Teladoc Health, Inc 8-K, filed May 30, 2023
Teladoc Health, Inc. (TDOC)
About this 8-K
Teladoc Health, Inc filed this 8-K on May 30, 2023, reporting on events of May 25, 2023.
Items reported
- Item 5.02: Director or officer change, or executive pay
- Item 5.07: Shareholder vote results
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event
reported) May 30, 2023 (
(Exact name of registrant as specified in its charter)
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Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Equity Plan Approvals
The 2023 Annual Meeting of Stockholders (the “Annual Meeting”) of Teladoc Health, Inc. (the “Company”) was held on May 25, 2023. At the Annual Meeting, the Company’s stockholders approved the Teladoc Health, Inc. 2023 Incentive Award Plan (the “2023 Incentive Award Plan”), which provides for the issuance of up to 8,250,000 shares of the Company’s common stock, par value $0.001 (“Common Stock”), pursuant to awards granted under the 2023 Incentive Award Plan, plus the number of shares of the Company’s Common Stock remaining available for future grant under the Company’s prior plans as of the effective date of the 2023 Incentive Award Plan and the number of shares of the Company’s Common Stock issued under any of the Company’s prior plans as of the effective date that are thereafter forfeited, canceled, expire, terminated, otherwise lapsed or are settled in cash, in whole or in part, without the delivery of shares of Company’s Common Stock. The Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) may grant awards under the 2023 Incentive Award Plan of stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards, as well as performance compensation awards, or any combination of the foregoing. Employees, directors, officers, or consultants of the Company or its affiliates, or other individuals approved by the Compensation Committee, are eligible to participate in the 2023 Incentive Award Plan, including the Company’s chief executive officer, chief financial officer and other named executive officers. A description of the material terms of the 2023 Incentive Award Plan was included in the Company’s Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on, and distributed to its stockholders commencing on or about, April 11, 2023 in connection with the Annual Meeting (the “Proxy Statement”), and is incorporated by reference into this Item 5.02 of this Current Report on Form 8-K. The foregoing summary is qualified in its entirety by reference to the full text of the 2023 Incentive Award Plan, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
At the Annual Meeting, the Company’s stockholders also approved the proposal to amend the Teladoc Health, Inc. 2015 Employee Stock Purchase Plan, as amended (such amendment, the “ESPP Amendment”) to increase the number of shares of the Company’s Common Stock available for issuance thereunder by 3,000,000 shares, and to also remove the evergreen provision automatically increasing the number of shares under the plan and lowering the maximum percentage of compensation a participant may designate to purchase under the plan from 25% to 15%, in line with the Company’s administration of the Teladoc Health, Inc. 2015 Employee Stock Purchase Plan to maximize broad based share usage. A description of the material terms of the ESPP Amendment was included in the Company’s Proxy Statement and is incorporated herein by reference into this Item 5.02 of this Current Report on Form 8-K. The foregoing summary is qualified in its entirety by reference to the full text of the ESPP Amendment, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference.
Level 14 Severance Plan
On May 25, 2023, the Compensation Committee approved the Teladoc Health, Inc. Level 14 Severance Plan (the “Severance Plan”), effective June 1, 2023. Under the Severance Plan, certain employees of the Company and its subsidiaries, including certain of the Company’s named executive officers, who are not otherwise entitled to any severance pay or benefits or prior notice of employment termination (or pay in lieu of such prior notice) under any binding contract or agreement with the Company or any of its subsidiaries (each, an “Eligible Employee”), are eligible for payments and benefits in connection with a qualifying termination of employment.
Under the Severance Plan, in the event an Eligible Employee resigns for “Good Reason” (as defined in the Severance Plan) or is terminated by the Company or its subsidiaries without “Cause” (as defined in the Severance Plan), in each case, other than on the date of or within 12 months following a “Change of Control” (as defined in the Severance Plan) of the Company, such Eligible Employee will be eligible to receive (i) six months of continued base salary, (ii) any earned but unpaid annual bonus for the year prior to such Eligible Employee’s termination, (iii) up to six months of continued health insurance with premiums paid by the Company or a taxable payment equal to the cost of the health insurance premiums required to continue Company health insurance, and (iv) vesting of all of such Eligible Employee’s unvested equity and equity-based awards under any of the Company’s equity compensation programs subject to service-based vesting that are scheduled to vest in the following six months, with any performance-based awards remaining eligible to vest to the extent the performance conditions are satisfied during that six-month period.
The Severance Plan further provides that, in the event an Eligible Employee resigns for Good Reason or is terminated by the Company or its subsidiaries without Cause, in each case, on the date of or within 12 months following a Change of Control of the Company, such Eligible Employee will be eligible to receive (i) nine months of continued base salary, (ii) an additional lump-sum cash payment equal to 75% of such Eligible Employee’s target annual bonus, (iii) any earned but unpaid annual bonus for the year prior to such Eligible Employee’s termination, (iv) up to nine months of continued health insurance with premiums paid directly by the Company or a taxable payment equal to the cost of the health insurance premiums required to continue Company health insurance, and (v) vesting of all of such Eligible Employee’s unvested equity and equity-based awards under any of the Company’s equity compensation programs subject to service-based vesting, with any performance-based awards remaining eligible to vest to the extent the performance conditions are thereafter satisfied.
Any Eligible Employee’s receipt of severance payments and benefits is subject to such Eligible Employee’s timely execution and delivery of a release of claims against the Company. Furthermore, in the event that the Company or any subsidiary is obligated by law to pay severance pay, a termination indemnity, notice pay or the like, or if the Company or any subsidiary is obligated by law to provide advance notice of separation (a “Notice Period”), then any severance pay payable under the Severance Plan shall be reduced (including to zero) by the amount of any such severance pay, termination indemnity, notice pay or the like, as applicable, and by the amount of any compensation received during any Notice Period. The board of directors of the Company has reserved the right to modify or terminate the Severance Plan at any time, except that during the one-year period following a Change of Control, the Severance Plan may not be terminated and the Severance Plan may not be amended if the amendment would in any manner be adverse to the interests of an Eligible Employee.
The foregoing description of the Severance Plan does not purport to be complete and is subject to and qualified in its entirety by the full text of such Severance Plan, which is filed as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 5.07. Submission of Matters to a Vote of Security Holders.
The Company previously filed with the Securities and Exchange Commission the Proxy Statement and related materials pertaining to the Annual Meeting, which describe in detail each of the six proposals submitted to stockholders at the Annual Meeting. The final results for the votes regarding each proposal are set forth below.
Proposal 1 — Election of Directors
The stockholders of the Company elected each of the following director nominees proposed by the Company’s Board of Directors to serve until the 2024 Annual Meeting of Stockholders of the Company and until their respective successors have been duly elected and qualified. The voting results for each director nominee are set forth below.
| Name | For | Against | Abstentions | Broker Non-Votes | ||||||||
| Karen L. Daniel | 90,139,425 | 949,292 | 241,289 | 28,923,619 | ||||||||
| Sandra L. Fenwick | 89,927,780 | 1,173,491 | 228,735 | 28,923,619 | ||||||||
| Jason Gorevic | 90,172,443 | 924,178 | 233,385 | 28,923,619 | ||||||||
| Catherine A. Jacobson | 90,113,407 | 975,068 | 241,531 | 28,923,619 | ||||||||
| Thomas G. McKinley | 86,075,780 | 5,004,803 | 249,423 | 28,923,619 | ||||||||
| Kenneth H. Paulus | 89,421,095 | 1,657,837 | 251,074 | 28,923,619 | ||||||||
| David L. Shedlarz | 88,399,631 | 2,682,261 | 248,114 | 28,923,619 | ||||||||
| Mark Douglas Smith, M.D., MBA | 89,898,033 | 1,180,486 | 251,487 | 28,923,619 | ||||||||
| David B. Snow, Jr. | 86,958,904 | 4,162,296 | 208,806 | 28,923,619 |
Proposal 2 — Advisory Vote Approving the Compensation of the Company’s Named Executive Officers
The stockholders of the Company approved, on an advisory basis, the compensation paid to the Company’s named executive officers. The voting results are set forth below.
| For | Against | Abstentions | Broker Non-Votes | |||
| 74,437,080 | 16,406,746 | 486,180 | 28,923,619 |
Proposal 3 — Approving the Teladoc Health, Inc. 2023 Incentive Award Plan
The stockholders of the Company approved the Teladoc Health, Inc. 2023 Incentive Award Plan. The voting results are set forth below.
| For | Against | Abstentions | Broker Non-Votes | |||
| 51,690,454 | 39,506,673 | 132,879 | 28,923,619 |
Proposal 4 — Approving an Amendment to the Teladoc Health, Inc. 2015 Employee Stock Purchase Plan
The stockholders of the Company approved an amendment to the Teladoc Health, Inc. 2015 Employee Stock Purchase Plan. The voting results are set forth below.
| For | Against | Abstentions | Broker Non-Votes | |||
| 90,596,731 | 615,655 | 117,620 | 28,923,619 |
Proposal 5 — Ratifying the Appointment of the Independent Registered Public Accounting Firm
The stockholders of the Company ratified the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2023. The voting results are set forth below.
| For | Against | Abstentions | Broker Non-Votes | |||
| 118,869,979 | 757,876 | 625,770 | N/A |
Proposal 6 — Voting on a Stockholder Proposal Entitled “Fair Elections”
The stockholders of the Company did not approve a stockholder proposal entitled “Fair Elections”. The voting results are set forth below.
| For | Against | Abstentions | Broker Non-Votes | |||
| 14,994,415 | 75,977,425 | 358,166 | 28,923,619 |
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | |
| 10.1 | Teladoc Health, Inc. 2023 Incentive Award Plan. | |
| 10.2 | Second Amendment to Teladoc Health, Inc. Amended and Restated Employee Stock Purchase Plan. | |
| 10.3 | Teladoc Health, Inc. Level 14 Severance Plan. | |
| 104 | The cover page of this Current Report on Form 8-K formatted as Inline XBRL. |
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.
| Date: May 30, 2023 | TELADOC HEALTH, INC. | ||||
| By: | /s/ Adam C. Vandervoort | ||||
| Name: | Adam C. Vandervoort | ||||
| Title: | Chief Legal Officer and Secretary | ||||
Exhibit 10.1
TELADOC HEALTH, INC.
2023 INCENTIVE AWARD PLAN
ARTICLE
I.
PURPOSE
The Plan’s purpose is to enhance the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing these individuals with equity ownership opportunities. Capitalized terms used in the Plan are defined in Article XI.
ARTICLE
II.
ELIGIBILITY
Service Providers, as defined in Section 11.37 herein, and other individuals approved by the Committee are eligible to be granted Awards under the Plan, subject to the limitations described herein.
ARTICLE
III.
ADMINISTRATION AND DELEGATION
3.1 Administration. The Plan is administered by the Administrator. The Administrator has authority to determine which Service Providers receive Awards, grant Awards and set Award terms and conditions, subject to the conditions and limitations in the Plan. The Administrator also has the authority to take all actions and make all determinations under the Plan, to interpret the Plan and Award Agreements and to adopt, amend and repeal Plan administrative rules, guidelines and practices as it deems advisable. The Administrator may correct defects and ambiguities, supply omissions and reconcile inconsistencies in the Plan or any Award as it deems necessary or appropriate to administer the Plan and any Awards. The Administrator’s determinations under the Plan are in its sole discretion and will be final and binding on all persons having or claiming any interest in the Plan or any Award.
3.2 Appointment of Committees. To the extent Applicable Laws permit, the Board may delegate any or all of its powers under the Plan to one or more Committees. The Board may abolish any Committee or re-vest in itself any previously delegated authority at any time.
ARTICLE
IV.
STOCK AVAILABLE FOR AWARDS
4.1 Number of Shares. Subject to adjustment under Article VIII and the terms of this Article IV, Awards may be made under the Plan covering up to the Overall Share Limit. As of the Effective Date, the Company will cease granting awards under the Prior Plans; however, Prior Plan Awards will remain subject to the terms of the applicable Prior Plan. Shares issued under the Plan may consist of authorized but unissued Shares, Shares purchased on the open market or treasury Shares.
4.2 Share Recycling. If all or any part of an Award or Prior Plan Award expires, lapses or is terminated, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, in any case, in a manner that results in the Company acquiring Shares covered by the Award or Prior Plan Award at a price not greater than the price (as adjusted to reflect any Equity Restructuring) paid by the Participant for such Shares or not issuing any Shares covered by the Award or Prior Plan Award, the unused Shares covered by the Award or Prior Plan Award will, as applicable, become or again be available for Award grants under the Plan. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards or Prior Plan Awards shall not count against the Overall Share Limit. Notwithstanding anything to the contrary contained herein, the following Shares shall not be added to the Shares authorized for grant under Section 4.1 and shall not be available for future grants of Awards: (i) Shares tendered by the Participant or withheld by the Company in payment of the exercise price of an Option, (ii) Shares tendered by the Participant or withheld by the Company to satisfy any tax withholding obligation with respect to an Award, (iii) Shares subject to a Stock Appreciation Right that are not issued in connection with the stock settlement of the Stock Appreciation Right on exercise thereof and (iv) Shares purchased by the Company on the open market with the cash proceeds from the exercise of Options.
4.3 Incentive Stock Option Limitations. Notwithstanding anything to the contrary herein, no more than 8,250,000 Shares may be issued pursuant to the exercise of Incentive Stock Options.
4.4 Substitute Awards. In connection with an entity’s merger or consolidation with the Company or the Company’s acquisition of an entity’s property or stock, the Administrator may grant Awards in substitution for any options or other stock or stock-based awards granted before such merger or consolidation by such entity or its affiliate. Substitute Awards may be granted on such terms as the Administrator deems appropriate, notwithstanding limitations on Awards in the Plan. Substitute Awards will not count against the Overall Share Limit (nor will Shares subject to a Substitute Award be added to the Shares available for Awards under the Plan as provided above), except that Shares acquired by exercise of substitute Incentive Stock Options will count against the maximum number of Shares that may be issued pursuant to the exercise of Incentive Stock Options under the Plan. 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 authorized for grant under the Plan (and Shares subject to such Awards shall not be added to the Shares available for Awards under the Plan as provided above); 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 Employees or Directors prior to such acquisition or combination.
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4.5 Non-Employee Director Compensation. Notwithstanding any provision to the contrary in the Plan, the Administrator may establish compensation for non-employee Directors from time to time, subject to the limitations in the Plan. The Administrator will from time to time determine the terms, conditions and amounts of all such non-employee Director compensation in its discretion and pursuant to the exercise of its business judgment, taking into account such factors, circumstances and considerations as it shall deem relevant from time to time, provided that the sum of any cash compensation, 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 of the Company may not exceed $650,000. The Administrator may make exceptions to this limit for individual non-employee Directors in extraordinary circumstances, as the Administrator may determine in its discretion, provided that the non-employee Director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous compensation decisions involving non-employee Directors.
ARTICLE
V.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
5.1 General. The Administrator may grant Options or Stock Appreciation Rights to Service Providers subject to the limitations in the Plan, including Section 9.9 with respect to Incentive Stock Options. The Administrator will determine the number of Shares covered by each Option and Stock Appreciation Right, the exercise price of each Option and Stock Appreciation Right and the conditions and limitations applicable to the exercise of each Option and Stock Appreciation Right. A Stock Appreciation Right will entitle the Participant (or other person entitled to exercise the Stock Appreciation Right) to receive from the Company upon exercise of the exercisable portion of the Stock Appreciation Right an amount determined by multiplying the excess, if any, of the Fair Market Value of one Share on the date of exercise over the exercise price per Share of the Stock Appreciation Right by the number of Shares with respect to which the Stock Appreciation Right is exercised, subject to any limitations of the Plan or that the Administrator may impose and payable in cash, Shares valued at Fair Market Value or a combination of the two as the Administrator may determine or provide in the Award Agreement.
5.2 Exercise Price. The Administrator will establish each Option’s and Stock Appreciation Right’s exercise price and specify the exercise price in the Award Agreement. The exercise price will not be less than 100% of the Fair Market Value on the grant date of the Option or Stock Appreciation Right.
5.3 Duration of Options. Each Option or Stock Appreciation Right will be exercisable at such times and as specified in the Award Agreement, provided that the term of an Option or Stock Appreciation Right will not exceed ten years.
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5.4 Exercise. Options and Stock Appreciation Rights may be exercised by delivering to the Company a written notice of exercise, in a form the Administrator approves (which may be electronic), signed by the person authorized to exercise the Option or Stock Appreciation Right, together with, as applicable, payment in full (i) as specified in Section 5.5 for the number of Shares for which the Award is exercised and (ii) as specified in Section 9.5 for any applicable taxes. Unless the Administrator otherwise determines, an Option or Stock Appreciation Right may not be exercised for a fraction of a Share.
5.5 Payment Upon Exercise. The exercise price of an Option must be paid in cash, wire transfer of immediately available funds or by check payable to the order of the Company or, subject to Section 10.8, any Company insider trading policy (including blackout periods) and Applicable Laws, by:
(a) if there is a public market for Shares at the time of exercise, unless the Administrator otherwise determines, (A) delivery (including telephonically to the extent permitted by the Company) of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to pay the exercise price or (B) the Participant’s delivery to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to pay the exercise price; provided that such amount is paid to the Company at such time as may be required by the Administrator;
(b) to the extent permitted by the Administrator, delivery (either by actual delivery or attestation) of Shares owned by the Participant valued at their Fair Market Value;
(c) to the extent permitted by the Administrator, surrendering Shares then issuable upon the Option’s exercise valued at their Fair Market Value on the exercise date;
(d) to the extent permitted by the Administrator, delivery of a promissory note or any other property that the Administrator determines is good and valuable consideration; or
(e) any combination of the above permitted payment forms (including cash, wire transfer or check).
ARTICLE
VI.
RESTRICTED STOCK; RESTRICTED STOCK UNITS
6.1 General. The Administrator may grant Restricted Stock, or the right to purchase Restricted Stock, to any Service Provider, subject to the Company’s right to repurchase all or part of such shares at their issue price or other stated or formula price from the Participant (or to require forfeiture of such shares) if conditions the Administrator specifies in the Award Agreement are not satisfied before the end of the applicable restriction period or periods that the Administrator establishes for such Award. In addition, the Administrator may grant to Service Providers Restricted Stock Units, which may be subject to vesting and forfeiture conditions during the applicable restriction period or periods, as set forth in an Award Agreement. The Administrator will determine and set forth in the Award Agreement the terms and conditions for each Restricted Stock and Restricted Stock Unit Award, subject to the conditions and limitations, including, but not limited to, the Minimum Vesting Condition, contained in the Plan.
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6.2 Restricted Stock.
(a) Dividends. Participants holding shares of Restricted Stock will be entitled to all ordinary cash dividends paid with respect to such Shares, unless the Administrator provides otherwise in the Award Agreement; provided that dividends paid with respect to an unvested share of Restricted Stock will only be paid to the Participant to the extent that the vesting conditions are subsequently satisfied and the share of Restricted Stock vests. In addition, if any dividends or distributions are paid in Shares, or consist of a dividend or distribution to holders of Common Stock of property other than an ordinary cash dividend, the Shares or other property will be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which they were paid.
(b) Stock Certificates. The Company may require that the Participant deposit in escrow with the Company (or its designee) any stock certificates issued in respect of shares of Restricted Stock, together with a stock power endorsed in blank.
6.3 Restricted Stock Units.
(a) Settlement. The Administrator may provide that settlement of Restricted Stock Units will occur upon or as soon as reasonably practicable after the Restricted Stock Units vest or will instead be deferred, on a mandatory basis or at the Participant’s election, in a manner intended to comply with Section 409A.
(b) Stockholder Rights. A Participant will have no rights of a stockholder with respect to Shares subject to any Restricted Stock Unit unless and until the Shares are delivered in settlement of the Restricted Stock Unit.
(c) Dividend Equivalents. If the Administrator provides, a grant of Restricted Stock Units may provide a Participant with the right to receive Dividend Equivalents. Dividend Equivalents may be paid currently or credited to an account for the Participant, settled in cash or Shares and subject to the same restrictions on transferability and forfeitability as the Restricted Stock Units with respect to which the Dividend Equivalents are granted and subject to other terms and conditions as set forth in the Award Agreement; provided that Dividend Equivalents with respect to an Award that are based on dividends paid prior to the vesting of the Award will only be paid to the Participant to the extent that the vesting conditions are subsequently satisfied and the Award vests.
ARTICLE
VII.
OTHER STOCK OR CASH BASED AWARDS
Other Stock or Cash Based Awards may be granted to Participants, including Awards entitling Participants to receive Shares to be delivered in the future and including annual or other periodic or long-term cash bonus awards (whether based on specified Performance Criteria or otherwise), in each case subject to any conditions and limitations in the Plan. Such Other Stock or Cash Based Awards will also be available as a payment form in the settlement of other Awards, as standalone payments and as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock or Cash Based Awards may be paid in Shares, cash or other property, as the Administrator determines. Subject to the provisions of the Plan, the Administrator will determine the terms and conditions of each Other Stock or Cash Based Award, including any purchase price, performance goal (which may be based on the Performance Criteria), transfer restrictions and vesting conditions, which will be set forth in the applicable Award Agreement.
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ARTICLE
VIII.
ADJUSTMENTS FOR CHANGES IN COMMON STOCK
AND CERTAIN OTHER EVENTS
8.1 Equity Restructuring. In connection with any Equity Restructuring, notwithstanding anything to the contrary in this Article VIII, the Administrator will equitably adjust each outstanding Award as it deems appropriate to reflect the Equity Restructuring, which may include adjusting the number and type of securities subject to each outstanding Award and/or the Award’s exercise price or grant price (if applicable), granting new Awards to Participants, and making a cash payment to Participants. The adjustments provided under this Section 8.1 will be nondiscretionary and final and binding on the affected Participant and the Company; provided that the Administrator will determine whether an adjustment is equitable.
8.2 Corporate Transactions. In the event of any dividend or other distribution (whether in the form of cash, Common Stock, other securities or other property), reorganization, merger, consolidation, combination, repurchase, recapitalization, liquidation, dissolution or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company or sale or exchange of Common Stock or other securities of the Company, Change in Control, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, other similar corporate transaction or event, other unusual or nonrecurring transaction or event affecting the Company or its financial statements or any change in any Applicable Laws or accounting principles, the Administrator, on such terms and conditions as it deems appropriate, subject to compliance with Section 409A of the Code and other applicable law, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event (except that action to give effect to a change in Applicable Law or accounting principles may be made within a reasonable period of time after such change) and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to (x) prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Award granted or issued under the Plan, (y) to facilitate such transaction or event or (z) give effect to such changes in Applicable Laws or accounting principles:
(a) To provide for the cancellation of any such Award in exchange for either an amount of cash or other property with a value equal to the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights under the vested portion of such Award, as applicable; provided that, if the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights, in any case, is equal to or less than zero, then the Award may be terminated without payment;
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(b) To provide that such Award shall vest and, to the extent applicable, be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the provisions of such Award;
(c) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and/or applicable exercise or purchase price, in all cases, as determined by the Administrator;
(d) To make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards and/or with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Article IV hereof on the maximum number and kind of shares which may be issued) and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards;
(e) To replace such Award with other rights or property selected by the Administrator; and/or
(f) To provide that the Award will terminate and cannot vest, be exercised or become payable after the applicable event.
8.3 Administrative Stand Still. In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other extraordinary transaction or change affecting the Shares or the share price of Common Stock, including any Equity Restructuring or any securities offering or other similar transaction, for administrative convenience, the Administrator may refuse to permit the exercise of any Award for up to sixty (60) days before or after such transaction.
8.4 Minimum Vesting Condition. Notwithstanding anything to the contrary in this Article VIII, and subject to Section 8.2, Awards shall be subject to the Minimum Vesting Condition; provided, however, that the Committee may, in its sole discretion, (i) accelerate the vesting of Awards or otherwise lapse or waive the Minimum Vesting Condition upon (A) the Participant’s death or Disability (as defined in the Participant’s Award Agreement) or (B) a Change in Control (subject to the requirements of Section 8.2) (ii) grant Awards that are not subject to the Minimum Vesting Condition with respect to 5% or less of the Overall Share Limit (as set forth in Section 4.1, as may be adjusted pursuant to Article IV) and (iii) subject to Section 4.5, grant Awards to non-employee Directors that are not subject to the Minimum Vesting Condition.
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8.5 General. Except as expressly provided in the Plan or the Administrator’s action under the Plan, no Participant will have any rights due to any subdivision or consolidation of Shares of any class, dividend payment, increase or decrease in the number of Shares of any class or dissolution, liquidation, merger or consolidation of the Company or other corporation. Except as expressly provided with respect to an Equity Restructuring under Section 8.1 above or the Administrator’s action under the Plan, no issuance by the Company of Shares of any class, or securities convertible into Shares of any class, will affect, and no adjustment will be made regarding, the number of Shares subject to an Award or the Award’s grant or exercise price. The existence of the Plan, any Award Agreements and the Awards granted hereunder will not affect or restrict in any way the Company’s right or power to make or authorize (i) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, (ii) any merger, consolidation dissolution or liquidation of the Company or sale of Company assets or (iii) any sale or issuance of securities, including securities with rights superior to those of the Shares or securities convertible into or exchangeable for Shares. The Administrator may treat Participants and Awards (or portions thereof) differently under this Article VIII.
ARTICLE
IX.
GENERAL PROVISIONS APPLICABLE TO AWARDS
9.1 Transferability. Awards may not be sold, assigned, transferred, pledged or otherwise encumbered, either voluntarily or by operation of law, except by will or the laws of descent and distribution, or during the life of the Participant, will be exercisable only by the Participant.
9.2 Documentation. Each Award will be evidenced in an Award Agreement, which may be written or electronic, as the Administrator determines. Each Award may contain terms and conditions in addition to those set forth in the Plan.
9.3 Discretion. Except as the Plan otherwise provides, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award to a Participant need not be identical, and the Administrator need not treat Participants or Awards (or portions thereof) uniformly.
9.4 Termination of Status. The Administrator will determine how the disability, death, retirement, authorized leave of absence or any other change or purported change in a Participant’s Service Provider status affects an Award and the extent to which, and the period during which, the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award, if applicable.
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9.5 Withholding. Each Participant must pay the Company, or make provision satisfactory to the Administrator for payment of, any taxes required by law to be withheld in connection with such Participant’s Awards by the date of the event creating the tax liability. The Company may deduct an amount sufficient to satisfy such tax obligations based on the minimum statutory withholding rates (or such other rate as may be determined by the Company after considering any accounting consequences or costs) from any payment of any kind otherwise due to a Participant. Participants may satisfy such tax obligations in cash, by wire transfer of immediately available funds, by check made payable to the order of the Company or subject to Section 10.8 and any Company insider trading policy (including blackout periods), (i) to the extent permitted by the Administrator, in whole or in part by delivery of Shares, including Shares retained from the Award creating the tax obligation, valued at their Fair Market Value, (ii) if there is a public market for Shares at the time the tax obligations are satisfied, unless the Administrator otherwise determines, (A) delivery (including telephonically to the extent permitted by the Company) of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to satisfy the tax obligations or (B) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to satisfy the tax withholding; provided that such amount is paid to the Company at such time as may be required by the Administrator or (iii) any combination of the foregoing permitted payment forms (including cash, wire transfer or check). If any tax withholding obligation will be satisfied under clause (i) of the immediately preceding sentence by the Company’s retention of Shares from the Award creating the tax obligation and there is a public market for Shares at the time the tax obligation is satisfied, the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on the applicable Participant’s behalf some or all of the Shares retained and to remit the proceeds of the sale to the Company or its designee, and each Participant’s acceptance of an Award under the Plan will constitute the Participant’s authorization to the Company and instruction and authorization to such brokerage firm to complete the transactions described in this sentence.
9.6 Amendment of Award; Prohibition on Repricing Without Stockholder Consent. The Administrator may amend, modify or terminate any outstanding Award, including by substituting another Award of the same or a different type, changing the exercise or settlement date and converting an Incentive Stock Option to a Non-Qualified Stock Option. The Participant’s consent to such action will be required unless (i) the action, taking into account any related action, does not materially and adversely affect the Participant’s rights under the Award or (ii) the change is permitted under Article VIII or pursuant to Section 10.6. Notwithstanding the foregoing or anything in the Plan to the contrary, the Administrator may not except pursuant to Article VIII, without the approval of the stockholders of the Company, reduce the exercise price per share of outstanding Options or Stock Appreciation Rights or cancel outstanding Options or Stock Appreciation Rights in exchange for cash, other Awards or Options or Stock Appreciation Rights with an exercise price per share that is less than the exercise price per share of the original Options or Stock Appreciation Rights.
9.7 Conditions on Delivery of Stock. The Company will not be obligated to deliver any Shares under the Plan or remove restrictions from Shares previously delivered under the Plan until (i) all Award conditions have been met or removed to the Company’s satisfaction, (ii) as determined by the Company, all other legal matters regarding the issuance and delivery of such Shares have been satisfied, including any applicable securities laws and stock exchange or stock market rules and regulations and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Administrator deems necessary or appropriate to satisfy any Applicable Laws. The Company’s inability to obtain authority from any regulatory body having jurisdiction, which the Administrator determines is necessary to the lawful issuance and sale of any securities, will relieve the Company of any liability for failing to issue or sell such Shares as to which such requisite authority has not been obtained.
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9.8 Acceleration. The Administrator may at any time provide that any Award will become immediately vested and fully or partially exercisable, free of some or all restrictions or conditions, or otherwise fully or partially realizable.
9.9 Additional Terms of Incentive Stock Options. The Administrator may grant Incentive Stock Options only to employees of the Company, any of its present or future parent or subsidiary corporations, as defined in Section 424(e) or (f) of the Code, respectively, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code. If an Incentive Stock Option is granted to a Greater Than 10% Stockholder, the exercise price will not be less than 110% of the Fair Market Value on the Option’s grant date, and the term of the Option will not exceed five years. All Incentive Stock Options will be subject to and construed consistently with Section 422 of the Code. By accepting an Incentive Stock Option, the Participant agrees to give prompt notice to the Company of dispositions or other transfers (other than in connection with a Change in Control) of Shares acquired under the Option made within (i) two years from the grant date of the Option or (ii) one year after the transfer of such Shares to the Participant, specifying the date of the disposition or other transfer and the amount the Participant realized, in cash, other property, assumption of indebtedness or other consideration, in such disposition or other transfer. Neither the Company nor the Administrator will be liable to a Participant, or any other party, if an Incentive Stock Option fails or ceases to qualify as an “incentive stock option” under Section 422 of the Code. Any Incentive Stock Option or portion thereof that fails to qualify as an “incentive stock option” under Section 422 of the Code for any reason, including becoming exercisable with respect to Shares having a fair market value exceeding the $100,000 limitation under Treasury Regulation Section 1.422-4, will be a Non-Qualified Stock Option.
ARTICLE
X.
MISCELLANEOUS
10.1 No Right to Employment or Other Status. No person will have any claim or right to be granted an Award, and the grant of an Award will not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or any Award, except as expressly provided in an Award Agreement.
10.2 No Rights as Stockholder; Certificates. Subject to the Award Agreement, no Participant or Designated Beneficiary will have any rights as a stockholder with respect to any Shares to be distributed under an Award until becoming the record holder of such Shares. Notwithstanding any other provision of the Plan, unless the Administrator otherwise determines or Applicable Laws require, the Company will not be required to deliver to any Participant certificates evidencing Shares issued in connection with any Award and instead such Shares may be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator). The Company may place legends on stock certificates issued under the Plan that the Administrator deems necessary or appropriate to comply with Applicable Laws.
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10.3 Effective Date and Term of Plan. The Plan will become effective on the Effective Date and will remain in effect until the tenth (10th) anniversary of such date, unless earlier terminated by the Board. No Awards may be granted under the Plan during any suspension period or after Plan termination. Notwithstanding anything in the Plan to the contrary, an Incentive Stock Option may not be granted under the Plan after ten years from the earlier of (i) the date the Board first adopted the Plan or (ii) the date the Company’s stockholders first approved the Plan, but Awards previously granted may extend beyond that date in accordance with the Plan.
10.4 Amendment of Plan. The Administrator may amend, suspend or terminate the Plan at any time; provided that no amendment, other than an increase to the Overall Share Limit, may materially and adversely affect any Award outstanding at the time of such amendment without the affected Participant’s consent. Awards outstanding at the time of any Plan suspension or termination will continue to be governed by the Plan and the Award Agreement, as in effect before such suspension or termination. The Board will obtain stockholder approval of any Plan amendment to the extent necessary to comply with Applicable Laws.
10.5 Provisions for Foreign Participants. The Administrator may modify Awards granted to Participants who are foreign nationals or employed outside the United States or establish subplans or procedures under the Plan to address differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.
10.6 Section 409A.
(a) General. The Company intends that all Awards be structured to comply with, or be exempt from, Section 409A, such that no adverse tax consequences, interest or penalties under Section 409A apply. Notwithstanding anything in the Plan or any Award Agreement to the contrary, the Administrator may, without a Participant’s consent, amend this Plan or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and retroactive actions) as are necessary or appropriate to preserve the intended tax treatment of Awards, including any such actions intended to (A) exempt this Plan or any Award from Section 409A, or (B) comply with Section 409A, including regulations, guidance, compliance programs and other interpretative authority that may be issued after an Award’s grant date. The Company makes no representations or warranties as to an Award’s tax treatment under Section 409A or otherwise. The Company will have no obligation under this Section 10.6 or otherwise to avoid the taxes, penalties or interest under Section 409A with respect to any Award and will have no liability to any Participant or any other person if any Award, compensation or other benefits under the Plan are determined to constitute noncompliant “nonqualified deferred compensation” subject to taxes, penalties or interest under Section 409A.
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(b) Separation from Service. If an Award constitutes “nonqualified deferred compensation” under Section 409A, any payment or settlement of such Award upon a termination of a Participant’s Service Provider relationship will, to the extent necessary to avoid taxes under Section 409A, be made only upon the Participant’s “separation from service” (within the meaning of Section 409A), whether such “separation from service” occurs upon or after the termination of the Participant’s Service Provider relationship. For purposes of this Plan or any Award Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms means a “separation from service.”
(c) Payments to Specified Employees. Notwithstanding any contrary provision in the Plan or any Award Agreement, any payment(s) of “nonqualified deferred compensation” required to be made under an Award to a “specified employee” (as defined under Section 409A and as the Administrator determines) due to his or her “separation from service” will, to the extent necessary to avoid taxes under Section 409A(a)(2)(B)(i) of the Code, be delayed for the six-month period immediately following such “separation from service” (or, if earlier, until the specified employee’s death) and will instead be paid (as set forth in the Award Agreement) on the day immediately following such six-month period or as soon as administratively practicable thereafter (without interest). Any payments of “nonqualified deferred compensation” under such Award payable more than six months following the Participant’s “separation from service” will be paid at the time or times the payments are otherwise scheduled to be made.
10.7 Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, other employee or agent of the Company or any Subsidiary will be liable to any Participant, former Participant, spouse, beneficiary or any other person for any claim, loss, liability or expense incurred in connection with the Plan or any Award, and such individual will not be personally liable with respect to the Plan because of any contract or other instrument executed in his or her capacity as an Administrator, director, officer, other employee or agent of the Company or any Subsidiary. The Company will indemnify and hold harmless each director, officer, other employee and agent of the Company or any Subsidiary that has been or will be granted or delegated any duty or power relating to the Plan’s administration or interpretation, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Administrator’s approval) arising from any act or omission concerning this Plan unless arising from such person’s own fraud or bad faith.
10.8 Lock-Up Period. The Company may, at the request of any underwriter representative or otherwise, in connection with registering the offering of any Company securities under the Securities Act, prohibit Participants from, directly or indirectly, selling or otherwise transferring any Shares or other Company securities during a period of up to one hundred eighty (180) days following the effective date of a Company registration statement filed under the Securities Act, or such longer period as determined by the underwriter.
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10.9 Data Privacy. As a condition for receiving any Award, each Participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this section by and among the Company and its Subsidiaries and affiliates exclusively for implementing, administering and managing the Participant’s participation in the Plan. The Company and its Subsidiaries and affiliates may hold certain personal information about a Participant, including the Participant’s name, address and telephone number; birthdate; social security, insurance number or other identification number; salary; nationality; job title(s); any Shares held in the Company or its Subsidiaries and affiliates; and Award details, to implement, manage and administer the Plan and Awards (the “Data”). The Company and its Subsidiaries and affiliates may transfer the Data amongst themselves as necessary to implement, administer and manage a Participant’s participation in the Plan, and the Company and its Subsidiaries and affiliates may transfer the Data to third parties assisting the Company with Plan implementation, administration and management. These recipients may be located in the Participant’s country, or elsewhere, and the Participant’s country may have different data privacy laws and protections than the recipients’ country. By accepting an Award, each Participant authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, to implement, administer and manage the Participant’s participation in the Plan, including any required Data transfer to a broker or other third party with whom the Company or the Participant may elect to deposit any Shares. The Data related to a Participant will be held only as long as necessary to implement, administer and manage the Participant’s participation in the Plan. A Participant may, at any time, view the Data that the Company holds regarding such Participant, request additional information about the storage and processing of the Data regarding such Participant, recommend any necessary corrections to the Data regarding the Participant or refuse or withdraw the consents in this Section 10.9 in writing, without cost, by contacting the local human resources representative. The Company may cancel Participant’s ability to participate in the Plan and, in the Administrator’s discretion, the Participant may forfeit any outstanding Awards if the Participant refuses or withdraws the consents in this Section 10.9. For more information on the consequences of refusing or withdrawing consent, Participants may contact their local human resources representative.
10.10 Severability. If any portion of the Plan or any action taken under it is held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provisions had been excluded, and the illegal or invalid action will be null and void.
10.11 Governing Documents. If any contradiction occurs between the Plan and any Award Agreement or other written agreement between a Participant and the Company (or any Subsidiary) that the Administrator has approved, the Plan will govern, unless it is expressly specified in such Award Agreement or other written document that a specific provision of the Plan will not apply.
10.12 Governing Law. The Plan and all Awards will be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding any state’s choice-of-law principles requiring the application of a jurisdiction’s laws other than the State of Delaware.
10.13 Claw-back Provisions. All Awards (including any proceeds, gains or other economic benefit the Participant actually or constructively receives upon receipt or exercise of any Award or the receipt or resale of any Shares underlying the Award) will be subject to any Company claw-back policy, including any claw-back policy adopted to comply with Applicable Laws (including the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder) as set forth in such claw-back policy or the Award Agreement.
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10.14 Titles and Headings. The titles and headings in the Plan are for convenience of reference only and, if any conflict, the Plan’s text, rather than such titles or headings, will control.
10.15 Conformity to Securities Laws. Participant acknowledges that the Plan is intended to conform to the extent necessary with Applicable Laws. Notwithstanding anything herein to the contrary, the Plan and all Awards will be administered only in conformance with Applicable Laws. To the extent Applicable Laws permit, the Plan and all Award Agreements will be deemed amended as necessary to conform to Applicable Laws.
10.16 Relationship to Other Benefits. No payment under the Plan will be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except as expressly provided in writing in such other plan or an agreement thereunder.
10.17 Broker-Assisted Sales. In the event of a broker-assisted sale of Shares in connection with the payment of amounts owed by a Participant under or with respect to the Plan or Awards, including amounts to be paid under the final sentence of Section 9.5: (a) any Shares to be sold through the broker-assisted sale will be sold on the day the payment first becomes due, or as soon thereafter as practicable; (b) such Shares may be sold as part of a block trade with other Participants in the Plan in which all participants receive an average price; (c) the applicable Participant will be responsible for all broker’s fees and other costs of sale, and by accepting an Award, each Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages or expenses relating to any such sale; (d) to the extent the Company or its designee receives proceeds of such sale that exceed the amount owed, the Company will pay such excess in cash to the applicable Participant as soon as reasonably practicable; (e) the Company and its designees are under no obligation to arrange for such sale at any particular price; and (f) in the event the proceeds of such sale are insufficient to satisfy the Participant’s applicable obligation, the Participant may be required to pay immediately upon demand to the Company or its designee an amount in cash sufficient to satisfy any remaining portion of the Participant’s obligation.
10.18 No Fractional Shares. Notwithstanding any provision in the Plan to the contrary, no fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Administrator shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.
ARTICLE
XI.
DEFINITIONS
As used in the Plan, the following words and phrases will have the following meanings:
11.1 “Administrator” means the Board or a Committee to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee.
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11.2 “Applicable Laws” means the requirements relating to the administration of equity incentive plans under U.S. federal and state securities, tax and other applicable laws, rules and regulations, the applicable rules of any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws and rules of any foreign country or other jurisdiction where Awards are granted.
11.3 “Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units or Other Stock or Cash Based Awards.
11.4 “Award Agreement” means a written agreement evidencing an Award, which may be electronic, that contains such terms and conditions as the Administrator determines, consistent with and subject to the terms and conditions of the Plan.
11.5 “Board” means the Board of Directors of the Company.
11.6 “Change in Control” means and includes each of the following:
(a) A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission or a transaction or series of transactions that meets the requirements of clauses (i) and (ii) of subsection (c) below) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, 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 subsection (a) or (c)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the Directors then still in office who either were Directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or
(c) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(i) which results in the Company’s voting 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
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(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 clause (ii) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction.
Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award (or portion of any Award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (a), (b) or (c) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).
The Administrator shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.
11.7 “Code” means the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.
11.8 “Committee” means one or more committees or subcommittees of the Board, which may include one or more Company directors or executive officers, to the extent Applicable Laws permit. To the extent required to comply with the provisions of Rule 16b-3, it is intended that each member of the Committee will be, at the time the Committee takes any action with respect to an Award that is subject to Rule 16b-3, a “non-employee director” within the meaning of Rule 16b-3; however, a Committee member’s failure to qualify as a “non-employee director” within the meaning of Rule 16b-3 will not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.
11.9 “Common Stock” means the common stock of the Company.
11.10 “Company” means Teladoc Health, Inc., a Delaware corporation, or any successor.
11.11 “Consultant” means any person, including any adviser, engaged by the Company or its parent or Subsidiary to render services to such entity if the consultant or adviser: (i) renders bona fide services to the Company; (ii) renders services not in connection with the offer or sale of securities in a capital-raising transaction and does not directly or indirectly promote or maintain a market for the Company’s securities; and (iii) is a natural person.
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11.12 “Designated Beneficiary” means the beneficiary or beneficiaries the Participant designates if the Participant dies or becomes incapacitated, including powers of attorney. Without a Participant’s effective designation, “Designated Beneficiary” will mean the Participant’s estate.
11.13 “Director” means a Board member.
11.14 “Dividend Equivalents” means a right granted to a Participant under the Plan to receive the equivalent value (in cash or Shares) of dividends paid on Shares.
11.15 “Effective Date” means May 25, 2023, provided that the Plan is approved by the stockholders at the 2023 Annual Meeting of the Company.
11.16 “Employee” means any employee of the Company or its Subsidiaries.
11.17 “Equity Restructuring” means a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of Shares (or other Company securities) or the share price of Common Stock (or other Company securities) and causes a change in the per share value of the Common Stock underlying outstanding Awards.
11.18 “Exchange Act” means the Securities Exchange Act of 1934, as amended.
11.19 “Fair Market Value” means, as of any date, the value of Common Stock determined as follows: (i) if the Common Stock is listed on any established stock exchange, its Fair Market Value will be the closing sales price for such Common Stock as quoted on such exchange for such date, or if no sale occurred on such date, the last day preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; (ii) if the Common Stock is not traded on a stock exchange but is quoted on a national market or other quotation system, the closing sales price on such date, or if no sales occurred on such date, then on the last date preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; or (iii) without an established market for the Common Stock, the Administrator will determine the Fair Market Value in its discretion.
11.20 “Greater Than 10% Stockholder” means an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or its parent or subsidiary corporation, as defined in Section 424(e) and (f) of the Code, respectively.
11.21 “Incentive Stock Option” means an Option intended to qualify as an “incentive stock option” as defined in Section 422 of the Code.
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11.22 “Minimum Vesting Condition” means with respect to any Award, a condition that vesting of (or lapsing of restrictions on) such Award does not occur until at least the first (1st) anniversary of the grant date.
11.23 “Non-Qualified Stock Option” means an Option not intended or not qualifying as an Incentive Stock Option.
11.24 “Option” means an option to purchase Shares.
11.25 “Other Stock or Cash Based Awards” means cash awards, awards of Shares, and other awards valued wholly or partially by referring to, or are otherwise based on, Shares or other property.
11.26 “Overall Share Limit” means the sum of (i) 8,250,000 Shares, (ii) the aggregate number of shares available for issuance under each of the Prior Plans as of the Effective Date and (iii) any shares of Common Stock which are subject to Prior Plan Awards which become available for issuance under the Plan pursuant to Article IV.
11.27 “Participant” means a Service Provider who has been granted an Award.
11.28 “Performance Criteria” means the criteria (and adjustments) that the Administrator may select for an Award to establish performance goals for a performance period, which may include, but is not limited to, the following: net earnings or losses (either before or after one or more of interest, taxes, depreciation, amortization and non-cash equity-based compensation expense); gross or net sales or revenue or sales or revenue growth; net income (either before or after taxes) or adjusted net income; profits (including but not limited to gross profits, net profits, profit growth, net operation profit or economic profit), profit return ratios or operating margin; budget or operating earnings (either before or after taxes or before or after allocation of corporate overhead and bonus); cash flow (including operating cash flow and free cash flow or cash flow return on capital); return on assets; return on capital or invested capital; cost of capital; return on stockholders’ equity; total stockholder return; return on sales; costs, reductions in costs and cost control measures; expenses; working capital; earnings or loss per share; adjusted earnings or loss per share; price per share or dividends per share (or appreciation in or maintenance of such price or dividends); regulatory achievements or compliance; implementation, completion or attainment of objectives relating to research, development, regulatory, commercial or strategic milestones or developments; market share; economic value or economic value added models; division, group or corporate financial goals; individual business objectives; production or growth in production; reserves or added reserves; growth in reserves per share; inventory growth; environmental, health and/or safety performance; effectiveness of hedging programs; improvements in internal controls and policies and procedures; customer satisfaction/growth; customer service; employee satisfaction; recruitment and maintenance of personnel; human resources management; supervision of litigation and other legal matters; strategic partnerships and transactions; financial ratios (including those measuring liquidity, activity, profitability or leverage); debt levels or reductions; sales-related goals; financing and other capital raising transactions; cash on hand; acquisition activity; investment sourcing activity; and marketing initiatives, any of which may be measured in absolute terms or as compared to any incremental increase or decrease. Such performance goals also may be based solely by reference to the Company’s performance or the performance of a Subsidiary, division, business segment or business unit of the Company or a Subsidiary, or based upon performance relative to performance of other companies or upon comparisons of any of the indicators of performance relative to performance of other companies. Any performance goals that are financial metrics may be determined in accordance with U.S. generally accepted accounting principles, in accordance with accounting principles established by the International Accounting Standards Board, or may be adjusted when established to include or exclude any items otherwise includable or excludable under U.S. generally accepted accounting principles or under the accounting principles established by the International Accounting Standards Board. The Committee may provide for exclusion of the impact of an event or occurrence which the Committee determines should appropriately be excluded, including (a) restructurings, discontinued operations, extraordinary items and other unusual, infrequently occurring or non-recurring charges or events, (b) asset write-downs, (c) litigation or claim judgments or settlements, (d) acquisitions or divestitures, (e) reorganization or change in the corporate structure or capital structure of the Company, (f) an event either not directly related to the operations of the Company, Subsidiary, division, business segment or business unit or not within the reasonable control of management, (g) foreign exchange gains and losses, (h) a change in the fiscal year of the Company, (i) the refinancing or repurchase of bank loans or debt securities, (j) unbudgeted capital expenditures, (k) the issuance or repurchase of equity securities and other changes in the number of outstanding shares, (l) conversion of some or all of convertible securities to Common Stock, (m) any business interruption event, (n) the cumulative effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles or (o) the effect of changes in other laws or regulatory rules affecting reported results.
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11.29 “Plan” means this 2023 Incentive Award Plan (as it may be amended and restated from time to time).
11.30 “Prior Plans” means, collectively, the Teladoc, Inc. 2015 Incentive Award Plan, the Teladoc, Inc. Second Amended and Restated Stock Incentive Plan, the Teladoc Health, Inc. Livongo Acquisition Incentive Award Plan, the Teladoc, Inc. 2017 Employment Inducement Incentive Award Plan and any prior equity incentive plans of the Company or its predecessor.
11.31 “Prior Plan Award” means an award outstanding under the Prior Plans as of the Effective Date.
11.32 “Restricted Stock” means Shares awarded to a Participant under Article VI subject to certain vesting conditions and other restrictions.
11.33 “Restricted Stock Unit” means an unfunded, unsecured right to receive, on the applicable settlement date, one Share or an amount in cash or other consideration determined by the Administrator to be of equal value as of such settlement date, subject to certain vesting conditions and other restrictions.
11.34 “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act.
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11.35 “Section 409A” means Section 409A of the Code and all regulations, guidance, compliance programs and other interpretative authority thereunder.
11.36 “Securities Act” means the Securities Act of 1933, as amended.
11.37 “Service Provider” means an Employee, Consultant or Director.
11.38 “Shares” means shares of Common Stock.
11.39 “Stock Appreciation Right” means a stock appreciation right granted under Article V.
11.40 “Subsidiary” means any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least 50% of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
11.41 “Termination of Service” means the date the Participant ceases to be a Service Provider.
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Exhibit 10.2
SECOND AMENDMENT TO
TELADOC HEALTH, INC.
AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
The 2015 Employee Stock Purchase Plan, amended and restated as of May 9, 2021, (the “Plan”) of Teladoc Health, Inc., a Delaware corporation (the “Company”), is hereby further amended, effective as of May 25, 2023 (the “Effective Date”), as follows:
1. Amendment to Section 3.1 of the Plan. Section 3.1 of the Plan is hereby deleted and replaced in its entirety with the following:
“Number of Shares. Subject to Article VIII, the aggregate number of Shares that may be issued pursuant to rights granted under the Plan shall be 4,113,343 Shares. If any right granted under the Plan shall for any reason terminate without having been exercised, the Common Stock not purchased under such right shall again become available for issuance under the Plan.”
2. Amendment to Section 5.2(b) of the Plan. The second sentence of Section 5.2(b) is hereby deleted and replaced in its entirety with the following:
“An Eligible Employee may designate any whole percentage of Compensation that is not less than 1% and not more than the maximum percentage specified by the Administrator in the applicable Offering Document (which percentage shall be 15% in the absence of any such designation) as payroll deductions.”
3. Effectiveness. In accordance with Section 9.1(a) of the Plan, the effectiveness of this Second Amendment to the Teladoc Health, Inc. 2015 Employee Stock Purchase Plan (this “Amendment”) is subject to the approval of the Company’s stockholders at the Company’s 2023 annual general meeting of stockholders. For the avoidance of doubt, if stockholder approval is not obtained, then this Amendment shall be void ab initio and of no force and effect.
4. Effect on the Plan. This Amendment shall not constitute a waiver, amendment or modification of any provision of the Plan not expressly referred to herein. Except as expressly amended or modified herein, the provisions of the Plan are and shall remain in full force and effect and are hereby ratified and confirmed. On and after the Effective Date, each reference in the Plan to “this Plan,” “herein,” “hereof,” “hereunder” or words of similar import shall mean and be a reference to the Plan as amended hereby. To the extent that a provision of this Amendment conflicts with or differs from a provision of the Plan, such provision of this Amendment shall prevail and govern for all purposes and in all respects.
Exhibit 10.3
TELADOC HEALTH, INC. LEVEL 14 SEVERANCE PLAN
The Company has adopted this Level 14 Severance Plan (the “Plan”) for the benefit of certain management and highly compensated employees of the Company and its subsidiaries, on the terms and conditions hereinafter stated. All capitalized terms used herein are defined in Section 1 hereof. The Plan, as set forth herein, is intended to help retain qualified employees, maintain a stable work environment and provide economic security to eligible employees in the event of certain terminations of employment.
SECTION 1. DEFINITIONS. As hereinafter used:
1.1 “Affiliate” means, with respect to any individual or entity, any other individual or entity who, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, such individual or entity. For purposes of this definition, “control,” when used with respect to any person or entity, means the power to direct the management and policies of such person or entity, directly or indirectly, whether through ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
1.2 “Base Salary” means an Eligible Employee’s base salary at the rate in effect on the date of such Eligible Employee’s Qualifying Termination (disregarding any decrease in such base salary that constitutes a Good Reason event).
1.3 “Board” means the Board of Directors of the Company.
1.4 “Cause” shall mean any of the following: (i) an Eligible Employee’s breach of his or her duty of loyalty to the Company or an Eligible Employee’s willful breach of his or her duty of care to the Company; (ii) an Eligible Employee’s material failure or refusal to comply with reasonable written policies, standards and regulations established by the Board from time to time which failure or refusal, if curable, is not cured to the reasonable satisfaction of the Board during the fifteen (15) day period following written notice of such failure or refusal from the Board; (iii) an Eligible Employee’s commission of a felony, an act of theft, embezzlement or misappropriation of funds or the property of the Company or its subsidiaries of material value or an act of fraud involving the Company or its subsidiaries; (iv) an Eligible Employee’s willful misconduct or gross negligence which causes or reasonably could cause (for example, if it became publicly known) material harm to the Company’s standing, condition or reputation; (v) an Eligible Employee’s material violation of the Company’s Code of Business Conduct and Ethics (or similar written policies concerning ethical behavior) or written policies concerning harassment or discrimination; or (vi) any material breach by an Eligible Employee of the provisions of the Confidentiality Agreement or a material provision of this Plan.
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1.5 “Change of Control” shall mean (i) any transaction or series of related transactions resulting in the consummation of a merger, combination, consolidation or other reorganization of the Company with or into any third party, other than any such merger, combination, consolidation or reorganization following which the holders of capital stock of the Company immediately prior to such merger, combination, consolidation or reorganization continue to hold, solely in respect of their interests in the Company’s capital stock immediately prior to such merger, combination, consolidation or reorganization, at least fifty-five percent (55%) of the voting power of the outstanding capital stock of the Company or the surviving or acquiring entity; (ii) any transaction or series of related transactions resulting in the consummation of the sale, lease, exclusive or irrevocable licensing or other transfer of all or substantially all of the assets of the Company to a third party, other than any such sale, lease, exclusive or irrevocable licensing or transfer following which the holders of capital stock of the Company immediately prior to such sale, lease, exclusive or irrevocable licensing or transfer continue to hold, solely in respect of their interests in the Company’s capital stock immediately prior to such sale, lease, exclusive or irrevocable licensing or transfer, at least fifty-five percent (55%) of the voting power of the outstanding capital stock of the acquiring entity; or (iii) any transaction or series of related transactions resulting in the transfer or issuance, whether by merger, combination, consolidation or otherwise, of Company securities to a person or group if, after such transfer or issuance, such person or group would hold fifty-five percent (55%) of the voting power of the outstanding capital stock of the Company; provided that, with respect to any payments or benefits payable to an Eligible Employee pursuant to this Plan that may be considered deferred compensation under Section 409A of the Code (“Section 409A”), the transaction or event described in clause (i), (ii) or (iii) shall only constitute a Change of Control for purposes of this Agreement if such transaction or event also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).
1.6 “Code” means the Internal Revenue Code of 1986, as amended, and the Treasury Regulations and other interpretive guidance thereunder.
1.7 “Confidentiality Agreement” shall mean any Employee Confidentiality and Proprietary Rights Agreement (or similar agreement concerning confidentiality) between the Company and an Eligible Employee.
1.8 “Committee” means the Compensation Committee of the Board.
1.9 “Company” means Teladoc Health, Inc. and any successors thereto and, where the context requires, its subsidiaries.
1.10 “Effective Date” shall mean June 1, 2023.
1.11 “Eligible Employee” means any full-time employee of the Company or any Affiliate at the employment level of fourteen (14) or above, as designated by the Company’s Human Resources department, who is not otherwise entitled to any severance pay or benefits or prior notice of employment termination (or pay in lieu of such prior notice) under any binding contract or agreement with the Company or its Affiliate (except as otherwise expressly provided therein).
1.12 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
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1.13 “Good Reason” shall mean the occurrence of any of the following events or conditions without an Eligible Employee’s written consent: (i) a material diminution in such Eligible Employee’s base salary or target annual bonus level; (ii) a material diminution in such Eligible Employee’s authority, duties or responsibilities, other than as a result of a Change of Control immediately after which such Eligible Employee holds a position with the Company or its successor (or any other entity that owns substantially all of the Company’s business after such sale) that is substantially equivalent with respect to the Company’s business as such Eligible Employee held immediately prior to such Change of Control; (iii) a change in the geographic location of such Eligible Employee’s principal place of employment to any location that is more than seventy-five (75) miles from the location immediately prior to such change; or (iv) the failure of the Company to obtain an agreement from any successor to all or substantially all of the business or assets of the Company to assume this Plan; provided that an Eligible Employee must provide written notice to the Company of the occurrence of any of the foregoing events or conditions within sixty (60) days of the occurrence of such event and such event or condition must remain uncured for thirty (30) days following the Company’s receipt of such written notice. Any voluntary termination for “Good Reason” following such 30-day cure period must occur no later than the date that is thirty (30) days following the expiration of the Company’s cure period.
1.14 “Qualifying Termination” means (i) a termination by an Eligible Employee of his or her employment with the Company for Good Reason or (ii) a termination by the Company of an Eligible Employee’s employment with the Company without Cause.
1.15 “Plan” means the Teladoc Health, Inc. Level 14 Severance Plan, as set forth herein, as it may be amended from time to time.
1.16 “Plan Administrator” means the Committee, or such other person or persons appointed from time to time by the Committee to administer the Plan.
1.17 “Target Bonus Amount” means an Eligible Employee’s target annual bonus amount in effect at the time of such Eligible Employee’s Qualifying Termination (disregarding any decrease in such target annual bonus amount that constitutes a Good Reason event).
SECTION 2. SEVERANCE BENEFITS
2.1 Severance Upon a Qualifying Termination. Subject to the terms of the Plan, if an Eligible Employee has a Qualifying Termination that does not occur on the date of or within twelve (12) months following a Change of Control, then subject to (x) the requirements of this Section 2, (y) such Eligible Employee’s continued compliance with the terms of the Confidentiality Agreement and (z) the terms of Section 7, such Eligible Employee shall be entitled to receive the following payments and benefits:
(a) The Company shall pay to such Eligible Employee (i) his or her fully earned but unpaid base salary through the date of such Eligible Employee’s Qualifying Termination, (ii) any accrued but unpaid paid time off and (iii) any other amounts or benefits, if any, under the Company’s employee benefit plans, programs or arrangements to which such Eligible Employee may be entitled pursuant to the terms of such plans, programs or arrangements or applicable law, payable in accordance with the terms of such plans, programs or arrangements or as otherwise required by applicable law (collectively, the “Accrued Rights”);
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(b) Such Eligible Employee shall receive continued payment of the Base Salary for a period of six (6) months following the termination date (the “Salary Severance Period”) in accordance with the Company’s ordinary payroll practices;
(c) The Company will pay such Eligible Employee the amount of any earned but unpaid annual bonus for the year immediately prior to the year in which such Eligible Employee’s Qualifying Termination occurs, as determined by the Board (or an authorized committee) in its good faith discretion, payable in a lump sum at the same time annual bonuses are paid to other Company executives generally but in no event later than December 31 of the year in which such Eligible Employee’s Qualifying Termination occurs;
(d) If such Eligible Employee timely elects continued coverage under COBRA for him or herself and his or her covered dependents under the Company’s group health (medical, dental or vision) plans following such Qualifying Termination, then the Company shall pay the COBRA premiums necessary to continue such Eligible Employee’s and his or her covered dependents’ health insurance coverage in effect on the termination date until the earliest of (i) six (6) months following the effective date of such Qualifying Termination (the “COBRA Severance Period”), (ii) the date when such Eligible Employee becomes eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment (and such Eligible Employee agrees to promptly notify the Company of such eligibility) and (iii) the date such Eligible Employee ceases to be eligible for COBRA continuation coverage for any reason, including plan termination (such period from the Qualifying Termination date through the earlier of (i)-(iii), the “COBRA Payment Period”). Notwithstanding the foregoing, if at any time the Company determines that its payment of COBRA premiums on such Eligible Employee’s behalf would result in a violation of applicable law (including but not limited to the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act) or an excise tax, then in lieu of paying COBRA premiums pursuant to this Section 2.1(d), the Company shall pay such Eligible Employee on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premium for such month, subject to applicable tax withholding, such payment to be made without regard to such Eligible Employee’s payment of COBRA premiums; and
(e) All unvested equity or equity-based awards granted to such Eligible Employee under any equity compensation plans of the Company that were scheduled to vest within six (6) months after the date of such Eligible Employee’s termination or resignation shall become immediately vested as to time, with any such awards that are subject to performance-based vesting conditions remaining eligible to vest to the extent the performance conditions are satisfied during such six-month period (provided that nothing herein shall operate to extend the term, if any, of an award beyond the final expiration date provided in the applicable award agreement or prohibit the award from being treated in substantially the same manner as awards held by Company employees in the context of a Change of Control or other corporate transaction).
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2.2 Severance Upon Qualifying Termination Occurring Within 12 Months Following a Change of Control. If an Eligible Employee has a Qualifying Termination that occurs on the date of or within twelve (12) months following a Change of Control, then subject to (x) the requirements of this Section 2, (y) such Eligible Employee’s continued compliance with the terms of the Confidentiality Agreement and (z) the terms of Section 7, such Eligible Employee shall be entitled to receive the payments and benefits described in Section 2.1 above; provided that: (a) the Salary Severance Period shall be increased to nine (9) months; (b) the COBRA Severance Period shall be increased to nine (9) months; (c) the Company shall pay such Eligible Employee an additional amount equal to seventy-five percent (75%) of the Target Bonus Amount, payable in a lump sum on the Company’s first ordinary payroll date occurring after the effective date of such Eligible Employee’s Qualifying Termination; and (d) in lieu of the treatment set forth in Section 2.1(e) above, all unvested equity or equity-based awards granted to such Eligible Employee under any equity compensation plans of the Company shall become immediately vested as to time and any such awards that are subject to performance-based vesting will remain eligible to vest to the extent the performance conditions are thereafter satisfied (provided that nothing herein shall operate to extend the term, if any, of an award beyond the final expiration date provided in the applicable award agreement or prohibit the award from being treated in substantially the same manner as awards held by Company employees in the context of a Change of Control or other corporate transaction).
2.3 Other Terminations. Upon an Eligible Employee’s termination of employment for any reason other than as set forth in Section 2.1 and Section 2.2, the Company shall pay to such Eligible Employee the Accrued Rights and shall have no other or further obligations to such Eligible Employee under this Plan. The foregoing shall be in addition to, and not in lieu of, any and all other rights and remedies which may be available to the Company under the circumstances, whether at law or in equity.
2.4 Release. As a condition to an Eligible Employee’s receipt of any amounts set forth in Section 2.1 or Section 2.2 other than the Accrued Rights, such Eligible Employee shall, within the sixty (60) day period following the date of such Eligible Employee’s Qualifying Termination, deliver (without revoking) prior to receipt of such severance benefits, an effective, general release of claims in favor of the Company or its successor, its subsidiaries and their respective directors, officers and stockholders in a form acceptable to the Company or its successor, such form to contain a reaffirmation of the Confidentiality Agreement, a promise not to disparage the Company, its business, or its employees, officers, directors or stockholders, and any other non-competition, non-solicitation, non-disparagement, confidentiality, or assignment of inventions covenants contained in any other agreement between such Eligible Employee and the Company. The form of the general release will be provided to such Eligible Employee not later than five (5) days following the date of such Eligible Employee’s Qualifying Termination.
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SECTION 3. PLAN ADMINISTRATION.
3.1 The Plan Administrator shall administer the Plan and may interpret the Plan, prescribe, amend and rescind rules and regulations under the Plan and make all other determinations necessary or advisable for the administration of the Plan, subject to all of the provisions of the Plan.
3.2 The Plan Administrator may delegate any of its duties hereunder to such person or persons from time to time as it may designate.
3.3 The Plan Administrator is empowered to engage accountants, legal counsel and such other personnel as it deems necessary or advisable to assist it in the performance of its duties under the Plan. The functions of any such persons engaged by the Plan Administrator shall be limited to the specified services and duties for which they are engaged, and such persons shall have no other duties, obligations or responsibilities under the Plan. Such persons shall exercise no discretionary authority or discretionary control respecting the management of the Plan. All reasonable expenses thereof shall be borne by the Company.
SECTION 4. CLAIM FOR BENEFITS AND APPEALS PROCESS.
4.1 Submission and non-revocation of the Release, as specified above in Section 2.4, is a precondition to benefits eligibility, even when designated as an Eligible Employee. The Release shall be provided to an Eligible Employee no later than five (5) days following the Separation Date, and must be executed and delivered as set forth in the Release within 60 days from the Separation Date.
4.2 If you do not receive benefits under this Plan for which you believe you are eligible, you may contact the Company in writing by sending your claim for benefit entitlement to [ ], and the Company will review your claim. If your application is denied in whole, or in part (for example, the Company believes that you are not an Eligible Employee, you were eligible but submitted an altered Release, or you otherwise failed to properly execute a release), the Company will notify you within 90 days after the Company receives the written claim unless special circumstances (as determined by the Company in its sole discretion) require an extension of time of up to an additional 90 days for processing the claim. Where possible, if such an extension of time for processing is required, written notice of the extension will be furnished to the claimant prior to the end of the initial 90-day period. This notice of extension will indicate the special circumstances requiring the extension of time and the date by which the Company expects to render its decision on the claim for benefits. If a written denial notice is not furnished within the 90-day (or extended 180-day period), the claim will be deemed denied.
4.3 If you wish to appeal the denial of your claim, you (or your duly authorized representative) may apply in writing to the Company for a review of the decision denying the claim. Your appeal should be in writing, signed and submitted to [ ] and specify the basis for your appeal and explain why the Company’s initial determination should be revised. You then will have the right to have a qualified person represent you, review pertinent documents, and to submit issues and comments in writing. The Company (or its designee) will provide written notice of his or her decision on review within sixty (60) days after he or she receives a review request.
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4.4 In the event that a Participant’s claim for benefits under the Plan is denied initially, or denied on review, in whole or in part, the written notice of the denial shall provide the following information:
(a) specific reasons for the denial;
(b) specific references to the pertinent Plan provisions on which the denial is based;
(c) a description of any additional information necessary for the Participant to perfect his or her claim and an explanation of why such information is necessary; and
(d) a description of the Plan’s claims and appeal procedures and the time limits applicable to such procedures, including a statement of the Participant’s right to bring a civil action under ERISA Section 502(a) following a final adverse benefits determination.
SECTION 5. PLAN MODIFICATION OR TERMINATION.
The Plan may be terminated or amended by the Board at any time; provided, however, that during the one-year period following a Change of Control, (a) the Plan may not be terminated and (b) the Plan may not be amended if such amendment would in any manner be adverse to the interests of any Eligible Employee. For the avoidance of doubt, (a) any action taken by the Company or the Plan Administrator to cause an Eligible Employee to no longer be designated as an Eligible Employee or to decrease the benefits under the Plan for which an Eligible Employee is eligible, and (b) any amendment to this Section 4 following the occurrence of a Change of Control shall be treated as an amendment to the Plan which is adverse to the interests of any Eligible Employee.
SECTION 6. Condition to Severance Obligations.
The Company shall be entitled to cease all severance payments and benefits to an Eligible Employee in the event of such Eligible Employee’s breach of any of the provisions of the Confidentiality Agreement or of any other non-competition, non-solicitation, non-disparagement, confidentiality, or assignment of inventions covenants contained in any other agreement between such Eligible Employee and the Company, which other covenants are hereby incorporated by reference into this Plan.
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SECTION 7. GENERAL PROVISIONS.
7.1 Except as otherwise provided herein or by law, no right or interest of any Eligible Employee under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation by execution, levy, garnishment, attachment, pledge or in any manner; no attempted assignment or transfer thereof shall be effective; and no right or interest of any Eligible Employee under the Plan shall be liable for, or subject to, any obligation or liability of such Eligible Employee. When a payment is due under this Plan to a severed employee who is unable to care for his or her affairs, payment may be made directly to his or her legal guardian or personal representative.
7.2 If the Company or any subsidiary thereof is obligated by law to pay severance pay, a termination indemnity, notice pay, or the like, or if the Company or any subsidiary thereof is obligated by law to provide advance notice of separation (“Notice Period”), then any severance pay hereunder shall be reduced (including to zero) by the amount of any such severance pay, termination indemnity, notice pay or the like, as applicable, and by the amount of any compensation received during any Notice Period. For the avoidance of doubt, the severance pay hereunder shall not be duplicative of severance pay, termination indemnity, notice pay, compensation received during any Notice Period or the like, as applicable, payable under applicable law.
7.3 Neither the establishment of the Plan, nor any modification thereof, nor the payment of any benefits shall be construed as giving any Eligible Employee, or any person whomsoever, the right to be retained in the service of the Company or any subsidiary thereof, and all Eligible Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted. Nothing in this Plan will prevent or limit an Eligible Employee’s continuing or future participation in any plan, contract, agreement, practice, policy or program provided by the Company or any Affiliate thereof for which the Eligible Employee may qualify (an “Other Arrangement”), nor will anything in this Plan limit or otherwise affect any rights the Eligible Employee may have under any Other Arrangement with the Company or any Affiliate thereof, provided that the benefits received under this Plan and an Other Arrangement shall not be duplicative.
7.4 If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included.
7.5 This Plan shall inure to the benefit of and be binding upon the heirs, executors, administrators, successors and assigns of the parties, including each Eligible Employee, present and future, and any successor to the Company. If a severed employee shall die while any amount would still be payable to such severed employee hereunder if the severed employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Plan to the executor, personal representative or administrators of the severed employee’s estate.
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7.6 The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.
7.7 The Plan shall not be funded, and no Eligible Employee shall have any right to, or interest in, any assets of any Company which may be applied by the Company to the payment of benefits or other rights under this Plan.
7.8 Any notice or other communication required or permitted pursuant to the terms hereof shall be provided in writing and shall have been duly given when delivered or mailed by United States Mail, first class, postage prepaid, addressed to the intended recipient at his, her or its last known address.
7.9 This Plan shall be construed and enforced according to the laws of the State of Delaware to the extent not preempted by federal law, which shall otherwise control.
7.10 The Company and any of its Affiliates may deduct and withhold from any amounts payable under this Plan such federal, state, local, foreign or other taxes as are required to be withheld pursuant to any applicable law or regulation. All benefits hereunder shall be reduced by applicable withholding and shall be subject to applicable tax reporting, as determined by the Plan Administrator.
7.11 The Plan, as an unfunded “severance pay arrangement” within the meaning of Section 3(2)(B)(i) of ERISA, maintained primarily for the benefit of a select group of management or highly compensated employees, is intended to be excepted from the definitions of “employee pension benefit plan” and “pension plan” set forth under section 3(2) of ERISA, and is intended to meet the descriptive requirements of a plan constituting a “severance pay plan” within the meaning of regulations published by the Secretary of Labor at Title 29, Code of Federal Regulations §2510.3-2(b). Accordingly, the Plan is a welfare plan under Section 3(1) of ERISA and under 29 C.F.R. §2520.104-24.
7.12 The provisions of the Plan shall apply to Eligible Employees outside the United States, provided, however, that the Plan Administrator may make such changes to the terms of the Plan (A) to the extent necessary to comply with applicable local law and (B) to reduce the amounts payable hereunder to the extent of any statutory or other severance due to the Eligible Employee in the applicable jurisdiction.
7.13 Section 409A.
(a) The payments and benefits under this Plan are intended to comply with or be exempt from Section 409A and, accordingly, to the maximum extent permitted, this Plan shall be interpreted to be in compliance therewith. Notwithstanding any provision of this Plan to the contrary, in the event that the Plan Administrator determines that any amounts payable hereunder will be immediately taxable to any Eligible Employee under Section 409A, the Plan Administrator may (without any obligation to do so or to indemnify the Eligible Employee for failure to do so) (A) adopt such amendments to this Plan or adopt such other policies and procedures (including amendments, policies and procedures with retroactive effect) that it determines to be necessary or appropriate to preserve the intended tax treatment of the benefits provided by this Plan or the economic benefits of this Plan and (B) take such other actions it determines to be necessary or appropriate to exempt the amounts payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder.
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(b) Notwithstanding anything in this Plan to the contrary, any compensation or benefits payable under this Plan upon an Eligible Employee’s termination of employment shall be payable only upon the Eligible Employee’s “separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided below, any such compensation or benefits shall not be paid, or, in the case of installments, shall not commence payment, until the 60th day following the Eligible Employee’s Separation from Service (the “First Payment Date”). Any installment payments that would have been made to an Eligible Employee during the sixty (60) day period immediately following the Eligible Employee’s Separation from Service but for the preceding sentence shall be paid to the Eligible Employee on the First Payment Date and the remaining payments shall be made as provided in this Plan.
(c) Notwithstanding any provision of this Plan to the contrary, if an Eligible Employee is deemed by the Company at the time of the Eligible Employee’s Separation from Service to be a “specified employee” for purposes of Section 409A, to the extent delayed commencement of any portion of the benefits to which the Eligible Employee is entitled under this Plan is required in order to avoid a prohibited distribution under Section 409A, such portion of the Eligible Employee’s benefits will not be provided to the Eligible Employee prior to the earlier of (i) the expiration of the six-month period measured from the date of the Eligible Employee’s Separation from Service or (ii) the date of the Eligible Employee’s death. As promptly as possible following the expiration of the applicable Section 409A period, all payments and benefits deferred pursuant to the preceding sentence will be paid in a lump sum to an Eligible Employee (or the Eligible Employee’s estate), and any remaining payments due to the Eligible Employee under this Plan will be paid as otherwise provided herein.
(d) An Eligible Employee’s right to receive any installment payments under this Plan shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment as permitted under Section 409A.
7.14 Section 280G.
(a) Notwithstanding any other provisions of this Plan, in the event that any payment or benefit by the Company or otherwise to or for the benefit of an Eligible Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Plan (all such payments and benefits, including the payments and benefits under Section 2.1 or Section 2.2 of the Plan, being hereinafter referred to as the “Total Payments”), would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Total Payments shall be reduced (in the order provided in subsection (b) below) to the minimum extent necessary to avoid the imposition of the Excise Tax on the Total Payments, but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income and employment taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income and employment taxes on such Total Payments and the amount of the Excise Tax to which the Eligible Employee would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).
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(b) The Total Payments shall be reduced in the following order: (i) reduction on a pro-rata basis of any cash severance payments that are exempt from Section 409A, (ii) reduction on a pro-rata basis of any non-cash severance payments or benefits that are exempt from Section 409A, and (iii) reduction of any payments or benefits otherwise payable to the Eligible Employee on a pro-rata basis or such other manner that complies with Section 409A; provided, in the case of clauses (ii) and (iii), that reduction of any payments attributable to the acceleration of vesting of Company equity awards shall be first applied to Company equity awards that would otherwise vest last in time.
(c) All determinations regarding the application of this Section 7.14 shall be made by an accounting firm or consulting group with experience in performing calculations regarding the applicability of Section 280G of the Code and the Excise Tax selected by the Company (the “Independent Advisors”). For purposes of determinations, no portion of the Total Payments shall be taken into account which, in the opinion of the Independent Advisors, (i) does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) or (ii) constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation. The costs of obtaining such determination and all related fees and expenses (including related fees and expenses incurred in any later audit) shall be borne by the Company.
(d) In the event it is later determined that a greater reduction in the Total Payments should have been made to implement the objective and intent of this Section 7.14, the excess amount shall be returned promptly by the Eligible Employee to the Company.
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