ROSS STORES, INC. NOTICE OF GRANT OF PERFORMANCE SHARES
▇▇▇▇ STORES, INC.
NOTICE OF GRANT OF PERFORMANCE SHARES
NOTICE OF GRANT OF PERFORMANCE SHARES
The Participant has
been granted an award of Performance Shares (the “Award”) pursuant to the ▇▇▇▇ Stores, Inc. 2008
Equity Incentive Plan (the “Plan”) and the Performance Share Agreement
attached hereto (the “Agreement”), as follows:
| Participant: | Employee ID: | ||||||
| Grant Date: | Grant No.: | ||||||
| Target Number of Performance Shares: |
[_______________], subject to adjustment as provided by the Agreement. | ||||||
| Maximum Number of Performance Shares: |
[_______________], subject to adjustment as provided by the Agreement. [Not to exceed 500,000 shares for each full fiscal year in the Performance Period] | ||||||
| Adjusted Pre-Tax
Profit Target: |
$ ____________________ | ||||||
| Performance Period: | Company fiscal year beginning ________, and ending _______. | ||||||
| Performance Share Vesting Date: |
__________, except as provided by the Agreement. | ||||||
| Vested
Performance Shares: |
Provided that the Participant’s Service has not terminated prior to the Performance Share Vesting Date, except as provided by the Agreement, on the Performance Share Vesting Date the number of Vested Performance Shares (not to exceed the Maximum Number of Performance Shares) shall be determined by multiplying the Target Number of Performance Shares by the Adjusted Pre-Tax Profit Multiplier (as defined by the Agreement). | ||||||
| Settlement Date: | The Performance Share Vesting Date, except as otherwise provided by the Agreement. | ||||||
| Vested Common Shares: | Except as provided by the Agreement and provided that the Participant’s Service has not terminated prior to the relevant date, the number of Vested Common Shares shall cumulatively increase on each respective date set forth below by the Vested Percentage set forth opposite such date, as follows: | ||||||
| Common Share Vesting Date | Vested Percentage |
| Settlement Date | 30% |
| 1st Anniversary of Settlement Date | 30% |
| 2nd Anniversary of Settlement Date | 40% |
| Employment Agreement: | Executive Employment Agreement between the Company and the Participant, as in effect at any applicable time. |
By their signatures
below or by electronic acceptance or authentication in a form authorized by the
Company, the Company and the Participant agree that the Award is governed by
this Notice and by the provisions of the Plan and the Performance Share
Agreement, both of which are made a part of this document. The Participant
acknowledges that copies of the Plan, Performance Share Agreement and the
prospectus for the Plan are available on the Company’s internal web site and may
be viewed and printed by the Participant for attachment to the Participant’s
copy of this Grant Notice. The Participant represents that the Participant has
read and is familiar with the provisions of the Plan and Performance Share
Agreement, and hereby accepts the Award subject to all of their terms and
conditions.
| ▇▇▇▇ STORES, INC. | PARTICIPANT | |||
| By: | ||||
| Signature | ||||
| Its: | ||||
| Date | ||||
| Address: | ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ | |||
| Pleasanton, CA 94588 | Address | |||
| ATTACHMENTS: | 2008 Equity Incentive Plan, as amended to the Grant Date, Performance Share Agreement and Plan Prospectus |
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▇▇▇▇ STORES, INC.
PERFORMANCE SHARE AGREEMENT
PERFORMANCE SHARE AGREEMENT
▇▇▇▇ Stores, Inc. has granted to the Participant named in the
Notice of Grant of Performance
Shares (the
“Grant Notice”) to which this Performance Share
Agreement (the “Agreement”) is attached an Award consisting of
Performance Shares subject to the terms and conditions set forth in the Grant
Notice and this Agreement. The Award has been granted pursuant to and shall in
all respects be subject to the terms and conditions of the ▇▇▇▇ Stores, Inc.
2008 Equity Incentive Plan (the “Plan”), as amended to the Grant Date, the
provisions of which are incorporated herein by reference. By signing the Grant
Notice, the Participant: (a) acknowledges receipt of and represents that the
Participant has read and is familiar with the Grant Notice, this Agreement, the
Plan and a prospectus for the Plan (the “Plan Prospectus”) in the form most recently prepared in
connection with the registration with the Securities and Exchange Commission of
shares issuable pursuant to the Plan, (b) accepts the Award subject to all of
the terms and conditions of the Grant Notice, this Agreement and the Plan and
(c) agrees to accept as binding, conclusive and final all decisions or
interpretations of the Committee upon any questions arising under the Grant
Notice, this Agreement or the Plan.
1. DEFINITIONS AND
CONSTRUCTION.
1.1 Definitions. Unless otherwise defined herein,
capitalized terms shall have the meanings assigned in the Grant Notice or the
Plan. Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) “Adjusted Pre-Tax
Profit” means the earnings before taxes as
reported in the Consolidated Statements of Earnings of the Company for the
fiscal year of the Company coinciding with the Performance Period, adjusted to
exclude from the determination of such amount the reduction in earnings
resulting from the accrual of compensation expense for Performance Awards under
the Plan and incentive awards under the Second Amended and Restated ▇▇▇▇ Stores,
Inc. Incentive Compensation Plan, granted in each case, with respect to the
Performance Period.
(b) “Adjusted Pre-Tax Profit
Multiplier” means a number determined as follows:
| Percentage of Adjusted Pre- | Adjusted Pre-Tax Profit | |
| Tax Profit Target Achieved | Multiplier | |
| Less than 90% | 0.00% | |
| 90% | 66.70% | |
| 95% | 83.33% | |
| 100% | 100.00% | |
| 105% | 125.00% | |
| 110% | 150.00% | |
| 115% | 175.00% | |
| Equal to or greater than 120% | 200.00% |
The Adjusted Pre-Tax Profit Multiplier
for percentages of Adjusted Pre-Tax Profit Target achieved falling between the
percentages set forth in the table above shall be determined by linear
interpolation.
(c) “Change in
Control” means a “Change in Control” as defined by
the Employment Agreement.
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(d) “Common Shares” mean shares of Stock issued in
settlement of the Award.
(e) “Expiration of Participant’s Employment
Agreement Due to Non-Renewal” means the expiration of the Employment
Agreement due to its “Non-Renewal,” as provided by the Employment Agreement.
(f) “Performance
Share” means a right to receive on the
Settlement Date one (1) Common Share, subject to further restrictions as
provided by this Agreement, if such Performance Share is then a Vested
Performance Share.
(g) “Termination Due to
Disability” means the termination of the
Participant’s employment due to “Disability” as defined by and upon terms set
forth in the Employment Agreement.
(h) “Termination for
Cause” means the termination of the
Participant’s employment for “Cause” as defined by the Employment Agreement.
(i) “Termination for Good
Reason” means the Participant’s termination of
employment for “Good Reason” as defined by the Employment Agreement.
(j) “Termination Without
Cause” means the termination of the
Participant’s employment “Without Cause” as defined by the Employment Agreement.
(k) “Voluntary
Termination” means the “Voluntary Termination” of the
Participant’s employment as defined by the Employment Agreement.
1.2 Construction. Captions and titles contained herein are
for convenience only and shall not affect the meaning or interpretation of any
provision of this Agreement. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term “or” is not intended to be exclusive, unless the context clearly
requires otherwise.
2. ADMINISTRATION.
All questions of interpretation
concerning the Grant Notice, this Agreement and the Plan shall be determined by
the Committee. All determinations by the Committee shall be final and binding
upon all persons having an interest in the Award as provided by the Plan. Any
Officer shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company herein, provided the Officer has apparent
authority with respect to such matter, right, obligation, or election. If the
Participant is a Covered Employee, compensation realized by the Participant
pursuant to the Award is intended to constitute qualified performance-based
compensation within the meaning of Section 162(m) of the Code and the
regulations thereunder, and the provisions of this Agreement shall be construed
and administered in a manner consistent with this intent. The Company intends
that the Award comply with Section 409A of the Code (including any amendments or
replacements of such section) and the regulations thereunder, and the provisions
of this Agreement shall be construed and administered in a manner consistent
with this intent.
3. THE AWARD.
3.1 Grant of Performance Shares. On the Grant Date, the Participant shall
acquire, subject to the provisions of this Agreement, a right to receive a
number of Performance Shares which shall not exceed the Maximum Number of
Performance Shares set forth in the Grant Notice, subject to adjustment as
provided in Section 12. The number of Performance Shares, if any, ultimately
earned by the Participant, shall be that number of Performance Shares which
become Vested Performance Shares.
3.2 No Monetary Payment Required. The Participant is not required to make
any monetary payment (other than applicable tax withholding, if any) as a
condition to receiving the Performance Shares or the Common Shares issued upon
settlement of the Performance Shares, the consideration for which shall be past
services actually rendered and/or future services to be rendered to a
Participating Company or for its benefit. Notwithstanding the foregoing, if
required by applicable state corporate law, the Participant shall furnish
consideration in the form of cash or past services rendered to a Participating
Company or for its benefit having a value not less than the par value of the
Common Shares issued upon settlement of the Performance Shares.
4. CERTIFICATION OF THE
COMMITTEE.
4.1 Level of Adjusted Pre-Tax Profit Attained. As soon as practicable following
completion of the Performance Period, and in any event prior to the Performance
Share Vesting Date, the Committee shall certify in writing the level of
attainment of Adjusted Pre-Tax Profit during the Performance Period and the
resulting number of Performance Shares which shall become Vested Performance
Shares on the Performance Share Vesting Date, subject to the Participant’s
continued Service until the Performance Share Vesting Date, except as otherwise
provided by Section 5. The Company shall promptly notify the Participant of the
determination by the Plan Administrator.
4.2 Adjustment to Adjusted Pre-Tax Profit for Extraordinary Items.
The Committee shall
adjust Adjusted Pre-Tax Profit, as it deems appropriate, to exclude the effect
(whether positive or negative) of any of the following occurring after the grant
of the Award: (a) a change in accounting standards required by generally
accepted accounting principles or (b) any extraordinary, unusual or nonrecurring
item. Each such adjustment, if any, shall be made solely for the purpose of
providing a consistent basis from period to period for the calculation of
Adjusted Pre-Tax Profit in order to prevent the dilution or enlargement of the
Participant’s rights with respect to the Award.
5. VESTING OF PERFORMANCE SHARES.
5.1 In General. Except as provided by this Section 5 and Section 11, the Performance
Shares shall vest and become Vested Performance Shares as provided in the Grant
Notice and certified by the Committee.
5.2 Effect of Termination for Cause or Voluntary Termination.
In the event of the
Termination for Cause or Voluntary Termination of the Participant prior to the
Performance Share Vesting
Date, the Participant shall forfeit and the Company shall automatically
reacquire all of the Performance Shares subject to the Award. The Participant
shall not be entitled to any payment for such forfeited Performance Shares.
5.3 Effect of Death or Termination Due to Disability. In the event of the death or Termination
Due to Disability of the Participant prior to the Performance Share Vesting
Date, then on the Performance Share Vesting Date a number of Performance Shares
shall become Vested Performance Shares equal to that number of Performance
Shares that would have become Vested Performance Shares had no such death or
termination occurred.
5.4 Effect of Termination Without Cause, Termination for Good Reason or
Effect of Expiration of Participant’s Employment Agreement Due to Non-Renewal.
In the event of the
Participant’s Termination Without Cause, Termination for Good Reason or
Expiration of Employment Agreement Due to Non-Renewal prior to the Performance
Share Vesting Date, then on the Performance Share Vesting Date the number of
Performance Shares that shall become Vested Performance Shares shall be
determined by multiplying (a) that number of Performance Shares that would have
become Vested Performance Shares had no such termination occurred, however, in
no case shall the number of Performance Shares that become Vested Performance
Shares exceed 100% of the Target Number of Performance Shares set forth in the
Notice of Grant of Performance Shares by (b) the ratio of the number of full
months of the Participant’s employment with the Company during the Performance
Period to the number of full months contained in the Performance
Period.
5.5 Forfeiture of Unvested Performance Shares. Except as otherwise provided by this
Section 5 or Section 11, on the Performance Share Vesting Date, the Participant
shall forfeit and the Company shall automatically reacquire all Performance
Shares subject to the Award which have not become Vested Performance Shares
(“Unvested Performance
Shares”). The Participant shall not be entitled
to any payment for such forfeited Performance Shares.
5.6 Ownership Change Event, Dividends, Distributions and
Adjustments. Upon the occurrence of an Ownership
Change Event, a dividend or distribution to the stockholders of the Company paid
in shares of Stock or other property, or any other adjustment upon a change in
the capital structure of the Company as described in Section 4.4 of the Plan,
any and all new, substituted or additional securities or other property (other
than regular, periodic dividends paid on Stock pursuant to the Company’s
dividend policy) to which the Participant is entitled by reason of the
Participant’s ownership of Unvested Performance Shares shall be immediately
subject to the Company Reacquisition Right and included in the terms
“Performance Shares” and “Unvested Performance Shares” for all purposes of this
Section 5 with the same force and effect as the Unvested Performance Shares
immediately prior to the Ownership Change Event, dividend, distribution or
adjustment, as the case may be. For purposes of determining the number of Vested
Performance Shares following an Ownership Change Event, dividend, distribution
or adjustment, credited Service shall include all Service with any corporation
which is a Participating Company at the time the Service is rendered, whether or
not such corporation is a Participating Company both before and after any such
event.
6. SETTLEMENT OF THE
AWARD.
6.1 Issuance of Common Shares. Subject to the provisions of Section 6.3
below, the Company shall issue to the Participant on the Settlement Date with
respect to each Vested Performance Share one (1) Common Share. Common Shares
issued in settlement of Performance Shares shall be subject to the vesting
conditions, Company Reacquisition Right and restrictions on transfer set forth
in Sections 7, 8.1 and 15, respectively, and any such other restrictions as may
be required pursuant to Section 6.3, Section 10 or the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Policy.
6.2 Beneficial Ownership of Common Shares; Certificate
Registration. The Participant hereby authorizes the
Company, in its sole discretion, to deposit for the benefit of the Participant
with any broker with which the Participant has an account relationship of which
the Company has notice any or all vested Common Shares acquired by the
Participant pursuant to the settlement of the Award. Further, the Participant
hereby authorizes the Company, in its sole discretion, to deposit unvested
Common Shares with the Company’s transfer agent, including any successor
transfer agent, to be held in book entry form during the term of the Escrow
pursuant to Section 9. Except as otherwise provided by this Section, a
certificate for the Common Shares as to which the Award is settled shall be
registered in the name of the Participant, or, if applicable, in the names of
the heirs of the Participant.
6.3 Restrictions on Grant of the Award and Issuance of Common
Shares. The grant of the Award and issuance of
Common Shares upon settlement of the Award shall be subject to compliance with
all applicable requirements of federal, state law or foreign law with respect to
such securities. No Common Shares may be issued hereunder if the issuance of
such shares would constitute a violation of any applicable federal, state or
foreign securities laws or other law or regulations or the requirements of any
stock exchange or market system upon which the Stock may then be listed. The
inability of the Company to obtain from any regulatory body having jurisdiction
the authority, if any, deemed by the Company’s legal counsel to be necessary to
the lawful issuance of any Common Shares subject to the Award shall relieve the
Company of any liability in respect of the failure to issue such shares as to
which such requisite authority shall not have been obtained. As a condition to
the settlement of the Award, the Company may require the Participant to satisfy
any qualifications that may be necessary or appropriate, to evidence compliance
with any applicable law or regulation and to make any representation or warranty
with respect thereto as may be requested by the Company.
6.4 Fractional Shares. The Company shall not be required to
issue fractional Common Shares upon the settlement of the Award. Any fractional
share resulting from the determination of the number of Vested Performance
Shares shall be rounded up to the nearest whole number.
7. VESTING OF COMMON SHARES.
7.1 In General. Except as provided by this Section 7 and Section 11, the Common Shares
issued in settlement of the Award shall vest and become Vested Common Shares as
provided in the Grant Notice; provided however, that Common Shares that would
otherwise become Vested Common Shares on a date (the “Original Vesting
Date”) on which a sale of such shares by the
Participant would violate the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Policy shall, not withstanding the
vesting schedule set forth
in the Grant Notice, become Vested Common Shares on the first to occur of (a)
the next business day on which such sale would not violate the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Policy or (b) the later of (i) the last day of the calendar year in which the
Original Vesting Date occurred or (ii) the last day of the Company’s taxable
year in which the Original Vesting Date occurred.
7.2 Effect of Termination for Cause or Voluntary Termination.
In the event of the
Termination for Cause or Voluntary Termination of the Participant on or after
the Settlement Date, no additional Common Shares shall become Vested Common
Shares.
7.3 Effect of Death, Termination Due to Disability, Termination Without
Cause, Termination for Good Reason Expiration of Participant’s Employment
Agreement Due to Non-Renewal. In the event of the death, Termination
Due to Disability, Termination Without Cause, Termination for Good Reason or
Expiration of Employment Agreement Due to Non-Renewal of the Participant prior
to the Performance Share Vesting Date, then on the Settlement Date the Company
shall issue to the Participant one (1) Vested Common Share for each Vested
Performance Share determined in accordance with Section 5.3 or Section 5.4. In
the event of the death, Termination Due to Disability, Termination Without
Cause, Termination for Good Reason or Expiration of Employment Agreement Due to
Non-Renewal of the Participant on or after the Settlement Date, then the vesting
of all Unvested Common Shares issued in settlement of the Award shall be
accelerated in full effective as of the date of such death, termination or
contract expiration; provided however, that if such vesting acceleration would
otherwise result in shares becoming Vested Common Shares on a date on which a
sale of such shares by the Participant would violate the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Policy,
then such shares shall become Vested Common Shares on the first to occur of (a)
the next business day on which such sale would not violate the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Policy or (b) the later of (i) the last day of the calendar year in which the
Original Vesting Date occurred or (ii) the last day of the Company’s taxable
year in which the Original Vesting Date occurred.
8. COMPANY REACQUISITION RIGHT.
8.1 Grant of Company Reacquisition Right. Except to the extent otherwise provided
by this Agreement, in the event that (a) the Participant’s Service terminates or
(b) the Participant, the Participant’s legal representative, or other holder of
the shares, attempts to sell, exchange, transfer, pledge, or otherwise dispose
of (other than pursuant to an Ownership Change Event), including, without
limitation, any transfer to a nominee or agent of the Participant, any Common
Shares which are not Vested Common Shares (“Unvested Common
Shares”), the Company shall automatically
reacquire the Unvested Common Shares, and the Participant shall not be entitled
to any payment therefor (the “Company Reacquisition
Right”).
8.2 Ownership Change Event, Non-Cash Dividends, Distributions and
Adjustments. Upon the occurrence of an Ownership
Change Event, a dividend or distribution to the stockholders of the Company paid
in shares of Stock or other property, or any other adjustment upon a change in
the capital structure of the Company as described in Section 4.4 of the Plan,
any and all new, substituted or additional securities or other property (other
than regular, periodic cash dividends paid on Stock pursuant to the Company’s
dividend policy) to which the Participant is entitled by reason of the Participant’s ownership of
Unvested Common Shares shall be immediately subject to the Company Reacquisition
Right and included in the terms “Common Shares,” “Stock” and “Unvested Common
Shares” for all purposes of the Company Reacquisition Right with the same force
and effect as the Unvested Common Shares immediately prior to the Ownership
Change Event, dividend, distribution or adjustment, as the case may be. For
purposes of determining the number of Vested Common Shares following an
Ownership Change Event, dividend, distribution or adjustment, credited Service
shall include all Service with any corporation which is a Participating Company
at the time the Service is rendered, whether or not such corporation is a
Participating Company both before and after any such event.
8.3 Obligation to Repay Certain Cash Dividends and Distributions.
The Participant
shall, at the discretion of the Company, be obligated to promptly repay to the
Company upon termination of the Participant’s Service any dividends and other
distributions paid to the Participant in cash with respect to Unvested Common
Shares reacquired by the Company pursuant to the Company Reacquisition Right.
9. ESCROW.
9.1 Appointment of Agent. To ensure that Common Shares subject to the Company Reacquisition Right
will be available for reacquisition, the Participant and the Company hereby
appoint the Secretary of the Company, or any other person designated by the
Company, as their agent and as attorney-in-fact for the Participant (the
“Agent”) to hold any and all Unvested Common
Shares and to sell, assign and transfer to the Company any such Unvested Common
Shares reacquired by the Company pursuant to the Company Reacquisition Right.
The Participant understands that appointment of the Agent is a material
inducement to make this Agreement and that such appointment is coupled with an
interest and is irrevocable. The Agent shall not be personally liable for any
act the Agent may do or omit to do hereunder as escrow agent, agent for the
Company, or attorney in fact for the Participant while acting in good faith and
in the exercise of the Agent’s own good judgment, and any act done or omitted by
the Agent pursuant to the advice of the Agent’s own attorneys shall be
conclusive evidence of such good faith. The Agent may rely upon any letter,
notice or other document executed by any signature purporting to be genuine and
may resign at any time.
9.2 Establishment of Escrow. The Participant authorizes the Company to
deposit the Unvested Common Shares with the Company’s transfer agent to be held
in book entry form, as provided in Section 6.2, and the Participant agrees to
deliver to and deposit with the Agent each certificate, if any, evidencing the
Unvested Common Shares and, if required by the Company, an Assignment Separate
from Certificate with respect to such book entry shares and each such
certificate duly endorsed (with date and number of Common Shares blank) in the
form attached to the Notice, to be held by the Agent under the terms and
conditions of this Section 9 (the “Escrow”). Upon the occurrence of a Change in
Control or a change, as described in Section 12, in the character or amount of
any outstanding stock of the corporation the stock of which is subject to the
provisions of this Agreement, any and all new, substituted or additional
securities or other property to which the Participant is entitled by reason of
his or her ownership of the Unvested Common Shares that remain, following such
Change in Control or change described in Section 12, subject to the Company
Reacquisition Right shall be immediately subject to the Escrow to the same
extent as the Unvested Common Shares immediately before such event. The Company
shall bear the expenses of the Escrow.
9.3 Delivery of Common Shares to Participant. The Escrow shall continue with respect to
any Common Shares for so long as such Common Shares remain subject to the
Company Reacquisition Right. Upon termination of the Company Reacquisition Right
with respect to Common Shares, the Company shall so notify the Agent and direct
the Agent to deliver such number of Common Shares to the Participant. As soon as
practicable after receipt of such notice, the Agent shall cause to be delivered
to the Participant the Common Shares specified by such notice, and the Escrow
shall terminate with respect to such Common Shares.
10. TAX MATTERS.
10.1 Tax Withholding.
(a) In General. At
the time the Grant Notice is executed, or at any time thereafter as requested by
the Company, the Participant hereby authorizes withholding from payroll and any
other amounts payable to the Participant, and otherwise agrees to make adequate
provision for, any sums required to satisfy the federal, state, local and
foreign tax withholding obligations of the Company, if any, which arise in
connection with the Award or the issuance of Common Shares in settlement
thereof. The Company shall have no obligation to process the settlement of the
Award or to deliver Common Shares until the tax withholding obligations as
described in this Section have been satisfied by the Participant.
(b) Assignment of Sale Proceeds; Payment of Tax Withholding by Check.
Subject to compliance
with applicable law and the Company’s ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Policy, the Company may
permit the Participant to satisfy the Participating Company’s tax withholding
obligations in accordance with procedures established by the Company providing
for either (i) delivery by the Participant to the Company or a broker approved
by the Company of properly executed instructions, in a form approved by the
Company, providing for the assignment to the Company of the proceeds of a sale
with respect to some or all of the Vested Shares, or (ii) payment by check. The
Participant shall deliver written notice of any such permitted election to the
Company on a form specified by the Company for this purpose at least thirty (30)
days (or such other period established by the Company) prior to the date on
which the Company’s tax withholding obligation arises (the “Withholding
Date”). If the Participant elects payment by
check, the Participant agrees to deliver a check for the full amount of the
required tax withholding to the applicable Participating Company on or before
the third business day following the Withholding Date. If the Participant elects
payment by check but fails to make such payment as required by the preceding
sentence, the Company is hereby authorized, at its discretion, to satisfy the
tax withholding obligations through any means authorized by this Section 10.1,
including by directing a sale for the account of the Participant of some or all
of the Vested Shares from which the required taxes shall be withheld, by
withholding from payroll and any other amounts payable to the Participant or by
withholding shares in accordance with Section 10.1(c).
(c) Withholding in Common Shares. The Company may require the Participant
to satisfy its tax withholding obligations by deducting from the Common Shares
otherwise deliverable to the Participant in settlement of the Award or from the
Common Shares otherwise to be released from the Company Reacquisition Right a
number of whole, Vested Common Shares having a fair market value, as determined
by the Company as of the date on which the tax withholding obligations arise,
not in excess of the amount of such tax withholding obligations determined by
the applicable minimum statutory withholding rates.
10.2 Election Under Section 83(b) of the Code.
(a) The Participant understands that Section
83 of the Code taxes as ordinary income the difference between the amount paid
for the Common Shares, if anything, and the fair market value of the Common
Shares as of the date on which the Common Shares are “substantially vested,”
within the meaning of Section 83. In this context, “substantially vested” means
that the right of the Company to reacquire the Common Shares pursuant to the
Company Reacquisition Right has lapsed. The Participant understands that he or
she may elect to have his or her taxable income determined at the time he or she
acquires the Common Shares rather than when and as the Company Reacquisition
Right lapses by filing an election under Section 83(b) of the Code with the
Internal Revenue Service no later than thirty (30) days after the date of
acquisition of the Common Shares. The Participant understands that failure to
make a timely filing under Section 83(b) will result in his or her recognition
of ordinary income, as the Company Reacquisition Right lapses, on the difference
between the purchase price, if anything, and the fair market value of the Common
Shares at the time such restrictions lapse. The Participant further understands,
however, that if Common Shares with respect to which an election under Section
83(b) has been made are forfeited to the Company pursuant to its Company
Reacquisition Right, such forfeiture will be treated as a sale on which there is
realized a loss equal to the excess (if any) of the amount paid (if any) by the
Participant for the forfeited Common Shares over the amount realized (if any)
upon their forfeiture. If the Participant has paid nothing for the forfeited
Common Shares and has received no payment upon their forfeiture, the Participant
understands that he or she will be unable to recognize any loss on the
forfeiture of the Common Shares even though the Participant incurred a tax
liability by making an election under Section 83(b).
(b) The Participant understands that he or
she should consult with his or her tax advisor regarding the advisability of
filing with the Internal Revenue Service an election under Section 83(b) of the
Code, which must be filed no later than thirty (30) days after the date of the
acquisition of the Common Shares pursuant to this Agreement. Failure to file an
election under Section 83(b), if appropriate, may result in adverse tax
consequences to the Participant. The Participant acknowledges that he or she has
been advised to consult with a tax advisor regarding the tax consequences to the
Participant of the acquisition of Common Shares hereunder. ANY ELECTION UNDER
SECTION 83(b) THE PARTICIPANT WISHES TO MAKE MUST BE FILED NO LATER THAN 30 DAYS
AFTER THE DATE ON WHICH THE PARTICIPANT ACQUIRES THE COMMON SHARES. THIS TIME
PERIOD CANNOT BE EXTENDED.
THE PARTICIPANT ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS
THE PARTICIPANT’S SOLE RESPONSIBILITY, EVEN IF THE PARTICIPANT REQUESTS THE COMPANY OR ITS
REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
(c) The Participant will notify the Company
in writing if the Participant files an election pursuant to Section 83(b) of the Code. The
Company intends, in the event it does not receive from the Participant evidence
of such filing, to claim a tax deduction for any amount which would otherwise be
taxable to the Participant in the absence of such an election.
11. CHANGE IN CONTROL.
11.1 Effect of Change in Control on Performance Shares. In the event of the consummation of a
Change in Control prior to the Performance Share Vesting Date, the vesting of
100% of the Target Number of Performance Shares shall be accelerated and such
Performance Shares shall be deemed Vested Performance Shares effective as of the
date of the Change in Control. The Award shall be settled in full in accordance
with Section 6 immediately prior to the Change in Control, provided that the
Participant’s Service has not terminated prior to the Change in Control. In
settlement of the Award, the Company shall issue to the Participant one (1)
Vested Common Share for each Vested Performance Share determined in accordance
with this Section. The vesting of Performance Shares and settlement of the Award
that was permissible solely by reason of this Section shall be conditioned upon
the consummation of the Change in Control.
11.2 Effect of Change in Control on Common Shares. In the event of the consummation of a
Change in Control on or after the Settlement Date, the vesting of all Unvested
Common Shares issued in settlement of the Award shall be accelerated in full
effective as of the date of the Change in Control.
11.3 Federal Excise Tax Under Section 4999 of the Code.
(a) Excess Parachute Payment. In the event that any acceleration of
vesting the Performance Shares or the Common Shares and any other payment or
benefit received or to be received by the Participant would subject the
Participant to any excise tax pursuant to Section 4999 of the Code due to the
characterization of such acceleration of vesting, payment or benefit as an
“excess parachute payment” under Section 280G of the Code, the amount of any
acceleration of vesting called for by this Agreement shall not exceed the amount
which produces the greatest after-tax benefit to the Participant.
(b) Determination by Independent Accountants. Upon the occurrence of any event that
might reasonably be anticipated to result in an “excess parachute payment” to
the Participant as described in Section 11.3(a) (an “Event”), the Company shall request a
determination in writing by independent public accountants selected by the
Company (the “Accountants”). Unless the Company and the Participant
otherwise agree in writing, the Accountants shall determine and report to the
Company and the Participant within twenty (20) days of the date of the Event the
amount of such acceleration of vesting, payments and benefits which would
produce the greatest after-tax benefit to the Participant. For the purposes of
such determination, the Accountants may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and the Participant shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make their required determination. The Company shall bear all fees and
expenses the Accountants may
reasonably charge in connection with their services contemplated by this
Section.
12. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.
Subject to any required action by the
stockholders of the Company and the requirements of Section 409A of the Code to
the extent applicable, in the event of any change in the Stock effected without
receipt of consideration by the Company, whether through merger, consolidation,
reorganization, reincorporation, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, split-up, split-off, spin-off,
combination of shares, exchange of shares, or similar change in the capital
structure of the Company, or in the event of payment of a dividend or
distribution to the stockholders of the Company in a form other than Stock
(excepting normal cash dividends) that has a material effect on the Fair Market
Value of shares of Stock, appropriate adjustments shall be made in the number of
Performance Shares and/or the number and kind of shares to be issued in
settlement of the Award, in order to prevent dilution or enlargement of the
Participant’s rights under the Award. For purposes of the foregoing, conversion
of any convertible securities of the Company shall not be treated as “effected
without receipt of consideration by the Company.” Any fractional share resulting
from an adjustment pursuant to this Section shall be rounded down to the nearest
whole number. Such adjustments shall be determined by the Committee, and its
determination shall be final, binding and conclusive.
13. RIGHTS AS A STOCKHOLDER OR EMPLOYEE.
The Participant shall have no rights as a
stockholder with respect to any Common Shares which may be issued in settlement
of this Award until the date of the issuance of a certificate for such shares
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). No adjustment shall be made for
dividends, distributions or other rights for which the record date is prior to
the date such certificate is issued, except as provided in Section 12. If the
Participant is an Employee, the Participant understands and acknowledges that,
except as otherwise provided in a separate, written employment agreement between
the Company or a Parent or Subsidiary and the Participant, the Participant’s
employment is “at will” and is for no specified term. Nothing in this Agreement
shall confer upon the Participant any right to continue in Service interfere in
any way with any right of the Company or any Parent or Subsidiary to terminate
the Participant’s Service at any time.
14. LEGENDS.
The Company may at any time place legends
referencing any applicable federal, state or foreign securities law restrictions
on all certificates representing Common Shares issued pursuant to this
Agreement. The Participant shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to this Award in the possession of the Participant in order to carry
out the provisions of this Section. Unless otherwise specified by the Company,
legends placed on such certificates may include, but shall not be limited to,
the following:
“THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO RESTRICTIONS SET FORTH IN AN AGREEMENT BETWEEN THIS
CORPORATION AND THE REGISTERED HOLDER, OR HIS PREDECESSOR IN INTEREST, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.”
15. RESTRICTIONS ON TRANSFER OF COMMON SHARES.
No Common Shares may be sold, exchanged,
transferred (including, without limitation, any transfer to a nominee or agent
of the Participant), assigned, pledged, hypothecated or otherwise disposed of,
including by operation of law, in any manner which violates any of the
provisions of this Agreement and, except pursuant to an Ownership Change Event,
until the date on which such shares become Vested Common Shares, and any such
attempted disposition shall be void. The Company shall not be required (a) to
transfer on its books any Common Shares which will have been transferred in
violation of any of the provisions set forth in this Agreement or (b) to treat
as owner of such Common Shares or to accord the right to vote as such owner or
to pay dividends to any transferee to whom such Common Shares will have been so
transferred. In order to enforce its rights under this Section, the Company
shall be authorized to give a stop transfer instruction with respect to the
Common Shares to the Company’s transfer agent.
16. COMPLIANCE WITH SECTION 409A.
It is intended that any election, payment
or benefit which is made or provided pursuant to or in connection with this
Award that may result in Section 409A Deferred Compensation shall comply in all
respects with the applicable requirements of Section 409A (including applicable
regulations or other administrative guidance thereunder, as determined by the
Committee in good faith) to avoid the unfavorable tax consequences provided
therein for non-compliance. In connection with effecting such compliance with
Section 409A, the following shall apply:
16.1 Required Delay in Payment to Specified Employee. If the Participant is a “specified
employee” of a publicly traded corporation as defined under Section
409A(a)(2)(B)(i) of the Code, unless subject to an applicable exception under
Section 409A, any payment of Section 409A Deferred Compensation in connection
with a “separation from service” (as determined for purposes of Section 409A)
shall not be made until six (6) months after the Participant’s separation from
service (the “Section 409A Deferral
Period”). In the
event such payments are otherwise due to be made in installments or periodically
during the Section 409A Deferral Period, to the extent permitted under Section
409A, the payments of Section 409A Deferred Compensation which would otherwise
have been made in the Section 409A Deferral Period shall be accumulated and paid
in a lump sum as soon as the Section 409A Deferral Period ends, and the balance
of the payments shall be made as otherwise scheduled.
16.2 Other Delays in Payment. Neither the Participant nor the Company
shall take any action to accelerate or delay the payment of any benefits under
this Agreement in any manner which would not be in compliance with Code Section
409A (including any transition or grandfather rules thereunder).
16.3 Amendments to Comply with Section 409A; Indemnification.
Notwithstanding any
other provision of this Agreement to the contrary, the Company is authorized to
amend this Agreement, to void or amend any election made by the Participant
under this Agreement and/or to delay the payment of any monies and/or provision
of any benefits in such manner as may be determined by the Company, in its
discretion, to be necessary or appropriate to comply with Section 409A
(including any transition or grandfather rules thereunder) without prior notice
to or consent of the Participant. The Participant hereby releases and holds
harmless the Company, its directors, officers and stockholders from any and all
claims that may arise from or relate to any tax liability, penalties, interest,
costs, fees or other liability incurred by the Participant in connection with
the Award, including as a result of the application of Section 409A.
16.4 Advice of Independent Tax Advisor. The Company has not obtained a tax ruling
or other confirmation from the Internal Revenue Service with regard to the
application of Section 409A to the Award, and the Company does not represent or
warrant that this Agreement will avoid adverse tax consequences to the
Participant, including as a result of the application of Section 409A to the
Award. The Participant hereby acknowledges that he or she has been advised to
seek the advice of his or her own independent tax advisor prior to entering into
this Agreement and is not relying upon any representations of the Company or any
of its agents as to the effect of or the advisability of entering into this
Agreement.
17. MISCELLANEOUS PROVISIONS.
17.1 Termination or Amendment. The Committee may terminate or amend the
Plan or this Agreement at any time; provided, however, that except as provided
in Section 11 in connection with a Change in Control, no such termination or
amendment may adversely affect the Participant’s rights under this Agreement
without the consent of the Participant unless such termination or amendment is
necessary to comply with applicable law or government regulation, including, but
not limited to, Section 409A. No amendment or addition to this Agreement shall
be effective unless in writing.
17.2 Nontransferability of the Award. Prior the issuance of Common Shares on
the Settlement Date, neither this Award nor any Performance Shares subject to
this Award shall be subject in any manner to anticipation, alienation, sale,
exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors
of the Participant or the Participant’s beneficiary, except transfer by will or
by the laws of descent and distribution. All rights with respect to the Award
shall be exercisable during the Participant’s lifetime only by the Participant
or the Participant’s guardian or legal representative.
17.3 Unfunded Obligation. The Participant shall have the status of a general unsecured creditor of
the Company. Any amounts payable to the Participant pursuant to the Award shall
be an unfunded and unsecured obligation for all purposes, including, without
limitation, Title I of the Employee Retirement Income Security Act of 1974. The
Company shall not be required to segregate any monies from its general funds, or
to create any trusts, or establish any special accounts with respect to such
obligations. The Company shall retain at all times beneficial ownership of any
investments, including trust investments, which the Company may make to fulfill
its payment obligations hereunder. Any investments or the creation or
maintenance of any trust or any Participant account shall not create or
constitute a trust or fiduciary relationship between the Committee or the Company and
the Participant, or otherwise create any vested or beneficial interest in the
Participant or the Participant’s creditors in any assets of the Company. The
Participant shall have no claim against the Company for any changes in the value
of any assets which may be invested or reinvested by the Company with respect to
the Award.
17.4 Further Instruments. The parties hereto agree to execute such further instruments and to take
such further action as may reasonably be necessary to carry out the intent of
this Agreement.
17.5 Binding Effect. This Agreement shall inure to the benefit of the successors and assigns
of the Company and, subject to the restrictions on transfer set forth herein, be
binding upon the Participant and the Participant’s heirs, executors,
administrators, successors and assigns.
17.6 Delivery of Documents and Notices. Any document relating to participation in
the Plan or any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given (except to the extent that this Agreement
provides for effectiveness only upon actual receipt of such notice) upon
personal delivery, electronic delivery at the e-mail address, if any, provided
for the Participant by the Company or a Parent or Subsidiary, or upon deposit in
the U.S. Post Office or foreign postal service, by registered or certified mail,
or with a nationally recognized overnight courier service, with postage and fees
prepaid, addressed to the other party at the address shown below that party’s
signature to the Grant Notice or at such other address as such party may
designate in writing from time to time to the other party.
(a) Description of Electronic Delivery. The Plan documents, which may include but
do not necessarily include: the Plan, the Grant Notice, this Agreement, the Plan
Prospectus, and any reports of the Company provided generally to the Company’s
stockholders, may be delivered to the Participant electronically. In addition,
the Participant may deliver electronically the Grant Notice to the Company or to
such third party involved in administering the Plan as the Company may designate
from time to time. Such means of electronic delivery may include but do not
necessarily include the delivery of a link to a Company intranet or the Internet
site of a third party involved in administering the Plan, the delivery of the
document via e-mail or such other means of electronic delivery specified by the
Company.
(b) Consent to Electronic Delivery. The Participant acknowledges that the
Participant has read Section 17.6(a) of this Agreement and consents to the
electronic delivery of the Plan documents and Grant Notice, as described in
Section 17.6(a). The Participant acknowledges that he or she may receive from
the Company a paper copy of any documents delivered electronically at no cost to
the Participant by contacting the Company by telephone or in writing. The
Participant further acknowledges that the Participant will be provided with a
paper copy of any documents if the attempted electronic delivery of such
documents fails. Similarly, the Participant understands that the Participant
must provide the Company or any designated third party administrator with a
paper copy of any documents if the attempted electronic delivery of such
documents fails. The Participant may revoke his or her consent to the electronic
delivery of documents described in Section 17.6(a) or may change the electronic
mail address to which such documents are to be delivered (if Participant has
provided an electronic mail address) at any time by notifying the Company of
such revoked consent or revised e-mail address by telephone, postal service or electronic mail.
Finally, the Participant understands that he or she is not required to consent
to electronic delivery of documents described in Section 17.6(a).
17.7 Integrated Agreement. The Grant Notice, this Agreement and the Plan, together with the
Employment Agreement, shall constitute the entire understanding and agreement of
the Participant and the Company with respect to the subject matter contained
herein or therein and supersede any prior agreements, understandings,
restrictions, representations, or warranties between the Participant and the
Company with respect to such subject matter other than those as set forth or
provided for herein or therein. To the extent contemplated herein or therein,
the provisions of the Grant Notice, this Agreement and the Plan shall survive
any settlement of the Award and shall remain in full force and effect.
17.8 Applicable Law. This Agreement shall be governed by the laws of the State of California
as such laws are applied to agreements between California residents entered into
and to be performed entirely within the State of California.
17.9 Counterparts. The Grant Notice may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
17.10 Recoupment Policy. Subject to the discretion and approval of the Board, the Company may, to
the extent permitted by governing law, require reimbursement and/or cancellation
of any Performance Share or Common Share issued in settlement of a Performance
Share where all of the following factors are present: (a) the award was
predicated upon the achievement of certain financial results that were
subsequently the subject of a material restatement, (b) the Board determines
that the Participant engaged in fraud or intentional misconduct that was a
substantial contributing cause to the need for the restatement, and (c) a lower
award would have been made to the Participant based upon the restated financial
results.