ITEM 3. APPROVAL OF AMENDMENT AND RESTATEMENT OF THE AMENDED AND RESTATED 2006 EQUITY
INCENTIVE PLAN
Introduction
In 2011, our board of directors and stockholders approved an amendment and restatement of our 2006 Equity Incentive Plan (the "2011
Restated Plan"). On June 23, 2016, our board of directors approved an amendment and restatement of the 2011 Restated Plan (the "2016 Restated Plan"), subject to stockholder approval. Our
stockholders are being asked to approve the 2016 Restated Plan. The 2016 Restated Plan will become effective immediately upon stockholder approval at our annual meeting.
The
2016 Restated Plan is identical in all material respects to the 2011 Restated Plan, including the share reserve thereunder. The 2016 Restated Plan does not increase the number of shares authorized
for issuance, and the authorized share limit from the 2011 Restated Plan would continue to apply.
The
principal features of the 2016 Restated Plan are summarized below, but the summary is qualified in its entirety by reference to the 2016 Restated Plan itself, which is attached to this proxy
statement as Appendix A, and which is marked to show changes to the 2011 Restated Plan, with deletions indicated by strike-outs and additions indicated by underlining. Other than as outlined in
"Overview of Proposed Amendments" below, the material terms of the 2016 Restated Plan remain the same as the 2011 Restated Plan.
Rationale for 2016 Restated Plan
Seeking Stockholder Re-approval Under Section 162(m) of the Code.
We are seeking stockholder re-approval of the material terms of the performance goals set
forth in the 2016 Restated Plan, which are identical to the performance goals previously approved by stockholders set forth in the 2011 Restated Plan. Stockholder re-approval of such performance goals
would preserve our ability to deduct compensation associated with future performance-based awards made under the 2016 Restated Plan to certain executives under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). Section 162(m) limits the deductions a publicly-held company can claim for compensation in excess of $1 million paid in a given year to its
chief executive officer and its three other most highly-compensated executive officers (other than its chief financial officer) (these officers are generally referred to as the "covered employees").
"Performance-based" compensation that meets certain requirements is not counted against the $1 million deductibility cap. Stock options and stock appreciation rights qualify as
performance-based compensation. Other awards that we may grant under the 2016 Restated Plan may qualify as performance-based compensation if the payment, retention or vesting of the award is subject
to the achievement during a predetermined period of performance goals selected by the Compensation Committee. The Compensation Committee retains the discretion to set the level of performance for a
given performance measure under a performance-based award. For such awards to qualify as performance-based compensation, the stockholders must approve the material terms of the performance goals every
five years. The stockholders last approved the performance goals in 2011 when they approved the 2011 Restated Plan. For a discussion of the performance criteria for which approval is being sought,
please see the discussion under "Performance Criteria" below.
Stockholder
approval of the 2016 Restated Plan is only one of several requirements under Section 162(m) that must be satisfied for amounts realized under the 2016 Restated Plan to qualify for
the "performance-based" compensation exemption under Section 162(m), and submission of the material terms of the 2016 Restated Plan performance goals for stockholder approval should not be
viewed as a guarantee that we will be able to deduct all compensation under the 2016 Restated Plan. Nothing in this proposal
precludes us or the plan administrator from making any payment or granting awards that do not qualify for tax deductibility under Section 162(m).
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ITEM 3. PROPOSAL TO AMEND AND RESTATE INCENTIVE PLAN
Non-Employee Director Compensation Limit.
The 2016 Restated Plan also includes an annual limit on compensation that may be made to non-employee directors each
fiscal year.
If
this Proposal No. 3 is not approved, the 2016 Restated Plan will not become effective, the existing 2011 Restated Plan will remain in effect, and we may continue to grant awards under the
existing 2011 Restated Plan, subject to its terms, conditions and limitations, using the shares available for issuance thereunder. In addition, we would lose the ability to deduct compensation
associated with future performance-based awards under Section 162(m) made under the 2011 Restated Plan.
Equity Incentive Awards Are Critical to Long-Term Stockholder Value Creation
The table below presents information about the number of shares that were subject to various outstanding equity awards under the 2011
Restated Plan, the AeroVironment, Inc. 2002 Equity Incentive Plan and the AeroVironment, Inc. Nonqualified Stock Option Plan, and the shares remaining available for issuance under each
such plan, each at August 8, 2016. The 2011 Restated Plan is the only equity plan we currently have in place under which we can grant equity awards.
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Number of
Shares
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As a % of Shares
Outstanding
1
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Dollar Value
2
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2011 Restated Plan
3
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Options outstanding
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677,799
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2.9
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%
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$
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19,629,059
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Restricted stock outstanding
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349,536
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1.5
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%
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$
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10,122,563
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Restricted stock units outstanding
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Shares remaining available for grant
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2,778,408
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11.9
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%
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$
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80,462,696
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Weighted average exercise price of outstanding options
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$
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24.46
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Weighted average remaining term of outstanding options
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4.9 years
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AeroVironment, Inc. 2002 Equity Incentive Plan
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Options outstanding
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4,223
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*
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$
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122,298
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Shares remaining available for grant
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Weighted average exercise price of outstanding options
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$
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11.791
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Weighted average remaining term of outstanding options
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0.1 years
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AeroVironment, Inc. Nonqualified Stock Option Plan
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Options outstanding
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90,829
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*
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$
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2,630,408
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Shares remaining available for grant
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Weighted average exercise price of outstanding options
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$
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0.593
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Weighted average remaining term of outstanding options
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2.2 years
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-
*
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Less than 1%.
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1.
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Based on 23,394,730 shares of our common stock outstanding as of August 8, 2016.
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2.
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Based on the closing price of our common stock on August 8, 2016 of $28.96 per share.
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3.
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Disclosure in this table for the 2011 Restated Plan does not include outstanding long-term incentive awards granted under the 2011 Restated Plan, which are
granted based on a target dollar value. The company's long-term incentive awards are described in more detail above under "Compensation Discussion and Analysis Executive
Compensation Program Components Long-Term Incentive Compensation Program." The maximum dollar value of the long-term incentive plan awards outstanding as of August 8, 2016
under the 2011 Restated Plan, assuming maximum performance is achieved under such awards, is $6,641,222 in the aggregate (50% of which would be paid in cash and 50% of which would be paid in
restricted stock units based on the fair market value per share of our common stock on the Certification Dates for such awards).
Our
board of directors determined not to increase the share reserve under the 2016 Restated Plan over the existing share reserve under the 2011 Restated Plan.
In fiscal years 2014, 2015 and 2016, equity awards representing a total of approximately 253,500 shares, 245,779 shares and 319,548 shares,
respectively, were granted under the 2011 Restated Plan (excluding long-term incentive plan awards issued during such periods), for an annual equity burn rate of 1.1%, 1.1% and 1.4%, respectively.
This level of equity awards represents a 3-year average burn rate of 1.2% of common shares outstanding. Equity burn rate is calculated by dividing the number of shares subject to equity awards granted
during the fiscal year by the number of shares outstanding at the end of the period.
We expect the proposed aggregate share reserve under the 2016 Restated Plan to provide us with enough shares for awards for the remaining term of
the
2016 Restated Plan, assuming we continue to grant awards consistent with our current practices and historical usage, as reflected in our historical burn rate, and further
65
ITEM 3. PROPOSAL TO AMEND AND RESTATE INCENTIVE PLAN
dependent
on the price of our shares and hiring activity during the next few years, forfeitures of outstanding awards, and noting that future circumstances may require us to change our current equity
grant practices. We cannot predict our future equity grant practices, the future price of our shares or future hiring activity with any degree of certainty at this time, and the share reserve under
the 2016 Restated Plan could last for a shorter or longer time.
In fiscal years 2014, 2015 and 2016, the end of year overhang rate was approximately 18.1%, 17.5% and 16.7%, respectively (excluding the effects of
long-term incentive plan awards outstanding at the end of such periods). If the 2016 Restated Plan is approved, we expect our overhang at the end of 2017 will be unchanged from the level at the end of
2016 and will remain at approximately 17%. Overhang is calculated by dividing (1) the sum of the number of shares subject to equity awards outstanding at the end of the fiscal year plus shares
remaining available for issuance for future awards at the end of the fiscal year by (2) the number of shares outstanding at the end of the fiscal year.
In
light of the factors described above, and the fact that the ability to continue to grant equity compensation is vital to our ability to continue to attract and retain employees in the extremely
competitive labor markets in which we compete, our board of directors has determined that the size of the share reserve under the 2016 Restated Plan is reasonable and appropriate at this time. Our
board of directors does not believe that the creation of a subcommittee to evaluate the risk and benefits for issuing shares under the 2016 Restated Plan is necessary and will not create such a
subcommittee.
Material Terms of the 2016 Restated Plan
Securities Subject to the 2016 Restated Plan
A total of 4,884,157 shares of our common stock are reserved for issuance under the 2016 Restated Plan. The proposed 2016 Restated Plan does not make
any change to the number of shares reserved for issuance under the 2011 Restated Plan. As of August 8, 2016, the aggregate number of shares of common stock subject to outstanding awards under
the 2011 Restated Plan was 1,027,335 (excluding any shares of common stock potentially issuable pursuant to our outstanding long-term incentive plan awards), and 1,078,414 shares of common stock have
been issued pursuant to the exercise, vesting or settlement of awards under the 2011 Restated Plan. As of August 8, 2016, a total of 2,778,408 shares of common stock remained available for
future issuance under the 2011 Restated Plan (excluding any shares of common stock potentially issuable pursuant to our outstanding long-term incentive plan awards). As of August 8, 2016, an
additional 114,662 shares of common stock may be issued pursuant to the terms of our outstanding long-term incentive plan awards based on the per share fair market value of our common stock on
August 8, 2016 and assuming maximum performance levels are achieved under such awards. The foregoing share numbers may be adjusted for changes in our capitalization and certain corporate
transactions, as described below under "Adjustments Upon Changes in Capitalization."
The
maximum number of shares which may be subject to awards granted under the 2016 Restated Plan to any individual in any fiscal year may not exceed 2,000,000 shares of common stock and the maximum
cash payment any individual can receive in any fiscal year with respect to awards granted under the 2016 Restated Plan is $5 million.
To
the extent that an award expires, terminates or lapses for any reason, or an award is settled in cash without the delivery of shares of stock to the recipient, any shares subject to the award as to
which the award was not exercised will be available for future grant or sale under the 2016 Restated Plan. Shares of restricted stock that are forfeited or repurchased by us pursuant to the 2016
Restated Plan may again be granted or awarded under the 2016 Restated Plan. In addition, shares of common stock that are delivered by the holder, or withheld by us upon the exercise of any award under
the 2016 Restated Plan, in payment of the exercise or purchase price of such award or tax withholding thereon will be available for future grant or sale under the 2016 Restated Plan.
To
the extent permitted by applicable law or any exchange rule, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by us
or any of our subsidiaries will not be counted against the shares available for issuance under the 2016 Restated Plan.
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ITEM 3. PROPOSAL TO AMEND AND RESTATE INCENTIVE PLAN
Administration
The Compensation Committee of our board of directors administers the 2016 Restated Plan. To administer the 2016 Restated Plan, our Compensation
Committee must consist of at least two members of our board of directors, each of whom is both a "non-employee director" for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and an "outside director" for purposes of Section 162(m) of the Code. Subject to the terms and conditions of the 2016 Restated Plan, our Compensation Committee
will have the authority to select the persons to whom awards are to be made, to determine the number of shares to be subject thereto and the terms and conditions thereof, and to make all other
determinations and to take all other actions necessary or advisable for the administration of the 2016 Restated Plan. Our Compensation Committee will also be authorized to adopt, amend or rescind
rules relating to administration of the 2016 Restated Plan. Our board of directors may at any time abolish the Compensation Committee and revest in itself the authority to administer the 2016 Restated
Plan. The full board of directors will administer the 2016 Restated Plan with respect to awards to non-employee directors.
Eligibility
Our employees, consultants and directors and the employees and consultants of our subsidiaries will be eligible to receive awards under the 2016
Restated Plan. As of August 8, 2016, we had 690 employees, 106 consultants and eight directors (seven of whom are non-employee directors). There were no additional employees or
consultants of our subsidiaries who would be eligible to participate in the 2016 Restated Plan.
Our
Compensation Committee determines which employees, consultants and directors will be granted awards. No person will be entitled to participate in the 2016 Restated Plan as a matter of right nor
does any such participation constitute assurance of continued employment or service with us. Only those employees, consultants and directors who are selected to receive grants by our Compensation
Committee may participate in the 2016 Restated Plan.
Awards Under the 2016 Restated Plan
The 2016 Restated Plan provides that our Compensation Committee (or the board of directors, in the case of awards to non-employee directors) may
grant or issue stock options (both incentive stock options ("ISOs") and non-qualified stock options ("NQSOs")), restricted stock awards, restricted stock units ("RSUs"), stock appreciation rights
("SARs"), performance share awards, performance share units, dividend equivalents, deferred stock, performance bonus awards, other stock-based awards and
stock payments, or any combination thereof. Each award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award.
Nonqualified Stock Options.
NQSOs will provide for the right to purchase shares of our common stock at a specified price which may not be less than the fair market
value of a share of common stock on the date of grant, and usually will become exercisable (at the discretion of our Compensation Committee) in one or more installments after the grant date, subject
to the participant's continued employment or service with us and/or subject to the satisfaction of performance targets established by our Compensation Committee (or the board of directors). NQSOs may
be granted for any term specified by our Compensation Committee (or the board of directors), but the term may not exceed ten years.
Incentive Stock Options.
ISOs will be designed to comply with the provisions of the Code and will be subject to specified restrictions contained in the Code. Among
such restrictions, ISOs must have an exercise price of not less than the fair market value of a share of common stock on the date of grant, may only be granted to employees, must expire within a
specified period of time following the optionee's termination of employment, and must be exercised within the ten years after the date of grant. In the case of an ISO granted to an individual who owns
(or is deemed to own) at least 10% of the total combined voting power of all classes of our capital stock, the 2016 Restated Plan provides that the exercise price must be at least 110% of the fair
market value of a share of common stock on the date of grant and the ISO must expire upon the fifth anniversary of the date of its grant.
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ITEM 3. PROPOSAL TO AMEND AND RESTATE INCENTIVE PLAN
Restricted Stock Awards.
Restricted stock may be granted to participants and made subject to such restrictions as may be determined by our Compensation Committee
(or the board of directors). Typically, restricted stock may be forfeited for no consideration or repurchased by us at the original purchase price if the conditions or restrictions are not met, and
they may not be sold or otherwise transferred to third parties until such conditions or restrictions are removed or expire. Purchasers of restricted stock, unlike recipients of options, will have
voting rights and certain other rights as a stockholder prior to the time when the restrictions lapse.
Restricted Stock Units and Deferred Stock.
RSUs and deferred stock may be awarded to participants, typically without payment of consideration, but subject to
vesting conditions based on continued employment or on performance criteria established by our Compensation Committee (or the board of directors). Like restricted stock, RSUs and deferred stock may
not be sold or otherwise transferred or hypothecated until
vesting conditions are removed or expire. Unlike restricted stock, stock underlying RSUs or deferred stock awards will not be issued until the awards have vested, and a recipient of RSUs or deferred
stock generally will have no rights as a stockholder prior to the time when vesting conditions are satisfied.
Stock Appreciation Rights.
SARs granted under the 2016 Restated Plan typically will provide for payments to the holder based upon increases in the price of our
common stock over the exercise price of the SAR, which exercise price shall not be less than the fair market value per share of our common stock on the date of grant. Except as required by
Section 162(m) of the Code with respect to an SAR intended to qualify as performance-based compensation as described in Section 162(m) of the Code, there are no restrictions specified in
the 2016 Restated Plan on the exercise of SARs or the amount of gain realizable therefrom. Our Compensation Committee (or the board of directors) may elect to pay SARs in cash or in common stock or in
a combination of both.
Dividend Equivalents.
Dividend equivalents represent the value of the dividends, if any, per share paid by us, calculated with reference to the number of shares
covered by the stock options, SARs, RSUs or other awards held by the participant.
Stock Payments.
Stock payments may be authorized by our Compensation Committee (or the board of directors) in the form of common stock or an option or other right
to purchase common stock as part of a bonus, deferred compensation or other arrangement. Unless otherwise determined by our Compensation Committee (or the board of directors), stock payments will be
made in lieu of all or any part of compensation that would otherwise be payable in cash to the employee or consultant.
Performance Awards.
Performance awards (
i.e.
, performance share awards, performance stock units, performance bonus
awards, performance-based awards and deferred stock) may be granted by our Compensation Committee (or the board of directors) on an individual or group basis. Generally, these awards will be based
upon specific performance targets and may be paid in cash or in common stock or in a combination of both. Performance awards may include "phantom" stock awards that provide for payments based upon
increases in the price of our common stock over a predetermined period. Performance awards may also include bonuses that may be granted by our Compensation Committee (or the board of directors) on an
individual or group basis, which may be paid on a current or deferred basis and may be payable in cash or in common stock or in a combination of both.
Performance Criteria
The Compensation Committee may designate employees as "covered employees" whose compensation for a given fiscal year may be subject to the limit on
deductible compensation imposed by Section 162(m) of the Code. The Compensation Committee may grant to such covered employees restricted stock, RSUs, performance awards and stock payments that
are paid, vest or become exercisable upon the attainment of company performance criteria that are related to one or more of the following performance goals as applicable to us or any of our
subsidiaries, divisions, business units or an individual:
net earnings (either before or after interest, taxes, depreciation and amortization);
economic value added;
gross or net sales or revenue,
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ITEM 3. PROPOSAL TO AMEND AND RESTATE INCENTIVE PLAN
net income (either before or after taxes)
operating earnings;
cash flow (including, but not limited to, operating cash flow and free cash flow);
stockholders' equity;
return on stockholders' equity;
return on assets;
return on capital;
total stockholder returns;
return on sales;
gross or net profit or operating margin;
operating or other costs and expenses;
improvements in expense levels;
margins;
working capital;
earnings per share of common stock;
price per share of common stock;
implementation or completion of critical projects;
market share;
comparisons with various stock market indices;
capital raised in financing transactions or other financing milestones;
market recognition (including, but not limited to, awards and analyst ratings);
financial ratios; and
implementation, completion or attainment of objectively determinable objectives relating to research, development, regulatory, commercial or
strategic milestones or developments.
Any
of the foregoing performance criteria may be measured either in absolute terms or as compared to any incremental increase or decrease or as compared to results of a peer group or to market
performance indicators or indices; in each case as determined in accordance with applicable accounting standards, if applicable.
The
Compensation Committee may provide that one or more objectively determinable adjustments will be made to one or more of the performance goals established for any performance period. Such
adjustments may include one or more of the following:
items related to a change in accounting principles;
items relating to financing activities;
expenses for restructuring or productivity initiatives;
non-cash charges, including those relating to share-based awards;
other non-operating items;
items related to acquisitions or other strategic transactions;
items attributable to the business operations of any entity acquired by us during the performance period;
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ITEM 3. PROPOSAL TO AMEND AND RESTATE INCENTIVE PLAN
items related to the disposal of a business of segment;
items related to discontinued operations that do not qualify as a segment of a business under applicable accounting standards;
items attributable to any stock dividend, stock split, combination or exchange of shares occurring during the performance period;
any other items of significant income or expense that are determined to be appropriate adjustments;
items relating to unusual or extraordinary corporate transactions, events or developments;
items related to amortization of acquired intangible assets;
items that are outside the scope of the company's core, on-going business activities;
items relating to changes in tax laws;
items relating to asset impairment charges;
items relating to gains or losses for litigation, arbitration and contractual settlements; or
items relating to any other unusual or nonrecurring events or changes in applicable laws, accounting principles or business conditions.
Non-Employee Director Limit
Under the 2016 Restated Plan, the sum of any cash compensation, or other compensation, and the value (determined as of the grant date in accordance
with Financial Accounting
Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of awards granted to a non-employee director as compensation for services as a non-employee director during any
fiscal year may not exceed $500,000, which amount is increased to $700,000 in the fiscal year of a non-employee director's initial year of service as a non-employee director. The Compensation
Committee may make exceptions to this limit for individual non-employee directors in extraordinary circumstances, as the Compensation Committee may determine in its discretion, provided that the
non-employee director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous compensation decisions involving non-employee
directors.
Awards Not Transferable
Awards may generally not be sold, pledged, transferred or disposed of in any manner other than by will or by the laws of descent and distribution.
The Compensation Committee (or the board of directors) may allow awards other than ISOs to be transferable to certain permitted transferees. ISOs may not be transferable. If the Compensation Committee
(or the board of directors) makes an award transferable, such award shall contain such additional terms and conditions as the Compensation Committee deems appropriate.
Adjustments Upon Changes in Capitalization
Certain transactions with our stockholders, such as stock splits, spin-offs, stock dividends or certain recapitalizations may affect the number of
shares, or the share price, of our common stock (which transactions are referred to collectively as equity restructurings). In the event that an equity restructuring occurs, the Compensation Committee
will equitably adjust the class of shares issuable and the maximum number and kind of shares of our common stock subject to the 2016 Restated Plan, and will equitably adjust outstanding awards as to
the class, number of shares and price per share of our common stock. Other types of transactions may also affect our common stock, such as a dividend or other distribution, reorganization, merger or
other changes in corporate structure. In the event that there is such a transaction, which is not an equity restructuring, and the Compensation Committee determines that an adjustment to the 2016
Restated Plan and any outstanding awards would be appropriate to prevent any dilution or enlargement of benefits under the 2016 Restated Plan, the Compensation Committee will equitably adjust the 2016
Restated Plan as to the class of shares issuable and the maximum number of shares of our common stock subject to the 2016 Restated Plan, as well as the maximum number of
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ITEM 3. PROPOSAL TO AMEND AND RESTATE INCENTIVE PLAN
shares
that may be issued to an employee during any calendar year, and will adjust any outstanding awards as to the class, number of shares, and price per share of our common stock in such manner as
it may deem equitable.
Change of Control
In the event of a change of control where the acquiror does not assume awards granted under the 2016 Restated Plan, awards issued under the 2016
Restated Plan will be subject to accelerated vesting such that 100% of the awards will become vested and exercisable or payable, as applicable. Under the 2016 Restated Plan, a change of control is
generally defined as:
the direct or indirect sale or exchange in a single or series of related transactions (other than an offering of our stock to the general public
through a registration statement filed with the SEC) whereby any person or entity or related group of persons or entities (other than us, our subsidiaries, an employee benefit plan maintained by us or
any of our subsidiaries or a person or entity that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, us) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of more than 50% of the total combined voting power of our securities outstanding immediately after such
acquisition;
during any two-year period, individuals who, at the beginning of such period, constitute our board of directors together with any new director(s)
whose election by our board of directors or nomination for election by our stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at
the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of our board of directors;
the merger, consolidation, reorganization, or business combination in which the company is a party (whether directly involving the company or
indirectly involving the company through one or more intermediaries, other than a merger, consolidation, reorganization, or business combination that results in our outstanding voting securities
immediately before the transaction continuing to represent a majority of the voting power of the acquiring company's outstanding voting securities or a merger, consolidation, reorganization, or
business combination after which no person or entity owns 50% of the successor company's voting power); and
the sale, exchange or transfer of all or substantially all of our assets.
Forfeiture, Recoupment and Clawback Provisions.
Pursuant to its general authority to determine the terms and conditions applicable to awards under the 2016 Restated Plan, the Compensation Committee
shall have the right to provide, in an award agreement or otherwise, that an award shall be subject to the provisions of any recoupment or clawback policies implemented by the company, including,
without limitation, any recoupment or clawback policies adopted to comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations
promulgated thereunder.
Prohibition on Repricing
Except in connection with a corporate transaction involving the company (including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), neither the board of directors nor the Compensation Committee will, without the approval of the
stockholders of the company, authorize the amendment of any outstanding award to reduce its price per share, including any amendment to reduce the exercise price per share of outstanding options or
SARs. Furthermore, no award will be canceled and replaced with the grant of an award having a lesser price per share without the further approval of stockholders of the company, which includes the
cancellation of outstanding options or SARs in exchange for cash, other awards or options or SARs with an exercise price per share that is less than the exercise price per share of the original
options or SARs.
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ITEM 3. PROPOSAL TO AMEND AND RESTATE INCENTIVE PLAN
Amendment and Termination of the 2016 Restated Plan
With approval from our board of directors, the Compensation Committee may terminate, amend or modify the 2016 Restated Plan. However, stockholder
approval of any amendment to the 2016 Restated Plan will be obtained to the extent necessary and desirable to comply with any applicable law, regulation or stock exchange rule, or for any repricing,
as described above under "Prohibition on Repricing." The 2016 Restated Plan does not extend the term of the 2011 Restated Plan. The 2016 Restated Plan, if not terminated earlier by the Compensation
Committee or the board of directors, will terminate in 2021.
Securities Laws
The 2016 Restated Plan is intended to conform with all provisions of the Securities Act of 1933, as amended, or the Securities Act, and the Exchange
Act and any and all regulations and rules promulgated by the SEC thereunder, including without limitation Rule 16b-3. The 2016 Restated Plan will be administered, and options will be granted
and may be exercised, only in such a manner as to conform to such laws, rules and regulations.
Federal Income Tax Consequences Associated with the 2016 Restated Plan
The following is a general summary under current law of the material federal income tax consequences to participants in the 2016 Restated Plan. This
summary deals with the general tax principles that apply and is provided only for general information. Some kinds of taxes, such as state and local income taxes, are not discussed. Tax laws are
complex and subject to change and may vary depending on individual circumstances and from locality to locality. This summary does not discuss all aspects of income taxation that may be relevant in
light of a holder's personal investment circumstances. This summarized tax information is not tax advice.
Nonqualified Stock Options.
For federal income tax purposes, if an optionee is granted NQSOs under the 2016 Restated Plan, the optionee will not have taxable
income on the grant of the option, nor will we be entitled to any deduction. Generally, on exercise of an NQSO the optionee will recognize ordinary income, and we will be entitled to a deduction, in
an amount equal to the difference between the option exercise price and the fair market value of a share of common stock on the date each such option is exercised. The optionee's basis for the stock
for purposes of determining gain or loss on subsequent disposition of such shares generally will be the fair market value of the common stock on the date the optionee exercises such option. Any
subsequent gain or loss will be generally taxable as capital gains or losses.
Incentive Stock Options.
There is no taxable income to an optionee when an optionee is granted an ISO or when that option is exercised. However, the amount by
which the fair market value of the shares at the time of exercise exceeds the option price will be an "item of adjustment" for the optionee for purposes of the alternative minimum tax. Gain realized
by the optionee on the sale of common stock received upon exercise of an ISO is taxable at capital gains rates, and no tax deduction is available to us, in each case unless the optionee disposes of
the shares within (1) two years after the date of grant of the option or (2) within one year of the date the shares were transferred to the optionee. If the common shares are sold or
otherwise disposed of before the end of the two-year and one-year periods specified above, the difference between the option exercise price and the fair market value of the shares on the date of the
option's exercise will be taxed at ordinary income rates, and we will be entitled to a deduction to the extent the optionee must recognize ordinary income. If such a sale or disposition takes place in
the year in which the optionee exercises the option, the income the optionee recognizes upon sale or disposition of the shares will not be considered income for alternative minimum tax purposes.
Otherwise, if the optionee sells or otherwise disposes of the shares before the end of the two-year and one-year periods specified above, the maximum amount that will be included as alternative
minimum tax income is the gain, if any, the optionee recognizes on the disposition of the shares.
An
ISO exercised more than three months after an optionee terminates employment, other than by reason of death or disability, will be taxed as a NQSO, and the optionee will have been deemed to have
received income on the exercise taxable at ordinary income rates. We will be entitled to a tax deduction equal to the ordinary income, if any, realized by the optionee.
72
ITEM 3. PROPOSAL TO AMEND AND RESTATE INCENTIVE PLAN
Restricted Stock, Restricted Stock Units and Deferred Stock.
A participant to whom restricted stock, RSUs or deferred stock is issued generally will not recognize
taxable income upon such issuance and we generally will not then be entitled to a deduction unless, with respect to restricted stock, an election is made by the participant under Section 83(b)
of the Code. However, when restrictions on shares of restricted stock lapse, such that the shares are no longer subject to a substantial risk of forfeiture, the employee generally will recognize
ordinary income and we generally will be entitled to a deduction for an amount equal to the excess of the fair market value of the shares at the date such restrictions lapse over the purchase price.
If a timely election is made under Section 83(b) with respect to restricted stock, the participant generally will recognize ordinary income on the date of the issuance equal to the excess, if
any, of the fair market value of the shares at that date over the purchase price therefore, and we will be entitled to a deduction for the same amount. Similarly, when RSUs or deferred stock vest and
the underlying common stock is issued to the participant, the participant generally will recognize ordinary income and we generally will be entitled to a deduction for the amount equal to the fair
market value of the shares at the date of issuance. A Section 83(b) election is not permitted with regard to the grant of RSUs or deferred stock.
Stock Appreciation Rights.
In the case of SARs granted with an exercise price equal to the fair market value of our common stock on the date of grant, no taxable
income is realized upon the receipt of the SAR, but upon exercise of the SAR, the fair market value of the shares received, determined on the date of exercise of the SAR, or the amount of cash
received in lieu of shares, must be treated as compensation taxable as ordinary income to the recipient in the year of such exercise. We will be entitled to a deduction for compensation paid in the
same amount that the recipient realized as ordinary income.
Dividend Equivalents.
A recipient of a dividend equivalent award generally will not recognize taxable income at the time of grant, and we will not be entitled to a
deduction at that time. When a dividend equivalent is paid, the participant generally will recognize ordinary income, and we will be entitled to a corresponding deduction.
Stock Payments.
A participant who receives a stock payment in lieu of a cash payment that would otherwise have been made will generally be taxed as if the cash
payment has been received, and we generally will be entitled to a deduction for the same amount.
Section 162(m) of the Code.
In general, under Section 162(m), income tax deductions of publicly-held corporations may be limited to the extent total
compensation (including base salary, annual bonus, stock option exercises and non-qualified benefits paid) for specified executive officers exceeds $1 million (less the amount of any "excess
parachute payments" as defined in Section 280G of the Code) in any one year. However, under Section 162(m), the deduction limit does not apply to certain "performance-based compensation"
as provided for by the Code and established by an independent compensation committee using performance-based criteria which are adequately disclosed to, and approved by, stockholders. In particular,
stock options and SARs will satisfy the "performance-based compensation" exception if the awards are made by a qualifying compensation committee, the underlying plan sets the maximum number of shares
that can be granted to any person within a specified period and the compensation is based solely on an increase in the stock price after the grant date (i.e., the option exercise price is equal
to or greater than the fair market value of the stock subject to the award on the grant date). Performance or incentive awards granted under the 2016 Restated Plan may qualify as "qualified
performance-based compensation" for purposes of Section 162(m) if such awards are granted or vest upon the pre-established objective performance goals described above.
Options
and stock appreciation rights granted by the Compensation Committee under the 2016 Restated Plan are intended to qualify as "qualified performance-based compensation" under
Section 162(m) of the Code. The 2016 Restated Plan has been structured with the intent that certain other awards granted under the 2016 Restated Plan may, in the discretion of the Compensation
Committee, be structured so as to qualify for the "qualified performance-based compensation" exception to the $1 million annual deductibility limit of Section 162(m) of the Code. We have
not, however, requested a ruling from the Internal Revenue Service or an opinion of counsel regarding this issue. This discussion will neither bind the Internal Revenue Service nor preclude the
Internal Revenue Service from adopting a contrary position.
Section 409A of the Code.
Certain types of awards under the 2016 Restated Plan may constitute, or provide for, a deferral of compensation under
Section 409A of the Code. Unless certain requirements set forth in Section 409A
73
ITEM 3. PROPOSAL TO AMEND AND RESTATE INCENTIVE PLAN
are
complied with, holders of such awards may be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to an additional
20% federal penalty tax (and, potentially, certain interest penalties). To the extent applicable, the 2016 Restated Plan and awards granted under the 2016 Restated Plan will be structured and
interpreted to comply with Section 409A of the Code and the Treasury Regulations and other interpretive guidance that may be issued pursuant to Section 409A of the Code.
If
a plan award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize the compensation deferred under the award as ordinary income when
such amounts are vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply,
Section 409A imposes an additional 20% federal income tax on
the deferred compensation recognized as ordinary income, as well as interest on such deferred compensation.
New Plan Benefits
The following individuals and groups of individuals have received the following equity awards under the 2011 Restated Plan that
remain outstanding as of August 8, 2016:
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Name
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Stock Options (#)
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Restricted Stock Units (#)
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Shares of Restricted Stock (#)
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Dollar Value of LTIP Units ($)
1
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Timothy Conver
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199,672
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33,674
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Raymond Cook
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30,000
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12,000
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306,111
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Teresa Covington
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8,818
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165,000
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Wahid Nawabi
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146,164
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25,807
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453,000
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Doug Scott
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43,117
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14,716
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276,000
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Cathleen S. Cline
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67,246
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10,244
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Named Executive Officers as a Group (6 persons)
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486,199
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105,259
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1,200,111
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Executive Officers as a Group (3 persons)
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219,281
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52,523
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1,035,111
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Non-Executive Directors as a Group (7 persons)
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312,272
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80,080
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Non-Executive Employees as a Group (687 persons)
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127,750
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206,689
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2,285,500
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-
1.
-
Represents the value of awards that may be paid to the participant(s) under our long-term incentive program for the FY2015-FY2017 Performance Period and the
FY2015-FY2018 Performance Period at target performance. Provided that the target performance goals for a performance period are achieved, the long-term incentive compensation awards will be paid as
follows: 50% will be paid in cash as soon as practicable following the Certification Date for the applicable performance period, and the remaining 50% will be paid in the form of a number of
restricted stock units equal to (1) the portion of the award to be paid in the form of restricted stock units divided by (2) the fair market value per share of the company's common stock
on the Certification Date. The restricted stock units will vest in two equal tranches on the last day of the first and second fiscal years following the completion of the relevant performance period.
If threshold or maximum performance is achieved for either performance period, the respective value of the long-term incentive awards would be 50% or 200% of the target amount, respectively.
Our
non-employee directors receive awards of restricted stock pursuant to a policy adopted by our non-employee directors, as described above under "Director Compensation."
All
other future grants under the 2016 Restated Plan are within the discretion of our board of directors or the Compensation Committee and the benefits of such grants are, therefore, not determinable.
Board Recommendation and Vote Required
Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy and
entitled to vote at the annual meeting. Abstentions will have the same effect as an "Against" vote with respect to this proposal. The board of directors unanimously recommends that stockholders vote
"FOR" Item 3.
If
a stockholder returns a validly executed proxy, the shares represented by the proxy will be voted on this item in the manner specified by the stockholder. If a stockholder of record does not
specify the manner in which shares represented by a validly executed proxy are to be voted on this matter, such shares will be voted "FOR" Item 3. If a beneficial owner of shares does not
specify how to vote his, her or its shares on Item 3 to the organization that holds such shares, such shares will not be voted on Item 3.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE AMENDED AND RESTATED 2006 EQUITY INCENTIVE PLAN.
74
Table of Contents
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Why did I receive these proxy materials?
You have received these proxy materials because you are an AeroVironment, Inc. stockholder, and our board of directors is
soliciting authority, or proxy, to vote your shares at the 2016 annual meeting of stockholders. The proxy materials include our notice of annual meeting of stockholders, proxy statement and 2016
annual report. These materials also include the proxy card and postage-paid return envelope or voting instruction form for the annual meeting. The proxy cards are being solicited on behalf of
our board of directors. The proxy materials include detailed information about the matters that will be discussed and voted on at the meeting, and provide updated information about our company that
you should consider in order to make an informed decision when voting your shares. The proxy materials are first being furnished to stockholders on or about August 26, 2016.
Three
proposals are scheduled to be voted on at the annual meeting:
Proposal 1:
Election of Charles Thomas Burbage, Charles R. Holland and Edward Muller, each to
serve as a Class I director for a three-year term;
Proposal 2:
Ratification of the selection of Ernst & Young LLP as our independent
registered public accounting firm for the fiscal year ending April 30, 2017; and
Proposal 3:
Proposal to amend and restate the company's Amended and Restated 2006 Equity Incentive
Plan.
Why is it so important that I promptly vote my shares?
We value your input. Regardless of the number of shares you hold and whether you plan to attend the annual meeting, we encourage you
to vote your shares as soon as possible to ensure that your vote is recorded promptly and so that we can avoid additional solicitation costs.
Can I access the proxy materials on the internet?
Yes. The company's proxy statement and 2016 annual report are available at investor.avinc.com/financials.cfm.
Can I receive a copy of the company's annual report on Form 10-K?
Our annual report on Form 10-K, which has been filed with the SEC for the fiscal year ended April 30, 2016, will be
made available to stockholders without charge upon written request to AeroVironment, Inc., Attn: Corporate Secretary, 800 Royal Oaks Drive, Suite 210, Monrovia, California 91016.
How can I view or request copies of the company's corporate documents and SEC filings?
The company's website contains the company's Corporate Governance Guidelines, board committee charters and Code of Business Conduct
and Ethics and the company's SEC filings. To view these documents, go to
75
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
www.avinc.com,
click on "Investors" and click on "Corporate Governance." To view the Company's SEC filings and Forms 3, 4 and 5 filed by the company's directors and executive officers, go to
www.avinc.com, click on "Investors," click on "Financial Information" and then click on "SEC Filings."
We
will promptly deliver free of charge, upon request, a copy of the Corporate Governance Guidelines, the board committee charters and the Code of Business Conduct and Ethics to any stockholder
requesting a copy. Requests should be directed to AeroVironment, Inc., Attn: Corporate Secretary, 800 Royal Oaks Drive, Suite 210, Monrovia, California 91016.
How do I attend the annual meeting?
The annual meeting will be held on Friday, September 30, 2016 at 9:00 a.m., local time, at the company's offices at 994
Innovators Way, Simi Valley, CA 93065. When you arrive, signs will direct you to the appropriate room. Please note that the doors to the meeting room will not be open until 8:30 a.m. You must
be prepared to present valid government-issued photo identification, such as a driver's license or passport, for admittance. In addition, if you are a stockholder of record, your name will be verified
against the list of stockholders of record prior to admittance to the annual meeting. If you are a beneficial owner, you must provide proof of beneficial ownership on the record date, such as your
account statement showing that you owned our stock as of August 12, 2016, a copy of the voting instruction form provided by your broker, trustee or nominee, or other similar evidence of
ownership. If you do not provide valid government-issued photo identification or comply with the other procedures outlined above, you will not be admitted to the annual meeting. You do not need to
attend the annual meeting to vote. Even if you plan to attend the annual meeting, please submit your vote in advance as instructed herein.
What is the quorum requirement for holding the annual meeting?
A majority of the outstanding shares of common stock, present in person or represented by proxy, will constitute a quorum at the
annual meeting. Abstentions will be counted as shares present for purposes of determining the presence of a quorum for the transaction of business.
Who can vote?
Holders of record of common stock at the close of business on August 12, 2016 will be entitled to vote at the annual meeting.
Each share of common stock will be entitled to one vote on all matters properly brought before the meeting. On August 12, 2016, the record date for the annual meeting, there were 23,392,659
shares of common stock outstanding. There are no other voting securities of the company outstanding.
What is the difference between holding shares as a holder of record and as a beneficial owner?
If at the close of business on August 12, 2016, the record date for the annual meeting, your shares were held in an account at
a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in "street name" and the proxy materials, as applicable, are being forwarded to you by
that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct that
organization on how to vote the shares in your account. If you do not provide voting instructions to your broker or bank, such organization will need to determine whether it has the discretionary
authority to vote your shares on any matter to be considered at the annual meeting.
76
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Under
applicable rules, your bank or broker has discretionary authority to vote your shares on the ratification of Ernst & Young, LLP as our independent registered public accounting firm
for fiscal year 2017 without receiving instructions from you. Therefore, your broker or bank will be able to vote on this matter if you do not provide voting instructions to such organization. Your
bank or broker does not have discretionary authority to vote your shares without receiving instructions from you with respect to the election of directors or the proposal to amend and restate our
Amended and Restated 2006 Equity Incentive Plan. Accordingly, if you do not give instructions to your custodian, your shares will not be voted with respect to these matters because the bank or
brokerage firm will not have authority to vote them on your behalf.
Banks and brokers are not permitted to vote your shares with respect to the election of directors or the proposal to amend and restate our Amended and Restated 2006 Equity
Incentive Plan without your instructions as to how to vote. Please instruct your broker how to vote your shares using the voting instruction form provided by your broker.
How do I vote my shares?
You may vote your shares using one of the following methods:
Over the internet.
If you have access to the internet, by submitting the
proxy following the instructions included on your proxy card for voting over the internet.
By telephone.
You can vote by calling a toll-free telephone number listed
on the proxy card. Please refer to your proxy card for instructions on voting by phone.
By mail.
You may vote your shares by completing, signing and mailing the
proxy card included with your proxy materials. Please refer to your proxy card for instructions on voting by mail.
In person at the annual meeting.
Stockholders are invited to attend the
annual meeting and vote in person at the annual meeting. If you are a beneficial owner of shares you must obtain a legal proxy from the bank, broker or other holder of record of your shares to be
entitled to vote those shares in person at the meeting.
A
control number, located on the instruction sheet attached to the proxy card, is designated to verify your identity and allow you to vote your shares and confirm that your voting instructions have
been recorded properly. If you vote via the internet or by telephone, there is no need to return a signed proxy card. However, you may still vote by proxy by using the proxy card.
Can I change my vote?
Yes. You may revoke the proxy at any time prior to its use by:
delivering a written notice to the Corporate Secretary of the company, mailed to the company's principal executive office at 800 Royal Oaks Drive,
Suite 210, Monrovia, California 91016;
executing and submitting a later-dated proxy;
re-voting your shares by telephone or on the internet; or
attending the annual meeting and voting in person.
Only
the latest validly executed proxy that you submit will be counted.
77
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
What vote is required to approve each of the proposals?
Proposal 1 Election of directors:
Directors will be
elected on a plurality basis and the three nominees receiving the highest number of "FOR" votes will be elected as directors. Notwithstanding the foregoing, pursuant to the company's Corporate
Governance Guidelines, if a director nominee is not elected by a majority of votes cast, he has agreed to submit a letter of resignation to the board. The Nominating and Corporate Governance Committee
will make a recommendation to the board on whether to accept or reject any such resignation, or whether other action should be taken and the board will act on the resignation taking into account the
recommendation of the Nominating and Corporate Governance Committee. Withholdings will be counted as present for the purposes of determining a quorum but are not counted as votes cast. Broker
non-votes will not be counted as present and are not entitled to vote on the proposal.
Proposal 2 Ratification of selection of independent registered public accounting
firm:
Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to
vote at the annual meeting. Abstentions will be counted as present for purposes of this vote and will have the effect of a vote against the proposal. Brokers have discretionary authority to vote your
shares on this proposal without receiving instructions from you.
Proposal 3 Proposal to Amend and Restate the Company's Amended and Restated 2006 Equity Incentive
Plan:
Approval of this proposal requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to
vote at the annual meeting. Abstentions will have the same effect as a vote against this proposal. Broker non-votes will not be counted as present and are not entitled to vote on the proposal.
What are the recommendations of the board of directors?
The board of directors recommends that you vote your shares on your proxy card:
FOR
the election of directors nominated herein;
FOR
the proposal to ratify the selection of Ernst &
Young LLP as our independent registered public accounting firm for the fiscal year ending April 30, 2017; and
FOR
the proposal to amend and restate our Amended and Restated 2006 Equity
Incentive Plan.
What if I do not specify how I want my shares to be voted?
If you are the record holder of your shares and do not specify on your proxy card (or when giving your proxy by telephone or the
internet) how you want to vote your shares, your shares will be voted:
FOR
the election of directors nominated herein;
FOR
the proposal to ratify the selection of Ernst &
Young LLP as our independent registered public accounting firm for the fiscal year ending April 30, 2017; and
FOR
the proposal to amend and restate our Amended and Restated 2006 Equity
Incentive Plan.
with respect to any other business which may properly come before the annual meeting or any adjournments or postponements thereof, in accordance
with
the best judgment of the designated proxy holders.
If
you are a beneficial owner of shares and do not specify to the organization that holds your shares how you want to vote, such organization may only vote your shares on "routine" matters. The only
routine matter to be voted upon at this meeting is the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm. Therefore, if you do not
provide instructions to the record holder on how you want to vote, your shares may not be voted on the election of directors or the amendment and restatement of our Amended and
78
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
2006
Equity Incentive Plan and will not be considered as present and entitled to vote on such matters. If your shares are held of record by a bank, broker or other nominee, we urge you to give
instructions to your bank, broker or other nominee as to how you wish your shares to be voted so you may participate in the stockholder voting on these important matters.
Is cumulative voting allowed for the election of directors?
No. You may not cumulate your votes for the election of directors.
What is the effect of an "ABSTAIN" vote?
Abstentions are considered to be present and entitled to vote with respect to each relevant proposal, but will not be considered a
vote cast with respect to that proposal. Therefore, an abstention will effectively be a vote against each of the proposals, except for the election of directors.
What is a "broker non-vote"?
A "broker non-vote" occurs when a beneficial owner of shares held by a broker, bank or other nominee fails to provide the record
holder with voting instructions on any "non-routine" matters brought to a vote at a stockholder meeting.
Under
applicable rules, "non-routine" matters include the election of directors and the proposal to amend and restate our Amended and Restated 2006 Equity Incentive Plan. As such, a broker may not
vote your shares with respect to the election of directors or other non-routine matters without your instructions. If your shares are held of record by a bank, broker or other nominee, we urge you to
give instructions to your bank, broker or other nominee as to how you wish your shares to be voted so you may participate in the stockholder voting on these important matters.
When will the company announce the voting results?
We will announce preliminary voting results at the annual meeting. Final official results will be provided in a current report on
Form 8-K filed with the SEC within four business days of the meeting (which will be available at www.sec.gov and www.avinc.com).
How are the proxies solicited and what is the cost?
We will bear the expense of soliciting proxies. Our directors, officers and other employees may solicit proxies in person, by
telephone, by mail or by other means of communication, but such persons will not be specially compensated for such services. We may also reimburse brokers, banks, custodians, nominees and other
fiduciaries for their reasonable charges and expenses in connection with the distribution of proxy materials.
What is householding?
Some brokers and other nominee record holders may be participating in the practice of "householding" proxy statements and annual
reports. This means that only one copy of our proxy statement and annual report may have
79
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
been
sent to multiple stockholders in a stockholder's household. Additionally, you may have notified us that multiple stockholders share an address and thus you requested to receive only one copy of
our proxy statement and annual report. We will promptly deliver a separate copy of either document to any stockholder who contacts our investor relations department at (626) 357-9983
×4245 or by mail addressed to Investor Relations, AeroVironment, Inc. 800 Royal Oaks Drive, Monrovia, California 91016, requesting such
copies. If a stockholder is receiving multiple copies of our proxy statement and annual report at the stockholder's household and would like to receive a single copy of the proxy statement and annual
report for a stockholder's household in the future, stockholders should contact their broker, or other nominee record holder to request mailing of a single copy of the proxy statement and annual
report. Stockholders receiving multiple copies of these documents directly from us, and who would like to receive single copies in the future, should contact our investor relations department to make
such a request.
How do I submit a proposal for action at next year's annual meeting?
Stockholder Proposals for Inclusion in Next Year's Proxy
Statement.
Stockholders may submit proposals on matters appropriate for stockholder action at meetings of our stockholders in accordance
with Rule 14a-8 promulgated under the Exchange Act. To be eligible for inclusion in the proxy statement relating to our 2017 annual meeting of stockholders, proposals of stockholders must be
received at our principal executive offices no later than April 28, 2017 (120 calendar days prior to the anniversary of the date of the proxy statement for our 2016 annual meeting was released
to stockholders) and must otherwise satisfy the conditions established by the SEC for stockholder proposals to be included in the proxy statement for that meeting. However, in the event that the date
of our 2017 annual meeting is more than 30 days before or after the anniversary of our 2016 annual meeting, a stockholder proposal will be timely if received at our principal executive offices
a reasonable time before we begin to print and send our proxy materials for the 2017 meeting.
Stockholder Proposals for Presentation at Next Year's Annual
Meeting.
If a stockholder wishes to present a proposal, including a director nomination, at our 2017 annual meeting of stockholders and
the proposal is not intended to be included in our proxy statement relating to that meeting, the stockholder must give advance notice in writing to our Corporate Secretary prior to the deadline for
such meeting determined in accordance with our bylaws. Our bylaws require notice with respect to the 2017 annual meeting between June 2, 2017 (120 calendar days prior to the anniversary of our
2016 annual meeting) and July 2, 2017 (90 calendar days prior to the anniversary of our 2016 annual meeting). However,
in the event that the date of the 2017 annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary of the 2016 annual meeting, notice by the
stockholder must be received no earlier than the close of business on the 120th day prior to the 2017 annual meeting and no later than the close of business on the later of (1) the
90th day prior to the 2017 annual meeting or (2) the 10th day following the earlier of (a) the day on which notice of the 2017 annual meeting was mailed or (b) the
date on which public announcement of the date of the 2017 annual meeting is first made by the company. If a stockholder fails to give timely notice of a proposal, the stockholder will not be permitted
to present the proposal to the stockholders for a vote at our 2017 annual meeting. In addition, our bylaws include other requirements for nomination of candidates for director and proposals of other
business.
Could any additional proposals be raised at the 2016 annual meeting of stockholders?
The board of directors knows of no other matters to come before the meeting. Should any unanticipated business properly come before
the meeting, the persons named in the enclosed proxy will vote in accordance with their best judgment. The accompanying proxy confers discretionary authority to such persons to vote on any
unanticipated matters.
80
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
It is important that proxies be returned promptly. Stockholders are urged to date and sign the proxy and return it promptly in the accompanying envelope, or to vote via the
internet or by calling the toll-free number as instructed on the proxy card.
If stockholders have any questions or require any assistance with voting your shares, please contact the company's corporate secretary.
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ON BEHALF OF THE BOARD OF DIRECTORS
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Wahid Nawabi
President and Chief Executive Officer
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Simi Valley, California
August 16, 2016
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APPENDIX A
2011
2016
AMENDMENT AND RESTATEMENT OF THE
AEROVIRONMENT, INC
.
2006 EQUITY INCENTIVE PLAN
ARTICLE 1
PURPOSE
The
purpose of the AeroVironment, Inc. 2006 Equity Incentive Plan (
as amended and restated,
the "
Plan
") is to promote the success and
enhance the value of AeroVironment, Inc. (the "
Company
") by linking the personal interests of the members of the Board, Employees, and Consultants to those of
Company stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to Company stockholders. The Plan is further intended to provide
flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board, Employees, and Consultants upon whose judgment, interest, and special effort the
successful conduct of the Company's operation is largely dependent.
ARTICLE 2
DEFINITIONS AND CONSTRUCTION
Wherever
the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the
context so indicates.
2.1 "
Applicable
Accounting Standards
" shall mean Generally Accepted Accounting Principles in the United States, International Financial Reporting Standards or
such other accounting principles or standards as may apply to the Company's financial statements under United States federal securities laws from time to time.
2.2 "
Award
"
means an Option, a Restricted Stock award, a Stock Appreciation Right award, a Performance Share award, a Performance Stock Unit award, a Dividend
Equivalents award, a Stock Payment award, a Deferred Stock award, a Restricted Stock Unit award, an Other Stock-Based Award, a Performance Bonus Award, or a Performance-Based Award granted to a
Participant pursuant to the Plan.
2.3 "
Award
Agreement
" means any written agreement, contract, or other instrument or document evidencing an Award, including through electronic medium, which
shall contain such terms and conditions with respect to an Award as the Committee shall determine consistent with the Plan.
2.4 "
Board
"
means the Board of Directors of the Company.
2.5 "
Change
in Control
" means and includes each of the following:
(a) A
transaction or series of transactions (other than an offering of Stock to the general public through a registration statement filed with the Securities and Exchange
Commission) whereby any "person" or related "group" of "persons" (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its subsidiaries, an
employee benefit plan maintained by the Company or any of its subsidiaries or a "person" that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control
with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the
total combined voting power of the Company's securities outstanding immediately after such acquisition; or
(b) During
any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a
director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in Section 2.5(a) or Section 2.5(c)) whose election by the
Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two
year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
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(c) The
consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger,
consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company's assets in any single transaction or series of related
transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(i) Which
results in the Company's voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being
converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially
all of the Company's assets or otherwise succeeds to the business of the Company (the Company or such person, the "
Successor Entity
") directly or indirectly, at least a
majority of the combined voting power of the Successor Entity's outstanding voting securities immediately after the transaction, and
(ii) After
which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity;
provided, however,
that no person or group shall be treated
for purposes of this Section 2.5(c)(ii) as beneficially owning 50% or more of
combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or
(d) The
Company's stockholders approve a liquidation or dissolution of the Company.
In
addition, if a Change in Control constitutes a payment event with respect to any Award which provides for the deferral of compensation and is subject to Section 409A of the Code, the
transaction or event described in subsection (a), (b), (c) or (d) with respect to such Award must also constitute a "change in control event," as defined in Treasury Regulation
§1.409A-3(i)(5) to the extent required by Section 409A.
The
Committee shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control of the Company has occurred pursuant to the above
definition, and the date of the occurrence of such Change in Control and any incidental matters relating thereto.
2.6 "
Code
"
means the Internal Revenue Code of 1986, as amended.
2.7 "
Committee
"
means the Compensation Committee of the Board, or another committee or subcommittee of the Board appointed as described in Article 12.
2.8 "
Consultant
"
means any consultant or adviser engaged to provide services to the Company or any Subsidiary that qualifies as a consultant under the
applicable rules of the Securities and Exchange Commission for registration of shares on a Form S-8 Registration Statement.
2.9 "
Covered
Employee
" means an Employee who is, or could be, a "covered employee" within the meaning of Section 162(m) of the Code.
2.10 "
Deferred
Stock
" means a right to receive a specified number of shares of Stock during specified time periods pursuant to Article 8.
2.11 "
Disability
"
means "disability," as such term is defined in Section 22(e)(3) of the Code.
2.12 "
Dividend
Equivalents
" means a right granted to a Participant pursuant to Article 8 to receive the equivalent value (in cash or Stock) of
dividends paid on Stock.
2.13 "
Eligible
Individual
" means any person who is an Employee, a Consultant or a member of the Board, as determined by the Committee.
2.14 "
Employee
"
means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company or any Subsidiary.
2.15 "
Equity
Restructuring
" means a non-reciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off,
rights offering or recapitalization including any large non-recurring
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cash
dividend, that affects the Stock (or other securities of the Company) or the share price and causes a change in the per share value of the Stock underlying outstanding Awards, as determined by
the Committee.
2.16 "
Exchange
Act
" means the Securities Exchange Act of 1934, as amended.
2.17 "
Fair
Market Value
" means, as of any given date, the fair market value of a share of Stock on the date determined by such methods or procedures as may be
established from time to time by the Committee. Unless otherwise determined by the Committee, the Fair Market Value of a share of Stock as of any date shall be the closing sales price for a share of
Stock as reported on the NASDAQ Global Market or the NASDAQ Global Select Market (or on any established stock exchange or national market system on which the Stock is then listed) for the date of
determination or, if no such prices are reported for that date, the closing sales price for a share of Stock on the last trading date prior to the date of determination.
2.18 "
Incentive
Stock Option
" means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.
2.19 "
Independent
Director
" means a member of the Board who is not an Employee of the Company.
2.20 "
Misconduct
"
shall mean the occurrence of any of, but not limited to, the following: (a) conviction of a Participant of any felony or any crime
involving fraud or dishonesty; (b) a Participant's participation (whether by affirmative act or omission) in a fraud, act or dishonesty or other act of misconduct against the Company and/or any
Subsidiary; (c) conduct by a Participant which, based upon a good faith and reasonable factual investigation by the Company (or, if a Participant is an executive officer, by the Board),
demonstrates such Participant's unfitness to serve; (d) a Participant's violation of any statutory or fiduciary duty, or duty of loyalty owed to the Company and/or any Subsidiary; (e) a
Participant's violation of state or federal law in connection with the Participant's performance of his or her job which has an adverse effect on the Company and/or any Subsidiary; and (f) a
Participant's violation of Company policy which has a material adverse effect on the Company and/or any Subsidiary. Notwithstanding the foregoing, a Participant's Disability shall not constitute
Misconduct as set forth herein. The determination that a termination is for Misconduct shall be by the Committee it its sole and exclusive judgment and discretion. Notwithstanding the foregoing, if a
Participant is a party to an employment or severance agreement with the Company or any Subsidiary in effect as of the date of grant of an Award which defines "Misconduct" or "Cause" or a similar term,
"Misconduct" for purposes of the Plan and such Award shall have the meaning given to such term in such employment or severance agreement.
2.21 "
Non-Employee
Director
" means a member of the Board who qualifies as a "Non-Employee Director" as defined in Rule 16b-3(b)(3) of the Exchange Act,
or any successor definition adopted by the Board.
2.22 "
Non-Qualified
Stock Option
" means an Option that is not intended to be an Incentive Stock Option.
2.23 "
Option
"
means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number of shares of Stock at a specified
price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.
2.24 "
Other
Stock-Based Award
" means an Award granted or denominated in Stock or units of Stock pursuant to Section 8.7 of the Plan.
2.25 "
Participant
"
means any Eligible Individual who, as an Independent Director, Consultant or Employee, has been granted an Award pursuant to the Plan.
2.26 "
Performance-Based
Award
" means an Award granted to selected Covered Employees pursuant to Articles 6 and 8, but which is subject to the terms and
conditions set forth in Article 9. All Performance-Based Awards are intended to qualify as Qualified Performance-Based Compensation.
2.27 "
Performance
Bonus Award
" has the meaning set forth in Section 8.8.
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2.28 "
Performance
Criteria
" means the criteria (and adjustments) that the Committee selects for purposes of establishing the Performance Goal or Performance
Goals for a Participant for a Performance Period, determined as follows:
(a) The
Performance Criteria that will be used to establish Performance Goals are limited to the following: net earnings (either before or after interest, taxes,
depreciation and amortization), economic value-added (as determined by the Committee), gross or net sales or revenue, net income (either before or after taxes), operating earnings, cash flow
(including, but not limited to, operating cash flow and free cash flow), stockholders' equity, return on stockholders' equity, return on assets, return on capital, total stockholder returns, return on
sales, gross or net profit or operating margin, operating or other costs and expenses, improvements in expense levels, margins, working capital, earnings per share of Stock, price per share of Stock,
implementation or completion of critical projects, market share, comparisons with various stock market indices, capital raised in financing transactions or other financing milestones, market
recognition (including but not limited to awards and analyst ratings), financial ratios, and implementation, completion or attainment of objectively determinable objectives relating to research,
development, regulatory, commercial or strategic milestones or developments, any of which may be measured either in absolute terms or as compared to any incremental increase or decrease or as compared
to results of a peer group or to market performance indicators or indices; in each case as determined in accordance with Applicable Accounting Standards, if applicable.
(b) The
Committee may, in its sole discretion, provide that one or more objectively determinable adjustments will be made to one or more of the Performance Goals established
for any Performance Period. Such adjustments may include one or more of the following: items related to a change in accounting principles, items relating to financing activities, expenses for
restructuring or productivity initiatives, non-cash charges, including those relating to share-based awards, other non-operating items, items related to acquisitions or other strategic transactions,
items attributable to the business operations of any entity acquired by us during the Performance Period, items related to the disposal of a business of segment of a business, items related to
discontinued operations that do not qualify as a segment of a business under Applicable Accounting Standards, items attributable to any stock dividend, stock split, combination or exchange of shares
occurring during the Performance Period, any other items of significant income or expense which are determined to be appropriate adjustments, items relating to unusual or extraordinary corporate
transactions, events or developments, items related to amortization of acquired intangible assets, items that are outside the scope of the Company's core, on-going business activities, items relating
to changes in tax laws, items relating to asset impairment charges, items relating to gains or losses for litigation, arbitration and contractual settlements, or items relating to any other unusual or
nonrecurring events or changes in applicable laws, accounting principles or business conditions.
To
the extent an Award is intended to be Qualified Performance-Based Compensation, the Committee shall, within the time prescribed by Section 162(m) of the Code, define in an objective fashion
the manner of calculating the Performance Criteria it selects to use for such Performance Period for such Participant.
2.29 "
Performance
Goals
" means, for a Performance Period, the goals established in writing by the Committee for the Performance Period based upon the
Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance or the performance
of a Subsidiary, division, business unit, or an individual. The achievement of each Performance Goal shall be determined, to the extent applicable, with reference to Applicable Accounting Standards
2.30 "
Performance
Period
" means the one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which
the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant's right to, and the payment of, a Performance-Based Award.
2.31 "
Performance
Share
" means a right granted to a Participant pursuant to Article 8, to receive Stock, the payment of which is contingent upon
achieving certain Performance Goals or other performance-based targets established by the Committee.
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2.32 "
Performance
Stock Unit
" means a right granted to a Participant pursuant to Article 8, to receive Stock, the payment of which is contingent upon
achieving certain Performance Goals or other performance-based targets established by the Committee.
2.33 "
Plan
"
means this
amended and restated
AeroVironment, Inc. 2006 Equity Incentive Plan, as it may be
further
amended from time to time.
2.34 "
Qualified
Performance-Based Compensation
" means any compensation that is intended to qualify as "qualified performance-based compensation" as described
in Section 162(m)(4)(C) of the Code.
2.35
"
Restatement
Effective Date
" shall have the meaning set forth in
Section 13.1.
2.36
2.35
"
Restricted
Stock
" means Stock awarded to a Participant pursuant to
Article 6 that is subject to certain restrictions and may be subject to risk of forfeiture.
2.37
2.36
"
Restricted
Stock Unit
" means an Award granted pursuant to Section 8.6.
2.38
2.37
"
Securities
Act
" shall mean the Securities Act of 1933, as amended.
2.39
2.38
"
Stock
"
means the common stock of the Company, $0.0001 par value, and such other
securities of the Company that may be substituted for Stock pursuant to Article 11.
2.40
2.39
"
Stock
Appreciation Right
" or "
SAR
" means a right
granted pursuant to Article 7 to receive a payment equal to the excess of the Fair Market Value of a specified number of shares of Stock on the date the SAR is exercised over the Fair Market
Value on the date the SAR was granted as set forth in the applicable Award Agreement.
2.41
2.40
"
Stock
Payment
" means (a) a payment in the form of shares of Stock, or
(b) an option or other right to purchase shares of Stock, as part of any bonus, deferred compensation or other arrangement, made in lieu of all or any portion of the compensation, granted
pursuant to Article 8.
2.42
2.41
"
Subsidiary
"
means any "subsidiary corporation" as defined in
Section 424(f) of the Code and any applicable regulations promulgated thereunder or any other entity of which a majority of the outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Company.
2.43
2.42
"
Substitute
Award
" shall mean an Award granted under the Plan upon the assumption
of, or in substitution for, outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction, such as a merger, combination, consolidation or
acquisition of property or stock; provided, however, that in no event shall the term "Substitute Award" be construed to refer to an award made in connection with the cancellation and repricing of an
Option or Stock Appreciation Right.
2.44
2.43
"
Termination
of Consultancy
" shall mean the time when the engagement of the
Participant as a Consultant to the Company or to a Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or
retirement, but excluding: (a) terminations where there is a simultaneous employment or continuing employment of the Participant by the Company or any Subsidiary, and (b) terminations
where there is a simultaneous reestablishment of a consulting relationship or continuing consulting relationship between the Participant and the Company or any Subsidiary. The Committee, in its
absolute discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a particular leave
of absence constitutes a Termination of Consultancy. Notwithstanding any other provision of the Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate a Consultant's
service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing.
2.45
2.44
"
Termination
of Directorship
" shall mean the time when the Participant, if he or
she is or becomes an Independent Director, ceases to be a Director for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement.
The Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Independent Directors.
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2.46
2.45
"
Termination
of Employment
" shall mean the time when the employee-employer
relationship between the Participant and the Company or any Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation,
discharge, death, Disability or retirement; but excluding: (a) terminations where there is a simultaneous reemployment or continuing employment of the Participant by the Company or any
Subsidiary, and (b) terminations where there is a simultaneous establishment of a consulting relationship or continuing consulting relationship between the Participant and the Company or any
Subsidiary. The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the
question of whether a particular leave of absence constitutes a Termination of Employment.
2.47
2.46
"
Termination
of Service
" shall mean the last to occur of a Participant's
Termination of Consultancy, Termination of Directorship or Termination of Employment, as applicable. A Participant shall not be deemed to have a Termination of Service merely because of a change in
the capacity in which the Participant renders service to the Company or any Subsidiary (
i.e.
, a Participant who is an Employee becomes a Consultant) or
a change in the entity for which the Participant renders such service (
i.e.
, an Employee of the Company becomes an Employee of a Subsidiary), unless
following such change in capacity or service the Participant is no longer serving as an Employee, Independent Director or Consultant of the Company or any Subsidiary.
ARTICLE 3
SHARES SUBJECT TO THE PLAN
3.1
Number
of Shares
.
(a) Subject
to Article 11, the aggregate number of shares of Stock which may be issued or transferred pursuant to Awards under the Plan shall be Four Million Eight
Hundred Eighty Four Thousand One Hundred Fifty Seven (4,884,157) shares. To the extent that an Award terminates, expires, or lapses for any reason, or an Award is settled in cash without the delivery
of shares of Stock to the Participant, then any shares of Stock subject to the Award shall again be available for the grant of an Award pursuant to the Plan.
Additionally, any shares of Stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award shall again be available for the grant of an Award
pursuant to the Plan. If any shares of Restricted Stock are forfeited by a Participant or repurchased by the Company pursuant to Section 6.3 hereof, such shares shall again be available for the
grant of an Award pursuant to the Plan. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not be counted against the shares available for issuance under the
Plan.
(b) To
the extent permitted by applicable law or any exchange rule, Substitute Awards shall not reduce the shares of Stock authorized for grant under the Plan. Additionally,
in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and
not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the
exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to
such acquisition or combination) may be used for Awards under the Plan and shall not reduce the shares of Stock authorized for grant under the Plan; provided that Awards using such available shares
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
not employed by or providing services to the Company or its Subsidiaries immediately prior to such acquisition or combination.
(c) Notwithstanding
the provisions of this Section 3.1, no shares of Stock may again be or, as applicable, may become eligible to be, optioned, granted or awarded if
such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code.
3.2
Stock
Distributed
. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury
Stock or Stock purchased on the open market.
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3.3
Limitation
on Number of Shares and Values Subject to Awards
.
(a)
Notwithstanding any provision in the Plan to the contrary, and subject to Article 11, the maximum aggregate
number of shares of Stock with respect to one or more Awards that may be granted to any Participant during any fiscal year of the Company shall be 2,000,000 and the maximum amount of cash that may be
paid to any Participant during any fiscal year of the Company with respect to one or more Awards payable in cash shall be $5,000,000.
(b)
Notwithstanding
any provision in the Plan to the contrary, and subject to Article 11, the sum of any cash compensation,
or other compensation, and the value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor
thereto) of Awards granted to an Independent Director as compensation for services as an Independent Director during any fiscal year of the Company may not exceed $500,000, increased to $700,000 in
the fiscal year of his or her initial service as an Independent Director. The Administrator may make exceptions to this limit for individual Independent Directors in extraordinary circumstances, as
the Administrator may determine in its discretion, provided that the Independent Director receiving such additional compensation may not participate in the decision to award such compensation or in
other contemporaneous compensation decisions involving Independent Directors.
ARTICLE 4
ELIGIBILITY AND PARTICIPATION
4.1
Eligibility
. Each
Eligible Individual shall be eligible to be granted one or more Awards pursuant to the Plan.
4.2
Participation
. Subject
to the provisions of the Plan, the Committee may, from time to time, select from among all Eligible Individuals, those
to whom Awards shall be granted and shall determine the nature and amount of each Award. No Eligible Individual shall have any right to be granted an Award pursuant to this Plan.
4.3
Foreign
Participants
. In order to assure the viability of Awards granted to Participants employed in foreign countries, the Committee may
provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy, or custom. Moreover, the Committee may approve such supplements to, or
amendments, restatements, or alternative versions of, the Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of the Plan as in effect for any other
purpose;
provided, however
, that no such supplements, amendments, restatements, or alternative versions shall increase the share limitations contained
in Sections 3.1 and 3.3 of the Plan.
ARTICLE 5
STOCK OPTIONS
5.1
General
. The
Committee is authorized to grant Options to Participants on the following terms and conditions:
(a)
Exercise
Price
. The exercise price per share of Stock subject to an Option shall be determined by the Committee and set forth
in the Award Agreement;
provided
that the exercise price for any Option shall not be less than 100% of the Fair Market Value of a share of Stock on the
date of grant.
(b)
Time
and Conditions of Exercise
. The Committee shall determine the time or times at which an Option may be exercised in whole
or in part;
provided
,
however
, that the term of an Option shall not be more than 10 years from
the date the Option is granted. The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised.
(c)
Manner
of Exercise
. All or a portion of an exercisable Option shall be deemed exercised upon delivery of all of the following
to the Secretary of the Company, or such other person or entity designated by the Committee, or his, her or its office, as applicable:
(i) A
written notice complying with the applicable rules established by the Committee stating that the Option, or a portion thereof, is exercised. The notice shall be signed
by the Participant or other person then entitled to exercise the Option or such portion of the Option;
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(ii) Such
representations and documents as the Committee, in its sole discretion, deems necessary or advisable to effect compliance with all applicable provisions of the
Securities Act and any other federal, state or foreign securities laws or regulations. The Committee may, in its sole discretion, also take whatever additional actions it deems appropriate to effect
such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars;
(iii) In
the event that the Option shall be exercised pursuant to Section 10.5 by any person or persons other than the Participant, appropriate proof of the right of
such person or persons to exercise the Option; and
(iv) Full
payment of the exercise price and applicable withholding taxes to the Secretary of the Company for the shares with respect to which the Option, or portion thereof,
is exercised, in a manner permitted by Section 10.1 and 10.2.
5.2
Incentive
Stock Options
. The terms of any Incentive Stock Options granted pursuant to the Plan must comply with the conditions and
limitations contained Section 13.2 and this Section 5.2.
(a)
Eligibility
. Incentive
Stock Options may be granted only to employees (as defined in accordance with Section 3401(c) of
the Code) of the Company or a Subsidiary which constitutes a "subsidiary corporation" of the Company (within the meaning of Section 424(f) of the Code and the applicable regulations promulgated
thereunder).
(b)
Exercise
Price
. The exercise price per share of Stock shall be set by the Committee;
provided
that subject to Section 5.2(e) the exercise price for any Incentive Stock Option
shall not be less than 100% of the Fair Market Value on
the date of grant.
(c)
Expiration
. Subject
to Section 5.2(e), an Incentive Stock Option may not be exercised to any extent by anyone after the
tenth anniversary of the date it is granted, unless an earlier time is set in the Award Agreement.
(d)
Individual
Dollar Limitation
. The aggregate Fair Market Value (determined as of the time the Option is granted) of all shares
of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000 or such other limitation as imposed by Section 422(d)
of the Code, or any successor provision. To the extent that Incentive Stock Options are first exercisable by a Participant in excess of such limitation, the excess shall be considered Non-Qualified
Stock Options.
(e)
Ten
Percent Owners
. An Incentive Stock Option shall be granted to any individual who, at the date of grant, owns stock
possessing more than ten percent of the total combined voting power of all classes of Stock of the Company or any "subsidiary corporation" of the Company (within the meaning of Section 424 of
the Code) only if such Option is granted at an exercise price per share that is not less than 110% of the Fair Market Value per share of Stock on the date of grant and the Option is exercisable for no
more than five years from the date of grant.
(f)
Notice
of Disposition
. The Participant shall give the Company prompt notice of any disposition of shares of Stock acquired by
exercise of an Incentive Stock Option within (i) two years from the date of grant of such Incentive Stock Option or (ii) one year after the transfer of such shares of Stock to the
Participant.
(g)
Transferability;
Right to Exercise
. An Incentive Stock Option shall not be transferable by the Participant other than by will
or by the laws of descent or distribution. During a Participant's lifetime, an Incentive Stock Option may be exercised only by the Participant.
5.3
Substitute
Awards
. Notwithstanding the foregoing provisions of this Article 5 to the contrary, in the case of an Option that is a
Substitute Award, the price per share of the shares of Stock subject to such Option may be less than the Fair Market Value per share on the date of grant; provided that the excess of: (a) the
aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate exercise price thereof does not exceed the
excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the
Committee) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate exercise price of such shares.
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ARTICLE 6
RESTRICTED STOCK AWARDS
6.1
Grant
of Restricted Stock
. The Committee is authorized to make Awards of Restricted Stock to any Participant selected by the Committee in
such amounts and subject to such terms and conditions as determined by the Committee. The Committee shall establish the purchase price, if any, and form of payment for Restricted Stock;
provided
,
however
, that if a purchase price is charged, such purchase price shall be no less than the
par value, if any, of the shares of Stock to be purchased, unless otherwise permitted by applicable law. In all cases, legal consideration shall be required for each issuance of Restricted Stock.
6.2
Issuance
and Restrictions
. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee
may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in
combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter.
6.3
Repurchase
or Forfeiture of Restricted Stock
. Except as otherwise determined by the Committee at the time of the grant of the Award or
thereafter, (a) if no price was paid by the Participant for the Restricted Stock, upon a Termination of Service during the applicable restriction period, the Participant's rights in unvested
Restricted Stock then subject to restrictions shall lapse, and such Restricted Stock shall be surrendered to the Company and cancelled without consideration, and (b) if a price was paid by the
Participant for the Restricted Stock, upon a Termination of Service during the applicable restriction period, the Company shall have the right to repurchase from the Participant the unvested
Restricted Stock then subject to restrictions at a cash price per share equal to the price paid by the Participant for such Restricted Stock or such other amount as may be specified in the Award
Agreement.
6.4
Certificates
or Book Entries for Restricted Stock
. Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the
Committee shall determine. Certificates or book entries evidencing shares of Restricted Stock must bear an appropriate legend or notation referring to the terms, conditions, and restrictions
applicable to such Restricted Stock, and the Company may, at its discretion, retain physical possession of any stock certificate until such time as all applicable restrictions lapse or the Award
Agreement may provide that the shares shall be held in escrow by an escrow agent designated by the Company.
ARTICLE 7
STOCK APPRECIATION RIGHTS
7.1
Grant
of Stock Appreciation Rights
.
A
Stock Appreciation Right may be granted to any Participant selected by the Committee. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the
Committee shall impose.
7.2
Stock
Appreciation Rights
.
(a) A
Stock Appreciation Right shall have a term set by the Committee
, which term shall not be more than ten (10) years from the date the Stock
Appreciation Right is granted
. A Stock Appreciation Right shall be exercisable in such installments as the Committee may determine. A Stock Appreciation Right shall cover such number of
shares of Stock as the Committee may determine.
(b) A
Stock Appreciation Right shall entitle the Participant (or other person entitled to exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a
specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by
subtracting the exercise price per share of the Stock
Appreciation Right from the Fair Market Value of a share of Stock on the date of exercise of the Stock Appreciation Right by the number of shares of Stock with respect to which the Stock Appreciation
Right shall have been exercised, subject to any limitations the Committee may impose. Except as described in (c) below, the exercise price per share of Stock subject to each Stock Appreciation
Right shall be set by the Committee, but shall not be less than 100% of the Fair Market Value on the date the Stock Appreciation Right is granted.
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(c) Notwithstanding
the foregoing provisions of Section 7.2(b) to the contrary, in the case of an Stock Appreciation Right that is a Substitute Award, the price per
share of the shares of Stock subject to such Stock Appreciation Right may be less than 100% of the Fair Market Value per share on the date of grant; provided that the excess of: (i) the
aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares of Stock subject to the Substitute Award, over (ii) the aggregate exercise price thereof does not
exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by
the Committee) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate exercise price of such shares.
7.3
Payment
and Limitations on Exercise
.
(a) Payment
of the amounts determined under Section 7.2(b) above shall be in cash, in Stock (based on its Fair Market Value as of the date the Stock Appreciation
Right is exercised) or a combination of both, as determined by the Committee in the Award Agreement. To the extent payment for a Stock Appreciation Right is to be made in cash, the Award Agreements
shall specify the date of payment which may be different than the date of exercise of the Stock Appreciation Right, to the extent necessary to comply with the requirements of Section 409A of
the Code, as applicable. If the date of payment for a Stock Appreciation Right is later than the date of exercise, the Award Agreement may specify that the Participant be entitled to earnings on such
amount until paid.
(b) To
the extent any payment under Section 7.2(b) is effected in Stock it shall be made subject to satisfaction of all provisions of Article 5 above
pertaining to Options.
7.4
Manner
of Exercise
. All or a portion of an exercisable Stock Appreciation Right shall be deemed exercised upon delivery of all of the
following to the Secretary of the Company, or such other person or entity designated by the Committee, or his, her or its office, as applicable:
(a)
A
written notice complying with the applicable rules established by the Committee stating that the Stock Appreciation Right, or a portion
thereof, is exercised. The notice shall be signed by the Participant or other person then entitled to exercise the Stock Appreciation Right or such portion of the Stock Appreciation Right;
(b)
Such
representations and documents as the Committee, in its sole discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal, state or foreign securities laws or regulations. The Committee may, in its sole discretion, also take whatever additional actions it
deems appropriate to effect such compliance; and
(c)
In
the event that the Stock Appreciation Right shall be exercised pursuant to this Section 7.4 by any person or persons other than
the Participant, appropriate proof of the right of such person or persons to exercise the Stock Appreciation Right
ARTICLE 8
OTHER TYPES OF AWARDS
8.1
Performance
Share Awards
. Any Participant selected by the Committee may be granted one or more Performance Share awards which shall be
denominated in a number of shares of Stock and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in
each case on a specified date or dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems
relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular Participant.
8.2
Performance
Stock Units
. Any Participant selected by the Committee may be granted one or more Performance Stock Unit awards which shall be
denominated in units of value including dollar value of shares of Stock and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined
appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider (among
such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular Participant.
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8.3
Dividend
Equivalents
.
(a) Any
Participant selected by the Committee may be granted Dividend Equivalents based on the dividends declared on the shares of Stock that are subject to any Award, to be
credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by the Committee. Such Dividend
Equivalents shall be converted to cash or additional shares of Stock by such formula and at such time and subject to such limitations as may be determined by the Committee.
(b)
Unless
otherwise determined by the Committee,
Dividend Equivalents with respect to an Award with performance-based vesting that
are based on dividends paid prior to the vesting of such Award shall only be paid out to the Participant to the extent that the performance-based vesting conditions are subsequently satisfied and the
Award vests.
(c) Notwithstanding
the foregoing, no Dividend Equivalents shall be payable with respect to Options or SARs.
8.4
Stock
Payments
. Any Participant selected by the Committee may receive Stock Payments in the manner determined from time to time by the
Committee. The number of shares of Stock or the number of options or other rights to purchase shares of Stock subject to a Stock Payment shall be determined by the Committee and may be based upon the
Performance Criteria or other specific performance criteria determined appropriate by the Committee, determined on the date such Stock Payment is made or on any date thereafter.
8.5
Deferred
Stock
. Any Participant selected by the Committee may be granted an award of Deferred Stock in the manner determined from time to
time by the Committee. The number of shares of Deferred Stock shall be determined by the Committee and may be linked to the Performance Criteria or other specific performance criteria determined to be
appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. Stock underlying a Deferred Stock award will not be issued until the
Deferred Stock award has vested, pursuant to a vesting schedule or performance criteria set by the Committee. Unless otherwise provided by the Committee, a Participant awarded Deferred Stock shall
have no rights as a Company stockholder with respect to such Deferred Stock until such time as the Deferred Stock Award has vested and the Stock underlying the Deferred Stock Award has been issued.
8.6
Restricted
Stock Units
. The Committee is authorized to make Awards of Restricted Stock Units to any Participant selected by the Committee in
such amounts and subject to such terms and conditions as determined by the Committee. At the time of grant, the Committee shall specify the date or dates on which the Restricted Stock Units shall
become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate. At the time of grant, the Committee shall specify the maturity date applicable to each grant
of Restricted Stock Units which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the grantee. On the maturity date, the Company shall, subject
to Section 10.7(b), transfer to the Participant one unrestricted, fully transferable share of Stock for each Restricted Stock Unit scheduled to be paid out on such date and not previously
forfeited. The Committee shall specify the purchase price, if any, to be paid by the grantee to the Company for such shares of Stock.
8.7
Other
Stock-Based Awards
. Any Participant selected by the Committee may be granted one or more Awards that provide Participants with shares
of Stock or the right to purchase shares of Stock or that have a value derived from the value of, or an exercise or conversion privilege at a price related to, or that are otherwise payable in shares
of Stock and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or
dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems relevant in light of the specific
type of Award) the contributions, responsibilities and other compensation of the particular Participant.
8.8
Performance
Bonus Awards
. Any Participant selected by the Committee may be granted one or more Performance-Based Awards in the form of a cash
bonus (a "
Performance Bonus Award
") payable upon the attainment of Performance Goals that are established by the Committee and relate to one or more of
the Performance Criteria, in each case on a specified date or dates or over any period or periods determined by the Committee. Any such Performance Bonus Award paid to a Covered Employee shall be
based upon objectively determinable bonus formulas established in accordance with Article 9.
.
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8.9
Term
. Except
as otherwise provided herein, the term of any Award of Performance Shares, Performance Stock Units, Dividend Equivalents, Stock
Payments, Deferred Stock, Restricted Stock Units or Other Stock-Based Award shall be set by the Committee in its discretion.
8.10
Exercise
or Purchase Price
. The Committee may establish the exercise or purchase price, if any, of any Award of Performance Shares,
Performance Stock Units, Deferred Stock, Stock Payments, Restricted Stock Units or Other Stock-Based Award;
provided, however
, that such price shall not
be less than the par value of a share of Stock on the date of grant, unless otherwise permitted by applicable law. In all cases, legal consideration shall be required for each issuance of shares of
Stock pursuant to an Award.
8.11
Exercise
Upon Termination of Service
. An Award of Performance Shares, Performance Stock Units, Dividend Equivalents, Deferred Stock, Stock
Payments, Restricted Stock Units and Other Stock-Based Award shall only be exercisable or payable while the Participant is an Employee, Consultant or a member of the Board, as applicable;
provided, however
, that the Committee in its sole and absolute discretion may provide that an Award of Performance Shares, Performance Stock Units,
Dividend Equivalents, Stock Payments, Deferred Stock, Restricted Stock Units or Other Stock-Based Award may be exercised or paid subsequent to a Termination of Service or following a Change in Control
of the Company, or because of the Participant's retirement, death or Disability, or otherwise;
provided, however
, that any such provision with respect
to Performance Shares or Performance Stock Units shall be subject to the requirements of Section 162(m) of the Code that apply to Qualified Performance-Based Compensation.
ARTICLE 9
PERFORMANCE-BASED AWARDS
9.1
Purpose
. The
purpose of this Article 9 is to provide the Committee with the ability to qualify Awards other than Options and SARs and
that are granted pursuant to Articles 6 and 8 as Qualified Performance-Based Compensation. If the Committee, in its discretion, decides to grant a Performance-Based Award to a Covered Employee,
the provisions of this Article 9 shall control over any contrary provision contained in Articles 6 or 8;
provided, however
, that the
Committee may in its discretion grant Awards to Covered Employees that are based on Performance Criteria or Performance Goals but that do not satisfy the requirements of this Article 9.
9.2
Applicability
. This
Article 9 shall apply only to those Covered Employees selected by the Committee to receive Performance-Based
Awards. The designation of a Covered Employee as a Participant for a Performance Period shall not in any manner entitle the Participant to receive an Award for the period. Moreover, designation of a
Covered Employee as a Participant for a particular Performance Period shall not require designation of such Covered Employee as a Participant in any subsequent Performance Period and designation of
one Covered Employee as a Participant shall not require designation of any other Covered Employees as a Participant in such period or in any other period.
9.3
Procedures
with Respect to Performance-Based Awards
. To the extent necessary to comply with the Qualified Performance-Based Compensation
requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted under Articles 6 and 8 which may be granted to one or more Covered Employees, no later than ninety
(90) days following the commencement of any Performance Period or any designated fiscal period or period of service (or such other time as may be required or permitted by Section 162(m)
of the Code), the Committee shall, in writing, (a) designate one or more Covered Employees, (b) select the Performance Criteria applicable to the Performance Period, (c) establish
the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period based on the Performance Criteria, and (d) specify the relationship between
Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by each Covered Employee for such Performance Period. Following the completion of each
Performance Period, the Committee shall certify in writing whether and the extent to which the applicable Performance Goals have been achieved for such Performance Period. In determining the amount
earned by a Covered Employee under such Awards, the Committee shall have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account
additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the Performance Period.
9.4
Payment
of Performance-Based Awards
. Unless otherwise provided in the applicable Award Agreement (and only to the extent otherwise permitted
by Section 162(m)(4)(C) of the Code, as to an Award that is intended to
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qualify
as Qualified Performance-Based Compensation), a Participant must be employed by the Company or a Subsidiary on the day a Performance-Based Award for such Performance Period is paid to the
Participant. Furthermore, a Participant shall be eligible to receive payment pursuant to a Performance-Based Award for a Performance Period only if and to the extent the Performance Goals for such
period are achieved.
9.5
Additional
Limitations
. Notwithstanding any other provision of the Plan, any Award which is granted to a Covered Employee and is intended to
constitute Qualified Performance-Based Compensation shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of
the Code) or any regulations or rulings issued thereunder that are requirements for qualification as Qualified Performance-Based Compensation, and the Plan and the Award Agreement shall be deemed
amended to the extent necessary to conform to such requirements.
ARTICLE 10
PROVISIONS APPLICABLE TO AWARDS
10.1
Payment
. The
Committee shall determine the methods by which payments by any Participant with respect to any Awards granted under the Plan
shall be made, including, without limitation: (a) cash, (b) promissory note bearing interest at no less than such rate as shall then preclude the imputation of interest under the Code,
(c) shares of Stock (including, in the case of payment of the exercise price of an Award, shares of Stock issuable pursuant to the exercise of the Award) held for such period of time as may be
required by the Committee in order to avoid adverse accounting consequences and having a Fair Market Value on the date of delivery equal to the aggregate payments required, (d) delivery of a
notice that the Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise or vesting of an Award, and that the broker has been directed to
pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate payments required,
provided,
that payment of
such proceeds is then made to the Company upon settlement of such sale, or (e) other property acceptable to the Committee (including through the delivery of a notice that the Participant has
placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net
proceeds of the sale to the Company in satisfaction of the Option exercise price;
provided
that payment of such proceeds is then made to the Company
upon settlement of such sale), and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants. Notwithstanding any other provision of the Plan to the contrary,
no Participant who is a member of the Board or an "executive officer" of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an
Option in any method which would violate Section 13(k) of the Exchange Act.
10.2
Withholding
. The
Company or any Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit
to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant's FICA or employment tax obligation) required by law to be withheld with respect to
any taxable event concerning a Participant arising as a result of this Plan. The Committee may in its discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have
the Company withhold shares of Stock otherwise issuable under an Award (or allow the return of shares of Stock) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding
any other provision of the Plan, the number of shares of Stock which may be withheld or surrendered with respect to the issuance, vesting, exercise or payment of any Award shall be limited to the
number of shares of Stock which have a Fair Market Value on the date of withholding or surrender equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for
federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income. The Committee shall determine the fair market value of the Stock,
consistent with applicable provisions of the Code, for tax withholding obligations due in connection with a broker-assisted cashless Option or Stock Appreciation Right exercise involving the sale of
shares to pay the Option or Stock Appreciation Right exercise price or any tax withholding obligation.
10.3
Stand-Alone
and Tandem Awards
. Awards granted pursuant to the Plan may, in the discretion of the Committee, be granted either alone, in
addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different
time from the grant of such other Awards.
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10.4
Award
Agreement
. Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each
Award which may include the term of an Award, the provisions applicable in the event the Participant's employment or service terminates, and the Company's authority to unilaterally or bilaterally
amend, modify, suspend, cancel or rescind an Award.
10.5
Limits
on Transfer
. No right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any
party other than the Company or a Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or a Subsidiary. Except as
otherwise provided by the Committee, no Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by will or the laws of descent and distribution. The Committee by
express provision in the Award or an amendment thereto may permit an Award (other than an Incentive Stock Option) to be transferred to, exercised by and paid to certain persons or entities related to
the Participant, including but not limited to members of the Participant's family, charitable institutions, or trusts or other entities whose beneficiaries or beneficial owners are members of the
Participant's family and/or charitable institutions, or to such other persons or entities as may be expressly approved by the Committee, pursuant to such conditions and procedures as the Committee may
establish. Any permitted transfer shall be subject to the condition that the Committee receive evidence satisfactory to it that the transfer is being made for estate and/or tax planning purposes (or
to a "blind trust" in connection with the Participant's Termination of Service with the Company or a Subsidiary to assume a position with a governmental, charitable, educational or similar non-profit
institution) and on a basis consistent with the Company's lawful issue of securities.
10.6
Beneficiaries
. Notwithstanding
Section 10.5, a Participant may, in the manner determined by the Committee, designate a beneficiary to
exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant's death. A beneficiary, legal guardian, legal representative, or other person
claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement
otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married and resides in a community property state, a designation of a
person other than the Participant's spouse as his or her beneficiary with respect to more than 50% of the Participant's interest in the Award shall not be effective without the prior written consent
of the Participant's spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant's will or the laws of
descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee.
10.7
Stock
Certificates; Book Entry Procedures
.
(a) Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates or make any book entries
evidencing shares of Stock pursuant to the exercise of any Award, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed or traded. All Stock
certificates delivered pursuant to the Plan and all shares issued pursuant to book-entry procedures are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or
advisable to comply with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on
which the Stock is listed, quoted, or traded. The Committee may place legends or notations on any Stock certificate or book-entry to reference restrictions applicable to the Stock. In addition to the
terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements, and representations as the Board, in its discretion, deems advisable in order
to comply with any such laws, regulations, or requirements. The Committee shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement
or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Committee.
(b) Notwithstanding
any other provision of the Plan, unless otherwise determined by the Committee or required by any applicable law, rule or regulation, the Company shall
not deliver to any Participant certificates evidencing shares of Stock issued in connection with any Award and instead such shares of Stock shall be recorded in the books of the Company (or, as
applicable, its transfer agent or stock plan administrator).
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10.8
Paperless
Administration
. In the event that the Company establishes for itself or using the services of a third party, an automated system
for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a
Participant may be permitted through the use of such an automated system.
10.9
Forfeiture
and Claw-Back Provisions
. Pursuant to its general authority to determine the terms and conditions applicable to Awards under the
Plan, the Committee shall have the right to provide, in an Award Agreement or otherwise, or to require a Participant to agree by separate written or electronic instrument, that:
(a) (i)
Any proceeds, gains or other economic benefit actually or constructively received by the Participant upon any receipt or exercise of the Award, or upon the receipt
or resale of any shares of Stock underlying the Award, must be paid to the Company, and (ii) the Award shall terminate and any unexercised portion of the Award (whether or not vested) shall be
forfeited, if (x) a Termination of Service occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, or (y) the Participant at any
time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the
Committee or (z) the Participant incurs a Termination of Service for Misconduct; and
(b) All
Awards (including any proceeds, gains or other economic benefit actually or constructively received by the Participant upon any receipt or exercise of any Award or
upon the receipt or resale of any shares of Stock underlying the Award) shall be subject to the provisions of any claw-back policy implemented by the Company, including, without limitation, any
claw-back policy adopted to comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, to the extent set forth
in such claw-back policy and/or in the applicable Award Agreement.
10.10
Prohibition
on Repricing
. Subject to Article 11, neither the Board nor the Committee shall, without the approval of
the stockholders of the Company, (a) authorize the amendment of any outstanding Option or Stock Appreciation Right to reduce its price per share, or (b) cancel any Option or Stock
Appreciation Right in exchange for cash or another Award when the Option or Stock Appreciation Right price per share exceeds the Fair Market Value of the underlying shares of Stock. Subject to
Article 11, the Committee shall have the authority, without the approval of the stockholders of the Company, to amend any outstanding Award to increase the price per share or to cancel and
replace an Award with the grant of an Award having a price per share that is greater than or equal to the price per share of the original Award. Furthermore, for purposes of this Section 10.10,
except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding Awards may not be amended to reduce the exercise price per share of outstanding Options or
Stock Appreciation Rights or cancel outstanding Options or Stock Appreciation Rights in exchange for cash, other Awards or Options or Stock Appreciation Rights with an exercise price per share that is
less than the exercise price per share of the original Options or Stock Appreciation Rights without the approval of the stockholders of the Company.
ARTICLE 11
CHANGES IN CAPITAL STRUCTURE
11.1
Adjustments
.
(a) In
the event that any dividend or other distribution, reorganization, merger, consolidation, combination, repurchase, or exchange of Stock or other securities of the
Company, or other change in the corporate structure of the Company affecting the Stock (other than an Equity Restructuring) occurs such that an adjustment is determined by the Committee (in its sole
discretion) to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner
as it may deem equitable, adjust (i) the number and type of shares which may be delivered under the Plan (including but not limited to adjustments of the limitations in Sections 3.1 and
3.3); (ii) the terms and conditions of any outstanding Awards (including without limitation, any applicable performance targets or criteria with respect thereto); and (ii) the grant or
exercise price per share and the number of shares of Stock covered by each Award.
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(b) In
connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Section 11(a):
(i) The
number and type of securities subject to each outstanding Award and the exercise price or grant price thereof, if applicable, will be proportionately adjusted so
that the fair value of each such Award and the proportionate interest represented thereby immediately after the Equity Restructuring will equal the fair value of such Award and the proportionate
interest represented thereby immediately prior to such Equity Restructuring. The adjustments provided under this Section 11(b)(i) shall be nondiscretionary and shall be final and binding on the
affected Participant and the Company.
(ii) The
Committee shall make such proportionate adjustments, if any, as it in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the
aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 and 3.3).
(c) All
adjustments under this Section 11 shall be made (i) in a manner that does not cause a modification to any Awards outstanding on the date of such
adjustment within the meaning of Section 409A of the Code and the regulations or published guidance thereunder, (ii) with respect to any Award intended as Qualified Performance-Based
Compensation consistent with the requirements of Section 162(m) of the Code; and (iii) with respect to any Incentive Stock Option consistent with the requirements of Section 424
of the Code.
(d) In
the event of any transaction or event described in Section 11.1(a), an Equity Restructuring or any unusual or nonrecurring transactions or events affecting the
Company, any affiliate of the Company, or the financial statements of the Company or any affiliate (including without limitation any Change in Control), or of changes in applicable laws, regulations
or accounting principles, and whenever the Committee determines that action is appropriate in order to prevent the dilution or enlargement of the benefits or potential benefits intended to be made
available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles, the Committee, in
its sole discretion and on such terms and conditions as it deems appropriate, either by amendment of the terms of any outstanding Awards or by action taken prior to the occurrence of such transaction
or event and either automatically or upon the Participant's request, is hereby authorized to take any one or more of the following actions:
(i) To
provide for either (A) termination of any such Award in exchange for an amount of cash and/or other property, if any, equal to the amount that would have been
attained upon the exercise of such Award or realization of the Participant's rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this
Section 11.1(b) the Committee 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 (B) the replacement of such Award with other rights or property selected by the Committee in its sole discretion;
(ii) To
provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options,
rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; and
(iii) To
make adjustments in the number and type of shares of Stock (or other securities or property) subject to outstanding Awards, and in the number and kind of
outstanding Restricted Stock or Deferred Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding options, rights and awards and
options, rights and awards which may be granted in the future;
(iv) To
provide that such Award shall be exercisable or payable or fully vested with respect to all shares covered thereby, notwithstanding anything to the contrary in the
Plan or the applicable Award Agreement; and
(v) To
provide that the Award cannot vest, be exercised or become payable after such event.
11.2
Acceleration
Upon a Change in Control
. Notwithstanding Section 11.1, and except as may otherwise be provided in any applicable Award
Agreement or other written agreement entered into between the Company or any Subsidiary or affiliate and a Participant, if a Change in Control occurs and a Participant's Awards are not
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converted,
assumed, or replaced by a successor entity, then immediately prior to the Change in Control such Awards shall become fully exercisable and all forfeiture restrictions on such Awards shall
lapse. Upon, or in anticipation of, a Change in Control, the Committee may cause any and all Awards outstanding hereunder to terminate at a specific time in the future, including but not limited to
the date of such Change in Control, and shall give each Participant the right to exercise such Awards during a period of time as the Committee, in its sole and absolute discretion, shall determine or
the right to receive the consideration that stockholders of the Company would receive in connection with such Change in Control less any exercise price or base price for any Award. In the event that
the terms of any agreement between the Company or any Subsidiary or affiliate and a Participant contains provisions that conflict with and are more restrictive than the provisions of this
Section 11.2, this Section 11.2 shall prevail and control and the more restrictive terms of such agreement (and only such terms) shall be of no force or effect.
11.3
No
Other Rights
. Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or
consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no issuance 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 of shares of Stock subject to an
Award or the grant or exercise price of any Award.
ARTICLE 12
ADMINISTRATION
12.1
Committee
. The
administrator of the Plan shall be the Committee, which shall consist solely of two or more members of the Board each of whom
is a Non-Employee Director, and with respect to awards that are intended to be Performance-Based Awards, an "outside director" within the meaning of Section 162(m) of the Code;
provided
that any
action taken by the Committee shall be valid and effective, whether or not members of the Committee at the time of such action are
later determined not to have satisfied the requirements for membership set forth in this Section 12.1 or otherwise provided in any charter of the Committee. Notwithstanding the foregoing:
(a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to all Awards granted to Independent Directors and for
purposes of such Awards the term "Committee" as used in this Plan shall be deemed to refer to the Board and (b) the Committee may delegate its authority hereunder to the extent permitted by
Section 12.5. In addition, in its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to
matters which are required to be determined in the sole discretion of the Committee under Rule 16b-3 of the Exchange Act or Section 162(m) of the Code, or any regulations or rules issued
thereunder. Appointment of Committee members shall be effective upon acceptance of appointment. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan.
Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may only be filled by the Board.
12.2
Action
by the Committee
. A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting
at which a quorum is present, and acts approved in writing by a majority of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to,
in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or of any Subsidiary, the Company's independent certified
public accountants, or any executive compensation consultant or other professional retained by the Company or any Subsidiary to assist in the administration of the Plan.
12.3
Authority
of Committee
. Subject to any specific designation in the Plan, the Committee has the exclusive power, authority and discretion to:
(a) Designate
Participants to receive Awards;
(b) Determine
the type or types of Awards to be granted to each Participant;
(c) Determine
the number of Awards to be granted and the number of shares of Stock to which an Award will relate;
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(d) Determine
the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any
reload provision, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers
thereof, any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Committee in its sole discretion determines;
provided, however
,
that the Committee shall not have the authority to accelerate the vesting or waive the forfeiture of any Performance-Based Awards;
(e) Determine
whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other
Awards, or other property, or an Award may be canceled, forfeited, or surrendered;
(f) Prescribe
the form of each Award Agreement, which need not be identical for each Participant;
(g) Decide
all other matters that must be determined in connection with an Award;
(h) Establish,
adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;
(i) Interpret
the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; and
(j) Make
all other decisions and determinations that may be required pursuant to the Plan or as the Committee deems necessary or advisable to administer the Plan.
12.4
Decisions
Binding
. The Committee's interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement and all
decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.
12.5
Delegation
of Authority
. To the extent permitted by and subject to the provisions of applicable law, the Committee may from time to time
delegate to a committee of one or more members of the Board or one or more officers of the Company the authority to grant or amend Awards to Participants other than (a) senior executives of the
Company who are subject to Section 16 of the Exchange Act, (b) Covered Employees, or (c) officers of the Company (or members of the Board) to whom authority to grant or amend
Awards has been delegated hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation, and the Committee may at any
time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 12.5 shall serve in such capacity at the pleasure of the Committee.
ARTICLE 13
EFFECTIVE AND EXPIRATION DATE
13.1
Restatement
Effective Date
. This amendment and restatement of the Plan
will be effective as of the date on which it is approved by the Company's stockholders
(the
"Restatement Effective Date
")
.
13.2
Expiration
Date
. The Plan will expire on, and no Incentive Stock Option or other Award may be granted pursuant to the Plan
after
, the tenth anniversary of the date this amendment and restatement of the Plan is approved by the Board
July 10, 2021
.
Any Awards that are outstanding at the expiration of the Plan shall remain in force according to the terms of the Plan and the applicable Award Agreement.
ARTICLE 14
AMENDMENT, MODIFICATION, AND TERMINATION
14.1
Amendment,
Modification, And Termination
. With the approval of the Board, at any time and from time to time, the Committee may terminate,
amend or modify the Plan;
provided, however
, that (a) to the extent necessary and desirable to comply with any applicable law, regulation, or
stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required, and (b) stockholder approval is required for any
amendment to the Plan that (i) increases the number of shares available under the Plan (other than any adjustment as provided by Article 11), (ii) reduces the price per share of
any
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outstanding
Option or Stock Appreciation Right granted under the Plan or takes any action prohibited under Section 10.10, or (iii) cancels any Option or Stock Appreciation Right in
exchange for cash or another Award when the Option or Stock Appreciation Right price per share exceeds the Fair Market Value of the underlying shares of Stock.
14.2
Awards
Previously Granted
. No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award
previously granted pursuant to the Plan without the prior written consent of the Participant.
ARTICLE 15
GENERAL PROVISIONS
15.1
No
Rights to Awards
. No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and neither
the Company nor the Committee is obligated to treat Eligible Individuals, Participants or any other persons uniformly.
15.2
No
Stockholders Rights
. Except as otherwise provided herein, a Participant shall have none of the rights of a stockholder with respect to
shares of Stock covered by any Award until the Participant becomes the record owner of such shares of Stock.
15.3
No
Right to Employment or Services
. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the
Company or any Subsidiary to terminate any Participant's employment or services at any time, nor confer upon any Participant any right to continue in the employ or service of the Company or any
Subsidiary.
15.4
Unfunded
Status of Awards
. The Plan is intended to be an "unfunded" plan for incentive compensation. With respect to any payments not yet
made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company
or any Subsidiary.
15.5
Indemnification
. To
the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified and
held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or
proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him
or her in satisfaction of judgment in such action, suit, or proceeding against him or her;
provided
he or she gives the Company an opportunity, at its
own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled pursuant to the Company's Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
15.6
Relationship
to other Benefits
. No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any
pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except to the extent otherwise expressly provided in writing in such other
plan or an agreement thereunder.
15.7
Expenses
. The
expenses of administering the Plan shall be borne by the Company and its Subsidiaries.
15.8
Titles
and Headings
. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall control.
15.9
Fractional
Shares
. No fractional shares of Stock shall be issued and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares of Stock or whether such fractional shares of Stock shall be eliminated by rounding up or down as appropriate.
15.10
Limitations
Applicable to Section 16 Persons
. Notwithstanding any other provision of the Plan, the Plan, and any Award
granted or awarded to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under
Section 16 of the Exchange
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Act
(including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards
granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
15.11
Government
and Other Regulations
. The obligation of the Company to make payment of awards in Stock or otherwise shall be
subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register pursuant to the Securities
Act of 1933, as amended, any of the shares of Stock paid pursuant to the Plan. If the shares paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the
Securities Act of 1933, as amended, the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption.
15.12
Section 409A
. To
the extent that the Committee determines that any Award granted under the Plan is subject to
Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan
and Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without
limitation any such regulations or other guidance that may be issued after the adoption of the Plan. Notwithstanding any provision of the Plan to the contrary, in the event that following the adoption
of the Plan the Committee determines that any Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may
be issued after the adoption of the Plan), the Committee may adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies
and procedures with retroactive effect), or take any other actions, that the Committee determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code
and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related Department of
Treasury guidance.
15.13
Governing
Law
. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State
of California.
*****
I
hereby certify that the foregoing Plan was duly adopted by the Board of Directors of AeroVironment, Inc. on
July 11
,
2011
2016
.
*****
I
hereby certify that the foregoing Plan was approved by the stockholders of AeroVironment, Inc. on
September 29
,
2011
2016
.
|
|
|
|
|
/s/ Leslie R. Ravestein
Corporate Secretary
|
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ANNUAL MEETING OF STOCKHOLDERS OF AEROVIRONMENT, September 30, 2016 INC. INTERNET - Access www.voteproxy.com and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call. Vote online/phone until 11:59 PMESTthe day before the meeting. MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible. INPERSON - You may vote your shares in person by attending the Annual Meeting. GO GREEN - e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.amstock.com to enjoy online access. Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet. 20330300000000001000 2 093016 firm: O Charles Thomas Burbage FOR ALL NOMINEES company's Amended and Restated 2006 Equity Incentive SHALL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE changes to the registered name(s) on the account may not be submitted via Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. A VOTE FOR EACH OF THE NOMINEES IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3 IS RECOMMENDED BY THE BOARD OF DIRECTORS. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x Proposal 1. To elect the board of directors' three nominees as directors: NOMINEES: O Charles R. Holland WITHHOLD AUTHORITYO Edward R. Muller FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish to withhold, as shown here: FOR AGAINST ABSTAIN Proposal 2. To ratify the selection of Ernst & Young LLP as the company's independent registered public accounting Proposal 3. To approve an amendment and restatement of the Plan: The undersigned hereby revokes any other proxy to vote at the annual meeting, and hereby ratifies and confirms all that said attorneys and proxies, and each of them, may lawfully do by virtue hereof. With respect to matters not known at the time of the solicitation hereof, said proxies are authorized to vote in accordance with their best judgment. THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH ABOVE OR, TO THE EXTENT NO CONTRARY DIRECTION IS INDICATED, WILL BE TREATED AS A GRANT OF AUTHORITY TO VOTE FOR EACH OF THE NOMINEES IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY CONFERS AUTHORITY TO AND PROXIES. The undersigned acknowledges receipt of a copy of the notice of annual meeting and accompanying proxy statement dated August 16, 2016 relating to the annual meeting. MARKX HERE IF YOU PLAN TO ATTEND THE MEETING. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that this method. Signature of Stockholder Date: Signature of StockholderDate: NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, Proxy Statement, Proxy Card are available at http://investor.avinc.com/financials.cfm COMPANY NUMBER ACCOUNT NUMBER PROXY VOTING INSTRUCTIONS
- 0 AEROVIRONMENT, INC. PROXY FOR ANNUAL MEETING OF STOCKHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned, a stockholder of AeroVironment, Inc., a Delaware corporation (the "Company"), hereby nominates, constitutes and appoints Wahid Nawabi and Douglas E. Scott, or either one of them, as proxy of the undersigned, each with full power of substitution, to attend, vote and act for the undersigned at the annual meeting of stockholders of the Company, to be held on September 30, 2016, and any postponements or adjournments thereof, and in connection therewith, to vote and represent all of the shares of the Company which the undersigned would be entitled to vote with the same effect as if the undersigned were present, as follows: (Continued and to be signed on the reverse side) 14475 1.1