| ●
| incentive compensation was predicated upon the achievement of certain financial results that were the subject of the restatement and such award, vesting or payment occurred or was received during the three-year period preceding the date on which we were required to prepare the restatement; andA smaller award, vesting or payment would have occurred or been made to the executive officer based upon the restated financial results. (2)
| There has been misconduct resulting in either a violation of law or of our Company policy that has caused significant financial or reputational harm to our Company and either the executive officer based uponcommitted the restated financial results.misconduct or failed in his or her responsibility to manage or monitor the applicable conduct or risks. |
In thosethe circumstances described in (1) above, we will, to the extent deemed appropriate by the compensation committee, seek to recover or cancel the amount(s) by which an executive officer’s incentive compensation that was awarded, vested or paid during the three-year period referenced above exceeded the amount(s) that would have been awarded, vested or paid based on the restated financial results, net of taxes paid or payable by the executive officer with respect to the recoverable compensation.
In the circumstances described in (2) above, we will, to the extent deemed appropriate by our compensation committee, seek to recover or cancel an executive officer’s incentive compensation that was awarded, vested or paid during any fiscal year in which the misconduct occurred. Executive Stock Ownership Guidelines
During
In 2014, we adopted stock ownership guidelines applicable to our executive officers.officers, which we updated in 2018. The guidelines are applicable to each of our executive officers and provide that each executive officer is expected to own shares of our common stock with a value at least equal to the amount shown below: | ●
| CEO – Three times annual base salary
|
| ●
| All other executive officers – One times annual base salary
|
CEO – Five times annual base salary
All other executive officers – One times annual base salary Each executive officer has five years from the date he or she becomes subject to the guidelines to achieve compliance with the guidelines. Until an executive officer has achieved compliance with the ownership guidelines, the individual must retain 100% of the “net profit shares” resulting from any option exercise or from the exercise, vesting or settlement of any other form of equity-based compensation award. For these purposes, “net profit shares” refers to that portion of the number of shares subject to the exercise, vesting or settlement of an award that the Covered Individual would receive had he or she authorized the Company to withhold shares otherwise deliverable in order to satisfy any applicable exercise price or withholding taxes. As of December 31, 2021, all of our named executive officers were either in compliance with the guidelines or within the five-year period to achieve compliance with the guidelines. Equity Award Approval Policy Our equity award approval policy permits us to make equity-based awards at any time other than during “blackout periods” provided for in our insider trading policy, which generally run from the tentheleventh of the month in which each fiscal quarter closes through the end of the second trading day following the public release of our financial results for that quarter. The policy does, however, permit us to approve an award during a blackout period, provided the effective date of the grant and the concurrent pricing of the grant occur on the first trading day after the blackout period ends. TABLE OF CONTENTS Other Equity-Related Policies We prohibit our executive officers from engaging in certain types of transactions in our stock, including short sales, pledges of our stock and other hedging transactions with respect to our stock. This policy is intended to prevent our executive officers from reducing the effect that decreases in the value of our stock have on their financial position. The LTIP requires that all stock options granted under the plan have an exercise price that is not less than the fair market value of a share of our common stock on the date the grant is made. The LTIP also prohibits re-pricing or exchanging underwater stock options under the LTIP without shareholder approval. Elements of Executive Compensation
Our executive compensation program historically has been comprised of three elements—base salary, annual cash and equity-based long-term incentives. The primary elements of our compensation program for 2014 were consistent with our 2013 compensation program. Our shareholders voted for the first time on a say-on-pay proposal at our 2014 annual meeting. The say-on-pay proposal received the approval of more than 99%
Tax Considerations Section 280G of the shares votedInternal Revenue Code of 1986, as amended (the “Code”), disallows a tax deduction with respect to excess parachute payments to certain executives of companies which undergo a change in control. In addition, Code Section 4999 imposes a 20% excise tax on the proposal. Our compensation committee considered this result to be an endorsement by our shareholders of our compensation program and maintained the fundamental features of our 2013 program for 2014. Our next say-on-pay proposal will be voted on at our 2016 Annual Meeting of Shareholders scheduled to be held in May 2016.While all elements of our executive compensation program are intended to collectively achieve our overriding purpose of attracting, retaining and motivating talented executives, the table below identifies the form and additional specific purposes of each element.
| | | | | | Compensation
Component
| | Form of Compensation
| | Purpose
| Base Salary
| | Cash
| | • | Compensate each named executive officer relative to individual responsibilities, experience and performance
| | | | | | | | | | | • | Provide steady cash flow not contingent on short-term variations in company performance
| | | | | | | Annual Incentive
| | Cash
| | • | Align compensation with our annual corporate financial performance
| | | | | | | | | | | • | Reward achievement of short-term financial objectives
| | | | | | | | | | | • | Provide participants with a meaningful total cash compensation opportunity (base salary plus annual incentive)
|
Long-Term Incentives
| | Stock Options and
Restricted Stock Units
| | • | Encourage long-term retention
| | | | | • | Create a long-term performance focus
| | | | | | | | | | | • | Align compensation with our long-term returns to shareholders
| | | | | | | | | | | • | Provide executive ownership opportunities
|
Our compensation committee has not adopted a formal or informal policy for allocating compensation among the various elements, or between cash and non-cash elements or between long- and short-term compensation. As noted earlier, however, we do place greater emphasis on incentive and variable forms of compensation for executives with more significant responsibilities, reflecting their greater capacity to affect our performance and results.
Base Salaries
At the time an executive officer is first hired, his or her base salary generally is established through individual negotiations between us and the executive officer, taking into account judgments asrespect to the executive officer’s qualifications, experience, responsibilities, prior salary, internal pay equity considerationsexcess parachute payment. Parachute payments are compensation linked to or triggered by a change in control and market factors. In connection with hiring Ms. Holtmay include, but are not limited to, bonus payments, severance payments, certain fringe benefits, and Mr. Way during 2014, we negotiated initial annual base salaries with these executivespayments and acceleration of $500,000 and $290,000, respectively.
The compensation committee annually reviews the base salaries of our executive officers near the end of each year and bases any adjustments for the following year on merit and market considerations. Merit-based adjustments primarily reflect a subjective assessment of an individual’s performance. Any market-based adjustments reflect an assessment of the competitive positioning of an individual’s salary with comparable positions in the market based on market data provided to the compensation committee by the compensation consultantvesting from long-term incentive plans including stock options and other market surveys the compensation committee might use.
Name | | 2014 Actual Salary Amount
($) | | | 2014 Actual IncentiveAmount
($) | | | 2014 Total Cash Compensation Amount
($) | | | Market 50th Percentile Total Cash Compensation
($) | | Victoria M. Holt(1) | | | 500,000 | | | | 441,800 | | | | 941,800 | | | | 806,000 | | John A. Way(1) | | | 290,000 | | | | 192,183 | | | | 482,183 | | | | 430,000 | | John R. Judd | | | 263,500 | | | | 175,383 | | | | 438,883 | | | | 430,000 | | Donald G. Krantz | | | 276,382 | | | | 183,980 | | | | 460,362 | | | | 488,000 | | Jacqueline D. Schneider | | | 251,169 | | | | 168,396 | | | | 419,565 | | | | 449,000 | | John B. Tumelty | | | 219,103 | (2) | | | 27,388 | (2)(3) | | | 246,491 | (2) | | | 279,990 | (2) |
(1)
| Ms. Holt and Mr. Way both commenced their employment with us during 2014. Salary and annual incentive amounts in the table above have been annualized for Ms. Holt and Mr. Way to facilitate comparison to the 50th percentile for our peer group.
|
(2)
| Amount is converted from British pounds sterling into U.S. dollars using an exchange rate of £1 = $1.647 based on the average of the exchange rates at the end of each month during 2014.
|
(3)
| Includes the amount of the discretionary cash bonus awarded to Mr. Tumelty for 2014 discussed below.
|
Dr. Krantz’s annual base salary for 2014 increased to $278,000 from $265,000 for 2013 asequity-based compensation. Excess parachute payments are parachute payments that exceed a result of a merit-based increase based on his contributions to our company and our company’s overall success in 2013 and expected success in 2014. Ms. Schneider’s annual base salary for 2014 increased to $255,000 from $222,000 for 2013 as a result of a merit-based increase as well as a market-based increase intended to have her base salary approximate the median of our peer group. Mr. Tumelty’s annual base salary for 2014 increased to £133,000 from £121,000 in 2013 as a result of a merit-based increase based on our strong performance in the European Union, or E.U., the region for which he is primarily responsible, during 2013, as well as a market-based increase intended to ensure we provide Mr. Tumelty competitive compensation in a region that we believe is important to our success and where competition for talent is intense.
Annual Incentive Program
2014 Annual Incentive Program
All of our employees, other than commissioned salespeople, participate in our annual incentive program. Our 2014 annual incentive program provided that payouts would be a function of two metrics:
| ●
| Revenue growth, calculated without regard to foreign currency exchange rates or the results of operations of FineLine Prototyping, Inc., or FineLine, which we acquired in April 2014. We refer to this aspect of the annual incentive program as the revenue factor.
|
| ●
| Adjusted operating income margin, calculated without regard to foreign currency exchange rates or the results of operations of FineLine. We refer to this aspect of the annual incentive program as the AOI threshold.
|
For purposes of calculating annual incentives, AOI is defined as operating income before stock-based compensation expense as a percentage of revenue. Revenue growth and AOI were selected as the primary financial objectives that would determine the size of 2014 annual incentive payouts because our primary objective continues to be to grow our company.
In structuring the 2014 annual incentive program, the compensation committee approved 2014 revenue and AOI for our company as a whole and for each of our major geographic business units (the United States, the European Union and Japan). Including business unit performance objectives enables us to tailor annual incentive opportunities so as to reward each executive officer for the performance of those portion(s) of our company for which the officer had the most direct responsibility. All of our named executive officers other than Mr. Tumelty had revenue goals based on our consolidated results. Mr. Tumelty’s annual incentive compensation for 2014 was based on our operating results in the E.U., the region for which he is primarily responsible.
Unlike 2013, our annual incentive program for 2014 did not include a strategic objectives component that, in 2013, could increase or decrease the payout amountsthreshold determined under Code Section 280G based on the compensation committee’s evaluation of our achievement of certain strategic goals that were not directly related to short-term revenue or income generation. The strategic objectives component in our 2013 annual incentive program was the first time in our history our annual incentive program included such a component. The compensation committee eliminated this component for 2014 in light of our historical practices and because the committee believed our primary goals of revenue growth with a reasonable level of profitability were sufficiently captured by the program’s collective application of the revenue factor and the AOI threshold.
A target payout expressed as a percentage of annual base salary is established for each named executive officer annually. For 2014, their target payout percentages were as follows:
Name
| | TargetPayout as %
of 2014 Salary
| Victoria M. Holt
| | 100%
| Bradley A. Cleveland
| | n/a(1)
| John A. Way
| | 75%
| John R. Judd
| | 75%
| Donald G. Krantz
| | 75%
| Jacqueline D. Schneider
| | 75%
| John B. Tumelty
| | 50%
|
| (1)
| Ms. Holt replaced Mr. Cleveland as our CEO prior to the time the compensation committee established annual incentive target payouts for 2014, and therefore no target payout was established for Mr. Cleveland for the year.
|
Ms. Holt’s and Mr. Way’s target payouts were established in connection with negotiating their initial terms of employment. The target payout percentages for the other named executives remained unchanged from the 2013 percentages in light of the compensation committee’s determination that the target percentages from 2013 remained competitive.
The payout is zero for 2014 revenue below specified threshold amounts for our company as a whole and each of its business units, is 50% at those threshold amounts, and increases (with no maximum) in amounts specified by the compensation committee to the degree revenue exceeds the respective threshold amounts. The revenue factor is 100% at targeted revenue growth on a consolidated basis or for each region, as applicable, for each individual.
For 2014, the compensation committee approved the following thresholds and targets for the revenue factor. The threshold and target amounts in the table below were established before our acquisition of FineLine in April 2014.
Objective | | 2014 Threshold Growth | | 2014 Threshold Amount | | 2014 Target Growth | | 2014 Target Growth | Consolidated Revenue Growth | | 12.5% | | $183.39M | | 25% | | $203.66M | E.U. Revenue Growth | | 14% | | £22.93M | | 28% | | £25.74M |
The following table summarizes our actual performance during 2014 and the related payout factors:
Objective | | Actual
Performance(1) | | | Final
Payout
Factor | | Consolidated Revenue(2) | | $ | 198.90 | | | | 88.36 | %(3) | E.U. Revenue(4) | | £ | 22.79 | | | | 0.00 | % |
| (1)
| Our actual performance is equal to our 2014 revenue without regard to foreign exchange rate fluctuation or the results of operations of FineLine.
|
| (2)
| For consolidated revenue performance between threshold and target, the payout factor would increase proportionately between 50% and 100%, or about 2.5 percentage points for each $1 million in additional consolidated revenue. For revenue performance above target, the payout factor would similarly increase by 2.5 percentage points for each $1 million in additional revenue, with no maximum payout specified.
|
| (3)
| The final payout factor represents the percentage of the target payout that would be made based on the actual company-wide revenue for 2014, without regard to foreign exchange rates or the results of operations of FineLine. Each named executive officer other than Mr. Tumelty received an incentive of approximately 3.2% less based on base salary than they would have received had exchange rate fluctuations been included in the revenue factor.
|
| (4)
| For E.U. revenue performance between threshold and target, the payout factor would increase proportionately between 50% and 100%, or about 17.8 percentage points for each £1 million in additional E.U. revenue. For revenue performance above target, the payout factor would similarly increase by 17.8 percentage points for each £1 million in additional revenue, with no maximum payout specified.
|
For 2014, we implemented a threshold level of AOI that, if met, resulted in the full incentive payout being made to each executive as determined using the revenue factor. The threshold level of company-wide consolidated AOI for 2014 was 27%. For 2014, our company-wide AOI was 31.9%. As a result, our named executive officers compensated based on our consolidated results earned the incentive payments as calculated based on the revenue factor. We eliminated the sliding scale AOI matrix that historically adjusted payout amounts between 0% and 100% of the amount determined based on the revenue factor because of the significant revenue growth required to meet the 2014 target amount and the primary importance of revenue growth to our company, which the compensation committee believed should require a baseline level of profitability rather than a sliding scale that could reduce compensation even if we achieve reasonable profitability and strong revenue growth for the year.
Discretionary Cash Bonus
executive’s prior compensation. As discussed above, Mr. Tumelty didwe do not earn a payout under our 2014 annual incentive program dueprovide tax gross-ups on income attributable to our failure to achieve the 14% threshold revenue growth in the E.U. Our 2014 revenue growth rate of 13.3% in the E.U. followed our extraordinarily strong revenue growth rate of approximately 42% in the E.U. during 2013, resulting in a two-year compound annual growth rate of 26.7%. In light of the fact that our 2014 E.U. revenue growth only slightly missed the revenue factor threshold, and in recognition of our strong two-year performance in the E.U., we granted all of our E.U. employees who participated in our 2014 annual incentive program a discretionary cash bonus equal to 25% of the employees’ target incentive payouts for 2014. Our compensation committee, after discussing the appropriateness of a zero payout or a modest discretionary bonus, approved a discretionary cash bonus for Mr. Tumelty for 2014 calculated in the same manner as the bonuses awarded to our other E.U. employees. Changes for 2015 Annual Incentive Program
The 2015 annual incentive program also provides that the leaders of our Americas, E.U. and Japanese units will be based 65 percent on how the leader’s respective region performs and 35 percent based on our global performance. Historically, the leaders of our major geographic business units received annual incentive compensation based solely on the performance of their respective unit. The change made for the 2015 program reflects the global nature of most of our support functions and resources and the need for our company to consider our global organization when making decisions with respect to each region to optimize the long-term success of our company.
Long-Term Equity-Based Compensation
Annual Equity Grants
The long-term incentive portion of our executive compensation program historically has taken the form of annual equity grants that have five-year annual ratable vesting periods. The five-year vesting period is longer than the vesting period used by most companies in our peer group. However, the Compensation Committee believes that a longer vesting period is more closely aligned with the creation of long-term shareholder value and assists in the retention of key executives. Further, the committee understands that none of the companies in our peer group have the same business model of financial performance as our company.
We generally have not utilized a formulaic approach to determine the size of individual equity awards to our executives. Instead, our compensation committee generally has determined the size of individual grants using its collective business judgment and experience, taking into account factors such as the role and responsibility of the individual executive, the size and value of the unvested portion of existing equity awards and of existing holdings of our common stock, an evaluation of the expected and actual performance of each executive, internal pay equity considerations and market factors. The size of equity awards granted to our executives is inherently subjective in light of the discretion granted to the compensation committee and the various factors the committee considers when granting equity awards.
The annual equity grants made to our named executive officers for 2014 were granted in February 2014 and were as follows:
Name | | Grant Date Fair Value | | | Number of RSUs | | | Number of Shares Subject to Stock Option | | John R. Judd | | $500,416 | | | 2,230 | | | 8,160 | | Donald G. Krantz | | $500,416 | | | 2,230 | | | 8,160 | | Jacqueline D. Schneider | | $500,416 | | | 2,230 | | | 8,160 | | John B. Tumelty | | $750,424 | | | 3,345 | | | 12,235 | |
The Compensation Committee awarded a higher level grant to John Tumelty as a reward for delivering extraordinarily strong performance in the E.U. with revenue growth of approximately 42% during 2013.
Beginning in 2014, we modified our historic practice of granting equity compensation only in the form of stock options and granted awards in the form of stock options and time-based restricted stock units, or RSUs. Sixty-five percent of the annual equity awards we granted in 2014 were made in the form of stock options, based on the Black-Scholes value of the options on the grant date, and thirty-five percent were made in the form of RSUs, based on the closing price of the stock on the date of grant. The compensation committee decided to begin granting a portion of our annual equity awards in the form of RSUs for the following reasons:
| ●
| To more directly align the interests of our shareholders and our executive officers by ensuring that fluctuations in our stock price affect the value of the compensation paid to our executive officers in the same manner and to the same extent as our shareholders;
|
| ●
| To mitigate the incentive our executive officers have to take excessive risks because, unlike stock options, RSUs provide value to the recipient regardless of whether our stock appreciates above a certain price (i.e., the exercise price of a stock option);
|
| ●
| To mitigate the potential dilution that our executive compensation program has on our shareholders by providing equity compensation to our executive officers in a manner that could result in the issuance of fewer shares; and
|
| ●
| To be competitive with comparable companies, many of which grant restricted stock or restricted stock units in addition to or in lieu of stock options.
|
During 2014, the compensation committee also discussed the use of performance vesting in addition to time vesting for awards. The compensation committee decided to retain time based vesting for the 2014 grants due to challenges with determining appropriate metrics that were not duplicative with our annual incentive plan, and potential goal setting changes that could create a disconnect between pay and performance.
Special Equity Grants
In addition to annual equity awards, we historically have granted equity awards in connection with an individual’s initial employment with us, upon promotionsseverance or other changes in responsibilities, in recognition of significant achievements and generally when it believed that the number of unvested option shares held by a key employee was insufficient to constitute an effective retention tool. These additional equity awards are made outside our typical annual grant cycle, and are subject to our equity award approval policy summarized below in “Other Compensation and Equity-Related Policies—Equity Award Approval Policy” below.
In connection with hiring Ms. Holt, we granted her an initial equity award of 12,728 shares of restricted stock with a grant date fair value of $1,000,294. The restricted stock award was an inducement for Ms. Holt to accept our offer of employment and a building block for her equity ownership in our company. Ms. Holt’s initial restricted stock award vests ratably in four annual installments, subject to her continued employment with us, and the vesting accelerates under certain circumstances described below in “Potential Payments Upon Termination or Change in Control.” Ms. Holt’s initial restricted stock grant has a four-year vesting period to align the vesting period with what we believe is a more common market practice than our typical five-year vesting period for annual equity awards.
In connection with hiring Mr. Way, we granted him an initial equity award in the form of stock options with a grant date fair value of $200,058 and RSUs with a grant date fair value of $200,022. The number of shares awarded under the stock option grant was 6,520 and was determined using the estimated fair value of the award calculated using the Black-Scholes model with an exercise price of $62.90 per share, which is equal to the closing price of our common stock on the grant date. The number of shares awarded under the RSU grant was 3,180 and was determined by dividing $200,000 by the closing price of our common stock on the grant date and rounding to the nearest whole share. Mr. Way’s initial equity award vests on our typical five-year vesting schedule.
Other Executive Benefits
Our named executive officers generally receive health and welfare benefits under the same programs and subject to the same terms as our other salaried employees. These benefits include medical, dental and vision benefits, short- and long-term disability insurance, accidental death and dismemberment insurance and basic life insurance. Our named executive officers are also eligible to participate in our 401(k) retirement plan, under which our company provides a matching contribution in an amount equal to 100% of the first 3% of compensation contributed by a participant and 50% of the next 2% of compensation contributed.
Similarly, other benefits or perquisites provided on occasion to our named executive officers are also available to our salaried employees generally, such as reimbursement of spousal travel costs in connection with extended overseas assignments and withholding taxes associated with discretionary bonuses. We also provide supplemental benefits to our executive officers who are based outside of the United States as part of compensation packagespayments that are intended to be competitive in the respective local markets.
Severance and Change in Control Benefits
In connection with hiring Ms. Holt and Mr. Way, we entered into agreements with each of them in recognition of the need to provide the executive certain protection if the executive’s employment with us is involuntarily terminated without “cause” or terminated by the executive for “good reason,” includingdeemed made in connection with a change in controlcontrol.
Code Section 409A requires that “nonqualified deferred compensation” be deferred and paid under plans or arrangements that satisfy the requirements of the statute with respect to the timing of deferral elections, timing of payments and certain other matters. Failure to satisfy these requirements can expose employees and directors to accelerated income tax liabilities, substantial additional taxes and interest on their vested compensation under such plans. Accordingly, as a general matter, it is our intention to design and administer our compensation and benefit plans and arrangements for all of our company.employees and directors, including our Named Executive Officers, so that they are either exempt from, or satisfy the requirements of, Code Section 409A. Code Section 162(m) disallows a tax deduction to public companies for compensation of more than $1 million paid in any taxable year to each “covered employee,” consisting of the CEO and the three other highest paid executive officers employed at the end of the year (other than the CFO), plus any person who served as CEO or CFO at any time the year, as well as any person who was ever identified as a covered employee in 2017 or any subsequent year. Risk Assessment On an annual basis our executives, compensation committee, and an outside consultant review our compensation policies and practices to ensure there are no material risks that could have an adverse impact to the organization. The agreements provide Ms. Holtscope of the assessment includes a review of the overall compensation strategy and Mr. Way certain cash payments based onphilosophy, the executive’s base salarydesign of the short-term and targetlong-term incentive plans and the corporate governance of the incentive programs. The annual review confirmed that there is an appropriate balance between the short-term and long-term incentives and that the variable pay targets are aligned to the strategic goals of the organization. The performance measures of revenue and operating income ensure the plan is affordable and the targets are sufficiently aggressive as to incent the organization to grow. The performance goals are aligned to the annual budget and the accelerators for exceeding budget targets are appropriately aggressive. The incentive paymentsplans are capped and the accruals are reviewed by the audit committee quarterly. Finally, a Claw-back Policy is in place to continuationprotect the organization from any unforeseen circumstances related to ethical conduct of certain benefits following termination. We believe this protection was necessary to induce the executive to forego other employment opportunities and assume a critical position inexecutives. The conclusion of the review maintains we are confident that our organization. We also believecompensation programs are aligned with the change-in-control-related benefits are beneficial tointerests of our shareholders, by encouraging Ms. Holtthe programs reward the organization for delivering on our aggressive growth strategy and Mr. Waywe have the appropriate governance in place to remain focused on shareholders’ interests in the face of a potential change in control, and the benefits promote stable leadership during a possible transition period.mitigate any unforeseen risks.
TABLE OF CONTENTS In June 2011, we entered into an
EXECUTIVE COMPENSATION TABLES Summary Compensation Table The employment agreement with Mr. Judd, which provides him certain protection if his employment should be involuntarily terminated without cause or terminated by him for “good reason” after a change in control of our company. We entered into this agreement for the same reasons we entered into agreements provided for severance benefits to Ms. HoltCEO and Mr. Way.During 2013, we entered into severance agreements with our executive officers other than Mr. Cleveland and Mr. Judd. Pursuant to these severance agreements, if the executive officer’s employment is terminated by us without “cause” or if the executive voluntary resigns for “good reason,” the executive officer will be entitled to certain cash payments based on the executive’s base salaryCFO, and the annual incentive payment the executive would have receivedconsulting agreement for the calendar year in which the termination date occurs assuming the executive remained employed through the date executive would have otherwise earned the payment and to a 12-month continuation of certain benefits following termination. In addition, notwithstanding any language in any stock option agreement under the LTIP to the contrary, a pro rata portion, as calculatedformer CEO are summarized in the severance agreement,Compensation Discussion & Analysis. None of the unvested options to purchase shares of our stock held by such executive officer that are scheduled to vest on the next anniversary date will vest. An executive officer’s receipt of these severance pay and benefits will be conditioned on such executive’s execution of a release of claims against our company. We entered into these severance agreements because we believe they are a common protection for executives of similar companies that facilitate stability among our management team.
For a summaryother NEOs employed as of the material terms and conditionsend of our agreements with the named executive officers providing for payments in connection with termination offiscal year 2021 were parties to employment and changes in control of our company, see “Potential Payments Upon Termination or Change in Control.”
Our existing stock option award agreements under our 2000 Stock Option Plan (the “2000 Plan”) generally provide for accelerated vesting and exercisability of awards if an executive officer’s employment terminates due to death or disability, or upon a change in control of our company. The choice of “single trigger” acceleration upon a change in control reflects the belief that in the context of a privately held company, which we were at the time this plan was adopted, such arrangements would help ensure that executive officers would be effectively incented to obtain the highest value possible in a change in control transaction and be subject to a strong retention device during the uncertain times preceding the transaction.
The award agreements under the LTIP provide for “double trigger” acceleration of vesting and exercisability of stock options in connection with a change in control, meaning that both a change in control and either a failure to continue, assume or replace outstanding awards or a termination of employment are necessary before acceleration will occur. The compensation committee believes that the double trigger structure avoids an unintended windfall to executives who retain their employment and their equity awards in the event of a friendly change in control, but still provides them appropriate incentives to cooperate in negotiating any change in control in which they believe they could lose their jobs.
Summary Compensation Table
agreements. The following table summarizes the compensation provided to or earned by our named executive officers during our three most recently completed fiscal years: Name and Principal Position | | Year | | | Salary
($) | | | Bonus
($) | | | Stock Awards ($)(1) | | | Option
Awards
($) (1) | | | Non-Equity
Incentive Plan
Compensation
($) (2) | | | All Other
Compensation
($) (3) | | | Total ($) | | Victoria M. Holt, | | 2014 | | | 436,539 | | | — | | | 1,000,294 | | | — | | | 385,725 | | | 71,652 | | | 1,894,210 | | President and Chief Executive Officer(4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Bradley A. Cleveland, | | 2014 | | | 39,231 | | | — | | | 50,019(5) | | | 50,001(5) | | | — | | | — | | | 139,251 | | Former Chief Executive Officer | | 2013 | | | 270,000 | | | — | | | — | | | — | | | 508,433 | | | — | | | 778,433 | | | | | 2012 | | | 241,084 | | | — | | | — | | | — | | | 200,919 | | | — | | | 442,003 | | | | | | | | | | | | | | | | | | | | | | | | | | | | John A. Way, | | 2014 | | | 16,731 | | | — | | | 200,022 | | | 200,058 | | | 11,087 | | | — | | | 427,898 | | Chief Financial Officer (6) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | John R. Judd, | | 2014 | | | 263,500 | | | — | | | 175,256 | | | 325,160 | | | 175,383 | | | 10,200 | | | 949,499 | | FormerChief FinancialOfficer | | 2013 | | | 252,000 | | | — | | | — | | | 400,000 | | | 237,595 | | | — | | | 889,595 | | | | | 2012 | | | 240,000 | | | 75,000 | | | — | | | 216,000 | | | 111,120 | | | 10,000 | | | 652,120 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Donald G. Krantz, | | 2014 | | | 276,382 | | | — | | | 175,256 | | | 325,160 | | | 183,980 | | | 10,677 | | | 971,455 | | Executive Vice President | | 2013 | | | 265,000 | | | — | | | — | | | 400,000 | | | 248,408 | | | — | | | 913,408 | | and Technology Officer | | 2012 | | | 229,215 | | | — | | | — | | | 216,000 | | | 106,127 | | | 2,453 | | | 553,795 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Jacqueline D. Schneider | | 2014 | | | 251,169 | | | — | | | 175,256 | | | 325,160 | | | 168,396 | | | 10,200 | | | 930,181 | | Vice President ofGlobal Sales | | 2013 | | | 222,000 | | | — | | | — | | | 400,000 | | | 208,716 | | | — | | | 830,716 | | | | | | | | | | | | | | | | | | | | | | | | | | | | John B. Tumelty(7) | | 2014 | | | 219,103 | | | 27,388 | | | 262,884 | | | 487,540 | | | — | | | 24,413 | | | 1,021,328 | | Vice President/General Manager and Managing Director –EMEA | | 2013 | | | 199,335 | | | — | | | — | | | 400,000 | | | 170,361(7) | | | 15,650 | | | 785,346 | |
| | Robert Bodor(5)
President and Chief
Executive Officer | | | 2021 | | | 473,277 | | | 1,430,533 | | | 825,044 | | | 282,062 | | | 11,200 | | | 3,022,116 | | | | 2020 | | | 338,658 | | | 475,722 | | | 153,036 | | | 24,900 | | | 11,200 | | | 1,003,516 | | | | 2019 | | | 324,492 | | | 447,048 | | | 153,014 | | | 59,941 | | | 11,000 | | | 995,495 | | | | Daniel Schumacher(6)
Interim Chief Financial
Officer | | | 2021 | | | 206,799 | | | 316,783 | | | 83,255 | | | 38,465 | | | 7,933 | | | 653,235 | | | | 2020 | | | — | | | — | | | — | | | — | | | — | | | — | | | | 2019 | | | — | | | — | | | — | | | — | | | — | | | — | | | | Arthur R. Baker III
Chief Technology Officer | | | 2021 | | | 318,558 | | | 980,427 | | | 275,100 | | | 98,793 | | | 9,096 | | | 1,681,974 | | | | 2020 | | | 317,044 | | | 475,722 | | | 153,036 | | | 19,113 | | | 11,200 | | | 976,115 | | | | 2019 | | | 312,312 | | | 447,048 | | | 153,014 | | | 56,133 | | | 11,000 | | | 979,507 | | | | Michael R. Kenison(7)
Vice President/General
Manager - Americas | | | 2021 | | | 291,795 | | | 253,478 | | | 126,560 | | | 101,730 | | | 6,745 | | | 780,308 | | | | 2020 | | | — | | | — | | | — | | | — | | | — | | | — | | | | 2019 | | | — | | | — | | | — | | | — | | | — | | | — | | | | Bjoern Klaas
Vice President and Managing
Director - Europe, Middle East
and Africa | | | 2021 | | | 336,635 | | | 568,525 | | | 145,942 | | | 31,945 | | | 14,108 | | | 1,097,155 | | | | 2020 | | | 324,274 | | | 317,212 | | | 102,010 | | | 20,318 | | | 15,179 | | | 778,993 | | | | 2019 | | | 322,390 | | | 298,066 | | | 102,011 | | | 112,925 | | | 13,863 | | | 849,255 | | | | Victoria M. Holt(8)
Former President and Chief
Executive Officer | | | 2021 | | | 108,277 | | | — | | | — | | | 63,266 | | | 7,269 | | | 178,812 | | | | 2020 | | | 583,292 | | | 2,314,264 | | | 425,022 | | | 73,440 | | | 11,200 | | | 3,407,218 | | | | 2019 | | | 600,000 | | | 2,160,169 | | | 340,034 | | | 215,308 | | | 11,000 | | | 3,326,511 | | | | John A. Way
Former Chief Financial
Officer | | | 2021 | | | 344,091 | | | 1,114,800 | | | 250,004 | | | — | | | 11,200 | | | 1,720,095 | | | | 2020 | | | 367,985 | | | 713,631 | | | 229,513 | | | 33,272 | | | 11,200 | | | 1,355,601 | | | | 2019 | | | 362,436 | | | 670,677 | | | 229,523 | | | 97,748 | | | 11,000 | | | 1,371,384 | |
(1)
| (1)
Amounts shown in this column reflect the aggregate grant date fair value of the RSUs and PSUs (at target) granted in 2021, 2020 and 2019 and are computed in accordance with ASC Topic 718, Compensation—Stock Compensation (ASC 718), based on the closing stock price on the grant date. The grant date fair value of RSUs granted in 2021 and the grant date fair value of the PSUs granted in 2021 if target performance and maximum performance is achieved are as follows: |
| | Robert Bodor | | | $1,210,204 | | | $220,329 | | | $330,494 | | | | Daniel Schumacher | | | $316,783 | | | $— | | | $— | | | | Arthur R. Baker III | | | $760,098 | | | $220,329 | | | $330,494 | | | | Michael R. Kenison | | | $253,478 | | | $— | | | $— | | | | Bjoern Klaas | | | $426,788 | | | $141,737 | | | $212,606 | | | | Victoria M. Holt | | | $— | | | $— | | | $— | | | | John A. Way | | | $799,979 | | | $314,821 | | | $472,232 | |
(2)
| Amounts shown in this column represent the grant date fair values computed in accordance with ASC Topic 718Compensation—Stock Compensation(ASC 718) utilizing the assumptions discussed in Note 1213 to our Consolidated Financial Statements for the year ended December 31, 20142021 contained in our Annual Report on Form 10-K for the year ended December 31, 2014,2021, and disregarding the effects of any estimates of forfeitures related to service-based vesting. |
(3)
| (2)
| Amounts shown in this column represent amounts earned under our annual incentive program. program during each respective year and paid early in the following year. |
(4)
| (3)
| Amounts shown in this column for all named executive officers other than Ms. Holt and Mr. Tumelty for 2014 include company2021 represent Company contributions to our 401(k) retirement plan. The amount for Ms. Holt for 2014 includes $64,758 for payment of Ms. Holt’s relocation expenses in connection with the commencement of her employment with usplan, and $6,894 for company contributions to our 401(k) retirement plan. The amountadditional compensation for Mr. Tumelty for 2014 includes $15,650 for company contributions into a U.K. retirement planKlaas. |
(5)
| Effective March 1, 2021, Dr. Bodor began serving as President and amounts paidCEO. Prior to himbeing named CEO, Dr. Bodor served as a vehicle allowance.Vice President/General Manager – Americas. |
(6)
| (4)
| We hired Ms. HoltMr. Schumacher began serving as our Chief Executive Officer on February 6, 2014.
|
| (5)
| Mr. Cleveland’s RSU and option awards for 2014 were made pursuant to our 2014 non-employee director compensation program. We historically did not grant equity awards to Mr. Cleveland for his service as an executive officer given the ownership interest he otherwise had in our company.
|
| (6)
| We hired Mr. Way as our Chief Financial OfficerInterim CFO on December 1, 2014.
2021, and as permanent CFO on June 3, 2022. Prior to being named Interim CFO, Mr. Schumacher served as Vice President of Investor Relations and FP&A. |
(7)
| (7)
Mr. Kenison began serving as Vice President/General Manager – Americas on July 1, 2021. Prior to being named Vice President/General Manager – Americas, Mr. Kenison served as Vice President of Manufacturing – Americas. |
(8)
| Mr. Tumelty’s cashMs. Holt retired as President and other compensation for 2013 and 2014 wasCEO, effective February 28, 2021. Ms. Holt’s 2021 salary represents amounts paid in British pounds sterlingher role as CEO and is converted into U.S. dollars in the table above using an exchange rate of £1 = $1.647.
consultant. |
TABLE OF CONTENTS Grants of Plan-Based Awards The annual incentive plan, including description of types of equity awards, vesting schedules, performance conditions, and events that would accelerate vesting, for grants made in 2021 is summarized in the CD&A. No dividends or dividend equivalents are paid on RSUs or PSUs. The following table summarizes the grants of plan-based awards made to our named executive officers during the year ended December 31, 2014:| | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | | | | | | | | | | | | Name | | Grant Date | | | Compensation Committee Approval Date(1) | | | Threshold
($) | | | Target
($) | | | Maximum
($)(2) | | | All OtherStock Awards: Number ofShares of Stock orUnits
(#) | | | All Other Option Awards: Number of Securities Underlying Options
(#) | | | Exercise or Base Price of Option Awards
($/Sh) | | | Grant Date Fair Value of Stock and Option Awards ($)(3) | | Victoria M. Holt(4) | | | | | | | | 218,270 | | | 436,539 | | | n/a | | | | | | | | | | | | | | | | | 2/13/14 | | | 2/5/14 | | | | | | | | | | | | 12,728 | | | | | | | | | 1,000,294 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Bradley A. Cleveland(5) | | 5/20/14 | | | 4/24/14 | | | | | | | | | | | | 798 | | | | | | | | | 50,019 | | | | | 5/20/14 | | | 4/24/14 | | | | | | | | | | | | | | | 1,731 | | | 62.68 | | | 50,001 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | John A. Way(4) | | | | | | | | 6,274 | | | 12,549 | | | n/a | | | | | | | | | | | | | | | | | 12/1/14 | | | 11/21/14 | | | | | | | | | | | | 3,180 | | | | | | | | | 200,022 | | | | | 12/1/14 | | | 11/21/14 | | | | | | | | | | | | | | | 6,520 | | | 62.90 | | | 200,058 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | John R. Judd | | | | | | | | 99,375 | | | 198,750 | | | n/a | | | | | | | | | | | | | | | | | 2/13/14 | | | 2/12/14 | | | | | | | | | | | | 2,230 | | | | | | | | | 175,256 | | | | | 2/13/14 | | | 2/12/14 | | | | | | | | | | | | | | | 8,160 | | | 78.59 | | | 325,160 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Donald G. Krantz | | | | | | | | 104,250 | | | 208,500 | | | n/a | | | | | | | | | | | | | | | | | 2/13/14 | | | 2/12/14 | | | | | | | | | | | | 2,230 | | | | | | | | | 175,256 | | | | | 2/13/14 | | | 2/12/14 | | | | | | | | | | | | | | | 8,160 | | | 78.59 | | | 325,160 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Jacqueline D. Schneider | | | | | | | | 95,625 | | | 191,250 | | | n/a | | | | | | | | | | | | | | | | | 2/13/14 | | | 2/12/14 | | | | | | | | | | | | 2,230 | | | | | | | | | 175,256 | | | | | 2/13/14 | | | 2/12/14 | | | | | | | | | | | | | | | 8,160 | | | 78.59 | | | 325,160 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | John B. Tumelty | | | | | | | | 54,776(6) | | | 109,552(6) | | | n/a | | | | | | | | | | | | | | | | | 2/13/14 | | | 2/12/14 | | | | | | | | | | | | 3,345 | | | | | | | | | 262,884 | | | | | 2/13/14 | | | 2/12/14 | | | | | | | | | | | | | | | 12,235 | | | 78.59 | | | 487,540 | |
| | Robert Bodor | | | $153,815 | | | $473,277 | | | $946,554 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/16/2021 | | | 2/2/2021 | | | | | | | | | | | | | | | | | | | | | 3,104 | | | | | | | | | $560,148 | | | | | | | 2/16/2021 | | | 2/2/2021 | | | | | | | | | | | | | | | | | | | | | | | | 2,190 | | | 180.46 | | | $175,035 | | | | | | | 2/16/2021 | | | 2/2/2021 | | | | | | | | | | | | 485 | | | 970 | | | 1,455 | | | | | | | | | | | | $220,329 | | | | | | | 3/1/2021 | | | 2/2/2021 | | | | | | | | | | | | | | | | | | | | | 4,309 | | | | | | | | | $650,056 | | | | | | | 3/1/2021 | | | 2/2/2021 | | | | | | | | | | | | | | | | | | | | | | | | 9,652 | | | 150.86 | | | $650,009 | | | | Daniel Schumacher | | | $68,014 | | | $110,000 | | | $170,090 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5/18/2021 | | | 5/11/2021 | | | | | | | | | | | | | | | | | | | | | 1,748 | | | | | | | | | $166,759 | | | | | | | 5/18/2021 | | | 5/11/2021 | | | | | | | | | | | | | | | | | | | | | | | | 1,936 | | | 95.40 | | | $83,255 | | | | | | | 12/1/2021 | | | 11/5/2021 | | | | | | | | | | | | | | | | | | | | | 3,085 | | | | | | | | | $150,024 | | | | Arthur R. Baker III | | | $51,766 | | | $159,279 | | | $318,558 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/16/2021 | | | 2/2/2021 | | | | | | | | | | | | | | | | | | | | | 4,212 | | | | | | | | | $760,098 | | | | | | | 2/16/2021 | | | 2/2/2021 | | | | | | | | | | | | | | | | | | | | | | | | 3,442 | | | 180.46 | | | $275,100 | | | | | | | 2/16/2021 | | | 2/2/2021 | | | | | | | | | | | | 485 | | | 970 | | | 1,455 | | | | | | | | | | | | $220,329 | | | | Michael R. Kenison | | | $47,417 | | | $145,898 | | | $291,795 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5/18/2021 | | | 5/11/2021 | | | | | | | | | | | | | | | | | | | | | 2,657 | | | | | | | | | $253,478 | | | | | | | 5/18/2021 | | | 5/11/2021 | | | | | | | | | | | | | | | | | | | | | | | | 2,943 | | | 95.40 | | | $126,560 | | | | Bjoern Klaas | | | $54,703 | | | $168,318 | | | $336,635 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/16/2021 | | | 2/2/2021 | | | | | | | | | | | | | | | | | | | | | 2,365 | | | | | | | | | $426,788 | | | | | | | 2/16/2021 | | | 2/2/2021 | | | | | | | | | | | | | | | | | | | | | | | | 1,826 | | | 180.46 | | | $145,942 | | | | | | | 2/16/2021 | | | 2/2/2021 | | | | | | | | | | | | 312 | | | 624 | | | 936 | | | | | | | | | | | | $141,737 | | | | Victoria M. Holt | | | $35,190 | | | $108,277 | | | $216,554 | | | | | | | | | | | | | | | | | | | | | | | | | John A. Way | | | $83,872 | | | $258,069 | | | $516,137 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/16/2021 | | | 2/2/2021 | | | | | | | | | | | | | | | | | | | | | 4,433 | | | | | | | | | $799,979 | | | | | | | 2/16/2021 | | | 2/2/2021 | | | | | | | | | | | | | | | | | | | | | | | | 3,128 | | | 180.46 | | | $250,004 | | | | | | | 2/16/2021 | | | 2/2/2021 | | | | | | | | | | | | 693 | | | 1,386 | | | 2,079 | | | | | | | | | | | | $314,821 | |
(1)
| (1)
| The compensation committee approved Mr. Way’s compensation, including his initial equity grant, prior to the commencement of his employment with us, effective as the first day of his employment with us. In accordance with the terms of our equity grant timing policy, the restricted stock, RSURSUs, PSUs and stock option grants to our named executive officers identified in the “All Other Stock Awards” and “All Other Option Awards” columns of this table were granted effective as of the end of the second trading day following the public release of our financial results for the fourth quarter of 2014,2020, even though the compensation committee approved the grants on an earlier date.
Mr. Schumacher and Mr. Kenison received grants prior to being named executive officers. Mr. Schumacher received an additional off-cycle grant in connection with his new role. |
(2)
| (2)
| As discussed above in “Compensation Discussion and Analysis – Analysis—Elements of Executive Compensation, – Annual Incentive Program,” amounts paid under our annual incentive program for 2014 were based in part on our revenue growth for the year. If the threshold level of revenue growth or adjusted operating income margin was not achieved for the year, no payment was paid. We also did not impose a maximum amount executive officers could receive under the program to reward their ability to grow the revenue of our company, with appropriate adjusted operating income margins, to the maximum extent possible. |
| (3)
| Amounts shown in this column represent an award of PSUs under the LTIP capable of being earned and vesting at the end of a three-year performance period depending on our Company’s three-year cumulative Total Shareholder Return (“TSR”) performance relative to the Russell 2000 Growth Index and the award recipient’s continued employment. The PSU vesting terms in the event of certain terminations of employment or a change in control of our Company are described above in “Elements of Executive Compensation—Long-Term Equity-Based Compensation.” No dividend equivalents are paid on the PSUs.
|
(3)
| Amounts in this column represent awards of RSUs under the LTIP which vest as to 25% of the shares in four annual installments beginning on either February 13, 2022 or May 20, 2022 depending on the grant date. Mr. Schumacher’s December 1, 2021 grant vests as to 100% of the shares on December 1, 2022. Unvested RSUs will immediately vest in full upon the named executive officer’s death or disability and if, within one year of a change in control, the named executive officer’s employment is terminated without cause or for good reason. No dividend equivalents are paid on the RSUs. |
(4)
| Amounts in this column represent awards of stock options under the LTIP which vest as to 25% of the shares in four annual installments beginning on February 13, 2022 or May 20, 2022 depending on the grant date. Unvested options will immediately become vested and exercisable in full upon the named executive officer’s death or disability and if, within one year of a change in control, the named executive officer’s employment is terminated without cause or for good reason. |
(5)
| The actual value to be realized by a named executive officer depends upon the appreciation in value of our stock and the length of time the award is held. No value will be realized with respect to any stock option award if our stock price does not increase following the grant date. For a description of the assumptions used in computing grant date fair values ofvalue for stock option awards computed in accordance withpursuant to ASC Topic 718, Compensation—Stock Compensation(ASC 718) utilizing the assumptions discussed insee Note 1213 to our Consolidated Financial Statements for the year ended December 31, 20142021 contained in our Annual Report on Form 10-K for the year ended December 31, 2014, and disregarding the effects of any estimates of forfeitures related to service-based vesting. |
| (4)
| 10-K. The threshold and target amounts in the table above reflect that Ms. Holt’s and Mr. Way’s awards pursuant to our annual incentive plan were prorated for the portion of the year during which we employed them. |
| (5)
| Mr. Cleveland’s RSU and option awards for 2014 were made pursuant to our 2014 non-employee director compensation program. Our board of directors approved Mr. Cleveland���s participation in our 2014 non-employee director compensation program on April 24, 2014. On September 1, 2014, in recognition of Mr. Cleveland’s contributions to our company, we accelerated the vesting of these equity awards to vest in full on thatgrant date in connection with Mr. Cleveland’s resignation as a director of our company for health reasons. Mr. Cleveland retired prior to the time the compensation committee granted annual incentive awards for 2014, and therefore Mr. Cleveland did not receive a non-equity incentive plan award for 2014.
|
| (6)
| Amount is converted from British pounds sterling into U.S. dollars using an exchange rate of £1 = $1.647 based on the average of the exchange rates at the endfair value of each month during 2014.
RSU award and PSU award (at target) was computed in accordance with ASC 718. |
TABLE OF CONTENTS Victoria M. Holt Employment Agreement
In connection with hiring Ms. Holt, we entered into an employment agreement with her. Ms. Holt’s employment agreement establishes her initial annual base salary at $500,000 and provides that her annual cash incentive target payout will be 100% of her annual base salary. Her employment agreement also provides that the value of her annual equity grant is expected to be $800,000 for each year during the term of the employment agreement, as measured on the date of grant and based on the board’s assessment of our company’s performance against Ms. Holt’s and our company’s performance objectives. We also granted Ms. Holt an initial equity award of 12,728 shares of restricted stock with a grant date fair value of $1,000,294 in connection with the commencement of her employment with us.
Outstanding Equity Awards at 20142021 Year-End The following table provides information on each named executive officer’s outstanding equity awards as of December 31, 2014, the last day of our most recent fiscal year.2021. | | Robert Bodor | | | 02/13/14 | | | 1,632 | | | — | | | 78.59 | | | 02/13/24 | | | | | | | | | | | | | | | | | | | 02/09/15 | | | 3,998 | | | — | | | 67.15 | | | 02/09/25 | | | | | | | | | | | | | | | | | | | 02/08/16 | | | 5,673 | | | — | | | 57.88 | | | 02/08/26 | | | | | | | | | | | | | | | | | | | 02/13/17 | | | 2,721 | | | 907 | | | 58.35 | | | 02/13/27 | | | | | | | | | | | | | | | | | | | 02/12/18 | | | 2,253 | | | 751 | | | 105.75 | | | 02/12/28 | | | | | | | | | | | | | | | | | | | 02/11/19 | | | 1,602 | | | 1,602 | | | 104.99 | | | 02/11/29 | | | | | | | | | | | | | | | | | | | 02/10/20 | | | 917 | | | 2,751 | | | 96.72 | | | 02/10/30 | | | | | | | | | | | | | | | | | | | 02/16/21 | | | — | | | 2,190 | | | 180.46 | | | 02/16/31 | | | | | | | | | | | | | | | | | | | 03/01/21 | | | — | | | 9,652 | | | 150.86 | | | 03/01/31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,286 | | | 66,036 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 656 | | | 33,686 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,415 | | | 72,660 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,304 | | | 118,310 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,104 | | | 159,390 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,309 | | | 221,267 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 13,074(3) | | | 671,349 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,506 | | | $77,333(4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | 970 | | | $49,810(5) | | | | Daniel Schumacher | | | 05/16/18 | | | 93 | | | 93 | | | 117.55 | | | 05/16/28 | | | | | | | | | | | | | | | | | | | 05/15/19 | | | 177 | | | 355 | | | 106.85 | | | 05/15/29 | | | | | | | | | | | | | | | | | | | 05/19/20 | | | 256 | | | 769 | | | 117.00 | | | 05/20/30 | | | | | | | | | | | | | | | | | | | 05/18/21 | | | — | | | 1,936 | | | 95.40 | | | 05/18/31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 238 | | | 12,221 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 128 | | | 6,573 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 309 | | | 15,867 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 636 | | | 32,659 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,748 | | | 89,760 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,085 | | | 158,415 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6,144(6) | | | 315,495 | | | | | | | | | | Arthur R. Baker III | | | 05/02/16 | | | 1,737 | | | — | | | 60.96 | | | 05/02/26 | | | | | | | | | | | | | | | | | | | 02/13/17 | | | — | | | 907 | | | 58.35 | | | 02/13/27 | | | | | | | | | | | | | | | | | | | 02/12/18 | | | 2,413 | | | 805 | | | 105.75 | | | 02/12/28 | | | | | | | | | | | | | | | | | | | 02/11/19 | | | 1,602 | | | 1,602 | | | 104.99 | | | 02/11/29 | | | | | | | | | | | | | | | | | | | 02/10/20 | | | 917 | | | 2,751 | | | 96.72 | | | 02/10/30 | | | | | | | | | | | | | | | | | | | 02/16/21 | | | — | | | 3,442 | | | 180.46 | | | 02/16/31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,286 | | | 66,036 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 703 | | | 36,099 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,415 | | | 72,660 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,304 | | | 118,310 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4,212 | | | 216,286 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 9,920(7) | | | 509,391 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,506 | | | $77,333(4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | 970 | | | $49,810(5) | | | | Michael R. Kenison | | | 05/16/18 | | | 232 | | | 233 | | | 117.55 | | | 05/16/28 | | | | | | | | | | | | | | | | | | | 05/15/19 | | | 532 | | | 1,064 | | | 106.85 | | | 05/15/29 | | | | | | | | | | | | | | | | | | | 05/19/20 | | | 520 | | | 1,561 | | | 117.00 | | | 05/20/30 | | | | | | | | | | | | | | | | | | | 05/18/21 | | | — | | | 2,943 | | | 95.40 | | | 05/18/31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 635 | | | 32,607 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 320 | | | 16,432 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 927 | | | 47,601 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,289 | | | 66,190 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,657 | | | 136,436 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,828(8) | | | 299,266 | | | | | | | |
TABLE OF CONTENTS | | Option Awards | Stock Awards | Name | Option
Grant
Date (1) | Number ofSecurities
Underlying
Unexercised
Options (#)
Exercisable | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | Option
Exercise
Price
($/Sh) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (2) | Victoria M. Holt | | | | | | 12,728 (3) | 854,812 | Bradley A. Cleveland | n/a | n/a | n/a | n/a | n/a | n/a | n/a | John A. Way | 12/01/14 | — | 6,520 | 62.90 | 12/01/24 | | | | | | | | | | 3,180(4) | 213,569 | John R. Judd | | | 05/07/12 | 5,428 | 8,142 | 30.58 | 05/07/22 | | | | | 02/15/13 | 3,234 | 12,936 | 47.08 | 02/15/23 | | | | | 02/13/14 | — | 8,160 | 78.59 | 02/13/24 | | | | | | | | | | 2,230(5) | 149,767 | Donald G. Krantz | | | 12/21/10 | 42,000 | 21,000 | 7.86 | 12/21/20 | | | | | 05/07/12 | 5,428 | 8,142 | 30.58 | 05/07/22 | | | | | 02/15/13 | 3,234 | 12,936 | 47.08 | 02/15/23 | | | | | 02/13/14 | -- | 8,160 | 78.59 | 02/13/24 | | | | | | | | | | 2,230(5) | 149,767 | Jacqueline D. Schneider | | | 4/28/09 | 7,000 | — | 5.56 | 04/28/19 | | | | | 12/21/10 | 14,000 | 14,000 | 7.86 | 12/21/20 | | | | | 05/07/12 | 4,428 | 8,142 | 30.58 | 05/07/22 | | | | | 02/15/13 | 3,234 | 12,936 | 47.08 | 02/15/23 | | | | | 02/13/14 | — | 8,160 | 78.59 | 02/13/24 | | | | | | | | | | 2,230(5) | 149,767 | John B. Tumelty | | | 12/21/10 | 21,000 | 21,000 | 7.86 | 12/21/20 | | | | | 05/07/12 | 2,714 | 8,142 | 30.58 | 05/07/22 | | | | | 02/15/13 | 3,234 | 12,936 | 47.08 | 02/15/23 | | | | | 02/13/14 | — | 12,235 | 78.59 | 02/13/24 | | | | | | | | | | 3,345(5) | 224,650 |
| | Bjoern Klaas | | | 02/11/19 | | | 1,068 | | | 1,068 | | | 104.99 | | | 02/11/29 | | | | | | | | | | | | | | | | | | | 02/10/20 | | | 611 | | | 1,834 | | | 96.72 | | | 02/10/30 | | | | | | | | | | | | | | | | | | | 02/16/21 | | | — | | | 1,826 | | | 180.46 | | | 02/16/31 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,059 | | | 54,380 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 943 | | | 48,423 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,536 | | | 78,874 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,365 | | | 121,443 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,903(9) | | | 303,120 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,004 | | | $51,555(4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | 624 | | | $32,042(5) | | | | Victoria M. Holt | | | 02/13/17 | | | 7,256 | | | 1,814 | | | 58.35 | | | 02/13/27 | | | | | | | | | | | | | | | | | | | 02/12/18 | | | 5,363 | | | 1,788 | | | 105.75 | | | 02/12/28 | | | | | | | | | | | | | | | | | | | 02/11/19 | | | 3,560 | | | 1,780 | | | 104.99 | | | 02/11/29 | | | | | | | | | | | | | | | | | | | 02/10/20 | | | 2,546 | | | 2,547 | | | 96.72 | | | 02/10/30 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,571 | | | 132,021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,561 | | | 80,157 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,572 | | | 80,722 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,133 | | | 109,529 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7,837(10) | | | 402,429 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 8,367 | | | $429,645(4) | | | | John A. Way | | | 02/08/16 | | | 2,837 | | | — | | | 57.88 | | | 02/28/22 | | | | | | | | | | | | | | | | | | | 02/13/17 | | | 5,444 | | | — | | | 58.35 | | | 02/28/22 | | | | | | | | | | | | | | | | | | | 02/12/18 | | | 3,218 | | | — | | | 105.75 | | | 02/28/22 | | | | | | | | | | | | | | | | | | | 02/11/19 | | | 2,403 | | | — | | | 104.99 | | | 02/28/22 | | | | | | | | | | | | | | | | | | | 02/10/20 | | | 1,375 | | | — | | | 96.72 | | | 02/28/22 | | | | | | | | | | | | | |
(1)
| The February option awards granted prior to 2018 vest as to 20% of the shares subject to each award in five annual installments on February 13 each year. The February option awards granted beginning in 2018 vest as to 25% of the first five anniversariesshares subject to each award in four annual installments on February 13 each year. The May option awards vest as to 25% of the grant date. shares subject to each award in four annual installments on May 20 each year. |
(2)
| Based on the $67.16$51.35 per share closing price of our common stock on the NYSE on December 31, 2014. 2021. |
(3)
| The restricted sharesIn the order presented in the table, the RSUs listed vest as to 25% of1,286 shares subject to the units on February 13, 2022, as to 656 shares subject to the units on February 13, 2022, as to 707 shares subject to the units on each of February 13, 2015, 2016, 2017,2022 and 2018.
2023, as to 768 shares subject to the units on each of February 13, 2022, 2023 and 2024, as to 776 shares subject to the units on each of February 13, 2022, 2023, 2024, and 2025, and as to 1,077 shares subject to the units on each of February 13, 2022, 2023, 2024, and 2025. | | |
(4)
| The restrictedPerformance stock units vest on December 31, 2022 depending on our Company’s three-year cumulative Total Shareholder Return (“TSR”) performance relative to the Russell 2000 Growth Index and the award recipients continued employment. |
(5)
| Performance stock units vest on December 31, 2023 depending on our Company’s three-year cumulative Total Shareholder Return (“TSR”) performance relative to the Russell 2000 Growth Index and the award recipients continued employment. |
(6)
| In the order presented in the table, the RSUs listed vest as to 20%238 shares subject to the units on May 20, 2022, as to 128 shares subject to the units on May 20, 2022, as to 154 shares subject to the units on each of May 20, 2022 and 2023, as to 212 shares subject to the units on each of May 20, 2022, 2023 and 2024, as to 437 shares subject to the units on each of May 20, 2022, 2023, 2024 and 2025, and as to 3,085 shares subject to the units on December 1, 2022. |
(7)
| In the order presented in the table, the RSUs listed vest as to 1,286 shares subject to the units on February 13, 2022, as to 703 shares subject to the units on February 13, 2022, as to 707 shares subject to the units on each of February 13, 2022 and 2023, as to 768 shares subject to the units on each of February 13, 2022, 2023 and 2024, and as to 1,053 shares subject to the units on each of February 13, 2022, 2023, 2024, and 2025. |
(8)
| In the order presented in the table, the RSUs listed vest as to 635 shares subject to the units on May 20, 2022, as to 320 shares subject to the units on May 20, 2022, as to 463 shares subject to the units on each of May 20, 2022 and 2023, as to 429 shares subject to the units on each of May 20, 2022, 2023 and 2024, and as to 664 shares subject to the units on each of May 20, 2022, 2023, 2024, and 2025. |
(9)
| In the order presented in the table, the RSUs listed vest as to 1,059 shares subject to the units on each of December 1, 2015, 2016, 2017, 2018 and 2019. | | | (5) | The restricted stock units vest2022, as to 20% of the471 shares subject to the units on each of February 13, 2015, 2016, 2017, 20182022 and 2019.2023, as to 512 shares subject to the units on each of February 13, 2022, 2023 and 2024, and as to 591 shares subject to the units on each of February 13, 2022, 2023, 2024 and 2025. |
(10)
| In the order presented in the table, the RSUs listed vest as to 2,571 shares subject to the units on February 13, 2022, as to 1,561 shares subject to the units on February 13, 2022, as to 1,572 shares subject to the units on February 13, 2022, and as to 2,133 shares subject to the units on February 13, 2022. |
TABLE OF CONTENTS Option Exercises and Stock Vested in 2014 The following table summarizes the value realized by our named executive officers on option awards exercised and restricted stock units vested during the year ended December 31, 2014.
| | Option Awards | Stock Awards | Name | Number of
Shares
Acquired on
Exercise (#) | Value Realized
on Exercise ($) (1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (2) | Victoria M. Holt | — | — | — | — | Bradley A. Cleveland | 1,731 | 13,311 | 798 | 61,047 | John A. Way | — | — | — | — | John R. Judd | 75,000 | 4,569,750 | — | — | Donald G. Krantz | — | — | — | — | Jacqueline D. Schneider | 14,000 | 1,092,560 | — | — | John B. Tumelty | 4,464 | 226,400 | — | — |
| | Robert Bodor | | | — | | | — | | | 4,279 | | | 843,177 | | | | Daniel Schumacher | | | 363 | | | 30,466 | | | 732 | | | 66,246 | | | | Arthur R. Baker III | | | 7,102 | | | 886,116 | | | 4,283 | | | 766,545 | | | | Michael R. Kenison | | | — | | | — | | | 2,513 | | | 227,427 | | | | Bjoern Klaas | | | — | | | — | | | 2,043 | | | 245,396 | | | | Victoria M. Holt | | | 18,910 | | | 2,464,531 | | | 9,563 | | | 1,884,289 | | | | John A. Way | | | — | | | — | | | 6,373 | | | 1,255,800 | |
(1)
| The value realized on exercise is calculated as the difference between the closing price of our common stock on the date of exercise as reported by the New York Stock Exchange for the number of shares acquired upon exercise and the applicable option exercise price for those options. shares. |
(2)
| The value realized on vesting is calculated by multiplying the number of shares vested by the closing price of our common stock on the vesting date as reported by the New York Stock Exchange. |
We do not offer any defined benefit pension plans. Nonqualified Deferred Compensation We do not offer any nonqualified deferred compensation plans. Potential Payments Uponupon Termination or Change in Control Below is a description of the agreements, plans and arrangements that were in effect as of December 31, 2021 providing for payments or benefits to our named executive officers upon termination of employment or in connection with a change in control of our company.Victoria M. HoltCompany.
Robert Bodor Employment Agreement, effective March 1, 2021 Pursuant to our employment agreement with Ms. Holt,Dr. Bodor, if we voluntarily terminate herhis employment without “cause” (and other than as a result of herhis death or disability) or if shehe resigns for “good reason,” each as defined in the employment agreement (a “qualifying termination”), provided that Ms. HoltDr. Bodor complies with certain conditions (including execution of a general waiver and release of claims), then shehe will be entitled to the benefits summarized below. If Ms. Holt’sDr. Bodor’s employment with us terminates during the term of herhis employment agreement and prior to any change in control (as defined in the employment agreement) or followingafter any 18-month period following a change in control, which we refer to as the transition“transition period, and if the termination is without cause (other than as a result of death or disability) or for good reason, which we refer to as a qualifying termination, then, subject to certain conditions: | ●
| we will pay Ms. Holt an amount equal to one times her annualized base salary in substantially equal installments in accordance with our regular payroll practices over the 12-month period immediately following the termination date, subject to limited exceptions;
|
| ●
| we will pay Ms. Holt an amount equal to one times her target annual cash incentive payment for the calendar year in which her employment with us terminates, payable in a lump sum;
|
| ●
| we will pay our share of premiums due for Ms. Holt and her eligible dependents for the first 12 months of coverage under COBRA if elected by Ms. Holt; and
|
| ●
| if Ms. Holt has any unvested equity-based awards as of the termination date, a pro rata portion of any unvested awards scheduled to vest on the next anniversary of the grant date will vest immediately.
|
If a change in control occurs during the term of her employment agreement and Ms. Holt’s termination date occurs upon a change in control during the transition period,” and if the termination is a qualifying“qualifying termination,” then subject to certain conditions:
| ●
| we will pay Ms. Holt an amount equal to two times her annualized base salary in substantially equal installments in accordance with our regular payroll practices over the 12-month period immediately following the termination date, subject to limited exceptions;
|
| ●
| we will pay Ms. Holt an amount equal to two times her target annual cash incentive payment for the calendar year in which her employment with us terminates, payable in a lump sum;
|
| ●
| we will pay our share of premiums due for Ms. Holt and her eligible dependents for the first 18 months of coverage under COBRA if elected by Ms. Holt; and
|
| ●
| if Ms. Holt has any unvested equity-based awards as of the termination date, all such unvested awards will vest immediately on Ms. Holt’s termination date.
|
we will pay Dr. Bodor an amount equal to one times his annualized base salary in substantially equal installments in accordance with our regular payroll practices over the 12-month period immediately following the termination date, subject to limited exceptions; we will pay Dr. Bodor an amount equal to one times his target annual cash incentive bonus for the calendar year in which his employment with us terminates, payable in a lump sum; we will pay our share of premiums due Dr. Bodor and his eligible dependents under COBRA for the first 12 months of COBRA coverage, if timely elected by Dr. Bodor; and if Dr. Bodor has any unvested equity-based awards as of the termination date, a pro rata portion of any unvested awards scheduled to vest on the next anniversary of the grant date will vest immediately. If Ms. Holt’sDr. Bodor’s termination date occurs during the term of the employment agreement and within 90 days prior to a change in control, and if the termination is a qualifying termination and Ms. HoltDr. Bodor reasonably demonstrates within 30 days after the change in control that the qualifying termination arose in connection with or in anticipation of the change in control, then, we will: pay Dr. Bodor an amount equal to two times his annualized base salary, payable in a lump sum; pay Dr. Bodor an amount equal to two times his target annual cash incentive bonus for the calendar year in which his employment with us terminates, payable in a lump sum; TABLE OF CONTENTS pay our share of premiums due for Dr. Bodor and his eligible dependents for 18 months of coverage under COBRA, if timely elected by Dr. Bodor; and pay Dr. Bodor an amount equal to the value of any unvested equity-based awards held by him as of the termination date that were forfeited as of the termination date. If a change in control occurs during the term of his employment agreement and Dr. Bodor’s termination date occurs upon a change in control during the transition period, and if the termination is a qualifying termination, then, subject certain conditions: we will pay Dr. Bodor an amount equal to two times his annualized base salary in substantially equal installments in accordance with the Company’s regular payroll practices over the 24-month period immediately following the termination date, subject to limited exceptions; we will pay Dr. Bodor an amount equal to two times his target annual cash incentive bonus for the calendar year in which his employment with us terminates, payable in a lump sum; we will pay our share of premiums due for Dr. Bodor and his eligible dependents under COBRA for the first 18 months of COBRA coverage, if timely elected by Dr. Bodor; and if Dr. Bodor has any unvested equity-based awards as of the termination date, all such unvested awards will vest immediately on Dr. Bodor’s termination date. If Dr. Bodor’s employment with us is terminated due to his death or disability, then, in addition to payment of accrued but unpaid salary and benefits, Dr. Bodor (or his estate) will be entitled to receive a pro rata portion of his target annual cash incentive award for the then-current year based on the portion of the year he was employed by us prior to termination. In the event that the severance pay and other benefits provided for in the CEO Agreement or otherwise payable to Dr. Bodor constitute Section 280G “parachute payments” and would be subject to excise taxes, then such benefits will be either be delivered in full or delivered as to such lesser extent which would result in no portion of such severance pay and other benefits being subject to excise taxes, whichever results in the receipt by Dr. Bodor of the greatest amount of benefits. Severance Agreements with Other Named Executive Officers We have entered into severance agreements with each of our other named executive officers. If we voluntarily terminate the employment of any such officer without “cause” (and other than as a result of his death or disability) or if he resigns for “good reason,” as defined in the applicable severance agreement, provided that such officer complies with certain conditions (including execution of a general waiver and release of claims), then he will be entitled to the benefits summarized below. If such officer’s employment with us terminates at a time other than during the period from the date of a change in control to the 18-month anniversary of the Change in Control (the “transition period”), and if the termination is a qualifying termination, then, subject to certain conditions: we will pay such officer an amount equal to his annualized base salary (the “severance”) in substantially equal installments in accordance with our regular payroll practices over the 12-month period immediately following the termination date, subject to limited exceptions; we will pay such officer a pro rata cash incentive payment amount, payable in a lump sum; we will pay our share of premiums due for such officer and his eligible dependents for the first 12 months of coverage under COBRA (the “COBRA benefit”); and if such officer has any unvested equity-based awards as of the termination date, a pro rata portion of any unvested awards scheduled to vest on the next anniversary of the grant date will vest immediately. If such officer’s termination date occurs during the transition period, and if the termination is a qualifying termination, then, subject to certain conditions we will pay the severance and COBRA benefits described above, plus: we will pay such officer an amount equal to the sum of (i) his target annual cash incentive payment for the calendar year in which his employment with us terminates plus (ii) a pro rata cash incentive payment amount, payable in a lump sum; and if such officer has any unvested equity-based awards as of the termination date, all such unvested awards will vest immediately on his termination date. TABLE OF CONTENTS If such officer’s termination date occurs within 90 days prior to a change in control, and if the termination is a qualifying termination and he reasonably demonstrates within 30 days after the change in control that the qualifying termination arose in connection with or in anticipation of the change in control, then, in addition to the compensation Ms. Holthe otherwise is entitled to receive in connection with a qualifying termination (not during a transition period), we will: | ●
| pay Ms. Holtpay such officer an amount equal to one times her annualized base salary, payable in a lump sum;
|
| ●
| pay Ms. Holt an amount equal to one times her target annual cash incentive payment for the calendar year in which her employment with us terminates, payable in a lump sum;
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| pay our share of premiums due for Ms. Holt and her eligible dependents for the first six months of coverage under COBRA if elected by Ms. Holt; and
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| pay Ms. Holt an amount equal to the value of any unvested equity-based awards held by her as of the termination date that were forfeited as of the termination date.
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If Ms. Holt’s employment with us is terminated due to her death or disability, then, in addition to payment of accrued but unpaid salary and benefits, Ms. Holt will be entitled to receive a pro rata portion of herhis target annual cash incentive awardpayment for the then-currentcalendar year based on the portion of the year she was employed by us prior to termination.
John A. Way Severance Agreement
In connection with Mr. Way’s hiring, we entered into a severance agreement with him providing that if we voluntarily terminatein which his employment without “cause” (and other than as a result of his disability) or if he resigns for “good reason,” each as defined in the severance agreement, provided that Mr. Way complies with certain conditions (including execution of a general waiver and release of claims), then he will be entitled to the benefits summarized below.
If Mr. Way’sher employment with us terminates, at a time other than during the transition period, and if the termination is a qualifying termination, then, subject to certain conditions:
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| we will pay Mr. Way an amount equal to his annualized base salary in substantially equal installments in accordance with our regular payroll practices over the 12-month period immediately following the termination date, subject to limited exceptions;
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| we will pay Mr. Way a pro rata cash incentive payment amount, payable in a lump sum;
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| we will pay our share of premiums due for Mr. Way and his eligible dependents for the first 12 months of coverage under COBRA; and
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| if Mr. Way has any unvested equity-based awards as of the termination date, a pro rata portion of any unvested awards scheduled to vest on the next anniversary of the grant date will vest immediately.
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If Mr. Way’s termination date occurs upon a change in control or during the transition period, and if the termination is a qualifying termination, then, subject to certain conditions:
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| we will pay Mr. Way an amount equal to his annualized base salary in substantially equal installments in accordance with our regular payroll practices over the 12-month period immediately following the termination date, subject to limited exceptions;
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| we will pay Mr. Way an amount equal to the sum of (i) his target annual cash incentive payment for the calendar year in which his employment with us terminates plus (ii) a pro rata cash incentive payment amount, payable in a lump sum;
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| we will pay our share of premiums due for Mr. Way and his eligible dependents for the first 12 months of coverage under COBRA; and
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| if Mr. Way has any unvested equity-based awards as of the termination date, all such unvested awards will vest immediately on Mr. Way’s termination date.
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If Mr. Way’s termination date occurs within 90 days prior to a change in control, and if the termination is a qualifying termination and Mr. Way reasonably demonstrates within 30 days after the change in control that the qualifying termination arose in connection with or in anticipation of the change in control, then, in addition to the compensation Mr. Way otherwise is entitled to receive in connection with a qualifying termination, we will:
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| pay Mr. Way an amount equal to his target annual cash incentive payment for the calendar year in which his employment with us terminates, payable in a lump sum; and
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| pay Mr. Way an amount equal to the value of any unvested equity-based awards held by him as of the termination date that were forfeited as of the termination date.
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John Judd Employment Agreement
In June 2012, we renewed the employment agreement with Mr. Judd, our CFO at that time. Mr. Judd retired in January 2015. Mr. Judd’s agreement provided that if, within 18 months after a change in control of our company, we terminated Mr. Judd’s employment without cause, or Mr. Judd terminated his employment for “good reason,” then he would be entitled to severance benefits so long as he complied with an ongoing confidentiality obligation and a two-year non-competition obligation. The severance benefits available to Mr. Judd consist of:
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| a lump sum cash payment in an amount equal to his annual base salary in effect immediately prior to the change in control plus his target annual incentive payment for the year in which the change in control occurs; and
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| our continued payment for 12 months after such termination of the employer’s portion of the premiums for group health plan coverage for Mr. Judd and his dependents if he elects continued COBRA coverage under our plan.
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OtherSeverance Agreements
In February 2013, we entered into severance agreements with certain of our executive officers located in the United States, except we did not enter into a severance agreement with Mr. Cleveland, our CEO at the time, Mr. Judd, our CFO at the time, or Mr. Lukis, our Chairman and Chief Technology Officer at the time. In addition, in March 2013 we entered into a severance agreement with Mr. Tumelty, our executive officer in the United Kingdom. Under these agreements, if the executive officer’s employment is terminated by us without cause or if the executive voluntary resigns for good reason (both as defined in the severance agreement), the executive officer will be entitled to the following severance pay and benefits: (i) a cash payment equal to one times the executive officer’s annualized base salary generally payable in substantially equal installments in accordance with our regular payroll practices over a 12-month period; (ii) a pro rata cash incentive payment amount calculated in accordance with the severance agreement payable in a lump sumsum; and (iii) continuation of certain benefits pursuant to COBRA for 12 months. In addition, notwithstanding any language in any stock option agreement under the LTIP or in the LTIP to the contrary, a pro rata portion, as calculated in the severance agreement, of the unvested options to purchase shares of our stock held by
pay such executive officer that are scheduled to vest on the next anniversary date will vest. An executive officer’s receipt of these severance pay and benefits will be conditioned on such executive’s execution of a release of claims against our company.2000 Plan
Under the 2000 Plan and the option award agreements under that plan, upon the death or disability of a named executive officer, all outstanding options vest in full, and the options remain exercisable until the earlier of (1) one year after the date employment ends or (2) the expiration date of the option. If employment ends for a reason other than death or disability, the then currently vested and exercisable portion of an option will remain exercisable until the earlier of (1) three months after the date employment ends or (2) the expiration date of the option, and may be exercised to the extent it was exercisable at or before employment ended.
The 2000 Plan provides that stock option awards may become fully vested and exercisable upon the occurrence of a change in control of our company, as defined in the 2000 Plan, if provided in the award agreement or by the compensation committee. Generally, stock option award agreements under our 2000 Plan provide that option awards to employees will become fully vested and exercisable upon the occurrence of a change in control of our company. The 2000 Plan also provides our compensation committee with the discretion to cancel some or all outstanding stock options in connection with a change in control that does not involve a change in the majority of the members of our board of directors, and pay each holder of a canceled option an amount in cash equal to the excessvalue of any unvested equity-based awards held by him as of the fair market valuetermination date that were forfeited as of the shares subject to the option immediately prior to the change in control over the aggregate exercise price of the shares subject to the option, which we refer to as the “option spread.” termination date.
In addition, in the event of a merger, consolidation or statutory share exchange involving our company, a sale of substantially all of its assets, or its liquidation or dissolution, any of which are referred to as an “event,” then our compensation committee will have the discretion to declare, prior to the event that the exercisability of all optionsseverance pay and other benefits provided for in the severance agreements constitute Section 280G “parachute payments” and would be subject to excise taxes, then such benefits will be accelerated prioreither be delivered in full or delivered as to such lesser extent which would result in no portion of such severance pay and other benefits being subject to excise taxes, whichever results in the event and that all options will be canceled at the timereceipt by executive of the event. The compensation committee may also, in such circumstances, pay each holder of a canceled option an amount in cash equal to the option spread, calculated using the value of the per share proceeds to be received by our shareholders upon the occurrence of the event. Alternatively, if the event is a merger, consolidation or statutory share exchange, our compensation committee may act to protect outstanding options by substituting for them either options to purchase voting common stock of the surviving corporation (or its parent) or voting common stock of the surviving corporation (or its parent) that have a fair market value equal to the option spread, calculated using the value of the per share proceeds to be received by our shareholders upon the occurrence of the event.The 2000 Plan provides that in the event any payments or benefits provided under our 2000 Plan taken together with other payments an individual may receive in connection with a change in control may constitute a “parachute payment” under Section 280G of the Internal Revenue Code, such payments or benefits may be reduced to provide the individual with the best after-tax result. Specifically, the individual will receive either a reduced amount so that the excise tax imposed under Section 4999 of the Internal Revenue Code is not triggered, or the individual will receive the fullgreatest amount of the payments and benefits and then be liable for any excise tax.
LTIP
Under the LTIP, upon termination for cause, all unvested awards and all unexercised stock options and SARs will be forfeited. Upon termination due to death or disability, any unvested portion of an award will immediately become vested and exercisable in full and options and SARs will remain exercisable for twelve months after the date of termination. Upon termination for any other reason, the then currently vested and exercisable portion of any option or SAR will remain exercisable for three months after termination (unless the participant dies during that three-month period, in which case the post-termination exercise period will be extended to twelve months). Any post-termination exercise period may, however, be extended by the compensation committee if the issuance of shares upon such exercise would then violate applicable registration requirements under the Securities Act. Any such post-termination exercise period may not, however, extend beyond the expiration date of any option or SAR. After giving effect to any accelerated vesting as provided above, all unvested and unexercisable portions of outstanding awards will be forfeited in connection with a termination of service. Under the LTIP, unless otherwise provided in an award agreement, if a change in control, as defined in the LTIP, occurs that involves a sale of all or substantially all of our assets or a merger, consolidation, reorganization or statutory share exchange involving our company,Company, our board of directors or compensation committee are to take one or more of the following actions with respect to outstanding awards under the LTIP: | ●
| Arrange for the surviving or successor entity to continue, assume or replace some or all of the outstanding awards under the LTIP.
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| Accelerate the vesting and exercisability of outstanding awards prior to and conditioned upon the occurrence of the event and provide that unexercised options and SARs will be terminated at the effective time of the event.
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| Cancel any outstanding award in exchange for payment to the holder of the amount of the consideration that would have been received in the event for the number of shares subject to the award, less the aggregate exercise price (if any) of the award.
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| Provide that if an award is continued, assumed or replaced in connection with such an event and if within 18 months after the event a participant experiences an involuntary termination of service other than for cause, the participant’s outstanding awards will vest in full, will immediately become fully exercisable and will remain exercisable for one year following termination.
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| Make certain adjustments to awards as provided in the LTIP.
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Arrange for the surviving or successor entity to continue, assume or replace some or all of the outstanding awards under the LTIP. Accelerate the vesting and exercisability of outstanding awards prior to and conditioned upon the occurrence of the event and provide that unexercised options and SARs will be terminated at the effective time of the event. Cancel any outstanding award in exchange for payment to the holder of the amount of the consideration that would have been received in the event for the number of shares subject to the award, less the aggregate exercise price (if any) of the award. Provide that if an award is continued, assumed or replaced in connection with such an event and if within 18 months after the event a participant experiences an involuntary termination of service other than for cause, the participant’s outstanding awards will vest in full, will immediately become fully exercisable and will remain exercisable for one year following termination. Make certain adjustments to awards as provided in the LTIP. In the event of a change in control that does not involve a merger, consolidation, reorganization, statutory share exchange or sale of all or substantially all of our company’sCompany’s assets, our board of directors or compensation committee, in its discretion, may provide (1) that any outstanding award will become fully vested and exercisable upon the change in control or upon the termination of the participant’s service without cause within 18 months after the change in control, (2) that any outstanding option or SAR will remain exercisable during all or some specified portion of its remaining term, or (3) that any outstanding award will be canceled in exchange for payment to the participant of the amount of the consideration that would have been received in the change in control for the number of shares subject to the award less the aggregate exercise price (if any) of the award. TABLE OF CONTENTS The form of option award agreement approved by the compensation committee for use under the LTIP provides that if, within 12 months of a change in control, an optionee’s employment is involuntarily terminated without cause or the optionee resigns for good reason, and if the option or a replacement thereof then remains outstanding, it will immediately become exercisable in full and remain exercisable for one year following termination. The form of RSU award agreement approved by the compensation committee for use under the LTIP provides that if, within 12 months of a change in control, a participant’s employment is involuntarily terminated without cause or the participant resigns for good reason, and if the award then remains outstanding, any unvested portion of the RSUs or a replacement thereof will immediately become vested. The form of PSU award agreement approved by the compensation committee for use under the LTIP provides that if a change in control of our Company occurs before the scheduled vesting dates of the award, the performance period will be truncated and a pro rata portion of the number of PSUs determined to have been earned during the truncated performance period will vest as of the date of the change in control. The pro rata portion will be based on the portion of original performance period that elapsed prior to the date of the change in control. The LTIP provides that in the event any payments or benefits provided under the LTIP taken together with other payments an individual may receive in connection with a change in control may constitute a “parachute payment” under Section 280G of the Internal Revenue Code, such payments or benefits may be reduced to provide the individual with the best after-tax result. Specifically, the individual will receive either a reduced amount so that the excise tax imposed under Section 4999 of the Internal Revenue Code is not triggered, or the individual will receive the full amount of the payments and benefits and then be liable for any excise tax. Potential Payments
The following table sets forth quantitative information with respect to potential payments to be made to each of the named executive officers or their beneficiaries upon termination in various circumstances, assuming termination on December 31, 2014.2021. In the following table, unless indicated otherwise, all equity is listed at its dollar value as of December 31, 20142021 and all stock options are valued based on the difference between $67.16,$51.35, the closing price for one share of our common stock on the NYSE on December 31, 2014,2021, and the applicable exercise price. | | Robert Bodor | | | | | | | | | | | | | | | | | | | | | | | | | Base Salary Payment | | | 500,000 | | | 1,000,000 | | | 1,000,000 | | | — | | | — | | | — | | | — | | | | Incentive Payment | | | 473,277 | | | 946,554 | | | 946,554 | | | 473,277 | | | 473,277 | | | — | | | — | | | | Benefits Continuation | | | 5,357 | | | 8,036 | | | 8,036 | | | — | | | — | | | — | | | — | | | | Accelerated Option Vesting | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Accelerated RSU Vesting | | | 270,615 | | | 671,349 | | | 671,349 | | | 671,349 | | | 671,349 | | | — | | | 270,615 | | | | Accelerated PSU Vesting(3) | | | — | | | — | | | — | | | 68,159 | | | — | | | — | | | 68,159 | | | | Daniel Schumacher | | | | | | | | | | | | | | | | | | | | | | | | | Base Salary Payment | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Incentive Payment | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Benefits Continuation | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Accelerated Option Vesting | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Accelerated RSU Vesting | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Accelerated PSU Vesting(3) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Arthur R. Baker III | | | | | | | | | | | | | | | | | | | | | | | | | Base Salary Payment | | | 318,558 | | | 318,558 | | | 318,558 | | | — | | | — | | | — | | | — | | | | Incentive Payment | | | 159,279 | | | 318,558 | | | 318,558 | | | — | | | — | | | — | | | — | | | | Benefits Continuation | | | 4,747 | | | 4,747 | | | 4,747 | | | — | | | — | | | — | | | — | | | | Accelerated Option Vesting | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Accelerated RSU Vesting | | | 231,948 | | | 509,391 | | | 509,391 | | | 509,391 | | | 509,391 | | | — | | | — | | | | Accelerated PSU Vesting(3) | | | — | | | — | | | — | | | 68,159 | | | — | | | — | | | — | | | | Michael R. Kenison | | | | | | | | | | | | | | | | | | | | | | | | | Base Salary Payment | | | 340,000 | | | 340,000 | | | 340,000 | | | — | | | — | | | — | | | — | | | | Incentive Payment | | | 145,898 | | | 291,795 | | | 291,795 | | | — | | | — | | | — | | | — | | | | Benefits Continuation | | | 12,797 | | | 12,797 | | | 12,797 | | | — | | | — | | | — | | | — | | | | Accelerated Option Vesting | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Accelerated RSU Vesting | | | 128,940 | | | 299,266 | | | 299,266 | | | 299,266 | | | 299,266 | | | — | | | — | | | | Accelerated PSU Vesting(3) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Name | | Termination Without Cause or For Good Reason Not During Transition Period or in Anticipation of Change in Control | | | Termination Without Cause or For Good Reason Upon a Change in Control or During Transition Period(1)(2) | | | Termination Without Cause or For Good Reason in Anticipation of Change in Control(3) | | | Death or Disability | | | Change in ControlWithout Termination(1) | | | Retirement | | Victoria M. Holt | | | | | | | | | | | | | | | | | | | Base SalaryPayment | | $500,000 | | | $1,000,000 | | | $1,000,000 | | | — | | | — | | | — | | Incentive Payment | | $500,000 | | | $1,000,000 | | | $1,000,000 | | | $449,315 | | | — | | | — | | BenefitsContinuation | | $12,168 | | | $18,252 | | | $18,252 | | | — | | | — | | | — | | AcceleratedRestricted StockVesting | | $192,041 | | | $854,812 | | | $854,812 | | | $854,812 | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | Bradley A. Cleveland(4) | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | John A. Way | | | | | | | | | | | | | | | | | | | Base SalaryPayment | | $290,000 | | | $290,000 | | | $290,000 | | | — | | | — | | | — | | Incentive Payment | | $217,500 | | | $435,000 | | | $435,000 | | | — | | | — | | | — | | BenefitsContinuation | | $12,168 | | | $12,168 | | | $12,168 | | | — | | | — | | | — | | Accelerated OptionVesting | | $456 | | | $27,775 | | | $27,775 | | | $27,775 | | | — | | | — | | Accelerated RSU Vesting | | $3,627 | | | $213,569 | | | $213,569 | | | $213,569 | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | John R. Judd(5) | | | | | | | | | | | | | | | | | | | Base Salary Payment | | n/a | | | n/a | | | n/a | | | n/a | | | n/a | | | — | | Incentive Payment | | n/a | | | n/a | | | n/a | | | n/a | | | n/a | | | — | | Benefits Continuation | | n/a | | | n/a | | | n/a | | | n/a | | | n/a | | | — | | Accelerated Option Vesting | | n/a | | | n/a | | | n/a | | | n/a | | | n/a | | | $114,118 | | Accelerated RSU Vesting | | n/a | | | n/a | | | n/a | | | n/a | | | n/a | | | $25,166 | | | | | | | | | | | | | | | | | | | | | | Donald G. Krantz | | | | | | | | | | | | | | | | | | | Base Salary Payment | | $278,000 | | | $278,000 | | | $278,000 | | | — | | | — | | | — | | Incentive Payment | | $208,500 | | | $208,500 | | | $208,500 | | | — | | | — | | | — | | Benefits Continuation | | $5,760 | | | $5,760 | | | $5,760 | | | — | | | — | | | — | | Accelerated Option Vesting | | $155,302 | | | $1,366,445 | | | $155,302 | | | $1,802,889 | | | $1,245,300 | | | — | | Accelerated RSU Vesting | | $26,461 | | | $26,461 | | | $26,461 | | | $149,767 | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | Jacqueline D. Schneider | | | | | | | | | | | | | | | | | | | Base Salary Payment | | $255,000 | | | $255,000 | | | $255,000 | | | — | | | — | | | — | | Incentive Payment | | $191,250 | | | $191,250 | | | $191,250 | | | — | | | — | | | — | | Benefits Continuation | | $12,168 | | | $12,168 | | | $12,168 | | | — | | | — | | | — | | Accelerated Option Vesting | | $143,916 | | | $951,345 | | | $143,916 | | | $1,387,789 | | | $830,200 | | | — | | Accelerated RSU Vesting | | $26,461 | | | $26,461 | | | $26,461 | | | $149,767 | | | — | | | — | | | | | | | | | | | | | | | | | | | | | | John B. Tumelty(6) | | | | | | | | | | | | | | | | | | | Base Salary Payment | | $207,299 | | | $207,299 | | | $207,299 | | | — | | | — | | | — | | Incentive Payment | | $103,650 | | | $103,650 | | | $103,650 | | | — | | | — | | | — | | Benefits Continuation | | $1,560 | | | $1,560 | | | $1,560 | | | — | | | — | | | — | | Accelerated Option Vesting | | $155,302 | | | $1,366,445 | | | $155,302 | | | $1,802,889 | | | $1,245,300 | | | — | | Accelerated RSU Vesting | | $39,692 | | | $39,692 | | | $39,692 | | | $224,650 | | | — | | | — | |
TABLE OF CONTENTS | | Bjoern Klaas | | | | | | | | | | | | | | | | | | | | | | | | | Base Salary Payment | | | 336,635 | | | 336,635 | | | 336,635 | | | — | | | — | | | — | | | — | | | | Incentive Payment | | | 168,318 | | | 336,635 | | | 336,635 | | | — | | | — | | | — | | | — | | | | Benefits Continuation | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Accelerated Option Vesting | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Accelerated RSU Vesting | | | 135,205 | | | 303,120 | | | 303,120 | | | 303,120 | | | 303,120 | | | — | | | — | | | | Accelerated PSU Vesting(3) | | | — | | | — | | | — | | | 45,051 | | | — | | | — | | | — | | | | Victoria M. Holt | | | | | | | | | | | | | | | | | | | | | | | | | Base Salary Payment | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Incentive Payment | | | 108,277 | | | 216,554 | | | 108,277 | | | — | | | — | | | — | | | — | | | | Benefits Continuation | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Accelerated Option Vesting | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Accelerated RSU Vesting | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Accelerated PSU Vesting(3) | | | — | | | — | | | — | | | 429,645 | | | — | | | — | | | 429,645 | | | | John A. Way(4) | | | | | | | | | | | | | | | | | | | | | | | | | Base Salary Payment | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Incentive Payment | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Benefits Continuation | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Accelerated Option Vesting | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Accelerated RSU Vesting | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | Accelerated PSU Vesting(3) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
(1)
| (1)
| The stock option award agreements under our 2000 Plan generally provide that option awards will become fully vested and exercisable upon the occurrence of a change in control. The LTIP provides that, in connection with a change in control, we may, among other actions, (i) arrange for the surviving or successor entity to continue, assume or replace outstanding awards under the LTIP, (ii) accelerate the vesting and exercisability of outstanding awards upon the occurrence of the change in control or (iii) cancel outstanding awards in exchange for payment of the amount of consideration that would have been received in the change in control for the number of shares subject to the award, less the aggregate exercise price (if any) of the award. The amounts shown assume assumptionacceleration of all outstanding awards under the LTIP in connection with a change in control.
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(2)
| (2)
| Amounts for Ms. Schneider and Messrs. Krantz and Tumelty in this column for accelerated option vesting and accelerated RSU vesting reflect the value of the awards that would be accelerated in connection with a change in control. The severance agreements with those officers do not include provisions providing for accelerated vesting in the event of termination during a transition period following a change in control.
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| (3)
| Pursuant to agreements between us and Ms. Holt and Mr. Way, Ms. Holt and Mr. Way areeach of our named executive officers each such named executive officer is entitled to the payments and benefits summarized above if theirhis or her employment terminates within 90 days prior to a change in control, and if the termination is a without cause or for good reason and the executive reasonably demonstrates within 30 days after the change in control that the qualifying termination arose in connection with or in anticipation of the change in control. |
(3)
| (4)
| Mr. Cleveland retired and ceased serving as one of our executive officers in February 2014.
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| (5)
| Mr. Judd ceased serving as one of our officers on December 1, 2014 and retired effective January 2, 2015. In connection with Mr. Judd’s expected retirement following 2014, and in recognition of his significant contribution to our success becoming and operating as a public company, the compensation committee accelerated the vesting of a portionUpon termination of the unvested equity awards Mr. Judd had outstanding asexecutive officer’s employment by us without cause or by the date of his retirement. Theexecutive for good reason or due to retirement or disability, a pro rata portion of the awards accelerated was determined based(based on the number of shares scheduled to vest on each award’s next vesting date in 2015 and the portion of the vesting year Mr. Judd was employed by usperformance period that elapsed prior to his retirement.
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| (6)
| The base salary payment, incentive payment and benefits continuation amounts due to Mr. Tumelty basedthe date of termination) of the number of PSUs that would have been earned at the end of the applicable performance periods if employment had continued will vest on the assumptions described above have been into U.S. dollars using an exchange ratescheduled vesting date. Because the PSU awards are not accelerated under such circumstances, and because the determination regarding the number of £1.00 = $1.559, which wasoutstanding PSUs to be earned cannot be made until after the exchange rateapplicable performance periods end on December 31, 2014.
2022 and 2023, no accelerated values for outstanding PSU awards are included in the table columns relating to retirement, disability and without cause and good reason terminations. |
Upon a change in control of our Company, the performance period for the PSUs is truncated and a pro rata portion (based on the portion of original performance period that elapsed prior to the date of the change in control) of the number of PSUs determined to have been earned during the truncated performance period vests as of the date of the change in control. The amounts included in the table reflect the PSUs earned assuming the applicable performance periods had ended on December 31, 2021, prorated based on the portion of the original performance periods that had elapsed prior to December 31, 2021. Upon the executive officer’s death, a pro rata portion of the target number of PSUs vest. (4)
| Mr. Way was not entitled to any severance benefits due to his resignation effective November 30, 2021. |
We determined that the 2021 annual total compensation of the median of all our employees who were employed as of December 31, 2020, other than our CEO, Robert Bodor, was $49,852; Dr. Bodor’s 2021 annual total compensation was $3,022,116; and the ratio of these amounts was 61-to-1. For our 2021 CEO pay ratio analysis, we determined that we could use the same median employee that we identified in 2020, as permitted by SEC rules. There has been no change in either our employee population or our employee compensation arrangements that we believe would significantly impact our 2021 pay ratio disclosure. Similarly, there has been no change in our median employee’s circumstances that we reasonably believe would result in a significant change to our 2021 pay ratio disclosure. As of December 31, 2020, our total population consisted of 2,408 employees. To identify the median compensated employee, we used a Consistently Applied Compensation Measure (CACM) defined as the aggregation of base salary or regular wages and overtime pay. Further, we annualized salary and wages for individuals not employed for a full year. This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates TABLE OF CONTENTS and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
COMPENSATION COMMITTEE REPORT
The compensation committee assists the board of directors in establishing a philosophy and policies regarding executive and director compensation, provides oversight of the administration of our director and executive compensation programs and administers our equity-based plans, reviews the compensation of directors, named executive officers and senior management and prepares any report on executive compensation required by the rules and regulations of the SEC or other regulatory body, including this compensation committee report. In performing its oversight responsibilities, the compensation committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on the review and discussions, we havethe compensation committee has recommended to the board that the Compensation Discussion and Analysis be included in this Proxy Statement for the 2015 Annual Meeting of Shareholders.Statement. Rainer Gawlick, Chair Douglas W. Kohrs
Brian K. Smith
Compensation Risk Assessment
Moonhie Chin
Donald G. Krantz COMPENSATION RISK ASSESSMENT Management and the compensation committee, with the assistance of the compensation consultant, assess the risk of the employee compensation policies and practices, including those that apply to our executive officers. Management has reviewed our compensation plans, program design and existing practices as well as global and local compensation policies, programs and practices applicable to all employees. Management then analyzed the likelihood and magnitude of potential risks, focusing on whether any of our compensation policies and practices varied significantly from our overall risk and reward structure, whether any such policies and practices incentivized individuals to take risks that were inconsistent with our goals, and whether any such policies and practices have resulted in establishing an inappropriate balance between short-term and long-term incentive arrangements. Management has discussed the findings of the risk assessment with the compensation committee. Based on the assessment, we have concluded that our compensation policies and practices are aligned with the interests of shareholders, appropriately reward pay for performance and do not create risks that are reasonably likely to have a material adverse effect on our company.Conflict of Interest Analysis
Company. CONFLICT OF INTEREST ANALYSIS Our compensation committee has considered the relationships that its compensation consultant has had with our company,Company, the members of the compensation committee and our executive officers, as well as the policies that such compensation consultant has in place to maintain its independence and objectivity, and has determined that the work performed by itsthe compensation consultant has raised no conflicts of interest. TABLE OF CONTENTS Our director compensation program is designed to compensate our non-employee directors fairly for work required for a company of our size and scope and to align our non-employee directors’ interests with the long-term interests of our shareholders. Directors who are also our employees receive no additional compensation for serving on our board of directors. Except as described below,The compensation committee periodically reviews the compensation arrangements for our non-employee directors receivedand makes recommendations to our board of directors. In September 2021, the following compensation forcommittee, with the advice of its compensation consultant, conducted a review of our director compensation program. This review analyzed the structure and the overall level and mix of compensation delivered by our director compensation program as compared to our peer group. In addition, with assistance from the compensation consultant, in May 2018 the compensation committee revised the non-employee director compensation program to provide the directors with the option to elect whether to receive their service during 2014:annual equity award in the form of restricted stock units or deferred stock units (DSUs). This change was designed to provide flexibility to our directors and to also make our director compensation program more consistent with those of the companies in our peer group. A summary of our non-employee director compensation program follows: Annual cash retainer: | | | $35,00050,000 | | | | | Annual
Additional annual cash retainer for lead independent director and Chairman: | | | $15,00050,000 ($80,000 in 2022) | | | | | Annual cash retainer for committee chairs: | | | Audit Committee: $15,000$20,000
Compensation Committee: $10,000
$15,000 Nominating and Governance Committee: $7,500$10,000 |
| | | | Annual cash retainer for other committee members: | | | Audit Committee: $7,500$8,000
Compensation Committee: $5,000$6,000
Nominating and Governance Committee: $3,750$4,000 | | | | | Annual equity award: | | Restricted stock units with $50,000
| $145,000 grant date fair value andof restricted stock options with $50,000 grant date fair value, becomingunits or deferred stock units (at the director’s election) which become vested or exercisable (as applicable) in full on the earlier of the first anniversary of the grant date or the date of the next annual meeting of our shareholders | | | | | New director equity award: | | Fully-vested shares of common
| Restricted stock units or deferred stock units (at the director’s election) with a$145,000 grant date fair value, of $100,000 granted and vested on the date the director is first elected to the board | | | | | | | | In addition, a grant of pro-rata portion of the restricted stock units or deferred stock units (at the director’s election) which was granted to directors at the most recent annual meeting of shareholders, which will vest at the following annual meeting of shareholders | | | | | Meeting fees: | | | Generally none, but compensation committee has the discretion to provide for meeting fees if the number of board of directors meetings exceeds eight per year or if the number of meetings of any committee exceeds six per year |
Mr. Lukis did not participate in the equity portions of our non-employee director compensation program for 2014 in light of the significant equity interest he historically has had in our company as our founder. Bradley A. Cleveland participated in our non-employee director compensation program for the portion of the year he served as a director and was not an employee, and the compensation he received under our non-employee director compensation program for 2014 is disclosed in the Summary Compensation Table above.
We have stock ownership guidelines for our non-employee directors who are not significant shareholders. Each such director is expected to own shares of our common stock with a fair market value of at least threefive times the amount of the annual board member retainer, and to achieve this ownership level within three years after first joining our board of directors. Until a director has satisfied this ownership guideline, the director may not dispose of any shares of our common stock, except for sales whosewhich proceeds will be used to pay the exercise price in connection with an option exercise or to pay applicable income taxes in connection with the vesting, exercise or payout of any equity-based award. For purposes of this guideline, shares subject to an unvested or unexercised equity-based award will be counted as owned shares. All of our directors who are not significant shareholders have met these guidelines.
TABLE OF CONTENTS Non-Employee Director Compensation for 20142021 The following table sets forth information concerning annual compensation for our non-employee directors during the year ended December 31, 2014:Name | | Fees Earned or
Paid in Cash ($) | | | Stock Awards ($)(1) | | | Option Awards ($)(1) | | | Total
($) | | Matthew C. Blodgett(2) | | | 15,495 | | | | — | | | | — | | | | 15,495 | | Rainer Gawlick | | | 45,000 | | | | 50,019 | | | | 50,001 | | | | 145,020 | | John B. Goodman | | | 50,000 | | | | 50,019 | | | | 50,001 | | | | 150,020 | | Douglas W. Kohrs | | | 42,297 | | | | 50,019 | | | | 50,001 | | | | 142,317 | | Margaret A. Loftus(3) | | | 15,010 | | | | — | | | | — | | | | 15,010 | | Lawrence J. Lukis | | | 35,000 | | | | — | | | | — | | | | 35,000 | | Brian K. Smith | | | 45,563 | | | | 50,019 | | | | 50,001 | | | | 145,583 | | Sven A. Wehrwein | | | 68,750 | | | | 50,019 | | | | 50,001 | | | | 168,770 | |
| | Archie C. Black | | | 106,000 | | | 145,000 | | | — | | | 251,000 | | | | Sujeet Chand | | | 60,000 | | | 145,000 | | | — | | | 205,000 | | | | Moonhie Chin | | | 54,000 | | | 145,000 | | | — | | | 199,000 | | | | Rainer Gawlick | | | 73,000 | | | 145,000 | | | — | | | 218,000 | | | | John B. Goodman(1) | | | 64,000 | | | 145,000 | | | — | | | 209,000 | | | | Stacy Greiner(2) | | | 6,319 | | | 189,716 | | | — | | | 196,035 | | | | Donald G. Krantz | | | 50,000 | | | 145,000 | | | — | | | 195,000 | | | | Sven A. Wehrwein | | | 74,000 | | | 145,000 | | | — | | | 219,000 | |
(1)
| (1)
| Amounts shown in this column representMr. Goodman’s term ended on the grant date fair values computed in accordance with ASC Topic 718, Compensation—Stock Compensation (ASC 718) utilizingof the assumptions discussed in Note 12 to our Consolidated Financial Statements for the year ended December 31, 2014 contained in our2022 Annual Report on Form 10-K for the year ended December 31, 2014, and disregarding the effects of any estimates of forfeitures related to service-based vesting.
Meeting. |
(2)
| (2)
| Mr. Blodgett did not seek reelection at our 2014 Annual MeetingNote that Ms. Greiner was appointed to the board of Shareholders and his service as a director terminated upon the conclusion of such annual meeting.
directors on November 15, 2021. |
| (3)
| Ms. Loftus did not seek reelection at our 2014 Annual Meeting of Shareholders and her service as a director terminated upon the conclusion of such annual meeting.
|
Non-Employee Directors –- Outstanding Equity Awards at 20142021 Fiscal Year-End The following table summarizes for each of our non-employee directors the number of shares underlying unexercised option awards, unvested RSUs and DSUs, in each case, outstanding as of December 31, 2014:2021: | | Archie C. Black | | | — | | | 1,520 | | | — | | | | Sujeet Chand | | | — | | | 1,520 | | | — | | | | Moonhie Chin | | | — | | | 1,520 | | | — | | | | Rainer Gawlick | | | 4,055 | | | 1,520 | | | — | | | | John B. Goodman | | | — | | | 1,520 | | | — | | | | Stacy Greiner | | | — | | | 767 | | | — | | | | Donald G. Krantz | | | — | | | — | | | 1,520 | | | | Sven A. Wehrwein | | | 6,055 | | | 1,520 | | | — | |
Name | | Number of Shares
Underlying UnexercisedOptions | | | Number of Shares
Subject to Unvested RSUs | | Matthew C. Blodgett(1) | | | — | | | | — | | Rainer Gawlick | | | 25,708 | | | | 798 | | John B. Goodman | | | 7,446 | | | | 798 | | Douglas W. Kohrs | | | 9,208 | | | | 798 | | Margaret A. Loftus(2) | | | — | | | | — | | | Lawrence J. Lukis | | | — | | | | — | | Brian K. Smith | | | 4,446 | | | | 798 | | Sven A. Wehrwein | | | 9,208 | | | | 798 | |
| (1)
| Mr. Blodgett did not seek reelection at our 2014 Annual Meeting of Shareholders and his service as a director terminated upon the conclusion of such annual meeting.
|
| (2)
| Ms. Loftus did not seek reelection at our 2014 Annual Meeting of Shareholders and her service as a director terminated upon the conclusion of such annual meeting.
|
TABLE OF CONTENTS PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM
The audit committee has selected Ernst & Young LLP (“E&Y”) as our independent registered public accounting firm for fiscal 2015, and the board of directors is asking shareholders to ratify that selection. Although current law, rules and regulations, as well as the audit committee charter, require our independent registered public accounting firm to be engaged, retained, and supervised by the audit committee, the board of directors considers the selection of an independent registered public accounting firm to be an important matter of shareholder concern and considers a proposal for shareholders to ratify such selection to be an opportunity for shareholders to provide direct feedback to the board of directors on a significant issue of corporate governance.
If the selection of E&Y as our independent registered public accounting firm for fiscal 2015 is not ratified by our shareholders, the audit committee will review its future selection of an independent registered public accounting firm in the light of that vote result.
Representatives of E&Y will be present at the Annual Meeting, will have an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions.
THE BOARD, UPON RECOMMENDATION OF THE AUDIT COMMITTEE, UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE RATIFICATION OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2015.
AUDIT COMMITTEE REPORT
The following is the report of the audit committee. The audit committee has reviewed and discussed our audited financial statements for the fiscal year ended December 31, 2014 with our management. In addition, the audit committee has discussed with Ernst & Young LLP, our independent accountants (“E&Y”), the matters required to be discussed by standards promulgated by the American Institute of Certified Public Accountants (“AICPA”) and Public Company Accounting Oversight Board (“PCAOB”), including Statement on Auditing Standards No. 61 as amended (AICPA, Professional Standards, Vol. 1. AU Section 380), as adopted by the PCAOB in Rule 3200T. The audit committee also has received the written disclosures and the letter from E&Y as required by the applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence, and the audit committee has discussed with E&Y the independence of E&Y.
Based on the audit committee’s review of the matters noted above and its discussions with our independent accountants and our management, the audit committee recommended to the board of directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
AUDIT COMMITTEE
Sven A. Wehrwein, Chair
John B. Goodman
Brian K. Smith
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
| | | Fiscal Year | | | | | 2014 | | | 2013 | | Audit Fees(1) | | $ | 660,617 | | | $ | 471,500 | | Audit-Related Fees | | | — | | | | — | | Tax Fees | | | 105,730 | | | | 143,252 | | All Other Fees | | | — | | | | — | | | | | | | | | | | | Total | | $ | 766,347 | | | $ | 614,752 | |
(1)
| Reflects the fees approved by Proto Labs and billed or to be billed by E&Y with respect to services performed for the audit and other services for the applicable fiscal year.
|
“Audit Fees” consisted of fees for the audit of our annual financial statements, including audited financial statements presented in our Annual Report on Form 10-K, audit of our internal control over financial reporting, review of the financial statements presented in our quarterly reports on Form 10-Q, and services that are normally provided by the independent registered public accountants in connection with statutory and regulatory filings or engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements and statutory audits required by non-U.S. jurisdiction.
“Audit-Related Fees” consisted of assurance and related services by E&Y that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.”
“Tax Fees” consisted of professional services rendered by E&Y for tax compliance, tax advice and tax planning. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
Pre-approval Policy. The audit committee has established a policy governing our use of the services of our independent registered public accountants. Under the policy, the audit committee is required to pre-approve all audit and non-audit services performed by our independent registered public accountants in order to ensure that the provision of such services does not impair the public accountants’ independence. In fiscal years 2014 and 2013, all fees identified above under the captions “Audit Fees,” “Audit-Related Fees” and “Tax Fees” that were billed by E&Y were approved by the audit committee in accordance with SEC requirements.
The audit committee has determined that the rendering of the services other than audit services by E&Y is compatible with maintaining their independence.
PROPOSAL 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION
We are asking our shareholders to provide advisory approval of the compensation of our named executive officers included in this Proxy Statement, as we have described it above. While this vote is advisory and nonbinding, the compensation committee will consider the outcome of the vote when making future compensation decisions for our executive officers. We believe our compensation program aligns the interests of our executive officers and shareholders and serves the best interests of our shareholders. During 2014, we performed well, with our revenue increasing 28.5% compared to the prior year and our net income increasing 18.0% compared to the prior year, and we successfully completed our first acquisition and integration of a new business. We believe the compensation earned by our named executive officers for 2014 reflects these strong results while remaining at a reasonable level and not encouraging excessive risk taking.
The board of directors recommends that shareholders approve the following advisory resolution:
RESOLVED, that the compensation paid to the individuals identified in the Summary Compensation Table, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC (which disclosure includes the Compensation Discussion and Analysis section and the related compensation tables and accompanying footnotes and narratives), is hereby approved.
THE BOARD UNANIMOUSLY RECOMMENDSTHAT YOU VOTE “FOR” THE ADVISORY (NONBINDING) RESOLUTION.
PROPOSAL 4
APPROVAL OF AMENDMENT TO THE
THIRD AMENDED AND RESTATED ARTICLES OF INCORPORATION
TO REQUIRE A MAJORITY VOTE FOR THE ELECTION OF DIRECTORS
The board of directors has approved, and recommends shareholder approval of, an amendment to our articles of incorporation to require that directors receive a majority of the votes cast in order to be elected to the board of directors.
Currently, the members of our board of directors are elected by a plurality of the votes present in person or by proxy at a meeting. Minnesota law requires that, unless otherwise provided in the articles of incorporation, directors be elected by a plurality of the votes present in person or by proxy at a meeting. The majority voting standard is a development in corporate governance best practices that has become common among U.S. public companies in recent years.
The amendment to the articles of incorporation operates as follows:
| ●
| Subject to the rights, if any, of holders of any preferred stock of Proto Labs, each director shall be elected at a meeting of shareholders by the vote of a majority of the votes cast with respect to the director.
|
| ●
| However, in a contested election of directors in which the number of nominees exceeds the number of directors to be elected, the directors will continue to be elected by a plurality of the votes present in person or by proxy at the meeting.
|
| ●
| For purposes of the majority voting standard, a majority of the votes cast means that the votes entitled to be cast by the holders of all the then outstanding shares of voting stock of Proto Labs that are voted “for” a director must exceed the shares voted “against” the director.
|
The amendment is effected by adding a new Article X to our third amended and restated articles of incorporation. The full text of Article X is attached to this Proxy Statement as Appendix I. If the amendment is approved by shareholders at the meeting, the majority voting standard will be effective following our next annual meeting of shareholders.
Under Minnesota law, an incumbent director who does not receive the requisite vote continues to serve until his or her successor is elected. Accordingly, if the proposal to amend the articles is approved, we also will amend our corporate governance guidelines to require incumbent directors who do not receive a majority of the votes cast “for” their election to offer to tender their resignation to our nominating and governance committee. The board of directors, taking into account the nominating and governance committee’s recommendation, will act on the tendered resignation and publicly disclose its decision within 90 days after the date of the certification of the election results. The nominating and governance committee may consider any factors or other recommendations that it considers relevant and appropriate. Any director who has offered to tender his or her resignation will not participate in the decision with respect to his or her resignation. If the director’s resignation is not accepted by the board of directors, the director will continue to serve until the next annual meeting and until his or her successor is duly elected. If the director’s resignation is accepted by the board of directors, the board of directors may choose to appoint a director to fill the vacancy on the board created by the resignation.
THE BOARD UNANIMOUSLY RECOMMENDSTHAT SHAREHOLDERS VOTE“FOR” THE AMENDMENT OF THE THIRD AMENDED AND RESTATED ARTICLES OF INCORPORATION TO REQUIRE A MAJORITY VOTE FOR THE ELECTION OF DIRECTORS.
OTHER MATTERS
The board of directors is not aware of any matters that are expected to come before the AnnualSpecial Meeting other than those referred to in this Proxy Statement. If any other matter should come before the AnnualSpecial Meeting, the persons named in the accompanying proxy intend to vote the proxies in accordance with their best judgment. SUBMISSION OF SHAREHOLDER PROPOSALS AND NOMINATIONS Proposals Included in the Proxy Statement
Proposals of our shareholders that are intended to be presented by such shareholders at our fiscal 20152023 Annual Meeting of Shareholders to be held in calendar 2016 and that shareholders desire to have included in our proxy materials related to such Annual Meeting must be received by us at our principal executive offices no later than 5:00 p.m. Central Time, December 9, 2015,6, 2022, which is 120 calendar days prior to the anniversary of this year’sthe mailing date.date of the proxy materials for the 2022 Annual Meeting of Shareholders. Upon timely receipt of any such proposal, we will determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable regulations governing the solicitation of proxies. Proposals Not Included in the Proxy Statement
If a shareholder wishes to present a proposal at our fiscal 20152023 Annual Meeting of Shareholders to be held in calendar 2016 or to nominate one or more directors and the proposal is not intended to be included in our proxy statement relating to that Annual Meeting, the shareholder must give advance notice to us prior to the deadline for such Annual Meeting determined in accordance with our by-laws. In general, our by-laws provide that such notice should be addressed to the Secretary and be no less than 90 days prior to the first anniversary of the preceding year’s Annual Meeting, except in certain circumstances.circumstances (including a notice of proxy access nomination pursuant to Section 2.17 of our by-laws, which must be received no less than 120 days prior to the first anniversary of this year’s mailing date). For purposes of our fiscal 20152023 Annual Meeting, such notice must be received no later than February 20, 2016.17, 2023 or, in the case of a notice of proxy access nomination, no later than December 6, 2022. Our by-laws set out specific requirements that such shareholders and written notices must satisfy. Copies of those requirements will be forwarded to any shareholder upon written request to our Secretary. The Notice contains instructions on how to access our proxy materials on the Internet and vote your shares of stock via the Internet and how to request a paper copy of our proxy materials. A
Additional copies of the Notice, this Proxy Statement and the accompanying proxy may be obtained from the Investor page of the Company’s Internet site, www.protolabs.com, or from our Chief Financial Officer upon written request addressed to: Chief Financial Officer
Proto Labs, Inc.
5540 Pioneer Creek Drive
Maple Plain, Minnesota 55359
(763) 479-3680 You may also obtain a copy of our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the SEC, will be sent to any shareholder without charge upon written request addressed to:Chief Financial Officer
Proto Labs, Inc.
5540 Pioneer Creek Drive
Maple Plain, Minnesota 55359
(763) 479-3680
You may also obtain our Annual Report on Form 10-K2021 via the Internet at the SEC’s Internet site, www.sec.gov,.
Additional copies of the Annual Report on Form 10-K, the Notice, this Proxy Statement and the accompanying proxy may be obtained from John A. Way,or without charge by written request to our Chief Financial Officer at the address above.above address. Copies of exhibits to the Annual Report on Form 10-K may be obtained upon payment to us of the reasonable expense incurred in providing such exhibits.
By Order of the Board of Directors 
William R. Langton
Secretary
Jason Frankman
Secretary TABLE OF CONTENTS 2022 LONG-TERM INCENTIVE PLAN 1. Purpose.Amendment The purpose of the Proto Labs, Inc. 2022 Long-Term Incentive Plan (the “Plan”) is to Articleshelp attract and retain the best available people for positions of Incorporationresponsibility with the Company, to provide additional incentives to them and align their interests with those of the Company’s shareholders, and to thereby promote the Company’s long-term business success. 2. Definitions. In this Plan, the following definitions will apply. (a) “Affiliate” means any entity that is a Subsidiary or Parent of the Company. (b) “Agreement” means the written or electronic agreement containing the terms and conditions applicable to an Award granted under the Plan. An Agreement is subject to the terms and conditions of the Plan. (c) “Award” means the grant of a compensatory award under the Plan in the form of an Option, Stock Appreciation Rights, Restricted Stock, Stock Units, Other Stock-Based Award or Cash Incentive Award. (d) “Board” means the Board of Directors of the Company. (e) “Cash Incentive Award” means an Award described in Section 11 of the Plan. (f) “Cause” means what the term is expressly defined to mean in a then-effective written agreement (including an Agreement) between a Participant and the Company or any Affiliate or, in the absence of any such then-effective agreement or definition, means a Participant’s (i) failure or refusal to perform satisfactorily the duties reasonably required of the Participant by the Company (other than by reason of Disability); (ii) material violation of any law, rule, regulation, court order or regulatory directive (other than traffic violations, misdemeanors or other minor offenses); (iii) material breach of any Company code of conduct or Company policy, of any agreement with the Company or any Affiliate, or of any nondisclosure, non-solicitation, non-competition or similar obligation owed to the Company or any Affiliate; (iv) engaging in any act or practice that involves personal dishonesty on the part of the Participant or demonstrates a willful and continuing disregard for the best interests of the Company and its Affiliates; or (v) engaging in conduct that would be reasonably expected to harm or bring disrepute to the Company, any of its Affiliates, or any of their customers, employees or vendors. (g) “Change in Control” means one of the following: (1) An Exchange Act Person becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding Voting Securities, except that the following will not constitute a Change in Control: (A) any acquisition of securities of the Company by an Exchange Act Person directly or indirectly from the Company for the purpose of providing financing to the Company; (B) any formation of a Group consisting solely of beneficial owners of the Company’s Voting Securities as of the effective date of this Plan; or (C) any Exchange Act Person becomes the beneficial owner of more than 50% of the combined voting power of the Company’s outstanding Voting Securities as the result of any repurchase or other acquisition by the Company of its Voting Securities. If, however, an Exchange Act Person or Group referenced in clause (A), (B) or (C) above acquires beneficial ownership of additional Company Voting Securities after initially becoming the beneficial owner of more than 50% of the combined voting power of the Company’s outstanding Voting Securities by one of the means described in those clauses, then a Change in Control shall be deemed to have occurred. TABLE OF CONTENTS (2) Individuals who are Continuing Directors cease for any reason to constitute a majority of the members of the Board. (3) The consummation of a Corporate Transaction unless, immediately following such Corporate Transaction, all or substantially all of the individuals and entities who were the beneficial owners of the outstanding Company Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding Voting Securities of the of the surviving or acquiring entity (or its Parent) resulting from such Corporate Transaction in substantially the same proportions as their ownership, immediately before such Corporate Transaction, of the outstanding Company Voting Securities. Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred upon an event described in Section 2(g) unless the event would also constitute a change in ownership or effective control of, or a change in the ownership of a substantial portion of the assets of, the Company under Code Section 409A. (h) “Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time. For purposes of the Plan, references to sections of the Code shall be deemed to include any applicable regulations and guidance promulgated thereunder and any successor or similar statutory provisions. (i) “Code Section 409A” means Section 409A of the Code. (j) “Committee” means two or more Non-Employee Directors designated by the Board to administer the Plan under Section 3, each member of which shall (i) satisfy the independence requirements for independent directors and members of compensation committees as set forth from time to time in the Listing Rules of the Nasdaq Stock Market and (ii) be a non-employee director within the meaning of Exchange Act Rule 16b-3. The Committee shall be the Compensation Committee of the Board unless otherwise specified by the Board. (k) “Company” means Proto Labs, Inc., a Minnesota corporation, or any successor thereto. (l) “Continuing Director” means an individual (A) who is, as of the effective date of the Plan, a director of the Company, or (B) who becomes a director of the Company subsequent to the effective date of the Plan and whose initial election, or nomination for initial election by the Company’s shareholders, was approved by at least a majority of the then Continuing Directors, but excluding, for purposes of this clause (B), any such individual whose initial assumption of office occurs as a result of an actual or threatened proxy contest involving the solicitation of proxies or consents by a person or Group other than the Board, or by reason of an agreement intended to avoid or settle an actual or threatened proxy contest. (m) “Corporate Transaction” means a reorganization, merger, consolidation or statutory share exchange involving the Company, regardless of whether the Company is the surviving entity, or a sale or other disposition (in one or a series of transactions) of all or substantially all of the assets of the Company. (n) “Disability” means “total and permanent disability” within the meaning of Code Section 22(e)(3). (o) “Employee” means an employee of the Company or an Affiliate. (p) “Exchange Act” means the Securities Exchange Act of 1934, as amended and in effect from time to time. (q) “Exchange Act Person” means any natural person, entity or Group other than (i) the Company or any Subsidiary of the Company; (ii) any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate; (iii) an underwriter temporarily holding securities in connection with a registered public offering of such securities; or (iv) an entity owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company. TABLE OF CONTENTS (r) “Fair Market Value” means the closing sales price for a Share on the New York Stock Exchange as reported inARTICLE X The Wall Street Journal or such other source as the Committee deems reliable, or if no sale of Shares occurred on that date, on the next preceding date on which a sale of Shares occurred; provided, however, that if the Shares are not then readily tradable on an established securities market (as determined under Code Section 409A), or if Fair Market Value for any date cannot be so determined, then Fair Market Value will be determined by the Committee as the result of a reasonable application of a reasonable valuation method that satisfies the requirements of Code Section 409A. (s) “Full Value Award” means an Award other than an Option Award, Stock Appreciation Rights Award or Cash Incentive Award. (t) “Grant Date” means the date on which the Committee approves the grant of an Award under the Plan, or such later date as may be specified by the Committee on the date the Committee approves the Award. (u) “Global Service Provider” means a Service Provider who is located outside of the United States, who is not compensated from a payroll maintained in the United States, or who is otherwise subject to (or could cause the Company to be subject to) legal, tax or regulatory requirements of countries outside of the United States. (v) “Group” means two or more persons who act, or agree to act together, as a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding, voting or disposing of securities of the Company (w) “Non-Employee Director” means a member of the Board who is not an Employee. (x) “Option” means a right granted under the Plan to purchase a specified number of Shares at a specified price during a specified period of time. An “Incentive Stock Option” or “ISO” means any Option designated as such and granted in accordance with the requirements of Code Section 422. A “Non-Statutory Stock Option” means an Option other than an Incentive Stock Option. (y) “Other Stock-Based Award” means an Award described in Section 11 of this Plan. (z) “Parent” means a “parent corporation,” as defined in Code Section 424(e). (aa) “Participant” means a Service Provider to whom an Award is or has been made in accordance with the Plan. (bb) “Performance-Based Award” means an Award that is conditioned on the achievement of specified performance goals. (cc) “Plan” means this Proto Labs, Inc. 2022 Long-Term Incentive Plan, as amended and in effect from time to time. (dd) “Prior Plan” means the Proto Labs, Inc. 2012 Long-Term Incentive Plan, as amended. (ee) “Restricted Stock” means Shares issued to a Participant that are subject to such restrictions on transfer, vesting conditions and other restrictions or limitations as may be set forth in this Plan and the applicable Agreement. (ff) “Service” means the provision of services by a Participant to the Company or any Affiliate in any Service Provider capacity. A Service Provider’s Service shall be deemed to have terminated either upon an actual cessation of providing services to the Company or any Affiliate or upon the entity for which the Service Provider provides services ceasing to be an Affiliate. Except as otherwise provided in this Plan or any Agreement, Service shall not be deemed terminated in the case of (i) any approved leave of absence; (ii) transfers among the Company and any Affiliates in any Service Provider capacity; or (iii) any change in status so long as the individual remains in the service of the Company or any Affiliate in any Service Provider capacity. TABLE OF CONTENTS (gg) “Service Provider” means an Employee, a Non-Employee Director, or any consultant or advisor, who is a natural person and who provides services (other than in connection with respect(i) a capital-raising transaction or (ii) promoting or maintaining a market in Company securities) to the Company or any Affiliate. (hh) “Share” means a share of Stock. (ii) “Stock” means the common stock, par value $0.001 per share, of the Company. (jj) “Stock Appreciation Right” or “SAR” means a right granted under the Plan to receive, in cash and/or Shares as determined by the Committee, an amount equal to the appreciation in value of a specified number of Shares between the Grant Date of the SAR and its exercise date. (kk) “Stock Unit” means a right granted under the Plan to receive, in cash and/or Shares as determined by the Committee, the Fair Market Value of a Share, subject to such restrictions on transfer, vesting conditions and other restrictions or limitations as may be set forth in this Plan and the applicable Agreement. (ll) “Subsidiary” means a “subsidiary corporation,” as defined in Code Section 424(f), of the Company. (mm) “Substitute Award” means an Award granted upon the assumption of, or in substitution or exchange for, outstanding awards granted by a company or other entity acquired by the Company or any Affiliate or with which the Company or any Affiliate combines. The terms and conditions of a Substitute Award may vary from the terms and conditions set forth in the Plan to the extent that the Committee at the time of the grant may deem appropriate to conform, in whole or in part, to the provisions of the award in substitution for which it has been granted. (nn) “Voting Securities” of an entity means the outstanding securities entitled to vote generally in the election of directors (or comparable equity interests) of such entity. 3. Administration of the shareholdersPlan. (a) Administration. The authority to control and manage the operations and administration of the Plan shall be vested in the Committee in accordance with this Section 3. Notwithstanding the foregoing sentence, the Board shall perform the duties and have the responsibilities of the Committee with respect to Awards made to Non-Employee Directors. (b) Scope of Authority. Subject to the terms of the Plan, the Committee shall have the authority, in its discretion, to take such actions as it deems necessary or advisable to administer the Plan, including: (1) determining the Service Providers to whom Awards will be granted, the timing of each such Award, the types of Awards and the number of Shares or amount of cash covered by each Award, the terms, conditions, performance criteria, restrictions and other provisions of Awards, and the manner in which Awards are paid or settled; (2) cancelling or suspending an Award or the exercisability of an Award, accelerating the vesting or extending the exercise period of an Award, or otherwise amending the terms and conditions of any outstanding Award, subject to the requirements of Sections 6(b), 15(d) and 15(e); (3) establishing, amending or rescinding rules to administer the Plan, interpreting the Plan and any Award or Agreement made under the Plan, and making all other determinations necessary or desirable for the administration of the Plan; and (4) taking such actions as are described in Section 3(c) with respect to Awards to Global Service Providers. (c) Awards to Global Service Providers. The Committee may grant Awards to Global Service Providers, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to comply with applicable foreign laws and regulatory requirements and to promote achievement of the purposes of the Plan. In connection TABLE OF CONTENTS therewith, the Committee may establish such subplans or annexes to Award Agreements and may modify exercise procedures and other Plan rules and procedures to the extent such actions are deemed necessary or desirable, and may take any other action atthat it deems advisable to obtain local regulatory approvals or to comply with any necessary local governmental regulatory exemptions. (d) Acts of the Committee; Delegation. A majority of the members of the Committee shall constitute a quorum for any meeting of shareholders by the affirmative voteCommittee, and any act of a majority of the voting powermembers present at any meeting at which a quorum is present or any act unanimously approved in writing by all members of the shares presentCommittee shall be the act of the Committee. Any such action of the Committee shall be valid and entitledeffective even one or more of the members of the Committee at the time of such action are later determined not to votehave satisfied all of the criteria for membership in clauses (i) or such larger proportion or number as is required by(ii) of Section 2(j). To the extent not inconsistent with applicable law or these Articlesstock exchange rules, the Committee may delegate all or any portion of Incorporation. Subjectits authority under the Plan to the rights, if any one or more of its members or, as to Awards to Participants who are not subject to Section 16 of the holdersExchange Act, to one or more directors or executive officers of the Company, or to a committee of the Board comprised of one or more directors of the Company. The Committee may also delegate non-discretionary administrative responsibilities in connection with the Plan to such other persons as it deems advisable. (e) Finality of Decisions. The Committee’s interpretation of the Plan and of any Award or Agreement made under the Plan and all related decisions or resolutions of the Board or Committee shall be final and binding on all parties with an interest therein. (f) Indemnification. Each person who is or has been a member of the Committee or of the Board, and any other person to whom the Committee delegates authority under the Plan, shall be indemnified by the Company, to the maximum extent permitted by law, against liabilities and expenses imposed upon or reasonably incurred by such person in connection with or resulting from any claims against such person by reason of the performance of the individual’s duties under the Plan. This right to indemnification is conditioned upon such person providing the Company an opportunity, at the Company’s expense, to handle and defend the claims before such person undertakes to handle and defend them on such person’s own behalf. The Company will not be required to indemnify any person for any amount paid in settlement of a claim unless the Company has first consented in writing to the settlement. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person or persons may be entitled under the Company’s Articles of Incorporation or Bylaws, as a matter of law, or otherwise. 4. Shares Available Under the Plan. (a) Maximum Shares Available. Subject to the provisions of this Section 4 and to adjustment as provided in Section 12(a), the number of Shares that may be the subject of Awards and issued under the Plan shall be 1,236,000, plus any Shares remaining available for future grants under the Prior Plan on the effective date of this Plan. After the effective date of the Plan, no additional awards may be granted under the Prior Plan. Shares to be issued under the Plan shall be authorized and unissued Shares. In determining the number of Shares to be counted against this share reserve in connection with any Award, the following rules shall apply: (1) Where the number of Shares subject to an Award is variable on the Grant Date, the number of Shares to be counted against the share reserve shall be the maximum number of Shares that could be received under that particular Award, until such time as it can be determined that only a lesser number of shares could be received. (2) Where two or more types of Awards are granted to a Participant in tandem with each other, such that the exercise of one type of Award with respect to a number of Shares cancels at least an equal number of Shares of the other, the number of Shares to be counted against the share reserve shall be the largest number of Shares that would be counted against the share reserve under either of the Awards. TABLE OF CONTENTS (3) Shares subject to Substitute Awards shall not be counted against the share reserve, nor shall they reduce the Shares authorized for grant to a Participant in any calendar year. (4) Awards that may be settled solely in cash shall not be counted against the share reserve, nor shall they reduce the Shares authorized for grant to a Participant in any calendar year. (b) Effect of Forfeitures and Other Actions. Any Shares subject to an Award, or to an award granted under the Prior Plan that is outstanding on the effective date of this Plan (a “Prior Plan Award”), that is cancelled, expires or forfeited or is settled for cash shall, to the extent of such cancellation, forfeiture, expiration or cash settlement, again become available for Awards under this Plan, the share reserve under Section 4(a) shall be correspondingly replenished as provided in Section 4(c) below. The following Shares shall not, however, again become available for Awards or replenish the share reserve under Section 4(a): (i) Shares tendered (either actually or by attestation) by the Participant or withheld by the Company in payment of the exercise price of a stock option issued under this Plan or the Prior Plan, (ii) Shares tendered (either actually or by attestation) by the Participant or withheld by the Company to satisfy any tax withholding obligation with respect to an Award or Prior Plan Award, (iii) Shares repurchased by the Company with proceeds received from the exercise of an option issued under this Plan or the Prior Plan, and (iv) Shares subject to a stock appreciation right award issued under this Plan or the Prior Plan that are not issued in connection with the stock settlement of that Award upon its exercise. (c) Counting Shares Again Available. Each Share that again becomes available for Awards as provided in Section 4(b) shall correspondingly increase the share reserve under Section 4(a), with such increase based on the same share ratio by which the applicable share reserve was decreased upon the grant of the applicable award. (d) Effect of Plans Operated by Acquired Companies. If a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by shareholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall supplement the share reserve under Section 4(a). Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees or Non-Employee Directors prior to such acquisition or combination. (e) No Fractional Shares. Unless otherwise determined by the Committee, the number of Shares subject to an Award shall always be a whole number. No fractional Shares may be issued under the Plan, but the Committee may, in its discretion, adopt any rounding convention it deems suitable or pay cash in lieu of any fractional Share in settlement of an Award. (f) Limits on Awards to Non-Employee Directors. The aggregate grant date fair value (as determined in accordance with generally accepted accounting principles applicable in the United States) of all Awards granted during any calendar year to any Non-Employee Director, together with the amount of any cash fees or retainers paid to such Non-Employee Director during such calendar year with respect to such individual’s Service as a Non-Employee Director shall not exceed $750,000. 5. Eligibility. Participation in the Plan is limited to Service Providers. Incentive Stock Options may only be granted to Employees who are not Global Service Providers. 6. General Terms of Awards. (a) Award Agreement. Except for any Award that involves only the immediate issuance of unrestricted Shares, each Award shall be evidenced by an Agreement setting forth the number of Shares subject to the Award together with such other terms and conditions applicable to the TABLE OF CONTENTS Award (and not inconsistent with the Plan) as determined by the Committee. If an Agreement calls for acceptance by the Participant, the Award evidenced by the Agreement will not become effective unless acceptance of the Agreement in a manner permitted by the Committee is received by the Company within 30 days of the date the Agreement is delivered to the Participant. An Award to a Participant may be made singly or in combination with any form of Award. Two types of Awards may be made in tandem with each other such that the exercise of one type of Award with respect to a number of Shares reduces the number of Shares subject to the related Award by at least an equal amount. (b) Vesting and Term. Each Agreement shall set forth the period until the applicable Award is scheduled to vest and, if applicable, expire (which shall not be more than ten years from the Grant Date), and consistent with the requirements of this Section 6, the applicable vesting conditions and any applicable performance period. The Committee may provide in an Agreement for such vesting conditions as it may determine. Unless the Committee provides otherwise, the vesting of Awards granted hereunder will continue to vest during any unpaid leave of absence. (c) Transferability. Except as provided in this Section 6(c), (i) during the lifetime of a Participant, only the Participant or the Participant’s guardian or legal representative may exercise an Option or SAR, or receive payment with respect to any other Award; and (ii) no Award may be sold, assigned, transferred, exchanged or encumbered, voluntarily or involuntarily, other than by will or the laws of descent and distribution. Any attempted transfer in violation of this Section 6(c) shall be of no effect. The Committee may, however, provide in an Agreement or otherwise that an Award (other than an Incentive Stock Option) may be transferred pursuant to a domestic relations order or may be transferable by gift to any “family member” (as defined in General Instruction A(1)(a)(5) to Form S-8 under the Securities Act of 1933) of the Participant. Any Award held by a transferee shall continue to be subject to the same terms and conditions that were applicable to that Award immediately before the transfer thereof. For purposes of any provision of the Plan relating to notice to a Participant or to acceleration or termination of an Award upon the death or termination of Service of a Participant, the references to “Participant” shall mean the original grantee of an Award and not any transferee. (d) Designation of Beneficiary. The Committee may permit each Participant to designate a beneficiary or beneficiaries to exercise any Award or receive a payment under any Award that is exercisable or payable on or after the Participant’s death. Any such designation shall be on a written or electronic form approved by the Committee and shall be effective upon its receipt by the Company or an agent selected by the Company. (e) Termination of Service. Unless otherwise provided in an Agreement, and subject to Sections 6(i) and 12 of this Plan, if a Participant’s Service with the Company and all of its Affiliates terminates, the following provisions shall apply (in all cases subject to the originally scheduled expiration of an Option or Stock Appreciation Right Award, as applicable): (1) Upon termination of Service for Cause, or upon conduct during a post-termination exercise period that would constitute Cause, all unexercised Options and SARs and all unvested portions of any other outstanding Awards shall be immediately forfeited without consideration. (2) Upon termination of Service due to death or Disability, any unvested portion of an Award shall immediately become vested (and exercisable, if applicable), and the vested and exercisable portions of Options or SARs may be exercised for a period of twelve months after the date of such termination and shall terminate upon the expiration of such period. (3) Upon a termination of Service for any reason other than Cause, death or Disability, all unvested and unexercisable portions of any outstanding Awards shall be immediately forfeited without consideration, but the currently vested and exercisable portions of Options and SARs may be exercised for a period of three months after the date of such termination TABLE OF CONTENTS and shall, subject to the following sentence, terminate upon the expiration of such period. However, if a Participant dies during such three-month post-termination exercise period, then the applicable post-termination exercise period shall be extended to twelve months after the date of such termination. (f) Rights as Shareholder. No Participant shall have any rights as a shareholder with respect to any Shares covered by an Award unless and until the date the Participant becomes the holder of record of the Shares, if any, to which the Award relates. (g) Performance-Based Awards. Any Award may be granted as Performance-Based Award if the Committee establishes one or more measures of corporate, Subsidiary, business unit or individual performance which must be attained, and the performance period over which the specified performance is to be attained, as a condition to the grant, vesting, exercisability, lapse of restrictions and/or settlement in cash or Shares of such Award. In connection with any such Award, the Committee shall determine the extent to which performance measures have been attained and other applicable terms and conditions have been satisfied, and the degree to which the grant, vesting, exercisability, lapse of restrictions and/or settlement of such Award has been earned. Any Performance-Based Award shall additionally be subject to the requirements of Section 17 of this Plan. Except as provided in Section 17 with respect to Performance-Based Award, the Committee shall also have the authority to provide, in an Agreement or otherwise, for the modification of a performance period and/or an adjustment or waiver of the achievement of performance goals upon the occurrence of events that are unusual in nature or infrequently occurring, such as a Change of Control, a Corporate Transaction, an equity restructuring, a recapitalization, a divestiture, a change in the accounting practices of the Company, or the Participant’s death or Disability. (h) Dividends and Dividend Equivalents. Any dividends, dividend equivalents or distributions paid with respect to Shares that are subject to the unvested portion of an Award will be subject to the same restrictions as the Shares to which such dividends or distributions relate. No dividends, dividend equivalents or distributions will be paid with respect to Shares subject to an Option or SAR Award. In its discretion, the Committee may provide in an Agreement for a Stock Unit Award or an Other Stock-Based Award that the Participant will be entitled to receive dividend equivalents on the units or other Share equivalents subject to the Award based on dividends actually declared and paid on outstanding Shares. Dividends and dividend equivalents on Performance-Based Awards will be subject to the same terms and conditions, including vesting conditions and the achievement of any applicable performance goals, as the original Award. The additional terms of any such dividend equivalents will be as set forth in the applicable Award Agreement, including any additional restrictions and whether such dividend equivalents will be credited with interest or deemed to be reinvested in additional units or Share equivalents. Any Shares issued or issuable during the term of this Plan as the result of the reinvestment of dividends or the deemed reinvestment of dividend equivalents in connection with an Award or a Prior Plan Award shall be counted against, and replenish upon any subsequent forfeiture, the Plan’s share reserve as provided in Section 4. (i) Extension of Termination Date. If a Participant would otherwise be precluded from exercising an Option or SAR prior to the expiration of its scheduled term or prior to its termination following the termination of the Participant’s Service solely because the issuance of the Shares upon such exercise would violate applicable registration requirements under the Securities Act, then the Committee may provide that the period during which the Option or SAR may be exercised and the termination date of the Option or SAR shall be extended until the later of (i) the date that is 30 days after the exercise of the Option or SAR would no longer violate the registration requirements of the Securities Act, or (ii) the end of the applicable post-termination exercise period, but in no event later than the scheduled expiration date of the Option as set forth in the applicable Agreement. 7. Stock Option Awards. (a) Type and Exercise Price. The Agreement pursuant to which an Option is granted shall specify whether the Option is an Incentive Stock Option or a Non-Statutory Stock Option. The TABLE OF CONTENTS exercise price at which each Share subject to an Option may be purchased shall be determined by the Committee and set forth in the Agreement, and shall not be less than the Fair Market Value of a Share on the Grant Date, except in the case of Substitute Awards (to the extent consistent with Code Section 409A and, in the case of Incentive Stock Options, Code Section 424). (b) Payment of Exercise Price. The purchase price of the Shares with respect to which an Option is exercised shall be payable in full at the time of exercise. The purchase price may be paid in cash or in such other manner as the Committee may permit, including by payment under a broker-assisted sale and remittance program acceptable to the Committee or by withholding Shares otherwise issuable to the Participant upon exercise of the Option or by delivery to the Company of Shares (by actual delivery or attestation) already owned by the Participant (in each case, such Shares having a Fair Market Value as of the date the Option is exercised equal to the purchase price of the Shares being purchased). (c) Exercisability and Expiration. Each Option shall be exercisable in whole or in part on the terms provided in the Agreement. No Option shall be exercisable at any time after its scheduled expiration. When an Option is no longer exercisable, it shall be deemed to have terminated. (d) Incentive Stock Options. (1) An Option will constitute an Incentive Stock Option only if the Participant receiving the Option is an Employee who is not a Global Service Provider, and only to the extent that (i) it is so designated in the applicable Agreement and (ii) the aggregate Fair Market Value (determined as of the Option’s Grant Date) of the Shares with respect to which Incentive Stock Options held by the Participant first become exercisable in any calendar year (under the Plan and all other plans of the Company and its Affiliates) does not exceed $100,000. To the extent an Option granted to a Participant exceeds this limit, the Option shall be treated as a Non-Statutory Stock Option. The maximum number of Shares that may be issued upon the exercise of Incentive Stock Options shall equal the maximum number of Shares that may be the subject of Awards and issued under the Plan as provided in the first sentence of Section 4(a) subject to adjustment as provided in Section 12(a). (2) No Participant may receive an Incentive Stock Option under the Plan if, immediately after the grant of such Award, the Participant would own (after application of the rules contained in Code Section 424(d)) Shares possessing more than 10% of the total combined voting power of all classes of stock of the Company or seriesan Affiliate, unless (i) the option price for that Incentive Stock Option is at least 110% of preferredthe Fair Market Value of the Shares subject to that Incentive Stock Option on the Grant Date and (ii) that Option will expire no later than five years after its Grant Date. (3) For purposes of continued Service by a Participant who has been granted an Incentive Stock Option, no approved leave of absence may exceed three months unless reemployment upon expiration of such leave is provided by statute or contract. If reemployment is not so provided, then on the date six months following the first day of such leave, any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Non-Statutory Stock Option. (4) If an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Code Section 422, or otherwise fails to qualify as an Incentive Stock Option, such Option shall thereafter be treated as a Non-Statutory Stock Option. (5) The Agreement covering an Incentive Stock Option shall contain such other terms and provisions that the Committee determines necessary to qualify the Option as an Incentive Stock Option. 8. Stock Appreciation Rights. (a) Nature of Award. An Award of Stock Appreciation Rights shall be subject to such terms and conditions as are determined by the Committee, and shall provide a Participant the right to receive upon exercise of the SAR all or a portion of the excess of (i) the Fair Market Value as of the date of exercise of the SAR of the number of Shares as to which the SAR is being exercised, over TABLE OF CONTENTS (ii) the aggregate exercise price for such number of Shares. The per Share exercise price for any SAR Award shall be determined by the Committee and set forth in the applicable Agreement, and shall not be less than the Fair Market Value of a Share on the Grant Date, except in the case of Substitute Awards (to the extent consistent with Code Section 409A). (b) Exercise of SAR. Each SAR may be exercisable in whole or in part at the times, on the terms and in the manner provided in the Agreement. No SAR shall be exercisable at any time after its scheduled expiration. When a SAR is no longer exercisable, it shall be deemed to have terminated. Upon exercise of a SAR, payment to the Participant shall be made at such time or times as shall be provided in the Agreement in the form of cash, Shares or a combination of cash and Shares as determined by the Committee. The Agreement may provide for a limitation upon the amount or percentage of the total appreciation on which payment (whether in cash and/or Shares) may be made in the event of the exercise of a SAR. 9. Restricted Stock Awards. (a) Vesting and Consideration. Shares subject to a Restricted Stock Award shall be subject to vesting conditions, and the corresponding lapse of forfeiture conditions and other restrictions, based on such factors and occurring over such period of time as the Committee may determine in its discretion. The Committee may provide whether any consideration other than Services must be received by the Company or any Affiliate as a condition precedent to the grant of a Restricted Stock Award, and may correspondingly provide for Company reacquisition or repurchase rights if such additional consideration has been required and some or all of a Restricted Stock Award does not vest. (b) Shares Subject to Restricted Stock Awards. Unvested Shares subject to a Restricted Stock Award shall be evidenced by a book-entry in the name of the Participant with the Company’s transfer agent or by one or more Stock certificates issued in the name of the Participant. Any such Stock certificate shall be deposited with the Company or its designee, together with an assignment separate from the certificate, in blank, signed by the Participant, and bear an appropriate legend referring to the restricted nature of the Restricted Stock evidenced thereby. Any book-entry shall be subject to transfer restrictions and accompanied by a similar legend. Upon the vesting of Shares of Restricted Stock and the corresponding lapse of the restrictions and forfeiture conditions, and any necessary conditions precedent to the release of vested Shares (such as satisfaction of tax withholding obligations) have been satisfied, the corresponding transfer restrictions and restrictive legend will be removed from the book-entry evidencing such Shares or the certificate evidencing such Shares, and any such certificate shall be delivered to the Participant. Such vested Shares may, however, remain subject to additional restrictions as provided in Section 18(c). Except as otherwise provided in the Plan or an applicable Agreement, a Participant with a Restricted Stock Award shall have all the rights of a shareholder, including the right to vote the Shares of Restricted Stock. 10. Stock Unit Awards. (a) Vesting and Consideration. A Stock Unit Award shall be subject to vesting conditions, and the corresponding lapse of forfeiture conditions and other restrictions, based on such factors and occurring over such period of time as the Committee may determine in its discretion. If a Stock Unit Award is a Performance-Based Award, the extent to which the goals are achieved over the specified performance period shall determine the number of Stock Units that will be earned and eligible to vest, which may be greater or less than the target number of Stock Units stated in the Agreement. The Committee may provide whether any consideration other than Services must be received by the Company or any Affiliate as a condition precedent to the settlement of a Stock Unit Award. (b) Settlement of Award. Following the vesting of a Stock Unit Award, and the Committee’s determination that any necessary conditions precedent to the settlement of the Award (such as satisfaction of tax withholding obligations and compliance with applicable legal requirements) have TABLE OF CONTENTS been satisfied, settlement of the Award and payment to the Participant shall be made at such time or times in the form of cash, Shares (which may themselves be considered Restricted Stock under the Plan subject to restrictions on transfer and forfeiture conditions) or a combination of cash and Shares as determined by the Committee. 11. Cash-Based and Other Stock-Based Awards. (a) Cash Incentive Awards. A Cash Incentive Award may be considered a Performance-Based Award, and may be granted to any Participant in such amounts and upon such terms and at such times as shall be determined by the Committee, and may be denominated in units that have a dollar value established by the Committee as of the Grant Date. Following the completion of the applicable performance period and the vesting of a Cash Incentive Award, payment of the settlement amount of the Award to the Participant shall be made at such time or times in the form of cash, Shares or other forms of Awards under the Plan (valued for these purposes at their grant date fair value) or a combination of cash, Shares and other forms of Awards as determined by the Committee and specified in the applicable Agreement. (b) Other Stock-Based Awards. The Committee may from time to time grant Stock and other Awards that are valued by reference to and/or payable in whole or in part in Shares under the Plan. The Committee, in its sole discretion, shall determine the terms and conditions of such Awards, which shall be consistent with the terms and purposes of the Plan. The Committee may, in its sole discretion, direct the Company to issue Shares subject to restrictive legends and/or stop transfer instructions that are consistent with the terms and conditions of the Award to which the Shares relate. 12. Changes in Capitalization and Other Corporate Events. (a) Adjustments for Changes in Capitalization. In the event of any equity restructuring (within the meaning of FASB ASC Topic 718 - Stock Compensation) that causes the per share value of Shares to change, such as a stock dividend, stock split, spinoff, rights offering or recapitalization through an extraordinary dividend, the Committee shall make such adjustments as it deems equitable and appropriate to (i) the aggregate number and kind of Shares or other securities issued or reserved for issuance under the Plan, (ii) the number and kind of Shares or other securities subject to outstanding Awards, (iii) the exercise price of outstanding Options and SARs, and (iv) any maximum limitations prescribed by the Plan with respect to certain types of Awards or the grants to individuals of certain types of Awards. In the event of any other change in corporate capitalization, including a merger, consolidation, reorganization, or partial or complete liquidation of the Company, such equitable adjustments described in the foregoing sentence may be made as determined to be appropriate and equitable by the Committee to prevent dilution or enlargement of rights of Participants. In either case, any such adjustment shall be conclusive and binding for all purposes of the Plan. No adjustment shall be made pursuant to this Section 12(a) in connection with the conversion of any convertible securities of the Company, or in a manner that would cause Incentive Stock Options to violate Section 422(b) of the Code or cause an Award to be subject to adverse tax consequences under Code Section 409A. (b) Corporate Transactions. Unless otherwise provided in an applicable Agreement, in the event of a Change in Control that involves a Corporate Transaction, the Board or the Committee shall take one or more of the following actions with respect to outstanding Awards, which actions may vary among individual Participants and among Awards held by an individual Participant, and are conditioned in each case upon the closing or completion of the Corporate Transaction: (1) Continuation, Assumption or Replacement of Awards. Arrange for the surviving or successor entity (or its Parent) to continue, assume or replace Awards outstanding as of the date of the Corporate Transaction (with such adjustments as may be required or permitted by Section 12(a)), and such Awards or replacements therefor to remain outstanding and be governed by their respective terms. A surviving or successor entity may elect to continue, assume or replace only some Awards or portions of Awards. For purposes of this Section 12(b)(1), an Award shall be considered assumed or replaced if, in connection with the Corporate Transaction and in a manner consistent with Code Sections 409A and 424, either TABLE OF CONTENTS (i) the contractual obligations represented by the Award are expressly assumed by the surviving or successor entity (or its Parent) with appropriate adjustments to the number and type of securities subject to the Award and the exercise price thereof that preserves the intrinsic value of the Award existing at the time of the Corporate Transaction, or (ii) the Participant has received a comparable equity-based award that preserves the intrinsic value of the Award existing at the time of the Corporate Transaction and is subject to substantially similar terms and conditions as the Award. (2) Acceleration. Accelerate the vesting (and exercisability, if applicable) of (i) some or all outstanding Options and SARs so that such Awards may be exercised in full for such limited period of time prior to the effective time of the Corporate Transaction as is deemed fair and equitable by the Board or Committee, with such Awards then terminating to the extent not exercised at the effective time of the Corporate Transaction, and (ii) some or all outstanding Full Value Awards or Cash Incentive Awards immediately prior to the effective time of the Corporate Transaction. In the case of Performance-Based Awards, the number of Shares or the amount of a Cash Incentive Award subject to such accelerated vesting shall be based on a determination by the Board or Committee of the degree to which any performance-based vesting or payment conditions will be deemed satisfied. The Board or Committee shall provide written notice of the period of accelerated exercisability of Options and SARs to all affected Participants, and any exercise of such accelerated Awards shall be conditioned upon the consummation of the Corporate Transaction and shall be effective only immediately before the effective time of the Corporate Transaction. (3) Payment for Awards. Cancel some or all outstanding Awards at or immediately prior to the effective time of the Corporate Transaction in exchange for payments to the holders as provided in this Section 12(b)(3). The payment for any Award canceled shall be in an amount equal to the difference, if any, between (i) the fair market value (as determined in good faith by the Board or Committee) of the consideration that would otherwise be received in the Corporate Transaction for the number of Shares remaining subject to the Award, and (ii) the aggregate exercise price (if any) for the number of Shares remaining subject to such Award. If the amount determined pursuant to clause (i) of the preceding sentence is less than or equal to the amount determined pursuant to clause (ii) of the preceding sentence with respect to any Award, such Award may be canceled without payment of any kind to the affected Participant. The payment for any canceled Cash Incentive Award that was to be settled in Shares shall be in an amount equal to the settlement amount that was to form the basis for the calculation of the number of Shares to be issued. In the case of Performance-Based Awards, the number of Shares remaining subject to an Award or the settlement amount of a Cash Incentive Award shall be calculated based on a determination by the Board or Committee of the degree to which any performance-based vesting or payment conditions will be deemed satisfied. Payment of any amount under this Section 12(b)(3) shall be made in such form (including in shares of the surviving or successor entity or its Parent), on such terms and subject to such conditions as the Board or Committee determines in its discretion, which may or may not be the same as the form, terms and conditions applicable to payments to the Company’s shareholders in connection with the Corporate Transaction, and may, in the discretion of the Board or Committee, include subjecting such payments to vesting conditions comparable to those of the Award canceled, subjecting such payments to escrow or holdback terms comparable to those imposed upon the Company’s shareholders under the Corporate Transaction, or calculating and paying the present value of payments that would otherwise be subject to escrow or holdback terms. (4) Termination After a Corporate Transaction. Provide that with respect to any Award that is continued, assumed or replaced under the circumstances described in Section 12(b)(1), if within 18 months after the Corporate Transaction the Participant experiences an involuntary termination of Service from the surviving or successor entity (or its Parent or subsidiary) for reasons other than Cause, then (i) outstanding Options and SARs issued to the Participant that are not yet fully exercisable shall immediately become exercisable in full and shall remain TABLE OF CONTENTS exercisable for one year following the Participant’s termination of Service, and (ii) any Full Value Awards that are not yet fully vested shall immediately vest in full, with vesting in full for a Performance-Based Award determined as provided in Section 12(b)(2). (5) Adjustments to Awards. Make such adjustments to some or all outstanding Awards as may be required or permitted by Sections 12(a) and 6(g). (c) Other Change in Control. In connection with a Change in Control that does not involve a Corporate Transaction, the Board or Committee may provide (in the applicable Agreement or otherwise) for one or more of the following: (i) that any Award shall become fully vested (and exercisable, if applicable) upon the occurrence of the Change in Control or upon the involuntary termination of the Participant without Cause within 18 months of the Change in Control, (ii) that any Option or SAR shall remain exercisable during all or some specified portion of its remaining term, or (iii) that Awards shall be canceled in exchange for payments in a manner similar to that provided in Section 12(b)(3). The Committee will not be required to treat all Awards similarly in such circumstances. (d) Dissolution or Liquidation. Unless otherwise provided in an applicable Agreement, in the event the shareholders of the Company approve the complete dissolution or liquidation of the Company, all outstanding Awards will terminate immediately prior to the consummation of any such proposed action. The Committee will notify each Participant as soon as practicable of such pending termination. (e) Limitation on Change in Control Payments. If any payments to a Participant pursuant to Awards made under this Plan (including, for this purpose, the acceleration of the vesting and exercisability of any Award or the payment of cash or other property in exchange for all or part of any Award), taken together with any payments or benefits otherwise paid or distributed to the Participant by the Company or any corporation that is a member of an “affiliated group” (as defined in Section 1504 of the Code without regard to Section 1504(b) of the Code) of which the Company is a member (the “other arrangements”) would collectively constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), and if the net after-tax amount of such parachute payment to the Participant is less than what the net after-tax amount to the Participant would be if the aggregate payments and benefits otherwise constituting the parachute payment were limited to three times the Participant’s “base amount” (as defined in Section 280G(b)(3) of the Code) less $1.00, then the aggregate payments and benefits otherwise constituting the parachute payment shall be reduced to an amount that shall equal three times the Participant’s base amount, less $1.00. Should such a reduction in payments and benefits be required, the Participant shall be entitled, subject to the following sentence, to designate those payments and benefits under this Plan or the other arrangements that will be reduced or eliminated (including, as applicable, a reduction in the number of Shares subject to Awards that will vest on an accelerated basis) so as to achieve the specified reduction in aggregate payments and benefits to the Participant and avoid characterization of such aggregate payments and benefits as a parachute payment. To the extent that the Participant’s ability to make such a designation would cause any of the payments and benefits to become subject to any additional tax under Code Section 409A, or if the Participant fails to make such a designation within the time prescribed by the Committee, then the Committee shall achieve the necessary reduction in such payments and benefits in the following order: (1) by reducing or eliminating the portion of the payments and benefits that are payable in cash; (2) by reducing or eliminating equity awards (or the accelerated vesting thereof) that are included as parachute payments; (3) by reducing or eliminating any non-cash, non-equity benefits; in each case, within each category, in reverse order beginning with payments and benefits which are to be paid or provided the furthest in time from the date of the Committee’s determination. For purposes of this Section 12(e), a net after-tax amount shall be determined by taking into account all applicable income, excise and employment taxes, whether imposed at the federal, state or local level, including the excise tax imposed under Section 4999 of the Code. 13. Plan Participation and Service Provider Status. Status as a Service Provider shall not be construed as a commitment that any Award will be made under the Plan to that Service Provider or to eligible Service Providers generally. Nothing in the Plan or in any Agreement or related documents shall TABLE OF CONTENTS confer upon any Service Provider or Participant any right to continued Service with the Company or any Affiliate, nor shall it interfere with or limit in any way any right of the Company or any Affiliate to terminate the person’s Service at any time with or without Cause or change such person’s compensation, other benefits, job responsibilities or title. 14. Tax Withholding. The Company or any Affiliate, as applicable, shall have the right to (i) withhold from any cash payment under the Plan or any other compensation owed to a Participant an amount sufficient to cover any required withholding taxes related to the grant, vesting, exercise or settlement of an Award, and (ii) require a Participant or other person receiving Shares under the Plan to pay a cash amount sufficient to cover any required withholding taxes before actual receipt of those Shares. In lieu of all or any part of a cash payment from a person receiving Shares under the Plan, the Committee may permit the individual to cover all or any part of the required withholdings (up to the Participant’s maximum individual statutory tax withholding rate) through a reduction in the number of Shares delivered or a delivery or tender to the Company of Shares held by the Participant or other person, in each case valued in the same manner as used in computing the withholding taxes under applicable laws. 15. Effective Date, Duration, Amendment and Termination of the Plan. (a) Effective Date. The Plan shall become effective on the date it is approved by the Company’s shareholders, which shall be considered the date of its adoption for purposes of Treasury Regulation §1.422-2(b)(2)(i). No Awards shall be made under the Plan prior to its effective date. (b) Duration of the Plan. The Plan shall remain in effect until all Shares subject to it shall be distributed, the Plan is terminated pursuant to Section 15(c), or the tenth anniversary of the effective date of the Plan, whichever occurs first (the “Termination Date”). Awards made before the Termination Date shall continue to be outstanding in accordance with their terms and the terms of the Plan unless otherwise provided in the applicable Agreements. (c) Amendment and Termination of the Plan. The Board may at any time terminate, suspend or amend the Plan. The Company shall submit any amendment of the Plan to its shareholders for approval only to the extent required by applicable laws or regulations or the rules of any securities exchange on which the Shares may then be listed. No termination, suspension, or amendment of the Plan may materially impair the rights of any Participant under a previously granted Award without the Participant’s consent, unless such action is necessary to comply with applicable law or stock exchange rules. (d) Amendment of Awards. Subject to Section 15(e), the Committee may unilaterally amend the terms of any Agreement previously granted, except that no such amendment may materially impair the rights of any Participant under the applicable Award without the Participant’s consent, unless such amendment is necessary to comply with applicable law or stock exchange rules or any compensation recovery policy as provided in Section 18(i)(2). (e) No Option or SAR Repricing. Except as provided in Section 12(a), no Option or Stock Appreciation Right Award granted under the Plan may be (i) amended to decrease the exercise price thereof, (ii) cancelled in conjunction with the grant of any new Option or Stock Appreciation Right Award with a lower exercise price, (iii) cancelled in exchange for cash, other property or the grant of any Full Value Award at a time when the per share exercise price of the Option or Stock Appreciation Right Award is greater than the current Fair Market Value of a Share, or (iv) otherwise subject to any action that would be treated under accounting rules as a “repricing” of such Option or Stock Appreciation Right Award, unless such action is first approved by the Company’s shareholders. 16. Substitute Awards. The Committee may also grant Awards under the Plan in substitution for, or in connection with the assumption of, existing awards granted or issued by another corporation and assumed or otherwise agreed to be provided for by the Corporation, voting separatelyCompany pursuant to or by classreason of a transaction involving a merger, consolidation, acquisition of property or seriesstock, separation, reorganization or liquidation to elect directorswhich the Company or an Affiliate is a party. The terms and conditions TABLE OF CONTENTS of the Substitute Awards may vary from the terms and conditions set forth in the Plan to the extent that the Committee at the time of the grant may deem appropriate to conform, in whole or in part, to the provisions of the awards in substitution for which they are granted. 17. Performance-Based Awards. (a) Performance-Based Awards. If an Award is a Performance-Based Award, then the lapsing of restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as applicable, shall be subject to the achievement over the applicable performance period of one or more performance goals based on one or more of the performance measures specified in Section 17(b). The Committee will select the applicable performance measure(s) and specify the performance goal(s) based on those performance measures for any performance period, specify in terms of an objective formula or standard the method for calculating the amount payable to a Participant if the performance goal(s) are satisfied, and certify the degree to which applicable performance goals have been satisfied and any amount that vests and is payable in connection with an Award subject to this Section 17. In specifying the performance goals applicable to any performance period, the Committee may provide that one or more objectively determinable adjustments shall be made to the performance measures on which the performance goals are based, which may include adjustments that would cause such measures to be considered “non-GAAP financial measures” within the meaning of Rule 101 under Regulation G promulgated by the Securities and Exchange Commission, including adjustments for events that are unusual in nature or infrequently occurring, such as a Change in Control, acquisitions, divestitures, restructuring activities or asset write-downs, or for changes in applicable tax laws or accounting principles. The Committee may also adjust performance measures for a performance period in connection with an event described in Section 12(a) to prevent the dilution or enlargement of a Participant’s rights with respect to Performance-Based Award. The Committee may adjust any amount determined to be otherwise payable in connection with such an Award. The Committee may also provide, in an Agreement or otherwise, that the achievement of specified performance goals in connection with an Award subject to this Section 17 may be waived upon the death or Disability of the Participant. 18. Other Provisions. (a) Unfunded Plan. The Plan shall be unfunded and the Company shall not be required to segregate any assets that may at any time be represented by Awards under the Plan. Neither the Company, its Affiliates, the Committee, nor the Board shall be deemed to be a trustee of any amounts to be paid under the Plan nor shall anything contained in the Plan or any action taken pursuant to its provisions create or be construed to create a fiduciary relationship between the Company and/or its Affiliates, and a Participant. To the extent any person has or acquires a right to receive a payment in connection with an Award under the Plan, this right shall be no greater than the right of an unsecured general creditor of the Company. (b) Limits of Liability. Except as may be required by law, neither the Company nor any member of the Board or of the Committee, nor any other person participating (including participation pursuant to a delegation of authority under Section 3(c) of the Plan) in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability to any party for any action taken, or not taken, in good faith under the Plan. (c) Compliance with Applicable Legal Requirements and Company Policies. No Shares distributable pursuant to the Plan shall be issued and delivered unless the issuance of the Shares complies with all applicable legal requirements, including compliance with the provisions of applicable state and federal securities laws, and the requirements of any securities exchanges on which the Company’s Shares may, at the time, be listed. The Committee may, in its discretion, to the extent permitted by Code Section 409A, if applicable, suspend the right to exercise Options or SARs to be settled in Shares, or delay the payment or settlement of any other Awards to be paid or settled in Shares, during any period in which the issuance of such Shares would not be in compliance with any applicable legal or securities exchange requirements. During any period in which the offering and issuance of Shares under the Plan are not registered under federal or state TABLE OF CONTENTS securities laws, Participants shall acknowledge that they are acquiring Shares under the Plan for investment purposes and not for resale, and that Shares may not be transferred except pursuant to an effective registration statement under, or an exemption from the registration requirements of, such securities laws. Any book-entry or stock certificate evidencing Shares issued under the Plan that are subject to such securities law restrictions shall be accompanied by or bear an appropriate restrictive legend or stop transfer instruction. Notwithstanding any other provision of this Plan, the acquisition, holding or disposition of Shares acquired pursuant to the Plan shall in all events be subject to compliance with applicable Company policies, including those relating to insider trading, pledging or hedging transactions, minimum post-vesting holding periods and stock ownership guidelines, and to forfeiture or recovery of compensation as provided in Section 18(i). (d) Other Benefit and Compensation Programs. Payments and other benefits received by a Participant under an Award made pursuant to the Plan shall not be deemed a part of a Participant’s regular, recurring compensation for purposes of the termination, indemnity or severance pay laws of any country or state and shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan, contract or similar arrangement provided by the Company or an Affiliate unless expressly so provided by such other plan, contract or arrangement, or unless the Committee expressly determines that an Award or portion of an Award should be included to accurately reflect competitive compensation practices or to recognize that an Award has been made in lieu of a portion of competitive cash compensation. (e) Governing Law. To the extent that federal laws do not otherwise control, the Plan and all determinations made and actions taken pursuant to the Plan shall be governed by the laws of the State of Minnesota without regard to its conflicts-of-law principles and shall be construed accordingly. (f) Severability. If any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. (g) Code Section 409A. It is intended that all Awards under the Plan will be exempt from, or will comply with, Code Section 409A, and to the maximum extent permitted the Awards the Plan will be limited, construed and interpreted in accordance with this intent. Notwithstanding anything to the contrary in the Plan or any Agreement, with respect to any Award that constitutes a deferral of compensation subject to Code Section 409A: (1) If any amount is payable under such Award upon a termination of Service, a termination of Service will be deemed to have occurred only at such time as the Participant has experienced a “separation from service” as such term is defined for purposes of Code Section 409A; and (2) If any amount shall be payable with respect to any such Award as a result of a Participant’s “separation from service” at such time as the Participant is a “specified employee” within the meaning of Code Section 409A, then no payment shall be made, except as permitted under Code Section 409A, prior to the first business day after the earlier of (i) the date that is six months after the Participant’s separation from Service or (ii) the Participant’s death. Unless the Committee has adopted a specified employee identification policy as contemplated by Code Section 409A, specified employees will be identified in accordance with the terms of such preferred stock, each directordefault provisions specified under Code Section 409A. Each amount to be paid under an Award or this Plan shall be elected atconstrued as a meetingseparate and distinct payment for purposes of shareholdersCode Section 409A. None of the Company, the Committee or any other person involved with the administration of this Plan shall (i) in any way be responsible for ensuring the exemption of any Award from, or compliance by any Award with, the requirements of Code Section 409A, (ii) have any duty or obligation to design or administer the Plan or Awards granted thereunder in a manner that minimizes a Participant’s tax liabilities, including the avoidance of any additional tax liabilities under Code Section 409A; or (iii) have any liability to any Participant for any such tax liabilities. TABLE OF CONTENTS (h) Rule 16b-3. It is intended that the Plan and all Awards granted pursuant to it shall be administered by the voteCommittee so as to permit the Plan and Awards to comply with Exchange Act Rule 16b-3. If any provision of the majorityPlan or of any Award would otherwise frustrate or conflict with the intent expressed in this Section 18(h), that provision to the extent possible shall be interpreted and deemed amended in the manner determined by the Committee so as to avoid the conflict. To the extent of any remaining irreconcilable conflict with this intent, the provision shall be deemed void as applied to Participants subject to Section 16 of the votes castExchange Act to the extent permitted by law and in the manner deemed advisable by the Committee. (i) Forfeiture and Compensation Recovery. (1) The Committee may specify in an Agreement that the Participant’s rights, payments, and benefits with respect to an Award will be subject to reduction, cancellation, forfeiture or recovery by the director, providedCompany upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include termination of Service for Cause, violation of any material Company or Affiliate policy, breach of noncompetition, non-solicitation or confidentiality provisions that directors shall be elected byapply to the Participant, a pluralitydetermination that the payment of the votes presentAward was based on an incorrect determination that financial or other criteria were met or other conduct by the Participant that is detrimental to the business or reputation of the Company or its Affiliates. (2) Awards and entitledany compensation associated therewith will be made subject to vote onforfeiture, recovery by the election of directorsCompany or other action pursuant to any compensation recovery policy adopted by the Board or the Committee at any such meeting for which the number of nominees (other than nominees withdrawn on or priortime, including in response to the day precedingrequirements of Section 10D of the date the Corporation first mails its notice for such meeting to the shareholders) exceeds the number of directors toExchange Act and any implementing rules and regulations thereunder, or as otherwise required by law. Any Agreement may be elected. For purposes of this Article X, action at a meeting shall mean action at a meeting which satisfies the notice and quorum requirements imposedunilaterally amended by the By-Laws of the Corporation, except as otherwise provided by law, and a majority of the votes cast means that the votes entitledCommittee to be cast by the holders of all then outstanding shares ofcapital stock of the Corporationcomply with respect to the election of a director nominee that are voted “for”any such nominee must exceed the votes that are voted “against” that director by the holders of outstanding shares of the Corporation’s capital stock entitled to cast a vote with respect to the election of such director nominee.compensation recovery policy.
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