The following table provides information regarding grants of plan-based awards to the Company’s Named Executive OfficersNEOs during fiscal 2014.2019.
|
| | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercise Price ($) | | Option Expiration Date | | Number of Securities Unvested | | Market Value of Unvested Securities ($) |
Parker H. Petit | | 425,000 |
| | — |
| | | 0.73 |
| | 2/24/2019 | | | | |
| | 225,000 |
| | — |
| | | 1.65 |
| | 2/23/2020 | | | | |
| | 100,000 |
| | — |
| | | 1.20 |
| | 5/11/2020 | | | | |
| | 125,000 |
| | — |
| |
| 1.35 |
| | 1/5/2021 | | | | |
| | 300,000 |
| | — |
| |
| 1.23 |
| | 3/18/2021 | | | | |
| | 500,000 |
| | — |
| |
| 1.05 |
| | 6/29/2021 | | | | |
| | 200,000 |
| | — |
| |
| 1.10 |
| | 12/14/2021 | | | | |
| | 533,333 |
| | 266,667 |
| | (1) | 1.25 |
| | 2/23/2022 | | | | |
| | 66,666 |
| | 33,334 |
| | (2) | 2.94 |
| | 10/31/2022 | | | | |
| | 83,333 |
| | 166,667 |
| | (3) | 5.07 |
| | 3/6/2023 | | 53,334 (5) | | 614,941 |
|
| | 25,000 |
| | 50,000 |
| | (4) | 6.04 |
| | 10/29/2018 | | 17,334 (6) | | 199,861 |
|
| | — |
| | 177,110 |
| | (7) | 7.96 |
| | 2/25/2024 | | 57,037 (8) | | 657,637 |
|
| | | | | | | | | | | 50,000 (9) | | 576,500 |
|
| | | | | | | | | | | | | |
William C. Taylor | | 350,000 |
| | — |
| | | 1.65 |
| | 2/23/2020 | | | | |
| | 75,000 |
| | — |
| |
| 1.35 |
| | 1/5/2021 | | | | |
| | 225,000 |
| | — |
| |
| 1.23 |
| | 3/18/2021 | | | | |
| | 125,000 |
| | — |
| |
| 1.18 |
| | 8/3/2021 | | | | |
| | 115,000 |
| | — |
| |
| 1.10 |
| | 12/14/2021 | | | | |
| | 400,000 |
| | 200,000 |
| | (1) | 1.25 |
| | 2/23/2022 | | | | |
| | 50,000 |
| | 25,000 |
| | (2) | 2.94 |
| | 10/31/2022 | | | | |
| | 55,000 |
| | 110,000 |
| | (3) | 5.07 |
| | 3/6/2023 | | 36,667(5) | | 422,771 |
|
| | 16,666 |
| | 33,334 |
| | (4) | 5.49 |
| | 10/29/2023 | | 12,000 (6) | | 138,360 |
|
| | — |
| | 113,359 |
| | (7) | 7.24 |
| | 2/25/2024 | | 36,506 (8) | | 420,914 |
|
Michael J. Senken | | 100,000 |
| | — |
| | | 0.87 |
| | 1/15/2020 | | | | |
| | 100,000 |
| | — |
| | | 1.65 |
| | 2/23/2020 | | | | |
| | 25,000 |
| | — |
| | | 1.20 |
| | 5/11/2020 | | | | |
| | 50,000 |
| | — |
| |
| 1.35 |
| | 1/5/2021 | | | | |
| | 110,000 |
| | — |
| |
| 1.23 |
| | 3/18/2021 | | | | |
| | 175,000 |
| | — |
| |
| 1.10 |
| | 12/14/2021 | | | | |
| | 100,000 |
| | 50,000 |
| | (1) | 1.25 |
| | 2/23/2022 | | | | |
| | 23,333 |
| | 11,667 |
| | (2) | 2.94 |
| | 10/31/2022 | | | | |
| | 25,000 |
| | 50,000 |
| | (3) | 5.07 |
| | 3/6/2023 | | 16,667 (5) | | 192,171 |
|
| | 5,833 |
| | 11,667 |
| | (4) | 5.49 |
| | 10/29/2023 | | 5,500(6) | | 63,415 |
|
| | — |
| | 49,607 |
| | (7) | 7.24 |
| | 2/25/2014 | | 15,976 (8) | | 184,203 |
|
Roberta L. McCaw | | 10,000 |
| | — |
| | | 0.50 |
| | 7/31/2019 | | | | |
| | 37,500 |
| | — |
| | | 0.70 |
| | 9/22/2019 | | | | |
| | 40,000 |
| | — |
| | | 1.65 |
| | 2/23/2020 | | | | |
| | 75,000 |
| | — |
| | | 1.20 |
| | 5/11/2020 | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price | | Option Expiration Date | | Number of Securities Unvested | | | | Market Value of Unvested Securities(1) |
Wright | | — |
| | — |
| | | | | | 681,818 |
| | (2) | | $ | 5,168,180 |
|
Coles | | — |
| | — |
| | | | | | — |
| | | | $0 |
Borkowski | | — |
| | — |
| | | | | | — |
| | | | $0 |
Carlson | | — |
| | — |
| | | | | | 190,140 |
| | (3) | | $ | 1,441,261 |
|
Landy | | — |
| | — |
| | | | | | — |
| | | | $0 |
Turner | | — |
| | — |
| | | | | | 10,000 |
| | (4) | | $75,800 |
| | | | | | | | | | 10,600 |
| | (5) | | $80,348 |
| | | | | | | | | | 6,667 |
| | (6) | | $50,536 |
| | | | | | | | | | 52,067 |
| | (7) | | $394,668 |
|
| | | | | | | | | | | | | | | | | |
| | 15,000 |
| | — |
| |
| 1.35 |
| | 1/5/2021 | | | | |
| | 40,000 |
| | — |
| |
| 1.23 |
| | 3/18/2021 | | | | |
| | 53,333 |
| | 26,667 |
| | (1) | 1.25 |
| | 2/23/2022 | | | | |
| | 17,666 |
| | 35,334 |
| | (3) | 5.07 |
| | 3/6/2023 | | 9,334 (5) | | 107,621 |
|
| | — |
| | 35,780 |
| | (7) | 7.24 |
| | 2/25/2014 | | 11,523 (8) | | 132,860 |
|
| |
(1) | The unexercisable portionCalculated based on a closing stock price of this option vested and became exercisable$7.58 per share on February 23, 2015.December 31, 2019. |
| |
(2) | The unexercisableA portion of this option vestsvested on June 7, 2020, and becomes exercisablethe remaining balance is scheduled to vest on October 31, 2015.June 7, 2021 and 2022. |
| |
(3) | One halfReflects (a) a time-vested restricted stock grant with a value of $350,000 which vests pro rata annually over three years on December 16, 2020, 2021, and 2022; and (b) a performance-vested restricted stock unit grant with a value of $1,000,000, which vests upon the unexercisable portionachievement of this option vested and became exercisable on March 6, 2015. The remaining unexercisable portioneach of this option vests on March 6, 2016.four discrete performance goals. |
| |
(4) | The unexercisable portion of this option vests and becomes exercisable in equal installmentsremaining balance vested on each of October 29, 2015 and 2016.February 22, 2020. |
| |
(5) | On March 6, 2015 one half of the awards vested. The remaining balance of each award willis scheduled to vest on March 6, 2016.February 22, 2021. |
| |
(6) | The awards willremaining balance is scheduled to vest in equaltwo installments on October 29, 2015December 11, 2020 and 2016, respectively.2021. |
| |
(7) | One third ofA portion vested on April 26, 2020, and the unexercisable portion of this option vested and became exercisable on February 25, 2015. The remaining unexercisable portion of this option vests and becomes exercisable in equal installments on February 25, 2016, and 2017. |
| |
(8) | On February 25, 2015 one third of the awards vested. The remaining balance of each award willis scheduled to vest in equal installments on February 25, 2016April 26, 2021 and 2017. |
| |
(9) | The award will vest in equal installments on October 29, 2015, 2016, and 2017, respectively.2022. |
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about the Company’s equity compensation plans as of December 31, 2019.
|
| | | | | | | | | |
Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted average exercise price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans |
Equity compensation plans approved by security holders | | 2,885,334 |
| | $4.42 | | 6,334,170 |
|
Equity compensation plans not approved by security holders | | — |
| | — |
| | — |
|
Total | | 2,885,334 |
| | $4.42 | | 6,334,170 |
|
2019 OPTION EXERCISES AND STOCK VESTED (FY2014) TABLE
The following table provides information concerning each exercise of stock options and each vesting of restricted stock during the fiscal year ended December 31, 2014,2019, on an aggregated basis with respect to each of the Company’s NamedNEOs.
|
| | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
Name | | | Number of Securities Acquired on Exercise | | Value Realized on Exercise | | Number of Securities Acquired on Vesting | | Value Realized on Vesting(1) |
Wright | | | — |
| | $0 | | — |
| | $0 |
Coles | | | — |
| | $0 | | — |
| | $0 |
Borkowski | | | — |
| | $0 | | 33,333 |
| | $100,999 |
Carlson | | | — |
| | $0 | | — |
| | $0 |
Landy | | | — |
| | $0 | | 25,433 |
| | $103,193 |
Turner | | | — |
| | $0 | | 25,800 |
| | $71,411 |
| |
(1) | Represents the number of shares acquired on vesting multiplied by the closing price of Company common stock on the vesting date. |
2019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
This section describes additional payments that the Company would make to the NEOs assuming a hypothetical termination of employment occurred on December 31, 2019 under various scenarios. We did not include Messrs. Coles or Borkowski in the table below because they voluntarily resigned their employment before December 31, 2019. See “Compensation Discussion and Analysis - Agreements with Our Executive Officers.Officers” for a discussion of certain severance payments to and arrangements made with Messrs. Borkowski and Landy.
|
| | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
Name | | Number of Securities Acquired on Exercise (#) | | Value Realized on Exercise ($) (1) | | Number of Securities Acquired on Vesting (#) | | Value Realized on Vesting ($) |
Parker H. Petit | | — |
| | — |
| | 65,703 |
| | 490,855 |
|
William C. Taylor | | 300,000 |
| | 2,368,550 |
| | 24,333 |
| | 189,238 |
|
Michael J. Senken | | — |
| | — |
| | 11,083 |
| | 86,220 |
|
Roberta L. McCaw | | — |
| | — |
| | 4,666 |
| | 34,435 |
|
(1) RepresentsThe Company’s agreement with Mr. Wright provides for, and its agreement with Mr. Landy provided for, compensation to the difference betweenexecutive in the market valueevent the executive’s employment with the Company is terminated involuntarily without “Cause” (as defined in the agreement), or if the executive voluntarily terminates employment for “Good Reason” (as defined in the agreement). The compensation payable under the agreements is a lump sum severance payment equal to a multiple of two times in the underlying shares oncase of Mr. Wright, or one time in the case of Mr. Landy, the executive’s annual base salary and targeted base bonus as of the date of exercisetermination. In addition, following termination of employment, he is entitled to receive life, health insurance coverage (subject to a COBRA election), and certain other fringe benefits equivalent to those in effect at the exercise price.
Potential Payments upon Terminationdate of termination for period of 24 months in the case of Mr. Wright, or Change12 months in Control
the case of Mr. Landy.
The Company has entered into change-in-control severanceCompany’s agreements with Messrs. Petit, TaylorWright and Senken. The agreementsTurner provide for compensation to the executive in the event the executive’s employment with the Company is terminated following the consummation of a “change-in-control” for reasons other than the executive’s death, disability or for “Cause” (as defined in the respective agreements), or if the executive voluntarily terminates employment for “Good Reason” (as defined in the respective agreements). The compensation payable under the agreements is a lump sum severance payment equal to a multiple of the executive’s annual base salary and targeted base bonus as of the date of the
change-in-control. The multiple applicable to Mr. Petit is three. The multiple applicable to Mr. Taylor is twomultiples are 2.5 and the multiple applicable to Mr. Senken is one0.5 Messrs. Wright and a half.Turner, respectively. In addition, following termination of employment, these executives are entitled to receive for a period of three years in the case of Mr. Petit, two years in the case of Mr. Taylor and 18 months in the case of Mr. Senken, life, health insurance coverage (subject to a COBRA election), and certain other fringe benefits equivalent to those in effect at the date of termination for periods of 30 months and will be entitled to receive additional amounts, if any, relating to any excise taxes imposed on the executive as a result of Section 280G of the Code.6 months for Messrs. Wright and Turner, respectively. The agreements require the executive to comply with certain covenants that preclude the executive from competing with the Company or soliciting customers or employees of the Company for a period following termination of employment equal to the period for which fringe benefits are continued under the applicable agreement. The agreements expire three years after a change in control of the Company or any successor to the Company.
Upon a “change in control,” as defined in the 2006 Stock Incentive Plan and subject to any requirements of Section 409A of the Internal Revenue Code of 1986, as amended, (the (“Code”), all outstanding awards vest and become exercisable. The Compensation Committee has discretion whether to provide that awards granted under the 2016 Plan will vest upon a “change in control.” Thus far, the Committee has exercised such discretion and provided for full vesting upon a change in control for all awards granted under the 2016 Plan to NEOs to date.
The following table sets forth in tabular form estimates of the potential post-employment payments due to the Named Executive Officers under the agreements discussed above and the 2006 Stock Incentive Plan, assuming the triggering event for the payments occurred on the last business day of the last fiscal year.
35
2019 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
|
| | | | | | | | | | | | | |
Executive | | Involuntary Without Cause or for Good Reason | | | | Involuntary or for Good Reason with Change in Control | | | | Death or Disability | | |
Wright | | | | | | | | | | | | |
cash severance | | 3,000,000 |
| | (1) | | $3,750,000 | | (1)(2) | | $0 | | |
estimated benefits | | $24,881 | | (3) | | $31,101 | | (2)(3) | | $0 | | |
estimated value of accelerated equity awards | | — |
| | | | $5,168,180 | | (4) | | $5,168,180 | | (5) |
Carlson | | | | | | | | | | | | |
cash severance | | $0 | | | | $0 | | | | $0 | | |
estimated benefits | | $0 | | | | $0 | | | | $0 | | |
estimated value of accelerated equity awards | | $0 | | | | $0 | | | | $1,441,261 | | (5) |
Turner | | | | | | | | | | | | |
cash severance | | $0 | | | | $248,500 | | (1)(2) | | $0 | | |
estimated benefits | | $0 | | | | $8,644 | | (2)(3) | | $0 | | |
estimated value of accelerated equity awards | | $0 | | | | $601,352 | | (4) | | $601,352 | | (5) |
Landy | | | | | | | | | | | | |
cash severance | | $687,750 | | | | n/a | | (6) | | n/a | | (6) |
estimated benefits | | $55 | | | | n/a | | (6) | | n/a | | (6) |
estimated value of accelerated equity awards | | $0 | | | | n/a | | (6) | | n/a | | (6) |
|
| | | | | | | | | | |
Executive | Cash Severance ($) (1) (2) | Estimated Benefits ($) (2) (3) | Estimated Value of Accelerated Equity Awards ($) (4) | Estimated 280G Tax Gross-Ups ($) (2) | Retirement Plans ($) |
Parker H. Petit | 2,455,200 |
| 76,080 |
| 7,060,066 |
| 3,677,312 |
| — |
|
William C. Taylor | 1,346,950 |
| 59,480 |
| 4,651,042 |
| 2,183,661 |
| — |
|
Michael J. Senken | 635,250 |
| 44,610 |
| 1,660,291 |
| 657,934 |
| — |
|
Roberta L. McCaw | — |
| — |
| 896,372 |
| — |
| — |
|
| |
(1) | Includes a)(a) annual base salary as of December 31, 2014,2019, plus b)(b) annual targeted bonus for the year ended December 31, 2014,2019, times the multiple applicable to the Named Executive Officer.NEO. |
| |
(2) | Payable only in the event the executive’s employment is terminated without cause or for “good reason” within three years following a change in control. |
| |
(3) | Includes a)(a) the estimated value of medical, dental, vision and life insurance, plus b)(b) the employer’s cost of FICA for the duration of the severance period. |
| |
(4) | Includes the accelerated value of a) unvested stock options as of December 31, 2014 that are in-the-money based on the December 31, 2014 stock price, plus b) unvested restricted stock based on the December 31, 20142019 stock price. |
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about MiMedx's equity compensation plans as of December 31, 2014:
|
| | | | | | | | | | |
| | A | | B | | C |
Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted average exercise price of outstanding options, warrants and rights reflected in column (A) | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A)* |
Equity compensation plans approved by security holders | | 17,745,525 |
| | $ | 3.57 |
| | 3,897,317 |
|
Equity compensation plans not approved by security holders | | — |
| | — |
| | — |
|
Total | | 17,745,525 |
| | $ | 3.57 |
| | 3,897,317 |
|
DIRECTOR COMPENSATION
The following table provides information concerning compensation of the Company's directors for the year ended December 31, 2014. The compensation reported is for services as directors. Only those directors who received compensation for such services during the year ended December 31, 2014, are listed.
|
| | | | | | | | | | | | | | | | | | |
Name | Fees Earned or Paid in Cash ($) (1) | | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation | | Change in Pension Value and Nonqualified Deferred Compensation Earnings | | All Other Compensation | | Total ($) |
Joseph G. Bleser | 67,500 |
| | 56,520 |
| 55,350 |
| — |
| | — |
| | — |
| | 179,370 |
|
J. Terry Dewberry | 69,000 |
| | 56,520 |
| 55,350 |
| — |
| | — |
| | — |
| | 180,870 |
|
Charles R. Evans | 52,500 |
| | 56,520 |
| 55,350 |
| — |
| | — |
| | — |
| | 164,370 |
|
Bruce L. Hack | 48,000 |
| | 56,520 |
| 55,350 |
| — |
| | — |
| | — |
| | 159,870 |
|
Charles E. Koob | 42,000 |
| | 56,520 |
| 55,350 |
| — |
| | — |
| | — |
| | 153,870 |
|
Larry W. Papasan | 72,750 |
| | 56,520 |
| 55,350 |
| — |
| | — |
| | — |
| | 184,620 |
|
Neil S. Yeston | 50,750 |
| | 56,520 |
| 55,350 |
| — |
| | — |
| | — |
| | 162,620 |
|
| |
(1) | Amount represents fees paid or earned duringprice, the year endedvesting of which is deemed accelerated to December 31, 2014.2019. |
| |
(2)(5) | Restricted stock awardIf the Participant’s employment with the Company terminated on account of 9,000the Participant’s death or disability, the shares which will vestshall become vested and non-forfeitable on July 28, 2015. The amount representstermination of the aggregate grant date fair valueParticipant’s employment with the Company on account of stock awards granted in the fiscal year valued in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718. This amount does not represent our accounting expense for these awards during the year and does not correspond to the actual cash value recognized by the director when received.Participant’s death or disability. |
| |
(3)(6) | Option grant of 15,000 shares which will vestMr. Landy’s employment actually terminated on July 28, 2015. The amount representsSeptember 16, 2009 when the aggregate grant date fair value of option awards granted in the fiscal year valued in accordance with FASB ASC Topic 718. This amount does not represent our accounting expense for these awards during the year and does not correspond to the actual cash value recognized by the director when received.Company eliminated his position. |
The Company's compensation policy for its non-employee directors, as revised effective July 28, 2014, is as follows:
•An annual cash retainer of $42,000 for service as a member of the Board;
36
•An annual cash retainer2019 DIRECTOR COMPENSATION
The Company compensates non-employee directors with a mix of $21,000 for service as chairman of the Audit Committee;
•An annual cash retainer of $16,000 for service as chairman of the Compensation Committee;
•An annual cash retainer of $11,000 for service as chairman of the Nominatingequity and Governance Committee; and
•An annual cash retainer ranging from $6,000 to $11,000 for service as a non-chairman member of a Board committee.
Each director who is not a full time employee of the Company also receives a grant of options to purchase the Company's common stock equivalent to a fair value (calculated using the Black-Scholes Model) of $118,000 and restricted shares at a fair market value of $67,000 upon being first elected or appointed to the Board of Directors. In addition, on the date of the annual meeting of shareholders, each director who is not a full time employee of the Company and who has been a director for at least 12 months, receives a grant of options to purchase the Company's common stock equivalent to a fair value (calculated using the Black-Scholes Model) of $59,000 and restricted shares at a fair market value of $60,000. These grants vest on the first anniversary of the grant date.cash. Directors who are full timefull-time Company employees of the Company do not receive any compensation for their service as directors or as members of boardBoard committees. The Company compensates non-employee directors at approximately the median of peer practices. The 2016 Plan imposes limits on awards to directors for their service as directors of (i) 125,000 shares granted during any calendar year and (ii) a maximum of $300,000 for any consecutive 12-month period for awards stated with reference to a specific dollar amount.
Equity Compensation
STOCK OWNERSHIPUpon initial election or appointment to the Board, each non-employee director received a one-time grant of restricted shares of Company common stock valued at $50,000, plus a prorated portion of the prior year’s annual grant (based on the number of months between the date of appointment to the Board and targeted date for the next annual meeting of shareholders). This grant vests on the first anniversary of the grant date. In October 2020, the Board increased the initial equity grant to $175,000, and extended the vesting to three years.
In addition, each non-employee director receives an annual grant of restricted shares of Company common stock valued at $175,000. The Board usually makes this grant on the date of the annual meeting of shareholders, and it vests on the earlier of the next annual meeting or the first anniversary of the grant date. Because, in 2019, the Restatement was incomplete and there was incomplete information publicly available about the Company, the Board made its annual grants in the form of restricted stock units, initially denominated in cash but which will be converted to a number of shares of Company common stock based on the stock price on the date thirty (30) days following the date the Company first becomes current with its SEC reporting obligations. The Board altered its grant practices in an attempt to ensure that the grants are based on a reliable price for the Company’s stock and which reflects all available information and current financial statements, to prevent the possibility of a windfall, and to ensure alignment with shareholders.
The following table sets forth certain information regardingDue to the Company's capital stock, beneficially ownedpending Audit Committee investigation in early 2018 and the expectation that the Company’s financial statements might need to be restated, the Board did not make the expected $175,000 equity grant to directors in 2018. Instead, on June 13, 2019 (prior to the election or appointment of Dr. Behrens and Messrs. Bierman and Newton to the Board), the Board, in its capacity as Administrator of the 2006 Plan, modified all options then outstanding held by non-employee directors under the Company’s Assumed 2006 Stock Incentive Plan, as amended and restated as of February 28, 2015,25, 2014 (the “2006 Plan”), such that all options held by each person knownincumbent directors who served on the Board prior to the CompanyCompany’s 2018 annual meeting of shareholders would expire on the original expiration date of such options, rather than on the first to beneficially own more than 5%occur of (i) three months following the date of termination of a director’s service on the Board for any reason and (ii) the expiration date of the Company's common stock, each Named Executive Officer andoption. The modification resulted in an incremental expense charge under United States generally accepted accounting principles (“GAAP”), which varied by director and all directors and executive officersbased upon the number of outstanding options then held by the director as a group. Beneficial ownership is calculated according to Rule 13d-3well as other factors. The incremental fair value of the Exchange Act as of that date. Unless otherwise indicated below, the address of those identifiedsuch modified options has been included in the table is MiMedx Group, Inc., 1775 West Oak Commons Court, NE, Marietta, Georgia 30062.below in the column, “Options.”
Cash Compensation
In 2019, the Company also paid the following cash amounts to non-employee directors:
|
| | | | | | |
Name and address of beneficial owner | | Number of Shares (1) | | Percentage Ownership (1) |
Parker H. “Pete” Petit (2) | | 9,142,530 |
| | 8.2 | % |
| | | | |
William C. Taylor (3) | | 2,293,426 |
| | 2.1 | % |
| | | | |
Charles E. Koob (4) | | 1,523,653 |
| | 1.4 | % |
| | | | |
Bruce L. Hack (5) | | 763,268 |
| | * |
|
| | | | |
Michael J. Senken (6) | | 936,452 |
| | * |
|
| | | | |
Roberta McCaw (7) | | 538,006 |
| | * |
|
| | | | |
Larry W. Papasan (8) | | 191,394 |
| | * |
|
| | | | |
Joseph G. Bleser (9) | | 175,085 |
| | * |
|
| | | | |
J. Terry Dewberry (10) | | 120,666 |
| | * |
|
| | | | |
Neil S. Yeston (11) | | 54,000 |
| | * |
|
| | | | |
Charles R. Evans (12) | | 39,000 |
| | * |
|
Total Directors and Executive Officers (11 persons)(13) | | 15,777,480 |
| | 13.8 | % |
|
| | | | |
| | Chairman | | Non-Chair Member |
Board | | $71,000 | | $42,000 |
Audit Committee | | $21,000 | | $11,000 |
Compensation Committee | | $16,000 | | $8,500 |
Nominating and Corporate Governance | | $11,000 | | $6,000 |
Science and Research Liaison | | $15,000 | | n/a |
Ethics and Compliance Committee | | $12,500 | | $6,500 |
Special Litigation Committee (ad hoc) | | $15,000 | | $7,500 |
In addition, for 2019 only, the Board paid excess meeting fees, subject to a cap, once the number of meetings for a particular body exceeded a threshold, as follows:
|
| | | |
*Supplemental Meeting Fees | Less than 1%Threshold # of Meetings | Per Meeting Fee | Supplemental Meeting Fee Cap |
Board Meetings | 12 meetings | $2,500 Chair $1,250 Member | $30,000 Chair $15,000 Member |
Audit Committee | 15 meetings | $2,000 Chair $1,000 Member | $24,000 Chair $12,000 Member
|
Compensation; Science & Research liaison; Special Litigation (ad hoc) | 12 meetings |
Nominating & Governance; Ethics & Compliance | 10 meetings |
The following table provides information concerning compensation of the Company’s non-employee directors who served in 2019.
|
| | | | | | | | |
Name | | Fees Earned or Paid in Cash | | Stock Awards(1) | | Options | | Total |
Luis A. Aguilar(2) | | $113,250 | | $0 | | $0 | | $113,250 |
Richard J. Barry | | $14,500 | | $225,000 | (6)(7) | $0 | | $239,500 |
M. Kathleen Behrens | | $34,471 | | $225,000 | (6)(7) | $0 | | $259,471 |
James L. Bierman | | $18,038 | | $225,000 | (6)(7) | $0 | | $243,038 |
Joseph G. Bleser(3) | | $78,750 | | $0 | | $89,437 | (5) | $168,187 |
J. Terry Dewberry | | $108,000 | | $175,000 | (6) | $82,019 | (5) | $365,019 |
Charles R. Evans | | $152,925 | | $175,000 | (6) | $0 | (5) | $327,925 |
Bruce L. Hack(3) | | $51,000 | | $0 | | $89,437 | (5) | $140,437 |
Charles E. Koob | | $57,000 | | $175,000 | (6) | $0 | | $232,000 |
K. Todd Newton | | $15,913 | | $225,000 | (6)(7) | $0 | | $240,913 |
Larry W. Papasan(4) | | $61,125 | | $0 | | $105,073 | (5) | $166,198 |
Neil S. Yeston(8) | | $107,125 | | $175,000 | (6) | $0 | (5) | $282,119 |
| |
(1)1. | Beneficial ownership is determined in accordanceThe following directors had stock options outstanding as of December 31, 2019: Papasan - 87,000; Koob - 75,000; and Bleser, Dewberry, Evans, Hack, Koob, and Yeston—each with the rules60,000. In addition, on December 31, 2019 each of the SECMessrs. Barry, Bierman, and includes voting or investment powerNewton, and Ms. Behrens, had restricted stock units with respect to shares beneficially owned. Unless otherwise specified, reported ownership refers to both votinga value of $225,000, and investment power. Stock options, warrantseach of Messrs. Dewberry, Evans, and convertible securities which are exercisable within 60 days are deemed to be beneficially owned. AsKoob and Dr. Yeston had restricted stock units with a value of February 28, 2015, there were 108,082,526 shares of common stock issued and outstanding.$175,000. |
| |
(2)2. | Includes (i) 4,737,661 shares held by Mr. Petit including 271,240 shares of unvested restricted stock; (ii) 3,054,869 shares of common stock issuable uponAguilar resigned from the exercise of vested options; and (iii) 1,350,000 shares held by six Grantor Retained Annuity Trusts.Board on September 19, 2019. |
| |
(3)3. | Includes (i) 588,974 shares owned byThe terms of Mr. Taylor including 145,041 shares of unvested restricted stock;Bleser and (ii) 1,704,452 shares issuable uponMr. Hack expired on June 17, 2019 following the exercise of vested options.2018 Annual Meeting. |
| |
(4)4. | Includes (i) 615,000 shares held jointly by Mr. Koob and his wife; (ii) 853,653 shares held individually by Mr. Koob including 9,000 shares of unvested restricted stock; and (iii) 55,000 shares issuable uponPapasan resigned from the exercise of vested options.Board on June 17, 2019 following the 2018 Annual Meeting. |
| |
(5)5. | Includes (i) 673,268 shares owned by Mr.Reflects incremental fair value of options as a result of modifications effective on June 13, 2019: Bleser - $89,437; Dewberry - $82,019; Hack including 9,000 shares of unvested restricted stock;$89,437; Papasan $105,073; Evans, Koob and (ii) 90,000 shares issuable upon the exercise of vested options. |
| |
(6) | Includes (i) 50,000 shares held by Mr. Senken and his wife; (ii) 80,750 held by Mr. Senken including 64,342 shares of unvested restricted stock, and (iii) 805,702 shares issuable upon the exercise of vested options.Yeston - $0. |
| |
(7)6. | Includes (i) 193,247 shares owned by Ms. McCaw including 17,016 sharesReflects grant of unvested$175,000 restricted stock; and (ii) 344,759 shares issuable upon the exercise of vested options.stock unit award to all directors serving after June 17, 2019. |
| |
(8)7. | Includes (i) 86,727 shares owned by Mr. Papasan including 9,000 sharesReflects grant of unvested$50,000 restricted stock; (ii) 41,667 shares held in a trust for the benefit of Mr. Papasan; and (iii) 63,000 shares issuable upon the exercise of vested options.stock unit award to new directors. |
| |
(9)8. | Includes (i) 85,085 shares owned by Mr. Bleser including 9,000 shares of unvested restricted stock;Dr. Yeston serves as the Science and (ii) 90,000 shares issuable uponResearch liaison to the exercise of vested options. |
| |
(10) | Includes (i) 30,666 shares owned by Mr. Dewberry including 9,000 shares of unvested restricted stock;Board and (ii) 90,000 shares issuable uponas the exercise of vested options. |
| |
(11) | Includes (i) 24,000 shares owned by Mr. Yeston including 9,000 shares of unvested restricted stock; and (ii) 30,000 shares issuable upon the exercise of vested options. |
| |
(12) | Includes (i) 9,000 shares owned by Mr. Evans including 9,000 shares of unvested restricted stock; and (ii) 30,000 shares issuable upon the exercise of vested options. |
| |
(13) | Includes (i) 9,419,698 shares controlled or held for the benefitChairman of the executive officers and directors including 560,639 shares of unvested restricted stock and; (ii) 6,357,782 shares issuable upon the exercise of vested options.ad hoc special litigation committee. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Policies and Procedures for Approval of Related Party Transactions
Under its charter, the Audit Committee is responsible for reviewing and approving all transactions or arrangements between the Company and any of its directors, officers, or principal shareholders and any of their respective affiliates, associates or related parties. In determining whether to approve or ratify a related party transaction, the Audit Committee considers all relevant facts and circumstances available to it, such as:
Whether the terms of the transaction are fair to the Company and at least as favorable to the Company as would apply if the transaction did not involve a related party;
Whether there are demonstrable business reasons for the Company to enter into the transaction;
Whether the transaction would impair the independence of an outside director; and
Whether the transaction would present an improper conflict of interest for any director or executive officer, taking into account the size of the transaction, the direct or indirect nature of the related party’s interest in the transaction and the ongoing nature of any proposed relationship, and any other factors the Audit Committee deems relevant.
Related Party Transactions
On January 20, 2014, Mr. Petit exercised 975,000 warrants to purchase shares of the Company's common stock. The exercise price of each warrant was $0.73. There were no other related party transactions as defined by SEC rules since the beginning of the 2014 fiscal year.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s executive officers and directors, and any beneficial owner of more than ten percent of a registered class of the Company’s equity securities, to file reports (Forms 3, 4 and 5) of stock ownership and changes in ownership with the SEC. Officers, directors and beneficial owners of more than ten percent of the common stock are required by SEC regulations to furnish the Company with copies of all such forms that they file.
Based solely on the Company’s review of the copies of Forms 3, 4, and 5 the Company believes that during the year ended December 31, 2014, all filing requirements were complied with by its executive officers, directors and beneficial owners of more than ten percent of the common stock, with the exception of one late Form 4 filing by each of Parker H. Petit, Larry W. Papasan, Charles E. Koob, and Neil S. Yeston.
PROPOSAL 3 - APPROVAL OF AN AMENDMENT
TO THE COMPANY'S ARTICLES OF INCORPORATION
(PROPOSAL 2)
Shareholders are being asked to approve an Amendmentamendment to the Company’s Articles of Incorporation, as amended (the “Articles”“Articles”), to increase the number of authorized shares of the Company’s capital stock from 135,000,000155,000,000 shares to 155,000,000192,500,000 shares, and to increase the number of shares designated as common stock from 130,000,000150,000,000 shares ($.001 par value) to 150,000,000187,500,000 shares ($.001 par value). The Board of Directors has approved this amendment, subject to shareholder approval, and directed that this amendment be submitted to a vote of the Company’s shareholders at the 20152020 Annual Meeting of Shareholders.Meeting. The Board has determined that this amendment is in the best interests of the Company and its shareholders and recommends approval by the Company’s shareholders.
The Articles currently authorize the issuance of up to 135,000,000155,000,000 shares of capital stock of which 130,000,000150,000,000 shares are designated as common stock ($.001 par value) and 5,000,000 shares are designated as preferred stock ($.001 par value).
As of the close of business on February 28, 2015, 108,082,526Record Date, [110,787,833] shares of common stock were outstanding (including restricted stock awards outstanding under our 2006 Stockthe MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan)Plan (the “Plan”)). In addition, as of the close of business on February 28, 2015, the Company had 15,990,471[2,314,043] shares of common stock subject to outstanding stock options, 2,651,080[2,459,211] shares of common stock subject to outstanding restricted stock unit awards, and [4,032,142] shares reserved for issuance pursuant to future grants under the Company’s current stock incentive plans,plans.
Also, as of the Record Date, 100,000 shares of Series B Preferred Stock were outstanding. Each holder of Series B Preferred Stock (each a “Holder” and 42,400collectively, the “Holders”) has the right, at its option, to convert its Series B Preferred Stock, in whole or in part, into a number of fully paid and non-assessable shares of Company common stock equal to the Purchase Price Per Share ($1,000), plus any accrued and unpaid dividends, at the conversion price (currently $3.85). (No Holder may convert its shares of Series B Preferred Stock into shares of Company common stock if such conversion would result in the Holder, together with its affiliates, holding more than 19.9% of the votes entitled to be cast at any shareholder meeting or beneficially owning in excess of 19.9% of then-outstanding shares of Company common stock.) Accordingly, the Company has reserved 25,794,026 shares of Company common stock for issuance upon potential conversion of the Series B Preferred Stock.
After accounting for the outstanding shares of common stock subjectand common stock reserved with respect to outstanding warrants. No preferred stock options, restricted stock unit awards, future grants under the Company’s current stock incentive plans (prior to the amendments contemplated by Proposal 3), and outstanding shares of Series B Preferred Stock, the Company has been issued or is outstanding. only [4,404,813]shares of common stock remaining available for issuance under the Articles.
The proposed amendment will not increase or otherwise affect the Company’s authorized preferred stock.
The additional common stock to be authorized by adoption of the proposed amendment would have rights identical to the currently outstanding common stock of the Company. Adoption of the proposed amendment and issuance of the additional common stock would not affect the rights of the holders of currently outstanding common stock of the Company, except for effects incidental to increasing the number of shares of the Company’sCompany common stock outstanding, such as dilution of the voting rights of current holders of common stock. If the amendment is adopted, it will become effective upon the filing of Articles of Amendment with the Department of State of the State of Florida.
Purpose of Amendment
The Board believes it is in the best interest of the Company to increase the number of authorized shares of common stock in order to give the Company greater flexibility in considering and planning for future potential business needs. The additional shares may be used for various purposes without further stockholdershareholder approval, subject to applicable laws and applicable listing requirements that may require stockholdershareholder approval for certain issuances of additional shares.
TheHaving this additional authorized common stock available for future use will allow the Company to issue additional shares of common stock without the expense and delay of arranging a special meeting of shareholders.
Further, as described in Proposal 3 below, the Company is seeking shareholder approval to add 8,400,000 shares to the Plan. Except for Proposal 3, below, the Company has no current plan, commitment, arrangement, understanding or agreement regarding the issuance of the additional authorized shares of common stock resulting from the increase proposed herein. The additional shares of common stock will be available for issuance by the Board for various corporate purposes, including but not limited to, financings, potential strategic transactions, including mergers, acquisitions, strategic partnerships, joint ventures, divestitures,
and business combinations, stock splits, stock dividends, grants under employee stock incentive plans, as well as other general corporate transactions.
Having this additional authorized common stock available for future use will allow the Company to issue additional shares of common stock without the expense and delay of arranging a special meeting of shareholders.
Possible Effects of the Amendment and Additional Anti-takeover Consideration
The additional shares of common stock that would become available for issuance if the proposal is adopted could also be used by the Company to oppose a hostile takeover attempt or to delay or prevent changes in control or management of the Company. For example, without further stockholdershareholder approval, the Board of Directors could strategically sell shares of common stock in a private transaction to purchasers who would oppose a takeover or favor the current Board of Directors. Although this proposal to increase the authorized common stock has been prompted by business and financial considerations and not by the threat of any hostile takeover attempt (nor is the Board of Directors currently aware of any such attemptsattempt directed at the Company), stockholdersshareholders should be aware that approval of the proposal could facilitate future efforts by the Company to deter or prevent changes in control of the Company, including transactions in which the stockholdersshareholders might otherwise receive a premium for their shares over then current market prices.
Effect of the Amendment
If the Company’s shareholders approve the Proposal,proposed amendment, the Board will have authority to file with the Department of State of the State of Florida an amendment to the Company’s Articles to authorize an additional 20,000,00037,500,000 shares of capital stock,
all of which shall be designated as common stock ($.001 par value). Upon approval and following such filing with the Secretary of State of the State of Florida, the Articles of Amendment will become effective on the date it isthey are filed.
The first paragraph of Article 3 of the Articles currently provides as follows:
“Article 3. Capital Stock. The total number of shares of stock which the Corporation shall have authority to issue is not more than 135,000,000 shares of capital stock, of which 130,000,000 shares shall be designated “Common Stock,” at $.001 par value per share, and 5,000,000 shares shall be designated as “Preferred Stock,” at $.001 par value per share."
Our Board of Directors has approved the following amendment to “Article 3, subject to approval of such amendment by the holders of our common stock in accordance with the required vote as set forth above. If this Proposal 2 is approved, we will subsequently file Articles of Amendment to the Articles providing that the first paragraph of Article 3, set forth above, will be deleted in its entirety and replaced by the following:
“Article 3. 3. Capital Stock.Stock. The total number of shares of stock which the Corporation shall have authority to issue is not more than 155,000,000 shares of capital stock, of which 150,000,000 shares shall be designated “Common Stock,” at $.001 par value per share, and 5,000,000 shares shall be designated as “Preferred Stock,” at $.001 par value per share."
Our Board of Directors has approved the following amendment to Article 3, subject to approval of such amendment by the holders of our common stock in accordance with the required vote as set forth above. If this Proposal 3 is approved, we will subsequently file Articles of Amendment to the Articles providing that the first paragraph of Article 3, set forth above, will be deleted in its entirety and replaced by the following:
“Article 3. Capital Stock. The total number of shares of stock which the Corporation shall have authority to issue is not more than 192,500,000 shares of capital stock, of which 187,500,000 shares shall be designated “Common Stock,” at $.001 par value per share, and 5,000,000 shares shall be designated as “Preferred Stock,” at $.001 par value per share."
Vote Required
This proposal requires the affirmative vote of a majority of shares entitled to vote on the matter (i.e., shares outstanding). The failure to vote as well as abstentions and broker non-votes will be counted as votes “AGAINST” this proposal.
Neither Florida law, nor the Company’s Articles, nor the Company’s amended and restated bylaws providesprovide for appraisal or other similar rights for dissenting shareholders in connection with this proposal. Accordingly, the Company’s shareholders will have no right to dissent and obtain payment for their shares.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ARTICLES OF AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
PROPOSAL 4–APPROVAL OF AMENDMENTS TO THE 2015 MANAGEMENTCOMPANY’S
2016 EQUITY AND CASH INCENTIVE PLAN
(PROPOSAL 3)THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENT TO THE 2016 EQUITY AND CASH INCENTIVE PLAN
We are requesting that shareholders vote in favor of approving the Company’s 2015 ManagementThe MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan (the “2015 MIP”“Plan”) to permitwas originally approved by shareholders at the grantAnnual Meeting held on May 18, 2016. The Plan was recently amended and restated and adopted by the Board of awards that are intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code (the "Code"). Qualified performance-based awards are awards which include performance criteria intended to satisfy Section 162(m) of the Code. Section 162(m) of the Code limits the Company’s federal income tax deduction for compensation to certain specified senior executives to $1 million, but excludes from that limit “performance-based compensation.” The portion of the 2015 MIP applicable to Covered Employees (as defined by Section 162(m) of the Internal Revenue Code (the “Code”)) is contingentDirectors, upon the approval of the shareholders of the Company.
The 2015 MIP participants include the Chief Executive Officer (the “CEO”), plus the direct reports to the CEO and Chief Operating Officer (the "MIP Participants"). MIP participants will be eligible to receive awards as determinedrecommendation by the Compensation Committee, of the Board (the "Compensation Committee") in its sole discretion, and will receive payments pursuant to awards based upon the degree of achievement of performance goals. By voting in favor of this proposal, you will be voting to approve the material terms of the 2015 MIP to permit the grant of awards that are intended to qualify as performance-based compensation under Section 162(m) of the Code. No bonuses may be paid under the 2015 MIP to Covered Employees unless and until the shareholders of the Company approve the 2015 MIP. The provisions of the 2015 MIP are bifurcated, so that certain provisions of the 2015 MIP required in order to satisfy the requirements of Section 162(m) of the Code are only applicable to MIP Participants whose compensation is subject to 162(m) of the Code.shareholder approval.
The 2015 MIP was approvedprincipal features of the Plan, as amended and recommended to the Board of Directorsrestated, are summarized below. The summary is qualified in its entirety by the Compensation Committee and was approved by the Boardfull text of the Directors based upon the Compensation Committee's recommendation. A copy of the 2015 MIPPlan, which is attachedset forth as Appendix A to this Proxy StatementStatement. The principal amendments were to increase by 8,400,000 the total number of shares of the Company’s common stock reserved for issuance as awards under the Plan, and is incorporated hereinto reflect changes relating to Section 162(m) of the Internal Revenue Code (performance criteria and the transitional rules) as imposed by reference. We encourage youthe Tax Cuts and Jobs Act. To further align compensation with performance, the Plan provides for the grant of Performance Shares and Performance Units, requires a minimum one-year vesting requirement for awards, and prohibits the payment of dividends or dividend equivalents on unvested awards, or on any stock option, stock appreciation right or other purchase right. The Plan provides for “double-trigger” vesting upon a Change in Control. To reflect current best practices, the Plan also includes meaningful limits with respect to read the 2015 MIP in its entirety.non-employee director compensation.
The purposes ofAmendment to the 2015 MIP are (a) to increase shareholder value; (b) to achieve and exceed the Company's 2015 business plan; (c) to reward key individuals for demonstrated performance that is sustained throughout the year; and (d) to enhance the Company’s ability to be competitive in the marketplace for executive talent, and to attract, retain and motivate a high-performing and high-potential management team.Plan
TheOn October 2, 2020, our Board of Directors has the discretion,approved, subject to approval by our shareholders, an amendment to the provisionsPlan to add 8,400,000 shares to the Plan and the additional amendments described below. If the amendment to the Company’s articles of incorporation (Proposal No. 2) is not approved by shareholders, then the number of shares added to the Plan will be limited to 4,404,813, which is the maximum amount permitted under our current charter.
Prior to giving effect to the amendment, there were available in the Plan only [4,032,142] shares available for grant as of October 7, 2020. If shareholders approve the amendment to the Plan, then 8,400,000 additional shares will become available for grant as full value shares and other awards under the Plan. We estimate that this will be sufficient to make grants for approximately three years, assuming no cancellation of outstanding awards, but our estimate depends on a number of factors, including the rate at which prior awards are forfeited and the rate at which our workforce grows. Refer to the table below which shows the amount of prior grants and forfeitures. The Plan is our only plan for providing stock-based compensation to our eligible employees and non-employee directors.
Shareholder approval of the 2015 MIP, to make or to select the manner of making all determinations with respectamendment to the 2015 MIP. The Board of Directors has delegatedPlan is required by Nasdaq Stock Market listing standards.
Reasons for the administration of the 2015 MIP to the Compensation Committee, who in turn, will approve and subsequently make recommendations to the Board of Directors for final approval of all determinations with respect the MIP. As delegated by the Board of Directors, the Compensation Committee shall have full authority to formulate adjustments and make interpretations under the 2015 MIP as it deems appropriate.Amendment
The 2015 MIP provides for target base bonuses that are expressed as a percentage of each MIP Participant's 2015 annual base compensation. Bonuses are earnedAmendment will allow the Company to continue to make grants under the 2015 MIP based onPlan for the purpose of attracting, retaining, and motivating key employees, and to continue to support the Company’s 2015 revenue performance,growth. Based on itsreview, the Compensation Committee determined that an insufficient number of shares were available under the Plan to continue to provide future grants to the Company’s Adjusted EBITDAemployees and individual objectives. Eighty percentnon-employee directors. As noted above, there remain only [4,032,142] shares available for grant as of the base bonus is based on the Company’s 2015 revenue performance, 10% is based on 2015 Adjusted EBITDA performance, and 10% is based on the achievement of individual goals and objectives as further described in the 2015 MIP attached hereto as Appendix A. Under the 2015 MIP, the portion of the base bonus that is based on the Company’s 2015 revenue and the Company’s 2015 Adjusted EBITDA is earned on a sliding scale established by the Board for each component. Provided that the minimum threshold established by the Board for 2015 Adjusted EBITDA is achieved, the sliding scale of incentive payout for the Adjusted EBITDA component of the MIP ranges from 10% to 100%, depending on the Company’s actual 2015 Adjusted EBITDA achieved. Provided that the minimum threshold established by the Board for 2015 Adjusted EBITDA and 2015 revenue are both achieved, the sliding scale of incentive payout for the revenue component of the MIP ranges from 15% to 100%, depending on the Company’s actual 2015 revenue achieved. If the Company’s 2015 Adjusted EBITDA target is met or exceeded and the Company’s 2015 revenue exceeds the revenue target established by the Board, MIP Participants may earn an excess bonus. The total bonus (including the excess bonus) may equal up to two times the amount of the MIP Participant’s base bonus if the Adjusted EBITDA target is met or exceeded, all individual objectives are fully achieved and the actual 2015 revenue meets or exceeds a maximum payout level established by the Board.October 7, 2020.
Amounts which would be payable inOver the futurepast three-year period, we have used the following number of shares under the 2015 MIP cannot be determined because they are contingent upon the attainment of pre-established performance goals, the outcome of which is substantially uncertain at the time the performance goals are established. Similarly, as the performance goals established by the Compensation Committee pursuant toPlan:
the 2015 MIP are applicable only to a specific year, the amount that would have been paid in the prior fiscal year to eligible participants in the 2015 MIP is not determinable. |
| | | | | | | | |
| 2017 | 2018 | 2019 | Average 2017-2019 |
Total Number of Employees on January 1 | 646 | 853 | 753 | 751 |
Number of Employees Receiving Grants During the Year | 963 | 574 | 154 | 564 |
Shares Subject to Options Granted During the Year | 0 | 0 | 0 | 0 |
Shares of Full Value Awards Granted During the Year | 3,358,693 |
| 1,941,925 |
| 3,356,059 |
| 2,885,559 |
|
Subtotal | 3,358,693 |
| 1,941,925 |
| 3,356,059 |
| 2,885,559 |
|
less forfeitures (includes grants made in prior years) | -431,781 |
| -7,326,367 |
| -1,772,635 |
| -3,176,928 |
|
Net Shares Used During the Year | 2,926,912 |
| -5,384,442 |
| 1,583,424 |
| -291,369 |
|
Shares outstanding at December 31 | 109,347,517 |
| 109,098,663 |
| 110,818,649 |
| 109,754,943 |
|
The following is a brief and general discussion of the United States federal income tax consequences to recipients of awards granted under the 2015 MIP. This summary is not comprehensive and is based upon laws and regulations in effect on April , 2015. Such laws and regulations are subject to change. This summary is intended for the information of shareholders considering how to vote and not as tax guidance for MIP Participants. MIP Participants should consult their own tax advisors as to the tax consequences of participation.
A MIP Participant will generally recognize ordinary income on receipt of payment in satisfaction of an award. In general, whenever a MIP Participant is required to recognize ordinary income in connection with an award, the Company will be entitled to a corresponding tax deduction. However, the Company will not be entitled to deductions in connection with awards under the 2015 MIP to certain senior executive officers to the extent that the amount of deductible income in a year to any such officer, together with his or her other compensation from the Company, exceeds the $1 million limitation of Section 162(m) of the Code. Compensation which qualifies as “performance-based” is not subject to this limitation, however. For purposes of the foregoing summary, we assumed that no award under the 2015 MIP will be considered “deferred compensation” as that term is defined for purposes of recent federal tax legislation governing non- qualified deferred compensation arrangements, Section 409A of the Code, or, if any award were considered to any extent to constitute deferred compensation, its terms would comply with the requirements of that legislation (in general, by limiting any flexibility in the time of payment). If an award includes deferred compensation, and its terms do not comply with the requirements of the legislation, then any deferred compensation component of an award under the 2015 MIP will be taxable when it is earned and vested (even if not then payable) and the recipient will be subject to a 20% additional tax.41
Although the foregoing summarizes the essential features of the 2015 MIP, it is qualified in its entirety by reference to the full text of the 2015 MIP as attached.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE 2015 MANAGEMENT INCENTIVE PLAN TO PERMIT THE GRANT OF AWARDS THAT ARE INTENDED TO QUALIFY AS PERFORMANCE-BASED COMPENSATION UNDER SECTION 162(m) OF THE INTERNAL REVENUE CODE.
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(PROPOSAL 4)
Independent Registered Public Accounting Firm For 2015
The Board of Directors, upon the recommendation of its Audit Committee, has selected Cherry Bekaert LLP, to audit our accounts for the fiscal year ending December 31, 2015. Cherry Bekaert LLP has reported that none of its members has any direct financial interest or material indirect financial interest in us. Currently, our Audit Committee is composed of Mr. Dewberry, Mr. Papasan, Mr. Bleser and Mr. Evans and has responsibility for recommending the selection of our independent registered public accounting firm.
The Audit Committee’s pre-approval process for non-audit and audit-related services may be found in the charter of the Audit Committee.
Representatives of Cherry Bekaert LLP, are expected to be present at the Annual Meeting of Shareholders. These representatives will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.
Audit Firm Fee Summary
The following table presents fees billed for professional audit services rendered by Cherry Bekaert LLP, the Company's independent registered public accounting firm, for the audit of the Company's annual financial statements for the year ended December 31, 2014, and December 31, 2013, and fees billed for other services rendered by Cherry Bekaert LLP, during these periods.
|
| | | | | | | | |
| | Fiscal Year end December 31, 2014 | | Fiscal Year end December 31, 2013 |
Audit Fees | | $ | 260,000 |
| | $ | 235,000 |
|
Audit - related Fees | | $ | 15,000 |
| | $ | 22,000 |
|
Tax Fees | | $ | — |
| | $ | 39,400 |
|
All Other Fees | | $ | 17,926 |
| | $ | — |
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Audit Fees. This category includes fees for (i) the audit of the Company's annual financial statements and review of financial statements included in its quarterly reports on Form 10-Q; and (ii) services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements for the relevant periods described above.
Audit-related Fees. This category includes fees for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit Fees.” The fees noted here were related to the Company's public offering of common stock in December 2013.
Tax Fees. This category consists of professional services rendered for tax compliance, tax planning, tax return preparation, tax research and tax advice.
All Other Fees. This category includes the aggregate fees for products and services that are not reported above under “Audit Fees,” or “Tax Fees.”
Audit Committee Pre-Approval Policy
The Audit Committee has responsibility for the appointment, retention and oversight of the work of the Company's independent auditors, to recommend their selection and engagement, and to review and approve in advance all non-audit related work performed by the Company's independent registered public accounting firm prior to the performance of each such service. The Audit Committee also is required to establish formal policies and procedures for the engagement of the independent auditors to provide permitted non-audit services. The Audit Committee gave its prior approval to all services provided by the Company's independent auditors in fiscal 2014 and 2013. The Audit Committee has determined that the provision of services by Cherry Bekaert LLP is compatible with maintaining the independence of the independent registered public accounting firm.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF THE AUDIT COMMITTEE
The following report of the Audit Committee shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall it be incorporated by reference into any previous or future filing by the Company under the Securities Act of 1933 or the Exchange Act of 1934 except to the extent that the Company incorporates it by specific reference.
In accordance with the written charter adopted by the Board of Directors, the Audit Committee assists the Board of Directors in fulfilling its responsibility for oversight of the quality and integrity of the Company’s financial reporting processes.
Review and Discussions with Management. The Audit Committee has reviewed and discussed our audited financial statements for the year ended December 31, 2014, and the unaudited financial statements for the quarters ended March 31, June 30 and September 30, 2014 and the system of internal controls designed to provide reasonable assurance regarding compliance with accounting standards and applicable laws with our management.
Review and Discussion with Independent Registered Public Accounting Firm. The Audit Committee has reviewed and discussed with Cherry Bekaert LLP, our independent registered public accounting firm, which is responsible for expressing an opinion on the conformity, in all material respects, of those audited consolidated financial statements with U.S. generally accepted accounting principles, its judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee by standards of the Public Company Accounting Oversight Board (PCAOB). In addition, the Audit Committee has received the written disclosures and the letter from Cherry Bekaert LLP required by the PCAOB.
Conclusion. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board of Directors has approved, that the audited consolidated financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2014, for filing with the Securities and Exchange Commission.
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Current Overhang (As of October 7, 2020) | Audit Committee of the Board of Directors |
Stock Options Outstanding | J. Terry Dewberry, Chairman[2,314,043] |
Weighted Average Exercise Price of Outstanding Stock Options | Joseph G. Bleser$4.59 |
Weighted Average Remaining Term of Outstanding Stock Options | Larry W. Papasan3.81 years |
Full Value Awards Outstanding (restricted stock units and performance-based awards) | Charles Evans[2,459,211] |
Total Equity Awards Outstanding | [4,773,254] |
Shares Remaining Available for Future Grant | [4,032,142] |
Common Stock Outstanding as of October 7, 2020 | [ ] |
DEADLINE FOR SHAREHOLDER PROPOSALSThe Board believes that the success of the Company is largely dependent on its ability to attract and retain highly‑qualified employees, consultants, and non-employee directors and that by offering them the opportunity to acquire or increase their proprietary interest in the Company, the Company will enhance its ability to attract and retain such persons. Further, the Company strongly believes in aligning the interests of its employees, especially its executive officers, with those of its shareholders. If the amendment to the Plan is not approved by the shareholders, then our ability to provide future awards to attract, provide incentives to and retain key personnel and non-employee directors would be limited significantly.
ProposalsIf shareholders approve the amendments to the Plan, and if the shareholders approve the amendment to the Company’s articles of incorporation (Proposal 2), then the amendments to the Plan will become effective on November 20, 2020. If shareholders intended for inclusiondo not approve the amendment, the amendment will not take effect; the pre-amendment Plan will continue to be effective according to its terms, and we may continue to make awards under the Plan, subject to such pre-amendment share limits.
Long-term equity incentive awards assist us in recruiting and retaining individuals with ability and initiative by enabling such individuals to participate in our future success and aligning their interests with our interests and the interests of our shareholders. In consideration of the benefits of long-term equity incentive awards and upon the recommendation of our Compensation Committee, our Board of Directors adopted the amended and restated Plan on October 2, 2020 contingent upon its approval by our shareholders. If approved by our shareholders, the amended and restated Plan will provide us with the ability to continue to utilize equity and cash incentive awards as a part of our overall compensation structure.
Other Amendments
In addition to the increase in shares available, to further align compensation with performance, the Plan, as amended and restated, provides for the grant of Performance Shares and Performance Units. The Plan requires a minimum one-year vesting requirement for awards and prohibits the payment of dividends or dividend equivalents on unvested awards, or on any stock option, stock appreciation right or other purchase right. The Plan also provides for “double‑trigger” vesting upon a Change in Control for assumed awards . Additionally, to reflect current best practices, the Plan also includes meaningful limits with respect to non-employee director compensation.
Key features of the Plan, as amended and restated, include:
All stock options, stock appreciation rights and other purchase rights must have an exercise price that is not less than the fair market value of the underlying stock on the grant date.
The maximum number of shares of our Common Stock that will be made available under the Plan is the sum of (i) 8,400,000shares plus (ii) the number of shares that remain available for issuance under the Plan on the date the Company’s shareholders approve the amended and restated Plan (iii) plus the number of shares that are represented by outstanding Awards issued under the Plan on the date that the Company’s shareholders approve the amended and restated Plan and that later become available because of the expiration or forfeiture of the Award without the issuance of the underlying shares.
Shares of Common Stock not issued as the result of a net settlement of an Award, or tendered or withheld to pay the exercise price, purchase price or withholding taxes relating to an Award, shall not again be made available for issuance as Awards under the Plan.
Awards granted under the Plan will be subject to a one-year minimum vesting period, subject to certain exceptions for the participant’s death, Disability, Retirement, involuntary termination without Cause or in connection with a
Change in Control (each as defined in the Plan), provided that up to 5% of the shares authorized for issuance under the Plan may provide for vesting of Awards in less than one year.
The Compensation Committee may not accelerate the vesting of Awards other than in the event of the participant’s death, Disability, Retirement, involuntary termination without Cause or in connection with a Change in Control.
The Plan does not include any reload or “evergreen” share replenishment features.
Except in connection with an equitable adjustment or a Change in Control, the Plan prohibits the repricing of outstanding stock options, stock appreciation rights and other stock-based awards in the nature of purchase rights, whether by amending an existing award or by substituting a new award at a lower price. The Plan also prohibits the payment of cash, Awards or other securities in exchange for out-of-the-money awards.
Awards granted under the Plan are subject to the Company’s Compensation Recoupment Policy (which is described above under “Compensation Discussion and Analysis - Recoupment of Compensation”).
Notwithstanding any other provision of the Plan or any Agreement to the contrary, no participant may sell, transfer or otherwise dispose of any shares of Common Stock acquired under an Award (“net” shares acquired in case of any net exercise or withholding of shares) until the participant has met the minimum level of ownership provided in the Company’s Stock Ownership Guidelines (which is described above under “Compensation Discussion and Analysis - Stock Ownership Guidelines”, to the extent applicable to the participant.
There is no liberal Change in Control definition in the Plan. A Change in Control does not occur on announcement or commencement of a tender offer, a potential takeover or shareholder approval of a merger or other transaction.
Material amendments to the Plan require shareholder approval.
The Plan will be administered by our Compensation Committee, which is comprised entirely of independent directors.
No dividends or Dividend Equivalents (as defined below) may be granted in connection with Options, SARs or other Stock-Based Awards in the nature of purchase rights (as defined below). No dividends or Dividend Equivalents may be paid in connection with any Award unless and until the applicable Award becomes payable or nonforfeitable. Dividends or dividend equivalents may accumulate (without interest) and become payable only at the time and to the extent the underlying Awards becomes payable or nonforfeitable.
A summary of the principal features of the Plan is included below. However, every aspect of the Plan is not addressed in this summary and shareholders are encouraged to read the full text of the Plan which is attached to this proxy statement as Appendix B. We have no current plans, proposals or arrangements, written or otherwise, to grant any specific awards under the Plan except (a) certain routine awards to be granted to non-executive employees under the Plan at the Company’s December 2020 Board of Directors meeting and; (b) grants to non-employee Directors in the ordinary course of business.
Reasons for the Plan and Recommendation of the Board of Directors
As described in more detail in this proxy statement under “Executive Compensation-Compensation Disclosure and Analysis,” we believe our compensation programs are structured to attract, retain and motivate our employees, officers and directors. Our Board of Directors believes that equity incentive awards play a key role in these programs as they help align the interests of employees, officers and directors with those of our shareholders. As of October 7, 2020, there are only [4,032,142] shares available for grant under the Plan.
Historical Burn Rate. We are committed to managing the use of our equity incentives prudently to balance the benefits equity compensation brings to our compensation program with the dilution it causes our shareholders. As part of our analysis when considering the proposed share increase, we considered the Plan’s “burn rate,” calculated as the number of shares subject to equity awards granted under the Plan, divided by the weighted average number of shares outstanding for that period. Our average burn rate (before forfeitures) for the three years ended December 31, 2019 was 2.63%. We believe that our burn rate and potential dilution amounts are reasonable for our industry and market conditions. Since the Plan was adopted, we have sought to provide equity compensation to our employees who we believe are important to our organization in furthering our business strategy. In addition, we have made multiple leadership appointments and promotions to advance our strategy. We made equity grants from the Plan in connection with each of these new hires and promotions. We believe these new hires and
promotions are key to the development and strengthening of the management team with the experience and talent necessary to further implement our strategy.
Shareholder Value Transfer Analysis. When evaluating the appropriate number of shares to increase the share reserve under the Plan, we reviewed the shareholder value transfer of the proposed increase, calculated as the value of available shares and plan awards as a percentage of our market capitalization, and determined that the approval of 8,400,000 new shares under the Plan was reasonable and consistent with industry guidelines.
Expected Duration. We expect that the shares available for future awards, including the additional shares if this proposal is approved by our shareholders, will be sufficient for currently-anticipated awards under the Plan for approximately the next three years. Expectations regarding future share usage could be impacted by a number of factors such as hiring and promotion activity at the executive level; the rate at which shares are returned to the Plan reserve upon awards’ expiration, forfeiture or cash settlement; the future performance of our stock price; consequences of acquiring other companies; and other factors. While we believe that the assumptions we used are reasonable, future share usage may differ from current expectations.
For the foregoing reasons, the Board of Directors recommends that our shareholders approve the amended and restated Plan.
General Plan Information
The Plan is intended to permit the grant of stock options (both incentive stock options (“ISOs”) and non-qualified stock options (“NQSOs” (collectively “Options”)), stock appreciation rights (“SARs”), restricted stock awards (“Restricted Stock Awards”), performance stock awards (“Performance Stock Awards”), restricted stock units (“RSUs”), performance stock units (“PSUs”), incentive awards (“Incentive Awards”), other stock-based awards (“Stock-Based Awards”) and dividend equivalents (“Dividend Equivalents”) (collectively “Awards”). “Full Value Award” means an Award other than an Option, SAR or Stock-Based Award in the nature of purchase rights. All Awards granted under the Plan will be governed by separate written or electronic agreements between MiMedx and the participants. The separate agreements will specify the terms and conditions of the Award. No right or interest of a participant in any Award will be subject to any lien, obligation or liability of the participant. The laws of the State of Florida govern the Plan and any Awards granted thereunder. The Plan is unfunded, and we will not segregate any assets to cover grants of Awards under the Plan.
No Awards may be granted on or after October 2, 2030. No Awards will be granted and become effective under the Plan as amended and restated unless the shareholders approve the Plan. If shareholders do not approve the amended and restated Plan, the pre-amendment Plan will continue to be effective according to its terms, and we may continue to make awards under the pre-amendment Plan.
Administration
We will bear all expenses of administering the Plan. Our Compensation Committee will administer the Plan and has the authority to grant Awards to such persons and upon such terms and conditions (not inconsistent with the provisions of the Plan) as it may consider appropriate. Our Compensation Committee may act through subcommittees or, with respect to Awards granted to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act and who are not members of our Board of Directors or the Board of Directors of our Affiliates (as defined in the Plan), delegate to one or more of our officers all or part of its duties with respect to such Awards.
Eligibility for Participation
Any of our employees or independent contractors, employees or independent contractors of our Affiliates, and non-employee members of our Board of Directors or of any Board of Directors of our Affiliates is eligible to receive an Award under the Plan. However, ISOs may only be granted to employees of MiMedx or one of our Affiliates.
Shares Subject to Plan
The maximum aggregate number of shares of our Common Stock that may be issued under the Plan pursuant to Awards is the sum of (i) 8,400,000 shares plus (ii) the number of shares that remain available for issuance under the Plan on the date the Company’s shareholders approve the amended and restated Plan (iii) plus the number of shares that are represented by outstanding Awards (as defined below) issued under the Plan on the date the Company’s shareholders approve the amended and restated Plan and that later become available because of the expiration or forfeiture of the Award without the issuance of the underlying shares.
Except as described below, each share issued in connection with an Award will reduce the number of shares available under the Plan by one, and each share covered under a stock-settled SAR will reduce the number of shares available under the Plan by one even though the share is not actually issued upon settlement of the stock-settled SAR.
Shares relating to Awards that are terminated, settled in cash in lieu of shares, or exchanged prior to the issuance of shares for Awards not involving shares, will again be available for issuance under the Plan. Shares of Common Stock not issued as the result of a net settlement of an Award, or tendered or withheld to pay the exercise price, purchase price or withholding taxes relating to an Award, or purchased on the open market with the proceeds of the exercise or purchase price of any Award, will not again be available for issuance under the Plan. This treatment of Awards also applies to any Awards which were issued under the Plan prior to its amendment and restatement and are outstanding after the date that the Company’s shareholders approve the Plan as amended and restated.
Notwithstanding the foregoing, the maximum aggregate number of shares of our Common Stock that may be issued under the Plan, and the maximum aggregate number of shares of our Common Stock that may be issued under any specific type of Award, will not be reduced by (i) substitute Awards with respect to our shares of Common Stock that are granted to participants who become employed with MiMedx or its Affiliates in connection with a corporate transaction or other appropriate event or (ii) Awards with respect to shares of our Common Stock that become available for grant under a shareholder-approved plan of an acquired company (subject in both cases to applicable stock exchange requirements).
In any calendar year, no participant may be granted Options, SARs or other Stock-Based Awards in the nature of purchase rights that relate to more than 1,000,000 shares of our Common Stock, or Full Value Awards that relate to more than 1,000,000 shares of our Common Stock. The limit in such a period for a member of our Board of Directors is 125,000 shares of Common Stock. For any Award that is stated with reference to a specific dollar limit, the maximum amount payable with respect to any 12-month performance period to any one participant is $2,000,000 (pro-rated up or down for performance periods greater or less than 12 months), and the maximum for any Award stated with reference to a specific dollar amount is $300,000 for a member of our Board of Directors. The maximum number of shares of Common Stock that may be issued pursuant to Awards, the per individual limits on Awards and the terms of and number of shares subject to outstanding Awards will be adjusted as is equitably required in the event of corporate transactions and other appropriate events.
Awards
Options
An Option entitles the participant to purchase from MiMedx a stated number of shares of Common Stock. The exercise price per share of Common Stock underlying any Option may not be less than the fair market value of a share of Common Stock on the date the Option is granted. With respect to an ISO granted to a participant who, at the time of grant, beneficially owns more than ten-percent of the combined voting power of MiMedx or any of our Affiliates (determined by applying certain attribution rules), the exercise price per share may not be less than 110% of the fair market value of the Common Stock on the date the Option is granted. The exercise price may be paid in cash or, if the written agreement so provides, our Compensation Committee may allow a participant to pay all or part of the exercise price by tendering shares of Common Stock, by a broker-assisted cashless exercise, by means of a “net exercise” procedure, or by any other specified medium of payment. In the case of ISOs, the aggregate fair market value (determined as of the date of grant) of the Common Stock with respect to which an ISO may become exercisable for the first time during any calendar year cannot exceed $100,000; and if this limitation is exceeded, the ISOs which cause the limitation to be exceeded will be treated as NQSOs.
SARs
A SAR entitles the participant to receive, upon exercise, the excess of the fair market value on that date of each share of Common Stock subject to the exercised portion of the SAR over the fair market value of each such share on the date of the grant of the SAR. A SAR can be granted alone or in tandem with an Option. A SAR granted in tandem with an Option is called a Corresponding SAR and entitles the participant to exercise the Option or the SAR, at which time the other tandem Award expires with respect to the number of shares being exercised. No participant may be granted Corresponding SARs in tandem with ISOs which are first exercisable in any calendar year for shares of Common Stock having an aggregate fair market value (determined as of the date of grant) that exceeds $100,000. A Corresponding SAR may be exercised only to the extent that the related Option is exercisable, and no SAR is exercisable unless the fair market value of the Common Stock at the time of exercise exceeds the fair market value of the Common Stock as of the date of grant of the SAR. As set forth in the written agreement, the amount payable as a result of the exercise of a SAR may be settled in cash, shares of Common Stock or a combination of each.
Restricted Stock Awards and Performance Stock Awards
A Restricted Stock Award and a Performance Stock Award is the grant or sale of shares of Common Stock, which may be subject to forfeiture for a period of time or subject to certain conditions. Performance Stock Awards are subject to performance conditions, which may include those described below. The Compensation Committee will determine, on the date of the grant of the Award, whether the participant will have all rights of a shareholder with respect to the shares of Common Stock subject to an Award, including the right to vote the shares, provided, however, the participant may not transfer the shares while they are subject to forfeiture. To the extent deemed necessary by the Compensation Committee (or as described below), dividends payable with respect to an Award may accumulate (without interest) and become payable in cash or shares of our Common Stock at the time and to the extent that the portion of the Award to which the dividends relate has become transferable and nonforfeitable. In no event will dividends be paid until the vesting of the underlying Award. In lieu of retaining the certificates evidencing the shares, we may hold the certificates evidencing the shares in escrow or record the certificates evidencing the shares as outstanding by notation on our stock records. If a participant must pay for an Award, the participant may pay the purchase price in cash or, if the written agreement so provides, our Compensation Committee may allow a participant to pay all or part of the purchase price by tendering shares of Common Stock, by means of a “net exercise” procedure, or by any other specified medium of payment.
RSUs and PSUs
An RSU and a PSU entitle the participant to receive, upon vesting, shares of our Common Stock (or as otherwise determined by the Compensation Committee and set forth in the applicable agreement, the equivalent fair market value of shares of our Common Stock in cash). PSUs are subject to performance conditions, which may include those described below. We will deliver to the participant one share of Common Stock (or, if applicable, the fair market value of one share of Common Stock in cash) for each RSU or PSU that becomes earned and payable. No participant shall have any rights of a shareholder with respect to an RSU or PSU unless and until the underlying shares of Common Stock are issued, provided, however, except as described below, dividends payable with respect to shares subject to RSUs and PSUs may accumulate (without interest) and be paid in cash or shares of Common Stock only to the extent the related RSUs and PSUs become earned and payable. In no event will dividends be paid until the vesting of the underlying RSU or PSU.
Incentive Awards
An Incentive Award entitles the participant to receive cash or Common Stock when certain conditions are met, which may include performance conditions as described below. As set forth in the participant’s separate agreement, an Incentive Award may be paid in cash, shares of Common Stock or a combination of each. No participant shall have any rights of a shareholder with respect to shares underlying an Incentive Award unless and until the underlying shares of Common Stock are issued.
Stock-Based Awards
Stock-Based Awards may be denominated or payable in, valued by reference to or otherwise based on shares of Common Stock, including Awards convertible or exchangeable into shares of Common Stock (or the cash value thereof) and Common Stock purchase rights and Awards valued by reference to the fair market value of the Common Stock. The purchase price for the Common Stock under any Stock-Based Award in the nature of a purchase right may not be less than the fair market value of the shares of the Common Stock as of the date the Award is granted. Cash awards, as an element of or supplement to any other Award under the Plan, may also be granted.
Our Compensation Committee is also authorized under the Plan to grant shares of Common Stock as a bonus, or to grant shares of Common Stock or other awards in lieu of other obligations of MiMedx or any of our Affiliates to pay cash or to deliver other property under the Plan or under any other plans or compensatory arrangements of MiMedx or any of our Affiliates.
Dividend Equivalents
A Dividend Equivalent is an award that entitles the participant to receive cash, shares of Common Stock, other awards or other property equal in value to all or a specified portion of dividends paid with respect to shares of our Common Stock. Except as described below, Dividend Equivalents may be accrued or deemed to have been reinvested in additional shares of Common Stock, other awards or other investment vehicles, subject to restrictions on transferability, risk of forfeiture and any other terms set forth in the written agreement for the Award. Dividend equivalents are not paid until the vesting of the underlying Award. No Dividend Equivalents may be granted in connection with Options, SARs or Stock-Based Awards in the nature of purchase rights.
Performance Objectives and Time-Based Vesting
Our Compensation Committee has discretion to establish performance conditions for when Awards will become vested, exercisable, and payable. These performance conditions may be based on one or any combination of metrics related to our financial, market or business performance. Performance conditions may be related to a specific customer or group of customers or products or geographic region individually, alternatively or in any combination, subset or component thereof. The form of the performance conditions also may be measured on a company, Affiliate, division, business unit, service line, segment, product or geographic basis individually, alternatively or in any combination thereof. Performance goals may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other external measure of the selected performance conditions. Profits, earnings and revenues used for any performance conditions measurement may exclude any extraordinary or nonrecurring items.
The performance conditions may, but need not, be based upon an increase or positive result under the specified performance conditions and could include, for example and not by way of limitation, maintaining the status quo or limiting the economic losses (measured, in each case, by reference to the specific performance conditions). An Award that is intended to become exercisable, vested or payable on the achievement of performance conditions means that the Award will not become exercisable, vested or payable solely on mere continued employment or service. However, such an Award, in addition to performance conditions, may be subject to continued employment or service by the participant.
The performance conditions may, among others, include any or any combination of the following: (a) cash flow; (b) return on equity; (c) return on assets; (d) earnings per share; (e) operations expense efficient milestones; (f) earnings (losses) before or after interest, taxes, depreciation, amortization and/or share-based compensation or expenses (consolidated or otherwise); (g) net income (loss); (h) operating income (loss); (i) book value per share; (j) return on investment; (k) return on capital; (l) improvements in capital structure; (m) expense management; (n) profitability of an identifiable business unit or product; (o) maintenance or improvement of profit margins; (p) stock price; (q) total shareholder return; (r) market share; (s) revenues (consolidated or otherwise); (t) sales; (u) costs; (v) working capital; (w) economic wealth created; (x) strategic business criteria; (y) efficiency ratio(s); (z) achievement of division, group, function or corporate financial, strategic or operational goals; (aa) days sales outstanding; (bb) comparisons with stock market indices or performance metrics of peer companies; (cc) individual participant performance criteria; and (dd) any other performance criteria adopted by the Compensation Committee. Performance goals may be determined in accordance with GAAP or adjusted to include or exclude any items otherwise includable or excludable under GAAP. In determining if the performance conditions have been achieved, the Compensation Committee may adjust the performance targets in the event of any unbudgeted acquisition, divestiture or other unexpected fundamental change in the business of the Company, an Affiliate or business unit or in any product that is material taken as a whole as appropriate to fairly and equitably determine if the Award is to become exercisable, nonforfeitable and transferable or earned and payable pursuant to the conditions set forth in the Award. Additionally, in determining if such performance conditions have been achieved, the Compensation Committee also may adjust the performance targets in the event of any (a) unanticipated asset write-downs or impairment charges, (b) litigation or claim judgments or settlements thereof, (c) changes in tax laws, accounting principles or other laws or provisions affecting reported results, (d) accruals for reorganization or restructuring programs, or extraordinary, unusual, infrequently occurring or non-reoccurring items, (e) acquisitions or dispositions or (f) foreign exchange gains or losses.
The Compensation Committee will have the discretion to select one or more periods of time over which the attainment of one or more of the foregoing performance conditions will be measured for the purpose of determining when an Award will become vested, exercisable or payable.
Minimum Vesting Requirement
Awards must vest over a period of not less than one year, subject to exceptions for the participant’s death, Disability, Retirement, involuntary termination without Cause or in connection with a Change in Control, provided that up to 5% of the shares authorized for issuance under the Plan may provide for vesting of Awards in less than one year.
Post-Exercise Holding Requirement
Notwithstanding any other provision of the Plan or any Agreement to the contrary, no participant may sell, transfer or otherwise dispose of any shares of Common Stock acquired under an Award (“net” shares acquired in case of any net exercise or withholding of shares) until the participant has met the minimum level of ownership provided in the Company’s Stock Ownership Guidelines (which is described above under “Compensation Discussion and Analysis - Stock Ownership Guidelines”), to the extent applicable to the participant.
Limited Discretion to Accelerate
The Compensation Committee may not accelerate the time at which any Award may be exercised, become transferable or nonforfeitable or become earned and settled other than in the event of the participant’s death, Disability, Retirement, involuntary termination without Cause or in the event of a Change in Control.
Form and Timing of Payments
Payments to be made by us upon the exercise of an Option or SAR or settlement of any other Award may be made in such form as our Compensation Committee may determine and set forth in the separate agreement for the Award, including cash, shares of Common Stock, other Awards or other property and may be made in a single payment or transfer, in installments or on a deferred basis if and to the extent permitted by and consistent with Code (as defined in the Plan) Section 409A. However, no dividends or Dividend Equivalents may be paid in connection with an Award unless and until the underlying Award vests and any such dividends or Dividend Equivalents may accumulate (without interest) and become payable to the participant only at the time and to the extent that the applicable Award becomes payable or nonforfeitable.
Shareholder Rights
No participant shall have any rights as a shareholder of MiMedx unless and until the Award is settled by the issuance of Common Stock (other than such rights as a shareholder to which the participant may be entitled pursuant to the specific terms of the separate agreement).
Maximum Award Period
No Award may be exercisable or become vested or payable more than 10 years after the date of grant (except that the Compensation Committee may make certain exceptions in the event the Award would expire prior to exercise, vesting or settlement because trading in shares of our Common Stock is then prohibited by law or by any insider trading policy, in which case the term of the Award may be extended until thirty (30) days after the expiration of any such prohibitions). An ISO granted to a participant who beneficially owns more than 10% of the combined voting power of MiMedx or any of our Affiliates (determined by applying certain attribution rules) or a Corresponding SAR that relates to such an ISO may not be exercisable more than five years after the date of grant.
Change in Control
With respect to outstanding Awards, to the extent that written provision is made for their continuance, assumption or substitution in connection with a Change in Control, and except as otherwise provided in the applicable Award agreement, the following provisions shall apply. In the event the employment of a participant is terminated by the Company and its Affiliates without Cause during the two-year period following the Control Change Date (as defined in the Plan):
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(i) | all outstanding Stock Options, SARs and Other Stock-Based Awards in the nature of purchase rights shall become fully vested and exercisable; |
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(ii) | all restrictions with respect to outstanding Restricted Stock Awards, RSUs, Incentive Awards, Dividend Equivalents or Other Stock-Based Awards shall lapse, and such shares or units shall be fully vested and nonforfeitable; and |
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(iii) | all restrictions with respect to outstanding Performance Stock Awards, PSUs or other shares or units which are based on performance conditions and for which performance periods are already completed shall lapse, and such shares or units, measured at actual performance achieved, shall be fully vested and nonforfeitable. |
Unless the applicable Award agreement shall otherwise provide, if a Change in Control occurs prior to the end of any performance period, with respect to outstanding Performance Stock Awards, PSUs and other shares or units, the target level of performance set forth with respect to each performance condition under such shares and units shall be deemed to have been attained (or, if higher, the actual level of performance attained) and such shares or units shall be converted into and remain outstanding as Restricted Stock or RSUs, subject to forfeiture unless the participant continues to be actively employed by the Company through the end of the original performance period, but subject to exception in the case of a termination of employment by the Company without Cause during the two-year period following the Control Change Date, and such other exceptions as may be provided by the Compensation Committee.
With respect to outstanding Awards, in the event that written provision is not made for their continuance, assumption or substitution in connection with the Change in Control, notwithstanding any provision of any Agreement the Compensation Committee may accelerate the time at which an Award may be exercised, become transferable or be earned and settled on and after a Control Change Date to the extent not exercisable, transferable and non-forfeitable or earned and payable prior to such time. Subject in all circumstances to the foregoing, the Compensation Committee may take the following actions with respect to vested Awards:
(i) declare that outstanding Options, SARs and Other Stock-Based Awards in the nature of purchase rights previously granted under the Plan, whether or not then exercisable, shall terminate on the Change in Control without any payment to the holder thereof, provided the Compensation Committee gives prior written notice to the holders of such termination and gives such holders the right to exercise their outstanding Options, SARs and other Stock-Based Awards in the nature of purchase rights, at least seven days before termination, to the extent then exercisable or will become exercisable as of the Change in Control;
(ii) terminate on the Change in Control outstanding Restricted Stock Awards, Performance Stock Awards, RSUs, PSUs, Incentive Awards, Other Stock-Based Awards not in the nature of purchase rights and Dividend Equivalents previously granted under the Plan that are not then nonforfeitable and transferable or earned and payable (and that will not become nonforfeitable and transferable or earned and payable as of the Change in Control) without any payment to the holder thereof, other than the return, if any, of the purchase price of any such Awards;
(iii) terminate on the Change in Control outstanding Options, SARs and Other Stock-Based Awards in the nature of purchase rights previously granted under the Plan, whether or not then exercisable, in consideration of payment to the holder thereof, with respect to each share of Common Stock for which the Options, SARs and Other Stock-Based Awards in the nature of purchase rights are then exercisable (or that will become exercisable as of the Change in Control), of the excess, if any, of the fair market value on such date of the Common Stock subject to such Awards over the purchase price or initial value at the date of grant, as applicable (any Options, SARs and Other Stock-Based Awards in the nature of purchase rights that are not then exercisable and will not become exercisable on the Change in Control, and Options, SARs and Other Stock-Based Awards in the nature of purchase rights with respect to which the fair market value of the Common Stock subject to the Awards does not exceed the purchase price or initial value at the date of grant, as applicable, shall be cancelled without any payment therefor);
(iv) terminate on the Change in Control outstanding Restricted Stock Awards, Performance Stock Awards, RSUs, PSUs, Incentive Awards, Other Stock-Based Awards not in the nature of purchase rights and Divided Equivalents previously granted under the Plan that will become nonforfeitable and transferable or earned and payable as of the Change in Control (or that previously became nonforfeitable and transferable or earned and payable but have not yet been settled as of the Change in Control) in exchange for a payment equal to the excess of the fair market value of the shares of Common Stock subject to such Awards, or the amount of cash payable under the Awards, over any unpaid purchase price, if any, for such Awards (any such Awards that are not then nonforfeitable and transferable or earned and payable as of the Change in Control (and that will not become nonforfeitable and transferable or earned and payable as of the Change in Control) shall be cancelled without any payment therefor); or
(v) take such other actions as the Compensation Committee determines to be reasonable under the circumstances to permit the participant to realize the value of the outstanding Awards (which fair market value for purposes of Awards that are not then exercisable, nonforfeitable and transferable or earned and payable as of the Change in Control (and that will not become exercisable, nonforfeitable and transferable or earned and payable as of the Change in Control) or with respect to which the fair market value of the Common Stock subject to the Awards does not exceed the purchase price or initial value at the date of grant, as applicable, shall be deemed to be zero).
The payments described above may be made in any manner the Compensation Committee determines, including in cash, stock or other property. The Compensation Committee may take the actions described above with respect to Awards that are not then exercisable, nonforfeitable and transferable or earned and payable or with respect to which the fair market value of the Common Stock subject to the Awards does not exceed the purchase price or initial value at the date of grant, as applicable even though the participant will receive any payments therefor. The Compensation Committee in its discretion may take any of the actions described in this section contingent on consummation of the Change in Control, and such actions need not be uniform with respect to all outstanding Awards or participants.
Compliance with Applicable Law
No Award shall become exercisable, vested or payable except in compliance with all applicable federal and state laws and regulations (including, without limitation, tax, withholding and securities laws), any listing agreement with any stock exchange to which we are a party and the rules of all domestic stock exchanges on which our shares may be listed.
Amendment and Termination of Plan
Our Board of Directors may amend or terminate the Plan at any time; provided, however, that no amendment may adversely impair the rights of a participant with respect to outstanding Awards without the participant’s consent. An amendment will be contingent on approval of our shareholders, to the extent required by law, any tax or regulatory requirement, by the rules of any stock exchange on which our securities are then traded or if the amendment would (a) increase the benefits accruing to Plan participants, (b) increase the aggregate number of shares of Common Stock issuable under the Plan, or (c) modify the eligibility requirements of the Plan.
Forfeiture Provisions; No Repricings
Awards do not confer upon any individual any right to continue in the employ of or service to MiMedx or any of our Affiliates. All rights to any Award that a participant has will be immediately forfeited if the participant is discharged from employment or service for “Cause” (as defined in the Plan). Except to the extent approved by our shareholders, the Plan does not permit (a) any decrease in the exercise price or base value of any outstanding Awards, (b) the issuance of any replacement Options, SARs or Stock-Based Awards in the nature of purchase rights, which shall be deemed to occur if a participant agrees to forfeit an existing Option, SAR or Stock-Based Award in the nature of purchase rights in exchange for a new Option, SAR or Stock-Based Award in the nature of purchase rights with a lower exercise price or base value, (c) us to repurchase underwater or out-of-the-money Options, SARs or Stock-Based Awards in the nature of purchase rights, which shall be deemed to be those Options, SARs or Stock-Based Awards in the nature of purchase rights with exercise prices or base values in excess of the current fair market value of the shares of Common Stock underlying the Option, SAR or Stock-Based Award in the nature of purchase rights, (d) us to issue any replacement or substitute Awards, or pay cash in exchange, for underwater or out-of-the-money Options, SARs or Stock-Based Awards in the nature of purchase rights, (e) us to repurchase any Awards under the Plan prior to the time the Award becomes exercisable, vested or payable or (f) any other action that is treated as a “repricing” under generally accepted accounting principles or Nasdaq listing rules.
Federal Income Tax Consequences
The following discussion summarizes the principal United States federal income tax consequences associated with Awards under the Plan. The discussion is based on laws, regulations, rulings and court decisions currently in effect, all of which are subject to change. This summary is not intended to be exhaustive or constitute tax advice and does not describe state, local or foreign tax consequences. To the extent any awards under the Plan are subject to Code Section 409A, the following description assumes that such awards will be designed to conform to the requirements of Code Section 409A (or an exception thereto). The Plan is not subject to the protective provisions of the Employee Retirement Income Security Act of 1974 and is not qualified under Section 401(a) of the Internal Revenue Code.
ISOs
A participant will not recognize taxable income on the grant or exercise of an ISO (although the excess of the fair market value of the shares over the exercise price at the time of exercise may result in payment of the alternative minimum tax). A participant will recognize taxable income when he or she disposes of the shares of Common Stock acquired under the ISO. If the disposition occurs more than two years after the grant of the ISO and more than one year after its exercise, the participant will recognize long-term capital gain (or loss) to the extent the amount realized from the disposition exceeds (or is less than) the participant’s tax basis in the shares of Common Stock. A participant’s tax basis in the Common Stock generally will be the amount the participant paid for the stock. If Common Stock acquired under an ISO is disposed of before the expiration of the ISO holding period described above, the participant will recognize as ordinary income in the year of the disposition the excess of the fair market value of the Common Stock on the date of exercise of the ISO over the exercise price. Any additional gain will be treated as long-term or short-term capital gain, depending on the length of time the participant held the shares. Special rules apply if a participant pays the exercise price by delivery of Common Stock.
We will not be entitled to a federal income tax deduction with respect to the grant or exercise of an ISO. However, in the event a participant disposes of Common Stock acquired under an ISO before the expiration of the ISO holding period described above, except as described in Limitations on Deductions below, we generally will be entitled to a federal income tax deduction equal to the amount of ordinary income the participant recognizes.
NQSOs
A participant will not recognize any taxable income on the grant of a NQSO. On the exercise of a NQSO, the participant will recognize as ordinary income the excess of the fair market value of the Common Stock acquired over the exercise price. A participant’s tax basis in the Common Stock is the amount paid plus any amounts included in income on exercise. Special rules apply if a participant pays the exercise price by delivery of Common Stock. Except as described in Limitations on Deductions below, the exercise of a NQSO generally will entitle us to claim a federal income tax deduction equal to the amount of ordinary income the participant recognizes.
SARs
A participant will not recognize any taxable income at the time SARs are granted. The participant at the time of receipt will recognize as ordinary income the amount of cash and the fair market value of the Common Stock that he or she receives. Except as described in Limitations on Deductions below, we generally will be entitled to a federal income tax deduction equal to the amount of ordinary income the participant recognizes.
Restricted Stock and Performance Stock Awards
A participant will recognize ordinary income on account of a Restricted Stock Award or Performance Stock Award on the first day that the shares are either transferable or not subject to a substantial risk of forfeiture. The ordinary income recognized will equal the excess of the fair market value of the Common Stock on such date over the purchase price, if any, paid for the Award. However, even if the shares under an Award are both nontransferable and subject to a substantial risk of forfeiture, the participant may make a special “83(b) election” to recognize income, and have his or her tax consequences determined, as of the date the Award is made. The participant’s tax basis in the shares received will equal the income recognized plus the price, if any, paid for the Award. Except as described in Limitations on Deductions below, we generally will be entitled to a federal income tax deduction at the time the participant recognizes ordinary income from the Award, and equal to the amount of ordinary income the participant recognizes.
RSUs and PSUs
The participant will not recognize any taxable income at the time RSUs or PSUs are granted. When the terms and conditions to which the RSUs and PSUs are subject have been satisfied and the RSUs or PSUs are paid, the participant will recognize as ordinary income the fair market value of the Common Stock he or she receives. Except as described in Limitations on Deductions below, we generally will be entitled to a federal income tax deduction at the time the participant recognizes ordinary income, and equal to the amount of ordinary income the participant recognizes.
Incentive Awards
A participant will not recognize any taxable income at the time an Incentive Award is granted. When the terms and conditions to which an Incentive Award is subject have been satisfied and the Award is paid, the participant will recognize as ordinary income the amount of cash and the fair market value of the Common Stock he or she receives. Except as described in Limitations on Deductions below, we generally will be entitled to a federal income tax deduction at the time the participant recognizes ordinary income, and equal to the amount of ordinary income the participant recognizes.
Stock-Based Awards
A participant will recognize ordinary income on receipt of cash or shares of Common Stock paid with respect to a Stock-Based Award. Except as described in Limitations on Deductions below, we generally will be entitled to a federal tax deduction at the time the participant recognizes ordinary income, and equal to the amount of ordinary income the participant recognizes.
Dividend Equivalents
A participant will recognize as ordinary income the amount of cash and the fair market value of any Common Stock he or she receives on payment of the Dividend Equivalents. Except as described in Limitations on Deductions below, we generally will be entitled to a federal tax deduction at the time the participant recognizes ordinary income, and equal to the amount of ordinary income the participant recognizes. To the extent the Dividend Equivalents are paid in the form of other Awards, the participant will recognize income as otherwise described herein.
Limitation on Deductions
The Company and its subsidiaries may lose a compensation deduction, which would otherwise be allowable, for all or a part of compensation paid in the form of awards under the Plan, if, the employee is the Chief Executive Officer or Chief Financial Officer of the Company (or acts in such capacity) or is another “covered employee” as defined under the Code or was such an employee beginning in any year after 2017, if the total compensation paid to such employee exceeds $1,000,000. In addition, if a “change of control” of the Company causes awards under the Plan to accelerate vesting or is deemed to result in the attainment of performance goals, the participants could, in some cases, be considered to have received “excess parachute payments,” which could subject participants to a 20% excise tax on the excess parachute payments and could result in a disallowance of the Company’s deductions under Code Section 280G.
Other Tax Rules
The Plan is designed to enable our Compensation Committee to structure Awards that are intended to not be subject to Code Section 409A, which imposes certain restrictions and requirements on deferred compensation. However, our Compensation Committee may grant Awards that are intended to be subject to Code Section 409A. In that case, the terms of such 409A Award will be (a) subject to the deferral election requirements of Section 409A; and (b) may only be paid upon a separation from service, a set time, death, disability, a change in control or an unforeseeable emergency, each within the meanings of Section 409A. Our Compensation Committee shall not have the authority to accelerate or defer a 409A Award other than as permitted by Code Section 409A. Moreover, any payment on a separation from service of a “Specified Employee” (as defined in the Plan) will not be made until six months following the participant’s separation from service (or upon the participant’s death, if earlier) as required by Code Section 409A.
New Plan Benefits
The benefits that will be awarded or paid under the Plan are not currently determinable. Awards granted under the Plan are within the discretion of the Compensation Committee and future awards and the individuals who may receive them have not been determined. The Grants of Plan Based Awards Table includes information for prior year grants with respect to the persons indicated therein under the Plan.
Vote Required
To be approved, the votes cast FOR by the holders of shares present and entitled to vote must exceed the votes cast AGAINST. Abstentions and broker non-votes will have no effect on the outcome of this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENT TO THE 2016 EQUITY AND CASH INCENTIVE PLAN
Audit Matters
Changes in Registered Public Accounting Firm
The Audit Committee approved the appointment of Ernst & Young LLP (“EY”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017, effective August 4, 2017.
In February 2018, the Company announced that the Audit Committee was conducting an independent investigation into current and prior-period matters relating to allegations regarding certain sales and distribution practices at the Company and certain other matters (the “Audit Committee Investigation”).
On December 4, 2018, EY informed the Audit Committee that EY was resigning from the engagement to audit the Company’s consolidated financial statements for the years ended December 31, 2017 and 2018, effective immediately. As noted above, EY was engaged on August 4, 2017 to audit the Company’s consolidated financial statements as of and for the year ended December 31, 2017. The 2017 audit was still in process at the time of EY’s resignation, and EY did not issue any audit reports on the Company’s consolidated financial statements for this or any other period. During the engagement period, EY had one “disagreement,” as that term is defined in Item 304(a)(1)(iv) of Regulation S-K, with certain members of the Company’s prior senior management who were subsequently separated from the Company (the "Separated Officers"), which separations were later determined to be “for cause” as disclosed in a Form 8-K filed by the Company on September 20, 2018, regarding revenue recognition under certain distributor contracts. However, this disagreement was not the cause of EY’s resignation and was in any event resolved in June 2018 when the Audit Committee, after discussing the disagreement with EY and based on interim findings of its independent investigation, concluded that the Company’s previously issued consolidated financial statements could no longer be relied upon, as disclosed in a Form 8-K filed by the Company on June 7, 2018. This disagreement was only between EY and the Separated Officers.
Except as noted above, during the period from August 4, 2017 through December 4, 2018, there were no disagreements with EY on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures which, if not resolved to the satisfaction of EY, would have caused EY to make reference to the subject matter of the disagreements in connection with its audit report. During this same period, there were the following “reportable events,” as that term is defined in Item 304(a)(1)(v) of Regulation S-K:
EY advised the Company that the internal controls necessary for the Company to develop reliable financial statements did not exist;
Although EY could accept representations from the Company’s Interim CEO and Interim CFO based on their knowledge, EY advised the Company that EY was unable to rely on representations from them because, as of the date of the resignation, the current Company’s CEO and Interim CFO, in turn, would have needed to rely on representations from certain legacy management personnel still in positions that could affect what is reflected in the Company’s books and records. At the time of EY’s resignation, the Audit Committee Investigation was still ongoing;
EY advised the Company of the need to significantly expand the scope of the Audit Committee Investigation, due to material allegations of inappropriate financial reporting, material allegations of noncompliance with laws and regulations, the findings to date from the Audit Committee Investigation into these allegations, and the lack of internal controls necessary for the Company to develop reliable financial statements. EY had not completed the necessary work in connection with this expanded audit scope at the time of its resignation; and
EY advised the Company that information had come to EY’s attention that EY had concluded materially impacts the reliability of previously issued financial statements, and the issues raised by this information had not been resolved to EY’s satisfaction prior to its resignation.
On June 6, 2018, the Company disclosed that the Audit Committee, with the concurrence of management, concluded that the Company’s previously issued consolidated financial statements and financial information relating to each of the fiscal years ended December 31, 2016, 2015, 2014, 2013 and 2012 and each of the interim periods within such years, along
with the unaudited condensed consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017, June 30, 2017 and September 30, 2017, would need to be restated under GAAP and could no longer be relied upon.
The Company provided EY with a copy of the foregoing disclosures and requested that EY furnish the Company with a letter addressed to the Commission stating whether EY agreed with the above statements. A copy of EY’s letter dated December 7, 2018 was filed as Exhibit 16.1 to the Company’s Form 8-K filed December 7, 2018.
On May 24, 2019, the Audit Committee approved the engagement of and executed an agreement with BDO USA, LLP (“BDO”) as the Company’s new independent registered public accounting firm for the fiscal years ending December 31, 2017, 2018 and 2019.
On April 28, 2020, the Audit Committee approved the engagement of and executed an agreement with BDO as the Company’s independent registered public accounting firm for the fiscal years ending December 31, 2020. Shareholders ratified BDO’s appointment as the Company’s independent registered public accounting firm for the fiscal years ending December 31, 2020 on August 31, 2020 at the 2019 Annual Meeting of Shareholders mustShareholders. A representative of BDO is expected to be receivedpresent at our offices (addressedthe virtual Annual Meeting, will have the opportunity to make a statement if he or she desires to do so, and is expected to be available to respond to appropriate questions.
Audit Firm Fees
The Audit Committee’s duties include pre-approving audit and non-audit services provided to the attentionCompany by the Company’s independent registered public accounting firm, BDO. All of the Corporate Secretary) not laterservices in respect of 2019 and 2018 under the Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees categories below were pre-approved by the Audit Committee.
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Type of Fee | Year Ended December 31, 2019 | | Year Ended(1) December 31, 2018 |
Audit Fees(2) | $3,875,000 | | $2,433,333 |
Audit-Related Fees(3) | $19,000 | | $21,400 |
Tax Fees | $0 | | $0 |
All Other Fees | $0 | | $0 |
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(1) | The Company engaged BDO in May 2019 to audit its financial statements for the years ended December 31, 2018, 2017, and 2016. Total fees incurred by BDO were $7.3 million and were apportioned equally to each of the three years for the purposes of this tabular presentation. The Company paid or incurred these fees in 2019. |
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(2) | This category includes fees for the audit of the Company’s annual financial statements and review of financial statements included in its quarterly reports on Form 10-Q. |
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(3) | This relates to BDO’s audit of the Company’s 401(k) plan. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables sets forth certain information as of October 7, 2020 regarding the Company’s capital stock, beneficially owned by each person known to the Company to beneficially own more than [December 7], 2015. Any such proposal must comply with Rule 14a-8 of Regulation 14A5% of the proxy rulesoutstanding shares of Company common stock, each NEO, each director, and all directors and executive officers as a group. Unless otherwise indicated below, the Securities and Exchange Commission. The submission by a shareholderaddress of a proposal for inclusionthose identified in the proxy statement does not guarantee that it will be included. Pursuant to the Company's bylaws, any shareholder proposal not includedtable is c/o MiMedx Group, Inc., 1775 West Oak Commons Court, NE, Marietta, Georgia 30062.
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SERIES B CONVERTIBLE PREFERRED STOCK |
Name of Beneficial Owner | | Number of Shares of Series B Convertible Preferred Stock | | Number of Shares of Company Common Stock Into Which They May Convert(b) | | Percentage Ownership(b)(c) |
EW Healthcare Partners(a) | | 90,000 |
| | [23,376,623] | | [16.9%] |
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(a) | Represents shares of Company common stock issuable upon conversion of [90,000] shares of Series B Preferred Stock owned by Falcon Fund 2 Holding Company, L.P., a partnership controlled by EW Healthcare Partners. EW Healthcare Partners Fund 2-UGP, LLC, the general partner of Falcon Fund 2 Holding Company, L.P., may also be deemed to have sole voting and investment power with respect to such shares of Company common stock. EW Healthcare Partners Fund 2-UGP, LLC disclaims beneficial ownership of such shares of Company common stock except to the extent of its pecuniary interest therein. Martin P. Sutter, Scott Barry, Ronald W. Eastman, Petri Vainio and Steve Wiggins are each a manager and collectively the managers of EW Healthcare Partners Fund 2-UGP, LLC. Each of the managers may be deemed to exercise shared voting and investment power with respect to such shares. Each manager disclaims beneficial ownership of such shares of Company common stock except to the extent of his pecuniary interest therein. Martin P. Sutter is a member of the Company’s Board of Directors. The principal address of the EW Healthcare Partners entities and each of the managers is 21 Waterway Avenue, Suite 225, The Woodlands, Texas 77380. |
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(b) | Each holder of Series B Preferred Stock (each a “Holder” and collectively, the “Holders”) will have the right, at its option, to convert its Series B Preferred Stock, in whole or in part, into a number of fully paid and non-assessable shares of Company common stock equal to the Purchase Price Per Share, plus any accrued and unpaid dividends, at the conversion price. For purposes of this table the conversion price is presumed to be $3.85. No Holder may convert its shares of Series B Preferred Stock into shares of Company common stock if such conversion would result in the Holder, together with its affiliates, holding more than 19.9% of the votes entitled to be cast at any shareholders meeting or beneficially owning in excess of 19.9% of then-outstanding shares of Company common stock. |
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(c) | Each share of Series B Preferred Stock is entitled to be voted by the Holders and will vote on an as-converted basis (converted at $5.25 per share) as a single class with the Company common stock, subject to certain limitations on voting set forth in the Articles of Amendment to the Company’s Articles of Incorporation, including a limit on the maximum number of votes to which Holders are entitled. As a result, EW Healthcare Partners would have 17,142,857 votes, or [13.3%], as of October 7, 2020. Percentage of total voting power is based on [110,279,217] shares of Company common stock outstanding on October 7, 2020, plus 19,047,618 votes to which the Holders are entitled. |
Percentage ownership set forth in the proxy materials we disseminate for our 2016 Annual Meetingtable is based on [110,279,217] shares of Shareholders in accordance withCompany common stock outstanding on October 7, 2020, plus [2,314,043] shares deemed outstanding pursuant to Rule 14a-813d-3 under the Exchange Act, plus 25,974,025 shares of Company common stock to be issued upon conversion (at $3.85 per share) of all of the Series B Stock.
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Name of Beneficial Owner | | Number of Shares | | | | Percentage Ownership(1) |
Eiad Asbahi(2) | | 8,755,335 |
| | | | 6.3% |
| | | | | | |
NEOs, Executive Officers, and Directors | | Number of Shares | | | | Percentage Ownership(1) |
M. Kathleen Behrens, Ph.D. | | 64,371 |
| | | | * |
James L. Bierman | | 64,371 |
| | | | * |
Edward J. Borkowski(3) | | 21,194 |
| | | | * |
Peter M. Carlson(4) | | 322,895 |
| | | | * |
David Coles(5) | | — |
| | | | * |
Charles R. Evans(6) | | 181,357 |
| | | | * |
Michael J. Giuliani | | — |
| | | | * |
William A. Hawkins(7) | | 39,654 |
| | | | * |
Charles E. Koob(8) | | 1,491,525 |
| | | | 1.0% |
Cato T. Laurencin | | — |
| | | | * |
I. Mark Landy(9) | | 33,529 |
| | | | * |
K. Todd Newton | | 64,371 |
| | | | * |
Martin P. Sutter(10) | | [23,377,123] |
| | | | [16.9]% |
Scott M. Turner(11) | | 177,602 |
| | | | * |
Timothy R. Wright(12) | | 1,253,851 |
| | | | * |
Neil S. Yeston(13) | | 186,357 |
| | | | * |
Total Directors and Executive Officers(14) (15 persons) | | 27,619,734 |
| | | | 19.9% |
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(1) | The beneficial ownership set forth in the table is determined in accordance with SEC rules. The percentage of beneficial ownership is based on [110,279,217] shares of Company common stock outstanding on October 7, 2020, plus [2,314,043] shares deemed outstanding pursuant to Rule 13d-3 under the Exchange Act and 25,974,025 shares deemed outstanding upon conversion of the Company’s Series B Preferred Stock at $3.85 per share. See also notes (b) and (c), above, for information about voting power of the Series B Preferred Stock. |
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(2) | On July 15, 2020 Eiad Asbahi, Prescience Point, and certain affiliated entities filed a Schedule 13G that indicated, among other things, that Mr. Asbahi had shared voting power and dispositive power over an aggregate of 8,755,335 shares and Prescience Investment Group, LLC (d/b/a Prescience Point Capital Management, LLC) had shared voting and dispositive power over an aggregate of 8,754,403 shares. The address for Mr. Asbahi, Prescience, Point, and their affiliates is 1670 Lobdell Avenue, Suite 200, Baton Rouge, LA 70806. |
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(3) | Mr. Borkowski resigned as Executive Vice President and Interim Chief Financial Officer effective November 15, 2019. |
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(4) | Mr. Carlson joined the Company as Executive Vice President, Finance, on December 16, 2019. Does not include 140,844 restricted stock units granted on December 16, 2019 that will vest based upon the achievement of certain performance criteria. Includes 248,389 restricted stock units that will be settled in Company common stock upon vesting. |
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(5) | Mr. Coles served as Interim Chief Executive Officer until May 13, 2019. |
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(6) | Includes 60,000 shares issuable upon the exercise of options. |
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(7) | Includes 13,418 restricted stock units that will be settled in Company common stock upon vesting. |
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(8) | Includes 1,175,627 shares held by a trust and 60,000 shares issuable upon the exercise of options. |
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(9) | The Company eliminated Mr. Landy’s position of Chief Strategy Officer effective September 16, 2019. |
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(10) | For purposes of this table all shares of Series B Preferred Stock are deemed to have converted to Company common stock at $3.85 per share. For voting purposes, shares of Series B Preferred Stock are deemed to have been converted to Company common stock at $5.25 per share. Mr. Sutter is deemed to own beneficially shares controlled by EW Healthcare Partners. See notes (b), (c) and (1), above. No Holder may convert its shares of Series B Preferred Stock into shares of Company common stock if such conversion would result in the Holder, together with its affiliates, holding more than 19.9% of the votes entitled to be cast at any shareholders meeting or beneficially owning in excess of 19.9% of then-outstanding shares of Company common stock. Includes 500 shares owned by Mr. Sutter’s spouse. |
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(11) | Includes 48,135 restricted stock units that will be settled in Company common stock upon vesting. |
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(12) | Includes 572,033 restricted stock units that will be settled in Company common stock upon vesting. |
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(13) | Includes 60,000 shares issuable upon the exercise of options. |
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(14) | Represents the ownership of only those persons currently serving as a director or executive officer of the Company. |
OTHER MATTERS
Proxy Solicitation Costs
We are required by law to convene an annual meeting of our shareholders at which directors are elected. Because our shares are widely held, it would be impractical for our shareholders to meet physically in sufficient numbers to hold a meeting. Accordingly, the Company is soliciting proxies from our shareholders.
The Company will bear the expenses of calling and holding the Annual Meeting and the solicitation of proxies on behalf of the Board. These expenses will include, among other things, the costs of preparing, assembling, printing and mailing the proxy materials to shareholders of record and reimbursement paid to brokerage firms, banks and other fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy materials to beneficial owners and obtaining beneficial owners’ voting instructions. Proxies may be considered untimelysolicited through the mail, in person, by telephone or via email.
We have retained Innisfree M&A Incorporated to solicit proxies in connection with the Annual Meeting. Under our agreement with Innisfree, Innisfree will receive $10,000 plus expenses. Innisfree will solicit proxies in person, by mail, telephone, facsimile or email.
Shareholder Proposals and Director Nominations for the purposes2021 Annual Meeting of Rules 14a-4 and 14a-5 underShareholders
The Company does not know at this time when it will hold the Exchange Act if notice2021 Annual Meeting. In the event that an annual meeting is held more than 30 days earlier than the anniversary of the proposal is received after January 15, 2016. Management proxies will be authorized to exercise discretionary authority with respect to any shareholder proposal not included in our proxy materials unless (a) we receive notice of such proposal by January 15, 2016 (unless the date of the 2016immediately preceding annual meeting, as will be the case with respect to the 2021 Annual Meeting, is changednotice of a shareholder nomination or proposal must be delivered to the Company no more than 30190 days fromprior to such annual meeting nor less than the later of (i) 90 days prior to the date of the 2015 Annual Meeting, upon which the notice must be received no later than the close of business onsuch annual meeting and (ii) the tenth day following the day on which the noticepublic announcement of the 2016date of such meeting is first made.
Because the 2021 Annual Meeting was mailed or public disclosure ofhas not yet been scheduled, the meeting was made whichever occurs first), and (b)Company is not providing a deadline for submitting shareholder proposals for the conditions set forth2021 Annual Meeting at this time. Instead, in accordance with Rule 14a-4(c)14a-8(e)(2)(i)-(iii) under the Exchange Act, are met.the Company will provide shareholders with a deadline set at a reasonable time before the Company begins to print and send its proxy materials for the 2021 Annual Meeting.
Householding of Proxy Materials
ADDITIONAL INFORMATIONWe may deliver only one copy of this Proxy Statement to shareholders residing at the same address unless contrary instructions have been received from one or more of the affected shareholders. This is known as “householding.” We do this to reduce costs and preserve resources. Upon oral or written request, we will promptly deliver a separate copy to any shareholder residing at an address to which only one copy was mailed. Shareholders of record residing at the same address that have received multiple copies of this Proxy Statement may contact our mailing agent, Broadridge, to request that only a single copy of our proxy statement be mailed in the future. Contact Broadridge by phone at 1-800-690-6903 or by mail at 51 Mercedes Way, Edgewood, NY 11717.
Additional Information
Management knows of no matters that are to be presented for action at the Annual Meeting of Shareholders other than those set forth above.in this Proxy Statement. If any other matters properly come before the Annual Meeting, of Shareholders, the persons named in the enclosed form of proxy will vote the shares represented by proxies in accordance with their best judgment on such matters.
We will bear the expenses in connection with the solicitation of proxies. Solicitation will be made by mail, but may also be made by telephone, personal interview, facsimile or personal calls by our officers, directors or employees who will not be specially compensated for such solicitation. We may request brokerage houses and other nominees or fiduciaries to forward copies of our proxy statement to beneficial owners of common stock held in their names and we may reimburse them for reasonable out-of-pocket expenses incurred in doing so.
A copy of our Annual Report on Form 10-K for the year ended December 31, 2014, and our Quarterly Reports on Form 10-Q for the periods ended March 31, June 30 and September 30, 2014, as filed with the Securities and Exchange Commission, will be sent to any shareholder without charge upon written request addressed to:
|
| | |
| Michael J. Senken |
| MiMedx Group, Inc. |
| 1775 West Oak Commons Court, NE |
| Marietta, Georgia 30062 |
| | |
| | By order of the Board of Directors, |
| | |
| | /s/ Parker H. Petit |
| | Parker H. Petit |
| | Chairman and Chief Executive Officer |
| | April , 2015 |
| | |
APPENDIX A
Appendix A - Amendment to Articles of Incorporation
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
MIMEDX GROUP, INC.
FIRST: This Corporation is named MiMedx Group, Inc. (the “Corporation”). The Articles of Incorporation of the Corporation were originally filed in the Office of the Department of State of the State of Florida on February 28, 2008, and amended by the Articles of Merger filed in the Office of the Department of State of the State of Florida on March 31, 2008, the Articles of Amendment filed in the Office of the Department of State of the State of Florida on May 14, 2010, the Articles of Amendment filed in the Office of the Department of State of the State of Florida on August 8, 2012, the Articles of Amendment filed in the Office of the Department of State of the State of Florida on November 8, 2012, the Articles of Amendment filed in the Office of the Department of State of the State of Florida on May 15, 2015, MANAGEMENTthe Articles of Amendment filed in the Office of the Department of State of the State of Florida on November 7, 2018, the Articles of Merger filed in the Office of the Department of State of the State of Florida on July 25, 2019, and the Articles of Amendment filed in the Office of the Department of State of the State of Florida on July 1, 2020.
SECOND: Pursuant to the authority of the Board of Directors of the Corporation set forth in the Corporation’s Articles of Incorporation, as amended, and Section 607.0602 of the Florida Business Corporation Act, these Articles of Amendment were duly adopted by the Board of Directors of the Corporation on October 2, 2020 in accordance with the provisions of Section 607.1003 of the Act.
THIRD: These Articles of Amendment were duly approved by holders of a majority of the outstanding shares of the Common Stock and of the Preferred Stock of the Corporation, voting together as a single class, in accordance with the provisions of Section 607.1003 of the Act and the Amended Articles on November 20, 2020.
FOURTH: The Amended Articles are hereby amended by deleting the first sentence of Article 3 and inserting the following text in lieu thereof:
Article 3. Capital Stock. The total number of shares of stock which the Corporation shall have authority to issue is not more than 192,500,000 shares of capital stock, of which 187,500,000 shares shall be designated “Common Stock,” at $.001 par value per share, and 5,000,000 shares shall be designated as “Preferred Stock,” at $.001 par value per share.
IN WITNESS WHEREOF, the undersigned has executed these Articles of Amendment on November 20, 2020.
MiMedx Group, Inc.
By: ____________________________
Name: William F. Hulse IV
Its: General Counsel and Secretary
Appendix B - Amended and Restated 2016 Equity and Cash Incentive Plan
MIMEDX GROUP, INC.
2016 EQUITY AND CASH INCENTIVE PLAN (MIP)
Amended and Restated through October 2, 2020
TABLE OF CONTENTS
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1.12 | Control Change Date 4 |
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1.15 | Dividend Equivalent 4 |
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1.21 | Independent Contractor 5 |
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1.25 | Other Stock-Based Award 6 |
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1.28 | Performance Stock Award 6 |
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1.29 | Performance Stock Unit 6 |
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1.31 | Restricted Stock Award 6 |
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1.32 | Restricted Stock Unit 7 |
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1.35 | Ten Percent Shareholder 7 |
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ARTICLE II ESTABLISHMENT AND PURPOSES | 7 |
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ARTICLE III TYPES OF AWARDS | 8 |
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ARTICLE IV ADMINISTRATION | 8 |
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4.01 | General Administration 8 |
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4.02 | Limited Discretion to Accelerate; Treatment of Awards in Connection with a Change in Control 8 |
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4.03 | Delegation of Authority 9 |
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4.04 | Indemnification of Committee 9 |
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ARTICLE VI COMMON STOCK SUBJECT TO PLAN | 10 |
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6.01 | Common Stock Issued 10 |
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7.03 | Maximum Term of Option 13 |
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7.06 | Stockholder Rights 14 |
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I.7.07 | PurposeDisposition of Shares 14 |
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7.08 | No Liability of Company 14 |
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7.09 | Effect of Termination Date on Options 14 |
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8.02 | Maximum Term of SAR 15 |
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8.05 | Stockholder Rights 16 |
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8.06 | Effect of Termination Date on SARs 16 |
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ARTICLE IX RESTRICTED STOCK & PERFORMANCE STOCK AWARDS | 17 |
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9.04 | Maximum Restriction Period 18 |
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9.05 | Stockholder Rights 18 |
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ARTICLE X RESTRICTED STOCK UNITS & PERFORMANCE STOCK UNITS | 19 |
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10.02 | Earning the Award 19 |
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10.03 | Maximum Unit Award Period 19 |
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10.05 | Stockholder Rights 19 |
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10.06 | Performance Stock Units 20 |
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ARTICLE XI INCENTIVE AWARDS | 20 |
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11.02 | Earning the Award 20 |
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11.03 | Maximum Incentive Award Period 20 |
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11.05 | Stockholder Rights 21 |
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ARTICLE XII OTHER STOCK-BASED AWARDS | 21 |
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12.01 | Other Stock-Based Awards 21 |
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12.02 | Bonus Stock and Awards in Lieu of Other Obligations 21 |
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12.03 | Effect of Termination Date on Other Stock-Based Awards 22 |
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ARTICLE XIII DIVIDEND EQUIVALENTS | 23 |
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ARTICLE XIV TERMS APPLICABLE TO ALL AWARDS | 23 |
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14.01 | Written Agreement 23 |
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14.02 | Nontransferability 23 |
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14.03 | Transferable Awards 23 |
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14.04 | Participant Status 24 |
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14.05 | Change in Control 25 |
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14.06 | Stand-Alone, Additional, Tandem and Substitute Awards 27 |
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14.07 | Form and Timing of Payment; Deferrals 27 |
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14.08 | Time and Method of Exercise; Minimum Vesting Requirement 28 |
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ARTICLE XV PERFORMANCE-BASED COMPENSATION | 28 |
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15.01 | Performance Conditions 28 |
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15.02 | Establishing the Amount of the Award 29 |
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15.03 | Earning the Award 29 |
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15.04 | Performance Awards 30 |
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ARTICLE XVI ADJUSTMENT UPON CHANGE IN COMMON STOCK | 30 |
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16.01 | General Adjustments 30 |
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16.03 | Substitute Awards 31 |
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16.04 | Limitation on Adjustments 31 |
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ARTICLE XVII COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES | 31 |
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17.02 | Postponement of Exercise or Payment 32 |
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17.03 | Forfeiture of Payment 32 |
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ARTICLE XVIII LIMITATION ON BENEFITS | 32 |
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ARTICLE XIX GENERAL PROVISIONS | 34 |
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19.01 | Effect on Employment and Service 34 |
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19.03 | Rules of Construction 34 |
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19.04 | Tax Withholding and Reporting 34 |
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19.05 | Code Section 83(b) Election 35 |
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19.06 | Reservation of Shares 35 |
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19.09 | Repurchase of Common Stock 36 |
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19.11 | Forfeiture Provisions 36 |
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19.12 | Legends; Payment of Expenses 36 |
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19.13 | Repricing of Awards 37 |
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19.15 | Fractional Shares 37 |
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19.16 | Compensation Recoupment Policy 38 |
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19.17 | Post-Exercise Holding Requirements 38 |
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ARTICLE XX CLAIMS PROCEDURES | 38 |
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20.03 | Time to File Suit 39 |
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21.01 | Amendment of Plan 39 |
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21.02 | Amendment of Awards 39 |
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ARTICLE XXII SECTION 409A PROVISION | 40 |
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22.03 | Election Requirements 40 |
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22.05 | Acceleration or Deferral 41 |
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22.06 | Distribution Requirements 41 |
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22.07 | Key Employee Rule 42 |
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22.08 | Distributions Upon Vesting 42 |
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22.09 | Scope and Application of this Provision 42 |
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ARTICLE XXIII EFFECTIVE DATE OF PLAN | 43 |
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ARTICLE XXIV DURATION OF PLAN | 43 |
ARTICLE I. DEFINITIONS
1.01 409A Award
409A Award means an Award that is intended to be subject to Section 409A of the Code.
1.02 Affiliate
Affiliate, as it relates to any limitations or requirements with respect to incentive stock options, means any “subsidiary” or “parent” corporation (as such terms are defined in Code Section 424) of the Company. Affiliate otherwise means any entity that is part of a controlled group of corporations or is under common control with the Company within the meaning of Code Sections 1563(a), 414(b) or 414(c), except that, in making any such determination, fifty percent (50%) shall be substituted for eighty percent (80%) under such Code Sections and the related regulations.
1.03 Agreement
Agreement means a written or electronic agreement (including any amendment or supplement thereto) between the Company and a Participant specifying the terms and conditions of an Award granted to such Participant.
1.04 Award
Award means an Option, SAR, Restricted Stock Award, Performance Stock Award, Restricted Stock Unit, Performance Stock Unit, Incentive Award, Other Stock-Based Award or Dividend Equivalent granted under this Plan.
1.05 Board
Board means the Board of Directors of the Company.
1.06 Cause
Cause means “Cause” as such term is defined in any employment or service agreement between the Company or any Affiliate and the Participant except as otherwise determined by the Committee and set forth in the applicable Agreement. If no such employment or service agreement exists or if such employment or service agreement does not contain any such definition, except as otherwise determined by the Committee and set forth in the applicable Agreement, “Cause” means (i) the Participant's willful and repeated failure to comply with the lawful directives of the Board, the Board of Directors of any Affiliate or any personnel with managerial responsibility for the Participant; (ii) any criminal act or act of fraud, dishonesty or willful misconduct by the Participant that has a material adverse effect on the property, operations, business or reputation of the Company or any Affiliate; (iii) the material breach by the Participant of the terms of any confidentiality, non-competition, non-solicitation or other agreement that the Participant has with the Company or any Affiliate; (iv) acts by the Participant of willful malfeasance or negligence in a matter of material importance to the Company or any Affiliate, (v) regular or repeated refusal or failure to perform the Participant’s duties with the Company or an Affiliate or (vi) conduct by the Participant that could have a material adverse effect on the property, operations, business or reputation of the Company or any of its Affiliates without a reasonable good faith belief that such conduct was in the best interests of the Company and its Affiliates. For purposes of the Plan, other than where the definition of Cause is determined under any employment or service agreement between the Company or any Affiliate and the Participant, in which case such employment or service agreement shall control, in no event shall any termination of employment or service be deemed for Cause unless the Committee concludes that the situation warrants a determination that the Participant's employment or service terminated for Cause; except that, in the case of any individual who is subject to the reporting and other provisions of Section 16 of the Exchange Act, any determination that such individual’s employment terminated for Cause shall be made by the Board acting without such individual (if such individual is then serving on the Board). Without in any way limiting the effect of the foregoing, for the purposes of the Plan and any Award, a Participant’s employment or service shall be deemed to have terminated for Cause if, after the Participant’s employment or service has terminated, facts and circumstances are discovered that would have justified, in the opinion of the Committee, a termination for Cause.
1.07 Change in Control
Change in Control means the occurrence of any of the following events:
(a) The 2015 MIPaccumulation in any number of related or unrelated transactions by any Person of beneficial ownership (as such term is designedused in Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of the combined voting power of the Company's voting stock; provided that for purposes of this subsection (a), a Change in Control will not be deemed to providehave occurred if the accumulation of more than fifty percent (50%) of the voting power of the Company's voting stock results from any acquisition of voting stock (i) directly from the Company that is approved by the Incumbent Board, (ii)
by the Company, (iii) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate, or (iv) by any Person pursuant to a merger, consolidation or reorganization (a "Business Combination") that would not cause a Change in Control under subsections (b), (c) or (d) below; or
(b) Consummation of a Business Combination, unless, immediately following that Business Combination, (i) all or substantially all of the Persons who were the beneficial owners of the voting stock of the Company immediately prior to that Business Combination beneficially own, directly or indirectly, at least fifty percent (50%) of the then outstanding shares of common stock and at least fifty percent (50%) of the combined voting power of the then outstanding voting stock entitled to vote generally in the election of directors of the entity resulting from that Business Combination (including, without limitation, an incentive for keyentity that as a result of that transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions relative to each other as their ownership, immediately prior to that Business Combination, of the voting stock of the Company, and (ii) at least fifty percent (50%) of the members of the Board of Directors of the entity resulting from that Business Combination holding at least fifty percent (50%) of the voting power of such Board of Directors were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board of Directors providing for that Business Combination and as a result of or in connection with such Business Combination, no Person has a right to dilute either of such percentages by appointing additional members to the Board of Directors or otherwise without election or other action by the shareholders; or
(c) A sale or other disposition of all or substantially all of the assets of the Company, except pursuant to a Business Combination that would not cause a Change in Control under subsections (b) above or (d) below; or
(d) A complete liquidation or dissolution of the Company, except pursuant to a Business Combination that would not cause a Change in Control under subsections (b) and (c) above.
Notwithstanding the foregoing, a Change in Control shall only be deemed to have occurred with respect to a Participant and the Participant’s 409A Award if the Change in Control otherwise constitutes a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A of the Code (except that, with respect to vesting of the 409A Award, Change in Control shall have the same meaning as described above).
1.08 Code
Code means the Internal Revenue Code of 1986 and any amendments thereto.
1.09 Committee
Committee means the Compensation Committee of the Board, or the Board itself if no Compensation Committee exists. If such Compensation Committee exists, if and to the extent deemed necessary by the Board, such Compensation Committee shall consist of two or more directors, all of whom are (i) “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act, (ii) to the extent required for purposes of compliance with transitional rules under Code Section 162(m), “outside directors” as defined in Code Section 162(m) prior to its amendment effective on January 1, 2018, and (iii) independent directors under the rules of the principal stock exchange on which the Company’s securities are then traded.
1.10 Common Stock
Common Stock means the common stock of the Company, par value $0.001 per share, or such other class or kind of shares or other securities resulting from the application of Article XVI, as applicable.
1.11 Company
Company means MiMedx Group, Inc., a Florida corporation, and any successor thereto.
1.12 Control Change Date
Control Change Date means the date on which a Change in Control occurs.
1.13 Corresponding SAR
Corresponding SAR means a SAR that is granted in relation to a particular Option and that can be exercised only upon the surrender to the Company, unexercised, of that portion of the Option to which the SAR relates.
1.14 Disability
Disability means a physical, mental or other impairment within the meaning of Section 22(e)(3) of the Code except as otherwise determined by the Committee and set forth in the applicable Agreement except that a Disability shall only be
deemed to occur with respect to a Participant and the Participant's 409A Award if there is a Disability within the meaning of Section 409A of the Code where required by Section 409A of the Code.
1.15 Dividend Equivalent
Dividend Equivalent means the right, granted under the Plan, to receive cash, shares of Common Stock, other Awards or other property equal in value to all or a specified portion of dividends paid with respect to a specified number of shares of Common Stock.
1.16 Exchange Act
Exchange Act means the Securities Exchange Act of 1934, as amended.
1.17 Fair Market Value
Fair Market Value of a share of Common Stock means, on any given date, the fair market value of a share of Common Stock as the Committee, in its discretion, shall determine; provided, however, that the Committee shall determine Fair Market Value without regard to any restriction other than a restriction which, by its terms, will never lapse and, if the shares of Common Stock are traded on any national stock exchange or quotation system, the Fair Market Value of a share of Common Stock shall be the closing price of a share of Common Stock as reported on such stock exchange or quotation system on such date, or if the shares of Common Stock are not traded on such stock exchange or quotation system on such date, then on the next preceding day that the shares of Common Stock were traded on such stock exchange or quotation system, all as reported by such source as the Committee shall select. The Fair Market Value that the Committee determines shall be final, binding and conclusive on the Company, any Affiliate and each Participant. Fair Market Value relating to the exercise price, Initial Value, or purchase price of any Non-409A Award that is an Option, SAR or Other Stock-Based Award in the nature of purchase rights shall conform to the requirements for exempt stock rights under Code Section 409A.
1.18 Full Value Award
Full Value Award means an Award other than an Option, SAR or Other Stock-Based Award in the nature of purchase rights.
1.19 Incentive Award
Incentive Award means an Award stated with reference to a specified dollar amount or number of shares of Common Stock which, subject to such terms and conditions as may be prescribed by the Committee, entitles the Participant to receive shares of Common Stock, cash or a combination thereof from the Company or an Affiliate.
1.20 Incumbent Board
Incumbent Board means a Board of Directors at least a majority of whom consist of individuals who either are (a) members of the Company's Board as of the effective date of the adoption of this Plan or (b) members who become members of the Company's Board subsequent to the date of the adoption of this Plan whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least sixty percent (60%) of the directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which that person is named as a nominee for director, without objection to that nomination), but excluding, for that purpose, any individual whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors.
1.21 Independent Contractor
Independent Contractor mans an independent contractor, consultant or advisor providing services to the Company or an Affiliate.
1.22 Initial Value
Initial Value means, with respect to a Corresponding SAR, the Option price per share of the related Option and, with respect to a SAR granted independently of an Option, the amount determined by the Committee on the date of grant which shall not be less than the Fair Market Value of one share of Common Stock on the date of grant, subject to Sections 14.06 and 16.03 with respect to substitute Awards.
1.23 Non-409A Award
Non-409A Award means an Award that is not intended to be subject to Section 409A of the Code.
1.24 Option
Option means a stock option that entitles the holder to purchase from the Company a stated number of shares of Common Stock at the price set forth in an Agreement.
1.25 Other Stock-Based Award
Other Stock-Based Award means an Award granted to the Participant under Article XII of the Plan.
1.26 Participant
Participant means an employee of the Company or an Affiliate, a member of the Board or Board of Directors of an Affiliate (whether or not an employee), an Independent Contractor of the Company or an Affiliate and any entity which is a wholly-owned alter ego of such employee, member of the Board or Board of Directors of an Affiliate or Independent Contractor and who satisfies the requirements of Article V and is selected by the Committee to receive an Award.
1.27 Plan
Plan means this MiMedx Group, Inc. (“MiMedx” or “Company”) management team2016 Equity and Cash Incentive Plan, as amended and restated as set forth herein and as hereafter amended.
1.28 Performance Stock Award
Performance Stock Award means shares of Common Stock granted to exceeda Participant under Article IX of the 2015 BusinessPlan.
1.29 Performance Stock Unit
Performance Stock Unit means an Award, stated with respect to a specified number of shares of Common Stock, that entitles the Participant to receive one share of Common Stock (or, as otherwise determined by the Committee and set forth in the applicable Agreement, the equivalent Fair Market Value of one share of Common Stock in cash) with respect to each Performance Stock Unit that becomes payable under the terms and conditions of the Plan and reward those management team membersthe applicable Agreement, including the performance conditions.
1.30 Person
Person means any individual, corporation, partnership, limited liability company, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or any other entity of any kind.
1.31 Restricted Stock Award
Restricted Stock Award means shares of Common Stock granted to a Participant under Article IX.
1.32 Restricted Stock Unit
Restricted Stock Unit means an Award, stated with deserving performance. respect to a specified number of shares of Common Stock, that entitles the Participant to receive one share of Common Stock (or, as otherwise determined by the Committee and set forth in the applicable Agreement, the equivalent Fair Market Value of one share of Common Stock in cash) with respect to each Restricted Stock Unit that becomes payable under the terms and conditions of the Plan and the applicable Agreement.
1.33 Retirement
Retirement means, as applied to any Participant, as defined in any employment agreement, consulting agreement or other similar agreement, if any, to which the Participant is a party, or, if there is no such agreement (or if any such agreement does contain any such definition), Retirement means retirement as determined by the Committee.
1.34 SAR
SAR means a stock appreciation right that in accordance with the terms of an Agreement entitles the holder to receive cash or a number of shares of Common Stock, as determined by the Committee and set forth in the applicable Agreement, based on the increase in the Fair Market Value of the shares underlying the stock appreciation right during a stated period specified by the Committee over the Initial Value. References to “SARs” include both Corresponding SARs and SARs granted independently of Options, unless the context requires otherwise.
1.35 Ten Percent Shareholder
Ten Percent Shareholder means any individual who (considering the stock attribution rules described in Code Section 424(d)) owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate.
1.36 Termination Date
Termination Date means the day on which a Participant’s employment or service with the Company and its Affiliates terminates or is terminated.
ARTICLE IIESTABLISHMENT AND PURPOSES
The MiMedxPlan was most recently adopted by the Company’s Board of Directors (the “Boardand approved by the Company’s stockholders on May 18, 2016. The Plan hereby is amended and restated as set forth herein, effective upon and subject to the approval of Directors”the Company’s stockholders. The Plan is intended to assist the Company and its Affiliates in recruiting and retaining individuals with ability and initiative by enabling such Persons to participate in the future success of the Company and its Affiliates by aligning their interests with those of the Company and its stockholders.
ARTICLE IIITYPES OF AWARDS
The Plan is intended to permit the grant of Options qualifying under Code Section 422 (“incentive stock options”) hasand Options not so qualifying, SARs, Restricted Stock Awards, Performance Stock Awards, Restricted Stock Units, Performance Stock Units, Incentive Awards, Other Stock-Based Awards and Dividend Equivalents in accordance with the Plan and procedures that may be established by the Committee. No Option that is intended to be an incentive stock option shall be invalid for failure to qualify as an incentive stock option. The proceeds received by the Company from the sale of shares of Common Stock pursuant to this Plan may be used for general corporate purposes.
ARTICLE IVADMINISTRATION
4.01 General Administration
The Plan shall be administered by the Committee. The Committee shall have authority to grant Awards upon such terms (not inconsistent with the provisions of this Plan) as the Committee may consider appropriate. Such terms may include conditions (in addition to those contained in this Plan) on the grant, exercisability, transferability, settlement and forfeitability of all or any part of an Award, among other terms. In addition, the Committee shall have complete authority to interpret all provisions of this Plan including, without limitation, the 2015 MIP,discretion to interpret any terms used in the Plan that are not defined herein; to prescribe the form of Agreements; to adopt, amend and rescind rules and regulations relatingpertaining to it,the administration of the Plan; and to make all other determinations necessary or advisable for the administration of this Plan. The express grant in the 2015 MIP (toPlan of any specific power to the Committee shall not be construed as limiting any power or authority of the Committee. Any decision made, or action taken, by the Committee in connection with the administration of this Plan shall be final and conclusive. The members of the Committee shall not be liable for any act done in good faith with respect to this Plan or any Agreement or Award. Unless otherwise provided by the Bylaws of the Company, by resolution of the Board or applicable law, a majority of the members of the Committee shall constitute a quorum, and acts of the majority of the members present at any meeting at which a quorum is present, and any acts approved in writing by all members of the Committee without a meeting, shall be the acts of the Committee.
4.02 Limited Discretion to Accelerate; Treatment of Awards in Connection with a Change in Control
Notwithstanding anything to the contrary in the Plan, following the grant of an Award, and other than in connection with a Change in Control as described below, the Committee may not accelerate the time at which an Award may be exercised, may become transferable or nonforfeitable or be earned and settled other than in the event of the Participant’s death, Disability, involuntary termination without Cause or Retirement.
Notwithstanding anything to the contrary in the Plan, in connection with a Change in Control the Committee may accelerate the time at which an Award may be exercised, may become transferable or nonforfeitable or be earned and settled on and after a Control Change Date to the extent not inconsistent with Section 162(m)exercisable, transferable and non-forfeitable or earned and payable prior to such time.
4.03 Delegation of Authority
The Committee may act through subcommittees, in which case the subcommittee shall be subject to and have the authority hereunder applicable to the Committee, and the acts of the Code for paymentssubcommittee shall be deemed to Covered Employees).
The portionbe the acts of the 2015 MIPCommittee hereunder. Additionally, to the extent applicable law so permits, the Committee, in its discretion, may delegate to Covered Employees (as defined by Section 162(m) of the Internal Revenue Code (the “Code”)) is contingent upon the approval of the shareholders of the Company. No bonuses may be paid under the 2015 MIP to Covered Employees unless and until the shareholdersone or more officers of the Company approvedall or part of the 2015 MIP. TheCommittee’s authority and duties with respect to Awards to be granted to individuals who are not subject to the reporting and other provisions of the 2015 MIP shall be bifurcated, so that certain provisionsSection 16 of the 2015 MIP required in order to satisfy the requirements of Section 162(m)Exchange Act and who are not members of the Code are only applicable to participants whose compensation is subject to 162(m) of the Code.
The goals of the 2015 MIP are:
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1. | To increase shareholder value. |
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2. | To achieve and exceed the MiMedx 2015 Business Plan. |
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3. | To reward key individuals for demonstrated performance that is sustained throughout the year. |
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4. | To enhance the Company’s ability to be competitive in the marketplace for executive talent, and to attract, retain and motivate a high-performing and high-potential management team. |
This program is in effect from January 1, 2015 through December 31, 2015. The program is subject to adjustment by the Company at any time duringBoard or after the program period. In the event of a program adjustment, an addendum will be published to inform eligible participants. No such adjustment may be made if it causes payments to Covered Employees to no longer qualify as qualified performance-based compensation under Section 162(m) of the Code.
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III. | MIP Participation and Eligibility |
Participation and eligibility is determined by the Board of Directors of an Affiliate. The Committee may revoke or amend the terms of any delegation at any time but such action shall not invalidate any prior actions of the Committee’s delegate or delegates that were consistent
with the Compensation Committee, as defined herein, approvingterms of the eligibility of Covered Employees. No individual is automatically included inPlan and the 2015 MIP. Only those individuals approvedCommittee’s prior delegation. If and to the extent deemed necessary by the Board, of Directors and confirmed in writing are eligible. Verbal comments or promisesall Awards granted to any employee or past practices are not binding on MiMedx or any of its divisions or subsidiaries in any manner.
Terminated Employees: If a participant terminates from the Company, the following guidelines will be used for all voluntary or involuntary terminations as well as terminations due to a Reduction in Force: Incentives are only earned by employeesindividual who are in good standing and employed on the date payment is made. Participants terminating employment prior to the date of payment are not eligible for any incentive payment, regardless of the reason for termination of employment.
First Time Participants: New management employees hired or promoted into an eligible position will be able to begin participating in the MIP on the first day of the first full month in the eligible position. The Base Bonus will be prorated based on the number of months employed in the eligible position. No incentives will be earned or paid for new hires beginning employment after September 30, 2015.
Existing Participants: Participants who transfer during the period January 1, 2015, through December 31, 2015, from one MIP eligible position to another MIP eligible position, having either a higher or lower Base Bonus, will begin participating at the new MIP level on the first day of the first full month in the new position. The participant’s Base Bonus will be prorated for the months employed in each eligible position.
Leave of Absence: Participants who have been on an approved leave of absence for medical or other reasons for greater than 60 cumulative days during the year will receive a prorated portion of their earned Base Bonus. The earned Base Bonus for participants on approved leaves of absence of less than 60 cumulative days will not be prorated based on the period of approved leave. Participants who have been on an approved leave of absence for medical or other reasons for greater than 120 cumulative days during the year will not be eligible to earn any amount of MIP for the year.
Covered Employees: The Compensation Committee shall retain discretion to name as a participant any otherwise-eligible Covered Employee hired or promoted after the commencement of the Plan.
The Board of Directors has the discretion, subject to the reporting and other provisions of the 2015 MIP, to make or to select the manner of making all determinations with respect to the 2015 MIP to the extent not inconsistent with Section 162(m) for Covered Employees. The Board of Directors had delegated the administration16 of the MIP to the Compensation Committee of the Board of Directors (the “Compensation Committee”), who in turn, will approve and subsequently make recommendations to the Board of Directors for final approval of all determinations with respect the MIP. As delegated by the Board of Directors, the Compensation Committee shall have full authority to formulate adjustments and make interpretations under the 2015 MIP as it deems appropriate. As delegated, the Compensation Committee shall also be empowered to make any and all of the determinations not herein specifically authorized which may be necessary or desirable for the effective administration of the 2015 MIP. As delegated, the bonus amounts calculated under the 2015 MIPExchange Act shall be paid only upon the Compensation Committee’s determination, in its sole discretion, that the participant is entitled to them. All matters of delegation of the 2015 MIP will be approvedmade by the Compensationa Committee prior to its recommendation to the Board of Directors for final approval. The Compensation Committee shall be comprised at all times solely of two or more directors, whoall of whom are “outside“non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act, to the extent necessary to exempt the Award from the short-swing profit rules of Section 162(m)16(b) of the Code.Exchange Act. An Award granted to an individual who is a member of the Committee may be approved by the Committee in accordance with the applicable Committee charters then in effect and other applicable law.
4.04 Indemnification of Committee
The Company shall bear all expenses of administering this Plan. The Company shall indemnify and hold harmless each Person who is or shall have been a member of the Committee acting as administrator of the Plan, or any delegate of such, against and from any cost, liability, loss or expense that may be imposed upon or reasonably incurred by such Person in connection with or resulting from any action, claim, suit or proceeding to which such Person may be a party or in which such Person may be involved by reason of any action taken or not taken under the Plan and against and from any and all amounts paid by such Person in settlement thereof, with the Company’s approval, or paid by such Person in satisfaction of any judgment in any such action, suit or proceeding against such Person, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. Notwithstanding the foregoing, the Company shall not indemnify and hold harmless any such Person if applicable law or the Company’s Certificate of Incorporation or Bylaws prohibit such indemnification. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such Persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law or otherwise, or under any other power that the Company may have to indemnify such Person or hold him or her harmless. The provisions of the foregoing indemnity shall survive indefinitely the term of this Plan.
TheARTICLE VELIGIBILITY
Any employee of the Company or an Affiliate (including an entity that becomes an Affiliate after the adoption of this Plan), a member of the Board or the Board of Directors of an Affiliate (including an entity that becomes an Affiliate after the adoption of the Plan) (whether or not such Board or Board of Directors member is an employee), an Independent Contractor of the Company or an Affiliate (including an entity that becomes an Affiliate after the adoption of the Plan) and any entity which is a wholly-owned alter ego of such employee, member of the Board or Board of Directors of an Affiliate or Independent Contractor is eligible to participate in this Plan if the Committee, in its sole discretion, determines that such Person or entity has contributed significantly or can be expected to contribute significantly to the profits or growth of the Company or any Affiliate or if it is otherwise in the best interest of the Company or any Affiliate for such Person or entity to participate in this Plan. With respect to any Board member who is (i) designated or nominated to serve as a Board member by a stockholder of the Company and (ii) an employee of such stockholder of the Company, then, at the irrevocable election of the employing stockholder, the Person or entity who shall be eligible to participate in this Plan on behalf of the service of the respective Board member shall be the employing stockholder (or one of its Affiliates). To the extent such election is made, the respective Board member shall have no rights hereunder as a Participant with respect to such Board member’s participation in this Plan. An Award may changebe granted to a Person or entity who has been offered employment or service by the Company or an Affiliate and who would otherwise qualify as eligible to receive the Award to the extent that Person or entity commences employment or service with the Company or an Affiliate, provided that such Person or entity may not receive any payment or exercise any right relating to the Award, and the grant of the Award will be contingent, until such Person or entity has commenced employment or service with the Company or an Affiliate.
ARTICLE VICOMMON STOCK SUBJECT TO PLAN
6.01 Common Stock Issued
Upon the issuance of shares of Common Stock pursuant to an Award, the Company may deliver to the Participant (or the Participant’s broker if the Participant so directs) shares of Common Stock from its authorized but unissued Common Stock, treasury shares or reacquired shares, whether reacquired on the open market or otherwise.
6.02 Aggregate Limit
The maximum aggregate number (the “Maximum Aggregate Number”) of shares of Common Stock that may be issued under this Plan and to which Awards may relate is the sum of (i) 8,400,000 shares of Common Stock, all of which may be issued as Incentive Stock Options, (ii) the number of Shares available under the Plan immediately prior to stockholder approval of the Plan as amended and restated, subject to the counting, adjustment and substitution provisions of the Plan, plus (iii) that number of shares of Common Stock that are represented by awards which previously have been granted and are outstanding under the Plan on the date the Plan as amended and restated is approved by stockholders of the Company and which subsequently
expire or otherwise lapse, are terminated or forfeited, are settled in cash, or exchanged with the Committee’s permission, prior to the issuance of shares of Common Stock, for Awards not involving shares of Common Stock, without the issuance of the underlying shares of Common Stock. The Maximum Aggregate Number of shares of Common Stock that may be issued under the Plan may be issued pursuant to (i) Options, SARs or Other Stock Based Awards in the nature of purchase rights, (ii) Full Value Awards or (iii) any combination thereof. To the extent shares of Common Stock not issued under an Option must be counted against this limit as a condition to satisfying the rules applicable to incentive stock options, such rule shall apply to the limit on incentive stock options granted under the Plan. Shares of Common Stock covered by an Award generally shall only be counted as used to the extent they are actually used. Except as set forth below, a share of Common Stock issued in connection with any Award under the Plan shall reduce the Maximum Aggregate Number of shares of Common Stock available for issuance under the Plan by one; provided, however, that a share of Common Stock covered under a stock-settled SAR shall reduce the Maximum Aggregate Number of shares of Common Stock available for issuance under the Plan by one even though the shares of Common Stock are not actually issued in connection with settlement of the stock-settled SAR.
Except as otherwise provided herein, any shares of Common Stock related to an Award which terminates by expiration, forfeiture, cancellation or otherwise without issuance of shares of Common Stock, which is settled in cash in lieu of Common Stock or which is exchanged, with the Committee’s permission, prior to the issuance of shares of Common Stock, for Awards not involving shares of Common Stock shall again be available for issuance under the Plan.
The following shares of Common Stock, however, may not again be made available for issuance as Awards under the Plan: (i) shares of Common Stock not issued or delivered as a result of the net settlement of an Award, (ii) shares of Common Stock tendered or withheld to pay the exercise price, purchase price or withholding taxes relating to an Award or (iii) shares of Common Stock repurchased on the open market with the proceeds of the purchase price of an Award.
The Maximum Aggregate Number of shares of Common Stock that may be issued under the Plan shall be subject to adjustment as provided in Article XVI, provided, however, that (i) substitute Awards granted under Section 16.03 shall not reduce the shares of Common Stock otherwise available under the Plan (to the extent permitted by applicable stock exchange rules) and (ii) available shares of stock under a stockholder-approved plan of an acquired company (as appropriately adjusted to reflect the transaction) also may be used for Awards under the Plan and shall not reduce the number of shares of Common Stock otherwise available under the Plan (subject to applicable stock exchange requirements).
6.03 Individual Limit
The maximum number of shares of Common Stock that may be covered by Options, SARs or other Stock-Based Awards in the nature of purchase rights granted to any one Participant during any calendar year shall be 1,000,000 shares of Common Stock. For purposes of the foregoing limit, an Option and its corresponding SAR shall be treated as a single Award. For Full Value Awards that are denominated in shares of Common Stock, no more than 1,000,000 shares of Common Stock may be subject to any such Full Value Awards granted to any one Participant during any calendar year (regardless of whether settlement of the Award is to occur prior to, at the time of, or after the time of vesting); provided, however, that if the Full Value Award is denominated in shares of Common Stock but an equivalent amount of cash is delivered in lieu of delivery of shares of Common Stock, the foregoing limit shall be applied based on the methodology used by the Committee to convert the number of shares of Common Stock into cash. For any Awards that are stated with reference to a specified dollar limit, the maximum amount that may be earned and become payable to any one Participant with respect to any twelve (12)-month performance period shall equal $2,000,00 (prorated up or down for performance periods that are greater or lesser than twelve (12) months); provided, however, that if the Award is denominated in cash but an equivalent amount of shares of Common Stock are delivered in lieu of delivery of cash, the foregoing limit shall be applied to the cash based on the methodology used by the Committee to convert the cash into shares of Common Stock. In addition to the limits set forth herein, (i) the maximum number of shares of Common Stock that may be covered by Awards stated with reference to a specific number of shares of Common Stock and granted to any one Participant in connection with the Participant's service as a member of the Board during any calendar year shall be 125,000 shares of Common Stock and (ii) for Awards stated with reference to a specific dollar amount, the maximum amount that may be earned and become payable to any one Participant in connection with the Participant's service as a member of the Board for any consecutive twelve (12)-month period shall equal $300,000 (prorated up or down for periods that are greater or lesser than twelve (12) months), in each case applied as described above for the other individual limitations. The maximum number of shares that may be granted in any calendar year to any Participant under the above limits shall be subject to adjustment as provided in Article XVI.
ARTICLE VIIOPTIONS
7.01 Grant
Subject to the eligibility provisions of Article V, the Committee will designate each individual or entity to whom an Option is to be granted and will specify the number of shares of Common Stock covered by such grant and whether the Option
is an incentive stock option or a nonqualified stock option. Notwithstanding any other provision of the Plan or any Agreement, the Committee may only grant an incentive stock option to an individual who is an employee of the Company or an Affiliate. An Option may be granted with or without a Corresponding SAR.
7.02 Option Price
The price per share of Common Stock purchased on the exercise of an Option shall be determined by the Committee on the date of grant, but shall not be less than the Fair Market Value of a share of Common Stock on the date the Option is granted, subject to Sections 14.06 and 16.03 with respect to substitute Awards. However, if at the time of grant of an Option that is intended to be an incentive stock option, the Participant is a Ten Percent Shareholder, the price per share of Common Stock purchased on the exercise of such Option shall not be less than one hundred ten percent (110%) of the Fair Market Value of a share of Common Stock on the date the Option is granted.
7.03 Maximum Term of Option
The maximum time period in which an Option may be exercised shall be determined by the Committee on the date of grant, except that no Option shall be exercisable after the expiration of ten (10) years from the date such Option was granted (or five (5) years from the date such Option was granted in the event of an incentive stock option granted to a Ten Percent Shareholder).
7.04 Exercise
Subject to the provisions of this Plan and the applicable Agreement, an Option may be exercised in whole at any time or in part from time to time at such times and in compliance with such requirements as the Committee shall determine; provided, however, that incentive stock options (granted under the Plan and all plans of the Company and its Affiliates) may not be first exercisable in a calendar year for shares of Common Stock having a Fair Market Value (determined as of the date the Option is granted) exceeding the limit set forth under Code Section 422(d) (currently $100,000). If the limitation is exceeded, the Options that cause the limitation to be exceeded shall be treated as nonqualified stock options. An Option granted under this Plan may be exercised with respect to any number of whole shares less than the full number for which the Option could be exercised. A partial exercise of an Option shall not affect the right to exercise the Option from time to time in any respect. All decisions made on behalfaccordance with this Plan and the applicable Agreement with respect to the remaining shares subject to the Option. The exercise of an Option shall result in the termination of the CompanyCorresponding SAR to the extent of the number of shares with respect to which the Option is exercised.
7.05 Payment
Subject to rules established by the BoardCommittee and unless otherwise provided in an Agreement, payment of Directors relative toall or part of the plan are final and binding. The determination of compliance with the individual objectives established under the plan for an employeeOption price shall be made by the Board of Directors in its sole discretion.
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V. | MIP Incentive Determination and Payment |
The 2015 MIP provides for the determination of a Base Bonus expressed as a percentage of the participant’s annual salary in effect at the end of the program periodcash or the end of each respective period when a participant transfers from one MIP eligible position to another.
Participants approved for MIP participation as of January 1, 2015, are eligible for a full year’s participation not subject to proration in accordance with the provisions hereof. All incentives earned under the MIP will be measured and paid annually.
The 2015 MIP participants include the Chief Executive Officer (the “CEO”), plus the direct reportscash equivalent acceptable to the CEO and Chief Operating Officer (the “COO”).
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VII. | MIP Method of Calculation |
Each participant’s incentive will be calculated based onCommittee. If the achievement of financial targets and individual objectives. Base bonus for all MIP participants is divided into two financial components and an individual objectives component. 80% ofAgreement so provides, the base bonus is allocated to 2015 Consolidated MiMedx Revenue performance (“Revenue”); 10% is allocated to 2015 Consolidated MiMedx Earnings Before Interest, Taxes, Depreciation, Amortization, and Share Based Compensation Expense performance (“Adjusted EBITDA”); and 10% is allocated to individual objectives performance (“Individual Objectives”).
The financial thresholds for 2015 Revenue and 2015 Adjusted EBITDA indicate the level of respective performance where partial payouts commence. Increased partial payouts are indicated for respective 2015 Revenue and 2015 Adjusted EBITDA performance above the financial threshold and below the financial target. The respective 2015 Revenue and 2015 Adjusted EBITDA targets indicate the point at which the respective target base bonuses are earned. Provided a minimum Adjusted EBITDA Threshold is achieved, each partial level of payout and target base bonus payout is determined independent of the other. Provided a minimum Adjusted EBITDA Threshold is achieved, at each respective level above of Adjusted EBITDA performance and Revenue performance a portion or the entire incentive amount allocated to individual objectives performance may be earned depending on the participant’s achievement of the individual objective(s).
All performance measures and/or metrics and performance goals will be established in writing and approved by the Compensation Committee and the Board of Directors no later than the earlier of (i) ninety (90) days following the start of the fiscal year to which they relate and (ii) before the lapse of twenty-five percent (25%) of the period to which they relate. All performance measures and/or metrics and performance goals must be uncertain of achievement at the time they are established, and the achievement of the performance measures and/or metrics and performance goals must be determinable by a third party with knowledge of the relevant facts.
Following the end of the Program Period, management will provide documentation to the Compensation Committee confirming the degree of achievement of all performance measures and/or metrics and performance goals pertaining to the 2015 MIP. The Compensation Committee will review the documentation from management, and following its review, the Compensation Committee will certify, in writing, the achievement of such performance measures and/or metrics and performance goals prior to the approval of the Compensation Committee and its subsequent recommendation to the Board of Directors for final approval and payment in accordance with such achievement.
EBITDA Performance
MiMedx Adjusted EBITDA performance has 6 designated levels at which specific portions of the EBITDA component (up to 100% of the Adjusted EBITDA target) are funded for payout.
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◦ | Financial Gatekeeper: The Adjusted EBITDA component is a gatekeeper for the Revenue component and the individual objectives component. If Adjusted EBITDA performance is unfavorable to the Adjusted EBITDA Threshold, no payout for Adjusted EBITDA performance, as well as Revenue performance or individual objectives performance can be made. If Adjusted EBITDA performance is favorable to the Adjusted EBITDA Threshold, the Revenue component and the Individual Objectives component are paid out independent of and in addition to the Adjusted EBITDA component.
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Revenue Performance
The Revenue performance has 6 designated levels at which specific portions of the Revenue component (up to 100% of the Revenue target) are funded for payout. The Revenue performance also has an additional 6
designated levels (levels 7 through 12 in the table below) above 100% of the Revenue target at which an excess bonus is funded for payout.
Revenue Performance Excess Bonus
If Revenue performance is greater than 100% of the Revenue Target (Level 6 in the Revenue performance table below), the participant may earn an excess bonus. The excess bonus is earned for each level of designated revenue performance at the excess percentage of the Revenue component plus the same excess percentage of the earned EBITDA component and the earned Individual Objectives component (levels 7 through 12 in the Revenue performance table below). Including the excess bonus, the total bonus cannot exceed two (2) times a participant’s Base Bonus amount.
Individual Objectives Performance
If Adjusted EBITDA performance is less than the Adjusted EBITDA Threshold (Level 1 in the EBITDA performance table below), no amounts can be earned for this component of the MIP. If Adjusted EBITDA performance is at or favorable to the Adjusted EBITDA Threshold (Level 1 in the EBITDA performance table below) the participant is eligible to earn a portion or all of the Base Bonus allocated to the Individual Objectives component.
Individual Objectives for the participants are reviewed and approved by the Compensation Committee and recommended for approval by the Board of Directors. The individual objectives are key operational measures and/or major milestone outcomes that are specific the participant’s position and directly related to the overall achievement of the MiMedx Business Plan and/or the MiMedx Strategic Plan. The individual objectives for all participants will be limited to one or more of the following performance measures and/or metrics: (i) Revenue; (ii) EBITDA; (iii) Adjusted EBITDA; (iv) cash flow (v) Days Sales Outstanding (DSO); (vi) return on equity; (vii) return on assets; (viii) earnings per share; (ix) operations expense efficiency; (x) return on investment; (xi) return on capital; (xii) improvements in capital structure; (xiii) expense management; (xiv) profitability of an identifiable business unit or product; (xv) maintenance or improvement of profit margins; (xvi) total shareholder return; (xvii) market share; (xviii) working capital; (xix) efficiency ratios; (xx) comparison with stock market indices or performance of metrics with peer companies; and (xxi) achievement of performance measures consistent with the foregoing performance measures within a division group, product line, or sales channel. Individual performance objectives for Covered Employees can only be based on the specific business criteria described herein as is acceptable for qualified performance-based compensation under Section 162(m) of the Code.
If all of the individual objectives are achieved, the participant may earn the full Base Bonus amount allocated to the Individual Objectives component of the MIP. If some, but not all, of the individual objectives are attained, a partial amount of the Base Bonus allocated to the individual objectives component may be earned on a proportionate basis.
A table summary of the MIP calculations is as follows:
Adjusted EBITDA Performance and Portions of EBITDA Component Funded
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◦ | Adjusted EBITDA < Level 1 = no incentive earned for any MIP component
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◦ | Adjusted EBITDA at Level 1 = 10% of Adjusted EBITDA target bonus (plus earned Revenue and Individual Objectives)
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◦ | Adjusted EBITDA at Level 2 = 25% of Adjusted EBITDA target bonus (plus earned Revenue and Individual Objectives)
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◦ | Adjusted EBITDA at Level 3 = 50% of Adjusted EBITDA target bonus (plus earned Revenue and Individual Objectives)
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◦ | Adjusted EBITDA at Level 4 = 75% of Adjusted EBITDA target bonus (plus earned Revenue and Individual Objectives)
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◦ | Adjusted EBITDA at Level 5 = 90% of Adjusted EBITDA target bonus (plus earned Revenue and Individual Objectives)
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◦ | Adjusted EBITDA at Level 6 = 100% of Adjusted EBITDA target bonus (plus earned Revenue and Individual Objectives)
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◦ | Adjusted EBITDA > Level 6 = 100% of Adjusted EBITDA target bonus (plus earned Revenue and Individual Objectives)
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▪ | For Adjusted EBITDA performance greater that the Adjusted EBITDA target, an Excess Bonus may only be funded based upon Revenue performance greater than 100% of revenue target as described below. |
Revenue Performance and Portions of Revenue Component Funded
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◦ | Revenue < Level 1 = no incentive earned for Revenue component.
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◦ | Revenue at Level 1 = 15% of Revenue target bonus (plus earned Adjusted EBITDA and earned Individual Objectives)
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◦ | Revenue at Level 2 = 40% of Revenue target bonus (plus earned Adjusted EBITDA and earned Individual Objectives)
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◦ | Revenue at Level 3 = 60% of Revenue target bonus (plus earned Adjusted EBITDA and earned Individual Objectives)
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◦ | Revenue at Level 4 = 80% of Revenue target bonus (plus earned Adjusted EBITDA and earned Individual Objectives)
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◦ | Revenue at Level 5 = 95% of Revenue target bonus (plus earned Adjusted EBITDA and earned Individual Objectives)
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◦ | Revenue at Level 6 = 100% of Revenue target bonus (plus earned Adjusted EBITDA and earned Individual Objectives)
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◦ | Revenue at Level 7 = 110% of Revenue target bonus and 110% of earned Adjusted EBITDA and earned Individual Objectives)
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◦ | Revenue at Level 8 = 125% of Revenue target bonus and 125% of earned Adjusted EBITDA and earned Individual Objectives)
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◦ | Revenue at Level 9 = 140% of Revenue target bonus and 140% of earned Adjusted EBITDA and earned Individual Objectives)
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◦ | Revenue at Level 10 = 160% of Revenue target bonus and 160% of earned Adjusted EBITDA and earned Individual Objectives)
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◦ | Revenue at Level 11 = 190% of Revenue target bonus and 190% of earned Adjusted EBITDA and earned Individual Objectives)
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◦ | Revenue at Level 12 = 200% of Revenue target bonus and 200% of earned Adjusted EBITDA and earned Individual Objectives)
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▪ | The maximum MIP amount is limited to two (2) times the participant’s Base Bonus. |
The Compensation Committee shall adjust the corporate and individual performance objectives as the Compensation Committee, in its sole discretion and provided applicable law so permits, may determine is appropriate in the event of unbudgeted acquisitionsallow a Participant to pay all or divestitures or other unexpected fundamental changes in the business, any business unit or any product to fairly and equitably determine the bonus amounts and to prevent any inappropriate enlargement or dilutionpart of the bonus amounts. In that respect, the corporate and individual performance objectives may be adjustedOption price (a) by surrendering (actually or by attestation) shares of Common Stock to reflect, by way of example and not of limitation, (i) unanticipated asset write-downs or impairment charges, (ii) litigation or claim judgments or settlements thereof, (iii) changes in tax laws, accounting principles or other laws or provisions affecting reported results, (iv) accruals for reorganization or restructuring programs, or extraordinary non-reoccurring items as described in Accounting Principles Board Opinion No. 30 or as described in management’s discussion and analysis of the financial condition and results of operations appearing in the Annual Report on Form 10-K for the applicable year, (v) acquisitions or dispositions or (vi) foreign exchange gains or losses. To the extent any such adjustments affect any bonus amounts, the intent is that the adjustments shall be in a form that allows the bonuses payable to Covered Employees to continue to meet the requirements of Section 162(m) of the Code for deductibility to the extent intended to constitute qualified performance-based compensation.
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VIII. | Maximum MIP Payment Amounts |
The maximum potential amount to be earned by a participant is two (2) times the participant’s Base Bonus Amount. The determining annual base salary in the earned payout calculation is the annual base salary in effect at the end of the program period or the end of each respective period when a participant transfers from one MIP eligible position to another. In all cases, the maximum earned payout for the 2015 MIP for any one individual participant cannot exceed $750,000.
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IX. | Payment of Earned MIP Amounts |
Amounts earned by participants will be paid following the Board of Directors meeting in late February or early March, and such payment date shall be paid between February 15,2016 and March 15,2016.
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X. | Compliance with Section 162 (m)
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It is the intent of the Company that the 2015 MIPParticipant already owns; (b) by a cashless exercise through a broker; (c) by means of a “net exercise” procedure; (d) by such other medium of payment as the Committee, in its discretion, shall authorize; or (e) by any combination of the aforementioned methods of payment. If shares of Common Stock are used to pay all or part of the Option price, the sum of the cash and cash equivalent and the Fair Market Value (determined as of the day preceding the date of exercise) of the shares surrendered must not be less than the Option price of the shares for which the Option is being exercised.
7.06 Stockholder Rights
No Participant shall have any bonuses payable under the 2015 MIPrights as a stockholder with respect to participants who are or may become persons whose compensation isshares subject to Section 162(m)his or her Option until the date of exercise of such Option and the issuance of the Code andshares of Common Stock.
7.07 Disposition of Shares
A Participant shall notify the Company of any sale or other disposition of shares of Common Stock acquired pursuant to an Option that are intended to constitute qualified performance-based compensation satisfy any applicable requirements of Section 162(m)was designated an incentive stock option if such sale or disposition occurs (a) within two (2) years of the Code to qualify as qualified performance-based compensation. Any provision, applicationgrant of an Option or interpretation(b) within one (1) year of the 2015 MIP inconsistent with this intentissuance of shares of Common Stock to the Participant (subject to any changes in such time periods as set forth in Code Section 422(a)). Such notice shall be disregarded or deemed to be amendedin writing and directed to the extent necessary to conform to such requirements. The provisionsSecretary of the 2015 MIP may be bifurcated by the BoardCompany.
7.08 No Liability of Directors upon recommendation by the Compensation Committee at any time, so that certain provisions of the 2015 MIP required in order to satisfy the requirements of Section 162(m) of the Code are only applicable to participants whose compensation is subject to 162(m) of the Code.Company
This Plan is intended to be exempt from the applicable requirements of Section 409A of the Code andThe Company shall be construed and interpreted in accordance therewith. The Committee may at any time amend, suspend or terminate this Plan, or any payments to be made hereunder, as necessary to be exempt from Section 409A of the Code. Notwithstanding the preceding, MiMedx shallnot be liable to any participantParticipant or any other personPerson if the Internal Revenue Service or any court or other authority having jurisdiction over such matter determines for any reason that an Option intended to be an incentive stock option and granted hereunder does not qualify as an incentive stock option.
7.09 Effect of Termination Date on Options
Subject to rules established by the Committee and unless otherwise provided in an Agreement:
(a) If a Participant incurs a Termination Date due to death, Disability or Retirement, any unexercised Option granted to the Participant may thereafter be exercised by the Participant (or, where appropriate, a transferee of the Participant), to the extent it was exercisable as of the Termination Date, (i) for a period of twelve (12) months after the Termination Date or (ii) until the expiration of the stated term of the Option, whichever period is shorter, unless specifically provided otherwise in the applicable Agreement (in which case the terms of the Agreement shall control). Any portion of the Option that remains unexercised after the expiration of such period, regardless of whether such portion of the Option is vested or unvested, shall terminate and be forfeited with no further compensation due to the Participant.
(b) If a Participant incurs a termination of service or employment by the Company and its Affiliates involuntarily and without Cause in contemplation of or within twelve (12) months after a Change in Control, any unexercised Option granted to the Participant may thereafter be exercised by the Participant (or, where appropriate, a transferee of the Participant), to the extent it was exercisable as of the Termination Date, (i) for a period of six (6) months after the Termination Date or (ii) until the expiration of the stated term of the Option, whichever period is shorter, unless specifically provided otherwise in the applicable Agreement (in which case the terms of the Agreement shall control). Any portion of the Option that remains unexercised after the expiration of such period, regardless of whether such portion of the Option is vested or unvested, shall terminate and be forfeited with no further compensation due to the Participant.
(c) If a Participant incurs a Termination Date for any reason, other than death, Disability or Retirement, other than as the result of termination of service or employment by the Company and its Affiliates involuntarily and without Cause in contemplation of or within twelve (12) months after a Change in Control and other than as the result of termination of service or employment by the Company and its Affiliates involuntarily and with Cause, any unexercised Option granted to the Participant may thereafter be exercised by the Participant (or, where appropriate, a transferee of the Participant), to the extent it was exercisable as of the Termination Date, (i) for a period of three (3) months after the Termination Date or (ii) until the expiration of the stated term of the Option, whichever period is shorter, unless specifically provided otherwise in the applicable Agreement (in which case the terms of the Agreement shall control). Any portion of the Option that remains unexercised after the expiration of such period, regardless of whether such portion of the Option is vested or unvested, shall terminate and be forfeited with no further compensation due to the Participant.
ARTICLE VIIISARS
8.01 Grant
Subject to the eligibility provisions of Article V, the Committee will designate each individual or entity to whom SARs are to be granted and will specify the number of shares of Common Stock covered by such grant. In addition, no Participant may be granted Corresponding SARs (under this Plan and all other incentive stock option plans of the Company and its Affiliates) that are related to incentive stock options which are first exercisable in any calendar year for shares of Common Stock having an aggregate Fair Market Value (determined as of the date the related Option is granted) that exceeds $100,000.
8.02 Maximum Term of SAR
The maximum term of a SAR shall be determined by the Committee on the date of grant, except that no SAR shall have a term of more than ten (10) years from the date such SAR was granted (or five (5) years for a Corresponding SAR that is related to an incentive stock option and that is granted to a Ten Percent Shareholder). No Corresponding SAR shall be exercisable or continue in existence after the expiration of the Option to which the Corresponding SAR relates.
8.03 Exercise
Subject to the provisions of this Plan and the applicable Agreement, a SAR may be exercised in whole at any time or in part from time to time at such times and in compliance with such requirements as the Committee shall determine; provided, however, that a SAR may be exercised only when the Fair Market Value of the Common Stock that is subject to the exercise exceeds the Initial Value of the SAR and a Corresponding SAR may be exercised only to the extent that the related Option is exercisable. A SAR granted under this Plan may be exercised with respect to any number of whole shares less than the full number for which the SAR could be exercised. A partial exercise of a SAR shall not affect the right to exercise the SAR from time to time in accordance with this Plan and the applicable Agreement with respect to the remaining shares subject to the SAR. The exercise of a Corresponding SAR shall result in the termination of the related Option to the extent of the number of shares with respect to which the SAR is exercised.
8.04 Settlement
The amount payable to the Participant by the Company as a result of the exercise of a SAR shall be settled in cash, by the issuance of shares of Common Stock or by a combination thereof, as the Committee, in its sole discretion, determines and sets forth in the applicable Agreement. No fractional share will be deliverable upon the exercise of a SAR but a cash payment will be made in lieu thereof.
8.05 Stockholder Rights
No Participant shall, as a result of receiving a SAR, have any rights as a stockholder of the Company or any Affiliate until the date that the SAR is exercised and then only to the extent that the SAR is settled by the issuance of Common Stock.
8.06 Effect of Termination Date on SARs
Subject to rules established by the Committee and unless otherwise provided in an Agreement:
(a) If a Participant incurs a Termination Date due to death, Disability or Retirement, any unexercised SAR granted to the Participant may thereafter be exercised by the Participant (or, where appropriate, a transferee of the Participant), to the extent it was exercisable as of the Termination Date, (i) for a period of twelve (12) months after the Termination Date or (ii) until the expiration of the stated term of the SAR, whichever period is shorter, unless specifically provided otherwise in the applicable Agreement (in which case the terms of the Agreement shall control). Any portion of the SAR that remains unexercised after the expiration of such period, regardless of whether such portion of the SAR is vested or unvested, shall terminate and be forfeited with no further compensation due to the Participant.
(b) If a Participant incurs a termination of service or employment by the Company and its Affiliates involuntarily and without Cause in contemplation of or within twelve (12) months after a Change in Control, any unexercised SAR granted to the Participant may thereafter be exercised by the Participant (or, where appropriate, a transferee of the Participant), to the extent it was exercisable as of the Termination Date, (i) for a period of six (6) months after the Termination Date or (ii) until the expiration of the stated term of the SAR, whichever period is shorter, unless specifically provided otherwise in the applicable Agreement (in which case the terms of the Agreement shall control). Any portion of the SAR that remains unexercised after the expiration of such period, regardless of whether such portion of the SAR is vested or unvested, shall terminate and be forfeited with no further compensation due to the Participant.
(c) If a Participant incurs a Termination Date for any reason, other than death, Disability or Retirement, other than as the result of the termination of service or employment by the Company and its Affiliates involuntarily and without Cause in contemplation of or within twelve (12) months after a Change in Control and other than as the result of termination of service or employment by the Company and its Affiliates involuntarily and with Cause, any unexercised SAR granted to the Participant may thereafter be exercised by the Participant (or, where appropriate, a transferee of the Participant), to the extent it was exercisable as of the Termination Date, (i) for a period of three (3) months after the Termination Date or (ii) until the expiration of the stated term of the SAR, whichever period is shorter, unless specifically provided otherwise in the applicable Agreement (in which case the terms of the Agreement shall control). Any portion of the SAR that remains unexercised after the expiration of such period, regardless of whether such portion of the SAR is vested or unvested, shall terminate and be forfeited with no further compensation due to the Participant.
ARTICLE IXRESTRICTED STOCK & PERFORMANCE STOCK AWARDS
9.01 Award
Subject to the eligibility provisions of Article V, the Committee will designate each individual or entity to whom a Restricted Stock Award or Performance Stock Award is to be granted, and will specify the number of shares of Common Stock covered by such grant and the price, if any, to be paid for each share of Common Stock covered by the grant.
9.02 Payment
Unless the Agreement provides otherwise, if the Participant must pay for a Restricted Stock Award or Performance Stock Award, payment of the Award shall be made in cash or cash equivalent acceptable to the Committee. If the Agreement so provides, the Committee, in its discretion and provided applicable law so permits, may allow a Participant to pay all or part of the purchase price (i) by surrendering (actually or by attestation) shares of Common Stock to the Company the Participant already owns, (ii) by means of a “net exercise procedure” by the surrender of vested shares of Common Stock to which the Participant is otherwise entitled under the Award, (iii) by such other medium of payment as the Committee in its discretion shall authorize or (iv) by any combination of the foregoing methods of payment. If Common Stock is used to pay all or part of the purchase price, the sum of cash and cash equivalent and other payments and the Fair Market Value (determined as of the day preceding the date of purchase) of the Common Stock surrendered must not be less than the purchase price of the
Award. A Participant’s rights in an Award may be subject to repurchase upon specified events as determined by the Committee and set forth in the Agreement.
9.03 Vesting
The Committee, on the date of grant may, but need not, prescribe that a Participant’s rights in the Restricted Stock Award or Performance Stock Award shall be forfeitable and nontransferable for a period of time or subject to such conditions as may be set forth in the Agreement. Notwithstanding any provision herein to the contrary except as provided in Section 14.08, the Committee, in its sole discretion, may grant Restricted Stock Awards that are nonforfeitable and transferable immediately upon grant. A Restricted Stock Award or Performance Stock Award can only become nonforfeitable and transferable during the Participant’s lifetime in the hands of the Participant.
9.04 Maximum Restriction Period
To the extent the Participant’s rights in an Award are forfeitable and nontransferable for a period of time, the Committee on the date of grant shall determine the maximum period over which the rights may become nonforfeitable and transferable, except that such period shall not exceed ten (10) years from the date of grant.
9.05 Stockholder Rights
The Committee, on the date of grant of the Restricted Stock Award or Performance Stock Award, shall determine whether the Participant will have any rights as a stockholder with respect to an Award, including the right to receive dividends upon vesting of the Award; provided, however, that during such period (a) a Participant may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of shares granted pursuant to an Award, (b) the Company shall retain custody of any certificates evidencing shares granted pursuant to an Award and (c) the Participant will deliver to the Company a stock power, endorsed in blank, with respect to each Award. In lieu of retaining custody of the certificates evidencing shares granted pursuant to an Award, the shares of Common Stock granted pursuant to the Award may, in the Committee’s discretion, be held in escrow by the Company or recorded as outstanding by notation on the stock records of the Company until the Participant’s interest in such shares of Common Stock vest. Notwithstanding the preceding sentences, in no event will any dividends be paid until the vesting of the underlying Award and, subject to Section 14.07 below, if and to the extent deemed necessary by the Committee, dividends payable with respect to Awards may accumulate (without interest) and become payable in cash or in shares of Common Stock to the Participant at the time, and only to the extent that, the portion of the Award to which the dividends relate has become transferable and nonforfeitable. The limitations set forth in the preceding sentences shall not apply after the shares granted under the Award are transferable and are no longer forfeitable.
9.06 Performance Stock
Performance Stock Awards are awards of stock subject to performance conditions and terms included within Article XV and such other terms and conditions as are provided in the Plan and the applicable Agreement.
ARTICLE XRESTRICTED STOCK UNITS & PERFORMANCE STOCK UNITS
10.01 Grant
Subject to the eligibility provisions of Article V, the Committee will designate each individual or entity to whom a grant of Restricted Stock Units or Performance Stock Units is to be made and will specify the number of shares covered by such grant.
10.02 Earning the Award
The Committee, on the date of grant of the Restricted Stock Units or Performance Stock Units, shall prescribe that the Units will be earned and become payable subject to such conditions as are set forth in the Agreement.
10.03 Maximum Unit Award Period
The Committee, on the date of grant, shall determine the maximum period over which Units may be earned, except that such period shall not exceed ten (10) years from the date of grant.
10.04 Payment
The amount payable to the Participant by the Company when an Award of Restricted Stock Units or Performance Stock Units is earned shall be settled by the issuance of one share of Common Stock (or, as otherwise determined by the Committee and set forth in the applicable Agreement, the equivalent Fair Market Value of one share of Common Stock in cash) for each Unit that is earned. A fractional share of Common Stock shall not be deliverable when an Award of Restricted Stock Units or Performance Stock Units is earned, but a cash payment will be made in lieu thereof.
10.05 Stockholder Rights
No Participant shall, as a result of receiving a grant of Restricted Stock Units or Performance Stock Units, have any rights as a stockholder until and then only to the extent that the Restricted Stock Units or Performance Stock Units are earned and settled in shares of Common Stock. However, notwithstanding the foregoing, the Committee, in its sole discretion, may set forth in the Agreement that, for so long as the Participant holds any Restricted Stock Units or Performance Stock Units, if the Company pays any cash dividends on its Common Stock, then upon the vesting of the Unit Award (a) the Company may pay the Participant in cash for each outstanding Unit covered by the Agreement as of the record date of such dividend, less any required withholdings, the per share amount of such dividend or (b) the number of outstanding Units covered by the Agreement may be increased by the number of Units, rounded down to the nearest whole number, equal to (i) the product of the number of the Participant’s outstanding Units as of the record date for such dividend multiplied by the per share amount of the dividend divided by (ii) the Fair Market Value of a share of Common Stock on the payment date of such dividend. In the event additional Units are Awarded, such Units shall be subject to the same terms and conditions set forth in the Plan and the Agreement as the outstanding Units with respect to which they were granted. Notwithstanding the preceding sentences, in no event will any dividends be paid until the vesting of the underlying Restricted Stock Units or Performance Stock Units and, subject to Section 14.07 below, if and to the extent deemed necessary to the Committee, dividends payable with respect to Restricted Stock Units or Performance Stock Units may accumulate (without interest) and become payable to the Participant at the time, and only to the extent that, the portion of the Units to which the dividends relate has become earned and payable. The limitations set forth in the preceding sentences shall not apply after the Units become earned and payable and shares are issued thereunder.
10.06 Performance Stock Units
Performance Stock Unit Awards are subject to performance conditions and terms included within Article XV and such other terms and conditions as are provided in the Plan and the applicable Agreement.
ARTICLE XIINCENTIVE AWARDS
11.01 Grant
Subject to the eligibility provisions of Article V, the Committee will designate each individual or entity to whom Incentive Awards are to be granted. All Incentive Awards shall be determined exclusively by the Committee under the procedures established by the Committee.
11.02 Earning the Award
Subject to the Plan, the Committee, on the date of grant of an Incentive Award, shall specify in the applicable Agreement the terms and conditions which govern the grant, including, without limitation, any performance conditions and whether the Participant to be entitled to payment must be employed or providing services to the Company or an Affiliate at the time the Incentive Award is to be paid.
11.03 Maximum Incentive Award Period
The Committee, at the time an Incentive Award is made, shall determine the maximum period over which the Incentive Award may be earned, except that such period shall not exceed ten (10) years from the date of grant.
11.04 Payment
The amount payable to the Participant by the Company when an Incentive Award is earned may be settled in cash, by the issuance of shares of Common Stock or by a combination thereof, as the Committee, in its sole discretion, determines and sets forth in the applicable Agreement. A fractional share of Common Stock shall not be deliverable when an Incentive Award is earned, but a cash payment will be made in lieu thereof.
11.05 Stockholder Rights
No Participant shall, as a result of receiving an Incentive Award, have any rights as a stockholder of the Company or any Affiliate on account of such Incentive Award, unless and then only to the extent that the Incentive Award is earned and settled in shares of Common Stock.
ARTICLE XIIOTHER STOCK-BASED AWARDS
12.01 Other Stock-Based Awards
The Committee is authorized, subject to limitations under applicable law, to grant to a Participant such other Awards that may be denominated or payable in, valued in whole or in part by reference to or otherwise based on shares of Common
Stock, including, without limitation, convertible or exchangeable securities, and other rights convertible or exchangeable into shares of Common Stock or the cash value of shares of Common Stock. The Committee shall determine the terms and conditions of any such Other Stock-Based Awards. Common Stock delivered pursuant to an Other Stock-Based Award in the nature of purchase rights (“Purchase Right Award”) shall be purchased for such consideration not less than the Fair Market Value of the shares of Common Stock as of the date the Other Stock-Based Award is granted (subject to Sections 14.06 and 16.03 with respect to substitute Awards), and may be paid for at such times, by such methods, and in such forms, including, without limitation, cash, shares of Common Stock, other Awards, notes or other property, as the Committee shall determine. The maximum time period in which an Other Stock-Based Award in the nature of purchase rights may be exercised shall be determined by the Committee on the date of grant, except that no Other Stock-Based Award in the nature of purchase rights shall be exercisable after the expiration of ten (10) years from the date such Other Stock-Based Award was granted. Cash Awards, as an element of or supplement to any other Award under the Plan, may also be granted pursuant to this Plan.
12.02 Bonus Stock and Awards in Lieu of Other Obligations
The Committee also is authorized (i) to grant to a Participant shares of Common Stock as a bonus, (ii) to grant shares of Common Stock or other Awards in lieu of other obligations of the Company or any Affiliate to pay cash or to deliver other property under this Plan or under any other plans or compensatory arrangements of the Company or any Affiliate, (iii) to use available shares of Common Stock as the form of payment for compensation, grants or rights earned or due under any other compensation plans or arrangements of the Company or an Affiliate, and (iv) subject to Section 19.13 below, to grant as alternatives to or replacements of Awards granted or outstanding under the Plan or any other plan or arrangement of the Company or any Affiliate, subject to such terms as shall be determined by the Committee and the overall limitation on the number of shares of Common Stock that may be issued under the Plan. The minimum vesting provisions contained within the Plan may be satisfied by reference to the vesting or performance period of any such other compensation or incentive plan, program or arrangement the obligations of which are satisfied through the use of Awards under the Plan. Notwithstanding any other provision hereof, shares of Common Stock or other securities delivered to a Participant pursuant to a purchase right granted under this Plan shall be purchased for consideration, the Fair Market Value of which shall not be less than the Fair Market Value of such shares of Common Stock or other securities as of the date such purchase right is granted.
12.03 Effect of Termination Date on Other Stock-Based Awards
Subject to rules established by the Committee and unless otherwise provided in an Agreement:
(a) If a Participant incurs a Termination Date due to death, Disability or Retirement, any unexercised Other Stock-Based Award in the nature of purchase rights may thereafter be exercised by the Participant (or, where appropriate, a transferee of the Participant), to the extent it was exercisable as of the Termination Date, (i) for a period of twelve (12) months after the Termination Date or (ii) until the expiration of the stated term of the Other Stock-Based Award in the nature of purchase rights, whichever period is shorter, unless specifically provided otherwise in the applicable Agreement (in which case the terms of the Agreement shall control). Any portion of the Other Stock-Based Award in the nature of purchase rights that remains unexercised after the expiration of such period, regardless of whether such portion of the Other Stock-Based Award in the nature of purchase rights is vested or unvested, shall terminate and be forfeited with no further compensation due to the Participant.
(b) If a Participant incurs a termination of service or employment by the Company and its Affiliates involuntarily and without Cause in contemplation of or within twelve (12) months after a Change in Control, any unexercised Other Stock-Based Award in the nature of purchase rights may thereafter be exercised by the Participant (or, where appropriate, a transferee of the Participant), to the extent it was exercisable as of the Termination Date, (i) for a period of six (6) months after the Termination Date or (ii) until the expiration of the stated term of the Other Stock-Based Award in the nature of purchase rights, whichever period is shorter, unless specifically provided otherwise in the applicable Agreement (in which case the terms of the Agreement shall control). Any portion of the Other Stock-Based Award in the nature of purchase rights that remains unexercised after the expiration of such period, regardless of whether such portion of the Other Stock-Based Award in the nature of purchase rights is vested or unvested, shall terminate and be forfeited with no further compensation due to the Participant.
(c) If a Participant incurs a Termination Date for any reason, other than death, Disability or Retirement, other than as the result of termination of service or employment by the Company and its Affiliates involuntarily and without Cause in contemplation of or within twelve (12) months after a Change in Control and other than as the result of termination of service or employment by the Company and its Affiliates involuntarily and with Cause, any unexercised Other Stock-Based Award in the nature of purchase rights may thereafter be exercised by the Participant (or, where appropriate, a transferee of the Participant), to the extent it was exercisable as of the Termination Date, (i) for a period of three (3) months after the Termination Date or (ii) until the expiration of the stated term of the Other Stock-Based Award in the nature of purchase rights, whichever period is shorter, unless specifically provided otherwise in the applicable Agreement (in which case the terms of the Agreement shall control). Any portion of the Other Stock-Based Award in the nature of purchase rights that remains unexercised after the
expiration of such period, regardless of whether such portion of the Other Stock-Based Award in the nature of purchase rights is vested or unvested, shall terminate and be forfeited with no further compensation due to the Participant.
ARTICLE XIIIDIVIDEND EQUIVALENTS
The Committee is authorized to grant Dividend Equivalents to a Participant which may be awarded on a free-standing basis or in connection with another Award. In no event will any dividend equivalents be paid until the vesting of the underlying Award. Subject to Section 14.07 below, the Committee may provide that Dividend Equivalents shall be accrued or shall be deemed to have been reinvested in additional shares of Common Stock, other Awards or other investment vehicles, subject to restrictions on transferability, risk of forfeiture and such other terms as the Committee may specify and set forth in the applicable Agreement. Notwithstanding the foregoing, no Dividend Equivalents may be awarded in connection with an Option, SAR or Other Stock-Based Award in the nature of purchase rights.
ARTICLE XIVTERMS APPLICABLE TO ALL AWARDS
14.01 Written Agreement
Each Award shall be evidenced by a written or electronic Agreement (including any amendment or supplement thereto) between the Company and the Participant specifying the terms and conditions of the Award granted to such Participant. Each Agreement should specify whether the Award is intended to be a Non-409A Award or a 409A Award.
14.02 Nontransferability
Except as provided in Section 14.03 below, each Award granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution or pursuant to the terms of a valid qualified domestic relations order. In the event of any transfer of an Option or Corresponding SAR (by the Participant or his transferee), the Option and Corresponding SAR that relates to such Option must be transferred to the same Person or Persons or entity or entities. Except as provided in Section 14.03 below, during the lifetime of the Participant to whom the Option or SAR is granted, the Option or SAR may be exercised only by the Participant. No right or interest of a Participant in any Award shall be liable for, or subject to, any lien, obligation, or liability of such Participant or his transferee.
14.03 Transferable Awards
Section 14.02 to the contrary notwithstanding, if the Agreement so provides, an Award that is not an incentive stock option or a Corresponding SAR that relates to an incentive stock option may be transferred by a Participant to any of such class of transferees who can be included in the class of transferees who may rely on a Form S-8 Registration Statement under the Securities Act of 1933 to sell shares issuable upon exercise or payment of such Awards granted under the Plan. Any such transfer will be permitted only if (a) the Participant does not receive any consideration for the transfer, (b) the Committee expressly approves the transfer and (c) the transfer is on such terms and conditions as are appropriate for the class of transferees who may rely on the Form S-8 Registration Statement. The holder of the Award transferred pursuant to this Section shall be bound by the same terms and conditions that governed the Award during the period that it was held by the Participant; provided, however, that such transferee may not transfer the Award except by will or the laws of descent and distribution. In the event of any transfer of an Option that is not an incentive stock option or a Corresponding SAR that relates to an incentive stock option (by the Participant or his transferee), the Option and Corresponding SAR that relates to such Option must be transferred to the same Person or Persons or entity or entities. Unless transferred as provided in Section 9.05, a Restricted Stock Award or Performance Stock Award may not be transferred prior to becoming non-forfeitable and transferable.
14.04 Participant Status
If the terms of any Award provide that it may be exercised or paid only during employment or continued service or within a specified period of time after termination of employment or continued service, the Committee may decide to what extent leaves of absence for governmental or military service, illness, temporary disability or other reasons shall not be deemed interruptions of continuous employment or service. For purposes of the Plan, employment and continued service shall be deemed to exist between the Participant and the Company and/or an Affiliate if, at the time of the determination, the Participant is a director, officer, employee, consultant or advisor of the Company or an Affiliate. A Participant on military leave, sick leave or other bona fide leave of absence shall continue to be considered an employee for purposes of the Plan during such leave if the period of leave does not exceed three (3) months, or, if longer, so long as the individual’s right to re-employment with the Company or any of its Affiliates is guaranteed either by statute or by contract. If the period of leave exceeds three (3) months, and the individual’s right to re-employment is not guaranteed by statute or by contract, the employment shall be deemed to be terminated on the first day after the end of such three (3) month period. Except as may otherwise be expressly provided in an Agreement, Awards granted to a director, officer, employee, consultant or advisor shall not be affected by any change in the
status of the Participant so long as the Participant continues to be a director, officer, employee, consultant or advisor to the Company or any of its Affiliates (regardless of having changed from one to the other or having been transferred from one entity to another). The Participant’s employment or continued service shall not be considered interrupted in the event the Committee, in its discretion, and as specified at or prior to such occurrence, determines there is no interruption in the case of a spin-off, sale or disposition of the Participant’s employer from the Company or an Affiliate, except that if the Committee does not otherwise specify such at or such prior to such occurrence, the Participant will be deemed to have a termination of employment or continuous service to the extent the Affiliate that employs the Participant is no longer the Company or an entity that qualifies as an Affiliate. The foregoing provisions apply to a 409A Award only to the extent Section 409A of the Code does not otherwise treat the Participant as continuing in service or employment or as having a separation from service at an earlier time.
14.05 Change in Control
With respect to outstanding Awards, to the extent that written provision is made for their continuance, assumption or substitution by the Company or a successor employer or its parent or subsidiary in connection with the Change in Control, and except as otherwise provided in the applicable Agreement, the following provisions shall apply. In the event the employment of a Participant is terminated by the Company and its Affiliates without Cause during the two-year period following the Control Change Date (i) all Stock Options, SARs and Other Stock-Based Awards in the nature of purchase rights which are then outstanding hereunder shall become fully vested and exercisable, (ii) all restrictions with respect to Restricted Stock, Restricted Units, Incentive Awards, Dividend Equivalents or Other Stock‑Based Awards which are then outstanding hereunder shall lapse, and such shares or units shall be fully vested and nonforfeitable, and (iii) all restrictions with respect to Performance Stock, Performance Shares or other shares or units which are then outstanding and based on performance conditions and for which performance periods are already completed shall lapse, and such shares or units, measured at actual performance achieved, shall be fully vested and nonforfeitable. Unless the applicable Agreement shall otherwise provide, if a Change in Control occurs prior to the end of any performance period, with respect to all Performance Stock Awards, Performance Unit Awards and other shares or units which are then outstanding hereunder, the target level of performance set forth with respect to each performance condition under such shares and units shall be deemed to have been attained (or, if higher, the actual level of performance attained) and such shares or units shall be converted into and remain outstanding as Restricted Stock or Restricted Stock Units, subject to forfeiture unless the Participant continues to be actively employed by the Company through the end of the original performance period, but subject to exception in the case of a termination of employment by the Company without Cause during the two-year period following the Control Change Date, and such other exceptions as may be provided by the Committee.
With respect to outstanding Awards, in the event that written provision is not made for their continuance, assumption or substitution by the Company or a successor employer or its parent or subsidiary in connection with the Change in Control, notwithstanding any provision of any Agreement, subject to Section 4.02 above, the Committee in its sole discretion may
(i) declare that outstanding Options, SARs and Other Stock-Based Awards in the nature of purchase rights previously granted under the Plan, whether or not then exercisable, shall terminate on the Control Change Date without any payment to the holder thereof, provided the Committee gives prior written notice to the holders of such termination and gives such holders the right to exercise their outstanding Options, SARs and Other Stock-Based Awards in the nature of purchase rights, at least seven (7) daysbefore termination, to the extent then exercisable or will become exercisable as of the Control Change Date);
(ii) terminate on the Control Change Date outstanding Restricted Stock Awards, Performance Stock Awards, Restricted Stock Units, Performance Stock Units, Incentive Awards, Other Stock-Based Awards not in the nature of purchase rights and Dividend Equivalents previously granted under the Plan that are not then nonforfeitable and transferable or earned and payable (and that will not become nonforfeitable and transferable or earned and payable as of the Control Change Date) without any payment to the holder thereof, other than the return, if any, of the purchase price of any such Awards;
(iii) terminate on the Control Change Date outstanding Options, SARs and Other Stock-Based Awards in the nature of purchase rights previously granted under the Plan, whether or not then exercisable, in consideration of payment to the holder thereof, with respect to each share of Common Stock for which the Options, SARs and Other Stock-Based Awards in the nature of purchase rights are then exercisable (or that will become exercisable as of the Control Change Date), of the excess, if any, of the Fair Market Value on such date of the Common Stock subject to such Awards over the purchase price or Initial Value, as applicable (any Options, SARs and Other Stock-Based Awards in the nature of purchase rights that are not then exercisable and will not become exercisable on the Control Change Date, and Options, SARs and Other Stock-Based Awards in the nature of purchase rights with respect to which the Fair Market Value of the Common Stock subject to the Awards does not exceed the purchase price or Initial Value, as applicable, shall be cancelled without any payment therefor);
(iv) terminate on the Control Change Date outstanding Restricted Stock Awards, Restricted Stock Units, Incentive Awards, Other Stock-Based Awards not in the nature of purchase rights and Divided Equivalents previously granted under the Plan that will become nonforfeitable and transferable or earned and payable as of the Control Change Date (or that previously became nonforfeitable and transferable or earned and payable but have not yet been settled as of the Control Change
Date) in exchange for a payment equal to the excess of the Fair Market Value of the shares of Common Stock subject to such Awards, or the amount of cash payable under the Awards, over any unpaid purchase price, if any, for such Awards (any such Awards that are not then nonforfeitable and transferable or earned and payable as of the Control Change Date (and that will not become nonforfeitable and transferable or earned and payable as of the Control Change Date) shall be cancelled without any payment therefor);
(v) terminate on the Control Change Date outstanding Performance Stock and Performance Stock Units in exchange for a payment equal to the target level of performance set forth with respect to each performance condition (or, if higher, the actual level of performance attained); or
(vi) take such other actions as the Committee determines to be reasonable under the circumstances to permit the Participant to realize the value of the outstanding Awards (which Fair Market Value for purposes of Awards that are not then exercisable, nonforfeitable and transferable or earned and payable as of the Control Change Date (and that will not become exercisable, nonforfeitable and transferable or earned and payable as of the Control Change Date) or with respect to which the Fair Market Value of the Common Stock subject to the Awards does not exceed the purchase price or Initial Value, as applicable, shall be deemed to be zero).
The payments described above may be made in any manner the Committee determines, including in cash, stock or other property. The Committee may take the actions described above with respect to Awards that are not then exercisable, nonforfeitable and transferable or earned and payable or with respect to which the Fair Market Value of the Common Stock subject to the Awards does not exceed the purchase price or Initial Value, as applicable, whether or not the Participant will receive any payments therefor. The Committee in its discretion may take any of the actions described in this Section 14.05 contingent on consummation of the Change in Control, and such actions need not be uniform with respect to all outstanding Awards or Participants.
14.06 Stand-Alone, Additional, Tandem and Substitute Awards
Subject to Section 19.13 below, Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution or exchange for, any other Award or any Award granted under another plan of the Company or any Affiliate or any entity acquired by the Company or any Affiliate or any other right of a Participant to receive payment from the Company or any Affiliate; provided, however, that a 409A Award may not be granted in tandem with a Non-409A Award, and incentive stock options may not be granted in tandem with nonqualified stock options. Awards granted in addition to or in tandem with another Award or Awards may be granted either at the same time as or at a different time from the grant of such other Award or Awards. Subject to applicable law and the restrictions on 409A Awards and repricings in Section 19.13 below, the Committee may determine that, in granting a new Award, the in-the-money value or Fair Market Value of any surrendered Award or Awards or the value of any other right to payment surrendered by the Participant may be applied, or otherwise taken into account with respect, to any other new Award or Awards.
14.07 Form and Timing of Payment; Deferrals
Subject to the terms of the Plan and any applicable Agreement, payments to be made by the Company or an Affiliate upon the exercise of an Option or settlement of any other Award may be made in such form as the Committee may determine and set forth in the applicable Agreement, including, without limitation, cash, shares of Common Stock, other Awards or other property and may be made in a single payment or transfer, in installments or on a deferred basis if and to the extent permitted by and consistent with Section 409A of the Code. Cash may be paid in lieu of shares of Common Stock in connection with settlement of an Award, in the discretion of the Committee or upon the occurrence of one or more specified events set forth in the applicable Agreement (and to the extent permitted by the Plan and Section 409A of the Code). Subject to the Plan, installment or deferred payments may be required by the Committee or permitted at the election of the Participant on the terms and conditions established by the Committee. Payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installments or deferred payments or the grant or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in shares of Common Stock. In the case of any 409A Award that is vested and no longer subject to a substantial risk of forfeiture (within the meaning of Sections 83 and 409A of the Code), such Award may be distributed to the Participant, upon application of the Participant to the Committee, if the Participant has an unforeseeable emergency within the meaning of Section 409A of the Code. Notwithstanding any other provision of the Plan, however, no dividends payable with respect to an Award or Dividend Equivalents may be paid in connection with any Awards or Dividend Equivalents that are to become nonforfeitable and transferable or earned and payable based upon performance conditions unless and until the performance conditions are satisfied, and any such dividends and Dividend Equivalents will accumulate (without interest) and become payable to the Participant at the time, and only to the extent that, the applicable Awards or Dividend Equivalents have become non-forfeitable and transferable or earned and payable upon satisfaction of the relevant performance conditions.
14.08 Time and Method of Exercise; Minimum Vesting Requirement
The Committee shall determine and set forth in the Agreement the time or times at which Awards granted under the Plan may be exercised or settled in whole or in part and shall set forth in the Agreement the rules regarding the exercise, settlement and/or termination of Awards upon the Participant’s death, Disability, termination of employment or ceasing to be a director. Notwithstanding any other provision of the Plan, an Option, SAR, other Stock Based Award in the nature of purchase rights, a Restricted Stock Award, Performance Stock Award, Restricted Units, Performance Stock Units, Incentive Award payable in shares or any other Award shall not become exercisable or vested sooner than one (1) year after the date of grant (except in case of death, Disability, Retirement, involuntary termination other than for Cause or a Change in Control, subject to Section 4.02, and awards to non-employee directors that vest on the earlier of the one-year anniversary of the date of grant and the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting). Notwithstanding the foregoing, up to five percent (5%) of the available shares of Common Stock authorized for issuance under the Plan pursuant to Section 5(a) may provide for vesting of Options, SARs, Other Stock-Based Awards in the nature of purchase rights, Restricted Stock Awards, Performance Stock Awards, Restricted Units, Performance Units, Incentive Awards or any other Award partially or in full, in less than one‑year. Notwithstanding any provision of the Plan providing for the maximum term of an Award, in the event any Award would expire prior to exercise, vesting or settlement because trading in shares of Common Stock is prohibited by law or by any insider trading policy of the Company, the Committee may extend the term of the Award (or provide for such in the applicable Agreement) until thirty (30) days after the expiration of any such prohibitions to permit the Participant to realize the value of the Award, provided such extension (i) is permitted by law, (ii) does not violate Section 409A with respect to any Awards, and (iii) does not otherwise adversely impact the tax consequences of the Award (such as incentive stock options and related Awards).
ARTICLE XVPERFORMANCE-BASED COMPENSATION
15.01 Performance Conditions
In accordance with the Plan, the Committee may prescribe that Awards will become exercisable, nonforfeitable and transferable, and earned and payable, based on performance conditions. The performance conditions may be stated with respect to (a) cash flow; (b) return on equity; (c) return on assets; (d) earnings per share; (e) operations expense efficient milestones; (f) earnings (losses) before or after interest, taxes, depreciation, amortization and/or share-based compensation or expenses (consolidated or otherwise); (g) net income (loss); (h) operating income (loss); (i) book value per share; (j) return on investment; (k) return on capital; (l) improvements in capital structure; (m) expense management; (n) profitability of an identifiable business unit or product; (o) maintenance or improvement of profit margins; (p) stock price; (q) total shareholder return; (r) market share; (s) revenues (consolidated or otherwise); (t) sales; (u) costs; (v) working capital; (w) economic wealth created; (x) strategic business criteria; (y) efficiency ratio(s); (z) achievement of division, group, function or corporate financial, strategic or operational goals; (aa) days sales outstanding; (bb) comparisons with stock market indices or performance metrics of peer companies; (cc) individual Participant performance criteria; and (dd) any other performance criteria adopted by the Committee. Any performance goals that are financial metrics may be determined in accordance with United States Generally Accepted Accounting Principles (“GAAP”) or may be adjusted when established to include or exclude any items otherwise includable or excludable under GAAP. The business criteria above may be related to a specific customer or group of customers or products or geographic region. The form of the performance conditions may be measured on a Company, Affiliate, product, division, product line, sales channel, business unit, service line, customer type, segment or geographic basis, individually, alternatively or in any combination, subset or component thereof. Performance goals may include one or more of the foregoing business criteria, either individually, alternatively or any combination, subset or component. Performance goals may reflect absolute performance or a relative comparison of the performance to the performance of a peer group or other external measure of the selected business criteria. Profits, earnings and revenues used for any performance condition measurement may exclude any extraordinary, unusual, infrequently occurring or non-recurring items. The performance conditions, as applicable, may, but need not, be based upon an increase or positive result under the aforementioned business criteria and could include, for example and not by way of limitation, maintaining the status quo or limiting the economic losses (measured, in each case, by reference to the specific business criteria). The performance conditions may not include solely the mere continued employment of the Participant. However, the Award may become exercisable, nonforfeitable and transferable or earned and payable contingent on the Participant’s continued employment or service, and/or employment or service at the time the Award becomes exercisable, nonforfeitable and transferable or earned and payable, in addition to the performance conditions described above. The Committee shall have the sole discretion to select one or more periods of time over which the attainment of one or more of the foregoing performance conditions will be measured for the purpose of determining a Participant’s right to, and the settlement of, an Award that will become exercisable, nonforfeitable and transferable or earned and payable based on performance conditions, subject to applicable minimum vesting provisions.
15.02 Establishing the Amount of the Award
The amount of the Award that will become exercisable, nonforfeitable and transferable or earned and payable if the performance conditions are obtained (or a formula for, or method of, computing such amount) also must be established at the time set forth in Section 15.01 above. Notwithstanding the preceding sentence, the Committee may, in its sole discretion, reduce the amount of the Award that will become exercisable, nonforfeitable and transferable or earned and payable, as applicable, if the Committee determines that such reduction is appropriate under the facts and circumstances.
15.03 Earning the Award
If the Committee, on the date of grant, prescribes that an Award shall become exercisable, nonforfeitable and transferable or earned and payable only upon the attainment of any of the above enumerated performance conditions, the Award shall become exercisable, nonforfeitable and transferable or earned and payable only to the extent that the Committee determines that such conditions have been achieved. In determining if the performance conditions have been achieved, the Committee may adjust the performance targets in the event of any unbudgeted acquisition, divestiture or other unexpected fundamental change in the business of the Company, an Affiliate or business unit or in any product that is material taken as a whole as appropriate to fairly and equitably determine if the Award is to become exercisable, nonforfeitable and transferable or earned and payable pursuant to the conditions set forth in the Award. Additionally, in determining if such performance conditions have been achieved, the Committee also may adjust the performance targets in the event of any (a) unanticipated asset write-downs or impairment charges, (b) litigation or claim judgments or settlements thereof, (c) changes in tax laws, accounting principles or other laws or provisions affecting reported results, (d) accruals for reorganization or restructuring programs, or extraordinary, unusual, infrequently occurring or non-reoccurring items, (e) acquisitions or dispositions or (f) foreign exchange gains or losses.
15.04 Performance Awards
The purpose of this Article XV is to permit the grant of Awards that are performance‑based and subject to the achievement or satisfaction of performance conditions in addition to any employment conditions as may be specified by the Committee.
ARTICLE XVIADJUSTMENT UPON CHANGE IN COMMON STOCK
16.01 General Adjustments
The maximum number of shares of Common Stock that may be issued pursuant to Awards, the number of shares of Common Stock and terms of outstanding Awards and the per individual limitations on the number of shares of Common Stock that may be issued pursuant to Awards shall be adjusted as the Committee shall determine to be equitably required in the event (a) there occurs a reorganization, recapitalization, stock split, spin-off, split-off, stock dividend, issuance of stock rights, combination of shares, merger, consolidation or distribution to stockholders other than an ordinary cash dividend; (b) the Company engages in a transaction Code Section 424 describes; or (c) there occurs any other transaction or event which, in the judgment of the Board, necessitates such action. In that respect, the Committee shall make such adjustments as are necessary in the number or kind of shares of Common Stock or securities which are subject to the Award, the exercise price or Initial Value of the Award and such other adjustments as are appropriate in the discretion of the Committee. Such adjustments may provide for the elimination of fractional shares that might otherwise be subject to Awards without any payment therefor. Notwithstanding the foregoing, the conversion of one or more outstanding shares of preferred stock or convertible debentures that the Company may issue from time to time into Common Stock shall not in and of itself require any adjustment under this Article XVI. In addition, the Committee may make such other adjustments to the terms of any Awards to the extent equitable and necessary to prevent an enlargement or dilution of the Participant’s rights thereunder as a result of any such event or similar transaction. Any determination made under this Article XVI by the Committee shall be final and conclusive.
16.02 No Adjustments
The issuance by the Company of stock of any class, or securities convertible into stock of any class, for cash or property, or for labor or services, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of stock or obligations of the Company convertible into such stock or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the maximum number of shares that may be issued pursuant to Awards, the per individual limitations on the number of shares that may be issued pursuant to Awards or the terms of outstanding Awards.
16.03 Substitute Awards
The Committee may grant Awards in substitution for Options, SARs, Restricted Stock, Performance Stock, Restricted Stock Units, Performance Stock Units, Incentive Awards or similar Awards held by an individual who becomes an employee of the Company or an Affiliate in connection with a transaction described in the first paragraph of this Article XVI.
Notwithstanding any provision of the Plan (other than the limitation of Section 6.02), the terms of such substituted Awards shall be as the Committee, in its discretion, determines is appropriate.
16.04 Limitation on Adjustments
Notwithstanding the foregoing, no adjustment hereunder shall be authorized or made if and to the extent the existence of such authority or action (a) would cause a Non-409A Award to be subject to Section 409A of the Code or (b) would violate Code Section 409A for a 409A Award, unless the Committee determines that such adjustment is necessary and specifically acknowledges that the adjustment will be made notwithstanding any such result.
ARTICLE XVIICOMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
17.01 Compliance
No Option or SAR shall be exercisable, no Restricted Stock Award, Performance Stock Award, Restricted Stock Unit, Performance Stock Unit, Incentive Award, Other Stock-Based Award or Dividend Equivalents shall be granted or settled, no shares of Common Stock shall be issued, no certificates for shares of Common Stock shall be delivered and no payment shall be made under this Plan except in compliance with all applicable federal and state laws and regulations (including, without limitation, withholding tax requirements), any listing agreement to which the Company is a party and the rules of all domestic stock exchanges on which the Company’s shares may be listed. The Company shall have the right to rely on an opinion of its counsel as to such compliance. Any stock certificate evidencing shares of Common Stock issued pursuant to an Award may bear such legends and statements as the Committee may deem advisable to assure compliance with federal and state laws and regulations and to reflect any other restrictions applicable to such shares as the Committee otherwise deems appropriate. No Option or SAR shall be exercisable, no Restricted Stock Award, Performance Stock Award, Restricted Stock Unit, Performance Stock Unit, Incentive Award, Other Stock-Based Award or Dividend Equivalents shall be granted or settled, no shares of Common Stock shall be issued, no certificate for shares of Common Stock shall be delivered and no payment shall be made under this Plan until the Company has obtained such consent or approval as the Committee may deem advisable from regulatory bodies having jurisdiction over such matters.
17.02 Postponement of Exercise or Payment
The Committee may postpone any grant, exercise, vesting or payment of an Award for such time as the Committee in its sole discretion may deem necessary in order to permit the Company (i) to effect, amend or maintain any necessary registration of the Plan or the shares of Common Stock issuable pursuant to the Award under the securities laws; (ii) to take any action in order to (A) list such shares of Common Stock or other shares of stock of the Company on a stock exchange if shares of Common Stock or other shares of stock of the Company are not then listed on such exchange or (B) comply with restrictions or regulations incident to the maintenance of a public market for its shares of Common Stock or other shares of stock of the Company, including any rules or regulations of any stock exchange on which the shares of Common Stock or other shares of stock of the Company are listed; (iii) to determine that such shares of Common Stock in the Plan are exempt from such registration or that no action of the kind referred to in (ii)(B) above needs to be taken; (iv) to comply with any other applicable law, including without limitation, securities laws; (v) to comply with any legal or contractual requirements during any such time the Company or any Affiliate is prohibited from doing any of such acts under applicable law, including without limitation, during the course of an investigation of the Company or any Affiliate, or under any contract, loan agreement or covenant or other agreement to which the Company or any Affiliate is a party or (vi) to otherwise comply with any prohibition on such acts or payments during any applicable blackout period; and the Company shall not be obligated by virtue of any terms and conditions of any Agreement or any provision of the Plan to recognize the grant, exercise, vesting or payment of an Award or to grant, sell or issue shares of Common Stock or make any such payments in violation of the securities laws or the laws of any government having jurisdiction thereof or any of the provisions hereof. Any such postponement shall not extend the term of the Award and neither the Company nor its directors and officers nor the Committee shall have any obligation or liability to any Participant or to any other person with respect to shares of Common Stock or payments as to which the Award shall lapse because of such postponement.
17.03 Forfeiture of Payment
A Participant shall be required to forfeit any and all rights under Awards or to reimburse the Company for any payment under any Award (with interest as necessary to avoid imputed interest or original issue discount under the Code or as otherwise required by applicable law) to the extent applicable law or any applicable claw-back or recoupment policy of the Company or any of its Affiliates requires such forfeiture or reimbursement.
ARTICLE XVIIILIMITATION ON BENEFITS
Despite any other provisions of this Plan to the contrary, if the receipt of any payments or benefits under this Plan would subject a Participant to tax under Code Section 4999, the Committee may determine whether some amount of payments or benefits would meet the definition of a “Reduced Amount.” If the Committee determines that there is a Reduced Amount, the total payments or benefits to the Participant under all Awards must be reduced to such Reduced Amount, but not below zero. If the Committee determines that the benefits and payments must be reduced to the Reduced Amount, the Company must promptly notify the Participant of that determination, with a copy of the detailed calculations by the Committee. All determinations of the Committee under this Article XVIII are final, conclusive and binding upon the Company and the Participant. It is the intention of the Company and the Participant to reduce the payments under this Plan only if the aggregate Net After Tax Receipts to the Participant would thereby be increased. As result of the uncertainty in the application of Code Section 4999 at the time of the initial determination by the Committee under this Article XVIII, however, it is possible that amounts will have been paid under the Plan to or for the benefit of a Participant which should not have been so paid (“Overpayment”) or that additional amounts which will not have been paid under the Plan to or for the benefit of a Participant could have been so paid (“Underpayment”), in each case consistent with the calculation of the Reduced Amount. If the Committee, based either upon the assertion of a deficiency by the Internal Revenue Service against the Company or the Participant, which the Committee believes has a high probability of success, or controlling precedent or other substantial authority, determines that an Overpayment has been made, any such Overpayment must be treated for all purposes as a loan, to the extent permitted by applicable law, which the Participant must repay to the Company together with interest at the applicable federal rate under Code Section 7872(f)(2); provided, however, that no such loan may be deemed to have been made and no amount shall be payable by the Participant to the Company if and to the extent such deemed loan and payment would not either reduce the amount on which the Participant is subject to tax under Code Sections 1, 3101 or 4999 or generate a refund of such taxes. If the Committee, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, the Committee must promptly notify the Company of the amount of the Underpayment, which then shall be paid promptly to the Participant but no later than the end of the Participant’s taxable year next following the Participant’s taxable year in which the determination is made that the Underpayment has occurred. For purposes of this Section, (a) “Net After Tax Receipt” means the Present Value of a payment under this Plan net of all taxes imposed on Participant with respect thereto under Code Sections 1, 3101 and 4999, determined by applying the highest marginal rate under Code Section 1 which applies to the Participant’s taxable income for the applicable taxable year; (b) “Present Value” means the value determined in accordance with Code Section 280G(d)(4); and (c) “Reduced Amount” means the smallest aggregate amount of all payments and benefits under this Plan which (i) is less than the sum of all payments and benefits under this Plan and (ii) results in aggregate Net After Tax Receipts which are equal to or greater than the Net After Tax Receipts which would result if the aggregate payments and benefits under this Plan were any other amount less than the sum of all payments and benefits to be made under this Plan.
ARTICLE XIXGENERAL PROVISIONS
19.01 Effect on Employment and Service
Neither the adoption of this Plan, its operation nor any documents describing or referring to this Plan (or any part thereof), shall confer upon any individual or entity any right to continue in the employ or service of the Company or an Affiliate or in any way affect any right and power of the Company or an Affiliate to terminate the employment or service of any individual or entity at any time with or without assigning a reason therefor.
19.02 Unfunded Plan
This Plan, insofar as it provides for Awards, shall be unfunded, and the Company shall not be required to segregate any assets that may at any time be represented by Awards under this Plan. Any liability of the Company to any Person with respect to any Award under this Plan shall be based solely upon any contractual obligations that may be created pursuant to this Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company.
19.03 Rules of Construction
Headings are given to the articles and sections of this Plan solely as a convenience to facilitate reference. The reference to any statute, regulation or other provision of law shall be construed to refer to any amendment to or successor of such provision of law.
19.04 Tax Withholding and Reporting
Unless an Agreement provides otherwise, each Participant shall be responsible for satisfying in cash or cash equivalent any income and employment (including, without limitation, Social Security and Medicare) tax withholding obligations, if applicable, attributable to participation in the Plan and the grant, exercise, vesting or payment of Awards granted hereunder (including the making of a Code Section 83(b) election with respect to an Award). In accordance with procedures that the Committee establishes, the Committee, to the extent applicable law permits and only to the extent using shares of Common Stock to pay applicable withholdings would not cause adverse accounting consequences, may allow a Participant to pay any such applicable amounts (a) by surrendering (actually or by attestation) shares of Common Stock that the Participant already owns; (b) by a cashless exercise, or surrender of shares of Common Stock already owned, through a broker; (c) by means of a “net issuance” procedure by the surrender of shares of Common Stock to which the Participant is otherwise entitled under the Award; (d) by such other medium of payment as the Committee, in its discretion, shall authorize; or (e) by any combination of the aforementioned methods of payment; provided, however, that a cashless or net exercise shall not be permitted if the withholdings are incurred in connection with the making of a Code Section 83(b) election with respect to an Award unless the Participant actually surrenders shares of Common Stock that the Participant already owns. The Company shall comply with all such reporting and other requirements relating to the administration of this Plan and the grant, exercise, vesting or payment of any Award hereunder as applicable law requires.
19.05 Code Section 83(b) Election
No election under Section 83(b) of the Code (to include in gross income in the year of transfer the amounts specified in Code Section 83(b)) or under similar laws may be made unless expressly permitted by the terms of the Award or by action of the Committee in writing prior to the making of such election. In any case in which a Participant is permitted to make such an election in connection with an Award, the Participant shall notify the Company of such election within ten (10) days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to regulations issued under Code Section 83(b) or other applicable provisions.
19.06 Reservation of Shares
The Company, during the term of this Plan, shall at all times reserve and keep available such number of shares of Common Stock as shall be sufficient to satisfy the requirements of the Plan. Additionally, the Company, during the term of this Plan, shall use its best efforts to seek to obtain from appropriate regulatory agencies any requisite authorizations needed in order to issue and to sell such number of shares of Common Stock as shall be sufficient to satisfy the requirements of the Plan. However, the inability of the Company to obtain from any such regulatory agency the requisite authorizations the Company’s counsel deems to be necessary for the lawful issuance and sale of any shares of Common Stock hereunder, or the inability of the Company to confirm to its satisfaction that any issuance and sale of any shares of Common Stock hereunder will meet applicable legal requirements, shall relieve the Company of any liability in respect to the failure to issue or to sell such shares of Common Stock as to which such requisite authority shall not have been obtained.
19.07 Governing Law
This Plan and all Awards granted hereunder shall be governed by the laws of the State of Florida, except to the extent federal law applies.
19.08 Other Actions
Nothing in the Plan shall be construed to limit the authority of the Company to exercise its corporate rights and powers, including, by way of illustration and not by way of limitation, the right to grant Options, SARs, Restricted Stock Awards, Performance Stock Awards, Restricted Stock Units, Performance Stock Units, Incentive Awards, Other Stock-Based Awards or Dividend Equivalents for proper corporate purposes otherwise than under the Plan to any employee or to any other Person, firm, corporation, association or other entity, or to grant Options, SARs, Restricted Stock Awards, Performance Stock Awards, or Restricted Stock Units, Performance Stock Units, Incentive Awards, Other Stock-Based Awards or Dividend Equivalents to, or assume such Awards of any Person in connection with, the acquisition, purchase, lease, merger, consolidation, reorganization or otherwise, of all or any part of the business and assets of any Person, firm, corporation, association or other entity.
19.09 Repurchase of Common Stock
Subject to Section 19.13 below, the Company or its designee may have the option and right to purchase any Award or any shares of Common Stock issued pursuant to any Award in accordance with the terms and conditions set forth in the applicable Agreement. However, shares of Common Stock repurchased pursuant to an Agreement will still be deemed issued pursuant to the Plan and will not be available for issuance pursuant to future Awards under the Plan.
19.10 Other Conditions
The Committee, in its discretion, may, as a condition to the grant, exercise, payment or settlement of an Award, require the Participant on or before the date of grant, exercise, payment or settlement of the Award to enter into (i) a covenant not to compete (including a confidentiality, non-solicitation, non-competition or other similar agreement) with the Company or any Affiliate, which may become effective on the date of termination of employment or service of the Participant with the Company or any Affiliate or any other date the Committee may specify and shall contain such terms and conditions as the Committee shall otherwise specify, (ii) an agreement to cancel any other employment agreement, service agreement, fringe benefit or compensation arrangement in effect between the Company or any Affiliate and such Participant and/or (iii) a shareholders' agreement with respect to shares of Common Stock to be issued pursuant to the Award. If the Participant shall fail to enter into any such agreement at the Committee's request, then no Award shall be granted, exercised, paid or settled and the number of shares of Common Stock that would have been subject to such Award, if any, shall be added to the remaining shares of Common Stock available under the Plan.
19.11 Forfeiture Provisions
Notwithstanding any other provisions of the Plan or any Agreement, all rights to any Award that a Participant has will be immediately discontinued and forfeited, and the Company shall not have any further obligation hereunder to the Participant with respect to any Award and the Award will not be exercisable (whether or not previously exercisable) or become vested or payable on and after the time the Participant is discharged from employment or service with the Company or any Affiliate for Cause.
19.12 Legends; Payment of Expenses
The Company may endorse such legend or legends upon the certificates for shares of Common Stock issued upon the grant or exercise of an Award and may issue such "stop transfer" instructions to its transfer agent in respect of such shares as it determines, in its sole discretion, to be necessary or appropriate to (i) prevent a violation of, or to perfect an exemption from, the registration requirements under the Exchange Act, applicable state securities laws or other requirements, (b) implement the provisions of the Plan or any Agreement between the Company and the Participant with respect to such shares of Common Stock, (c) permit the Company to determine the occurrence of a "disqualifying disposition" as described in Section 421(b) of the Code of the shares of Common Stock transferred upon the exercise of an incentive stock option granted under the Plan or (d) as may be appropriate to continue an Award’s exemption or compliance with Section 409A of the Code. The Company shall pay all issuance taxes with respect to the issuance of shares of Common Stock upon the grant or exercise of the Award, as well as all fees and expenses incurred by the Company in connection with such issuance.
19.13 Repricing of Awards
Notwithstanding any other provisions of this Plan, except in connection with a Change in Control as described above, for adjustments pursuant to Article XVI or to the extent approved by the Company’s stockholders and consistent with the rules of any stock exchange on which the Company’s securities are traded, this Plan does not permit (a) any decrease in the exercise or purchase price or base value of any outstanding Awards, (b) the issuance of any replacement Options, SARs or Other Stock-Based Awards in the nature of purchase rights which shall be deemed to occur if a Participant agrees to forfeit an existing Option, SAR or Other Stock-Based Award in the nature of purchase rights in exchange for a new Option, SAR or Other Stock-Based Award in the nature of purchase rights with a lower exercise or purchase price or base value, (c) the Company to repurchase underwater or out-of-the-money Options, SARs or Other Stock-Based Awards in the nature of purchase rights, which shall be deemed to be those Options, SARs or Other Stock-Based Awards in the nature of purchase rights with exercise or purchase prices or base values in excess of the current Fair Market Value of the shares of Common Stock underlying the Option, SAR or Other Stock-Based Award in the nature of purchase rights, (d) the issuance of any replacement or substitute Awards or the payment of cash in exchange for, or in substitution of, underwater or out-of-the-money Options, SARs or Other Stock-Based Awards in the nature of purchase rights, (e) the Company to repurchase any Award if the Award has not become exercisable, vested or payable prior to the repurchase or (f) any other action that is treated as a repricing under generally accepted accounting principles or applicable Nasdaq listing rules.
19.14 Right of Setoff
The Company or an Affiliate may, to the extent permitted by applicable law, deduct from and setoff against any amounts the Company or Affiliate may owe the Participant from time to time, including amounts payable in connection with any Award, owed as wages, fringe benefits or other compensation owed to the Participant, such amounts as may be owed by the Participant to the Company or Affiliate, including but not limited to any amounts owed under the Plan, although the Participant shall remain liable for any part of the Participant’s obligation not satisfied through such deduction and setoff. By accepting any Award granted hereunder, the Participant agrees to any deduction or setoff hereunder.
19.15 Fractional Shares
No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereof shall be forfeited or otherwise eliminated.
19.16 Compensation Recoupment Policy
Notwithstanding any other provision of this Plan or any Agreement to the contrary, any Award received by the Participant and/or shares of Common Stock issued and/or cash paid hereunder, and/or any amount received with respect to any sale of any such shares of Common Stock, shall be subject to potential cancellation, recoupment, rescission, payback or other action in accordance with the terms of the Company’s Compensation Recoupment Policy, if any, as it may be established or amended from time to time. By acceptance of the Award, the Participant agrees and consents to the Company’s application, implementation and enforcement of (a) any Compensation Recoupment Policy or similar policy established by the Company or any Affiliate that may apply to the Participant and (b) any provision of applicable law relating to cancellation, rescission, payback or recoupment of compensation, and expressly agrees that the Company may take such actions as are necessary to effectuate any such Compensation Recoupment Policy, similar policy (as applicable to the Participant) or applicable law without further consent or action being required by the Participant. To the extent that the terms of this Plan or any Agreement and any Compensation Recoupment Policy or similar policy or law conflict, then the terms of such policy or law shall prevail.
19.17 Post-Exercise Holding Requirements
Notwithstanding any other provision of this Plan or any Agreement to the contrary, no Participant may sell, transfer or other dispose of any shares of Common Stock acquired under an Award (“net” shares acquired in case of any net exercise or withholding of shares) until the Participant has met the minimum level of ownership provided in the Company’s Stock Ownership Guidelines, to the extent applicable to the Participant. All shares of Common Stock acquired under Awards granted under the Plan (“net” shares acquired in case of any net exercise or withholding of shares) shall be subject to the terms and conditions of the Company’s Stock Ownership Guidelines, as they may be amended from time to time.
ARTICLE XXCLAIMS PROCEDURES
20.01 Initial Claim
If a Participant has exercised an Option or SAR or if shares of Restricted Stock or Performance Stock have become vested or Restricted Stock Units, Performance Stock Units, Incentive Awards, Other Stock-Based Awards or Dividend Equivalents have become payable, and the Participant has not received the benefits to which the Participant believes he or she is entitled under such Award, then the Participant must submit a written claim for such benefits to the Committee within ninety (90) days of the date the Participant tried to exercise the Option or SAR, the date the Participant contends the Restricted Stock or Performance Stock vested or the date the Participant contends the Restricted Stock Units, Performance Stock Units, Incentive Awards, or Other Stock-Based Awards of Dividend Equivalents became payable or the claim will be forever barred.
20.02 Appeal of Claim
If a claim of a Participant is wholly or partially denied, the Participant or his duly authorized representative may appeal the denial of the claim to the Committee. Such appeal must be made at any time within thirty (30) days after the Participant receives written notice from the Company of the denial of the claim. In connection therewith, the Participant or his duly authorized representative may request a review of the denied claim, may review pertinent documents and may submit issues and comments in writing. Upon receipt of an appeal, the Committee shall make a decision with respect to the appeal and, not later than sixty (60) days after receipt of such request for review, shall furnish the Participant with the decision on review in writing, including the specific reasons for the decision written in a manner calculated to be understood by the Participant, as well as specific references to the pertinent provisions of the Plan upon which the decision is based.
20.03 Time to File Suit
The Committee has the discretionary and final authority under the Plan to determine the validity of a claim. Accordingly, any decision the Committee makes on a Participant’s appeal will be administratively final. If a Participant disagrees with the Committee’s final decision, the Participant may sue, but only after the claim on appeal has been denied. Any lawsuit must be filed within ninety (90) days of receipt of the Committee’s final written denial of the Participant’s claim or the claim will be forever barred.
ARTICLE XXIAMENDMENT
21.01 Amendment of Plan
The Board may amend or terminate this Plan at any time; provided, however, that no amendment to the Plan may adversely impair the rights of a Participant with respect to outstanding Awards without the Participant’s consent. In addition, an amendment will be contingent on approval of the Company’s stockholders, to the extent required by law or any tax or regulatory requirement applicable to the Plan or by the rules of any stock exchange on which the Company’s securities are traded or if the amendment would (i) increase the benefits accruing to Participants under the Plan, including without limitation, any amendment to the Plan or any Agreement to permit a repricing or decrease in the exercise price of any outstanding Awards, (ii) increase the aggregate number of shares of Common Stock that may be issued under the Plan, or (iii) modify the requirements as to eligibility for participation in the Plan. Notwithstanding any other provision of the Plan, any termination of the Plan shall comply with the requirements of Code Section 409A with regard to any 409A Awards.
21.02 Amendment of Awards
The Committee may amend any outstanding Awards to the extent it deems appropriate; provided, however, that no amendment to an outstanding Award may adversely impair the rights of a Participant without the Participant’s consent.
ARTICLE XXIISECTION 409A PROVISION
22.01 Intent of Awards
It is intended that Awards that are granted under the Plan shall be exempt from treatment as “deferred compensation” subject to Section 409A of the Code unless otherwise specified by the Committee. Towards that end, all Awards under the Plan are intended to contain such terms as will qualify the Awards for an exemption from Section 409A of the Code unless otherwise specified by the Committee. The terms of the Plan and all Awards granted hereunder shall be construed consistent with the foregoing intent. Notwithstanding any other provision hereof, the Committee may amend any outstanding Award without Participant’s consent if, as determined by the Committee, in its sole discretion, such amendment is required either to (a) confirm exemption under Section 409A of the Code, (b) comply with Section 409A of the Code or (c) prevent the Participant from being subject to any tax or penalty under Section 409A of the Code. Notwithstanding the foregoing, however, neither the Company nor any of its Affiliates nor the Committee shall be liable to a Participant or any other Person if an Award that is subject to Section 409A of the Code or the Participant or any other Person is otherwise subject to any additional tax, interest or penalty under Section 409A of the Code. Each Participant is solely responsible for the payment of any tax liability (including any taxes, penalties orand interest as athat may arise under Section 409A of the Code) that may result of failingfrom an Award.
22.02 409A Awards
The Committee may grant Awards under the Plan that are intended to be exempt from, or409A Awards that comply with Section 409A of the Code. The bonuses underterms of such 409A Award, including any authority by the Plan are intendedCompany and the rights of the Participant with respect to satisfy the exemption fromsuch 409A Award, will be subject to such rules and limitations and shall be interpreted in a manner as to comply with Section 409A of the Code for “short-term deferrals.”Code.
22.03 Election Requirements
Nothing in the MIPIf a Participant is permitted to elect to defer an Award or any payment under an Award, such election shall be deemed to constitute a contract for the continuance of employment of the participants or bring about a change of status of employment. Neither the action of the Company in establishing this program, nor any provisions hereof, nor any action taken by the Company shall be construed as giving any employee the right to be retained in the employ of the Company for any period of time, or to be employed in any particular position, or at any particular rate of remuneration.
Further, nothing contained herein shall in any manner inhibit the day-to-day conduct of the business of the Company and its subsidiaries, which shall remain within the sole discretion of management of the Company; nor shall any requirements imposed by management or resulting from the conduct of the business of the Company constitute an excuse for, or waiver from, compliance with any goal established under this plan.
No persons shall have any right, vested or contingent, or any claim whatsoever, to be granted any award or receive any payment hereunder, except payments of awards determined and payablemade in accordance with the
specific provisions hereof requirements of Code Section 409A. Each initial deferral election (an “Initial Deferral Election”) must be received by the Committee prior to the following dates or pursuantwill have no effect whatsoever:
(a) Except as otherwise provided below, the December 31 immediately preceding the year in which the compensation is earned;
(b) With respect to any annual or long-term incentive pay which qualifies as “performance-based compensation” within the meaning of Code Section 409A, by the date six (6) months prior to the end of the performance measurement period applicable to such incentive pay provided such additional requirements set forth in Code Section 409A are met;
(c) With respect to “fiscal year compensation” as defined under Code Section 409A, by the last day of the Company’s fiscal year immediately preceding the year in which the fiscal year compensation is earned; or
(d) With respect to mid-year Awards or other legally binding rights to a specific and properly approved agreement regardingpayment of compensation in a subsequent year that is subject to a forfeiture condition requiring the grantingParticipant’s continued service for a period of at least twelve (12)
months, on or before the thirtieth (30th) day following the grant of such Award, provided that the election is made at least twelve (12) months in advance of the earliest date at which the forfeiture condition could lapse.
The Committee may, in its sole discretion, permit Participants to submit additional deferral elections in order to delay, but not to accelerate, a payment, or to change the form of payment of an awardamount of deferred compensation (a “Subsequent Deferral Election”), if, and only if, the following conditions are satisfied: (a) the Subsequent Deferral Election must not take effect until twelve (12) months after the date on which it is made, (b) in the case of a payment other than a payment attributable to the Participant’s death, disability or an unforeseeable emergency (all within the meaning of Section 409A of the Code) the Subsequent Deferral Election further defers the payment for a period of not less than five (5) years from the date such payment would otherwise have been made and (c) the Subsequent Deferral Election is received by the Committee at least twelve (12) months prior to the date the payment would otherwise have been made. In addition, Participants may be further permitted to revise the form of payment they have elected, or the number of installments elected, provided that such revisions comply with the requirements of a Subsequent Deferral Election.
22.04 Time of Payment
The time and form of payment of a 409A Award shall be as set forth in an applicable Agreement. A 409A Award may only be paid in connection with a separation from service, a fixed time, death, disability, Change in Control or an unforeseeable emergency within the meaning of Section 409A of the Code. The time of distribution of the 409A Award must be fixed by reference to the specified payment event. Notwithstanding the foregoing, if the time of distribution of the 409A Award is not set forth in the applicable Agreement, then the time of distribution of the 409A Award shall be within two and one-half months of the end of the later of the calendar year or the fiscal year of the Company or Affiliate that employs the Participant in which the 409A Award becomes vested and no longer subject to a designated individual.substantial risk of forfeiture within the meaning of Code Section 409A. For purposes of Code Section 409A, each installment payment will be treated as the entitlement to a single payment.
22.05 Acceleration or Deferral
The Company shall have no authority to accelerate or delay or change the form of any distributions relating to 409A Awards except as permitted under Code Section 409A.
22.06 Distribution Requirements
Any distribution of a 409A Award triggered by a Participant’s termination of employment shall be made only at the time that the Participant has had a separation from service within the meaning of Code Section 409A. A separation from service shall occur where it is reasonably anticipated that no further services will be performed after that date or that the level of bona fide services the Participant will perform after that date (whether as an employee or independent contractor of the Company or an Affiliate) will permanently decrease to less than fifty percent (50%) of the average level of bona fide services performed over the immediately preceding thirty-six (36) month period. A Participant shall be considered to have continued employment and to not have a separation from service while on a leave of absence if the leave does not exceed six (6) consecutive months (twenty-nine (29) months for a disability leave of absence) or, if longer, so long as the Participant retains a right to reemployment with the Company or Affiliate under an applicable statute or by contract. For this purpose, a “disability leave of absence” is an absence due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months, where such impairment causes the Participant to be unable to perform the duties of Participant’s position of employment or a substantially similar position of employment. Continued services solely as a director of the Company or an Affiliate shall not prevent a separation from service from occurring by an employee as permitted by Section 409A of the Code.
22.07 Key Employee Rule
Notwithstanding any other provision of the Plan, any distribution of a 409A Award that would be made upon a separation from service within six (6) months following the separation from service of a “specified employee” as defined under Code Section 409A and as determined under procedures adopted by the Board or its delegate shall instead occur on the first day of the seventh month following the separation from service (or upon the Participant’s death, if earlier) to the extent required by Section 409A of the Code. In the case of installments, this delay shall not affect the timing of any installment otherwise payable after the requisite delay period.
22.08 Distributions Upon Vesting
In the case of any Award providing for a distribution upon the lapse of a substantial risk of forfeiture, if the timing of such distribution is not otherwise specified in the Plan or the applicable Agreement, the distribution shall be made not later than two and one-half (2½) months after the calendar year in which the risk of forfeiture lapsed.
Neither this program, nor any payments pursuant to this program, shall affect, or have any application to, any of the Company’s life insurance, disability insurance, PTO, medical or other related benefit plans, whether contributory or non-contributory on the part of the employee except as may be specifically provided by the terms of the benefit plan.
All payments pursuant to this program are in gross amounts less applicable withholdings.88