Nautilus has a Director Compensation Program that provides for compensation of the non-employee members of our Board. Director compensation consists of annual retainers, meeting fees, fees for service as a committee chair, and awards of equity compensation. Directors who are employees receive no additional or special remuneration for serving as directors.
Under the Director Compensation Program, each non-employee director receives an annual retainer of $42,500 and a fee of $1,500 for attendance at each Board meeting. Our Board's Chairman receives an additional annual fee of $30,000. Each director serving on a committee of our Board receives an additional fee of $1,500 for attendance at each committee meeting. The Chair of the Audit Committee receives an additional annual retainer of $10,000, while the Chairs of the Compensation Committee and the Nominating and Corporate Governance Committee each receive an additional annual retainer of $5,000. We also reimburse non-employee director expenses for attending meetings of the board of directors.
The following table identifies our executive officers as of the date of this Proxy Statement, the positions they hold and the year in which they began serving as officers of Nautilus. Our Board appoints all of our executive officers, who hold office until their respective successors are elected and qualified.
Following are the biographies of the foregoing persons, except the biography of Mr. Barr, which is located above under the heading “Proposal No. 1: Election of Directors.”
of the sales and marketing teams. Prior to joining Nautilus, Mr. McGregor was the Senior Vice President, Global Sales from 2017 to 2018 for Ergobaby Inc., the global market leader in the baby carrier category. Prior to Ergobaby, Mr. McGregor was the Vice President of Sales - Americas for Reef Sandals from 2014 to 2016. Mr. McGregor has held various senior level sales and marketing positions in leading footwear and outdoor companies, including Adidas, Birkenstock USA, the Coleman Co., Gerber Legendary Blades, and Teva. Mr. McGregor holds a B.S. degree from Cal State University - Long Beach, as well as a Ryan Lifetime Teaching Credential (K-12) in Physical Education, Mathematics & Science, and attended the INSEAD Excellence in Leadership program in Fountainebleau, France.
Becky L. Alseth joined Nautilus, Inc. as Vice President of Marketing and Direct in March 2020. In her role, Ms. Alseth leads the Direct to Consumer business, as well as marketing for the Company. Prior to joining Nautilus, Becky held senior marketing and branding positions at Fortune 500 companies including Avis Budget Group and The Clorox Company, as well as global giants, Diageo and Nestle, with repeat successes of growing market share, customer loyalty and brand equity. Most recently she oversaw marketing at Ritchie Bros. Auctioneers where she led efforts to position the company as a multi-channel innovator in asset disposition. A native of Montana, Becky earned her Bachelor of Science in Society & Technology from Montana Tech and her MBA from the University of Washington Foster School of Business in Seattle.
COMPENSATION DISCUSSION AND ANALYSIS
In this section of the proxy statement, we identify the material elements of our compensation programs for all of our executive officers, including an overview of our executive compensation philosophy and the processes and methodology we use in making executive pay decisions. We also provide detailed information regarding compensation paid to each Named Executive Officer (“NEO”). Our NEOs for 20192020 are our Chief Executive Officer, Chief Financial Officer and our twothree most highly compensated executive officers other than the Chief Executive Officer and Chief Financial Officer, who were serving as executive officers as of December 31, 2019,2020, as follows:
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| | | | | | | |
Name | | Position |
James Barr, IV (1) | | Chief Executive Officer |
M. Carl Johnson, III (2)
| | Former Interim Chief Executive Officer |
Bruce M. Cazenave (3)
| | Former Chief Executive Officer |
Aina E. Konold (4) | | Chief Financial Officer |
JefferyBecky L. CollinsAlseth (1) | | Chief Marketing Officer |
Wayne M. Bolio | | Senior Vice President, General Manager, International and Commercial SpecialtyCounsel |
Christopher K. Quatrochi | | Senior Vice President, Innovation |
| | |
(1) Mr. Barr joined Nautilus on July 29, 2019. Ms. Alseth joined Nautilus on March 2, 2020. |
|
(2) Mr. Johnson served as Interim Chief Executive Officer from March 1, 2019 until Mr. Barr was appointed in July 2019.
(3) Mr. Cazenave resigned from his position effective on March 1, 2019.
(4) Ms. Konold joined Nautilus on December 10, 2019.
Executive Summary
Overview
The executive compensation program is comprised of three primary elements:
•a base salary that is intended to provide a market-competitive base level of compensation;
•a cash-based short-term incentive program that rewards the achievement of explicit, measurable, company financial objectives in the areas of operating income and net revenue growth, as well as individual and company achievement of short- and long-term business objectives; and
•an equity-based long-term incentive program that rewards the achievement of sustained increases in shareholder value over the long term.
Our executive officers are eligible to participate in our other employee benefits programs on the same terms as our eligible non-executive employees. Nautilus does not provide any material executive perquisites. Unexercised stock options held by our executive officers expire 90 days following termination, which areis the same termsterm that applyapplies to our non-executive employees.
Governance of Our Executive Compensation Program
The Compensation Committee (herein referred to as the "Committee"“Committee”) has overall responsibility for the evaluation, approval and oversight of our compensation plans, policies and programs and the total direct compensation of our executive officers. The Committee has sole responsibility for determining our CEO’s compensation and for reviewing it with our Board. Our CEO provides recommendations to the Committee on compensation matters for our other executive officers. From time to time, the Committee seeks input from an independent compensation consultant who advises the Committee regarding executive compensation matters.
During 2019, Meridian Compensation Partners,2020, Semler Brossy, LLC (“Meridian”Semler Brossy”) was engaged by the Committee to advise it on executive compensation matters. All of the services that MeridianSemler Brossy performs for Nautilus are performed at the request of the Committee, are related to executive and/or director compensation, and are in support of decision making by the Committee.
The Committee considered Meridian’sSemler Brossy’s independence in light of SEC rules and New York Stock Exchange listing standards. The Committee reviewed a questionnaire completed by MeridianSemler Brossy addressing factors pertaining to the independence of MeridianSemler Brossy and the senior advisor involved in the engagement, including the following factors: (1) other services provided to us by Meridian;Semler Brossy; (2) fees paid by us as a percentage of Meridian’sSemler Brossy's total revenue; (3) policies and procedures maintained by MeridianSemler Brossy that are designed to prevent a conflict of interest; (4) any business or personal relationships between the senior advisor and a member of the Committee; (5) any company stock owned by MeridianSemler Brossy or the senior advisor; and (6) any business or personal relationships between our executive officers and MeridianSemler Brossy or the senior advisor. The Committee discussed these considerations and concluded that the
work performed by MeridianSemler Brossy and Meridian’sSemler Brossy’s senior advisor involved in the engagement did not raise any conflict of interest. MeridianSemler Brossy reports directly to the Committee and supports the Committee by:
•providing information on executive compensation best practices and current trends;
•reviewing compensation-guiding principles and recommending assessment methodologies;
•conducting detailed executive compensation assessments, including development of appropriate peer group, and providing preliminary recommendations for executive compensation adjustments; and
•providing conceptual guidance and design advice on short-term and long-term incentive programs.
Compensation Philosophy
Our executive compensation program is designed with two primary objectives in mind:
•attracting, retaining and motivating executives critical to our financial stability and future success; and
•rewarding executives for meeting ambitious financial, operational and individual performance goals and taking effective actions which are expected to increase shareholder value over time.
Consistent with these objectives, we offer our executive officers a mix of base salary, short-term incentive cash compensation, long-term equity-based incentives, health and welfare benefits and employment contracts. While we do not target a specific percentage allocation for base salary, short-term incentive compensation or long-term incentives (as a percent of total compensation), we operate under the general philosophy of targeting a total compensation opportunity that is competitive within our market for executive talent. Relative to our peer group, we believe that we generally target a greater percentage of the executives’ total compensation opportunity as variable compensation. We do not believe the elements of our compensation program are structured so as to encourage excessive risk taking by any of our executives, but are part of an overall compensation and management philosophy designed to increase shareholder value over time.
Peer group data are used to compare our compensation program for executive officers with that of executives in comparable roles at peer group companies. A comprehensive compensation review was not conducted in 2019.
Based upon the selection criteria, which targeted high-end consumer products companies with annual revenues similar to Nautilus, the following companies were chosen for our peer group:
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● | Acushnet Holdings Corp. (GOLF) | ● | Lifetime Brands, Inc. (LCUT) |
● | Bassett Furniture Industries, Inc. (BSET) | ● | Malibu Boats, Inc. (MBUU) |
● | Callaway Golf Co. (ELY) | ● | Marine Products Corporation (MPX) |
● | Ethan Allen Interiors Inc. (ETH) | ● | MCBC Holdings, Inc.MasterCraft (MCFT) |
● | Flexsteel Industries, Inc. (FLXS) | ● | Movado Group, Inc. (MOV) |
● | Hooker Furniture Corporation (HOFT) | ● | Vera Bradley, Inc. (VRA) |
● | iRobot Corporation (IRBT) | ● | ZAGG Inc. (ZAGG) |
● | Johnson Outdoors Inc. (JOUT) | | |
Peer group data for the aforementioned companies is supplemented by data from published relevant compensation surveys, providing additional market-based analytical data for corporate executive pay at companies similar in industry, annual revenues or other relevant metrics.
The Committee has not established a desired competitive position for target total compensation by any specific percentile range of our peer group. Individual levels of compensation are affected by the executive’s experience, performance and potential, as assessed by the Committee with input from the CEO. The Committee has considered the results of the advisory vote on executive compensation conducted during the 20192020 annual meeting of shareholders, which indicatedresulted in majority vote percentage in support for the Committee's current executive compensation policies.
Base Salaries
Base salaries of our executive officers are intended to attract and retain executives, as part of the total compensation package, by providing a competitive base level of compensation. Base salaries are typically considered by the Compensation Committee on an annual basis, as well as in connection with the hiring of a new executive, a promotion or other changes in an incumbent executive’s job responsibilities. Base salaries of executive officers are determined by evaluating the responsibilities of the position, the experience and performance of the individual, and by reference to the competitive marketplace median for corporate executive positions of comparable scope, duties and responsibilities.
Long-Term Incentive Program
Long-term incentives are intended to focus executive behavior on making decisions that meaningfully contribute to our long-term success as reflected in our stock price. Under our long-term incentive plan,In October 2020, the CompensationBoard of Directors approved, upon recommendation of the Committee, may grant equity awardsan increase in the formannual base salary of stock options, stock appreciation rights, restricted stock, performance stock units ("PSUs") or time-vested restricted stock units ("RSUs")Aina Konold, to executive officers$385,000 and other employees. Stock options have exercise prices equalChristopher Quatrochi, to $325,000. In addition, the fair market valueBoard of our common stock on the date of grant as defined by the plan.Directors promoted Becky Alseth from Vice President, Marketing and Direct to Chief Marketing Officer. In granting these awards, the Compensation Committee may establish vesting conditions or other restrictions it deems appropriate.connection with her promotion, Ms. Alseth received an increase in her annual base salary to $325,000.
Short-Term Incentive Program
Our short-term incentive program for 2019 remained similar2020 is designed to compensate eligible employees based on the plan implemented in 2012.accomplishment against two measurable factors. The program focuses on achievement of certain annual companytwo factors include financial goals including operating income and net revenue growth (Corporate Financial Factor), as well as company-level key strategic initiatives (Key Initiative Factor)metrics and individual performancestrategic goals, that were established for the performance period.with each factor having a 50% weight towards an individual’s bonus target. Under the short-term incentive program, individual plan participants are eligible to receive incentive compensation in the form of cash bonuses based on a target percentage of their annual base salary. Individual bonus target amounts under the short-term incentive program remained unchanged in 2019.2020.
2019The calculation for determining an individual executive’s incentive amount earned under the short-term incentive program is a product of: 1) the executive’s base salary; 2) the executive’s target bonus percentage; and 3) combined achievement against the Financial Factor and Individual Performance Factor. For 2020, the combined maximum payout allowed under the plan was 150% of target.
Individual Bonus Targets
Individual bonus targets established under our short-term incentive program for 2020 for our NEOs ranged from 50% to 100% of annual eligible wages, consisting of base salaries and payable up to a maximum of 150% of target, as follows:
| | | | | |
| Individual Bonus Target (% of eligible wages) |
James Barr, IV | 100% |
Aina E. Konold | 60% |
Becky L. Alseth | 50% |
Wayne M. Bolio | 50% |
Christopher K. Quatrochi | 50% |
Corporate Financial Factor
We conduct our business in two segments, Direct and Retail. Our Direct business offers products directly to consumers primarily through our websites. Our Retail business offers our products through a network of independent companies to reach consumers in the home use markets in the U.S. and internationally. The Retail operating segment currently includes three Channels: mass retail, commercial & specialty retail, and international. The Direct operating segment is referred to as the direct Channel.
The Corporate Financial metric targets are comprised of Revenue and Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”). In addition to the Corporate Financial metrics, an individual responsible for a Channel may have Channel Financial metrics that are comprised of Channel Revenue and Channel Contribution. The Achievement against the Financial metrics can range from 30% to 200%, assuming established threshold levels are met. If the threshold is not met for a specific metric, achievement will be 0% for that metric. The Corporate Financial Factor is calculated on a calendar year basis for 2020. Each company financial goal is assigned a weighting. The 2020 Corporate Financial criteria and specific weightings were as follows:
| | | | | | | | | | | | | | |
Corporate Financial Criteria Weighting |
Net Sales | | EBITDA | | Combined Corporate Financial Factor |
20% | | 30% | | 50% |
Individual Performance Factor
In addition to the corporate financial factor, individual performance objectives were established for each executive officer in the form of formal written strategic goals. Performance was measured against individual goals related to, for example, long-term strategic planning, cost optimization, market research, connected fitness, organizational transformation and product development milestones. Achievement against the individual performance factor could range from 0% to 50%.
2020 Short-Term Incentive Program Payments
For 20192020 performance, our NEOs did not earnearned awards pursuant to the short-term incentive program based on achieving the following company performance metrics:
| | | | | | | | | | | | | | |
Corporate Financial Achievement |
Net Sales | | EBITDA | | Combined Corporate Financial Factor |
40% | | 60% | | 100% |
| | | | | |
Individual Performance Factor Achievement |
James Barr, IV | 50% |
Aina E. Konold | 50% |
Becky L. Alseth | 50% |
Wayne M. Bolio | 50% |
Christopher K. Quatrochi | 50% |
Based on the achievement of the Corporate Financial Factor and Individual Performance Factor, our NEOs earned the maximum payout allowed under the plan, 150% of target.
Based on the level of goals achieved, the NEOs earned the following short-term incentive compensation related to 2020:
| | | | | |
Incentive Amounts Earned |
James Barr, IV | $ | 825,000 | |
Aina E. Konold | 321,058 | |
Becky L. Alseth | 165,865 | |
Wayne M. Bolio | 198,750 | |
Christopher K. Quatrochi | 207,404 | |
Long-Term Incentive Program
Long-term incentives are intended to focus executive behavior on making decisions that meaningfully contribute to our long-term success as targeted financialreflected in our stock price. Under our long-term incentive plan, the Committee may grant equity awards in the form of stock options, stock appreciation rights, restricted stock, performance stock units (“PSUs”) or time-vested restricted stock units (“RSUs”) to executive officers and other employees. Stock options have exercise prices equal to the fair market value of our common stock on the date of grant as defined by the plan. In granting these awards, the Committee may establish vesting conditions or other restrictions it deems appropriate.
New Hire Equity Grants
Our executive officers generally are provided an equity grant upon commencement of their employment. The Committee reviews the equity position of executive officers on a periodic basis. Additionally, an executive officer’s overall equity position is reviewed at the time of promotion and an additional grant may be considered at that time. An equity award was granted to Ms. Alseth in March 2020 upon her being hired as Vice President of Marketing and Direct. An additional equity award was granted to Ms. Alseth in October 2020 upon her promotion to Chief Marketing Officer. Equity awards granted were as follows:
| | | | | |
| Restricted Stock Units(1) |
Becky L. Alseth (2) | 25,000 | |
Becky L. Alseth (3) | 10,000 | |
| |
| | |
(1) RSUs vest in three equal annual installments on the anniversary of the grant date. |
(2) RSUs awarded for new hire. |
(3) RSUs awarded for promotion. |
Equity Incentives
In 2020, Semler Brossy conducted a benchmark equity compensation analysis to assist the Committee in determining equity grants. The Committee approved a grant of equity compensation, which included a mix of RSUs and PSUs, both issued under our long-term incentive plan. The RSUs vest in three equal annual installments on the anniversary of the grant date, subject to the grantee's continuous employment through such date. The PSUs vest based on achievement metrics, includingof goals established for operating income growth as a percentage of net revenue and revenue growth,return on invested capital metrics over a three-year performance period. The actual number of shares issued under a PSU award is based on the level at which the financial goals are achieved and can range from a 60% minimum threshold to a maximum of 150%.
Equity awards granted to our NEOs in 2020 were as follows:
| | | | | | | | | | | | | | |
| | Restricted Stock Units (1) | | Performance Stock Units (2) |
James Barr, IV | | 128,923 | | | 128,923 | |
Aina E. Konold | | — | | | — | |
Becky L. Alseth | | 69,184 | | | 17,092 | |
Wayne M. Bolio | | 41,412 | | | 20,706 | |
Christopher K. Quatrochi | | 36,235 | | | 18,118 | |
| | |
(1) RSUs vest in three equal annual installments on the anniversary of the grant date. Shares granted to Ms. Alseth include her award upon hire to the position of Vice President of Marketing and Direct, as well as her award for her promotion to Chief Marketing Officer as described above under "New Hire Equity Grants." |
(2) PSUs are subject to vesting based on achievement of specific financial targets for the three-year vesting term of the award. The actual number of PSUs vested can range from 0% to 150%, depending on the attainment of specific company performance goals. |
Early 2021 Compensation Decisions
The Committee met in early 2021 to approve a one-time revision to the short-term incentive plan and long-term incentive plan due to our change in fiscal year-end. This one-time revision will cover our performance for January 1 through March 31, 2021. The Committee will meet in May to review and approve compensation decisions for fiscal year 2022 ending March 31, 2022.
Short-Term Incentive Plan
For the performance period of January 1 through March 31, 2021, the short-term incentive plan will focus on achievement of solely corporate financial goals. The financial goals are comprised of Revenue and EBITDA. The combined maximum payout allowed for this timeframe is 200% of target. Incentive targets for this specific timeframe are unchanged from the 2020 targets.
The Committee confirmed the following short-term incentive targets for January 1 through March 31, 2021, which will be applied towards eligible wages in the respective period:
| | | | | |
| Individual Bonus Target (% of eligible wages) |
James Barr, IV | 100% |
Aina E. Konold | 60% |
Becky L. Alseth | 50% |
Wayne M. Bolio | 50% |
Christopher K. Quatrochi | 50% |
Long-Term Incentive Plan
In early 2021, the Committee approved RSU grants under our long-term incentive plan. These grants were a proration of typical annual grants, focused on the time period between our prior fiscal year-end and current fiscal year-end. These grants vest in three equal annual installments on the anniversary of the grant date, subject to the grantee's continuous employment through such date.
Equity awards granted to our NEOs in February 2021 were as follows:
| | | | | | | | |
| | Restricted Stock Units (1) |
James Barr, IV | | 10,195 | |
Aina E. Konold | | 3,568 | |
Becky L. Alseth | | 2,636 | |
Wayne M. Bolio | | — | |
Christopher K. Quatrochi | | 2,636 | |
| | |
(1) RSUs vest in three equal annual installments on the anniversary of the grants. |
(2) Mr. Bolio will be retiring in May 2021 and, therefore, no 2021 awards were granted. |
Perquisites and Other Benefits
Our executive officers are eligible to participate in our medical, dental, vision, flexible spending, health savings account, 401(k), life, disability, Employee Stock Purchase Plan, and wellness programs on substantially the same terms as eligible non-executive employees, subject to legal limits on the amounts that may be contributed or paid to executive officers under these plans. No significant perquisites are provided to our executive officers.
Post-Employment Obligations
We believe that modest post-employment benefits are an important factor in maintaining the stability of our executive management team. We have separate severance arrangements with each of our currently-employed NEOs under their respective employment agreements. These documents outline the terms and conditions of the post-employment benefits. The agreements provide that, in the event of an involuntary termination of employment for reasons other than cause, Nautilus will pay severance of twelve months for Mr. Barr, nine months for Ms. Konold, six months for Mr. Bolio and Ms. Alseth, and four months for Mr. Quatrochi of the employee's base salary. In general, the definition of “cause” includes: indictment or conviction of the employee for a crime that, in our judgment, makes the employee unfit or unable to perform his or her duties, or adversely affects our reputation; employee dishonesty related to his or her employment; violation of key company policies; insubordination; serious conflicts of interest or self-dealing; intentional or grossly negligent conduct by the employee that is significantly injurious to us; certain serious performance failures by the employee; and, death or disability of the employee. In addition, if the employee leaves for “good reason” (as such terms are defined in the applicable employment agreement), we may be obligated to pay separation benefits to the employee.
The agreements with our executives also provide for continuation, during the severance period, of health benefits under COBRA for the employee and covered dependents, at active employee premium rates. Refer to the table entitled “Other Potential Post-Employment Payments” and related notes for information regarding severance and post-employment benefits that may be payable to our NEOs upon their termination.
Severance payments are made in accordance with our normal payroll cycle over the severance period. Severance payments for our NEOs will cease in the event the employee obtains subsequent employment, within the salary continuation period, at a salary equal to the employee's salary at the time of termination. Severance payments will be reduced in the event the NEO obtains subsequent employment, within the salary continuation period, at a salary less than the employee's salary at the time of termination. Distributions are subject to certain restrictions imposed by Internal Revenue Code Section 409A.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a company can deduct in any one year for certain executive officers. While the Committee considers the deductibility of awards as one factor in determining executive compensation, the Committee also believes that it is important to preserve flexibility in administering compensation programs in a manner designed to promote varying corporate goals.
The option awards exercised and stock awards vested during 2020 for our executive officers were not met.performance-based as described under Section 162(m) because the applicable performance criteria have not been specifically approved by the shareholders. In addition, base salary is not performance-based under Section 162(m), and therefore, would not be deductible to the extent the $1 million limit of Section 162(m) is exceeded. In 2020, a portion of the compensation paid to James Barr, IV and Aina E. Konold was not deductible.
Clawback Policy
Our Board of Directors has adopted an executive compensation clawback (“recoupment”) policy, which is a part of our Corporate Governance Policies. Under our recoupment policy, the Board must, in all appropriate circumstances, require an executive officer to reimburse the Company for any annual incentive payment or long-term incentive payment to the executive officer where: (i) the payment was predicated upon achieving certain financial results that were subsequently the subject of a substantial restatement of our financial statements filed with the SEC; (ii) the Board determines the executive engaged in intentional misconduct that caused or substantially caused the need for the substantial restatement; and (iii) a lower payment would have been made to the executive based on the restated financial results. In each such instance, we will, to the extent practicable, seek to recover from the individual executive the amount by which the individual executive’s incentive payments for the relevant period exceeded the lower payment that would have been made based on the restated financial results.
Hedging Policy
The Company has adopted a policy prohibiting our executive officers and non-executive employees from engaging in short sales and transactions involving publicly-traded options. In addition, with limited exceptions, our executive officers are prohibited from holding Nautilus securities in margin accounts and from pledging Nautilus securities as collateral for loans. We believe that these policies further align our executives’ interests with those of our shareholders.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation earned by, awarded to or paid to our NEOsNamed Executive Officers ("NEOs") serving as of December 31, 2020, for each of the twothree years ended December 31, 2018, 2019, and 2018, respectively:2020:
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| | Year | | Salary | | Bonus (1) | | Stock Awards(2) | | Option Awards(3) | | All Other Compensation(4) | | Total |
James Barr, IV | | 2019 | | $ | 211,539 |
| | $ | 275,000 |
| | $ | 1,173,321 |
| | $ | 531,405 |
| | $ | 180,419 |
| | $ | 2,371,684 |
|
Chief Executive Officer (5) | | | | | | | | | | | | | | |
M. Carl Johnson, III | | 2019 | | 226,923 |
| | — |
| | 66,200 |
| | — |
| | 10,933 |
| | 304,056 |
|
Interim Chief Executive Officer (6) | | | | | | | | | | | | | | |
Bruce M. Cazenave | | 2019 | | 125,000 |
| | — |
| | — |
| | — |
| | 3,750 |
| | 128,750 |
|
Former Chief Executive Officer (7) | | 2018 | | 490,385 |
| | — |
| | 650,014 |
| | — |
| | 9,625 |
| | 1,150,024 |
|
Aina E. Konold | | 2019 | | 5,385 |
| | 100,000 |
| | 694,800 |
| | — |
| | — |
| | 800,185 |
|
Chief Financial Officer (8) | | | | | | | | | | | | | |
|
|
Jeffery L. Collins | | 2019 | | 255,385 |
| | 24,500 |
| | 42,975 |
| | — |
| | 4,953 |
| | 327,813 |
|
Vice President, General Manager | | 2018 | | 242,115 |
| | — |
| | 220,507 |
| | — |
| | 5,103 |
| | 467,725 |
|
International and Commercial Specialty | | | | | | | | | | | | | | |
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| | Year | | Salary | | Bonus (1) | | Stock Awards(2) | | Option Awards(3) | | | All Other Compensation(4) | | Total |
James Barr, IV | | 2020 | | $ | 571,154 | | | $ | 825,000 | | | $ | 1,712,097 | | | $ | — | | | | $ | 9,625 | | | $ | 3,117,876 | |
Chief Executive Officer (5) | | 2019 | | 211,539 | | | — | | | 1,173,321 | | | 531,405 | | | | 455,419 | | | 2,371,684 | |
| | 2018 | | — | | | — | | | — | | | — | | | | — | | | — | |
Aina E. Konold | | 2020 | | 370,192 | | | 321,058 | | | — | | | — | | | | 109,810 | | | 801,060 | |
Chief Financial Officer (6) | | 2019 | | 5,385 | | | — | | | 694,800 | | | — | | | | 100,000 | | | 800,185 | |
| | 2018 | | — | | | — | | | — | | | — | | | | — | | | — | |
Becky Alseth | | 2020 | | 221,400 | | | 165,865 | | | 614,623 | | | — | | | | 29,135 | | | 1,031,023 | |
Chief Marketing Officer (7) | | 2019 | | — | | | — | | | — | | | — | | | | — | | | — | |
| | 2018 | | — | | | — | | | — | | | — | | | | — | | | — | |
Wayne M. Bolio | | 2020 | | 275,192 | | | 225,250 | | | 412,464 | | | — | | | | 5,376 | | | 918,282 | |
Senior Vice President, General Counsel | | 2019 | | 265,000 | | | 26,500 | | | 19,240 | | | — | | | | 9,625 | | | 320,365 | |
| 2018 | | 263,077 | | | 265,013 | | | — | | | — | | | | 9,208 | | | 537,298 | |
Christopher K. Quatrochi | | 2020 | | 286,731 | | | 233,904 | | | 360,904 | | | — | | | | 4,703 | | | 886,242 | |
Senior Vice President, Innovation | | 2019 | | 265,000 | | | 26,500 | | | 22,200 | | | — | | | | 4,601 | | | 318,301 | |
| | 2018 | | 254,808 | | | — | | | 365,512 | | | — | | | | 59,344 | | | 679,664 | |
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(1) The amount reflectsamounts reported reflect cash bonus payments earned pursuant to the short-term incentive plan. Additionally, Mr. Bolio's and Mr. Quatrochi's amounts reflect the second installment of a discretionarycash bonus of $275,000 paid to Mr. Barr as a sign-on bonus; $100,000 paid to Ms. Konold as a sign-on bonus;granted in early 2019 and $24,500 paid to Mr. Collins for extraordinary service.earned in January 2020. |
(2) The amounts reported reflect the aggregate grant date fair value of equity awards granted under our 2015 Long-Term Incentive Plan.LTIP. For further information regarding our stock-based compensation, see Notes 1 and 1718 of Notes to Consolidated Financial Statements, included in our Annual Report on Form 10-K for the year ended December 31, 2019.2020. |
(3) The amount reflects the aggregate grant date fair value of a stock option awarded to Mr. Barr upon his employment as Chief Executive Officer. |
(4) The amounts reported in this column reflect employer paid 401(k) match and/or taxable fringe benefits. Additionally, Mr. Barr's 2019 amount includes a discretionary bonus of $275,000 as a sign-on bonus and $174,496 in relocation payments; Ms. Konold's 2020 and 2019 amounts each include a $100,000 installment of her sign-on bonus, which totaled $200,000; and Mr. Johnson's 2019Quatrochi's 2018 amount includes a $4,000 in stipend in lieu of participation in Company healthcare benefits.$20,025 sign-on bonus and $35,000 relocation bonus. |
(5) Mr. Barr joined Nautilus on July 29, 2019. |
(6) Mr. Johnson served as Interim Chief Executive Officer from March 2019 until Mr. Barr's appointment in July 2019. |
(7) Mr. Cazenave resigned from his position effective March 1, 2019.
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(8) Ms. Konold joined Nautilus on December 10, 2019.
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(7) Ms. Alseth joined Nautilus on March 2, 2020. |
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Grants of Plan-Based Awards
The following table sets forth certain information regarding grants of plan-based awards to our NEOs during 2020.
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| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | | | | | | Grant Date Fair Value of Stock and Option Awards ($)(3) |
| | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (# Shares) | | Target (# Shares) | | Maximum (# Shares) | |
James Barr, IV | | | | $ | 137,500 | | | $ | 550,000 | | | $ | 825,000 | | | — | | | — | | | — | | | | | | | | | $ | — | |
| | 5/5/2020 | | — | | | — | | | — | | | 206,277 | | | 257,846 | | | 322,308 | | | | | | | | | 4,677,326 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Aina E. Konold | | | | 53,510 | | | 214,038 | | | 312,058 | | | — | | | — | | | — | | | | | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | |
Becky L. Alseth | | | | 27,644 | | | 110,577 | | | 165,865 | | | — | | | — | | | — | | | | | | | | | — | |
| | 5/5/2020 | | — | | | — | | | — | | | 44,439 | | | 51,276 | | | 59,822 | | | | | | | | | 930,147 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Wayne M. Bolio | | | | 33,125 | | | 132,500 | | | 198,750 | | | — | | | — | | | — | | | | | | | | | — | |
| | 5/5/2020 | | — | | | — | | | — | | | 53,836 | | | 62,118 | | | 72,471 | | | | | | | | | 1,126,821 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Christopher K Quatrochi | | | | 34,567 | | | 138,269 | | | 207,404 | | | — | | | — | | | — | | | | | | | | | — | |
| | 5/5/2020 | | — | | | — | | | — | | | 47,106 | | | 54,353 | | | 63,412 | | | | | | | | | 985,963 | |
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(1) Amounts reflect potential payments to our NEOs under our short-term incentive program for the year ended December 31, 2020. For amounts actually earned by our NEOs in 2020, see “Summary Compensation Table” located herein. Participation in the program is limited to those executives who are employed by us at the time the incentive payments are made. The threshold is calculated assuming the company financial factors are achieved at the minimum level, and the employee achieving an estimated lowest payout level at 10% for individual contribution. The target payout is calculated assuming the company financial factors are achieved at 100%, and the employee obtains 100% of the target payout level for individual contribution. The maximum payout is calculated assuming the company financial are achieved at the maximum level and the employee achieves 100% of the target payout level for individual contribution, which is the maximum. For further information regarding our short-term incentive program, see “Short-Term Incentive Program” located herein. |
(2) Amounts reflect potential stock to be earned pursuant to RSU and PSU awards. The RSUs vest in three equal annual installments on the anniversary of the grant date, subject to grantee's continuous employment through such date. The PSUs vest based on achievement of goals established for growth in operating income as a percentage of net revenue and return on invested capital for a three-year performance period. The number of shares vesting under the PSU awards following conclusion of the performance period will be determined based on the level at which the financial goals are achieved. The number of shares vesting can range from 60% of the PSU awards if minimum thresholds are achieved to a maximum of 150%. See Notes 1 and 18 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 for additional information. |
(3) See Notes 1 and 18 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 for detailed information regarding determining the fair value of stock-based awards and other relevant information. |
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information regarding outstanding stock-based awards held by our NEOs as of December 31, 2019.2020.
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| | Option Awards | | Stock Awards |
| | Grant Date | | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Option Exercise Price | | Option Expiration Date (1) | | Number of Shares or Units of Stock That Have Not Vested (#)(3) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
James Barr, IV (2) | | 7/29/2019 | | | | 682,163 |
| | $ | 1.79 |
| | 7/29/2027 |
| | 670,469 |
| | $ | 1,173,321 |
| | — |
| | $ | — |
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M. Carl Johnson, III | | 3/2/2019 | | | | — |
| | — |
| | — |
| | 10,000 |
| | 17,500 |
| | — |
| | — |
|
Aina E. Konold (5) | | 12/10/2019 | | | | — |
| | — |
| | — |
| | 360,000 |
| | 630,000 |
| | — |
| | — |
|
Jeffery L. Collins | | 2/14/2017 | | | | — |
| | — |
| | — |
| | 3,383 |
| | 5,920 |
| | 3,382 |
| | 5,919 |
|
| | 2/21/2018 | | | | — |
| | — |
| | — |
| | 11,324 |
| | 19,817 |
| | 7,206 |
| | 12,611 |
|
| | 6/5/2019 | | | | — |
| | — |
| | — |
| | 7,500 |
| | 13,125 |
| | — |
| | — |
|
| | 9/9/2019 | | | | — |
| | — |
| | — |
| | 15,000 |
| | 26,250 |
| | — |
| | — |
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| | Option Awards | | Stock Awards |
| | Grant Date | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unearned Unexer-cised Options (#) Unexer-cisable | | Option Exercise Price | | Option Expiration Date (1) | | Number of Shares or Units of Stock That Have Not Vested (#)(3) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
James Barr, IV | | 7/29/2019 (2) | | 227,388 | | | 454,775 | | | $ | 1.79 | | | 7/29/2027 | | 446,979 | | | $ | 8,108,199 | | | — | | | $ | — | |
| | 5/5/2020 | | — | | | — | | | — | | | — | | | 128,923 | | | 2,338,663 | | | 128,923 | | | 2,338,663 | |
Aina E. Konold | | 12/10/2019 (5) | | — | | | — | | | — | | | — | | | 293,333 | | | 5,321,061 | | | — | | | — | |
Becky L. Alseth | | 3/9/2020 (6) | | — | | | — | | | — | | | — | | | 25,000 | | | 453,500 | | | — | | | — | |
| | 5/5/2020 | | — | | | — | | | — | | | — | | | 34,184 | | | 620,098 | | | 17,092 | | | 310,049 | |
| | 10/13/2020 | | — | | | — | | | — | | | — | | | 10,000 | | | 181,400 | | | — | | | — | |
Wayne M. Bolio | | 2/21/2018 | | — | | | — | | | — | | | — | | | 13,362 | | | 242,387 | | | 8,908 | | | 161,591 | |
| | 9/9/2019 | | — | | | — | | | — | | | — | | | 6,500 | | | 117,910 | | | — | | | — | |
| | 5/5/2020 | | — | | | — | | | — | | | — | | | 41,412 | | | 751,214 | | | 20,706 | | | 375,607 | |
Chris K. Quatrochi | | 1/10/2018 | | — | | | — | | | — | | | — | | | 10,000 | | | 181,400 | | | — | | | — | |
| | 2/21/2018 | | — | | | — | | | — | | | — | | | 12,248 | | | 222,179 | | | 7,795 | | | 141,401 | |
| | 9/9/2019 | | — | | | — | | | — | | | — | | | 7,500 | | | 136,050 | | | — | | | — | |
| | 5/5/2020 | | — | | | — | | | — | | | — | | | 36,235 | | | 657,303 | | | 18,118 | | | 328,661 | |
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(1) Options granted under our 2015 Long-Term Incentive PlanLTIP and prior plans generally expire seven years from the date of grant. All options described in the table were granted under our 2015 Long-Term Incentive Plan.LTIP. |
(2) Option awards vest in three equal annual installments, beginning on the first anniversary of the grant date. |
(3) RSU awardsRSUs vest in full as ofthree equal annual installments on the third anniversary of the grant date. |
(4) PSU awards will be earned and vest if the applicable performance goal(s) have been achieved at the end of the three-year performance period. |
(5) RSU inducement grants awarded on December 11, 2019 outside of our 2015 Long-Term Incentive Plan.LTIP. Ms. Konold received an initial inducement grant of 200,000 RSUs, 66,667 vested in December 2020, and will receive a second inducement grant of 160,000 RSUs, each of which vest in three equal annual installments on the first three anniversaries of the grant dates in December and May, respectively. |
(6) RSU inducement grant awarded on March 9, 2020 outside of our 2015 LTIP. Ms. Alseth received an initial inducement grant of 25,000 RSUs which vest in three equal annual installments on the first three anniversaries of the grant date in March. |
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Employment Agreements
James
Options Exercises and Stock Vested
The following table provides information about options exercised and stock awards vested for the NEOs during 2020.
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| | Option Awards | | Stock Awards |
| | Number of Shares Acquired on Exercise | | Value Realized on Exercise(1) | | Number of Shares Acquired on Vesting | | Value Realized on Vesting (1) |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
James Barr IV | | — | | | — | | | 223,490 | | | 2,382,403 | |
Aina E. Konold | | — | | | — | | | 66,667 | | | 1,134,006 | |
Becky L. Alseth | | — | | | — | | | — | | | — | |
Wayne M. Bolio | | 2,871 | | | 16,723 | | | 11,750 | | | 112,393 | |
Christopher K. Quatrochi | | — | | | — | | | 7,500 | | | 111,450 | |
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(1) The market value realized was determined based on the NYSE closing price of our common stock on the date of exercise or the vesting date, as applicable. |
CEO Pay Ratio
As mandated by the Dodd-Frank Act, Item 402(u) of Regulation S-K requires us to disclose the ratio of the compensation of our Chief Executive Officer to the total compensation of our median employee. Mr. Barr, IVour Chief Executive Officer, had 2020 annual total compensation of $3,117,876. Our median employee had 2020 annual total compensation of $78,848. As a result, the ratio of Mr. Barr's 2020 annual total compensation to our median employee’s 2020 annual total compensation was approximately 40 to 1.
Mr. Barr’s 2020 annual total compensation is reported in the Summary Compensation Table provided in this Proxy Statement and includes the dollar value of Mr. Barr’s base salary and bonus awards (cash and non-cash) under our short-term and long-term incentive plans. Consistent with the calculation of Mr. Barr’s 2020 annual total compensation, our median employee’s 2020 annual total compensation includes the dollar value of her or his wages plus overtime and bonus earned for the performance year 2020.
We entered into an Executive Employment Agreementchose December 31, 2020 as the date to identify our median employee. We identified our median employee using a cash compensation measure, consistently applied to all employees, that included each employee’s cash base salary or wages plus overtime and cash bonus paid under our short-term incentive plan(s). This measure consistently excluded non-cash compensation, such as equity awards, and also consistently excluded certain cash compensation, such as 401(k) matching contributions. In addition, wages and salaries were annualized for those employees that were not employed for the full year of 2020. In identifying our median employee, we included all employees worldwide, except those employees based in the Netherlands and Taiwan. Of our total global population of 411 employees, 11, or approximately 3%, are based in the Netherlands and Taiwan.
POTENTIAL POST-EMPLOYMENT PAYMENTS
Each of our NEOs is employed “at-will,” meaning employment may be terminated by either party with or without cause. Upon termination of employment by us without “cause” or if the NEO leaves for “good reason” (as such terms are defined in the NEO’s employment agreement), we may be obligated to pay separation benefits. For a description of such benefits, see “Compensation Discussion and Analysis - Post-Employment Obligations” above. Change in control means either: (1) the sale, liquidation or other disposition of all or substantially all of the Company's assets; a merger or consolidation of the Company with one or more corporations as a result of which, immediately following such merger or consolidation, the shareholders of the Company as a group hold less than a majority of the outstanding capital stock of the surviving corporation; (2) any person or entity, including any “person” as such term is used in Section 13(d) (3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), becomes the “beneficial owner” as defined in the Exchange Act, of shares of the Company's Common Stock representing fifty percent (50%) or more of the combined voting power of the voting securities of the Company; or (3) the election of a majority of Directors to the Board of Directors who are nominated by any person or entity other than the Board of Directors in existence as of the date of these agreements.
CHANGE IN CONTROL ARRANGEMENTS WITH OUR NEOs
Arrangements with Mr. Barr effective as of
Under his employment agreement dated July 29, 2019, (the “Barr Agreement”). Mr. Barr’s initial annual base salary underBarr is eligible to receive severance payments and benefits upon a qualifying termination and in the Barr Agreementevent a change in control of our Company.
If Mr. Barr's employment is $550,000, andterminated without cause or he leaves for good reason or remains an employee of the Company at the time the change in control is consummated, he will be eligible to receive:
•Severance pay equal to twelve (12) months of his base salary in effect at the date of termination.
•Continued payment, at the Company's cost, of the Company portion of the current medical and dental coverage elected by Mr. Barr as of the date of termination for an annual bonus with a target amountthe duration of up to 100%the severance period.
•Payment of the portion of his annual base salary, payable based onbonus prorated through the end of the month in which his employment ends to the extent of achievement of corporate and/or personalCompany results and individual performance goals at the discretionthough that month.
•As a precondition to receipt of the Company’s Board of Directors (the “Barr Short-Term Incentive”). The Barr Agreement also provides thatseverance benefits Mr. Barr acknowledges and understands that he must sign a separation and release agreement and he will receive in 2020 an award of 50% restricted stock units and 50% performance stock units, collectively having a value of $880,000, under our 2015 Long Term Incentive Plan. The restricted stock units will vest annually over three years from the date of grant and the performance stock units will vest on the third anniversary of the grant date based on achievement of financial performance goals, each subject to Mr. Barr’s continued service on the vesting date.
The Barr Agreement also entitled Mr. Barr to receive (i) a sign-on bonus of $275,000, payable in either cash or equity at Mr. Barr’s election, upon commencement of his employment, (ii) equity awards having a total value of $1,760,000, 66% of which are restricted stock units vesting annually over three years and 33% of which are stock options to purchase shares of our common stock vesting annually over three years; and (iii) $275,000 payable upon the completion of fiscal year 2020 (the “Barr Second Cash Bonus”). The Barr Second Cash Bonus shall not be paid in the event that the Barr Short-Term Incentive payment for fiscal year 2020 is at least 50% of Mr. Barr’s annual base salary. Mr. Barr also received certain relocation benefits, including reimbursement of moving and travel expenses associated with Mr. Barr and his family’s relocation to the Vancouver, Washington area.
Either party may terminate the Barr Agreement at any time for any reason, provided, however, that if we terminate Mr. Barr’s employment without “cause” or Mr. Barr resigns for “good reason” (each as defined in the Barr Agreement), then Mr. Barr will be entitled to receive certainany severance benefits including cash severance equal to 12 monthsuntil he executes and delivers the separation and release agreement, and the revocation period set forth in the separation and release agreement has expired.
•Accelerated vesting such that one hundred percent (100%) of his then-current annual base
salary, continuation of the company-paid portion of medical and dental coverages during such twelve-month period, payment of a prorated Barr Short-Term Incentive bonus and 100% accelerated vesting of all outstanding equity awards and exercisabilityas of allthe date of termination shall immediately vest and stock options shall become exercisable for the remainderduration of their term. the option term without regard to any contingent vesting provisions set forth therein but otherwise in accordance with the plan and applicable stock units and option agreements.
•In the event a change in control of a “change of control” (as defined in the Barr Agreement) andCompany occurs during his employment, if Mr. Barrhe remains an employee throughof the Company at the time the change in control 100%is consummated, the Company shall accelerate vesting of allhis outstanding equity awards issuedsuch that one hundred percent (100%) of his outstanding equity awards as of the date the change of control is consummated shall immediately vest and stock options shall become exercisable for the full option term without regard to Mr. Barr will immediately vest.any contingent vesting provisions set forth therein but otherwise in accordance with the plan and the applicable stock units and option agreements.
Aina E. Konold
We entered into an Executive Employment AgreementArrangements with Ms. Konold effective as of
Under her employment agreement dated December 10, 2019, (the “Konold Agreement”). Ms. Konold’s initial annual base salary underKonold is eligible to receive severance payments and benefits upon a qualifying termination and in the Konold Agreementevent a change in control of our Company.
If Ms. Konold's employment is $350,000, andterminated without cause or she leaves for good reason or remains an employee of the Company at the time the change in control is consummated, she will be eligible for an annual bonus with a target amount of up to 60%receive:
•Severance pay equal to nine (9) months of her annual base salary payable based on achievement of corporate and/or personal performance goalsin effect at the discretiondate of our Board. The Konold Agreement also provides thattermination.
•Continued payment, at the Company's cost, of the Company portion of the current medical and dental coverage elected by Ms. Konold as of the date of termination for the duration of the severance period.
•As a precondition to receipt of the severance benefits Ms. Konold acknowledges and understands that she must sign a separation and release agreement and she will not be entitled to receive any severance benefits until she executes and delivers the separation and release agreement, and the revocation period set forth in the separation and release agreement has expired.
•In the event a change in control of the Company closes within ninety (90) days following a termination of her employment by the Company for a reason other than cause, death or disability or during her employment with the Company and she remains an initial inducement grantemployee of 200,000the Company at the time that the change in control closes, the vesting of her restricted stock units (the “Initial Inducement RSUs”shall be accelerated, such that one hundred percent (100%). The Initial Inducement RSUs will vest in three equal annual installments on the first three anniversaries of the effective date of the Konold Agreement, subject to Ms. Konold’s continued service until each vesting date. Furthermore, the Konold Agreement provides that Ms. Konold will receive a second inducement grant of 160,000such unvested restricted stock units (the “Second Inducement RSUs”shall become vested, immediately prior to the closing of the change in control.
Arrangements with Ms. Alseth
Under her employment agreement dated March 2, 2020, Ms. Alseth is eligible to receive severance payments and togetherbenefits upon a qualifying termination and in the event a change in control of our Company.
If Ms. Alseth's employment is terminated without cause or she leaves for good reason, she will be eligible to receive:
•Severance pay equal to six (6) months of her base salary in effect at the date of termination.
•Continued payment, at the Company's cost, of the Company portion of the current medical and dental coverage elected by Ms. Alseth as of the date of termination for the duration of the severance period.
•As a precondition to receipt of the severance benefits Ms. Alseth acknowledges and understands that she must sign a separation and release agreement and she will not be entitled to receive any severance benefits until she executes and delivers the separation and release agreement, and the revocation period set forth in the separation and release agreement has expired.
•In the event a change in control of the Company closes during her employment with the Initial Inducement RSUs,Company, if she remains an employee of the “Inducement RSUs”Company at the time that the change in control closes, the vesting of her restricted stock units shall be accelerated, such that one hundred percent (100%). The Second Inducement RSUs of such unvested restricted stock units shall become vested, immediately prior to the closing of the change in control.
Arrangements with Mr. Bolio
Under his employment agreement dated September 21, 2007, Mr. Bolio is eligible to receive severance payments and benefits upon a qualifying termination and in the event a change in control of our Company.
If Mr. Bolio's employment is terminated without cause or he leaves for good reason, he will be eligible to receive:
•Severance pay equal to six (6) months of his base salary in effect at the date of termination.
•Continued payment, at the Company's cost, of the Company portion of the current medical and dental coverage elected by Mr. Bolio as of the date of termination for the duration of the severance period.
•As a precondition to receipt of the severance benefits provided in his agreement, Mr. Bolio acknowledges and understands that he must sign a waiver and release of claims agreement. Mr. Bolio understands that he will not be entitled to receive any benefits under his agreement until he executes and delivers the wavier and release of claims agreement, and the revocation period set forth in the waiver and release of claims agreement has expired.
•Restricted stock units shall vest in three equal annual installments on the first three anniversaries of May 2020, subject to Ms. Konold’s continued service until each vesting date. The vesting of the Inducement RSUs will be acceleratedfull in the event of a “changechange in control,” as definedcontrol.
Arrangements with Mr. Quatrochi
Under his employment agreement dated January 1, 2018, Mr. Quatrochi is eligible to receive severance payments and benefits upon a qualifying termination and in the Konold Agreement, and the Inducement RSUsevent a change in control of our Company.
If Mr. Quatrochi's employment is terminated without cause or he leaves for good reason, he will be granted outsideeligible to receive:
•Severance pay equal to four (4) months of our Long-Term Incentive Plan.
The Konold Agreement also entitled Ms. Konold to receive sign-on bonuseshis average monthly annual base salary in effect at the total amount of $200,000, with 50% of such amount payable upon Ms. Konold’s employment, and 50% of such amount payable on the six-month anniversary of Ms. Konold’s first date of employment, subjecttermination.
•Continued payment, at The Company's cost, of the Company portion of the current medical and dental coverage elected by Mr. Quatrochi as of the date of termination for the duration of the severance period.
•As a precondition to Ms. Konold’s relocation toreceipt of the Vancouver, Washington area. These bonuses are subject to ratable claw-back should Ms. Konold resign prior to the first anniversary of her employment. Ms. Konold is also eligible for certain relocationseverance benefits including reimbursement of movingMr. Quatrochi acknowledges and travel expenses associated with Ms. Konoldunderstands that he must sign a separation and her family’s relocation to the Vancouver, Washington area.
Either party may terminate the Konold Agreement at any time for any reason, provided, however, if we terminate Ms. Konold’s employment without “cause” or Ms. Konold resigns for “good reason” (each as defined in the Konold Agreement), then Ms. Konoldrelease agreement and he will not be entitled to receive certainany severance benefits including cash severance equal to nine months of her then-current annual base salaryuntil he executes and continuation ofdelivers the company-paid portion of medicalseparation and dental coverages during such nine-month period. Inrelease agreement, and the revocation period set forth in the separation and release agreement has expired.
•Restricted stock units shall vest in full in the event of a “changechange in control.
The following table sets forth information regarding amounts that would have been payable to our NEOs had their employment been terminated without cause effective and in the Konold Agreement) and if Ms. Konold remains an employee through theevent of change of control or if such changethe accelerated vesting of control occurs within 90 days of Ms. Konold’s separation other than for cause, death or disability, 100% of all outstanding equity awards issued to Ms. Konold will immediately vest.December 31, 2020:
| | | | | | | | | | | | | | | | | | | | |
| | Salary Continuation or Severance(1) | | Benefits or Perquisites(2) | | Accelerated Vesting of Equity Awards ($)(3) |
James Barr, IV | | $ | 550,000 | | | $ | 12,864 | | | $ | 12,374,437 | |
Aina E. Konold | | 288,750 | | | 9,030 | | | 5,321,061 | |
Becky L. Alseth | | 162,500 | | | 3,287 | | | 1,007,047 | |
Wayne M. Bolio | | 132,500 | | | 6,432 | | | 1,648,709 | |
Christopher K. Quatrochi | | 108,333 | | | 5,615 | | | 1,666,994 | |
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(1) Amounts that may be paid under the applicable employment agreement, assuming termination occurred on December 31, 2020. |
(2) Per their individual employment agreements, all NEOs are entitled to continued health benefits for themselves and their covered dependents, at active-employee premium rates, during the period in which they are entitled to severance payments. |
(3) The value of the accelerated vesting of outstanding and unvested equity awards has been calculated based on the closing market price of our common stock on December 31, 2020. |
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Jeffery L. Collins
We entered into an offer letter with Mr. Collins, effective July 26, 2013. Pursuant to the offer letter and subsequent changes to Mr. Collins’ title and salary, Mr. Collins is currently entitled to receive a base salary
PROPOSAL NO. 2:
ADVISORY VOTE ON EXECUTIVE COMPENSATION
We are asking shareholders to approve, on a non-binding, advisory basis, a resolution approving our executive compensation as reported in this Proxy Statement. We currently conduct this non-binding vote to approve executive compensation annually, and the next non-binding vote to approve executive compensation will take place at the 2022 Annual Meeting of Shareholders.
We urge shareholders to read the “Compensation Discussion and Analysis” section of this Proxy Statement, which describes how our executive compensation program is designed and operates, as well as the Summary Compensation Table and other related compensation tables, which provide additional information on the compensation of our named executive officers. The Board and the Compensation Committee believe that our executive compensation program has supported and contributed to our recent and long-term success and the creation of long-term shareholder value; and that these programs are effective in helping us attract and retain the high caliber of executive talent necessary to drive our business forward and build sustainable value for our shareholders.
In accordance with regulations issued under Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), we are asking shareholders to approve the following non-binding, advisory resolution at the Annual Meeting:
RESOLVED, that the compensation paid to Nautilus' Named Executive Officers, as disclosed in the compensation tables and narrative discussion of the Proxy Statement for the 20202021 Annual Meeting of Shareholders, is hereby APPROVED.
While this advisory resolution, commonly referred to as a “say on pay” resolution, is non-binding, the Compensation Committee will carefully review and consider the voting results when making future decisions regarding our executive compensation program.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RESOLUTION
APPROVING NAUTILUS' NAMED EXECUTIVE OFFICERSOFFICERS' COMPENSATION.
AUDIT COMMITTEE REPORT TO SHAREHOLDERS *
Our Audit Committee has reviewed and discussed with our management and KPMG LLP (“KPMG”) our audited consolidated financial statements and managements report on internal control over financial reporting for the year ended December 31, 2019.2020. Our Audit Committee has also discussed with KPMG LLP the matters required to be discussed by Auditing Standard No. 1301 adopted by the Public Company Accounting Oversight Board (United States) regarding “Communications with Audit Committees.”
Our Audit Committee has received and reviewed the written disclosures and the letter from KPMG LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with our audit committee concerning independence and has discussed with KPMG LLP its independence from us.
Based on the review and discussions referred to above, our Audit Committee recommended to our board of directors that the audited consolidated financial statements be included in our annual report on Form 10-K for the year ended December 31, 20192020 for filing with the U.S. SEC.
The Audit Committee and the Board have also recommended, subject to shareholder ratification, the selection of Grant Thornton LLP as Nautilus' independent registered public accounting firm for the 3-month transition period ended March 31, 2021 and fiscal year ending March 31, 2022.
Respectfully Submitted,
Marvin G. Siegert, Chairman
Ronald P. Badie
Richard A. Horn
Patricia M. Ross
Anne G. Saunders
* The information contained in the Report of the Audit Committee shall not be deemed “soliciting material” or be incorporated by reference by any general statement incorporating this proxy statement into any filings under either the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (together, the “Acts”), except to the extent Nautilus specifically incorporates such report by reference, and further, such Report shall not otherwise be deemed filed under the Acts.
PROPOSAL NO. 3:
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR 2020THE TRANSITION PERIOD ENDED MARCH 31, 2021 AND FISCAL YEAR END MARCH 31, 2022
The Audit Committee hasapproved the decision to change accountants and appointed KPMGGrant Thornton LLP ("KPMG"(“Grant Thornton”) as our independent registered public accounting firm to audit our consolidated financial statements and internal controls over financial reporting for the transition period ended March 31, 2021 and the fiscal year ending DecemberMarch 31, 2020.2022. Although we are not required to seek shareholder approval of this appointment, the Board has determined it to be sound corporate governance to do so. If the appointment is not ratified by shareholders, the Audit Committee will investigate the possible bases for the negative vote and will reconsider the appointment in light of the results of its investigation.
KPMGGrant Thornton has served as our independent registered public accounting firm since March 6, 2017.1, 2021. A representative of KPMGGrant Thornton is expected to be present at the Annual Meeting. The representative will be given the opportunity to make a statement on behalf of KPMGGrant Thornton if the representative so desires, and the representative will be available to respond to appropriate shareholder questions.
We understand the need for KPMGGrant Thornton to maintain objectivity and independence in its audit of our financial statements. To minimize relationships that could appear to impair the objectivity of KPMG,Grant Thornton, our Audit Committee has restricted the non-audit services that KPMGGrant Thornton may provide. These determinations are among the key practices adopted by the Audit Committee in its “Policies and Procedures for the Approval of Audit and Non-audit Services Provided by the Independent Auditor.” Under these policies, with Audit Committee pre-approval, we may use KPMGGrant Thornton for the following categories of non-audit services: merger and acquisition due diligence and audit services; tax services; employee benefit plan audits; and reviews and procedures that we engage KPMGGrant Thornton to undertake to provide assurances on matters not required by laws or regulations.
We employed KPMG as our independent registered public accounting firm until KPMG was dismissed on March 1, 2021. KPMG's report on the financial statements for the past two years were unqualified opinions and contained no disagreements. The following table presents fees for professional audit services rendered by KPMG for the audits of our annual financial statements for the years ended December 31, 20192020 and 2018,2019, respectively, and fees billed for other services rendered by the firm during those periods.
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Type of Fees | | 2019 | | 2018 |
Audit Fees (1) | | $ | 803,047 |
| | $ | 770,912 |
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Tax Fees (2) | | 35,835 |
| | 36,756 |
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Total | | $ | 838,882 |
| | $ | 807,668 |
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Type of Fees | | 2020 | | 2019 |
Audit Fees (1) | | $ | 830,640 | | | $ | 803,047 | |
Tax Fees (2) | | 111,505 | | | 35,835 | |
Audit-Related Fees (3) | | — | | | — | |
All Other Fees(4) | | — | | | — | |
Total | | $ | 942,145 | | | $ | 838,882 | |
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(1) Fees for the audit of our consolidated financial statements included in Annual Reports on Form 10-K, review of our condensed consolidated financial statements included in Quarterly Reports on Form10-Q and services that are normally provided by the accountant in connection with our statutory and regulatory filings or engagements, including the audit of internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002. |
(2) Fees billed for tax compliance, tax advice and tax planning services rendered during the respective periods. Tax advice fees encompass a variety of permissible tax services, including technical tax advice related to federal and state and international income tax matters, assistance with sales tax and assistance with tax audits. |
(3) Audit-related fees includes fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. |
(4) All other fees includes fees for services other than the services reported in audit fees, audit-related fees and tax fees. |
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All of the services were performed by KPMG in 20192020 and 20182019 were pre-approved in accordance with the pre-approval policy and procedures adopted by the Audit Committee. This policy describes the permitted audit, audit-related, tax and other services that the independent auditors may perform. Generally, pre-approval is provided at regularly scheduled committee meetings; however, the authority to pre-approve services between meetings, as necessary, has been delegated to the Chairman of the Audit Committee, subject to formal approval by the full Audit Committee at the next regularly scheduled meeting.
The Audit Committee believes that the foregoing expenditures are compatible with maintaining the independence of our independent registered public accounting firm.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THE RATIFICATION OF THE AUDIT COMMITTEE'S APPOINTMENT OF KPMGGRANT THORNTON LLP AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2020.THE TRANSITION PERIOD ENDED MARCH 31, 2021 AND FISCAL YEAR END MARCH 31, 2022.
PROPOSAL NO. 4:
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE NAUTILUS, INC. 2015 LONG-TERM INCENTIVE PLAN, AS AMENDED
General
Proposal
We believe that future business success and our ability to remain competitive depend on our continuing efforts to attract, retain and motivate highly qualified personnel. In order to be competitive as an employer in our industry, we rely, among other things, on our equity-based compensation programs, including the grant of restricted stock units and other awards under the 2015 Plan. Allowing employees to participate in owning shares of our common stock helps to align the objectives of our shareholders and employees and is important in attracting, motivating and retaining the highly skilled personnel that are necessary in our industry.
Our Board of Directors has approved and we are seeking shareholder approval of the 2015 Plan, as amended (the “Amended 2015 Plan”), in order to (i) increase the number of shares of our common stock available for issuance under the Amended 2015 Plan by 2,000,000 shares, from 4,769,292 shares to 6,769,292 shares; (ii) require that ninety-five percent (95%) of the awards cannot become vested prior to the first anniversary of the date of grant of each such award; (iii) prohibit any vesting acceleration upon our change in control; (iv) permit 100% vesting acceleration of an award, if the award holder is terminated by us for a reason other than cause upon or within twelve (12) months following our change in control; (v) prohibit the issuance of dividends or dividend equivalents with respect to unissued or unvested shares under any award; (vi) require that all awards be subject to clawback or recoupment pursuant to our compensation clawback or recoupment policy; and (vii) reduce the aggregate number of shares available for issuance under the 2015 Plan by one and half (1.5) shares for each share delivered in settlement of any stock appreciation rights, restricted stock, restricted stock unit or performance unit award, and one (1) share for each share delivered in settlement of a stock option award.
Summary of the Amended 2015 Plan
Types of Awards
The Amended 2015 Plan permits the grant of awards to certain of our employees, directors and consultants. Types of awards include:
stock options;
stock appreciation rights or SARs;
restricted stock; and
restricted stock units and performance units.
Shares subject to the Amended 2015 Plan
The aggregate number of shares of common stock authorized for issuance as awards under the Amended 2015 Plan is 1,300,000, plus the 3,469,296 shares originally reserved under the Nautilus, Inc. 2005 Long Term Incentive Plan (the “Prior Plan”) that were not subject to grant on April 28, 2015 and any additional shares as to which an award granted under the Prior Plan is forfeited on or after April 28, 2015. Under Proposal No. 4, we are requesting an additional 2,000,000 shares to be reserved for issuance under the Amended 2015 Plan.
The maximum aggregate number of shares of common stock subject to stock options or stock appreciation rights which may be granted to any one participant in any one year under the Amended 2015 Plan is 1,000,000. The maximum aggregate number of shares of common stock subject to restricted stock or stock unit awards which may be granted to any one participant in any one year under the Amended 2015 Plan is 1,000,000.
Under Proposal No. 4, we are requesting that the aggregate number of shares available for issuance under the Amended 2015 Plan will be reduced by one and half (1.5) shares for each share delivered in settlement of any stock appreciation rights, restricted stock, restricted stock unit or performance unit award, and one (1) share for each share delivered in settlement of a stock option award.
Eligibility
Awards may be granted under the Amended 2015 Plan to any person who is (i) our employee, (ii) a non-employee member of our Board of Directors or the board of directors of our subsidiary or (iii) a consultant who provides services to us.
Administration
The Compensation Committee of our Board of Directors (the “Committee”) will generally administer the Amended 2015 Plan, except that our Board administers the Amended 2015 Plan with respect to awards made to its non-employee directors. The Committee is wholly comprised of directors who are deemed “independent” under applicable rules of the New York Stock Exchange and the SEC.
The Committee has full power and authority to determine when and to whom awards will be granted, including the type, amount, form of payment and other terms and conditions of each award, consistent with the provisions of the Amended 2015 Plan. In addition, the Committee has the authority to interpret the Amended 2015 Plan and the awards granted under the plan, and establish rules and regulations for the administration of the Amended 2015 Plan.
The Committee may delegate certain ministerial duties associated with the Amended 2015 Plan to our officers, including, for example, the maintenance of records of the awards. The Committee may also delegate the authority to grant awards to a subcommittee comprised of one or more Board members, or to executive officers of the Company, provided that such subcommittee or executive officers cannot be authorized to grant awards to executive officers.
Types of Awards
Under the Amended 2015 Plan, the Committee may grant stock options, stock appreciation rights, restricted stock, restricted stock units and performance units. Awards may be granted alone, in addition to, or in combination with any other award granted under the Amended 2015 Plan. Subject to the limitations set forth in the Amended 2015 Plan, the terms and conditions of each award will generally be governed by the particular document or agreement granting the award.
Stock Options. Stock options may either be incentive stock options, which must comply with Section 422 of the Internal Revenue Code, or non-qualified stock options. The Committee sets option exercise prices and other terms of stock options, except that the exercise price of stock options granted under the Amended 2015 Plan must be at least 100% of the fair market value of the Company’s common stock on the date of grant. Unless the Committee otherwise determines, fair market value means, as of a given date, the closing price of our common stock on that date. At the time of grant, the Committee determines when stock options are exercisable and when they expire, except that the term of a stock option cannot exceed ten (10) years. The option exercise price will be paid in cash or in such other form permitted by the Committee, including without limitation by delivery of already owned shares with a value equal to the exercise price, withholding of shares otherwise issuable under the stock option, and/or by payment under a broker-assisted sale and remittance program acceptable to the Committee.
Stock Appreciation Rights. Stock appreciation rights (“SAR”) may be granted independently or in combination with an award of stock options. SARs typically will provide for payments to the recipient based upon increases in the price of our common stock over the exercise price of the award. The exercise price of a SAR will be determined by the Committee, which will not be less than the fair market value of our common stock over the exercise price of the award. The Committee may elect to pay SARs in cash or in common stock or in a combination of cash and common stock. The term for a SAR may be set by the Committee but in no event will the term exceed ten (10) years from the date of grant.
Restricted Stock Awards. Restricted stock awards consist of shares granted to a participant that are subject to one or more risks of forfeiture. Restricted stock awards may be subject to risk of forfeiture based on the passage of time and/or the satisfaction of other criteria, such as continued employment, or achievement, as determined by the Committee, of individual or Company performance criteria. Recipients of restricted stock awards are entitled to vote and receive dividends attributable to the vested shares underlying the award beginning on the grant date.
Restricted Stock Units. Stock units consist of a right to receive shares in the future in consideration of the performance of services, but subject to the fulfillment of such conditions during the performance period as the Committee may specify, including, for example, continued employment with us and/or achievement, as determined by the Committee, of individual or Company performance criteria. Settlement of stock units will be made in shares, cash or a combination thereof, as determined by the Committee, at the times(s) and in the manner set forth in the applicable restricted stock unit agreement. Recipients of restricted
stock units have no rights as a shareholder with respect to any shares covered by the award until the date a stock certificate or book entry evidencing such shares is issued or made, respectively.
Performance Units. Performance units consist of the right, upon achievement of goals established for the performance period, to receive shares, cash or a combination thereof, as determined by the Committee, at the time(s) and in the manner set forth in the applicable performance unit agreement. The Committee establishes the performance goals and, after the performance period has ended, the extent to which the established performance goals have been achieved. Recipients of performance awards have no rights as a shareholder with respect to any shares covered by the award until the date a stock certificate or book entry evidencing such shares is issued or made, respectively.
Minimum Award Price
The exercise price per share under a stock option or stock appreciation right must not be less than 100% of the fair market value of a share of our common stock on the date of grant. “Fair market value” is defined in the Amended 2015 Plan, and generally refers to the closing price per share of our common stock on the New York Stock Exchange on the date of grant.
The Compensation Committee determines the price at which restricted stock or restricted stock units can be sold or awarded to a participant, and such prices vary from time to time and among participants. With respect to performance units, the Compensation Committee has the authority to grant performance units at any time or from time to time based on achievement of certain goals relating to performance, and such units may be awarded either alone or in addition to other awards granted under the Amended 2015 Plan.
Duration of Awards
Each stock option or stock appreciation right under the Amended 2015 Plan will be exercisable during the period prior to the expiration of the stock option or stock appreciation right as determined by the Compensation Committee. The Compensation Committee will have the right to make the timing of the ability to exercise any stock option or stock appreciation right subject to continued employment, the passage of time and/or such performance requirements as deemed appropriate by the Compensation Committee. The restricted stock or restricted stock unit or performance unit agreement may provide for the forfeiture or cancellation of the restricted stock or restricted stock unit award, in whole or in part, in the event of the termination of employment or service of the participant to whom it was granted.
Under Proposal No. 4, ninety-five percent (95%) of the awards cannot become vested prior to the first anniversary of the date of grant of each such award; there will be no vesting acceleration upon our change in control; and the vesting of one hundred percent (100%) of an award will become fully accelerated, if the award holder is terminated by us for a reason other than cause upon or within twelve (12) months following our change in control.
Means of Purchasing Stock Option Awards
The exercise price of a stock option may be paid in cash or any other means of payment as may be permitted by the Committee, including:
delivery of shares already owned;
withholding (either actually or by attestation) of shares otherwise issuable under the stock option; and/or
payment under a broker-assisted sale and remittance program acceptable to the Committee.
Required Award Elements
Each restricted stock agreement and each restricted stock unit agreement will contain provisions regarding:
the number of shares subject to the award or a formula for determining such;
the purchase price of the shares, if any, and the means of payment for the shares;
the performance criteria and level of achievement, if any, that will determine the number of shares granted, issued, retainable and/or vested;
such terms and conditions on the grant, issuance, vesting and/or forfeiture of the shares as may be determined from time to time by the Committee;
restrictions on the transferability of the shares; and
such further terms and conditions as may be determined from time to time by the Committee.
With respect to performance units, the Committee will determine the extent to which the established performance goals (to be established by the Committee) have been achieved, after the applicable performance period (as defined in the Amended 2015 Plan) will have ended.
Term and Amendment of the Amended 2015 Plan
Our Board may amend, alter or discontinue the Amended 2015 Plan at any time. However, no amendment or alteration may be made which would impair the rights of any participant under any award without such participant’s consent; provided that no such consent will be required with respect to any amendment or alteration if the Committee determines in its sole discretion that such amendment or alteration either:
is required or advisable in order for the Company, the Amended 2015 Plan or the award to satisfy any law or regulation or to meet the requirements of any accounting standard; or
is not reasonably likely to significantly diminish the benefits provided under such award, or that any such diminishment has been adequately compensated.
Subject to earlier termination by our Board of Directors, the Amended 2015 Plan will remain available for the grant of awards until the earliest of (i) April 28, 2025, or (ii) the date on which all shares available for issuance under the Amended 2015 Plan have been issued as fully-vested Shares. The expiration of the Committee’s authority to grant awards under the Amended 2015 Plan will not affect the operation of the terms of the Amended 2015 Plan or the Company’s and participants’ rights and obligations with respect to awards granted on or prior to the expiration date of the Amended 2015 Plan.
Transferability
Unless otherwise provided by the Committee, awards under the Amended 2015 Plan may only be transferred by will or the laws of descent and distribution. The Committee may permit further transferability pursuant to conditions and limitations that it may impose, except that no transfers for consideration will be permitted.
Dividends
Under Proposal No. 4, no adjustment will be made in shares issuable under an award on account of cash dividends that may be paid or other rights that may be issued to the holders of our common stock before the issuance or vesting of shares under an award, and in no event will unissued or unvested shares under any award receive dividends or dividend equivalent amounts.
Recoupment Policy
Under Proposal No. 4, subject to applicable law, all awards will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by us or required by law during the term of an award recipient’s service with us. This clawback or recoupment policy may require the cancellation of outstanding awards and the clawback or recoupment of any gains realized under awards.
Resale Restrictions
Employees and consultants who are not “affiliates” of the Company may resell without restriction any shares acquired under the Amended 2015 Plan. Affiliates may resell shares pursuant to a separate registration statement or the provisions of Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), without regard to the one-year holding period thereunder. An “affiliate” is defined under the Securities Act as a person who directly or indirectly controls the Company’s activities and, ordinarily, includes directors and officers.
Federal Income Tax Matters
The following summary is intended only as a general guide to the material U.S. federal income tax consequences of participation in the Amended 2015 Plan. The summary is based on existing U.S. laws and regulations, and there can be no assurance that those laws and regulations will not change in the future. The summary does not purport to be complete and does not discuss the tax consequences upon a participant’s death, or the provisions of the income tax laws of any municipality, state or foreign country in which the participant may reside. As a result, tax consequences for any particular participant may vary based on individual circumstances.
Award recipients should seek, and must depend upon, the advice of their own tax advisors regarding the specific tax consequences of a grant or exercise of an award and the sale of shares covered by awards.
Options. Under present law, an optionee will not recognize any taxable income on the date a non-qualified option (“NSO”) is granted pursuant to the Amended 2015 Plan. Upon exercise of the option, however, the optionee must recognize, in the year of exercise, compensation taxable as ordinary income in an amount equal to the difference between the option price and the fair market value of our common stock on the date of exercise. Upon the sale of the shares, any resulting gain or loss will be treated as capital gain or loss. The Company will receive an income tax deduction in its fiscal year in which NSOs are exercised equal to the amount of ordinary income recognized by those optionees exercising options, and must comply with applicable tax withholding requirements.
Incentive stock options (“ISOs”) granted under the Amended 2015 Plan are intended to qualify for favorable tax treatment under Section 422 of the Internal Revenue Code. Under Section 422, an optionee recognizes no taxable income when the option is granted. Further, the optionee generally will not recognize any taxable income when the option is exercised if he or she has at all times from the date of the option’s grant until three months before the date of exercise been an employee of ours. The Company ordinarily is not entitled to any income tax deduction upon the grant or exercise of an ISO. This favorable tax treatment for the optionee, and the denial of a deduction for the Company, will not, however, apply if the optionee disposes of the shares acquired upon the exercise of an incentive stock option within two (2) years from the granting of the option or one (1) year from the receipt of the shares.
Stock Appreciation Rights. Generally, a recipient of a SAR will recognize compensation taxable as ordinary income equal to the value of the shares of Company common stock or the cash received in the year that the stock appreciation right is exercised. The Company normally will receive a corresponding deduction equal to the amount of compensation the recipient is required to recognize as ordinary taxable income, and must comply with applicable tax withholding requirements.
Restricted Stock Awards. Generally, no income is taxable to the recipient of a restricted stock award in the year that the award is granted. Instead, the recipient will recognize compensation taxable as ordinary income equal to the fair market value of the shares in the year in which the risks of forfeiture restrictions lapse. Alternatively, if a recipient makes an election under Section 83(b) of the Internal Revenue Code, the recipient will, in the year that the restricted stock award is granted, recognize compensation taxable as ordinary income equal to the fair market value of the shares on the date of the award. The Company normally will receive a corresponding deduction equal to the amount of compensation the recipient is required to recognize as ordinary taxable income, and must comply with applicable tax withholding requirements.
Restricted Stock Units. A recipient of restricted stock units will generally recognize compensation taxable as ordinary income in an amount equal to the fair market value of the shares (or the amount of cash) distributed to settle the stock units on the vesting date(s). The Company normally will receive a corresponding deduction at the time of vesting, equal to the amount of compensation the recipient is required to recognize as ordinary taxable income, and must comply with applicable tax withholding requirements.
Performance Awards. A recipient of performance awards will recognize compensation taxable as ordinary income equal to the value of the shares of Company common stock or the cash received, as the case may be, in the year that the recipient receives payment. The Company normally will receive a deduction equal to the amount of compensation the recipient is required to recognize as ordinary taxable income, and must comply with applicable tax withholding requirements.
Code Section 409A. The Company intends that awards granted under the Amended 2015 Plan comply with, or otherwise be exempt from, Code Section 409A, but make no representation or warranty to that effect.
Tax Withholding. We are authorized to deduct or withhold from any award granted or payment due under the Amended 2015 Plan, or require a participant to remit to us, the amount of any withholding taxes due in respect of the award or payment and to take such other action as may be necessary to satisfy all obligations for the payment of applicable withholding taxes. We are not required to issue any shares of common stock or otherwise settle an award under the Amended 2015 Plan until all tax withholding obligations are satisfied.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE NAUTILUS, INC. 2015 LONG-TERM INCENTIVE PLAN, AS AMENDED.
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Exchange Act requires our directors and executive officers, as well as persons who own more than 10% of our outstanding common stock, to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership of shares of our common stock. Based solely on a review of copies of such forms furnished to us and written representations from our executive officers, directors and 10% shareholders, we believe that all Section 16(a) filing requirements attributable to Nautilus were timely made with respect to the year ended December 31, 2019,2020; except due to administrative errors for aeach of Mr. Barr, Mr. Bolio, Mr. Collins, Mr. Johnson and Ms. Konold filed one Form 4 late relating to the vesting of their RSUs and the withholding of shares by the Company for Jeffery L.taxes due upon vesting of their RSUs. Mr. Wiseman filed one Form 4 late relating to his RSU grants and shares withheld by the Company for tax withholding purposes.Mr. Collins reporting the purchasehad two additional late Form 4s relating to his sales of 33,200 shares of commonCompany stock on November 20, 2019, which was filed on January 13,in May 2020 and August 2020.
CODE OF ETHICS
We have adopted the Nautilus, Inc. Code of Business Conduct and Ethics (the “Code of Ethics”), which applies to all of our directors, officers and employees. You can view the Code of Ethics on our website at www.nautilusinc.com. A copy of the Code of Ethics will be provided in print without charge to all interested parties who submit a request in writing to Nautilus, Inc., 17750 S.E. 6th Way, Vancouver, Washington 98683, Attn: Corporate Communications.
HOUSEHOLDING
In accordance with applicable regulations, we deliver a single Annual Report and Proxy Statement to certain persons who share an address, unless we have been notified that such persons prefer to receive individual copies of those documents. This practice is referred to as “householding.” If you reside at an address that received only one copy of proxy materials as a result of householding, we will deliver additional copies promptly upon oral or written request. If you wish to receive separate copies in the future, please contact us at Nautilus, Inc., 17750 S.E. 6th Way, Vancouver, Washington 98683, or by phone at (360) 859-2900. If you and others living at your address received multiple copies of proxy materials and prefer to receive a single copy, you may request that a single copy be sent in the future by contacting us as described above.
OTHER MATTERS
As of the date of this Proxy Statement, the Board is not aware of any other matters that may come before the Annual Meeting. The persons named in the enclosed proxy card intend to vote the proxy in accordance with their best judgment if any other matters properly come before the Annual Meeting.
We will provide, without charge, on the written request of any beneficial owner of shares of our common stock entitled to vote at the Annual Meeting, a copy of our Annual Report on Form 10-K as filed with the SEC for our fiscal year ended December 31, 2019.2020. Written requests should be mailed to Nautilus, Inc., 17750 S.E. 6th Way, Vancouver, Washington 98683, Attn: Company Secretary.
Please return the enclosed proxy card as soon as possible. Unless a quorum consisting of a majority of the outstanding shares entitled to vote is represented at the Annual Meeting, no business can be transacted. Therefore, please be sure to date and sign your proxy card exactly as your name appears on your stock certificate and return it in the enclosed postage prepaid return envelope. Please act promptly to ensure that you will be represented at this important meeting.
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| By Order of the Board of Directors |
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| /s/ Wayne M. Bolio |
| WAYNE M. BOLIO Secretary |
Vancouver, Washington
April 29, 2021
March 30, 2020
APPENDIX A
NAUTILUS, INC.
AMENDED AND RESTATED 2015 LONG-TERM INCENTIVE PLAN
The purpose of the Nautilus, Inc. 2015 Long-Term Incentive Plan (the “Plan”) is to advance the interests of Nautilus, Inc., a Washington corporation (“Nautilus”), and its Subsidiaries (Nautilus and its Subsidiaries hereinafter collectively, the “Corporation”), by enhancing the Corporation's ability to attract and retain highly qualified personnel and directors and aligning the long-term interests of participants with those of shareholders. This Plan permits the grant of stock options, stock appreciation rights, restricted stock, performance units and stock units, each of which shall be subject to such conditions based upon continued employment, passage of time or satisfaction of performance criteria as shall be specified pursuant to the Plan.
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(a) | “Administrator” means the officer or officers of the Corporation appointed by the Committee to perform certain Plan ministerial functions pursuant to subsection 3(b).
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(b) | “Award” means a Stock Option, Stock Appreciation Right, Restricted Stock, Performance Unit or Stock Unit granted to a Participant pursuant to the Plan.
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(c) | “Award Agreement” means (as applicable) an Option Agreement, an SAR Agreement, a Restricted Stock Agreement, a Stock Unit Agreement and/or a Performance Unit Agreement.
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(d) | “Board of Directors” means the Board of Directors of Nautilus.
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(e) | “Change in Control” means either: (a) the sale, liquidation or other disposition of all or substantially all of the Company’s assets; (ii) a merger or consolidation of the Company with one or more corporations as a result of which, immediately following such merger or consolidation, the shareholders of the Company as a group hold less than a majority of the outstanding capital stock of the surviving corporation; or (iii) any person or entity, including any “person” as such term is used in Section 13(d) (3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), becomes the “beneficial owner” as defined in the Exchange Act, of shares of the Common Stock representing fifty percent (50%) or more of the combined voting power of the voting securities of the Company.
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(f) | “Cause” means (i) Participant’s indictment or conviction in a court of law for any felony that in the Company’s reasonable judgment makes Participant unfit for continued employment, prevents Participant from performing Participant’s duties or other obligations or adversely affects the reputation of the Company if Participant remained in Participant’s position; (ii) dishonesty by Participant related to Participant’s employment that has an adverse effect on the Company; (iii) violation of a key Company policy, the employment agreement, offer letter or the Business Protection Agreement between Participant and the Company (including, but not limited to, acts of harassment or discrimination, use of or being under the influence of unlawful drugs on the Company’s premises or while performing duties on behalf of the Company) that has an adverse effect on the Company; (iv) insubordination (i.e. conduct such as refusal to follow direct orders of the Participant’s manager), provided, however, conduct based on adherence to legal requirements (i.e. tax and securities laws) shall not constitute insubordination; (v) Participant’s failure to perform minimum duties after warning and failure to correct to the Company’s reasonable satisfaction; (vi) Participant’s competition with the Company, diversion of any corporate opportunity or other similarly serious conflict of interest or self‑dealing incurring to Participant’s direct or indirect benefit and the Company’s detriment; or (vii) intentional or grossly negligent conduct by Participant that is injurious to the Company or its affiliates after warning and failure to correct to the Company’s reasonable satisfaction.
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(g) | “Code” means the Internal Revenue Code of 1986, as amended from time to time and any successor thereto, the Treasury Regulations promulgated thereunder and other relevant interpretive guidance issued by the Internal Revenue Service or Treasury Department. Any reference to a section of the Code shall be deemed to include such regulations and guidance and any successor provision of the Code.
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(h) | “Committee” means the Compensation Committee of Nautilus.
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(i) | “Common Stock” means the common stock, without par value, of Nautilus authorized for issuance by Nautilus.
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(j) | “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time. Any reference to a section of the Exchange Act shall include any successor provision of the Exchange Act.
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(k) | “Executive Officer” means any “officer” of Nautilus as such term is defined in Rule 16a· I under the Exchange Act.
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(l) | “Fair Market Value” means, with respect to any given date, the value of a Share determined as follows:
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(1) | If the Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading, as reported in The Wall Street Journal or such other source as the Committee deems reliable (or, if there are no reported sales on such date, on the last date prior to such date on which there was a reported sale); |
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(2) | If the Common Stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average of the closing bid and asked prices of a Share as reported in The Wall Street Journal, or as quoted by an established quotation service for over-the-counter securities, or as reported by such other source as the Committee deems reliable, and if there is no such reported price for the Common Stock for the date in question, then such price on the last preceding date for which such price exists shall be determinative of Fair Market Value; or |
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(3) | If none of the foregoing is applicable, by the Committee in good faith and in a manner that satisfies Code Sections 409A and 422(c)(1), as applicable. |
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(m) | “Incentive Stock Option” or “ISO” means a Stock Option designated as, and qualified as, an “incentive stock option” within the meaning of Code Section 422.
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(n) | “Nonqualified Stock Options” or “NSO” means a Stock Option other than an Incentive Stock Option.
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(o) | “Option Agreement” means the document(s) evidencing the Award of a Stock Option.
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(p) | “Outside Director” means a member of the Board of Directors who is not otherwise an employee of the Corporation.
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(q) | “Participants” means those individuals who hold unexercised Awards and any authorized transferee of such individuals.
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(r) | “Performance Period” means the period described in subsection l0(d) during which a Performance Unit Award is earned.
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(s) | “Performance-Based Award” means an Award that vests only upon the satisfaction of one or more of the Qualifying Performance Criteria specified in subsection 11(b).
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(t) | “Performance Unit” means and Award granting the right to receive Shares or cash upon achievement of certain goals related to performance as stated in a Performance Unit Agreement.
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(u) | “Performance Unit Agreement” means the document(s) evidencing a Performance Unit Award.
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(v) | “Plan” means the Nautilus, Inc. 2015 Long Term Incentive Plan as stated in this document and any amendments to it.
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(w) | “Qualifying Performance Criteria” has the meaning set forth in subsection l l(b).
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(x) | “Restricted Stock Award” means an Award of Shares, the grant, issuance, retention, vesting, termination and/or forfeiture of which is subject to the terms and conditions stated in a Restricted Stock Agreement.
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(y) | “Restricted Stock Agreement” means the document(s) evidencing an Award of Restricted Stock.
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(z) | “SAR Agreement” means the document(s) evidencing a Stock Appreciation Right Award.
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(aa) | “Share” means a share of Common Stock or the number and kind of shares of stock or other securities which shall be substituted or adjusted for such shares as provided in Section 12.
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(ab) | “Stock Appreciation Right” or “SAR” means a right to receive, in cash or stock (as determined by the Committee), an amount, with respect to a specific number of Shares, equal to or otherwise based on the excess of:
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(1) | The market value of a Share at the time of exercise over; |
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(2) | The exercise price of the right, subject to the terms and conditions stated in the SAR Agreement. |
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(ac) | “Stock Option” means a right to purchase a number of Shares at such exercise price, at such times, and on such other terms and conditions as are specified in or determined pursuant to the Option Agreement. The Committee may grant Stock Options intended to qualify as Incentive Stock Options and Stock Options that are Nonqualified Stock Options, as the Committee, in its sole discretion, shall determine.
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(ad) | “Stock Unit Award” means an Award of a right to receive, in cash or stock (as determined by the Committee), the market value of one Share, the grant, issuance, retention, vesting, termination and/or forfeiture of which is subject to the terms and conditions stated in a Stock Unit Agreement.
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(ae) | “Stock Unit Agreement” means the document(s) evidencing a Stock Unit Award.
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(af) | “Subsidiary” means any corporation, partnership, joint venture, limited liability company or other entity in which at least 50% or more of the voting power or economic interests is owned, directly or indirectly, by Nautilus.
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3.ADMINISTRATION
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(a) | Administration by the Committee or Board.
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(1) | Subject to paragraph (2) below, this Plan shall be administered by the Committee in accordance with its Charter. |
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(2) | The Board of Directors, in its sole discretion, may exercise any authority of the Committee under this Plan in lieu of the Committee's exercise thereof and, in such instances, references in the Plan to the Committee shall refer to the Board of Directors. |
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(1) | The Board of Directors or the Committee may delegate to one or more separate committees (a “Subcommittee”) composed of one or more members of the Board of Directors who are Outside Directors (and who may but need not be members of the Committee) the ability to grant Awards and take the other actions described in subsection 3(c) with respect to any Participant who is not an Executive Officer, and such actions shall be treated for all purposes as if taken by the Committee. |
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(2) | The Committee may delegate to an Executive Officer the authority to grant Awards within parameters established by the Committee to any Participant who is not an Executive Officer. |
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(3) | Any action by any such Subcommittee or Executive Officer within the scope of such delegation shall be deemed for all purposes to have been taken by the Committee, and references in this Plan to the Committee shall include any such Subcommittee or Executive Officer. |
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(4) | The Committee may delegate certain ministerial functions with respect to the administration of the Plan to an officer or officers of the Corporation (an “Administrator”) as follows: |
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(A) | Subject to paragraphs (B) and (D) below, the Administrator(s) shall have the authority to: |
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(i) | Execute and distribute documents, instruments and other agreements evidencing or relating to Awards granted under this Plan; |
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(ii) | To maintain records relating to the grant, vesting, exercise, forfeiture or expiration of Awards; |
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(iii) | To process or oversee the issuance of Shares upon the exercise, vesting and/or settlement of an Award; and |
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(iv) | To take such other actions as the Committee may specify. |
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(B) | In no case shall any Administrator be authorized to grant Awards under the Plan or to take any discretionary actions with respect to the Plan or any Award, including, by way of example and not of limitation, interpreting the provisions of the Plan or any Award. |
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(C) | Any action by any Administrator within the scope of its delegation shall be deemed for all purposes to have been taken by the Committee, and references in this Plan to the Committee shall include any such Administrator, provided that the actions and interpretations of any such Administrator shall be subject to final review and approval, disapproval or modification by the Committee. |
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(D) | Notwithstanding anything to the contrary in this subsection 3(b), no power or authority may be delegated that is required by law, regulation or applicable stock exchange listing standards to be exercised by the Committee. |
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(c) | Powers of the Committee. Subject to the express provisions and limitations set forth in this Plan, the Committee shall be authorized and empowered to do all things necessary or desirable, in its sole discretion, in connection with the administration of the Plan, including, without limitation, the following:
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(1) | To prescribe, amend and rescind rules, policies and practices relating to the administration of the Plan and to define terms not otherwise defined in the Plan; |
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(2) | To determine which persons are Participants, to which of such Participants, if any, Awards shall be granted under the Plan, and the timing of any such Awards; |
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(3) | To grant Awards to Participants and, subject to the terms of the Plan, determine the terms and conditions of each Award, including the number of Shares covered by each Award, the exercise or purchase price, and any terms or conditions relating to vesting, exercise, forfeiture or expiration, which terms may, but need not be, conditioned upon the passage of time, continued employment, the satisfaction of performance criteria, the occurrence of certain events or other factors, provided that in no event will any portion of an Award become vested prior to the first anniversary of the date of grant of such Award (except in the case of death or disability and except that up to 5% of the Shares authorized for grant pursuant to Section 6(a) may be granted with a minimum vesting schedule of less than one year) and provided that in no event will any portion of an Award become vested immediately prior to or upon a Change in Control, except that each Award will become fully vested if the Participant holding the Award is terminated by the Company for a reason other than Cause upon or within twelve (12) months following the Change in Control; |
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(4) | To establish or verify the extent of satisfaction of any performance goals or other conditions applicable to the grant, issuance, exercisability, vesting and/or ability to retain any Award; |
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(5) | To prescribe and amend the terms of the Award Agreements and related documents and instruments pursuant to which Awards may be settled or exercised or beneficiaries may be designated; |
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(6) | To determine whether, and the extent to which, adjustments are required pursuant to Section 12; |
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(7) | To determine whether and to what extent an Award may be settled in cash, Shares, or a combination thereof; |
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(8) | To interpret and construe the Plan, any rules, polices or procedures relating to the Plan and the terms and conditions of any Award Agreement and related documents and instruments pursuant to which |
Awards may be settled or exercised or beneficiaries may be designated, and to make exceptions to any such provisions in good faith and for the benefit of the Corporation; and
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(9) | To make all other determinations deemed necessary or advisable for the administration of this Plan. |
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(d) | Effect of Change in Status. The Committee shall have the discretion to determine the effect upon an Award of a change in a Participant's employment status (including whether a Participant shall be deemed to have experienced a termination of employment or other change in status), including the vesting, expiration or forfeiture of an Award in the case of:
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(1) | Any individual who is employed by an entity that ceases to be a Subsidiary; |
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(2) | Any leave of absence approved by the Corporation; |
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(3) | Any transfer between locations of employment between Nautilus and any Subsidiary or between any Subsidiaries; |
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(4) | Any change in the Participant's status from an employee to a consultant or member of the Board of Directors, or vice versa; and |
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(5) | Any employee who at the request of the Corporation becomes employed by any partnership, joint venture, limited liability company, corporation or other entity that is not a Subsidiary. |
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(e) | Determinations of the Committee. All decisions, determinations and interpretations by the Committee regarding this Plan shall be final, conclusive and binding on all persons, including, the Participants and any other individual claiming benefits or rights under the Plan. Any dispute regarding the interpretation of the Plan or any Award shall be submitted by the Participant to the Committee for review. The resolution of such a dispute by the Committee shall be final, conclusive and binding on the Participant. The Committee shall consider such factors as it deems relevant to making such decisions, determinations and interpretations including, without limitation, the recommendations or advice of any attorneys, consultants and accountants as it may select.
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4.PARTICIPANTS
Awards under the Plan may be granted to:
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(a) | Any employee of the Corporation; |
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(b) | Any non-employee member of the Board of Directors or the board of directors (or other governing body) of any Subsidiary; and |
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(c) | Any non-employee consultant who provides services to the Corporation. |
5.EFFECTIVE DATE AND EXPIRATION OF PLAN
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(a) | Effective Date. This Plan was approved by the Board of Directors on February 12, 2015 and became effective on April 28, 2015 with shareholder approval at the 2015 Annual Meeting of the shareholders of Nautilus. The amendment and restatement of this Plan was approved by the Board of Directors on March 19, 2020, subject to shareholder approval at the 2020 Annual Meeting of the shareholders of Nautilus.
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(1) | The Plan shall remain available for the grant of Awards until the earlier of: |
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(B) | The date on which all Shares available for issuance under the Plan have been issued as fully vested Shares. |
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(2) | The expiration of the Committee's authority to grant Awards under the Plan will not affect the operation of the terms of the Plan or the Corporation's and Participants' rights and obligations with respect to Awards granted on or prior to the expiration date of the Plan. |
6.SHARES SUBJECT TO THE PLAN
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(1) | Subject to adjustment as provided in paragraph (2) below and in Section 12, the aggregate number of Shares that may be granted pursuant to Awards under the Plan is 3,300,000 plus any Shares reserved under Nautilus' 2005 Long-Term Incentive Plan, as amended, that are not subject to a grant on April 28, 2015, or as to which the option award is forfeited on or after April 28, 2015. The Shares that may be granted pursuant to Awards under the Plan may include Shares reacquired by Nautilus (including Shares purchased in the open market) or authorized but unissued Shares. To the extent any Award is forfeited, terminates, expires or lapses instead of being exercised, is not earned in full or is settled in cash, the Shares subject to such Awards not delivered as a result shall again be available to be granted as Awards under this Plan. Notwithstanding anything to the contrary contained herein, the following Shares shall not be added to the Shares authorized for grant under this Section 6(a)(1) and shall not be available for future grants of Awards: (i) Shares tendered by a 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 on the open market with the cash proceeds from the exercise of Options. |
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(2) | The aggregate number of Shares available for issuance under the Plan shall be reduced by 1.5 Shares for each Share delivered in settlement of any SAR, Restricted Stock, Stock Unit or Performance Unit Award, and one (I) Share for each Share delivered in settlement of a Stock Option Award. |
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(b) | Limitations on Grants.
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(1) | The aggregate number of Shares subject to Stock Options or Stock Appreciation Rights granted under this Plan during any calendar year to any one Participant shall not exceed 1,000,000. |
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(2) | The aggregate number of Shares subject to Restricted Stock or Stock Unit Awards granted under this Plan during any calendar year to any one Participant shall not exceed 1,000,000. |
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(3) | Notwithstanding anything to the contrary in this Plan, the limitations in paragraphs (1) and (2) above shall be subject to adjustment under Section 12, but only to the extent that such adjustment will not affect the status of any Award intended to qualify as “performance-based compensation” within the meaning of Code Section 162(m). |
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(4) | The aggregate number of Shares issued pursuant to Incentive Stock Options granted under the Plan shall not exceed 1,000,000, which limitation shall be subject to adjustment under Section 12 only to the extent that adjustment is allowable under Code Section 422. |
7.PLAN AWARDS
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(a) | Award Types. The Committee is authorized to grant the following Awards under the Plan provided that their terms and conditions are not inconsistent with the provisions of the Plan:
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(1) | Stock Options, pursuant to the terms and conditions of a Stock Option Agreement. |
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(2) | Stock Appreciation Rights, pursuant to the terms and conditions of an SAR Agreement. |
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(3) | Restricted Stock, pursuant to the terms and conditions of a Restricted Stock Agreement. |
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(4) | Stock Units, pursuant to the terms and conditions of a Stock Unit Agreement. |
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(5) | Performance Units pursuant to the terms and conditions of a Performance Unit Agreement. |
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(b) | Grants of Awards; Designation as Performance-Based Awards.
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(1) | Awards may be granted separately or in tandem or in the alternative. |
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(2) | The Committee, in its discretion, may designate any Award as a Performance- Based Award and designate in the Award Agreement the Qualifying Performance Criteria upon which the grant or vesting of the Award is conditioned. |
8.STOCK OPTIONS AND SARS
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(a) | The Committee may grant Stock Options or SARs only to those eligible individuals described in Section 4 who are selected by the Committee as Participants. |
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(b) | No Participant shall have any rights as a shareholder with respect to any Shares subject to Stock Options 6r SARs under the Plan until the Shares have been issued. |
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(c) | Each Stock Option or SAR shall be evidenced only by an Option Agreement or SAR Agreement approved by the Committee and executed by the Committee and the Participant. Each Stock Option grant will expressly identify the Stock Option as an ISO or as a Nonqualified Stock Option. Awards of Stock Options or SARs granted pursuant to the Plan need not be identical, but each must contain or be subject to the following terms and conditions: |
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(1) | Price. The exercise price of each Stock Option or SAR granted under the Plan shall be established by the Committee and set forth in the applicable Option Agreement or SAR Agreement. The exercise price per Share shall not be less than l00% of the Fair Market Value of a Share on the date of grant. The exercise price of a Stock Option shall be paid in cash or in such other form if and to the extent permitted by the Committee, including without limitation, by delivery of already-owned Shares with an aggregate value equal to the exercise price, withholding (either actually or by attestation) of Shares with an aggregate value equal to the exercise price otherwise issuable under such Stock Option and/or by payment under a broker assisted sale and remittance program acceptable to the Committee.
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(2) | No Repricing. Other than in connection with a change in the capitalization of Nautilus (as described in Section 12), in no event may any Stock Option or SAR without shareholder approval be amended to decrease the exercise price, be cancelled in exchange for cash or other Awards or in conjunction with the grant of any new Stock Option or SAR with a lower exercise price, or otherwise be subject to any action that would be treated as a “repricing” of such Stock Option or SAR under applicable stock exchange listing standards or accounting standards.
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(3) | Duration, Exercise and Termination of Stock Options and SARs. Each Stock Option or SAR shall be exercisable at such times and in such installments during the period prior to the expiration of the Stock Option or SAR as determined by the Committee and set forth in the Option Agreement or SAR Agreement. The Committee may make the exercise of any Stock Option or SAR subject to continued employment, the passage of time and/or such performance requirements as deemed appropriate by the Committee and set forth in the Option Agreement or SAR Agreement. At any time after the grant of a Stock Option or SAR, the Committee may reduce or eliminate any restrictions on the Participant's right to exercise all or part of the Stock Option or SAR. Upon exercise of a Stock Option or SAR, settlement and payment shall occur at the time(s) and in the manner set forth in the applicable Option Agreement or SAR Agreement.
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(4) | Termination of Employment. The Option Agreement or SAR Agreement may provide for the forfeiture or cancellation of the Stock Option or SAR, in whole or in part, in the event of the Participant's termination of employment or service. In all cases, the Option Agreement or SAR Agreement shall provide that vesting shall cease in the event of the Participant's termination of employment or service.
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(5) | Conditions and Restrictions Upon Securities Subject to Stock Options or SARs. Subject to the express provisions of the Plan, the Committee may provide in the Option Agreement or SAR Agreement that the Shares issued upon exercise of a Stock Option or SAR shall be subject to such further conditions
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or agreements as the Committee in its discretion may specify, including without limitation, conditions on vesting or transferability, forfeiture or repurchase provisions, provided that in no event will any portion of a Stock Option or SAR become vested prior to the first anniversary of the date of grant of such Stock Option or SAR (except in the case of death or disability and except that up to 5% of the Shares authorized for grant pursuant to Section 6(a) may be granted with a minimum vesting schedule of less than one year) and provided that in no event will any portion of a Stock Option or SAR become vested immediately prior to or upon a Change in Control, except that each Stock Option or SAR will become fully vested if the Participant holding the Stock Option or SAR is terminated by the Company for a reason other than Cause upon or within twelve (12) months following the Change in Control.
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(6) | Settlement of SARs. Settlement of SARs upon exercise may be satisfied through cash payments, the delivery of Shares, or a combination thereof, as the Committee shall determine.
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(7) | Other Terms and Conditions. Option Agreements and SAR Agreements may also contain such other provisions, which shall not be inconsistent with any of the foregoing terms, as the Committee shall deem appropriate, provided that no Option Agreements or SAR Agreements may have reload features under which the exercise of an Option or SAR by a Participant automatically entitles the Participant to a new Option or SAR.
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(8) | ISOs. Stock Options intending to qualify as ISOs shall be subject to the following conditions:
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(A) | ISOs may be granted only to employees of Nautilus or a “subsidiary corporation” of Nautilus within the meaning of Code Section 424(f). |
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(B) | No Stock Option intended to qualify as an ISO shall be granted to any person if, immediately after the grant of such Award, such person would own stock, including stock subject to outstanding Awards held by that person under the Plan or any other plan established by the Corporation, amounting to more than I0% of the total combined voting power or value of all classes of stock of the Corporation. |
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(C) | The aggregate Fair Market Value of the Common Stock (determined at the time of grant) for which ISOs are exercisable for the first time by the Participant during any calendar year, under all of the plans of the Corporation under which Incentive Stock Options may be issued, may not exceed $100,000. |
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(D) | To the extent a Stock Option that, by its terms, is intended to be an Incentive Stock Option exceeds this $100,000 limit, the portion of the Stock Option in excess of such limit shall be treated as a Nonqualified Stock Option. |
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(E) | To the extent that the Option Agreement specifies that a Stock Option is intended to qualify as an ISO, the provisions of the Option Agreement shall be construed and interpreted accordingly. |
9.RESTRICTED STOCK AND STOCK UNITS
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(a) | The Committee may grant Restricted Stock or Stock Units only to those eligible individuals described in Section 4 who are selected by the Committee. |
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(b) | Awards of Restricted Stock or Stock Units shall be evidenced by Restricted Stock Agreements or Stock Unit Agreements approved by the Committee and executed by the Committee and the Participant. Awards of Restricted Stock or Stock Units granted pursuant to the Plan need not be identical, but each must contain or be subject to the following terms and conditions: |
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(1) | Mandatory Terms and Conditions. Each Restricted Stock Agreement and Stock Unit Agreement shall contain provisions regarding:
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(A) | The number of Shares granted under the Award or a formula for determining such; |
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(B) | The purchase price of the Shares, if any, and the means of payment for the Shares; |
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(C) | If the Award is a Performance-Based Award, the Qualifying Performance Criteria, if any, and level of achievement versus these criteria that shall determine the number of Shares granted, issued, retainable and/or vested; |
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(D) | Such other terms and conditions relating to the grant, issuance, vesting and/or forfeiture of the Shares as determined by the Committee, to the extent not inconsistent with this Plan, provided that in no event will any portion of Restricted Stock or Stock Units become vested prior to the first anniversary of the date of grant of such Restricted Stock or Stock Units (except in the case of death or disability and except that up to 5% of the Shares authorized for grant pursuant to Section 6(a) may be granted with a minimum vesting schedule of less than one year) and provided that in no event will any portion of Restricted Stock or Stock Units become vested immediately prior to or upon a Change in Control, except that Restricted Stock and Stock Units will become fully vested if the Participant holding the Restricted Stock or Stock Units is terminated by the Company for a reason other than Cause upon or within twelve (12) months following the Change in Control; |
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(E) | Restrictions on the transferability of the Shares, if any; and |
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(F) | Such further terms and conditions as may be determined from time to time by the Committee, in each case not inconsistent with this Plan. |
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(2) | Sale or Award Price. Subject to the requirements of applicable law, the Restricted Stock Agreement or Stock Unit Agreement shall set forth the price, if any, as determined by the Committee at which Shares of Restricted Stock or Stock Units shall be sold or awarded to a Participant.
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(3) | Share Vesting. The grant, issuance, retention and/or vesting of Shares under Restricted Stock or Stock Unit Awards shall be at such time and in such installments as determined by the Committee or under criteria established by the Committee, provided that in no event will any portion of Restricted Stock or Stock Units become vested prior to the first anniversary of the date of grant of such Restricted Stock or Stock Units (except in the case of death or disability and except that up to 5% of the Shares authorized for grant pursuant to Section 6(a) may be granted with a minimum vesting schedule of less than one year) and provided that in no event will any portion of Restricted Stock or Stock Units become vested immediately prior to or upon a Change in Control, except that Restricted Stock and Stock Units will become fully vested if the Participant holding the Restricted Stock or Stock Units is terminated by the Company for a reason other than Cause upon or within twelve (12) months following the Change in Control. The Committee shall have the right to make the timing of the grant and/or the issuance, ability to retain and/or vesting of Shares under Restricted Stock or Stock Unit Awards subject to continued employment, passage of time and/or such performance criteria and level of achievement versus these criteria as deemed appropriate by the Committee, which criteria may be based on financial performance and/or personal performance evaluations. Notwithstanding anything to the contrary in the Plan, the performance criteria for any Restricted Stock Award or Stock Unit Award that is intended to satisfy the requirements for “performance-based compensation” within the meaning of Code Section l62(m) shall be measured based on one or more Qualifying Performance Criteria selected by the Committee and specified at the time the Restricted Stock Award is granted.
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(4) | Termination of Employment. The Restricted Stock Agreement or Stock Unit Agreement may provide for the forfeiture or cancellation of the Restricted Stock or Stock Unit Award, in whole or in part, in the event of the termination of employment or service of the Participant to whom it was granted. In all cases, the Restricted Stock Agreement or Stock Unit Agreement shall provide that vesting shall cease in the event of termination of employment or service of the Participant to whom it was granted.
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(5) | Shareholder Rights. No Participant shall have any rights as a shareholder with respect to any Shares subject to an Award of Stock Units under the Plan until said Shares have been issued. A Participant shall have rights as a shareholder with respect to any Shares subject to a Restricted Stock Award under the Plan only to the extent specified in this Plan or the Restricted Stock Agreement evidencing such Award.
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(6) | Settlement of Stock Units. Upon expiration of the vesting period, settlement of Stock Units shall be made in Shares, cash or a combination thereof, as determined by the Committee, at the time(s) and in the manner set forth in the applicable Stock Unit Agreement. Until a Stock Unit is so settled, the number of Shares represented by a Stock Unit shall be subject to adjustment pursuant to Section 12.
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10.PERFORMANCE UNITS
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(a) | General. The Committee may grant Performance Units only to those eligible individuals described in Section 4 who are selected by the Committee as Participants.
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(b) | Awards. A Performance Unit may be awarded either alone or in addition to other Awards granted under the Plan. The Committee shall determine the number of Performance Units granted to each Participant. Each Performance Unit Award shall be evidenced by a Performance Unit Agreement approved by the Committee and executed by the Committee and the Participant.
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(c) | Settlement. The Performance Unit Agreement shall provide that Performance Units may be settled in Shares, cash or a combination thereof, as determined by the Committee, at the time(s) and in the manner set forth in the applicable Performance Unit Agreement. Until a Performance Unit is so settled, the number of Shares represented by a Performance Unit shall be subject to adjustment pursuant to Section 12.
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(d) | Performance Period and Criteria. The time period during which a Performance Unit Award shall be earned shall be the “Performance Period,” and, except in the year in which the Plan is adopted, shall be at least the length of one (I) fiscal year (whether of Nautilus or of any Subsidiary, determined in the discretion of the Committee). Performance Units shall be subject to performance goals established by the Committee. Notwithstanding anything to the contrary in the Plan, the performance criteria for any Performance Unit that is intended to satisfy the requirements for “performance-based compensation” within the meaning of Code Section 162(m) shall be a measure based on one or more Qualifying Performance Criteria selected by the Committee and specified in the Performance Unit Agreement.
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(e) | Earning Performance Unit Awards. After the applicable Performance Period has ended, the Committee shall determine the extent to which the established performance goals have been achieved.
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(f) | Termination of Employment. The Performance Unit Agreement may provide for the forfeiture or cancellation of the Performance Unit Award, in whole or in part, in the event of the termination of employment or service of the Participant to whom it was granted. In all cases, the Performance Unit Agreement shall provide that vesting shall cease in the event of termination of employment or service of the Participant to whom it was granted.
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11.OTHER PROVISIONS APPLICABLE TO AWARDS
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(a) | Transferability. Unless the Award Agreement expressly states that the Award is transferable as provided under the Plan, no Award granted under this Plan, nor any interest in such Award, may be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise transferred in any manner prior to the vesting or lapse of any and all applicable restrictions, other than by will or the laws of descent and distribution. The Committee may grant an Award or amend an outstanding Award Agreement to provide that the Award is transferable or assignable:
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(1) | In the case of a transfer without the payment of any consideration, to any “family member” as such term is defined in Section A.1(a)(5) of the General Instructions to Form S-8 under the Securities Act of 1933, as amended from time to time; |
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(2) | In any transfer described in clause (ii) of Section A.1(a)(5) of the General Instructions to Form S-8 under the 1933 Act as amended from time to time, provided that, following the transfer or assignment, the Award will remain subject to substantially the same terms applicable to the Award while held by the Participant, as modified as the Committee shall determine appropriate, and as a condition to such transfer, the transferee shall execute an agreement agreeing to be bound by the terms; and |
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(3) | In the case of a Stock Option intended to qualify as an ISO, only to the extent consistent with Code Section 422. |
Any purported assignment, transfer or encumbrance that does not qualify under this subsection shall be void
and unenforceable against the Corporation.
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(b) | Qualifying Performance Criteria.
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(1) | For purposes of this Plan, the term “Qualifying Performance Criteria” shall mean any one or more of the following performance criteria, either individually, alternatively or in any combination, applied to either the Corporation as a whole or to a business unit or Subsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years' results or to a designated comparison group, in each case as specified by the Committee in the Award Agreement: |
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(C) | Earnings before interest, taxes and amortization; |
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(E) | Total shareholder return; |
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(F) | Share price performance; |
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(H) | Return on assets or net assets; |
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(I) | Revenue or revenue growth; |
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(K) | Operating income or net operating income; |
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(L) | Operating profit or net operating profit; |
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(M) | Operating margin or profit margin; |
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(N) | Return on operating revenue; |
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(O) | Return on invested capital; |
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(Q) | Product release schedules; |
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(R) | New product innovation; |
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(S) | Product cost reduction through advanced technology; |
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(T) | Brand recognition/acceptance; |
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(U) | Product ship targets; or |
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(V) | Customer satisfaction. |
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(2) | The Committee may adjust the performance goals and any evaluation of performance under any Qualifying Performance Criteria to account for changes in law or accounting practices and to make such adjustments the Committee deems necessary or appropriate to reflect the impact of extraordinary |
or unusual items, events or circumstances to avoid windfalls or hardships during a performance period, including without limitation:
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(B) | Litigation or claim judgments or settlements; |
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(C) | The effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results; |
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(D) | Accruals for reorganization and restructuring programs; |
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(E) | Any extraordinary non-recurring items as described in Accounting Standards Codification 225-20 and/or in management's discussion and analysis of financial condition and results of operations appearing in the Corporation's annual report to shareholders for the applicable year; and |
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(F) | Events either not directly related to Company operations or not under the reasonable control of Company management. |
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(3) | Notwithstanding satisfaction or completion of any Qualifying Performance Criteria, to the extent specified at the time of grant, the number of Shares, Stock Options, SARs, Stock Units or other benefits granted, issued, retainable and/or vested under an Award on account of satisfaction of such Qualifying Performance Criteria may be reduced by the Committee on the basis of such further considerations as the Committee in its sole discretion shall determine. However, such a reduction with respect to one Participant may not result in an increase in the amount payable to another Participant. |
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(c) | Dividends. No adjustment shall be made in Shares issuable under the Award Agreement on account of cash dividends that may be paid or other rights that may be issued to the holders of Common Stock prior to the issuance or vesting of Shares under any Award. The Committee shall specify in the Award Agreement whether dividends or dividend equivalent amounts shall be paid to any Participant with respect to the Shares subject to the Award Agreement that are subject to any restrictions or conditions on the record date for dividends, provided that in no event will unissued or unvested Shares under any Award receive dividends or dividend equivalent amounts.
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(d) | Award Agreements. The Committee shall, subject to applicable law, determine the date an Award is deemed to be granted. The Committee may establish the terms of Award Agreements and related documents and may, but need not, require as a condition to any such agreement's or document's effectiveness that such agreement or document be executed by the Participant, including by electronic signature or other electronic indication of acceptance, and that Participant agrees to such further terms and conditions as specified in such agreement or document. The grant of an Award under this Plan shall not confer any rights upon the Participant holding such Award other than such terms, and subject to such conditions, as are specified in this Plan as being applicable to such type of Award (or to all Awards) or as are expressly set forth in the Award Agreement.
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(e) | All Awards Subject to Company Clawback or Recoupment Policy. All Awards, subject to applicable law, shall be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board of Directors or required by law during the term of Participant’s employment or other service with the Company that is applicable to employees, Board of Director members or other service providers of the Company, and in addition to any other remedies available under such policy and applicable law, may require the cancellation of outstanding Awards and the recoupment of any gains realized with respect to Awards.
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(f) | Additional Restrictions on Awards. Either at the time an Award is granted or by subsequent action, the Committee may, but need not, impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by a Participant or other subsequent transfers by a Participant of any Shares issued under an Award, including without limitation:
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(1) | Restrictions under an insider trading policy; |
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(2) | Restrictions designed to delay and/or coordinate the timing and manner of sales by the Participant or Participants; and |
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(3) | Restrictions as to the use of a specified brokerage firm for such resales or other transfers. |
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(g) | Subsidiary Awards. In the case of a grant of an Award to any Participant who is employed by or a service provider to a Subsidiary, such grant may, if the Committee so directs, be implemented by Nautilus issuing any subject Shares to the Subsidiary, for such lawful consideration as the Committee may determine, upon the condition or understanding that the Subsidiary will transfer the Shares to the Participant in accordance with the terms of the Award specified by the Committee pursuant to the provisions of the Plan. Notwithstanding any other provision hereof, such Award may be issued by and in the name of the Subsidiary and shall be deemed granted on such date as the Committee shall determine.
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(h) | Suspension or Termination of Awards Upon Misconduct.
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(1) | If at any time (including after a notice of exercise has been delivered) the Committee reasonably believes that a Participant, other than an Outside Director, has committed an act of misconduct as described below, the Committee may suspend the exercise, vesting and settlement, as applicable, of any Award granted to the Participant pending a final determination of whether such an act of misconduct has been committed. If the Committee determines a Participant, other than an Outside Director, has committed an act of misconduct, any Award granted to the Participant may, in the discretion of the Committee, be forfeited, in whole or in part. |
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(2) | Any determination by the Committee with respect to the foregoing shall be final, conclusive, and binding on all interested parties. For any Participant who is an Executive Officer, the determination of the Committee shall be subject to the approval of the Board of Directors. |
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(3) | For purposes of this subsection, an “act of misconduct” means embezzlement, fraud, dishonesty in the performance of or willful neglect of job duties, nonpayment of any obligation owed to the Corporation, breach of fiduciary duty or deliberate disregard of Corporation rules, material breach of an agreement between the Participant and the Corporation, the unauthorized disclosure of any Corporation trade secret or confidential information, conduct constituting unfair competition, or inducing any customer to breach a contract with the Corporation, or any other conduct resulting in material (as determined by the Committee in its discretion) loss, damage or injury to the Corporation. |
12.ADJUSTMENT OF AND CHANGES IN THE COMMON STOCK
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(a) | The existence of outstanding Awards shall not affect in any way the right or power of Nautilus or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations, exchanges, or other changes in the capital structure or business of Nautilus, or any merger or consolidation of Nautilus or any issuance of Shares or other securities or subscription rights thereto, or any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock, the Shares or other securities of Nautilus or the rights thereof, or the dissolution or liquidation of Nautilus, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. Further, except as expressly provided in the Plan or by the Committee unless the Committee determines, in its sole discretion, that an adjustment is necessary or appropriate and is not inconsistent with applicable law, including Code Sections 409A and 424(h), no adjustment by reason thereof shall be made with respect to, the number of Shares subject to any and all Awards previously granted or the exercise or purchase price per Share under such Awards because of: |
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(1) | The issuance by Nautilus of shares of stock or any class of securities convertible into shares of any class of stock, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of Nautilus convertible into such shares or other securities; |
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(2) | The payment of a dividend in property other than Shares; or |
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(3) | The occurrence of any similar transaction whether or not for fair value. |
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(b) | If the number of outstanding Shares of Nautilus for which the Award is then exercisable or as to which the Award is to be settled shall at any time be changed or exchanged by declaration of a stock dividend, stock split, reverse stock split, combination of shares, extraordinary dividend of cash and/or assets, recapitalization, reorganization or any similar event affecting the capital structure of Nautilus or the number of Shares outstanding, the Committee shall, subject to and consistent with the requirements of applicable law, including Code Sections 409A and 424(h), appropriately and equitably adjust the number and kind of Shares which are subject to this Plan or subject to any Awards granted under the Plan, including Awards previously granted, and the exercise or settlement prices of such Awards, so as to maintain the proportionate number of Shares without changing the aggregate exercise or settlement price. |
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(c) | No right to purchase fractional Shares shall result from any adjustment of Stock Options or SARs pursuant to this Section 12. In case of any such adjustment, the Shares subject to the Stock Option or SAR shall be rounded down to the nearest whole share. |
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(d) | Any Award Agreement and related documents may include such terms relating to the effect of any merger, reorganization or changes in control affecting Nautilus as the Committee determines in its discretion to be appropriate, to the extent not inconsistent with Code Sections 409A and 424(h). Subject to any such terms, in the event Nautilus is a party to a merger or other reorganization, outstanding Awards shall be subject to the agreement of merger or reorganization. Such agreement may provide, without limitation, for the assumption of outstanding Awards by the surviving corporation or its parent, for their continuation by Nautilus (if Nautilus is a surviving corporation), for accelerated vesting and accelerated expiration, or for settlement in cash. |
13.LISTING OR QUALIFICATION OF COMMON STOCK
In the event that the Board of Directors determines in its discretion that the listing or qualification of the Shares available for issuance under the Plan on any securities exchange or quotation or trading system or other consent or approval under any applicable law or governmental regulation is necessary as a condition to the issuance of such Shares, a Stock Option or SAR may not be exercised, in whole or in part, and a Restricted Stock Award, Stock Unit Award, Performance Unit Award, Stock Option or SAR shall not vest unless such listing, qualification, consent or approval has been unconditionally obtained.
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14. | TERMINATION OR AMENDMENT OF THE PLAN |
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(a) | The Board of Directors may amend, alter or discontinue the Plan, and the Board or the Committee may, to the extent permitted by the Plan, amend any Award Agreement or other document relating to an Award made under this Plan, provided, however, that Nautilus shall submit for shareholder approval any amendment (other than an amendment pursuant to the adjustment provisions of Section 12) required to be submitted for shareholder approval by the rules of any national securities exchange on which the Shares are listed for trading or that otherwise would: |
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(1) | Increase the maximum number of Shares for which Awards may be granted under this Plan; |
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(2) | Reduce the price at which Stock Options may be granted below the price provided for in subsection 8(c)(1); |
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(3) | Reduce the exercise price of outstanding Stock Options; |
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(4) | Extend the term of this Plan; |
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(5) | Change the classes of persons eligible to be Participants (as described in Section 4); or |
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(6) | Increase the limits provided for in Section 6. |
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(b) | In addition, no such amendment or alteration shall be made which would impair the rights of any Participant, without such Participant's consent, under any Award theretofore granted, provided that no such consent shall be required with respect to any amendment or alteration if the Committee determines in its sole discretion that such amendment or alteration either: |
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(1) | Is required or advisable in order for the Corporation, the Plan or the Award to satisfy or conform to any law or regulation or to meet the requirements of any accounting standard; or |
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(2) | ls not reasonably likely to significantly diminish the benefits provided under such Award or that any such diminishment has been adequately compensated. |
15.PARTICIPANTS IN FOREIGN COUNTRIES
The Committee shall have the authority to adopt such modifications, procedures and sub-plans as may be necessary or advisable to comply with provisions of the laws of foreign countries in which the Corporation may operate.
To the extent required by applicable federal, state, local or foreign law, the Committee may and/or a Participant shall make arrangements satisfactory to the Corporation for the satisfaction of any and all taxes, including any withholding tax or payroll tax obligations, that arise with respect to any Award, the issuance of Shares or payment of cash upon exercise or settlement of an Award or any sale of Shares. The Corporation shall not be required to issue Shares or to recognize the disposition of such Shares until such tax obligations are satisfied. To the extent permitted or required by the Committee, these obligations may or shall be satisfied by having the Corporation withhold a portion of the Shares of stock that otherwise would be issued to a Participant under such Award or by tendering Shares previously acquired by the Participant.
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(a) | Employment At Will. Neither the Plan nor the grant of any Award nor any action by Nautilus, any Subsidiary, the Committee or any Administrator shall be held or construed to confer upon any person any right to be continued in the employ of Nautilus or a Subsidiary. Nautilus and each Subsidiary expressly reserves the right to discharge, without liability but subject to his or her rights under this Plan, any Participant whenever, in the sole discretion of Nautilus or a Subsidiary, as the case may be, its interest may so require.
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(b) | Governing Law. This Plan and any Award Agreements and other documents relating to Awards under the Plan shall be interpreted and construed in accordance with the laws of the State of Washington and applicable federal law. The Committee may provide that any dispute as to any Award shall be presented and determined in such forum as the Committee may specify, including through binding arbitration. Any reference in this Plan, or in an Award Agreement or related document, to a provision of law or to a rule or regulation shall be deemed to include any successor law, rule or regulation of similar effect or applicability.
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(c) | Unfunded Plan. Insofar as it provides for Awards, the Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants who are granted Awards under this Plan, any such accounts will be used merely as a bookkeeping convenience. The Corporation shall not be required to segregate any assets which may at any time be represented by Awards, nor shall this Plan be construed as providing for such segregation, nor shall the Corporation or the Committee be deemed to be a trustee of stock or cash to be awarded under the Plan.
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18.NON-EXCLUSIVITY OF PLAN
Neither the adoption of this Plan by the Board of Directors nor the submission of this Plan to the shareholders of the Corporation for approval shall be construed as creating any limitations on the power of the Board of Directors or the Committee to adopt such other incentive arrangements as either may deem desirable, including without limitation, the granting of stock options, stock appreciation rights, restricted stock, stock units or performance units other than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
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19. | COMPLIANCE WITH OTHER LAWS AND REGULATIONS |
This Plan, the grant and exercise of Awards under the Plan, and the obligation of the Corporation to sell, issue or deliver Shares under such Awards, shall be subject to all applicable federal, state and local laws, rules and regulations and to such approvals by any governmental or regulatory agency as may be required. The Corporation shall not be required to register in a Participant's name or deliver any Shares prior to the completion of any registration or qualification of such Shares under any federal, state or local law or any ruling or regulation of any government body which the Committee shall determine to be necessary or advisable. To the extent the Corporation is unable (or the Committee deems it infeasible) to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Corporation's counsel to be necessary to the lawful issuance and sale of any Shares
under the Plan, the Corporation shall be relieved of any liability with respect to the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. No Stock Option shall be exercisable and no Shares shall be issued and/or transferable under any other Award unless a registration statement with respect to the Shares underlying such Stock Option or Award is effective and current or the Corporation has determined that such registration is unnecessary.
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20. | LIABILITY OF CORPORATION |
The Corporation shall not be liable to a Participant or other persons as to:
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(a) | The non-issuance or sale of Shares as to which the Corporation has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Corporation's counsel to be necessary to the lawful issuance and sale of any Shares under the Plan; and |
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(b) | Any tax consequence expected, but not realized, by any Participant or other person due to the receipt, exercise or settlement of any Stock Option or other Award granted under the Plan. |
21.DESIGNATION OF BENEFICIARY
The Committee shall establish such procedures and prescribe such forms as it deems appropriate for a Participant to designate a beneficiary to receive any amounts payable under an Award in the event of the Participant's death.
APPENDIX B
SAMPLE PROXY CARD