to grant Awards to, and to cancel or take any other action in respect of, any Awards to Employees or Consultants of the Company who are not Directors or Officers;
(xii)
to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award, subject to compliance with Section 409A of the Code; and
(xiii)
to make all other determinations deemed necessary or advisable for administering the Plan.
Notwithstanding the foregoing, other than pursuant to Section 14, no Exchange Program may be implemented by the Administrator without the prior approval of the Company’s stockholders.
(b)
Effect of Administrator’s Decision
. All decisions, determinations, interpretations or actions of the Administrator made or taken pursuant to grants of authority under the Plan shall be made or taken in the sole discretion of the Administrator and shall be final, conclusive and binding on all persons for all purposes. The Administrator’s decisions and determinations under the Plan need not be uniform and may be made selectively among Participants, whether or not such Participants are similarly situated.
(c)
No Liability
. Under no circumstances shall the Company, its Affiliates, the Administrator, the Board, any Director or any Officer of the Company incur any liability, including for any direct, indirect, incidental, consequential or special damages (including lost profits) of any form, whether or not foreseeable, with respect to the Plan or the Company’s, its Affiliates’, the Administrator’s, the Board’s or any Director’s or Officer’s roles, acts, omissions, determinations or interpretations in connection with the Plan or any Award.
(d)
Minimum Vesting
. All Awards granted to all Participants under the Plan shall be subject to a minimum vesting period of not less than one year from the date of grant; provided, however, the Administrator may provide for the grant of Awards to Participants without regard to the foregoing minimum vesting requirement with respect to a maximum of five percent (5%) of the total number of Shares authorized for issuance under the Plan pursuant to Section 3(a), as may be adjusted under Section 14(a).
5.
Eligibility
. Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Performance Units, and Performance Shares may be granted to Service Providers. Incentive Stock Options may be granted only to employees of the Company or any Parent or Subsidiary of the Company.
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(a)
Limitations
. Each Option shall be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options shall be treated as Nonstatutory Stock Options. For purposes of this subsection 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. No dividends or dividend equivalents may be granted in respect of any Option, and holders of Options carry no voting rights.
(b)
Term of Option
. The term of each Option shall be stated in the Award Agreement. In the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement. In the case of a Nonqualified Stock Option, the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Award Agreement.
(c)
Option Exercise Price and Consideration
.
(i)
Exercise Price
. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, but will be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of the grant. In addition, in the case of an Incentive Stock Option granted to an employee of the Company or any Parent or Subsidiary of the Company who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant.
(ii)
Vesting Period
. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions that must be satisfied before the Option may be exercised. Any vesting period shall be established in accordance with Section 4(d) of the Plan.
(d)
Exercise of Option
.
(i)
Procedure for Exercise; Rights as a Stockholder
. Any Option granted hereunder shall be exercisable according to the terms of the Plan and the Award Agreement and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(A)
notice of exercise (in such form as the Administrator may specify from time to time) from the person entitled to exercise the Option, and
(B)
full payment for the Shares with respect to which the Option is exercised (together with applicable withholding taxes). Full payment shall be made:
(1)
in cash
or
by personal check, certified check or bank check or wire transfer of immediately available funds;
(2)
other Shares provided that such Shares have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option is exercised, provided that accepting such Shares will not result in any adverse accounting consequences to the Company, as the Administrator determines in its sole discretion;
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(3)
by delivery of a properly executed exercise notice together with any other documentation as the Administrator and the Participant’s broker, if applicable, require to effect an exercise of the Opti
on and delivery to the Company of the sale or other proceeds (as permitted by Applicable Law) required to pay the exercise price;
(4)
by withholding Shares otherwise issuable in connection with the exercise of the Option (“net exercise”);
(5)
such other consideration and method of payment authorized by the Administrator in its discretion or permitted by the Award Agreement, the Plan and Applicable Law; or
(6)
any combination of the foregoing methods of payment.
(7)
Shares issued upon exercise of an Option shall be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 14 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares thereafter available under the Option by the number of Shares as to which the Option is exercised.
(ii)
Termination of Relationship as a Service Provider
. If a Participant ceases to be a Service Provider, other than for Cause or due to the Participant’s death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, any vested portion of the Option shall remain exercisable for three (3) months following the Participant’s termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). Unless otherwise provided by the Administrator or in the Award Agreement, if on the date of termination, the Participant is not vested as to all or any portion of his or her Option, the unvested portion of the Option shall terminate. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator or in the Award Agreement, the Option shall terminate.
(iii)
Disability of Participant
. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, any vested portion of the Option shall remain exercisable for twelve (12) months following the Participant’s termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). Unless otherwise provided by the Administrator or in the Award Agreement, if on the date of termination the Participant is not vested as to all or any portion of his or her Option, the unvested portion of the Option shall terminate. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator or in the Award Agreement, the Option shall terminate.
(iv)
Death of Participant
. If a Participant dies while a Service Provider, the Option may be exercised following the Participant’s death within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, any vested portion of the Option shall remain exercisable for twelve (12) months following the Participant’s death (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). The Option may be exercised by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable by the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person or persons to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. Unless otherwise provided by the Administrator or in the Award Agreement, if at the time of death the Participant is not vested as to all or any portion of his or her Option, the unvested portion of the Option shall terminate. If the Option is not so exercised within the time specified by the Administrator or in the Award Agreement, the Option shall terminate.
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(v)
Termination for Cause
. If a Participant’s status as a Service Provider is terminated for Cause, then the Option, whether vested or unvested, will immediately terminate upon such ter
mination.
(a)
Grant of Restricted Stock
. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine.
(b)
Restricted Stock Agreement
. Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, which shall be established in accordance with Section 4(d) of the Plan; the number of Shares granted; and such other terms and conditions as the Administrator, in its sole discretion, will determine. Unless the Administrator determines otherwise, the Company (or its designee) as escrow agent will hold Shares of Restricted Stock (or a stop-transfer restriction will be placed on any Shares of Restricted Stock issued in book-entry form) until the restrictions on such Shares have lapsed.
(c)
Transferability
. Except as provided in this Section 7 and Section 13, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.
(d)
Other Restrictions
. The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.
(e)
Removal of Restrictions
. Except as otherwise provided in this Section 7, Shares of Restricted Stock granted under the Plan will be released from these restrictions as soon as practicable after the last day of the Period of Restriction, as provided in the Award Agreement, or at such other time as the Administrator may determine. Notwithstanding the foregoing, the Administrator is authorized, in its sole discretion, to allow participants to cause their otherwise vested Restricted Stock to be deferred pursuant to the terms of any nonqualified deferred compensation program as may be established by the Company from time to time in its discretion for eligible employees or Directors. Notwithstanding any provision of the Plan to the contrary, including but not limited to Section 4(d), in the event of the death, Disability, retirement or other termination of service of a Service Provider or a Change-in-Control, the Administrator, in its discretion, may accelerate or otherwise modify the time at which any restrictions will lapse or be removed.
(f)
Voting Rights
. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.
(g)
Dividends
. The Administrator may, in its sole discretion, provide that Awards of Restricted Stock earn dividends paid with respect to such Shares. Any such dividends shall be accumulated and credited to an account for the Participant, settled in cash or shares of Stock as determined by the Administrator, and shall be subject to the same terms and conditions, including vesting restrictions, as the Award with respect to which the dividends are credited. The Administrator may determine that any dividends so credited to a Participant’s account shall accrue interest at a rate per annum specified by the Administrator. Any credited dividends and accrued interest, if any, shall be paid as soon as administratively practicable following the time the related shares of Restricted Stock vest and are paid to the Participant. For the avoidance of doubt, no dividends or accrued interest, if any, may be paid before the underlying Restricted Stock vests, and to the extent an Award of Restricted Stock is terminated, cancelled or forfeited in whole or in part, due to failure to meet performance conditions or otherwise, any dividends and accrued interest, if any, credited with respect to such Award shall be terminated, cancelled or forfeited at the same time and to the same extent as such Award.
(h)
Termination of Restricted Stock Award
. On the date set forth in the Award Agreement or as provided by the Administrator, the Restricted Stock for which restrictions have not lapsed will be forfeited to the Company.
8.
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Restricted Stock Units
.
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(a)
Grant
. Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. After the Administrator determines that it will grant Restricted Stock Units under the Plan, it will advise the Participant in an Award Agreement of the terms, conditions, and restrictions related to the grant, including the number of Restricted Stock Units.
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(b)
Vesting Criteria and Other Terms
. The Administrator will set the vesting p
eriod, which shall be established in accordance with Section 4(d) of the Plan, and the vesting criteria in its discretion, which may be service-based and/or performance-based vesting criteria. The Administrator may set vesting criteria based upon the achi
evement of Company-wide, business unit, or individual goals (including, but not limited to, continued employment), or any other basis determined by the Administrator in its discretion.
(c)
Earning Restricted Stock Units
. Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as determined by the Administrator. Notwithstanding any provision of the Plan to the contrary, including but not limited to Section 4(d), in the event of the death, Disability, retirement or other termination of service of a Service Provider or a Change-in-Control at any time after the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout.
(d)
Form and Timing of Payment
. Payment of earned Restricted Stock Units will be made as soon as practicable, and in no event later than sixty (60) days, after the date(s) set forth in, and otherwise subject to the terms and conditions of, the Award Agreement or as provided by the Plan Administrator. The Administrator, in its sole discretion, may settle earned Restricted Stock Units in cash, Shares, or a combination of both, as provided in the Award Agreement. Notwithstanding the foregoing to the contrary, the Administrator is authorized, in its sole discretion from time to time, to allow participants to further defer receipt of the Shares or cash issued in settlement of Restricted Stock Units pursuant to the terms of any nonqualified deferred compensation program as may be established by the Company from time to time in its discretion for eligible employees or Directors.
(e)
Cancellation
. On the date set forth in, and otherwise subject to the terms and conditions of, the Award Agreement or as provided by the Administrator, all unearned Restricted Stock Units will be terminated and forfeited to the Company.
(f)
Dividend Equivalents
. The Administrator is authorized to grant to Participants dividend equivalents based on the dividends declared on Shares that are subject to any outstanding Restricted Stock Unit. Unless otherwise provided by the Administrator or in the Award Agreement, for an Award of Restricted Stock Units that is subject to performance-based vesting conditions, dividend equivalents shall be accrued only with respect to the target number of Restricted Stock Units, and additional dividend equivalents will not be earned for any Restricted Stock Units earned in excess of target. Dividend equivalents shall be credited as of dividend payment dates during the period between the date the Restricted Stock Unit Award is granted and the date the Restricted Stock Unit Award is vested, paid or expired. Such dividend equivalents shall be converted to cash, Shares or additional Restricted Stock Units by such formula and at such time and subject to such limitations as may be determined by the Administrator. Dividend equivalents accruing on unvested Restricted Stock Units shall, as provided in the Award Agreement, either (i) be reinvested in the form of additional Shares, which shall be subject to the same vesting provisions as provided for in the Restricted Stock Unit Award or (ii) be held by the Company under the same vesting provisions in an account allocated to the Participant and accumulated, with or without interest in the Administrator’s discretion, until the date upon which the Restricted Stock Unit Award becomes vested. For the avoidance of doubt, no dividend equivalents or accrued interest, if any, may be paid before the underlying Restricted Stock Units vest, and to the extent an Award of Restricted Stock Units is terminated, cancelled or forfeited in whole or in part, due to failure to meet performance conditions or otherwise, any dividend equivalents and accrued interest if any, credited with respect to such Award shall be terminated, cancelled or forfeited at the same time and to the same extent as such Award.
9.
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Stock Appreciation Rights
.
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(a)
Grant of Stock Appreciation Rights
. Subject to the terms and conditions of the Plan, a Stock Appreciation Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion. No dividends or dividend equivalents may be granted in respect of any Stock Appreciation Right, and holders of Stock Appreciation Rights carry no voting rights.
(b)
Number of Shares
. The Administrator will have complete discretion to determine the number of Stock Appreciation Rights granted to any Service Provider.
(c)
Exercise Price and Other Terms
. The per share exercise price for the Shares to be issued pursuant to exercise of a Stock Appreciation Right will be determined by the Administrator and will be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant. Otherwise, the Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under the Plan. Any vesting period for a Stock Appreciation Right shall be established in accordance with Section 4(d) of the Plan.
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(d)
Stock Appreci
ation Right Agreement
. Each Stock Appreciation Right grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such other terms and conditions as the Admin
istrator, in its sole discretion, will determine.
(e)
Expiration of Stock Appreciation Rights
. A Stock Appreciation Right granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement or as provided by the Administrator. Notwithstanding the foregoing, Stock Appreciation Rights shall be subject to a maximum term of ten (10) years and to the provisions of subsection 6(d) relating to exercise.
(f)
Payment of Stock Appreciation Right Amount
. Upon exercise of a Stock Appreciation Right, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:
(i)
The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times
(ii)
The number of Shares with respect to which the Stock Appreciation Right is exercised.
As provided in the Award Agreement or except as otherwise determined by the Administrator, the payment to the Participant upon exercise of a Stock Appreciation Right may be in cash, in Shares of equivalent value, or in some combination thereof.
10.
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Performance Units and Performance Shares
.
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(a)
Grant of Performance Units and/or Performance Shares
. Performance Units and Performance Shares may be granted to Service Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of Performance Units and Performance Shares granted to each Participant. The Administrator may, in its sole discretion, provide that Awards of Performance Shares and Performance Units earn dividends or dividend equivalents, as applicable, in accordance with, and subject to the restrictions of, Section 7(g) and Section 8(f), respectively. For the avoidance of doubt, no dividends or dividend equivalents or accrued interest, if any, earned with respect to a Performance Unit Award or a Performance Share Award may be paid before the underlying Award vests, and to the extent an Award of Performance Units or Performance Shares is terminated, cancelled or forfeited in whole or in part, due to failure to meet performance conditions or otherwise, any dividends, dividend equivalents and accrued interest if any, credited with respect to such Award shall be terminated, cancelled or forfeited at the same time and to the same extent as such Award.
(b)
Performance Objectives and Other Terms
. The Administrator will set performance objectives and/or other vesting provisions (including, without limitation, continued status as a Service Provider) in its discretion which, depending on the extent to which they are met, will determine the number or value of Performance Units or Performance Shares that will be paid out to the Service Providers. The time period during which the performance objectives or other vesting provisions must be met will be called the “Performance Period.” Each Award of Performance Units and Performance Shares will be evidenced by an Award Agreement that will specify the Performance Period, vesting period (which shall be established in accordance with Section 4(d)) and such other terms and conditions as the Administrator, in its sole discretion, will determine. The Administrator may set performance objectives, which may be based on financial, strategic or operational goals or any other performance goals or metrics determined by the Administrator in its discretion. Such performance objectives may be based upon the achievement of Company-wide, divisional, or individual goals, measured on an absolute or relative basis, or any other goals, metrics or bases determined by the Administrator in its discretion.
(c)
Earning of Performance Units and Performance Shares
. After the applicable Performance Period has ended, the holder of Performance Units or Performance Shares will be entitled to receive a payout of the number of Performance Units or Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved. After the grant of a Performance Units or Performance Shares, notwithstanding any provision of the Plan to the contrary, including but not limited to Section 4(d), the Administrator may, in its sole discretion, reduce or waive any performance objectives or other vesting provisions for such Performance Unit or Performance Share.
(d)
Form and Timing of Payment of Performance Units and Performance Shares
. Payment of earned Performance Units and Performance Shares will be made as soon as practicable after the expiration of the applicable Performance Period. The Administrator, in its sole discretion, may pay earned Performance Units and Performance Shares in the form of cash, in Shares, or a combination thereof.
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(e)
Cancellation of Performance Units and Performance Shares
. On the date set forth in, and otherwise subject to the terms and conditions of, the Award Agreement or as otherwise provided by the Administrator, all unearned or unvested Performance Un
its and Performance Shares will be forfeited to the Company.
11.
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Compliance With Code Section 409A
.
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(a)
Awards are intended to operate in a manner that they are either exempt from the application of, or comply with, the requirements of Code Section 409A such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A, except as otherwise determined in the sole discretion of the Administrator, provided no warranty of such compliance or exemption is hereby made. The Plan and each Award Agreement under the Plan is intended to meet the requirements of Code Section 409A and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator. To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Code Section 409A, the Award is intended to be granted, paid, settled or deferred in a manner that will meet the requirements of Code Section 409A, and the Plan and Award Agreements shall be interpreted and administered accordingly, though no guarantee or warranty of such compliance is made to any individual. The parties agree that this Plan may be amended, as determined in the discretion of the Administrator, and as may be necessary or advisable to comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder.
(b)
Notwithstanding anything in the Plan or in any Award Agreement to the contrary, to the extent that any amount or benefit that would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code would otherwise be payable or distributable under the Plan or any Award Agreement by reason of the occurrence
of a Change-in-Control, or the Participant’s Disability or separation from service, such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance unless (i) the circumstances giving rise to such Change-in-Control, Disability or separation from service meet any description or definition of “change-in-control event”, “disability” or “separation from service,” as the case may be, in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition), or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A of the Code by reason of the short-term deferral exemption or otherwise. This provision does not prohibit the vesting of any Award. If this provision prevents or delays the payment or distribution of any amount or benefit, such payment or distribution shall be made on the next earliest payment or distribution date or event specified in the Award Agreement that is permissible under Section 409A of the Code.
(c)
Notwithstanding anything in the Plan or in any Award Agreement to the contrary, if any amount or benefit that would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code would otherwise be p
ayable or distributable under this Plan or any Award Agreement by reason of a Participant’s separation from service during a period in which the Participant is a Specified Employee, then, subject to any permissible acceleration of payment by the Administrator under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes):
(i)
if the
payment or distribution is payable in a lump sum, the Participant’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of the Participant’s death or the first day of the seventh month following the Participant’s separation from service; and
(ii)
if the payment or distribution is payable over time, the amount of such non-exempt deferred compensation that would otherwise be payable during the six-month period immediately following the Participant’s separation from service will be accumulated and the Participant’s right to receive payment or distribution of such accumulated amount will be delayed until the earlier of the Participant’s death or the first day of the seventh
month following the Participant’s separation from service, whereupon the accumulated amount will be paid or distributed to the Participant and the normal payment or distribution schedule for any remaining payments or distributions will resume.
For purposes of this Plan, the term “Specified Employee” has the meaning in Section 2(pp) of the Plan, provided, however, that, as permitted in such final regulations, the Company’s Specified Employees and its application of the six-month delay rule of Section 409A(a)(2)(B)(i) of the Code shall be determined in accordance with any rules adopted by the Board or any committee of the Board, which shall be applied consistently with respect to all nonqualified deferred compensation arrangements of the Company, including this Plan.
(d)
If any one or more Awards granted under the Plan to a Participant could qualify for any separation pay exemption described in Treas. Reg. Section 1.409A-1(b)(9), but such Awards in the aggregate exceed the dollar limit
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permitted for the separation pay exemptions, the Administrator may determine which A
wards or portions thereof will be subject to such exemptions.
(e)
If, pursuant to an Award, a Participant is entitled to a series of installment payments, such Participant’s right to the series of installment payments shall be treated as a right to a series of separate payments and not to a single payment. For purposes of the preceding sentence, the term “series of installment payments” has the meaning provided in Treas. Reg. Section 1.409A-2(b)(2)(iii) (or any successor thereto).
12.
Leaves of Absence/Transfer Between Locations
. Unless the Administrator provides otherwise, vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Participant will not cease to be an Employee in the case of:
(a)
any leav
e of absence approved by the Company; or
(b)
transfer
s between locations of the Company or between the Company, its Parent, or any Subsidiary.
For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months following the first day of such leave, any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.
13.
Transferability of Awards
. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution or as otherwise provided in this Section 13 and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable, including, without limitation, for estate planning purposes by instrument to an inter vivos or testamentary trust in which the Awards are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift to Family Members, or pursuant to a domestic relations order (as defined in the Code) or other court-ordered marital settlement agreement, such Award shall be subject to the terms of the Plan and the Award Agreement and shall contain such additional terms and conditions as the Administrator deems appropriate. Notwithstanding the foregoing, under no circumstance may unvested or unexercised Awards be transferred for value or consideration.
14.
Adjustments; Dissolution or Liquidation; Merger or Change-in-Control
.
(a)
Adjustments
. In the event that any dividend (other than ordinary cash dividends) or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will adjust, in such equitable manner as the Administrator deems appropriate, the number and class of Shares issuable under the Plan and/or the number, class and, if applicable, exercise price, of Shares subject to each outstanding Award.
(b)
Dissolution or Liquidation
. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action.
(c)
Change-in-Control
.
(i)
In the event of a Change-in-Control, then notwithstanding any other provision of the Plan or an Award to the contrary, including without limitation Section 4(d), each outstanding Award shall be treated as the Administrator determines in its discretion without a Participant’s consent, including, without limitation:
(A)
Awards may be assumed, or substantially equivalent Awards may be substituted, by the acquiring or succeeding entity or an affiliate thereof (for purposes of this Section 14, the “successor”) with appropriate adjustments as to the number and kind of shares and prices;
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(B)
upon written notice to a Participant, the Participant’s Awards will terminate immediately prior to the consummation of such Change-in-Control;
(C)
Awards will vest and become exercisable, realizable, or payable, or restrictions applicable to an Award will lapse, in whole or in part, prior to or upon consummation of such Change-in-Control, and, to the extent the Administrator determines, terminate upon the effectiveness of such Change-in-Control;
(D)
(1) Awards will terminate in exchange for an amount of cash and/or property, if any, equal to the amount (if any) that would have been attained upon the exercise of such Award or realization of the Participant’s rights as of the date of the occurrence of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment), or (2) the replacement of such Award with other rights or property selected by the Administrator in its sole discretion; or
(E)
any combination of the foregoing.
In taking any of the actions permitted under this subsection 14(c), the Administrator will not be obligated to treat all Awards, all Awards held by a Participant, or all Awards of the same type, similarly.
(ii)
If, in the event of a Change-in-Control, the successor elects not to assume or substitute an Award, as determined by the Administrator, then upon the effective date of the Change-in-Control, the Participant shall fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights; all restrictions on then outstanding Restricted Stock and Restricted Stock Units will lapse; and, with respect to then outstanding Performance Units, Performance Shares and any other Awards subject to performance-based vesting conditions, all performance goals or other vesting conditions will be deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met. In addition, if an Option or Stock Appreciation Right is not assumed or substituted by the successor in the event of a Change-in-Control, as determined by the Administrator, the Administrator may notify the Participant in writing or electronically that the Option or Stock Appreciation Right shall be exercisable for a period of time determined by the Administrator in its sole discretion (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement), and the Option or Stock Appreciation Right shall terminate upon the expiration of such period.
(d)
Outside Director Awards
. With respect to Awards granted to an Outside Director that are assumed or substituted by a successor (in each case as determined by the Administrator), if, on the date of or following such assumption or substitution, the Participant’s status as a Director or a director of the successor, as applicable, is terminated other than upon a voluntary resignation by the Participant (unless such resignation is at the request of the successor), then the Participant will fully vest in and have the right to exercise Options and/or Stock Appreciation Rights as to all of the Shares underlying such Award for a period of one year following such termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement); all restrictions on Restricted Stock and Restricted Stock Units will lapse; and, with respect to Performance Units, Performance Shares and any other Awards subject to performance-based vesting conditions, all performance goals or other vesting conditions will be deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met.
(e)
Assumption, Conversion or Substitution of Awards
. For the purposes of Sections 14(c) and 14(d),
a successor will be deemed to have “assumed or substituted” an Award under this Plan if the surviving entity substitutes an Award under this Plan with an award under a plan of the surviving entity having substantially equivalent value to and terms and conditions
not
materially less favorable than the original Award, or otherwise assumes the obligations under and/or equitably adjusts such original Award. The Administrator or the Board shall have sole and complete authority and discretion (which authority and discretion the Administrator or Board may exercise prior to the Change-in-Control, in which case such exercise of authority and discretion shall be final and binding) to determine whether the proposed assumption or substitution of an Award by a successor meets the requirements provided for in this paragraph.
Notwithstanding anything in this Section 14(e) to the contrary, an Award that vests, is earned or paid out upon the satisfaction of one or more performance goals will not be considered assumed or substituted if, as determined by the Administrator or the Board, the Company or its successor modifies any of such performance goals without the Participant’s consent; provided, however, a modification to such performance goals only to reflect the successor’s post-Change-in-Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption, as determined by the Administrator or the Board.
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15.
Tax Withholding
.
(a)
Withholding Requirements
. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy any federal, state, local, foreign or other taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof).
(b)
Withholding Arrangements
. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation):
(i)
paying cash;
(ii)
electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld (or such other amount in the Administrator’s discretion that does not cause the Award to be treated as a liability instrument under generally accepted accounting principles); or
(iii)
delivering to the Company already-owned Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld (or such other amount in the Administrator’s discretion that does not cause the Award to be treated as a liability instrument under generally accepted accounting principles).
The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld.
16.
No Effect on Employment or Service
. Neither the Plan nor any Award shall confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company, nor shall they interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws.
17.
Date of Grant
. The date of grant of an Award shall be, for all purposes, the date on which the Administrator (or its delegee, to the extent permitted by the Plan) makes the determination granting such Award, or such other later date as is determined by the Administrator (or its delegee, to the extent permitted by the Plan). Notice of the determination shall be provided to each Participant within a reasonable time after the date of such grant.
18.
Term of Plan
. Following the Board’s adoption of the Plan, the Plan will become effective upon its approval by the Company’s stockholders (the “Effective Date”). It will continue in effect for a term of ten (10) years from the Effective Date, unless terminated earlier under Section 19 of the Plan.
19.
Amendment and Termination of the Plan
.
(a)
Amendment and Termination
. The Board may at any time amend, alter, suspend or terminate the Plan.
(i)
Stockholder Approval
. The Company shall obtain stockholder approval of any Plan amendment to the extent required by Applicable Laws or otherwise in the Board’s discretion.
(ii)
Effect of Amendment or Termination
. Subject to Section 19(c), no amendment, alteration, suspension or termination of the Plan shall impair the rights of any Participant under any then outstanding Award, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.
(b)
Awards Previously Granted
.
The Administrator may waive any conditions or restrictions under, amend or modify the terms and conditions of, or cancel or terminate any outstanding Award at any time, in connection with any termination of service of a Service Provider or otherwise and
notwithstanding any provision of the Plan to the contrary, including but not limited to Section 4(d)
; provided, however, subject to Section 19(c) and the provisions of the applicable Award Agreement, no such amendment, modification, cancellation or termination shall impair the rights of a Participant under an Award
unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company
.
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(c)
Compliance Amendments
. Notwithstanding any other provision of this Section 19, the Plan or any Award Agreement to the contrary, the Administrator may, in its sole discretion and without the consent of any Participant, amend the Plan or any Award Agree
ment, to take effect retroactively or otherwise, as it deems necessary or advisable in order for the Company, the Plan, an Award or an Award Agreement to satisfy or conform to any present or future Applicable Law (including without limitation, Code Sectio
n 409) or to meet the requirements of any accounting standard.
20.
Conditions Upon Issuance of Shares
.
(a)
Legal Compliance
. Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.
(b)
Investment Representations
. As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.
21.
Inability to Obtain Authority
. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
22.
Recoupment
. A Participant’s rights with respect to any Award hereunder shall in all events be subject to (i) any right that the Company may have under any Company clawback or recoupment policy as may be in effect from time to time or any other clawback or recoupment agreement or arrangement applicable to a Participant; or (ii) any right or obligation that the Company may have regarding the recoupment of “incentive-based compensation” under Section 10D of the Exchange Act and any applicable rules and regulations promulgated thereunder from time to time by the U.S. Securities and Exchange Commission.
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Appendix B
RUDOLPH TECHNOLOGIES, INC.
2018 EMPLOYEE STOCK PURCHASE PLAN
1.
Purpose of the Plan
.
The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company. It is the intention of the Company to have the Plan qualify as an “Employee Stock Purchase Plan” under Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of the Plan shall, accordingly, be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code.
2.
Definitions
.
As used herein, the following definitions shall apply:
(a)
“
Board
” shall mean the Board of Directors of the Company.
(b)
“
Code
” shall mean the Internal Revenue Code of 1986, as amended.
(c)
“
Common Stock
” shall mean the common stock of the Company.
(d)
“
Company
” shall mean Rudolph Technologies, Inc., a Delaware corporation.
(e)
“
Compensation
” shall mean the total compensation paid to an Employee, including all salary, wages (including amounts elected to be deferred by the Employee, that would otherwise have been paid, under any cash or deferred arrangement or other deferred compensation program established by the Company or the Employer), overtime pay, commissions, bonuses, and other remuneration paid directly to the Employee, but excluding referral and hiring bonuses, profit sharing, the cost of employee benefits paid for by the Company or the Employer, education, tuition or other similar reimbursements, imputed income arising under any Company group insurance or benefit program, traveling expenses, business and moving expense reimbursements, income received in connection with stock options, restricted stock grants, or other equity based awards, contributions made by the Company or the Employer under any employee benefit plan, and similar items of compensation.
(f)
“
Continuous Status as an Employee
” shall mean the absence of any interruption or termination of service as an Employee. Continuous Status as an Employee shall not be considered interrupted in the case of sick leave or other leave of absence agreed to in writing by the Company or the Employer, provided that such leave is for a period of not more than ninety (90) days or reemployment upon the expiration of such leave is guaranteed by contract, statute or as a matter of local law.
(g)
“
Contributions
”
shall mean all amounts credited to the account of a participant pursuant to the Plan.
(h)
“
Designated Subsidiary
” shall mean any Subsidiary that has been designated by the Board, or a committee named by the Board, from time to time in its sole discretion as eligible to participate in the Plan.
(i)
“
Employee
” shall mean any person, including an Officer, who is customarily employed for at least twenty (20) hours per week and more than five (5) months in a calendar year by the Company or a Designated Subsidiary, provided that, in certain jurisdictions outside the United States, the term “Employee” may, if so provided by the Company in writing, also include a person employed for less than twenty (20) hours per week or less than five (5) months in a calendar year if such person must be permitted to participate in the Plan pursuant to local laws (as determined by the Company).
(j)
“
Employer
” shall mean the Designated Subsidiary that employs a participant, if the employer is not the Company.
(k)
“
Enrollment Date
” shall mean the first Trading Day of each Offering Period.
(l)
“
Exchange Act
” shall mean the U.S. Securities Exchange Act of 1934, as amended.
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(m)
“
Exercise Date
”
shall mean the last Trading Day of each Offering Period.
(n)
“
Fair Market Value
” shall mean, as of any date, the value of 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 New York Stock Exchange, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the date of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked prices for the Common Stock on the date of determination, as reported in
The Wall Street Journal
or such other source as the Board deems reliable; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board.
(o)
“
Offering Periods
” shall mean the periods of approximately six (6) months during which an option granted pursuant to the Plan may be exercised, commencing on the first Trading Day on or after May 1st and November 1st of each year and terminating on the last Trading Day in the periods ending six (6) months later. The duration and timing of Offering Periods may be changed pursuant to Section 4 of this Plan.
(p)
“
Officer
” shall mean a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(q)
“
Parent
” shall mean a “parent corporation”, domestic or foreign, whether now or hereafter existing, as defined in Section 424(e) of the Code.
(r)
“
Plan
” shall mean this 2018 Employee Stock Purchase Plan.
(s)
“
Purchase Price
” shall mean an amount equal to 95% of the Fair Market Value of a Share of Common Stock on the Exercise Date; provided however that Purchase Price may be adjusted by the Board pursuant to Section 19.
(t)
“
Reserves
” shall mean the number of Shares covered by each option under the Plan which have not yet been exercised and the number of Shares which have been authorized for issuance under the Plan but not yet placed under option.
(u)
“
Share
” shall mean a share of Common Stock, as may be adjusted in accordance with Section 19 of the Plan.
(v)
“
Subsidiary
” shall mean a “subsidiary corporation”, domestic or foreign, whether now or hereafter existing, as defined in Section 424(f) of the Code.
(w)
“
Trading Day
” shall mean a day on which national stock exchanges are open for trading.
3.
Eligibility
.
(a) Any person who is an Employee as of the beginning of any given Offering Period shall be eligible to participate in such Offering Period under the Plan, subject to the requirements of Section 5(a) and the limitations imposed by Section 4
23(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan:
(i) if, immediately after the grant, such Employee (or any other person whose stock would be attributed to su
ch Employee pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company, any Subsidiary or any Parent; or
(ii) if such option would permit his or her rights to purchase stock under all employee stock purchase plans (described in Section 423 of the Code) of the Company, any Subsidiary or any Parent to accrue at a rate
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which exceeds Twenty-Fi
ve Thousand Dollars ($25,000) of Fair Market Value of such stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time.
4.
Offering Periods
. The Plan shall be implemented by consecutive Offering Periods with a new Offering Period commencing on the first Trading Day on or after May 1st and November 1st each year, or on such other date as the Board shall determine, and continuing thereafter. The Plan shall continue until terminated in accordance with Section 19 hereof. The Board shall have the power to change the duration and/or the frequency of Offering Periods (including the commencement dates thereof) with respect to future offerings without shareholder approval if such change is announced prior to the scheduled beginning of the first Offering Period to be affected.
5.
Participation
.
(a) An eligible Employee may become a participant in the Plan by completing a subscription agreement on the form provided by the Company and filing it w
ith the Company’s payroll office prior to the applicable Enrollment Date, unless a later time for filing the subscription agreement is set by the Board for all eligible Employees with respect to a given offering. The subscription agreement shall set forth the percentage of the participant’s Compensation (subject to Section 6(a) below) to be paid as Contributions pursuant to the Plan.
(b) An eligible Employee may contribute to the Plan by means of payroll deductions, unless payroll deductions are not per
mitted under local law, as determined by the Company, in which case eligible Employees may be permitted to contribute to the Plan by an alternative method, as determined by the Company. Payroll deductions, or, if payroll deductions are not permitted under local law, payments made under an alternative method, shall commence as of the first payday following the Enrollment Date and shall end on the last payday paid on or prior to the Exercise Date of the Offering Period to which the subscription agreement is applicable, unless the Employee’s participation is sooner terminated as provided in Section 10.
6.
Method of Payment of Contributions
.
(a)Where permitted under local law, the participant shall elect to have payroll deductions made on each payday durin
g the Offering Period in an amount not less than one percent (1)% and not more than fifteen percent (15)% of such participant’s Compensation on each such payday (or such other maximum percentage as the Board may establish from time to time before an Enrollment Date). Where payroll deductions are not permitted under local law, the participant may be permitted to contribute to the Plan by an alternative method, as determined by the Company. All payroll deductions or other payments made by a participant shall be credited to his or her account under the Plan. A participant may not make any additional payments into such account.
(b) A participant may discontinue his or her participation in the Plan as provided in Section 10, or, during an Offering Period, may
decrease the rate of his or her Contributions during the applicable Period by completing and filing with the Company a new subscription agreement. The Board may, in its discretion, limit the number of participation rate changes during any Offering Period. The change in rate shall be effective as soon as administratively practicable following the date of filing of the new subscription agreement; provided that any change elected on a new subscription agreement filed within twenty-one (21) days of the end of any Offering Period shall not take effect earlier than the beginning of the first new Offering Period to commence after the date of that filing. A participant may change the rate of his or her Contributions effective as of the beginning of any Offering Period by filing a new subscription agreement prior to the beginning of such Offering Period; provided that any change elected within twenty-one (21) days prior to the beginning of that Offering Period shall be given effect as soon as administratively practicable on or after the first day of that Offering Period. A participant’s subscription agreement shall remain in effect for successive Offering Periods unless terminated as provided in Section 10 hereof.
(c) Notwithstanding the foregoing, to the extent n
ecessary to comply with Section 423(b)(8) of the Code and Section 3(b) herein, a participant’s payroll deductions or other payments may be decreased to zero percent (0%) at any time during an Offering Period, as applicable. Payroll deductions or other payments shall re-commence at the rate provided in such participant’s subscription agreement at the beginning of the first Offering Period, as applicable, which is scheduled to end in the following calendar year, unless the participant’s participation is terminated as provided in Section 10. In addition, a participant’s payroll deductions or other payments may be decreased by the Company to zero percent (0%) at any time during an Offering Period in order to avoid unnecessary contributions as a result of application of the maximum Share limit set forth in Section 7(a), or as a result of the limitations set forth in Section 3(b), in which case payroll deductions or payments shall re-commence at the rate provided in such participant’s subscription agreement at the beginning of the next Offering Period, unless terminated by the participant as provided in Section 10.
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(d)
As may be further specified in the subscription agreement, at the time the option is exercised, in whole or in part, or at the time some or all of the Company’s Common Stock issued under the Plan is disposed of, the participant must make adequate provision
for the Company’s and/or the Employer’s federal, state, or other tax and social insurance withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock. At any time, the Company and the Employer may, b
ut shall not be obligated to, withhold from the participant’s compensation the amount necessary for the Company and/or the Employer to meet applicable withholding obligations, including any withholding required to make available to the Company or the Emplo
yer any tax deductions or benefits attributable to sale or early disposition of Common Stock by the participant.
7.
Grant of Option
. On the Enrollment Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an option to purchase on each Exercise Date occurring within the Offering Period a number of Shares determined by dividing such Employee’s Contributions accumulated prior to such Exercise Date and retained in the participant’s account as of the Exercise Date by the applicable Purchase Price; provided however, that the maximum number of Shares an Employee may purchase during any one Offering Period shall be 3,000 Shares, subject to adjustment as provided in Section 18, and provided further that such purchase shall be subject to the limitations set forth in Sections 3(b) and 12. The Board may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximum number of shares of the Company’s Common Stock an Employee may purchase during such Offering Period. The option shall expire on the last day of the Offering Period.
8.
Exercise of Option
.
(a) Unless a participant’s participation is terminated as provided in Section 10, his or her option for the purchase of Shares will b
e exercised automatically on the Exercise Date of an Offering Period, and the maximum number of full Shares subject to the option will be purchased at the applicable Purchase Price with the accumulated Contributions in his or her account (subject to such limitations as are specified in the Plan). The Shares purchased upon exercise of an option hereunder shall be deemed to be transferred to the participant on the Exercise Date. During his or her lifetime, a participant’s option to purchase Shares hereunder is exercisable only by him or her.
(b) No fractional Shares shall be purchased. Any payroll deductions or other payments accumulated in a participant’s account which are not sufficient to purchase a full Share shall be retained in the participant’s acco
unt for the subsequent Offering Period, subject to earlier withdrawal by the participant or termination of such participant’s participation as provided in Section 10 below. Any other amounts left over in a participant’s account after an Exercise Date shall be returned to the participant.
9.
Delivery
.
As promptly as practicable after each Exercise Date of each Offering Period, the Company shall arrange the delivery to each participant (by electronic or other means), as appropriate, of a certificate representing the Shares purchased upon exercise of his or her option. Notwithstanding the foregoing, the Board may require that all Shares purchased under the Plan be held in an account (the participant’s “
ESPP Stock Account
”) established in the name of the participant (or in the name of the participant and his or her spouse, as designated by the participant on his or her subscription agreement), subject to such rules as determined by the Board and uniformly applied to all participants, including designation of a brokerage or other financial services firm (an “
ESPP Broker
”) to hold such Shares for the participant’s ESPP Stock Account with registration of such Shares in the name of such ESPP Broker for the benefit of the participant (or for the benefit of the participant and his or her spouse, as designated by the participant on his or her subscription agreement).
10.
Voluntary Withdrawal: Termination of Employment
.
(a) A participant may withdraw all, but not less than all the Contributions credited to his
or her account under the Plan, by giving notice of withdrawal from the Plan in accordance with the withdrawal procedures then in effect, not less than twenty-one (21) days prior to the last day of the Offering Period for which such election is to be given effect. All of the participant’s Contributions credited to his or her account will be paid to him or her promptly after receipt of his or her notice of withdrawal and his or her option for that Offering Period will be automatically terminated, and no further Contributions for the purchase of Shares may be made by the participant for that Offering Period.
(b) Upon termination of the participant’s Continuous Status as an Employee prior to the last day of an Offering Period for any reason, including retir
ement or death, the Contributions credited to his or her account will be promptly returned to him or her or, in the case of his or her death, to the person or persons entitled thereto under Section 14, if any; his or her option for that Offering Period will be automatically terminated; and no further Contributions for the purchase of Shares may be made by the participant for that Offering Period. If a Subsidiary ceases to be a Subsidiary, each
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person employed by that Subsidiary will be deemed to have termin
ated employment for purposes of the Plan, unless the person continues as an employee of the Company or another Designated Subsidiary.
(c) In the event an Employee fails to remain in Continuous Status as an Employee for at least twenty (20) hours per we
ek during an Offering Period in which the Employee is a participant, unless such Employee is on an approved leave of absence or a temporary reduction of hours, or unless otherwise required by local law, he or she will be deemed to have elected to withdraw from the Plan; the Contributions credited to his or her account will be returned to him or her; his or her option for that Offering Period will be automatically terminated; and no further Contributions for the purchase of Shares may be made by the participant for that Offering Period.
(d) A participant’s withdrawal from an Offering Period will not have any effect upon his or her eligibility to participate in a succeeding Offering Period or in any similar plan which may hereafter be adopted by the Compan
y.
11.
Interest
. No interest shall accrue on the Contributions of a participant in the Plan, unless required by local law.
12.
Stock
.
(a) Subject to adjustment as provided in Section 18, the maximum number of Shares of the Company’s Common Stoc
k which shall be made available for sale under the Plan shall be 1,500,000 Shares.
(b) If the Board determines that, on a given Exercise Date, the number of Shares with respect to which options are to be exercised may exceed:
(i) the number of Share
s that were available for sale under the Plan on the Enrollment Date of the applicable Offering Period; or
(ii) the number of Shares available for sale under the Plan on such Exercise Date, the Board may in its sole discretion provide (x) that the Comp
any shall make a pro rata allocation of the Shares of Common Stock available for purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all participants exercising options to purchase Common Stock on such Exercise Date, and continue the Offering Period then in effect, or (y) that the Company shall make a pro rata allocation of the Shares available for purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all participants exercising options to purchase Common Stock on such Exercise Date, and terminate the Offering Period then in effect pursuant to Section 19 below. The Company may make pro rata allocation of the Shares available on the Enrollment Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional Shares for issuance under the Plan by the Company’s stockholders subsequent to such Enrollment Date.
(c) The participant will have no interest or voting right in Shares covered by his or her option until such option has been exercised and s
uch Shares have actually been delivered to and held of record by the participant. No adjustment will be made for dividends or other rights as a stockholder for which a record date is prior to such date of delivery.
(d) Shares to be delivered (by electr
onic or other means) to a participant under the Plan will be registered in the name of the participant or in the name of the participant and his or her spouse, as designated by the participant in his or her subscription agreement; provided that if the Board has determined that Shares shall be held in an ESPP Stock Account held by an ESPP Broker in accordance with Section 9, Shares shall be registered in the name of such ESPP Broker for the benefit of the participant or the participant and his or her spouse, as designated by the participant in his or her subscription agreement.
13.
Administration
.
(a) The Board, or a committee named by the Board, shall supervise and administer the Plan and shall have full power to adopt, amend and rescind any rules dee
med desirable and appropriate for the administration of the Plan and not inconsistent with the Plan, to construe and interpret the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. Any action taken by, or inaction of, the Company, any Subsidiary, the Board or a Board committee relating or pursuant to the Plan and within its authority hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons.
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(b)
The Board or Board committee has discretion to adopt any rules regarding administration of the Plan to conform to local laws. Without limiting the generality of the foregoing, the Board or a Board committee is specifical
ly authorized to adopt rules and procedures regarding handling of payroll deductions, payment of interest and handling of stock certificates which vary according to local requirements. The Board or a Board committee has the authority to suspend or limit pa
rticipation in the Plan by employees of any particular Subsidiary for any reason, including administrative or economic reasons. The Board or a Board committee may also adopt rules, procedures or sub-plans applicable to particular Subsidiaries or locations,
which sub-plans may be designed to be outside the scope of Section 423 of the Code.
(c) In making any determination or in taking or not taking any action under the Plan, the Board or a Board committee may obtain and may rely upon the advice of expert
s, including professional advisors to the Company. No director, officer or agent of the Company or any Subsidiary shall be liable for any such action or determination taken or made or omitted in good faith. The Board or a Board committee may delegate ministerial, non-discretionary functions relating to the Plan to individuals who are officers or employees of the Company or a Subsidiary.
(d) Neither the Board nor any Board committee, nor any member thereof or person acting at the direction thereof, shal
l be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Plan, and all such persons shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors and officers liability insurance coverage that may be in effect from time to time.
14.
Designation of Beneficiary
.
(a) Unless otherwise determined by the Company, a participant may file a written designation of a beneficiary who is to receive any Shares and cash, if any, from the participant’s account under the Plan in the event of such particip
ant’s death subsequent to the end of an Offering Period, as applicable, but prior to delivery to him or her of such Shares and/or cash. In addition, unless otherwise determined by the Company, a participant may file a written designation of a beneficiary who is to receive any cash from the participant’s account under the Plan in the event of such participant’s death prior to the Exercise Date of an Offering Period. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective.
(b) Unless otherwise determined by the Company, such designation of beneficiary may be changed by the participant (and his or her spouse, if any) at any time by written notice to the Company in
a manner acceptable to the Company. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant’s death, the Company shall deliver such Shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such Shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate or determine to be the appropriate recipient of the Shares and/or cash under applicable local law.
15.
Transferability
. Neither Contributions credited to a participant’s account nor any rights with regard to the exercise of an option or to receive Shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution, or as provided in Section 14) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds in accordance with Section 10.
16.
Use of Funds
. All Contributions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such Contributions, unless required by local law.
17.
Reports
. Individual accounts will be maintained for each participant in the Plan. Statements of account will be given to participating Employees as promptly as practically feasible following the Exercise Date, which statements will set forth the amounts of Contributions, the per Share Purchase Price, the number of Shares purchased and the remaining cash balance, if any.
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18.
Adjustments Upon Changes in Capitalization: Corporate Transactions
.
(a)
Adjustment.
Subject to any required action by the stockholders of the Company, the Reserves, the maximum number of Shares an Employee may purchase during each Offering Period as well as the price per Share and the number of Shares covered by each option under the Plan which has not yet been exercised shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of Shares effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an option.
(b)
Corporate Transactions
. In the event of the proposed dissolution or liquidation of the Company, the Plan, any Offering Period then in progress, and any outstanding option granted with respect to such Offering Period will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. If a participant’s option is terminated pursuant to the preceding sentence, the Contributions then credited to such participant’s account will be paid to him or her in cash without interest. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, unless otherwise determined by the Board, each option under the Plan shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, or, if not so assumed or substituted, the Offering Period then in progress shall be shortened and the Board shall set a new Exercise Date (the “New Exercise Date”). The New Exercise Date shall be on or before the date of consummation of the transaction and the Board shall notify each participant in writing, at least ten (10) days prior to the New Exercise Date, that the Exercise Date for his or her option (including for purposes of determining the Purchase Price of such option) has been changed to the New Exercise Date and that his or her option will be exercised automatically on the New Exercise Date, unless prior to such date he or she has withdrawn from the Offering Period as provided in Section 10. For purposes of this paragraph, an option granted under the Plan shall be deemed to be assumed if, following the sale of assets or merger, the option confers the right to purchase, for each Share subject to the option immediately prior to the sale of assets or merger, the consideration (whether stock, cash or other securities or property) received in the sale of assets or merger by holders of Common Stock for each Share held on the effective date of the transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares of Common Stock); provided, however, that if such consideration received in the sale of assets or merger was not solely common stock of the successor corporation or its parent (as defined in Section 424(e) of the Code), the Board may, with the consent of the successor corporation and the participant, provide for the consideration to be received upon exercise of the option to be solely common stock of the successor corporation or its parent equal in Fair Market Value to the per Share consideration received by holders of Common Stock and the sale of assets or merger.
(c) The Board may, if it so determines in the exercise of its sole discretion, also make provision for adjusting the Reserves, as well as the price per Share covered
by each outstanding option, in the event that the Company effects one or more reorganizations, recapitalizations, rights offerings or other increases or reductions of shares of its outstanding Common Stock, and in the event of the Company being consolidated with or merged into any other corporation.
19.
Amendment or Termination
.
(a) The Board may at any time and for any reason terminate or amend the Plan. Except as provided in Section 13(b) and 18, no such termination of the Plan may affect options pr
eviously granted, provided that the Plan or an Offering Period may be terminated by the Board on any Exercise Date or by the Board’s setting a new Exercise Date with respect to an Offering Period then in progress if the Board determines that termination of the Plan and/or the Offering Period is in the best interests of the Company and the stockholders or if continuation of the Plan and/or the Offering Period would cause the Company to incur adverse accounting charges as a result of a change after the effective date of the Plan in the generally accepted accounting rules applicable to the Plan. Except as provided in Section 18 and in this Section 19, no amendment to the Plan shall make any change in any option previously granted which adversely affects the rights of any participant without such participant’s written consent. In addition, to the extent necessary to comply with the requirements of Rule 16b-3 under the Exchange Act, Section 423 of the Code (or any successor rule or provision or any applicable law or regulation) or any stock exchange on which the Shares are then listed, the Company shall obtain stockholder approval in such a manner and to such a degree as so required.
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(b)
Without stockholder consent and without regard to whether any participant
rights may be considered to have been adversely affected, the Board shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establ
ish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Shares for each participant properly correspond with amounts withheld from the participant’s Compensation, and es
tablish such other limitations or procedures as the Board determines in its sole discretion advisable which are consistent with the Plan.
20.
Notices
. All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
21.
Conditions Upon Issuance of Shares
. The Company shall have no obligation to issue Shares with respect to an option unless the exercise of such option and the issuance and delivery of such Shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the U.S. Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.
22.
Term of Plan; Effective Date
. The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company. The Plan shall continue in effect for a term of ten (10) years unless sooner terminated under Section 19.
23.
Additional Restrictions of Rule 16b-3
. The terms and conditions of options granted hereunder to, and the purchase of Shares by, persons subject to Section 16 of the Exchange Act shall comply with the applicable provisions of Rule 16b-3. This Plan shall be deemed to contain, and such options shall contain, and the Shares issued upon exercise thereof shall be subject to, such additional conditions and restrictions as may be required by Rule 16b-3 to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions.
24.
No Employment Rights
. Nothing in the Plan (or in any subscription agreement or other document related to this Plan) will confer upon any Employee or participant any right to continue in the employ or other service of the Company or any Subsidiary, constitute any contract or agreement of employment or other service or effect an employee’s status as an employee at will, nor shall interfere in any way with the right of the Company or any Subsidiary to change such person’s compensation or other benefits or to terminate his or her employment or other service, with or without cause. Nothing contained in this Section 24, however, is intended to adversely affect any express independent right of any such person under a separate employment or service contract other than a subscription agreement.
25.
No Right to Assets of the Company
. No participant or other person will have any right, title or interest in any fund or in any specific asset (including Shares) of the Company or any Subsidiary by reason of any option hereunder. Neither the provisions of the Plan (or of any subscription agreement or other document related to the Plan), nor the creation or adoption of the Plan, nor any action taken pursuant to the provisions of the Plan will create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company or any Subsidiary and any participant, beneficiary or other person. To the extent that a participant, beneficiary or other person acquires a right to receive payment pursuant to the Plan, such right will be no greater than the right of any unsecured general creditor of the Company.
26.
Miscellaneous
.
(a) The Plan, the options, subscription agreements and other documents related to the Pl
an shall be governed by, and construed in accordance with, the laws of the State of Delaware. If any provision of the Plan shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of the Plan shall continue in effect.
B-8
(b)
Captions and headings are given to the sections of the Plan solely as a convenience to facilitate reference. Such captions and headings shall not be deemed in any way material or relevant to the construction of interpretation of the Plan or any provision h
ereof.
(c)
The adoption of the Plan shall not affect any other Company or Subsidiary compensation or incentive plans in effect. Nothing in the Plan will limit or be deemed to limit the authority of the Board or a Board committee:
(i) to establish a
ny other forms of incentives or compensation for employees of the Company or any Subsidiary (with or without reference to the Common Stock), or
(ii) to grant or assume options (outside the scope of and in addition to those contemplated by the Plan) in
connection with any proper corporate purpose, to the extent consistent with any other plan or authority.
Benefits received by a participant under an option granted pursuant to the Plan shall not be deemed a part of the participant’s compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Company or any Subsidiary, except where the Board or Board committee (or the Board of Directors of the Subsidiary that sponsors such plan or arrangement, as applicable) expressly otherwise provides or authorizes in writing.
B-9
Annual Meeting of Stockholders of Rudolph Technologies, Inc.
May 16, 2018
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: