Super Micro Computer, Inc 8-K, filed Nov 20, 2023
Super Micro Computer, Inc. (SMCI)
8-K
2023-11-20
For: 2023-11-14
View Original
Added on
April 10, 2026
About this 8-K
Super Micro Computer, Inc filed this 8-K on November 20, 2023, reporting on events of November 14, 2023.
Items reported
- Item 5.02: Director or officer change, or executive pay
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________________________
FORM 8-K
__________________________________________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 14, 2023
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
(Address of principal executive offices, including Zip Code)
Registrant’s telephone number, including area code: (408 ) 503-8000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. | ||||
Super Micro Computer, Inc. (the “Company,” “we,” “us,” or “our”) granted to Mr. Charles Liang, our chief executive officer, a new long-term performance-based option award (the “2023 Award”) to purchase up to 500,000 shares of the Company’s common stock which may vest in five equal tranches. Each of the five tranches vests if, and only if, one specified revenue goal (each, a “Revenue Goal”) and one specified stock price goal (each, a “Stock Price Goal”) is achieved. Revenue Goals must be achieved by December 31, 2028 (the “Revenue Performance Period”) and Stock Price Goals must be achieved by March 31, 2029 (the “Stock Price Performance Period”). The 2023 Award has an exercise price equal to $450.00 (the “Exercise Price”), representing a premium of approximately 53% to the closing stock price reported on NASDAQ on November 14, 2023. The 2023 Award will expire on November 14, 2033.
In an effort to further incentivize Mr. Liang’s continued long-term performance, the Compensation Committee designed the 2023 Award to be a challenging long-term incentive for future performance, and the Compensation Committee noted in particular that the performance thresholds were challenging and could take years to achieve. In addition, the Compensation Committee sought to ensure that the 2023 Award would further align Mr. Liang’s interests with those of the Company’s stockholders over the long-term. In connection with the grant of the 2023 Award, Mr. Liang will continue to receive a de minimis salary of $1 per annum (or such other non-waivable minimum wage requirement, if deemed advisable) and no cash bonuses through the earlier of (a) the date all of the tranches under the 2023 Award shall have vested and (b) March 31, 2029. Mr. Liang must also remain as the Company’s CEO (or such other position with the Company as Mr. Liang and the Board may agree) at the time each goal is met in order for the corresponding tranche to vest. This ensures Mr. Liang’s active leadership of the Company over the long-term.
The following table sets forth the Revenue Goals which must be achieved under the 2023 Award by the end of the Revenue Performance Period of December 31, 2028:
Revenue Goals(1) | Absolute Change From Revenue Reported for the Fiscal Year Ended June 30, 2023(2)(3) | ||||
$13.0 billion | 82% | ||||
$15.0 billion | 111% | ||||
$17.0 billion | 139% | ||||
$19.0 billion | 167% | ||||
$21.0 billion | 195% | ||||
(1)Revenue means the Company’s total revenues, as reported by the Company in its financial statements on Forms 10-Q and 10-K filed with the SEC (but without giving effect to any rounding used in reporting the amounts in Form 10-Q and Form 10-K), for the previous four consecutive fiscal quarters of the Company.
(2)Revenue reported in the Company’s Form 10-K for the fiscal year ended June 30, 2023 was $7,123.5 million.
(3)Rounded to the nearest whole percentage.
The following table sets forth the Stock Price Goals which must be achieved under the 2023 Award by the end of the Stock Price Performance Period of March 31, 2029:
Stock Price Goals(1) | Absolute Change in Stock Price from Grant Date Stock Price(2)(3) | Absolute Change in Stock Price From $450 Exercise Price(3) | ||||||
$450 | 53% | 0% | ||||||
$600 | 104% | 33% | ||||||
$750 | 155% | 67% | ||||||
$900 | 206% | 100% | ||||||
$1,100 | 274% | 144% | ||||||
(1)Sustained stock price performance is required for each Stock Price Goal to be met, other than in connection with a change in control. For each Stock Price Goal to be met, the trailing sixty trading day average stock price must equal or exceed the Stock Price Goal.
(2)Utilizes closing stock price of $293.87 on November 14, 2023.
(3)Rounded to the nearest whole percentage.
Each of the five tranches vests only when both the applicable Revenue Goal and Stock Price Goal for such tranche are certified by the Compensation Committee as having been met.
A Revenue Goal and a Stock Price Goal that are matched together can be achieved at different points in time and vesting will occur at the later of the achievement certification dates for such Revenue Goal and Stock Price Goal. Subject to any applicable clawback provisions, policies or other forfeiture terms described in the 2023 Award, once a goal is achieved, it is forever deemed achieved for determining the vesting of a tranche.
There is no full acceleration of vesting of the 2023 Award upon a “change in control.” However, in connection with a change in control, whether any unvested tranches vest, will depend solely on the Company’s attainment of the Stock Price Goals (and the Revenue Goals will be disregarded). In addition, for purposes of determining whether the Stock Price Goal has been achieved, the stock price shall equal the greater of (i) the most recent closing price per share immediately prior to the effective time of such change in control, or (ii) the per share common stock price (plus the per share of common stock value of any other consideration) received by the stockholders in the change in control.
The 2023 Award is being granted under the Company’s 2020 Equity and Incentive Compensation Plan (the “2020 Equity Plan”), and is memorialized in a Notice of Grant of Performance Based Stock Option to Mr. Charles Liang (the “Grant Notice”) and Non-qualified Stock Option Award Agreement associated with the Grant Notice (the “Award Agreement”) that includes, among other terms and conditions, a restriction on the sale of any shares issued upon exercise of the option until November 14, 2026.
The foregoing summary of the terms and conditions of the 2023 Award set forth above do not purport to be complete and are qualified in their entirety by reference to the provisions of the 2020 Equity Plan previously filed with the Securities and Exchange Commission, as well as the form of Grant Notice and Award Agreement associated with the Grant Notice which are attached Exhibits 10.1 and 10.2 to this Current Report on Form 8-K and incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits | ||||
| (d) Exhibits | ||||||||
| Exhibit Number | Description | |||||||
10.1 † | ||||||||
| 10.2 | ||||||||
| 104 | The cover page from this Current Report on Form 8-K, formatted in Inline XBRL | |||||||
† Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10).
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SUPER MICRO COMPUTER, INC. | ||||||||||||||||||||||||||
Date: November 20, 2023 | By: | /s/ Charles Liang | ||||||||||||||||||||||||
| President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer) | ||||||||||||||||||||||||||
Certain identified information has been omitted from this document because it is not material and is the type that the registrant treats as private and has been marked with "[ ]" to indicate where omissions have been made.
| NOTICE OF GRANT OF PERFORMANCE-BASED STOCK OPTION | Super Micro Computer, Inc. ID: 77-0353939 980 Rock Ave. San Jose, CA 95131 (408) 503-8000 | ||||
Charles Liang [2906 Belmont Terrace Fremont, CA, 94539] | ||
You (“you” or the “Grantee) have been granted Option Rights to purchase shares of Common Stock (the “Option”) of Super Micro Computer, Inc. subject to the terms and conditions in the Super Micro Computer, Inc. 2020 Equity and Incentive Compensation Plan (the “Plan”) and the attached Nonqualified Stock Option Award Agreement (together with this Notice of Grant of Performance-Based Stock Option, the “Agreement”), as follows:
| Date of Grant: | November 14, 2023 | ||||
| Option Exercise Price Per Share: | $450.00 | ||||
| Total Number of Shares of Common Stock Covered by the Option: | 500,000 | ||||
| Total Option Exercise Price: | $225,000,000 | ||||
| Type of Option: | Nonqualified | ||||
| Expiration Date: | November 14, 2033 | ||||
I.Vesting Terms:
a.The Option is a performance-based stock option award and shall have the opportunity to vest and become exercisable (unless earlier terminated as provided in the Nonqualified Stock Option Award Agreement) upon the satisfaction of both Stock Price Milestones and Revenue Milestones, as defined and described in more detail below, prior to the end of the applicable Performance Period (as defined below), in each case, so long as the Grantee continues as the Chief Executive Officer of the Company (or in such other position with the Company or a Subsidiary as the Grantee and the Board may agree) through the applicable date of Certification (as defined below).
b.As detailed in Table 1, the Option is divided into five (5) vesting tranches (each a “Tranche”), with each Tranche representing a portion of the Option covering that number of shares of Common Stock specified next to the applicable Tranche number in Table 1 below. Each Tranche shall vest upon (i) satisfaction of the Stock Price Milestone set forth next to the applicable Tranche in Table 1 below (each, a “Stock Price Milestone”) and (ii) the achievement of the Revenue Milestone set forth next to the applicable Tranche in Table 1 below (each, a “Revenue Milestone”) prior to the end of the applicable Performance Period, all subject to the Grantee continuing to serve as the Chief Executive Officer of the Company (or in such other position with the Company or a Subsidiary as the Grantee and the Board may agree) through the date the Committee determines, approves and certifies that the requisite vesting conditions for the applicable Tranche have been satisfied in accordance with the determination process outlined in Section II and Section III below (each such event, a “Certification”). Any date on which the Committee reviews and determines whether requisite vesting conditions have been met is referred to herein as a “Determination Date.” Separate Certifications may occur on separate Determination Dates with respect to the achievement of each of a Stock Price Milestone and a Revenue Milestone that are required for the vesting of any particular Tranche, provided that the vesting date of such Tranche will be the date on which the latter Certification necessary in order for the Tranche to vest is completed. The Committee shall, periodically and upon request of the Grantee, assess whether the vesting requirements have been satisfied.
c.Notwithstanding anything herein to the contrary, in order for any Tranche to vest (including in the event of a Change in Control), (i) the satisfaction of the Stock Price Milestone for such Tranche must occur on or prior to March 31, 2029 and (ii) the satisfaction of the Revenue Milestone for such Tranche must occur on or prior to December 31, 2028 (or a Change in Control must have been consummated by such date) (the Date of Grant through the date referred to in (i) or (ii), as applicable, the “Performance Period”). Promptly following the end of the Performance Period applicable to the Stock Price Milestone, the Committee shall assess whether any vesting requirements have been satisfied as of March 31, 2029 and provide Certification of the same. Any Tranche of the Option that has not been satisfied as of such Certification will immediately be forfeited for no consideration and will never become vested, and the Option shall expire as to the shares subject to such unvested Tranche, which shares shall again be available for issuance under the Plan in accordance with the terms of the Plan.
d.The maximum term of the Option shall be ten (10) years so that absent earlier termination as provided herein, the Option shall expire automatically on the Expiration Date specified above (without regard to whether any or all of the Option vested or whether the Grantee exercised any vested part of the Option).
Table 1 – Vesting Requirements for Performance-Based Option
The following table sets forth the number of shares of Common Stock covered by the Option that shall become exercisable upon satisfaction of the Stock Price Milestones and Revenue Milestones during the applicable Performance Period in accordance with the terms set forth in this Agreement:
| Tranche # | Number of Shares of Common Stock Subject to Option | Vesting Requirements 1 | ||||||||||||||||||||||||||||||
Stock Price Milestones 2 | Revenue Milestones 2 | |||||||||||||||||||||||||||||||
1 | 100,000 | $450.00 | $13,000,000,000 | |||||||||||||||||||||||||||||
2 | 100,000 | $600.00 | $15,000,000,000 | |||||||||||||||||||||||||||||
3 | 100,000 | $750.00 | $17,000,000,000 | |||||||||||||||||||||||||||||
4 | 100,000 | $900.00 | $19,000,000,000 | |||||||||||||||||||||||||||||
5 | 100,000 | $1,100.00 | $21,000,000,000 | |||||||||||||||||||||||||||||
1 | Subject to other terms of this Agreement, in order for a particular Tranche to vest, both the Stock Price Milestone set forth next to such Tranche and the Revenue Milestone for such Tranche must be achieved prior to the end of the applicable Performance Period. Achievement of the vesting requirements for each Tranche shall be determined, approved and certified by the Committee, in its sole, good faith discretion. Subject to any applicable clawback provisions, policies or other terms herein, once a milestone is achieved, it is forever deemed achieved for determining the vesting of a Tranche. For example, assume that after the first two Tranches have vested, the Committee determines that the Stock Price has exceeded $750.00, but the Company has not yet achieved the $17,000,000,000 Revenue Milestone. If the Committee later determines that the Company has achieved $17,000,000,000 in Revenue, and the Grantee continues to serve as the Chief Executive Officer of the Company (or in such other position with the Company or a Subsidiary as the Grantee and the Board may agree) through such Certification, then Tranche 3 will become vested, even if the Stock Price as of the date of such Certification has dropped below $750.00. In addition, for purposes of clarity, more than one Tranche may vest simultaneously upon a Certification, provided that the requisite Stock Price Milestones and Revenue Milestones for each Tranche have been met. For example, assume that none of the Tranches has vested, and upon a Certification, the Stock Price is determined to be $600.00 and Revenue of $15,000,000,000 had previously been met. As of the date of such Certification, and subject to the Grantee continuing to serve as the Chief Executive Officer of the Company (or in such other position with the Company or a Subsidiary as the Grantee and the Board may agree) through such date, both Tranches 1 and 2 will become vested. | ||||
2 | The Stock Price Milestones and Revenue Milestones are subject to adjustment pursuant to the terms of the Nonqualified Stock Option Award Agreement relating to certain corporate transactions. See Section V. | ||||
II.Determination of Stock Price Milestone
For purposes of this Option, “Stock Price” on a Determination Date refers to the “60-day Stock Price” determined in accordance with the following:
a.A trading day refers to a day on which the primary stock exchange or national market system on which the Common Stock trades (e.g., the Nasdaq Global Select Market) is open for trading.
b.The Company’s daily stock price for a particular trading day refers to the closing price per share of Common Stock as of the close of such trading day, as reported by The Nasdaq Stock Market (“Nasdaq”) (or other reliable source selected by the Committee if Nasdaq is not reporting a closing price for that day) (such price, the “Daily Stock Price”).
c.The “60-day Stock Price” is equal to (a) the sum of the Daily Stock Price of the Company for each of the sixty (60) trading days immediately prior to and including the Determination Date, divided by (b) 60.
In order for the Stock Price Milestone set forth in Table 1 for any particular Tranche above to be met, the 60-day Stock Price must equal or exceed the value of such applicable Stock Price Milestone on any Determination Date.
III.Determination of Revenue Milestone
For purposes of this Option, “Revenue” on a Determination Date shall mean the Company’s total revenues, as reported by the Company in its financial statements on Forms 10-Q and 10-K filed with the U.S. Securities and Exchange Commission (“SEC”), for the previous four (4) consecutive fiscal quarters of the Company. For the avoidance of doubt, for purposes of this Agreement, Revenue shall be such amount without application of any rounding used in reporting the amount in the Company’s Form 10-Q or 10-K, as applicable.
IV.Vesting Determination upon a Change in Control of the Company
a.Notwithstanding Sections I, II and III above, in the event of a Change in Control, for purposes of determining whether any Tranches vest on or as a result of such Change in Control, the Revenue Milestones shall be disregarded and only the Stock Price Milestones shall be required to be met for the vesting of Tranches.
b.In the event of a Change of Control, the 60-day Stock Price shall be disregarded and the Stock Price shall equal the greater of (i) the most recent closing price per share of Common Stock immediately prior to the effective time of such Change in Control, as reported by Nasdaq (or other reliable source selected by the Committee if Nasdaq is not reporting a closing price for that day), or (ii) the per share of Common Stock price (plus the per share of Common Stock value of any other consideration) received by the Stockholders in the Change in Control.
c.To the extent that any Tranche has not vested as of immediately before the effective time of the Change in Control and otherwise does not vest as a result of the Change in Control, such unvested Tranche will be forfeited automatically as of the effective time of the Change in Control and never shall become vested and the Option shall expire as to the shares subject to such unvested Tranche, which shares shall again be available for issuance under the Plan in accordance with the terms of the Plan.
V.Milestone Adjustments in the Event of Certain Corporate Transactions
a.Milestone Adjustments for Acquisitions. Following the closing of an Acquisition in which the Revenue of Target is greater than the Revenue Threshold, any and all Revenue Milestones that are unachieved as of immediately before the closing of such Acquisition will be increased as follows: for any Determination Date in the first fiscal quarter following the quarterly period that includes such Acquisition (the “Post-Acquisition Quarterly Period”), the Revenue Milestones will be increased by a dollar amount equal to 25% of the Revenue of Target applicable to such Acquisition; for any Determination Date in the second fiscal quarter following the Post-Acquisition Quarterly Period, the Revenue Milestones will be increased by a dollar amount equal to 50% of the Revenue of Target applicable to such Acquisition; for any Determination Date in the third fiscal quarter following the Post-Acquisition Quarterly Period, the Revenue Milestones will be increased by a dollar amount equal to 75% of the Revenue of Target applicable to such Acquisition; and for any Determination Date in the fourth fiscal quarter following the Post-Acquisition Quarterly Period or during the remainder of the term of the Option, the Revenue Milestones will be increased by a dollar amount equal to 100% of the Revenue of Target applicable to such Acquisition. Notwithstanding the foregoing, to the extent that, following such Acquisition, the Revenue of Target is otherwise included in the calculation of “Revenue” as provided in Section III above, then the Revenue Milestone shall be immediately increased by a corresponding amount, but without duplication of any increases provided in the previous sentence.
b.Milestone Adjustments for Spin-Offs. In the event of a spin-off involving the Company, the Committee may make such adjustments to the terms and provisions of this Option in accordance with Section 9 of the Nonqualified Stock Option Award Agreement.
VI.Termination Period
a.If the Grantee ceases to be the Chief Executive Officer (or serve in such other position with the Company or a Subsidiary as the Grantee and the Board may agree) for any reason, the Committee shall promptly assess whether any vesting requirements have been satisfied as of the Determination Date on or prior to the date the Grantee ceases to be the Chief Executive Officer (or serve in such other position, if applicable) and provide Certification of the same, effective as of the date the Grantee ceases to be the Chief Executive Officer (or serve in such other position, if applicable).
b.If the Grantee ceases to be the Chief Executive Officer (or serve in such other position with the Company or a Subsidiary as the Grantee and the Board may agree) for any reason, any portion of this Option that has not vested by the date of Grantee’s cessation as the Chief Executive Officer (or such other position, as applicable) will remain outstanding until the date of such final Certification specified in the immediately preceding paragraph (but in no event later than the Expiration Date) solely for purposes of such final Certification, and any such portion of the Option that fails to vest upon such final Certification will be forfeited automatically and never shall become vested and the Option shall expire as to the shares subject to such portion, which shares shall again be available for issuance under the Plan in accordance with the terms of the Plan. If, upon the Grantee’s cessation as the Chief Executive Officer (or such other position, as applicable) the Grantee continues as an employee of the Company, and so long as the Grantee continues as an employee of the Company, any vested and unexercised portion of the Option may be exercised until the Expiration Date of the Option, unless terminated earlier in accordance with Section 4 of the Nonqualified Stock Option Award Agreement.
c.Notwithstanding the forgoing, this Option may expire other than as provided in this Section VI as provided in Section 4 of the Nonqualified Stock Option Award Agreement.
VII.Holding Period
a.During the Grantee’s lifetime, except as permitted under a cashless exercise in accordance with Section 6(b)(i)(b)(iii) of the Nonqualified Stock Option Award Agreement and to satisfy tax withholding obligations in accordance with Section 10 of the Nonqualified Stock Option Award Agreement, the Grantee shall not sell, transfer or dispose of the shares of Common Stock acquired upon exercise of the Option until November 14, 2026; provided, however, the Grantee may conduct transactions that involve merely a change in the form in which the Grantee owns such shares of Common Stock (e.g., transfer of shares of Common Stock to an inter vivos trust for which the Grantee is the beneficiary during the Grantee’s lifetime), or as permitted by the Committee consistent with the Company’s internal policies.
VIII.Miscellaneous
a.By Grantee’s acceptance of this Agreement either electronically through the electronic acceptance procedure established by the Company or through a written acceptance delivered to the Company in a form satisfactory to the Company, Grantee agrees that this Option is granted under and governed by the terms and conditions of the Plan, this Notice and the Nonqualified Stock Option Award Agreement, attached hereto, all of which are made a part of this document. Grantee confirms that he has reviewed this Agreement in its entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of the Agreement. Grantee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions relating to the Agreement. Participant further agrees to notify the Company upon any change in the residence address indicated above.
b.Nothing in this Notice, the attached Nonqualified Stock Option Award Agreement or the Plan confers upon you any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate your employment or other service at any time.
c.Definitions. All capitalized terms in this Notice shall have the meaning assigned to them this Notice or in the Nonqualified Stock Option Award Agreement; provided, however, if a capitalized term is not defined in either this Notice or the Nonqualified Stock Option Award Agreement, then it will have the meaning assigned to it in the Plan.
In witness whereof, Super Micro Computer, Inc. has caused this Agreement to be executed on its behalf by its duly-authorized officer on the day and year first indicated above.
Super Micro Computer, Inc.
By: ____________________________________
David Weigand, CFO
Agreed and accepted :
Grantee: ________________________________
Charles Liang
SUPER MICRO COMPUTER, INC.
NONQUALIFIED STOCK OPTION AWARD AGREEMENT
Super Micro Computer, Inc., a Delaware corporation (the “Company”) has granted to the Grantee named in the Notice of Grant of Performance-Based Stock Option (the “Notice”) to which this Nonqualified Stock Option Award Agreement (the “Agreement”) is attached an award consisting of Option Rights to purchase shares of Common Stock (the “Option”) subject to the terms and conditions set forth in the Notice and this Agreement. The award has been granted pursuant to and shall in all respects be subject to the terms and conditions of the Super Micro Computer, Inc. 2020 Equity and Incentive Compensation Plan (the “Plan”).
1.Grant of Option. Subject to the terms and conditions of the Plan and the terms and conditions hereinafter set forth, pursuant to authorization under resolutions of the Committee, the Company hereby confirms to the Grantee the grant of the Option covering the number of shares of Common Stock set forth in the Notice, at the designated Option Exercise Price set forth in the Notice, which represents at least the Market Value per Share on the Date of Grant, as set forth in the Notice. The Option is not an Incentive Stock Option. The Option shall expire on the Expiration Date set forth in the Notice.
2.Vesting of Option. The Option (unless terminated as hereinafter provided) shall be exercisable in accordance with the vesting provisions set forth in the Notice. Shares of Common Stock scheduled to vest upon the occurrence of a certain condition will not vest in accordance with any of the provisions of this Agreement unless the Grantee has served continuously as the Chief Executive Officer of the Company (or in such other position with the Company or a Subsidiary as the Grantee and the Board may agree from time to time) from the Date of Grant until the date such vesting occurs.
3.Termination of the Option. The Option shall terminate and may no longer be exercised after the first to occur of (a) the close of business on the Expiration Date, or (b) the close of business on the last date for exercising the Option following termination of the Grantee’s Service as described in Section 4; provided, however, the Option may be subject to earlier termination as provided for in the Notice.
4.Effect of Termination of Service. In addition to the specific (and potentially earlier) termination and expiration provisions set forth in the Notice, the following termination and expiration provisions shall apply.
(a)Option Exercisability. Any unvested portion of the Option shall terminate immediately upon the Grantee’s termination of Service. Any vested portion of the Option may be exercised by the Grantee (or the Grantee’s guardian, legal representative, or estate, as applicable) after the Grantee’s termination of Service for any reason at any time prior to the first anniversary of the date on which the Grantee’s Service terminated, but in any event no later than the Expiration Date.
(b)Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of the Option within the applicable time period set forth in Section 4(a) is prevented by the provisions of Section 11, the Option shall remain exercisable until the later of (i) six (6) months after the date such exercise first would no longer be prevented by such provisions, or (ii) the end of the applicable time period under Section 4(a), but in any event no later than the Expiration Date. In addition, if, during the 60-day period prior to the Expiration Date, the Company does not have on file an effective registration statement under Form S-8, then the Grantee shall have the ability to “net exercise” the Option as described in Section 6(b)(i)(b)(ii) without regard to any Committee discretion or limitations provided in Section 6(b).
5.Effect of Change in Control. In the event of a Change in Control, subject to approval by the Committee, the surviving, continuing, successor, or purchasing entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of the Grantee, assume or continue in full force and effect the Company’s rights and obligations under all or any portion of the Option or substitute for all or any portion of the Option a substantially equivalent option with respect to the Acquiror’s stock. For purposes of this Section, the Option or any portion thereof shall be deemed assumed if, following the Change in Control, the Option confers the right to receive, subject to the terms and conditions of this Agreement, for each share of Common Stock subject to such portion of the Option immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Common Stock on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock).
6.Exercise and Payment of Option.
(a)Method of Exercise. To the extent exercisable, the Option may be exercised in whole or in part from time to time and shall be settled in shares of Common Stock by the Grantee giving electronic or written notice to the Company in a form authorized by the Company (the “Exercise Notice”). An electronic Exercise Notice must be digitally signed or authenticated by the Grantee in such manner as required by the Exercise Notice and transmitted to the Company or an authorized representative of the Company (including a third-party administrator designated by the Company). In the event that the Grantee is not authorized or is unable to provide an electronic Exercise Notice, the Option shall be exercised by a written Exercise Notice addressed to the Company, which shall be signed by the Grantee and delivered in person, by certified or registered mail, return receipt requested, by confirmed facsimile transmission, or by such other means as the Company may permit, to the Company, or an authorized representative of the Company (including a third-party administrator designated by the Company). Each Exercise Notice, whether electronic or written, must state the Grantee’s election to exercise the Option and the number of whole shares of Common Stock for which the Option is being exercised. Further, each Exercise Notice must be received by the Company prior to the termination of the Option as set forth in Section 3 and must be accompanied by full payment of the aggregate Option Exercise Price for the number of shares of Common Stock being purchased. The Option shall be deemed to be exercised upon receipt by the Company of such electronic or written Exercise Notice and the aggregate Option Exercise Price.
(b)Payment of Option Exercise Price.
(i)Forms of Consideration Authorized. Except as otherwise provided below, the Option Exercise Price shall be payable (a) in cash or by check acceptable to the Company or by wire transfer of immediately available funds; (b) if permitted by the Company and subject to the limitations set forth in Section 6(b)(ii), (i) by the actual or constructive transfer to the Company of shares of Common Stock owned by the Grantee having a value at the time of exercise equal to the Option Exercise Price, (ii) by a “net exercise” method as described in the Plan, or (iii) from the proceeds of sale through a bank or broker on a date satisfactory to the Company of some or all of the Common Stock acquired upon exercise of the Option; (c) by a combination of such methods of payment; or (d) by such other methods as may be approved by the Committee.
(ii)Limitations on Forms of Consideration. The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to
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establish, decline to approve or terminate any program or procedure providing for payment of the Option Exercise Price through any of the means described in Section 6(b)(i)(b) above, including with respect to the Grantee notwithstanding that such program or procedures may be available to others; provided, however, that the Company shall provide at least thirty (30) days’ advance notice to the Grantee in the event the Company decides to exercise such discretion in a manner that restricts or limits the Grantee’s possible methods for paying the Option Exercise Price; provided, further, that if an Acquiror in a Change of Control decides not to assume the Option, then the Grantee shall have the ability to “net exercise” the Option in connection with or following the consummation of such Change of Control without regard to any Committee discretion or limitations provided in this Section 6(b)(ii).
7.Option Not Transferable. Subject to Section 15 of the Plan, the Option is not transferable by the Grantee other than by will or the laws of descent and distribution, and in no event shall this award be transferred for value. Following the death of the Grantee, the Option, to the extent provided in Section 4, may be exercised by the Grantee’s legal representative or by any person empowered to do so under the deceased Grantee’s will or under the then applicable laws of descent and distribution.
8.No Dividends or Dividend Equivalents, No Rights as Stockholder. The Grantee shall not be entitled to dividends or dividend equivalents with respect to the Option or the shares of Common Stock underlying the Option. The Grantee will not have any rights as a stockholder with respect to the Common Stock subject to the Option prior to the date the Option (or a portion thereof) has been exercised.
9.Adjustments. The number and kind of shares of Common Stock covered by the Option and the other terms and conditions of the grant evidenced by this Agreement are subject to mandatory adjustment as provided in Section 11 of the Plan.
10.Tax Matters.
(a)If the Company is required to withhold federal, state, local or other national taxes or other amounts in connection with the Grantee’s right to receive Common Stock under this Agreement, it shall be a condition to the receipt of any such Common Stock (or the realization of any other benefit provided for under this Agreement) that the Grantee timely make arrangements satisfactory to the Company for payment of such taxes or other amounts (such amounts, collectively, the “Tax Withholdings”).
(b)Unless otherwise determined by the Committee, the Tax Withholdings shall be satisfied by the Company’s retention of a portion of the Common Stock issuable under this Agreement, by deducting from the Common Stock otherwise issuable to the Grantee upon exercise of the Option a number of whole shares of Common Stock having a fair market value, as determined by the Company as of the date on which the Tax Withholdings obligation arises, not in excess of the amount of such Tax Withholdings determined by the applicable minimum statutory withholding rates (unless higher withholding amounts would not result in adverse accounting implications for the Company and are authorized by the Committee, and the total amount withheld does not exceed the Grantee’s estimated tax obligations attributable to the exercise of the Option).
(c)If (x) the Grantee is not an officer or director for purposes of Section 16 of the Exchange Act or (y) the Grantee is an officer or director for purposes of Section 16 of the Exchange Act and obtains the express approval of the Committee at the time of
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exercise of the Option, then, alternatively, unless otherwise determined by the Company, the Grantee may, in addition to the withholding method set forth in Section 10(b), satisfy such Tax Withholdings (i) by paying the Company cash via personal check, wire transfer, or other means of immediate electronic payment, (ii) by the Grantee’s surrender of Common Stock that he has owned, or (iii) in accordance with procedures established by the Company providing for delivery by the Grantee to the Company or a broker approved by the Company of properly executed instructions, in a form permitted and approved by the Company, providing for the assignment to the Company of the proceeds of a sale with respect to Common Stock that he already owned or some or all of the Common Stock acquired upon exercise of the Option provided for under this Agreement, in each case subject to compliance with applicable law and the Company’s insider trading policy and procedures, provided in each case that the Grantee provides the Company adequate notice of such election in accordance with the Company’s then-applicable policies and procedures.
(d)Grantee has reviewed with Grantee’s own tax advisors the U.S. federal, state, local and non-U.S. tax consequences of this investment and the transactions contemplated by this Agreement. With respect to such matters, Grantee relies solely on such advisors and not on any statements or representations of the Company or any of its agents, written or oral. Grantee understands that Grantee (and not the Company) shall be responsible for Grantee’s own tax obligations and any other tax-related liabilities that may arise as a result of this investment or the transactions contemplated by this Agreement.
11.Compliance with Law; Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of shares of Common Stock upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state or other national law with respect to such securities. Notwithstanding any other provision of the Plan or this Agreement, the Option may not be exercised if the issuance of shares of Common Stock upon exercise would constitute a violation of any applicable federal, state or other national securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Common Stock may then be listed. In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. THE GRANTEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE GRANTEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of the Option, the Company may require the Grantee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
12.No Right to Future Awards; Right to Terminate Service. This Option award is a voluntary, discretionary award being made on a one-time basis and it does not constitute a commitment to make any future awards. No provision of this Agreement shall limit in any way whatsoever any right that the Company or a Subsidiary may otherwise have to terminate the Grantee’s Service at any time.
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13.Relation to Other Benefits. Any economic or other benefit to the Grantee under this Agreement or the Plan shall not be taken into account in determining any benefits to which the Grantee may be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained by the Company or a Subsidiary and shall not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan of the Company or a Subsidiary.
14.Amendments. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable to this Agreement; provided, however, that no amendment shall materially impair the rights of the Grantee with respect to the Common Stock or other securities covered by this Agreement without the Grantee’s consent. Notwithstanding the foregoing, the limitation requiring the consent of the Grantee to certain amendments shall not apply to any amendment that is deemed necessary by the Company to ensure compliance with Section 409A of the Code or Section 10D of the Exchange Act.
15.Severability. In the event that one or more of the provisions of this Agreement is invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions of this Agreement, and the remaining provisions of this Agreement shall continue to be valid and fully enforceable.
16.Clawback. Notwithstanding anything in this Agreement to the contrary, Grantee acknowledges and agrees that this Agreement and the award described herein (and any exercise or settlement thereof) are subject to the terms and conditions of the Company’s clawback policies as may be in effect from time to time, including specifically to implement Section 10D of the Exchange Act and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the Common Stock may be traded) (the “Compensation Recovery Policy”), and that, to the extent the Compensation Recovery Policy, by its terms, is applicable to the Option, relevant sections of this Agreement shall be (if necessary) deemed superseded by and subject to the terms and conditions of the Compensation Recovery Policy from and after the effective date thereof. Further, by accepting the Option covered by this Agreement, Grantee (a) consents to be bound by the terms of the Compensation Recovery Policy, as applicable, (b) agrees and acknowledges that Grantee is obligated to and will cooperate with, and will provide any and all assistance necessary to, the Company in any effort to recover or recoup any compensation or other amounts subject to clawback or recovery pursuant to the Compensation Recovery Policy and/or applicable laws, rules, regulations, stock exchange listing standards or other Company policy, and (c) agrees that the Company may enforce its rights under the Compensation Recovery Policy through any and all reasonable means permitted under applicable law as it deems necessary or desirable under the Compensation Recovery Policy.
17.Electronic Delivery. The Company may, in its sole discretion, deliver any documents related to the Option and the Grantee’s participation in the Plan, or future awards that may be granted under the Plan, by electronic means or request the Grantee’s consent to participate in the Plan by electronic means. The Grantee hereby consents to receive such documents by electronic delivery and, if requested, agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
18.Governing Law. This Agreement is made under, and shall be construed in accordance with the internal substantive laws of the State of Delaware and venue shall be exclusively in the applicable courts in Delaware, without giving effect to any principle of law that would result in the application of the law of any other jurisdiction.
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19.Successors and Assigns. Without limiting Section 7 hereof, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Grantee, and the successors and assigns of the Company.
20.Acknowledgement and Agreement. By electronically accepting the Notice, the Grantee: (a) acknowledges receipt of and represents that the Grantee has read and is familiar with the Notice, this Agreement, the Plan and a prospectus for the Plan prepared in connection with the registration with the Securities and Exchange Commission of the shares issuable pursuant to the award, (b) accepts the award subject to all of the terms and conditions of the Notice, this Agreement and the Plan and (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Notice, this Agreement or the Plan.
21.Counterparts. The Notice with this Agreement may be executed in one or more counterparts, all of which together shall constitute but one Agreement.
22.Relation to the Plan. In the event of any inconsistency between the provisions of this Agreement (including the Notice) and the Plan, this Agreement (and the Notice) shall govern.
23.Definitions. Capitalized terms used herein without definition shall have the meanings assigned to them in the Notice; provided however, that if any capitalized term used herein is not defined in either the Notice or this Agreement, it shall have the meaning assigned to it in the Plan. For the avoidance of doubt, if a capitalized term is defined in both the Plan and either the Notice or this Agreement, the definition in the Notice or this Agreement shall control. As used in this Agreement:
(a)“Acquisition” means any merger of a corporation or other entity with or into the Company, an acquisition by the Company of a corporation or other entity, or purchase by the Company of all or substantially all assets of a corporation or other entity.
(b) “Change in Control” means the occurrence of any of the following events:
(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either: (A) the then-outstanding Common Stock; or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (“Voting Shares”); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control: (w) any acquisition directly from the Company; (x) any acquisition by the Company; (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Subsidiaries; or (z) any acquisition by any Person pursuant to a transaction which complies with subsection (ii);
(ii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Common Stock and Voting Shares immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business
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Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions relative to each other as their ownership, immediately prior to such Business Combination, of the Common Stock and Voting Shares of the Company, as the case may be; or
(iii) Approval by the Stockholders of a complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, with respect to any particular transaction, the Company and the Grantee may mutually agree prior to the consummation of such transaction that it does not constitute a Change in Control for purposes of this Agreement.
(c) “Revenue of Target” means for each Acquisition completed during the term of the Option, the cumulative revenue (as determined under U.S. GAAP) of the Target (or, to the extent applicable, any predecessor to Target) for the four (4) consecutive fiscal quarters as of immediately prior to the closing date of such Acquisition. If such Target does not have four (4) fiscal quarters of operating history, the calculation will be annualized based on available quarterly financial data, as determined in good faith by the Committee.
(d)“Revenue Threshold” means a dollar amount equal to $250 million.
(e)“Securities Act” shall mean the Securities Act of 1933, as amended.
(f)“Service” shall mean the Grantee’s employment or service with the Company or a Subsidiary, whether as an employee, a Director or a consultant or similar individual who provides services to the Company or any Subsidiary that are equivalent to those typically performed by an employee (provided that such person satisfies the Form S-8 definition of “employee”). Unless otherwise provided by the Committee, the Grantee’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Grantee renders Service or a change in the Company or Subsidiary for which the Grantee renders Service, provided that there is no interruption or termination of the Grantee’s Service. Furthermore, the Grantee’s Service shall not be deemed to have been interrupted or terminated if the Grantee takes any military leave, sick leave, or other bona fide leave of absence approved by the Company. However, unless otherwise provided by the Committee, if any such leave taken by the Grantee exceeds ninety (90) days, then on the ninety-first (91st) day following the commencement of such leave the Grantee’s Service shall be deemed to have terminated, unless the Grantee’s right to return to Service is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, an unpaid leave of absence shall not be treated as Service for purposes of determining vesting under this Agreement. The Grantee’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the business entity for which the Grantee performs Service ceasing to be a Subsidiary. Subject to the foregoing, the Company, in its discretion, shall determine whether the Grantee’s Service has terminated and the effective date of and reason for such termination.
(g)“Stockholder” means an individual or entity that owns one or more voting securities of the Company.
(h)“Target” means any corporation or other entity acquired by the Company or merged with or into the Company, or from which all or substantially all assets of such corporation or other entity are acquired by the Company, in an Acquisition.
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