Proxy Statement (Form DEF 14A)
SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
| ☐ | Preliminary Proxy Statement |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☒ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to §240.14a-12 |
(Exact Name of Registrant as Specified in its Charter)
(
Payment of Filing Fee (Check the appropriate box):
| ☒ | No fee required. |
| ☐ | Fee paid previously with preliminary materials. |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a6(i)(1) and 0-11. |
Dear Stockholder:
You are cordially invited to attend the 2025 annual meeting of stockholders (the "Annual Meeting") of
Details regarding the Annual Meeting, the business to be conducted at the Annual Meeting, and information about the Company that you should consider when you vote your shares are described in the Proxy Statement.
At the Annual Meeting, we will ask stockholders to approve the following matters:
| 1. | Election of seven (7) directors named in the Proxy Statement to hold office until the next annual meeting of stockholders, or until their respective successors are elected and qualified or until their earlier resignation or removal (Proposal 1); | |
| 2. | Ratification of the appointment of |
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| 3. | Approval of a proposed amendment to our 2020 Incentive Plan (the "2020 Plan") to increase the aggregate number of shares of our common stock, par value |
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| 4. | Approval of the issuance of up to an aggregate of 17,447,366 shares of Common Stock upon the exercise of certain warrants issued in connection with the offering that closed on |
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| 5. | Approval of a proposal to adjouthe Annual Meeting to solicit additional proxies if there are insufficient votes at the time of the Annual Meeting to approve Proposal 3 and Proposal 4 (Proposal 5); and | |
| 6. | Such other business as may properly come before the Annual Meeting or any adjournments or postponements of the Annual Meeting. |
The board of directors recommends that you vote FOR each of the seven (7) director nominees and FOR the approval of each of the proposals.
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Under
We hope you will be able to attend the Annual Meeting. Whether you plan to attend the Annual Meeting or not, it is important that you cast your vote either during the Annual Meeting or by proxy before the Annual Meeting. You may vote over the Internet or by mail. When you have finished reading the proxy statement, you are urged to vote in accordance with the instructions set forth in the Notice of Internet Availability and the accompanying proxy statement. We encourage you to vote by proxy so that your shares will be represented and voted at the meeting, whether or not you can attend.
Thank you for your continued support of the Company. We look forward to seeing you at the Annual Meeting.
| Sincerely, | ||
| /s/ |
||
| Chairman and Chief Executive Officer |
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NOTICE OF 2025 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
| TIME: | ||
| DATE: | ||
| PLACE: | www.virtualshareholdermeeting.com/TOON2025 | |
| PURPOSES: | ||
| 1. | To elect seven (7) directors named in the Proxy Statement to hold office until the next annual meeting of stockholders, or until their respective successors are elected and qualified or until their earlier resignation or removal (Proposal 1); | |
| 2. | To ratify the appointment of |
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| 3. | To approve a proposed amendment to the 2020 Plan to increase the aggregate number of shares of Common Stock available for awards under the 2020 Plan by 5,000,000 shares (Proposal 3); | |
| 4. | To approve the issuance of up to an aggregate of 17,447,366 shares of Common Stock upon the exercise of certain warrants issued in connection with the offering that closed on |
|
| 5. | To approve a proposal to adjouthe Annual Meeting to solicit additional proxies if there are insufficient votes at the time of the meeting to adopt Proposal 3 and Proposal 4 (Proposal 5); and | |
| 6. | To transact such other business that is properly presented at the Annual Meeting and any adjournments or postponements thereof. | |
Who
You may vote if you were the owner of shares of Common Stock at
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All stockholders are cordially invited to attend the Annual Meeting. You can attend the Annual Meeting online and vote your shares during the online meeting. To be admitted to the Annual Meeting's live webcast, you must register to attend the virtual meeting by
Whether you plan to attend the Annual Meeting or not, we urge you to vote by following the instructions in the Notice of Internet Availability that you previously received and submit your proxy by the Internet or mail in order to ensure the presence of a quorum. You may change or revoke your proxy at any time before it is voted at the Annual Meeting.
| By Order of the Board of Directors: | ||
| /s/ |
||
| Corporate Secretary | ||
| Dated: |
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting:
The Proxy Statement is available at www.proxyvote.com. To view these materials please have your 16-digit control number(s) available that appears on your Notice of Internet Availability, proxy card or voting instruction form. On this website you can also elect to receive future distributions of our proxy statements and annual reports to stockholders by electronic delivery.
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TABLE OF CONTENTS
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PROXY STATEMENT
This proxy statement, along with the accompanying Notice of 2025 Annual Meeting of Stockholders, contains information about the 2025 Annual Meeting of Stockholders of
In this proxy statement, we refer to
This proxy statement relates to the solicitation of proxies by our board of directors (the "Board") for use at the Annual Meeting.
Voting Matters and the Board's Recommendation
| Agenda Item |
Board Vote Recommendation |
Page Reference |
||
| Election of seven (7) directors named in the Proxy Statement to hold office until the next annual meeting of stockholders, or until their respective successors are elected and qualified or until their earlier resignation or removal ("Proposal 1," or the "Election of Directors") |
FOR each Director Nominee |
9 | ||
| Ratification of the appointment of |
FOR | 32 | ||
| Approval of a proposed amendment to our 2020 Incentive Plan (the "2020 Plan") to increase the aggregate number of shares of our common stock, par value |
FOR | 36 | ||
| Approval of the issuance of up to an aggregate of 17,447,366 shares of Common Stock upon the exercise of certain warrants issued in connection with the offering that closed on |
FOR | 44 | ||
| Approval of the adjournment of the Annual Meeting to solicit additional proxies if there are insufficient votes at the time of the meeting to adopt the Incentive Plan Increase Proposal (Proposal 3) and the Warrant Exercise Proposal (Proposal 4) ("Proposal 5," or the "Adjournment Proposal") | FOR | 46 |
On or about
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IMPORTANT NOTICE REGARDING
THE AVAILABILITY OF PROXY MATERIALS FOR THE
2025 ANNUAL MEETING TO BE HELD ON
This proxy statement, the Notice of 2025 Annual Meeting of Stockholders, our form of proxy card and our 2024 Annual Report to stockholders are available for viewing, printing and downloading at www.proxyvote.com. To view these materials please have available your 16-digit control number(s) that appears on your Notice of Internet Availability, proxy card or voting instruction form. On this website you can also elect to receive future distributions of our proxy statements and annual reports to stockholders by electronic delivery.
Additionally, you can find a copy of our 2024 Annual Report, which includes our financial statements for the fiscal year ended
Exhibits will be provided upon written request and payment of an appropriate processing fee.
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IMPORTANT INFORMATION ABOUT
THE ANNUAL MEETING AND VOTING
Who is Soliciting My Proxy?
Our Board is soliciting your proxy to vote at the 2025 Annual Meeting of stockholders to be held by means of remote communication via a live webcast accessible at www.virtualshareholdermeeting.com/TOON2025 on
We have made available to you on the Internet or have sent you this proxy statement, the Notice of 2025 Annual Meeting of Stockholders, the proxy card and a copy of our 2024 Annual Report because you owned shares of our Common Stock on the Record Date (as defined below). On or about
Why Did I Receive a Notice of Internet Availability in the Mail Regarding the Internet Availability of Proxy Materials Instead of a Full Set of Proxy Materials?
As permitted by the rules of the
Why is the Company holding the Annual Meeting virtually?
We are holding the Annual Meeting online and providing internet voting to facilitate stockholder attendance and participation by enabling all stockholders to participate fully, equally and without cost, using an Internet-connected device from any location around the world, with procedures designed to ensure the authenticity and correctness of your voting instructions. In addition, the virtual-only meeting format increases our ability to engage with all stockholders, regardless of size, resources or physical location. Our stockholders will be afforded the same opportunities to participate at the virtual Annual Meeting as they would at an in-person Annual Meeting.
Where can I get technical assistance?
If you encounter any difficulties accessing the virtual Annual Meeting, please call the technical support number that will be posted at www.virtualshareholdermeeting.com/TOON2025.
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Who
We have one class of voting stock. Each stockholder who owned our Common Stock at
If on the Record Date your shares of Common Stock are registered directly in your name with our transfer agent,
If on the Record Date your shares are held not in your name but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in "street name" and the Notice of Internet Availability shall be forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares at the Annual Meeting unless you request and obtain a legal proxy from your broker or other agent authorizing you to vote your shares when you register for the Annual Meeting.
You do not need to attend the Annual Meeting to vote your shares. Shares represented by valid proxies, received in time for the Annual Meeting and not revoked prior to the Annual Meeting will be voted at the Annual Meeting. For instructions on how to change or revoke your proxy, see "May I Change or Revoke My Proxy?" below.
How Do I Vote?
If your shares are registered directly in your name through our stock transfer agent,
| · | By Internet. Follow the instructions included in the Notice of Internet Availability or, if you received printed materials, in the proxy card to vote by Internet. | |
| · | By mail. If you received a proxy card by mail, you can vote by mail by completing, signing, dating and returning the proxy card as instructed on the card. If you sign the proxy card but do not specify how you want your shares voted, they will be voted in accordance with the recommendations of our Board as noted below. | |
| · | At the Annual Meeting. If you attend the Annual Meeting virtually, you may vote at the Annual Meeting by following the instructions when you log in for the Annual Meeting at www.virtualshareholdermeeting.com/TOON2025. Have your proxy card or Notice of Internet Availability in hand as you will be prompted to enter your 16-digit control number to vote at the Annual Meeting. Electronic entry to the Annual Meeting will begin 15 minutes before the start of the meeting. |
Internet voting facilities for stockholders of record will be available 24 hours a day and will close at
If your shares are held in "street name" (held in the name of another holder of record, such as a brokerage firm, bank, dealer or other similar organization), you will receive instructions from the holder of record. You must follow the instructions of the holder of record in order for your shares to be voted. Telephone and Internet voting also will be offered to stockholders owning shares through certain banks and brokers. If your shares are not registered in your own name and you would like to vote your shares at the Annual Meeting, you should contact your broker or agent to obtain a legal proxy authorizing you to vote your shares when you register for the Annual Meeting.
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How Does Our Board Recommend that I Vote on the Proposals?
Our Board recommends that you vote as follows:
| · | "FOR" the election of each of the Board's nominees with respect to the Election of Directors (Proposal 1); | |
| · | "FOR" the Auditor Ratification Proposal (Proposal 2); | |
| · | "FOR" the Incentive Plan Increase Proposal (Proposal 3); | |
| · | "FOR" the Warrant Exercise Proposal (Proposal 4). | |
| · | "FOR" the Adjournment Proposal (Proposal 5). |
If any other matter is presented at the Annual Meeting, your proxy provides that your shares will be voted by the proxy holder listed in the proxy in accordance with his or her best judgment. At the time this proxy statement was first made available, we knew of no matters that needed to be acted on at the Annual Meeting, other than those discussed in this proxy statement.
May I Change or Revoke My Proxy?
If you are a stockholder of record and you give us your proxy, you may change or revoke it at any time before the Annual Meeting. You may change or revoke your proxy in any one of the following ways:
| · | if you received a proxy card, by signing a new proxy card with a date later than your previously delivered proxy and submitting it as instructed above; | |
| · | by re-voting by Internet as instructed above; | |
| · | by notifying our Corporate Secretary in writing before the Annual Meeting that you have revoked your proxy; or | |
| · | by attending the Annual Meeting virtually and voting online. Attending the Annual Meeting will not in and of itself revoke a previously submitted proxy. You must specifically vote your shares online at the Annual Meeting to revoke your previously submitted proxy. |
Your most current vote, whether by telephone, Internet or proxy card, is the one that will be counted.
If your shares are held in street name, please refer to information from your bank, broker, or other intermediary on how to revoke or submit new voting instructions.
What if I Receive More Than One Notice of Internet Availability, Proxy Card or Voting Instruction Form?
You may receive more than one Notice of Internet Availability, proxy card or voting instruction form if you hold shares of our Common Stock in more than one account, which may be in registered form or held in street name. Please vote in the manner described above under "How Do I Vote?" for each account to ensure that all of your shares are voted.
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Will
If your shares are registered in your name or if you have stock certificates, they will not be counted if you do not vote as described above under "How Do I Vote?" If your shares are held in street name and you do not provide voting instructions to the bank, broker or other nominee that holds your shares as described above, the bank, broker or other nominee that holds your shares has the authority to vote your unvoted shares with respect to matters considered to be "routine" under NYSE rules, but not with respect to "non-routine" matters. In this regard, we believe that the NYSE will treat the Election of Directors (Proposal 1), the Incentive Plan Increase Proposal (Proposal 3), the Warrant Exercise Proposal (Proposal 4) and the Adjournment Proposal (Proposal 5) as "non-routine," meaning that your broker, bank or other nominee may not vote your shares on any of these proposals in the absence of your voting instructions. However, we believe that the NYSE will treat the Auditor Ratification (Proposal 2) as a "routine" matter under the NYSE rules, meaning that if you do not retuvoting instructions to your broker, bank or other nominee by its deadline, your shares may be voted by your broker, bank or other nominee in its discretion on such proposal. This belief is based on preliminary guidance from the NYSE and may be incorrect or change before the Annual Meeting. In light of the foregoing, we encourage you to provide voting instructions to your bank, broker or other nominee. This ensures your shares will be voted at the Annual Meeting and in the manner you desire. A "broker non-vote" will occur if your broker cannot vote your shares on a particular matter because it has not received instructions from you and does not have discretionary voting authority on that matter or because your broker chooses not to vote on a matter for which it does have discretionary voting authority.
What Vote is Required to Approve Each Proposal and How are Votes Counted?
| PROPOSAL | VOTE REQUIRED | VOTING OPTIONS | EFFECT OF ABSTENTIONS (OR THE WITHHOLDING OF AUTHORITY) |
EFFECT OF BROKER NON-VOTES |
||||
| Election of Directors (Proposal 1) | Plurality-the seven director nominees who receive the most "FOR" votes will be elected to serve on the Board | "FOR" "WITHHOLD" |
No effect | No effect | ||||
| Auditor Ratification Proposal (Proposal 2) | Approved by a majority of the votes cast by the stockholders entitled to vote thereon who are present in person or represented by proxy | "FOR" "AGAINST" "ABSTAIN" |
No effect | Not applicable-There are not expected to be any. | ||||
| Incentive Plan Increase Proposal (Proposal 3) | Approved by a majority of the votes cast by the stockholders entitled to vote thereon who are present in person or represented by proxy | "FOR" "AGAINST" "ABSTAIN" |
No effect. | No effect. | ||||
| Warrant Exercise Proposal (Proposal 4) | Approved by a majority of the votes cast by the stockholders entitled to vote thereon who are present in person or represented by proxy | "FOR" "AGAINST" "ABSTAIN" |
No effect. | No effect | ||||
| Adjournment Proposal (Proposal 5) | Approved by a majority of the votes cast by the stockholders entitled to vote thereon who are present in person or represented by proxy | "FOR" "AGAINST" "ABSTAIN" |
No effect. | No effect |
Is Voting Confidential?
We will keep all the proxies, ballots and voting tabulations private. We only let our inspectors of election,
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Where Can I Find the Voting Results of the Annual Meeting?
The preliminary voting results will be announced at the Annual Meeting, and we will publish preliminary, or final results if available, in a Current Report on Form 8-K within four business days of the Annual Meeting. If final results are unavailable at the time we file the Form 8-K, then we will file an amended Current Report on Form 8-K to disclose the final voting results within four business days after the final voting results are known.
What Are the Costs of Soliciting these Proxies?
We will pay all of the costs of soliciting these proxies. Our directors and employees may solicit proxies in person or by telephone, fax or email. We will not pay these directors and employees any additional compensation for these services. We will ask banks, brokers and other institutions, nominees and fiduciaries to forward these proxy materials to their principals and to obtain authority to execute proxies. We will then reimburse them for their expenses.
We have engaged
What Constitutes a Quorum for the Annual Meeting?
The presence, in person or by proxy, of the stockholders entitled to cast at least 33.34% of all the votes entitled to be cast at the Annual Meeting constitutes a quorum for the Annual Meeting. Votes of stockholders of record who are present at the Annual Meeting in person or by proxy, abstentions, and broker non-votes are counted for purposes of determining whether a quorum exists.
Attending the Annual Meeting
The Annual Meeting will be held at
All stockholders may attend the Annual Meeting. For stockholders who plan to attend the Annual Meeting, you must register at www.proxyvote.com by
You need not attend the Annual Meeting in order to vote.
Householding of Annual Disclosure Documents
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If your household received a single Notice of Internet Availability or, if applicable, a single set of proxy materials this year, but you would prefer to receive your own copy, please contact our transfer agent,
If you do not wish to participate in householding and would like to receive your own Notice of Internet Availability or, if applicable, set of the Company's proxy materials in future years, follow the instructions described below. Conversely, if you share an address with another Company stockholder and together both of you would like to receive only a single Notice of Internet Availability or, if applicable, set of proxy materials, follow these instructions:
If your Company shares are registered in your own name, please contact our transfer agent,
Electronic Delivery of
Most stockholders can elect to view or receive copies of future proxy materials over the Internet instead of receiving paper copies in the mail.
You can choose this option and save the Company the cost of producing and mailing these documents by:
| · | following the instructions provided on your Notice of Internet Availability or proxy card; or | |
| · | following the instructions provided when you vote over the Internet at www.proxyvote.com. |
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PROPOSAL 1 - ELECTION OF DIRECTORS
The directors of the Company are elected annually and hold office for the ensuing year until the next annual meeting of stockholders and until their successors have been duly elected and qualified. The directors are elected by a plurality of the votes of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the Election of Directors. Our Bylaws, as amended (the "Bylaws") state that the number of directors constituting the entire Board may be determined by action of the directors. The number of directors currently fixed by the Board is seven.
On
Unless authority to vote for any of these nominees is withheld, the shares represented by the enclosed proxy will be voted FOR the election of
A brief biography of each nominee is below.
Nominees For Election as Directors
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Henry Sicignano III, Director
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Dr.
Dr. Turner-Graham has been a Director of the Company since
Required Vote
The seven director nominees who receive the most "FOR" votes will be elected to serve on the Board.
Recommendation of the Board
THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE DIRECTOR NOMINEES NAMED IN THIS PROXY STATEMENT.
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MANAGEMENT AND CORPORATE GOVERNANCE
Our Board
Our Bylaws provide that our business is to be managed by or under the direction of our Board. Set forth below are the names of our directors, each of whom has been nominated for reelection at this Annual Meeting, their respective ages as of the Record Date, their offices in the Company, if any, and any committees of the Board on which they serve. The biographies of our directors are set forth in "Proposal 1 - Election of Directors" above.
| Age | Position | |||
| 76 | Chief Executive Officer and Chairman of the Board of Directors | |||
| 82 | Director | |||
| Henry Sicignano III * | 57 | Director | ||
| 78 | Director | |||
| 72 | Director | |||
| 87 | Director | |||
| Dr. |
70 | Director |
| * | Denotes directors who are "independent" under applicable |
Our Board has reviewed the materiality of any relationship that each of our directors has with the Company, either directly or indirectly. Based upon this review, our Board has determined that the following members of the Board are "independent directors" as defined by the NYSE American Company Guide:
Family Relationships
There are no family relationships between any of our directors and our executive officers.
Board Leadership Structure and Role in Risk Oversight
The Board has responsibility for establishing broad corporate policies and reviewing our overall performance rather than day-to-day operations. The primary responsibility of our Board is to oversee the management of our company and, in doing so, serve the best interests of the Company and our stockholders. The Board selects, evaluates and provides for the succession of executive officers and, subject to stockholder election, directors. It reviews and approves corporate objectives and strategies and evaluates significant policies and proposed major commitments of corporate resources. Our Board also participates in decisions that have a potential major economic impact on the Company. Management keeps the directors informed of company activity through regular communication, including written reports and presentations at Board and committee meetings.
The Board currently consists of seven directors, including
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Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act of 1934, as amended (the "Exchange Act") requires our officers, directors and any persons who own more than 10% of our Common Stock to file reports of ownership of, and transactions in, our Common Stock with the
Committees of the Board and Meetings
During the fiscal year ended
The following table sets forth the four standing committees of our Board and the members of each committee and the number of meetings held by our Board and the committees during 2024:
| Director | Board |
Audit Committee |
Compensation Committee |
Nominating Committee |
Investment Committee |
|||||
| Chair | ||||||||||
| X | X | X | X | |||||||
| Henry Sicignano III | X | Chair | X | |||||||
| X | X | |||||||||
| X | X | Chair | Chair | |||||||
| Vice Chair | ||||||||||
| Dr. |
X | X | ||||||||
| Dr. |
X | |||||||||
| Meetings in 2024: | 6 | 4 | 1 | 1 | 1 |
| (1) | Effective |
| (2) | On |
To assist in carrying out its duties, the Board has delegated certain authority to the Audit Committee, the Compensation Committee, the Nominating Committee and the Investment Committee as the functions of each are described below.
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Audit Committee
| · | selecting, hiring, and compensating our independent auditors; | |
| · | evaluating the qualifications, independence and performance of our independent auditors; | |
| · | overseeing and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters; | |
| · | approving the audit and non-audit services to be performed by our independent auditor; | |
| · | reviewing with the independent auditor the design, implementation, adequacy and effectiveness of our internal controls and our critical accounting policies; and | |
| · | preparing the report that the |
The Board has adopted an Audit Committee charter, and the Audit Committee reviews and reassesses the adequacy of the charter on an annual basis. The Board has determined that the Audit Committee members meet NYSE American's financial literacy requirements and are independent under applicable
A copy of the Audit Committee's written charter is publicly available on our website at www.kartoonstudios.com.
Compensation Committee
Mses. Segall and Loesch serve on the Compensation Committee and the Board has determined that each of the Compensation Committee members are independent under the applicable NYSE American rules. Our Compensation Committee's main functions are assisting our Board in discharging its responsibilities relating to the compensation of outside directors, the Chief Executive Officer and other executive officers, as well as administering any stock incentive plans we may adopt. The Compensation Committee's responsibilities include the following:
| · | reviewing and recommending to our Board the compensation of our Chief Executive Officer and other executive officers, and the outside directors; | |
| · | conducting a performance review of our Chief Executive Officer; | |
| · | reviewing our compensation policies; and | |
| · | if required, preparing the report of the Compensation Committee for inclusion in our annual proxy statement. |
The Compensation Committee may delegate matters within its responsibility to subcommittees composed of certain of its members. The Board has adopted a Compensation Committee charter and the Compensation Committee reviews and reassesses the adequacy of the charter on an annual basis.
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The Compensation Committee's policy is to offer our executive officers competitive compensation packages that will permit us to attract and retain highly qualified individuals and to motivate and reward these individuals in an appropriate fashion aligned with the long-term interests of our Company and our stockholders.
A copy of the Compensation Committee's written charter is publicly available on our website at www.kartoonstudios.com.
Compensation Committee Risk Assessment
We have assessed our compensation programs and concluded that our compensation practices do not create risks that are reasonably likely to have a material adverse effect on us.
Role of Our Compensation Consultant
The Compensation Committee has the authority under its charter to retain compensation consultants to assist in carrying out its responsibilities. The Compensation Committee has from time to time retained consultants to provide independent advice on executive compensation and to perform specific tasks as requested by the Compensation Committee. Any such consultant reports directly to the Compensation Committee.
The Compensation Committee engaged
Nominating Committee
| · | identifying qualified individuals to serve as members of our Board; |
| · | review the qualifications and performance of incumbent directors; |
| · | review and consider candidates who may be suggested by any director or executive officer or by a stockholder of the Company; and |
| · | review considerations relating to board composition, including size of the board, term and age limits, and the criteria for membership of the board. |
The Board has adopted a Nominating Committee charter, and the Nominating Committee reviews and reassesses the adequacy of the charter on an annual basis. For all potential candidates, the Nominating Committee may consider all factors it deems relevant, such as a candidate's personal integrity and sound judgment, business and professional skills and experience, independence, knowledge of the industry in which we operate, possible conflicts of interest, diversity, the extent to which the candidate would fill a present need on the Board, and concefor the long-term interests of our stockholders. The Nominating Committee will consider potential candidates recommended by our stockholders. Any such potential candidates will be evaluated using the same criteria as candidates identified by any director or executive officer.
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The Nominating Committee considers issues of diversity among its members in identifying and considering nominees for director, and strives, where appropriate, to achieve a diverse balance of backgrounds, perspectives and experience on the Board and its committees, but it does not have a formal diversity policy .
A copy of the Nominating Committee's written charter is publicly available on our website at www.kartoonstudios.com.
Investment Committee
Messrs. Davis and Sicignano III serve on our Investment Committee. The primary purpose of the Investment Committee is to assist the Board in reviewing our investment policy and strategies and in overseeing our capital and financial resources. A material investment on behalf of the Company may not be made without the Investment Committee's approval or the approval of a delegate of the Investment Committee pursuant to an appropriate delegation of the Investment Committee's authority. In order to carry out its mission and function, and subject to the terms of the Company's Articles of Incorporation, as amended, the Investment Committee has the authority to:
| · | review the investment policy, strategies, transactions and programs of the Company and its subsidiaries to ensure they are consistent with the goals and objectives of the Company; | |
| · | evaluate and approve or disapprove each proposed material investment on behalf of the Company; | |
| · | determine whether the investment policy is consistently followed and that procedures are in place to ensure that the Company's investment portfolio is managed in compliance with its policies; | |
| · | review the performance of the investment portfolios of the Company and its subsidiaries; and | |
| · | approve and revise, as appropriate, the Company's investment policies and guidelines. |
Generally, stockholders who have questions or concerns should contact our Investor Relations department at 844-589-8760. However, any stockholders who wish to address questions regarding our business directly with the Board, or any individual director, should direct his or her questions in writing to
| · | junk mail and mass mailings; | |
| · | resumes and other forms of job inquiries; | |
| · | surveys; and | |
| · | solicitations or advertisements. |
In addition, any material that is unduly hostile, threatening, or illegal in nature may be excluded, provided that any communication that is filtered out will be made available to any outside director upon request.
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Insider Trading Policy
We have adopted an insider trading policy (the "Trading Policy") that is designed to promote compliance with federal and state securities laws and regulations, as well as the rules and regulations of the NYSE American. The Trading Policy provides our standards on trading and causing the trading of our securities while in possession of material nonpublic information. It prohibits trading in certain circumstances and applies to all of our directors, officers and employees as well as independent contractors or consultants who have access to material nonpublic information obtained through involvement with our company. Additionally, our Trading Policy imposes special additional trading restrictions applicable to all of our directors and executive officers and to such persons' family members who live in such persons' households. The Trading Policy also requires us to comply with all insider trading laws, rules and regulations, and any applicable listing standards when engaging in transactions in our own securities.
Hedging Policy
Pursuant to our Trading Policy, we prohibit our directors, officers, and employees from purchasing any financial instrument or engaging in any other transaction, such as a prepaid variable forward, equity swap, collar or exchange fund, that is designed to hedge or offset any decrease in the market value of the Company's securities. Our Trading Policy also prohibits our directors, officers, and employees from: (i) participating in short sales of the Company's securities; (ii) participating in a transaction involving publicly traded options, such as puts, calls or other derivative securities, related to the Company's securities; and (iii) holding Company securities in margin accounts or pledging Company securities as collateral for a loan.
* The disclosure under the caption "Hedging Policy" is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
Executive Officers
The following table sets forth certain information as of the Record Date, regarding our executive officers. Information regarding our Chief Executive Officer,
| Age | Position | |||
| 76 | Chief Executive Officer and Chairman of the Board | |||
| 55 | Chief Financial Officer | |||
| 59 | Chief Operating Officer, General Counsel and Corporate Secretary |
| 17 |
| 18 |
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
This section describes the material elements of compensation awarded to, earned by or paid to (i) all individuals who served as our principal executive officer during 2024, (ii) our two most highly compensated executive officers (other than the principal executive officer) who were serving as executive officers of the Company as of
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to our named executive officers for all services rendered in all capacities to us during the fiscal years noted below:
| Year | Salary ($) | Bonus ($) |
Stock Awards ($) (1) |
Option Awards ($) |
All Other Compensation ($) |
Total ($) | ||||||||
| 2024 | 440,000 | 220,000 | - | - | 415,384 | 1,075,384 | ||||||||
| Chief Executive Officer | 2023 | 440,000 | 220,000 | - | - | 816,984 | 1,476,984 | |||||||
| 2024 | 450,000 | 50,000 | - | - | - | 500,000 | ||||||||
| Chief Operating Officer, General Counsel and Corporate Secretary | 2023 | 419,826 | 50,000 | - | - | 8,364 | 478,190 | |||||||
| 2024 | 331,439 | 15,000 | - | - | - | 346,439 | ||||||||
| Chief Financial Officer | 2023 | 85,000 | - | 50,050 | - | - | 135,050 |
| (1) | The aggregate fair value of the stock awards on the date of grant was computed in accordance with FASB ASC Topic 718. |
| (2) | |
| (3) | |
| (4) | Effective |
| 19 |
Narrative Disclosure to Summary Compensation Table
Base Salary
Base salaries are used to recognize experience, skills, knowledge and responsibilities required of all of our employees, including our executive officers.
All Other Compensation
Pursuant to his employment agreement,
Bonus Compensation
Our named executive officers are eligible to receive an annual bonus award in accordance with their employment agreements and/or management incentive program then in effect with respect to such executive officer and based on an annualized target of base salary, as specified in their respective employment agreements, if applicable. In 2024,
Equity Based Incentive Awards
We believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executives and our stockholders. In addition, we believe that equity grants with a time-based vesting feature promote executive retention because this feature incentivizes our named executive officers to remain in our employment during the vesting period. Accordingly, our compensation committee and Board periodically review the equity incentive compensation of our named executive officers and from time to time may grant additional equity incentive awards to them in the form of stock options or other awards. During the year ended
Employment Agreements
CEO Employment Agreement
On
| 20 |
The options granted to
On
The award agreement further provides that in addition to vesting based on the stock price and market capitalization vesting conditions set forth above, the 1,125,000 RSUs had the opportunity to vest in four equal installments on the first, second, third and fourth anniversaries of
On
On
As of
| 21 |
The CEO Employment Agreement also entitles
COO and General Counsel Employment Agreement
On
The COO and General Counsel Employment Agreement provides
The COO and General Counsel Employment Agreement also entitles
Additionally, the COO and General Counsel Employment Agreement contains certain restrictive covenants regarding confidential information, intellectual property, non-competition and non-solicitation.
| 22 |
CFO Employment Agreement
Effective
The CFO Employment Agreement also entitles
The Company may terminate the CFO Employment Agreement in the event
Additionally, the CFO Employment Agreement contains certain restrictive covenants regarding confidential information, intellectual property, non-competition and non-solicitation.
Retirement Benefits
As of
Potential Payments upon Termination or Change-in-Control
Payments upon Termination
Our employment agreements with our named executive officers provide incremental compensation in the event of termination, as described above under Employment Agreements.
| 23 |
Further, our equity incentive plans have provisions for payments to our named executive officers if they are terminated as a result of death or disability. Under the
Payments upon Change in Control
Under our 2015 Plan, upon a Change in Control, the Compensation Committee may, but is not required to, provide for one or more of the following: (i) acceleration, vesting or lapsing of awards, (ii) cancellation of awards for fair value (as determined in the sole discretion of the Compensation Committee), (iii) issuance of substitute awards that substantially preserve the terms of the original awards, (iv) provision that options and rights shall be exercisable prior to such Change in Control and then be terminated following the Change in Control, or (v) any other action with respect to the awards as the Compensation Committee determines to be appropriate in its discretion.
Under our 2020 Plan, upon a Change in Control, the Compensation Committee may, but is not required to, provide for one or more of the following: (i) assumption of the 2020 Plan and outstanding awards by the surviving entity or its parent, (ii) issuance of substitute awards that substantially preserve the terms of the original awards, (iii) notice to holders of vested options and rights that such options and rights shall be exercisable prior to such Change in Control and then be terminated following the Change in Control, (iv) settlement of the intrinsic value of outstanding vested options and rights in cash, cash equivalence or equity (regardless of vesting status), (v) cancellation of all unvested or unexercisable awards, or (vi) any other action with respect to the awards as the Compensation Committee determines to be appropriate in its discretion; provided that in connection with an assumption or substitution awards under (i) or (ii), the awards so assumed or substituted shall continue to vest or become exercisable pursuant to the terms of the original award, except to the extent such terms are otherwise rendered inoperative.
Under our 2015 Plan and our 2020 Plan, "Change in Control" is defined to mean any of the following events: (a) any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (other than the Company or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company) becomes the "beneficial owner" within the meaning of Rule 13d-3 promulgated under the Act of 30% or more of the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors; excluding, however, any circumstance in which such beneficial ownership resulted from any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or by any corporation controlling, controlled by, or under common control with, the Company (or, under the 2020 Plan, the Company itself); (b) a change in the composition of the Board since the date of stockholder approval, such that the individuals who, as of such date, constituted the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of such board; provided that any individual who becomes a director of the Company subsequent to date of stockholder approval whose election, or nomination for election by the Company's stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and provided further, that any individual who was initially elected as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14A promulgated under the Exchange Act, or any other actual or threatened solicitation of proxies or consents by or on behalf of any person or entity other than the Board shall not be deemed a member of the Incumbent Board; (c) a reorganization, recapitalization, merger, consolidation or similar form of corporate transaction, or the sale, transfer, or other disposition of all or substantially all of the assets of the Company to an entity that is not an Affiliate (each of the foregoing events, a "Corporate Transaction") involving the Company, unless securities representing 60% or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Company or the corporation resulting from such Corporate Transaction, including a corporation that, as a result of such transaction owns all or substantially all of the Company's assets (or the direct or indirect parent of such corporation), are held immediately subsequent to such transaction by the person or persons who were the beneficial holders of the outstanding voting securities entitled to vote generally in the election of directors of the Company immediately prior to such Corporate Transaction, in substantially the same proportions as their ownership immediately prior to such Corporate Transaction; or (d) the liquidation or dissolution of the Company (or, under the 2020 Plan, stockholder approval of such liquidation or dissolution), unless such liquidation or dissolution is part of a transaction or series of transactions described in clause (c) above that does not otherwise constitute a Change in Control.
| 24 |
Clawback Policy
Effective
Company Policies and Practices Related to the Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information
The Company does not have a formal policy on the timing of awards of options in relation to the disclosure of material nonpublic information by the Company. The Compensation Committee does not seek to time equity grants to take advantage of information, either positive or negative, about our company that has not been publicly disclosed. Option grants are generally effective on the date the award determination is made by the Compensation Committee, and the exercise price of options is the closing market price of our Common Stock on the date of the grant or, if the grant is made on a weekend or holiday, on the prior business day.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth outstanding equity awards as of
| Option Awards | Stock Awards | |||||||||||||||||||||
| Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Option exercise price ($) |
Option expiration date | Number of shares or units of stock that have not yet vested (#) |
Market Value of shares or units of stock that have not yet vested ($) | Equity incentive plan awards: number of unearned shares, units or other rights that have not yet vested (#) |
Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($) | |||||||||||||||
| 500,000 | (1) | - | 13.90 | - | - | 843,750 | (2) | $ | 497,813 | |||||||||||||
| 100,000 | (3) | - | 13.90 | - | - | - | - | |||||||||||||||
| - | - | - | - | 23,333 | $ | 13,767 | - | - | ||||||||||||||
| (1) |
| (2) |
| (3) | All of |
| (4) | On |
| (5) | Calculated by multiplying the closing price per share of the Company's common stock on |
| 25 |
Pay Versus Performance
Pursuant to the Exchange Act, we are required to disclose in this proxy statement certain information comparing the total compensation actually paid ("CAP") to our principal executive officer (the "PEO") and the average CAP of our other named executive officers (whom we refer to below as our "Non-PEO NEOs") and certain other financial performance metrics of the Company using methodologies prescribed by the
| Year |
Summary Compensation Table Total (2) |
Compensation Actually Paid |
Average Summary Compensation Table Total for Non-PEO NEOs (3) |
Average Compensation Actually Paid to Non-PEO NEOs (4) |
Value of Initial Fixed (5) |
Net Loss (in 000s) (6) |
| 2024 | 1,075,384 | 698,509 | 423,220 | 409,937 | 6 | (20,941) |
| 2023 | 1,492,368 | (1,861,069) | 359,086 | 247,838 | 13 | (77,103) |
| 2022 | 1,450,384 | (5,369,928) | 494,981 | 173,217 | 44 | (45,595) |
| (1) | Mr. Heywardserved as our Chief Executive Officer and Chairman during each of the three years presented in the table. | |
| (2) | The values reflected in this column reflect the "Total" compensation set forth in the Summary Compensation Table ("SCT") in each applicable year. | |
| (3) | The dollar amounts reported in this column represent the average of the amounts reported for Non-PEO NEOs in the "Total" column of the SCT in each applicable year. The names of each of the Non-PEO NEOs included for purposes of calculating the average amounts in 2024 were |
| (4) | The dollar amounts reported in this column represent the average amount of CAP to Non-PEO NEOs as a group, as computed in accordance with |
|
| (5) | The cumulative total shareholder retu("TSR") is determined based on the value of an initial fixed investment of |
|
| (6) | The dollar amounts reported in this column are the Company's net income amounts reflected in the Company's audited financial statements for the applicable year. |
| 26 |
The following tables below detail these adjustments to compensation as reported in the Summary Compensation Table:
| Reported Summary Compensation Table Total for 2024 | $ | 1,075,384 | ||
| Deduct: Fair Value of Equity Awards Under the "Stock Awards" and "Option Awards" Column in SCT | - | |||
| Add: Year End |
- | |||
| Add: Change in Year Over Year End |
- | |||
| Add: Change in Prior Year End |
(376,875 | ) | ||
| Compensation Actually Paid for 2024 | $ | 698,509 | ||
| Reported Summary Compensation Table Total for 2023 | $ | 1,492,368 | ||
| Deduct: Fair Value of Equity Awards Under the "Stock Awards" and "Option Awards" Column in SCT | - | |||
| Add: Year End |
- | |||
| Add: Change in Year Over Year End |
(3,056,250 | ) | ||
| Add: Change in Prior Year End |
(297,188 | ) | ||
| Compensation Actually Paid for 2023 | $ | (1,861,069 | ) | |
| Reported Summary Compensation Table Total for 2022 | $ | 1,450,384 | ||
| Deduct: Fair Value of Equity Awards Under the "Stock Awards" and "Option Awards" Column in SCT | - | |||
| Add: Year End |
- | |||
| Add: Change in Year Over Year End |
(6,032,813 | ) | ||
| Add: Change in Prior Year End |
(787,500 | ) | ||
| Compensation Actually Paid for 2022 | $ | (5,369,928 | ) | |
| 27 |
| Average Non-PEO NEOs | ||||
| Average Reported Summary Compensation Table Total for 2024 | $ | 423,220 | ||
| Deduct: Average Fair Value of Equity Awards Under the "Stock Awards" and "Option Awards" Column in SCT | - | |||
| Add: Average Year End |
- | |||
| Add: Average Change in Year Over Year End |
(8,680 | ) | ||
| Add: Average Change in Prior Year End |
(4,603 | ) | ||
| Average Compensation Actually Paid for 2024 | $ | 409,937 | ||
| Average Reported Summary Compensation Table Total for 2023 | $ | 359,086 | ||
| Deduct: Average Fair Value of Equity Awards Under the "Stock Awards" and "Option Awards" Column in SCT | (16,683 | ) | ||
| Add: Average Year End |
16,217 | |||
| Add: Average Change in Year Over Year End |
- | |||
| Add: Average Change in Prior Year End |
(110,781 | ) | ||
| Average Compensation Actually Paid for 2023 | $ | 247,838 | ||
| Average Reported Summary Compensation Table Total for 2022 | $ | 494,981 | ||
| Deduct: Average Fair Value of Equity Awards Under the "Stock Awards" and "Option Awards" Column in SCT | (235,494 | ) | ||
| Add: Average Year End |
143,403 | |||
| Add: Average Change in Year Over Year End |
(138,690 | ) | ||
| Add: Average Change in Prior Year End |
(90,983 | ) | ||
| Average Compensation Actually Paid for 2022 | $ | 173,217 | ||
The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. The value of RSU awards is based on the fair value as of the end of the covered year or change in fair value during the covered year, in each case based on the closing sale price of our common stock. The value of option awards is based on the fair value as of the end of the covered year or change in fair value during the covered year, in each case based on our Black-Scholes option pricing model, the assumptions of which are described in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended
| 28 |
Pay Versus Performance Relationship Disclosures
Compensation Actually Paid and Cumulative Total Shareholder Return
The graph below compares the compensation actually paid to our PEOs and the average of the compensation actually paid to our remaining NEOs, with our cumulative total shareholder retufor the fiscal years ended
| 29 |
Compensation Actually Paid and Net Loss
The graph below compares the compensation actually paid to our PEOs and the average of the compensation actually paid to our remaining NEOs, with our net loss for the fiscal years ended
| 30 |
Director Compensation
The following table sets forth with respect to each of our non-employee directors, compensation information inclusive of equity awards and payments earned for the year ended
|
Fees Earned or Paid in Cash ($) (1) |
Stock Awards ($) (2) |
All Other Compensation ($) |
Total ($) |
|
| 25,000 | 25,000 | - | 50,000 | |
| Henry Sicignano III (4) | 20,000 | 20,000 | - | 40,000 |
| 22,500 | 22,500 | - | 45,000 | |
| 32,500 | 32,500 | - | 65,000 | |
| 20,000 | 20,000 | 63,000 | 103,000 | |
| Dr. |
22,500 | 22,500 | - | 45,000 |
| - | - | - | - |
| (1) | Directors, other than |
|
| (2) | Represents the grant date fair value in accordance with FASB ASC Topic 718. The assumptions applied in determining the fair value of the awards are discussed in the Notes to our audited consolidated financial statements in our Annual Report on Form 10-K for the year ended |
|
| (3) | ||
| (4) | ||
| (5) | ||
| (6) | ||
| (7) | ||
| (8) | Dr. Turner-Graham was paid compensation with an aggregate value of |
|
| (9) | On |
| 31 |
PROPOSAL 2 - APPROVAL OF THE AUDITOR RATIFICATION PROPOSAL
The Audit Committee has appointed
In deciding to appoint Withum, the Audit Committee reviewed auditor independence issues and existing commercial relationships with Withum and concluded that Withum has no commercial relationship with the Company that would impair its independence for the fiscal year ending
Withum has audited our financial statements since
Ratification of the appointment of Withum by our stockholders is not required by law, our Bylaws or other governing documents. As a matter of policy, however, the appointment is being submitted to our stockholders for ratification at the 2025 Annual Meeting. If our stockholders fail to ratify the appointment, the Audit Committee will reconsider whether or not to retain that firm. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of different independent auditors at any time during the year if they determine that such a change would be in our best interest and the best interests of our stockholders.
Changes in our Certifying Accountants and Accounting Firm Services and Fees
Current Principal Accountant Fees and Services
On
During our fiscal years ended
The following table represents aggregate fees billed to us by Withum for the fiscal years ended
| 2024 | 2023 | |||||||
| Audit Fees | $ | 590,476 | $ | 410,072 | ||||
| Audit-Related Fees | 14,300 | - | ||||||
| Tax Fees | - | - | ||||||
| Other Fees | - | - | ||||||
| Total Fees | $ | 604,776 | $ | 410,072 | ||||
Former Principal Accountants Fees and Services
On
| 32 |
The reports of
Additionally, during the years ended
The following table sets forth fees billed to us by
| 2024 | 2023 | |||||||
| Audit Fees | $ | - | $ | 581,839 | ||||
| Audit-Related Fees | 43,200 | 75,095 | ||||||
| Tax Fees | 150,551 | 205,474 | ||||||
| Other Fees | 195,000 | - | ||||||
| Total Fees | $ | 388,751 | $ | 862,408 | ||||
On
During the years ended
| 33 |
On
The following table sets forth fees billed to us by our independent registered public accounting firm
| 2024 | 2023 | |||||||
| Audit Fees | $ | - | $ | 70,720 | ||||
| Audit-Related Fees | - | - | ||||||
| Tax Fees | - | - | ||||||
| Other Fees | - | - | ||||||
| Total Fees | $ | - | $ | 70,720 | ||||
Policy on Audit Committee Preapproval of Audit and Permissible Non-Audit Services of the Independent Registered Public Accounting Firm
We obtain an engagement letter for all audit and non-audit services proposed to be performed during the year. The Board pre-approves the services performed by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services, as follows:
| · | Audit services include audit work performed in the preparation of financial statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards. | |
| · | Audit-Related services are for assurance and related services that are traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements. | |
| · | Tax services include all services performed by the independent auditor's tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice. | |
| · | Other Fees are those associated with services not captured in the other categories. We generally do not request such services from the independent auditor. |
Vote Required
The affirmative vote of a majority of the votes cast by the stockholders entitled to vote for the Auditor Ratification Proposal who are present in person or represented by proxy is required to adopt this proposal.
Recommendation of the Board
THE BOARD, UPON THE RECOMMENDATION OF THE AUDIT COMMITTEE, RECOMMENDS A VOTE "FOR" THE AUDITOR RATIFICATION PROPOSAL.
| 34 |
REPORT OF AUDIT COMMITTEE
The Audit Committee of the Board, which consists, as determined by the Board, entirely of directors who meet the independence and experience requirements of NYSE American, has furnished the following report:
The Audit Committee assists the Board in overseeing and monitoring the integrity of our financial reporting process, compliance with legal and regulatory requirements and the quality of internal and external audit processes. This committee's role and responsibilities are set forth in our charter adopted by the Board, which is available on our website at www.kartoonstudios.com. This committee reviews and reassesses our charter annually and recommends any changes to the
| · | Reviewed and discussed the audited financial statements for the fiscal year ended |
|
| · | Discussed with Withum the matters required to be discussed in accordance with the applicable requirements of the |
|
| · | Received written disclosures and the letter from Withum regarding its independence as required by applicable requirements of the |
Based on the review and discussion referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended
|
Members of the Audit Committee |
|
| 35 |
PROPOSAL 3 - APPROVAL OF THE INCENTIVE PLAN INCREASE PROPOSAL
At the Annual Meeting, stockholders will be asked to approve an amendment to our 2020 Plan (the "Incentive Plan Amendment"), which amendment was approved by the Compensation Committee and Board on
As of the Record Date, a total of 4,773,029 shares of Common Stock remain available for issuance under the 2020 Plan, and options to purchase 934,320 shares of Common Stock and 1,067,919 RSUs remain outstanding. As of the Record Date, no shares of Common Stock have been issued upon the exercise of options.
As of the Record Date and prior to the adoption of the proposed Incentive Plan Amendment, our "equity overhang," or the percentage of outstanding shares of our stock represented by all equity awards granted and available for future grant under the 2020 Plan was 17.2%. Equity overhang is calculated as (x) all shares issuable upon exercise or vesting of awards then outstanding, plus all shares available for future grant under all equity incentive plans, (y) divided by the issued and outstanding shares of Common Stock on a fully diluted basis. For purposes of this calculation, the denominator includes all shares authorized under all equity incentive plans and all shares underlying outstanding convertible securities, including shares issuable upon the exercise, conversion, or vesting of all issued and outstanding warrants, notes, restricted stock units ("RSUs") and stock options (whether issued under or outside the 2020 Plan).
The 2020 Plan was adopted on
Our Board, the Compensation Committee and management all believe that the effective use of stock-based long-term incentive compensation is vital to our ability to achieve strong performance in the future. Having an adequate number of shares available for issuance under the 2020 Plan will allow us to maintain and enhance the key policies and practices adopted by our management and Board to align employee and stockholder interests. In addition, our future success depends, in large part, upon our ability to maintain a competitive position in attracting, retaining and motivating key personnel. We believe that the increase in the number of shares available for issuance under our 2020 Plan is essential to permit our management to continue to provide long-term, equity-based incentives to present and future key employees, consultants and directors. Accordingly, our Board believes approval of the amendment to increase the aggregate number of shares available for issuance under the 2020 Plan is in our best interests and those of its stockholders and recommends a vote "FOR" the approval of the amendment to the 2020 Plan.
The material terms of the 2020 Plan are summarized below. This summary of the 2020 Plan is not intended to be a complete description of the 2020 Plan. This summary is qualified in its entirety by the actual text of the 2020 Plan to which reference is made. A copy of the complete Amended and Restated 2020 Plan is attached as Appendix Bto our 2024 Proxy Statement.
| 36 |
Material Terms of the 2020 Plan
Purpose
The purpose of the 2020 Plan is to enhance long-term profitability and stockholder value by offering Common Stock and Common Stock-based and other performance incentives to those employees, directors and consultants who are key to our growth and success.
The 2020 Plan may be administered by our Board, our Compensation Committee or a similar committee comprised of at least two non-employee directors (in each case, the "Administrator"). The Administrator has exclusive authority to grant awards under the 2020 Plan and to make all interpretations and determinations affecting the 2020 Plan. The Administrator has the discretion to determine the individuals to whom awards are granted, the amount of each award, any applicable vesting schedule and other terms of any award. The Administrator, in its discretion, may delegate to one or more of our officers all or part of the Administrator's authority and duties with respect to awards to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act.
Eligible Participants
The persons who shall be eligible to participate in the 2020 Plan and to receive Awards under the 2020 Plan shall be such persons who are our full- and part-time employees (including officers), non-employee members of the Board or independent contractors providing services to us or our Affiliates, in each case, as our Compensation Committee shall select. As of the Record Date, we have 344 employees, 6 non-employee members of the Board, and 68 independent contractors eligible to participate in the 2020 Plan.
Number of Shares Available for Issuance
The maximum number of shares of our Common Stock currently reserved and available for issuance under the 2020 Plan 8,216,767, which is equal to the sum of (i) 3,000,000 shares of Common Stock authorized for issuance at the time that the 2020 Plan was initially adopted; (ii) 216,767 shares of Common Stock that remained available for issuance under the 2015 Plan at the time that the 2020 Plan was initially adopted and (iii) 5,00,000 shares of Common Stock authorized for issuance in connection with amendment and restatement of the 2020 Plan on
If any stock award under the 2020 Plan (or options still outstanding under 2015 Plan) expires or otherwise terminates, in whole or in part, without having been vested or exercised in full (as applicable), the stock not acquired under such stock award reverts to and again becomes available for issuance under the 2020 Plan. Common Stock withheld from an award to pay the exercise price with respect to such award or to pay a participant's tax obligations with respect to an award shall not again be available for issuance under the 2020 Plan.
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Change in Control Provisions
The 2020 Plan provides that we may, in our sole discretion, and without the consent of participants, provide for one or more of the following in the event of a Change in Control (as defined in the 2020 Plan): (i) the assumption of the 2020 Plan and outstanding awards by the surviving entity; (ii) the substitution by the surviving entity of awards with substantially the same terms for such outstanding awards; (iii) notice to the holders of vested and exercisable stock options and stock appreciation rights of their ability to exercise such vested and exercisable awards prior to the transaction, followed by the cancellation of all unexercised awards (whether or not then vested and exercisable); (iv) settlement of the intrinsic value of outstanding vested awards in cash or cash equivalents or equity followed by the cancellation of all such awards (whether or not then vested or exercisable); (v) cancellation of all unvested or unexercisable awards; or (vi) taking of such other action with respect to Awards as the Compensation Committee shall determine to be appropriate in its discretion (including accelerating the vesting and exercisability of outstanding Awards). However, in the event that awards are either assumed or substituted, the awards will continue to vest or become exercisable pursuant to the terms of the original award, except to the extent such terms are otherwise rendered inoperative.
Adjustments for Stock Dividends, Stock Splits, Etc.
The 2020 Plan requires the Administrator to make appropriate adjustments to the number of shares of our Common Stock that are subject to the 2020 Plan, to certain limits in the 2020 Plan and to any outstanding awards to reflect stock dividends, stock splits, extraordinary cash dividends and similar events. The Administrator shall make necessary adjustments to the available shares of our Common Stock reserved for issuance under the 2020 Plan in connection with a reverse stock split, if approved by stockholders, as required.
Substitute Awards
The 2020 Plan provides that, in connection with a merger or consolidation of an entity with us or the acquisition by us of property or stock of an entity, our Board may grant awards in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof (such awards, "Substitute Awards"). Substitute Awards may be granted on such terms as our Board deems appropriate in the circumstances, notwithstanding any limitations on awards contained in the 2020 Plan, and except as otherwise determined by the Compensation Committee. Substitute Awards shall not count against the overall share limit set forth in the 2020 Plan.
Amendment to the 2020 Plan and Awards
Our Board at any time, and from time to time, may amend the 2020 Plan. However, no amendment will be effective unless approved by our stockholders to the extent stockholder approval is necessary to satisfy the requirements of the Code, any federal or state law or regulation or any securities exchange listing requirements. Further, no award under the 2020 Plan may be amended or cancelled for the purpose of repricing, replacing or regranting such award with an exercise price that is less than the exercise price of the original award unless otherwise approved by stockholders.
Termination of the 2020 Plan
Our Board or stockholders may terminate the 2020 Plan at any time. As amended and restated, the 2020 Plan will be terminated on
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Description of Material Terms of the Awards
Stock Options
A stock option is the right to purchase shares of our Common Stock at a fixed exercise price for a fixed period of time. The 2020 Plan permits the granting of (i) options to purchase Common Stock intended to qualify as incentive stock options under Section 422 of the Code and (ii) options that do not so qualify (referred to as "non-statutory stock options"). Incentive stock options may only be granted to employees of the Company and its subsidiaries. Non-statutory stock options may be granted to any persons eligible to receive incentive stock options and to non-employee directors and consultants. The Administrator determines the exercise price and additional terms of stock options. The option exercise price of each option will be determined by the Administrator but may not be less than 100% of the fair market value of our Common Stock on the date of grant. Fair market value for this purpose will be the last reported closing sales price of the shares of our Common Stock on NYSE American on the valuation date, or, if none, the closing sales price on the most recent trade date immediately prior to the valuation date. The exercise price of a stock option may not be reduced after the date of the stock option grant, other than to appropriately reflect changes in our capital structure.
The term of each stock option will be fixed by the Administrator and, for incentive stock options, may not exceed ten years from the date of grant. The Administrator will determine at what time or times each stock option may be exercised. Stock options may be made exercisable in installments and the exercisability of options may be accelerated by the Administrator. Upon exercise of stock options, the option exercise price must be paid in full in such form as the Administrator will provide (or as permitted by Section 422 of the Code in the case of incentive stock options). To qualify as incentive stock options, stock options must meet additional federal tax requirements, including a
Stock Appreciation Rights ("SARs")
The Administrator has the authority to grant SARs under the 2020 Plan. A SAR may be granted to a holder of an option with respect to all or a portion of the shares of Common Stock subject to the related option (a "Tandem SAR") or may be granted separately to an eligible employee (a "Free Standing SAR"). A Tandem SAR may be granted either concurrently with the grant of the related Option or at any time thereafter prior to the complete exercise, termination, expiration or cancellation of such related Option. Subject to the limitations of the 2020 Plan, SARs are exercisable in whole or in part upon notice to the Company upon such terms and conditions as are provided by the Administrator.
Restricted Stock and Restricted Stock Units
The Administrator has the authority to grant awards of restricted stock and restricted stock units pursuant to the terms of an award agreement. Each award agreement will be in such form and will contain such terms and conditions as the Administrator will deem appropriate. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with, or service to, the Company through a specified restricted period, except as otherwise set forth in the applicable award agreement. During the vesting period, awards of restricted stock and restricted stock units may be credited with dividend equivalent rights, but dividend equivalents payable with respect to awards shall not be paid unless and until such awards of restricted stock or restricted stock units vest.
Performance Awards
The Administrator may designate all or any party of any other type of award granted under the 2020 Plan as a performance award. These awards may be denominated in either cash or shares, and are subject to the achievement of performance goals set over performance periods, as established by the Administrator.
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Cash Awards and Other Stock-Based Awards
The Administrator may also grant cash awards or other stock-based awards under the 2020 Plan. Cash awards are subject to the terms, conditions, restrictions and contingencies as determined by the Administrator. Other stock-based awards are valued in whole or in part by reference to, or otherwise based on, shares of Common Stock. Other stock-based awards may be granted as a form of payment in the settlement of other awards granted under the 2020 Plan or as payment in lieu of compensation to which a holder is otherwise entitled. Other stock-based awards may be paid in shares of Common Stock or cash, as the Compensation Committee may determine.
The following is a brief summary of the general
Incentive Stock Options
Incentive stock options are intended to qualify for special treatment available under Section 422 of the Code. A participant who is granted an incentive stock option will not recognize ordinary income at the time of grant. A participant will not recognize ordinary income upon the exercise of an incentive stock option provided that the participant was, without a break in service, an employee of the Company or a subsidiary during the period beginning on the grant date of the option and ending on the date three months prior to the date of exercise (one year prior to the date of exercise if the participant's employment is terminated due to permanent and total disability).
If the participant does not sell or otherwise dispose of the shares of Common Stock acquired upon the exercise of an incentive stock option within two years from the grant date of the incentive stock option or within one year after he or she receives the shares of Common Stock, then, upon disposition of such shares of Common Stock, any amount recognized in excess of the exercise price will be taxed to the participant as a capital gain. The participant will generally recognize a capital loss to the extent that the amount recognized is less than the exercise price.
If the foregoing holding period requirements are not met, the participant will generally recognize ordinary income at the time of the disposition of the shares of Common Stock in an amount equal to the lesser of (i) the excess of the fair market value of the shares of Common Stock on the date of exercise over the exercise price or (ii) the excess, if any, of the amount recognized upon disposition of the shares of Common Stock over the exercise price. Any amount recognized in excess of the value of the shares of Common Stock on the date of exercise will be capital gain. If the amount recognized is less than the exercise price, the participant generally will recognize a capital loss equal to the excess of the exercise price over the amount recognized upon the disposition of the shares of Common Stock.
The rules described above that generally apply to incentive stock options do not apply when calculating any alternative minimum tax liability. The rules affecting the application of the alternative minimum tax are complex, and their effect depends on individual circumstances, including whether a participant has items of adjustment other than those derived from incentive stock options.
Nonqualified Stock Options
A participant will not recognize ordinary income when a nonqualified stock option is granted. When a nonqualified stock option is exercised, a participant will recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the shares of Common Stock that the participant purchased over the exercise price he or she paid.
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Stock Appreciation Rights
A participant will not recognize ordinary income when a SAR is granted. When a SAR is exercised, the participant will recognize ordinary income equal to the cash and/or the fair market value of shares of Common Stock the participant receives.
Restricted Stock
A participant who has been granted restricted stock will not recognize ordinary income at the time of grant, assuming that the underlying shares of Common Stock are not transferable and that the restrictions create a "substantial risk of forfeiture" for federal income tax purposes and that the participant does not make an election under Section 83(b) of the Code. Generally, upon the vesting of restricted shares, the participant will recognize ordinary income in an amount equal to the then fair market value of the shares of Common Stock, less any consideration paid for such shares of Common Stock. Any gains or losses recognized by the participant upon disposition of the shares of Common Stock will be treated as capital gains or losses. However, a participant may elect, pursuant to Section 83(b) of the Code, to have income recognized at the date of grant of a restricted share award equal to the fair market value of the shares of Common Stock on the grant date (less any amount paid for the restricted shares) and to have the applicable capital gain holding period commence as of that date.
Restricted Stock Units
A participant generally will not recognize ordinary income when RSUs are granted. Instead, a participant will recognize ordinary income when the RSUs are settled in an amount equal to the fair market value of the shares of Common Stock or the cash he or she receives, less any consideration paid.
Sale of Shares
When a participant sells shares of Common Stock that he or she has received under an award, the participant will generally recognize long-term capital gain or loss if, at the time of the sale, the participant has held the shares of Common Stock for more than one year (or, in the case of a restricted share award, more than one year from the date the restricted shares vested unless the participant made an election pursuant to Section 83(b) of the Code, described above). If the participant has held the shares of Common Stock for one year or less, the gain or loss will be a short-term capital gain or loss.
Tax Deductibility of Compensation Provided Under the 2020 Plan
When a participant recognizes ordinary compensation income as a result of an award granted under the 2020 Plan, the Company may be permitted to claim a federal income tax deduction for such compensation, subject to various limitations that may apply under applicable law.
Further, to the extent that compensation provided under the 2020 Plan may be deemed to be contingent upon a change in control of the Company, a portion of such compensation may be non-deductible by the Company under Section 280G of the Code and may be subject to a 20% excise tax imposed on the recipient of the compensation.
Restrictions on Shares; Claw-back Provisions
Shares of Common Stock acquired in respect of awards pursuant to the 2020 Plan are subject to such terms and conditions determined by the Board, including restrictions on the transferability of shares, our right to repurchase shares, our right to require the transfer of shares in the event of certain transactions, tag-along rights, bring-along rights, redemption and co-sale rights and voting requirements. The issuance of shares of Common Stock are subject to recipients' consent to such terms and conditions and the recipient entering into an award agreement. All awards are subject to the provisions of any claw-back policy implemented by us, including any claw-back policy adopted to comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, to the extent set forth in such claw-back policy and/or in the applicable award agreement.
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New Plan Benefits
The grant of options and other awards under the 2020 Plan is discretionary, and we cannot determine now the number or type of options or other awards to be granted in the future to any particular person or group other than the anticipated annual director grants.
Since it is not possible to determine the exact number of awards that will be granted under the 2020 Plan, the awards granted during the fiscal year ended
|
Dollar Value |
Number of Shares Underlying RSUs Granted |
|||||||
| $ | - | - | ||||||
| $ | - | - | ||||||
| $ | - | - | ||||||
| All Current Executive Officers as a Group | $ | - | - | |||||
| All Current Non-employee Directors as a Group | $ | 142,115 | 161,767 | |||||
| All Current Non-Executive Officer Employees as a Group | $ | - | - | |||||
Market Price of Shares
The closing price of our Common Stock, as reported on NYSE American on
Equity Compensation Plan Information
The following table provides certain information with respect to compensation plan under which our equity securities are authorized for issuance as of
| (a) | (b) | (c) | |||||||
| Plan category | Number of securities to be issued upon exercise of outstanding options, vesting of restricted stock units and other rights |
Weighted-average exercise price of outstanding options (1) |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
||||||
| Equity compensation plans approved by shareholders: | |||||||||
| 2015 Plan | 12,000 | - | |||||||
| 2020 Plan | 1,913,101 | 12.55 | 4,881,094 | ||||||
| Equity compensation plans not approved by shareholders: | - | - | - | ||||||
| Total | 1,925,101 | 4,881,094 |
| (1) | The weighted average exercise price calculation does not take into account any restricted stock units or performance shares. This table does not include the additional shares proposed to be authorized under the 2020 Plan pursuant to the Incentive Plan Amendment. |
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Interests of Directors and Executive Officers
Our directors and executive officers have substantial interests in the matters set forth in this proposal since equity awards may be granted to them under the 2020 Plan.
Required Vote
The affirmative vote of a majority of the votes cast by the stockholders entitled to vote on the Incentive Plan Increase Proposal who are present in person or represented by proxy is required to adopt this proposal.
Recommendation of the Board
THE BOARD RECOMMENDS A VOTE "FOR" THE INCENTIVE PLAN INCREASE PROPOSAL.
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PROPOSAL 4 - APPROVAL OF THE WARRANT EXERCISE PROPOSAL
Purpose and Background of the Share Issuance Proposal
On
Under NYSE American listing rules, the Common Warrants are not exercisable without the approval of our stockholders (the "Stockholder Approval"). We agreed to use reasonable best efforts to hold a meeting of stockholders at the earliest practicable date after the date of the Offering, but in no event later than
The Common Warrants have an exercise price of
In connection with the Offering, on
The Shares, the Pre-Funded Warrants, the Pre-Funded Warrant Shares, the Warrants and the Warrant Shares were offered by us pursuant to a registration statement on Form S-1 (File No. 333-282385), which was declared effective by the
Our Common Stock is currently listed on the NYSE American and, as such, we are subject to the rules set forth in the NYSE American Company Guide. Section 713 of the NYSE American Company Guide requires stockholder approval when additional shares will be issued in connection with a transaction involving the sale, issuance or potential issuance by an issuer of Common Stock (or securities convertible into Common Stock) equal to 20% or more of presently outstanding stock for less than the greater of book or market value or when the issuance or potential issuance of additional shares will result in a change of control of the issuer. The respective exercise prices of the Common Warrants and the Placement Agent Warrants as initially in effect are less than the book value on the date of issuance of the Common Warrants. As noted above, the terms of the Common Warrants provide that no Common Warrant Shares may be issued, unless Stockholder Approval is obtained. Therefore, we are asking stockholders to approve the issuance of more than 20% of our issued and outstanding Common Stock as of
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The Warrants provide for the Exercise Price to be adjusted in various circumstances such as stock splits. We may be required to adjust the Exercise Price pursuant to the Warrants or pursuant to a modification or amendment thereto, subject to the rules of NYSE American or other applicable law. To the extent that the Exercise Price of the Warrants is reduced, the gross proceeds received by us upon exercise of the Warrants may be less than anticipated. Accordingly, we are asking stockholders to approve the issuance of up to an aggregate of 17,447,366 shares of our Common Stock upon the exercise of the Warrants at the initial Exercise Price as well as an unknown lower Exercise Price in effect at the time of any such future exercise.
The Board is not seeking the approval of our stockholders to authorize our entry into the Purchase Agreement, as we already entered into the Purchase Agreement on
Each Common Warrant has an initial exercise price of
Potential Consequences if the Warrant Exercise Proposal is Not Approved
The failure of our stockholders to approve the Warrant Exercise Proposal will mean that (i) we cannot permit the full exercise of the Warrants, and (ii) we may incur substantial additional costs and expenses associated with holding additional stockholder meetings in order to seek Stockholder Approval.
Potential Adverse Effects of the Approval of the Warrant Exercise Proposal
If the Warrant Exercise Proposal is approved, upon exercise of the Warrants existing stockholders may suffer dilution in their ownership interests in the future upon the issuance of the Warrant Shares. In addition, the sale into the public market of these shares could materially and adversely affect the market price of our Common Stock.
Vote Required
The affirmative vote of a majority of the votes cast by the stockholders entitled to vote on the Warrant Exercise Proposal who are present in person or represented by proxy is required to adopt this proposal.
Recommendation of the Board
THE BOARD RECOMMENDS A VOTE "FOR" THE WARRANT EXERCISE PROPOSAL.
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PROPOSAL 5 - APPROVAL OF THE ADJOURNMENT PROPOSAL
Stockholders are being asked to approve one or more adjournments of the Annual Meeting, if necessary, to solicit additional proxies if there are insufficient votes at the time of the Annual Meeting to approve the Incentive Plan Increase Proposal (Proposal 3) and the Warrant Exercise Proposal (Proposal 4). If this proposal is approved, the Annual Meeting could be adjourned one or more times to a future date. We do not intend to call a vote on adjournments of the Annual Meeting to solicit additional proxies if the Incentive Plan Increase Proposal (Proposal 3) and the Warrant Exercise Proposal (Proposal 4) are approved at the Annual Meeting. Among other things, approval of the Adjournment Proposal could mean that, even if proxies representing a sufficient number of votes against the Incentive Plan Increase Proposal (Proposal 3) or the Warrant Exercise Proposal (Proposal 4) have been received to cause either such proposal to fail to pass, we could adjourn, postpone or continue the Annual Meeting without a vote on the Incentive Plan Increase Proposal (Proposal 3) or the Warrant Exercise Proposal (Proposal 4) and seek to convince stockholders to change their votes to votes in favor of the approval of the Incentive Plan Increase Proposal (Proposal 3) or the Warrant Exercise Proposal (Proposal 4). If the meeting is adjourned to solicit additional proxies, stockholders who have already submitted their proxies will be able to revoke them at any time prior to their use.
Required Vote
The affirmative vote of a majority of the votes cast by the stockholders entitled to vote on the Adjournment Proposal who are present in person or represented by proxy is required to adopt this proposal.
Recommendation of the Board
THE BOARD RECOMMENDS A VOTE "FOR" THE ADJOURNMENT PROPOSAL.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the beneficial ownership of shares of our Common Stock as of the Record Date, known by us through our transfer agent and other records, held by: (i) each person who beneficially owns 5% or more of the shares of Common Stock then outstanding; (ii) each of our directors; (iii) each of our named executive officers; and (iv) all of our current directors and executive officers as a group.
The information in this table reflects "beneficial ownership" as defined in Rule 13d-3 of the Exchange Act. To our knowledge and unless otherwise indicated, each stockholder has sole voting power and investment power over the shares listed as beneficially owned by such stockholder, subject to community property laws where applicable. Percentage ownership is based on 47,784,964 shares of Common Stock outstanding as of the Record Date. Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power and that person's address is c/o
|
Amount and Nature of Beneficial Ownership (1) |
Percent of Class (1) |
||||
| Directors and Named Executive Officers | |||||
| 2,563,884 | 5.29% | ||||
| 150,000 | * | ||||
| 11,667 | * | ||||
| 83,891 | * | ||||
| Henry Sicignano III (6) | 49,214 | * | |||
| 60,398 | * | ||||
| 52,563 | * | ||||
| 76,706 | * | ||||
| Dr. |
48,079 | * | |||
| All current executive officers and directors as a group (consisting of 9 persons) | 3,093,402 | 6.37% | |||
| 5% Stockholders Other Than Executive officers and Directors | |||||
| 4,190,734 | 8.77% | ||||
| * | Indicates ownership less than 1% |
| (1) | Applicable percentage ownership is based on 47,784,964 shares of common stock outstanding as of the Record Date, together with securities exercisable or convertible into shares of common stock within 60 days of the Record Date. Beneficial ownership is determined in accordance with the rules of the |
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| (2) | Consists of (i) 99,073 shares of Common Stock held by A |
|
| (3) | Consists of 50,000 shares of common stock held by |
|
| (4) | Consists of 5,834 shares of common stock held by |
|
| (5) | Consists of 2,000 shares of Common Stock issuable upon exercise of stock options granted to each that are exercisable within 60 days of the Record Date. In addition, |
|
| (6) | Consists of 49,214 shares of Common Stock held by |
|
| (7) | Information for |
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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Certain Relationships and Related Person Transactions
The following is a summary of transactions since
On
On
Review, Approval or Ratification of Transactions with Related Persons
Pursuant to the written charter of our Audit Committee, the Audit Committee is responsible for reviewing and approving all transactions both in which (i) we are a participant and (ii) any parties related to us, including our executive officers, our directors, beneficial owners of more than 5% of our securities, immediate family members of the foregoing persons and any other persons whom our Board determines may be considered related parties under Item 404 of Regulation S-K, has or will have a direct or indirect material interest. Certain of the transactions described in this section occurred prior to the adoption of the Audit Committee's charter on
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CODE OF CONDUCT AND ETHICS
We have adopted a Corporate Code of Conduct and Ethics and Whistleblower Policy that applies to all of our officers, directors and employees. A copy of the Code of Conduct and Ethics may be obtained, free of charge, by submitting a written request to the Company or on our website at www.kartoonstudios.com. Disclosure regarding any amendments to, or waivers from, provisions of the code of conduct and ethics that apply to our directors, principal executive and financial officers will be posted on the "Investors - Corporate Governance" section of our website at www.kartoonstudios.com or included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver.
OTHER MATTERS
As of the date of this proxy statement, the
ANNUAL REPORT/FORM 10-K
Our 2024 Annual Report is being mailed to certain stockholders concurrently with this proxy statement. Copies of the 2024 Annual Report as filed with the
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STOCKHOLDER PROPOSALS FOR THE 2026 ANNUAL MEETING
Stockholders who intend to present proposals at the 2026 Annual Meeting under SEC Rule 14a-8 must ensure that such proposals are received by the Corporate Secretary of the Company not later than
Stockholders who intend to submit proposals to be presented at the 2026 Annual Meeting outside the processes of SEC Rule 14a-8 must ensure that such proposals are received by the Corporate Secretary of the Company not later than
In addition to satisfying the foregoing requirements, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than the Company's nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than
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Appendix A
FORM OF AMENDMENT TO THE
2020 INCENTIVE PLAN
WHEREAS, the Board of Directors (the "Board") of
WHEREAS, the Plan was amended and restated, effective as of
WHEREAS, the Board desires to amend the Plan to increase the maximum number of shares of Common Stock available for grants of Awards thereunder by an additional 5,000,000 shares of Common Stock; and
WHEREAS, the Board desires to further amend the Plan to reflect the change in the name of
WHEREAS, pursuant to Section 12.7(b) of the Plan, the Board has the right to amend the Plan with respect to certain matters; and
WHEREAS, the Board has approved and authorized this Amendment to the Plan and has recommended that the stockholders of the Company approve this Amendment; now, therefore, be it
RESOLVED, that the Plan is hereby amended, subject to and effective as of the date of stockholder approval hereof, in the following particulars:
| 1. | The name of the Plan is hereby amended to be the " |
|
| 2. | Subject to approval of the Company's stockholders, Section 4.1(a) of the Plan is hereby amended by increasing the share references in such section by an additional 5,000,000 shares of Common Stock, such that Section 4.1(a), as amended and restated, reads in its entirety as follows: | |
| "Subject to the provisions of this Article 4, the maximum number of shares of Common Stock with respect to which Awards may be granted during the term of the Plan shall be the sum of (i) 13,000,000 Shares and (ii) the shares of Common Stock remaining available for issuance under the Company's 2015 Incentive Plan, subject to adjustment in accordance with Section 4.1(c) hereof. 13,000,000 Shares shall be available for the grant of Incentive Stock Options and other awards hereunder." | ||
| 3. | Except as specifically set forth herein, the terms of the Plan shall be and remain unchanged, and the Plan as amended shall remain in full force and effect. |
[Signature page follows.]
| A-1 |
IN WITNESS WHEREOF, the Company has caused this Amendment to be signed this ___ day of _____________, 2025.
| By: | |||
| Title: | |||
| A-2 |
Appendix B
Amended and Restated 2020 Plan
2020 INCENTIVE PLAN
Article 1 Purpose and Amendment of Plan
Section 1.1 Purpose. The purpose of the Plan is to promote the success of the Company by providing a method whereby (a) eligible employees of the Company and its Affiliates, (b) members of the Board of the Company and its Affiliates, and (c) independent contractors providing services to the Company and its Affiliates may be awarded additional remuneration for services rendered and encouraged to invest in capital stock of the Company, thereby increasing their proprietary interest in the Company's businesses, encouraging them to remain in the employ of (or otherwise provide services to) the Company or its Affiliates, and increasing their personal interest in the continued success and progress of the Company and its Affiliates. The Plan is also intended to aid in (i) attracting Persons of exceptional ability to become officers and employees and directors of the Company and its Affiliates, and (ii) encouraging independent contractors to agree to provide services to the Company and its Affiliates.
Section 1.2 Adoption of Plan. The Plan was originally approved by the Company's Board on
Article 2 Definitions
Section 2.1 Certain Defined Terms. Capitalized terms not defined elsewhere in the Plan shall have the following meanings (whether used in the singular or plural):
"Affiliate" means any individual, corporation, partnership, association, limited liability company, joint-stock company, trust, unincorporated association or other entity (other than the Company) that, for purposes of Section 424 of the Code, is a parent or subsidiary of the Company, direct or indirect.
"Agreement" means a stock option agreement, stock appreciation rights agreement, restricted stock agreement, stock units agreement, cash award agreement or an agreement evidencing another type of Award, or more than one type of Award, as any such Agreement may be supplemented or amended from time to time.
"Award" means a grant of Options, SARs, Restricted Stock, Restricted Stock Units, Performance Awards, Cash Awards, or Other Stock-Based Awards.
"Board" means the Board of Directors of the Company.
"Cash Award" means an Award made pursuant to Section 10.1 of the Plan.
"Change in Control" means the occurrence of any of the following events:
(a) any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the Act (other than the Company or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company) becomes the "beneficial owner" within the meaning of Rule 13d-3 promulgated under the Exchange Act of 30% or more of the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors; excluding, however, any circumstance in which such beneficial ownership resulted from any acquisition by the Company, an employee benefit plan (or related trust) sponsored or maintained by the Company or by any corporation controlling, controlled by, or under common control with, the Company;
| B-1 |
(b) a change in the composition of the Board since the Shareholder Approval Date, such that the individuals who, as of such date, constituted the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of such Board; provided that any individual who becomes a director of the Company subsequent to the Shareholder Approval Date whose election, or nomination for election by the Company's stockholders, was approved by the vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and provided further, that any individual who was initially elected as a director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-12 of Regulation 14A promulgated under the Exchange Act, or any other actual or threatened solicitation of proxies or consents by or on behalf of any person or entity other than the Board shall not be deemed a member of the Incumbent Board;
(c) a reorganization, recapitalization, merger, consolidation or similar form of corporate transaction, or the sale, transfer, or other disposition of all or substantially all of the assets of the Company to an entity that is not an Affiliate (each of the foregoing events, a "Corporate Transaction") involving the Company, unless securities representing 60% or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Company or the corporation resulting from such Corporate Transaction, including a corporation that, as a result of such transaction owns all or substantially all of the Company's assets (or the direct or indirect parent of such corporation), are held immediately subsequent to such transaction by the person or persons who were the beneficial holders of the outstanding voting securities entitled to vote generally in the election of directors of the Company immediately prior to such Corporate Transaction, in substantially the same proportions as their ownership immediately prior to such Corporate Transaction; or
(d) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company, unless such liquidation or dissolution is part of a transaction or series of transactions described in clause (c) above that does not otherwise constitute a Change in Control.
Notwithstanding anything herein to the contrary, for Awards that are subject to Section 409A of the Code that become payable upon the occurrence of a Change in Control a Change in Control shall not be deemed to occur unless such event constitutes a "change in the ownership of a corporation," "change in the effective control of a corporation," or a "change in the ownership of a substantial portion of a corporation's assets" within the meaning of Section 409A of the Code.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute or statutes thereto. Reference to any specific Code section shall include any successor section.
"Committee" means the Compensation Committee (or another committee) of the Board (or a subcommittee of such committee) appointed pursuant to Section 3.1 to administer the Plan. The Committee shall consist solely of two or more directors and each member of the Committee shall be a "non-employee director" within the meaning of Rule 16b-3 and also shall satisfy the requirements relating to the administration of equity-based awards under
"Common Stock" means the Company's common stock,
"Company" means
"Disability" means a permanent and total disability as defined in Section 22(e)(3) of the Code.
"Dividend Equivalents" means, with respect to Restricted Stock Units, to the extent specified by the Committee only, an amount equal to all dividends and other distributions (or the economic equivalent thereof) which are payable to stockholders of record during the Restriction Period on a like number and kind of shares of Common Stock.
| B-2 |
"Domestic Relations Order" means a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder.
"Effective Date" means the Shareholder Approval Date, the date on which the Plan, as amended and restated, becomes effective.
"Equity Security" shall have the meaning ascribed to such term in Section 3(a)(11) of the Exchange Act, and an equity security of an issuer shall have the meaning ascribed thereto in Rule 16a-1 promulgated under the Exchange Act, or any successor Rule.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute or statutes thereto. Reference to any specific Exchange Act section shall include any successor section.
"Fair Market Value" of a share of Common Stock on any day means the last sale price (or, if no last sale price is reported, the average of the high bid and low asked prices) for a share of Common Stock on such day (or, if such day is not a trading day, on the next preceding trading day) as reported on the consolidated transaction reporting system for the principal national securities exchange on which shares of Common Stock are listed on such day, or the Committee can, in its sole discretion, use averages or weighted averages either on a daily basis or such longer period as complies with Code Section 409A (to the extent necessary to so comply). If for any day the Fair Market Value of a share of Common Stock is not determinable by any of the foregoing means, then the Fair Market Value for such day shall be determined in good faith by the Committee on the basis of considerations as the Committee deems appropriate and otherwise in accordance with Section 409A.
"Free Standing SAR" has the meaning ascribed thereto in Section 7.1.
"Holder" means a person who has received an Award under the Plan that has not been fully satisfied or terminated.
"Incentive Stock Option" means an Option that is intended to be, is designated as, and actually qualifies as, an "incentive stock option" within the meaning of Section 422 of the Code and granted under Article 6.
"Nonqualified Stock Option" means an Option that is not an Incentive Stock Option and granted under Article 6.
"Option" means a Nonqualified Stock Option or Incentive Stock Option, as applicable in that context.
"Performance Award" means an Award made pursuant to Article 11 of the Plan to a Holder that is subject to the attainment of one or more Performance Objectives.
"Performance Objective" means a standard established by the Committee to determine in whole or in part whether a Performance Award shall be earned and shall be based on one or more of the performance measures set forth in Section 11.2.
"Person" means an individual, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind.
"Plan" means this
"Restricted Stock" means an Award made pursuant to Article 8.
"Restricted Stock Units" means an Award made pursuant to Article 9 of the Plan to a Holder.
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"Restriction Period" means a period of time beginning on the date of each Award of Restricted Stock or Restricted Stock Units and ending on the Vesting Date with respect to such Award.
"SARs" means stock appreciation rights, awarded pursuant to Article 7, with respect to shares of Common Stock.
"Tandem SAR" has the meaning ascribed thereto in Section 7.1.
"Vesting Date," with respect to any Restricted Stock or Restricted Stock Units awarded hereunder, means the date on which such Restricted Stock or Restricted Stock Units cease to be subject to a risk of forfeiture, as designated in or determined in accordance with the Agreement with respect to such Award of Restricted Stock pursuant to Article 8 or of Restricted Stock Units pursuant to Article 9. If more than one Vesting Date is designated for an Award, reference in the Plan to a Vesting Date in respect of such Award shall be deemed to refer to each part of such Award and the Vesting Date for such part.
Article 3 Administration
Section 3.1 Committee. The Plan shall be administered by the Committee. The Board or a committee of the Board may from time to time appoint members of the Committee in substitution for or in addition to members previously appointed, may fill vacancies in the Committee and may remove members of the Committee. The Committee shall select one of its members as its chairman and shall hold its meetings at such times and places as it shall deem advisable. A majority of its members shall constitute a quorum and all determinations shall be made by a majority of such quorum. Any determination reduced to writing and signed by all of the members shall be as fully effective as if it had been made by a majority vote at a meeting duly called and held.
Section 3.2 Powers. The Committee shall have full power and authority to grant Awards to eligible persons, to determine the terms and conditions (which need not be uniform nor identical among types of Awards, grants of Awards, or recipients of Awards) of all Awards so granted, to interpret the provisions of the Plan and any Agreements relating to Awards granted under the Plan and to supervise the administration of the Plan. The Committee in making an Award may provide for the granting or issuance of additional, replacement or alternative Awards upon the occurrence of specified events, including the exercise of the original Award. The Committee shall have sole authority in the selection of persons to whom Awards may be granted under the Plan and in the determination of the timing, pricing and amount of any such Award, subject only to the express provisions of the Plan. In making determinations hereunder, the Committee may take into account the nature of the services rendered by the respective employees and independent contractors, their present and potential contributions to the success of the Company and its Affiliates, and such other factors as the Committee in its discretion deems relevant. For the avoidance of doubt, the full Board may take any action relating to an Award granted or to be granted to a Person eligible to receive an Award under this Plan who is then subject to Section 16 of the Exchange Act in respect of the Company.
Section 3.3 Interpretation. The Committee is authorized, subject to the provisions of the Plan, to establish, amend and rescind such rules and regulations as it deems necessary or advisable for the proper administration of the Plan and to take such other action in connection with or in relation to the Plan as it deems necessary or advisable. Each action and determination made or taken pursuant to the Plan by the Committee, including any interpretation or construction of the Plan, shall be final and conclusive for all purposes and upon all persons.
Article 4 Shares Subject To The Plan
Section 4.1 Number of Shares; Award Limits.
(a) Subject to the provisions of this Article 4, the maximum number of shares of Common Stock with respect to which Awards may be granted during the term of the Plan shall be the sum of (i) 5,000,000 Shares and (ii) the shares of Common Stock remaining available for issuance under the Plan, as amended and restated, immediately prior to shareholder approval thereof, subject to adjustment in accordance with Section 4.1(d) hereof (the "Initial Limit"). 5,000,000 Shares shall be available for the grant of Incentive Stock Options and other awards hereunder.
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(b) Shares of Common Stock will be made available from the authorized but unissued shares of the Company or from shares reacquired by the Company, including shares purchased in the open market. If all or any portion of an Award expires or is cancelled, forfeited, exchanged, settled in cash or otherwise terminated, the shares of Stock subject to such Award (including shares forfeited with respect to Restricted Stock) shall again be available for purposes of the Plan. If an Award may be settled only in cash, such Award need not be counted against any share limit under this Section 4.1. Notwithstanding the foregoing, (A) in the case of the exercise of a SAR for shares, the number of shares counted against the shares available under the Plan shall be the full number of shares subject to the SAR multiplied by the percentage of the SAR actually exercised, regardless of the number of shares actually used to settle such SAR upon exercise; (B) shares of Common Stock delivered (either by actual delivery, attestation, or net exercise) to the Company by a Holder to (1) purchase shares of Common Stock upon the exercise of an Award or (2) satisfy tax withholding obligations (including shares retained from the Award creating the tax obligation) shall not be added back to the number of shares available for the future grant of Awards; and (C) shares of Common Stock repurchased by the Company on the open market using the proceeds from the exercise of an Award shall not increase the number of shares available for future grant of Awards.
(c) Adjustments. If the Company subdivides its outstanding shares of any series of Common Stock into a greater number of shares of such series of Common Stock (by stock dividend, stock split, reclassification, or otherwise) or combines its outstanding shares of any series of Common Stock into a smaller number of shares of such series of Common Stock (by reverse stock split, reclassification, or otherwise) or if the Committee determines that any stock dividend, extraordinary cash dividend, reclassification, recapitalization, reorganization, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase Common Stock or other similar corporate event affects any series of Common Stock so that an adjustment is required to preserve the benefits or potential benefits intended to be made available under the Plan, then the Committee, in such manner as the Committee, in its sole discretion, deems equitable and appropriate, shall make such adjustments to any or all of (i) the number and kind of shares of stock which thereafter may be awarded, optioned or otherwise made subject to the benefits contemplated by the Plan, (ii) the number and kind of shares of stock subject to outstanding Awards, and (iii) the purchase or exercise price and the relevant appreciation base with respect to any of the foregoing, provided, however, that the number of shares subject to any Award shall always be a whole number. The Committee may, if deemed appropriate, provide for a cash payment to any Holder of an Award in connection with any adjustment made pursuant to this Section 4.2.
Section 4.2 Substitute Awards. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof (such Awards, "Substitute Awards"). Substitute Awards may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan, and except as otherwise determined by the Committee. Substitute Awards shall not count against the overall share limit set forth in Section 4.1.
Article 5 Eligibility; Specific Terms of awards
Section 5.1 Eligibility. The persons who shall be eligible to participate in the Plan and to receive Awards under the Plan shall be such persons who are full- and part-time employees (including officers) of the Company, non-employee members of the Board or independent contractors providing services to the Company or its Affiliates, in each case, as the Committee shall select. Awards may be made to employees, members of the Board or independent contractors who hold or have held Awards under the Plan, the 2015 Plan, or other awards under any other plan of the Company or any of its Affiliates.
Section 5.2 General. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with any other Award. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Article 12), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine. Without limiting the scope of the preceding sentence, the Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance goals applicable to an Award, and any such performance goals may differ among Awards granted to any one Holder or to different Holders.
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Section 5.3 Dividend Equivalents. Subject to the provisions of this Plan and any Agreement, the recipient of an Award other than an Option or SAR may, if so determined by the Committee, be entitled to receive, currently or on a deferred basis, interest or dividends or Dividend Equivalents, with respect to the number of shares of Common Stock covered by the Award, as determined by the Committee, in its sole discretion, and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional shares of Common Stock or otherwise reinvested and/or shall be subject to the same terms and conditions (including vesting and forfeiture provisions) as the related Award. Dividends or Dividend Equivalents granted with respect to an Award will be accrued during the vesting and/or performance period applicable to such Award, and such dividends or Dividend Equivalents will vest and be paid only if and when the underlying Award vests.
Article 6 Stock Options
Section 6.1 Grant of Options. The Committee shall, subject to the limitations of the Plan, have authority to grant to eligible persons Options. The Committee shall designate from time to time those eligible persons to be granted Options, the time when each Option shall be granted to such eligible persons, the number of shares of Common Stock subject to such Option, and, subject to Section 6.2, the purchase price of the shares of Common Stock subject to such Option; provided, however, only a person who is a common-law employee of the Company, any "parent corporation" of the Company, or a "subsidiary corporation" of the Company (each term as defined in Section 424 of the Code) on the date of grant shall be eligible to be granted an Incentive Stock Option. To the extent that any Option is not designated as an Incentive Stock Option or even if so designated does not qualify as an Incentive Stock Option, it shall constitute a Nonqualified Stock Option. The determination made by the Committee pursuant to this Article 6 shall be specified in the applicable Agreement.
Section 6.2 Exercise Price. The price at which shares may be purchased upon exercise of an Option shall be fixed by the Committee and, for Options that do not constitute Substitute Awards, may be no less than the Fair Market Value of the shares of Common Stock subject to the Option as of the date the Option is granted. If an Option which is intended to qualify as an Incentive Stock Option is granted to an individual who owns or who is deemed to own shares possessing more than ten percent (10%) of the combined voting power of all classes of shares of the Company, a parent corporation or any subsidiary corporation (each term as defined in Section 6.1) (a "10% Owner"), the exercise price shall not be less than one hundred ten percent (110%) of the Fair Market Value per share on the date the Incentive Stock Option is granted.
Section 6.3 Term of Options. Subject to the provisions of the Plan, the term of each Option shall be for such period as the Committee shall determine as set forth in the applicable Agreement. In the case of an Incentive Stock Option, the term of such Option shall not exceed ten (10) years from the date the Incentive Stock Option is granted. If an Option which is intended to be an Incentive Stock Option is granted to a 10% Owner, the term of such Option shall not exceed five (5) years from the date the Incentive Stock Option is granted. No Option which is intended to be an Incentive Stock Option shall be granted more than ten (10) years from the date the Plan is adopted by the Company or the date the Plan is approved by the stockholders of the Company, whichever is earlier.
Section 6.4 Exercise of Options. An Option granted under the Plan shall become (and remain) exercisable during the term of the Option to the extent provided in the applicable Agreement and the Plan and, unless the Agreement otherwise provides, may be exercised to the extent exercisable, in whole or in part, at any time and from time to time during such term; provided, however, no Incentive Stock Option may be exercised before the Plan is approved by the stockholders of the Company in the manner prescribed by Section 422 of the Code; provided, further, however, that subsequent to the grant of an Option, the Committee, at any time before complete termination of such Option, may accelerate the time or times at which such Option may be exercised in whole or in part. If an Option is designated as an Incentive Stock Option, the aggregate Fair Market Value (determined on the date the Incentive Stock Option is granted) of the Common Stock as to which such Incentive Stock Option which is exercisable for the first time during any calendar year (under the Plan or any other plan of the Company or any parent corporation or subsidiary corporation) shall not exceed
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Section 6.5 Manner of Exercise.
(a) Form of Payment. An Option shall be exercised by notice to the Company upon such terms and conditions as the Agreement may provide and in accordance with such other procedures for the exercise of Options as the Committee may establish from time to time. The method or methods of payment of the purchase price for the shares to be purchased upon exercise of an Option and of any amounts required by Section 12.9 shall be determined by the Committee and may consist of (i) cash, (ii) check, (iii) whole shares of Common Stock (whether by delivery or attestation), (iv) the withholding of shares of Common Stock issuable upon such exercise of the Option, (v) the delivery, together with a properly executed exercise notice, of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds required to pay the purchase price (a so-called "cashless" exercise), or (vi) any combination of the foregoing methods of payment, or such other consideration and method of payment as may be permitted for the issuance of shares under the Nevada Corporation Code. The permitted method or methods of payment of the amounts payable upon exercise of an Option, if other than in cash, shall be set forth in the applicable Agreement and may be subject to such conditions as the Committee deems appropriate.
(b) Value of Shares. Unless otherwise determined by the Committee and provided in the applicable Agreement, shares of Common Stock delivered in payment of all or any part of the amounts payable in connection with the exercise of an Option, and shares of Common Stock withheld for such payment, shall be valued for such purpose at their Fair Market Value as of the exercise date.
(c) Issuance of Shares. The Company shall effect the transfer of the shares of Common Stock purchased under the Option as soon as practicable after the exercise thereof and payment in full of the purchase price therefor and of any amounts required by Section 12.9, and within a reasonable time thereafter, such transfer shall be evidenced on the books of the Company. Unless otherwise determined by the Committee and provided in the applicable Agreement, (i) no Holder or other person exercising an Option shall have any of the rights of a stockholder of the Company with respect to shares of Common Stock subject to an Option granted under the Plan until due exercise and full payment has been made, and (ii) no adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such due exercise and full payment.
Section 6.6 Limitation on Repricing. Unless such action is approved by the Company's stockholders, the Company may not (except as provided for under Section 4.2): (a) amend any outstanding Option granted under the Plan to provide an exercise price per share that is lower than the then- current exercise price per share of such outstanding Option, (b) cancel any outstanding option (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan (other than Awards granted pursuant to Section 4.3) covering the same or a different number of shares of Common Stock and having an exercise price per share lower than the then- current exercise price per share of the cancelled option, (c) cancel in exchange for a cash payment any outstanding Option with an exercise price per share above the then- current Fair Market Value, other than pursuant to Section 12.1(b), or (d) take any other action under the Plan that constitutes a "repricing" within the meaning of the rules of the
Section 6.7 Exercise Limits for Incentive Stock Options. Any portion of any Incentive Stock Option that was vested and exercisable on the date of termination of employment which was other than for death or disability (as defined in Section 22(e)(3) of the Code), shall expire and be forfeited at midnight ninety (90) days from the date of such termination and if termination of employment was on account of death or disability the portion of any Incentive Stock Option that is vested as of the date of termination of employment shall expire and be forfeited at midnight one (1) year from the date of such termination.
Article 7 SARS
Section 7.1 Grant of SARs. The Committee shall, subject to the limitations of the Plan, have authority to grant to eligible persons SARs. SARs may be granted by the Committee to such eligible persons in such numbers, with respect to Common Stock, and at such times during the term of the Plan as the Committee shall determine. A SAR may be granted to a Holder of an Option (hereinafter called a "related Option") with respect to all or a portion of the shares of Common Stock subject to the related Option (a "Tandem SAR") or may be granted separately to an eligible employee (a "Free Standing SAR"). Subject to the limitations of the Plan, SARs shall be exercisable in whole or in part upon notice to the Company upon such terms and conditions as are provided in the Agreement. The determination made by the Committee pursuant to this Article 7 shall be specified in the applicable Agreement.
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Section 7.2
Section 7.3 Free Standing SARs. Free Standing SARs shall be exercisable at the time, to the extent and upon the terms and conditions set forth in the applicable Agreement. The base price of a Free Standing SAR may be no less than the Fair Market Value of Common Stock with respect to which the Free Standing SAR was granted as of the date the Free Standing SAR is granted. Subject to the limitations of the Plan, upon the exercise of a Free Standing SAR and unless otherwise determined by the Committee and provided in the applicable Agreement, the Holder thereof shall be entitled to receive from the Company, for each share of Common Stock with respect to which the Free Standing SAR is being exercised, consideration (in the form determined as provided in Section 7.4) equal in value to the excess of the Fair Market Value of a share of Common Stock with respect to which the Free Standing SAR was granted on the date of exercise over the base price per share of such Free Standing SAR.
Section 7.4 Consideration. The consideration to be received upon the exercise of a SAR by the Holder shall be paid in Common Stock with respect to which the SAR was granted (valued at Fair Market Value on the date of exercise of such SAR) or cash equivalent thereto, as determined by the Committee and provided in the applicable Agreement. No fractional shares of Common Stock shall be issuable upon exercise of a SAR, and unless otherwise provided in the applicable Agreement, the Holder will receive cash in lieu of fractional shares.
Section 7.5 Limitations. The applicable Agreement may provide for a limit on the amount payable to a Holder upon exercise of SARs at any time or in the aggregate, for a limit on the time periods during which a Holder may exercise SARs, and for such other limits on the rights of the Holder and such other terms and conditions of the SAR, including a condition that the SAR may be exercised only in accordance with rules and regulations adopted from time to time, as the Committee may determine. Unless otherwise so provided in the applicable Agreement, any such limit relating to a Tandem SAR shall not restrict the exercisability of the related Option. Such rules and regulations may govethe right to exercise SARs granted prior to the adoption or amendment of such rules and regulations as well as SARs granted thereafter.
Section 7.6 Exercise. For purposes of this Article 7, the date of exercise of a SAR shall mean the date on which the Company shall have received notice from the Holder of the SAR of the exercise of such SAR (unless otherwise determined by the Committee and provided in the applicable Agreement).
Section 7.7 Limitation on Repricing. Unless such action is approved by the Company's stockholders, the Company may not (except as provided for under Section 4.2): (a) amend any outstanding SAR granted under the Plan to provide a base price per share that is lower than the then-current base price per share of such outstanding SAR, (b) cancel any outstanding stock appreciation right (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan (other than Awards granted pursuant to Section 4.2) covering the same or a different number of shares of Common Stock and having a base price per share lower than the then-current base price per share of the cancelled stock appreciation right, (c) cancel in exchange for a cash payment any outstanding SAR with a base price per share above the then-current Fair Market Value, other than pursuant to Section 12.1(b), or (d) take any other action under the Plan that constitutes a "repricing" within the meaning of the rules of NYSE.
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Article 8 Restricted Stock
Section 8.1 Grant. The Committee shall, subject to the limitations of the Plan, have authority to grant to eligible persons Restricted Stock. The Committee shall designate those eligible persons to be granted Awards of Restricted Stock, shall determine the time when each such Award shall be granted, and shall designate (or set forth the basis for determining) the Vesting Date or Vesting Dates for each Award of Restricted Stock, and may prescribe other restrictions, terms and conditions applicable to the vesting of such Restricted Stock in addition to those provided in the Plan. The Committee shall determine the price, if any, to be paid by the Holder for the Restricted Stock; provided, however, that the issuance of Restricted Stock shall be made for at least the minimum consideration necessary to permit such Restricted Stock to be deemed fully paid and nonassessable. All determinations made by the Committee pursuant to this Article 8 shall be specified in the Agreement.
Section 8.2 Dividends. Unless otherwise provided in the applicable Agreement, any dividends (whether paid in cash, stock or property) declared and paid by the Company with respect to shares of Restricted Stock ("Retained Distributions") shall be paid to the Holder only if and when such shares vest and become free from the restrictions on transferability and forfeitability that apply to such shares. Each payment of Retained Distributions will be made no later than the end of the calendar year in which the dividends are paid to stockholders of Common Stock or, if later, the 15th day of the third month following the end of the year in which the Vesting Date occurred.
Section 8.3 Issuance of Restricted Stock. When shares of Common Stock are issued at the beginning of the Restriction Period, the stock certificate or certificates representing such Restricted Stock shall be registered in the name of the Holder to whom such Restricted Stock shall have been awarded. During the Restriction Period, certificates representing the Restricted Stock and any securities constituting Retained Distributions shall bear a restrictive legend to the effect that ownership of the Restricted Stock (and such Retained Distributions), and the enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms and conditions provided in the Plan and the applicable Agreement. Such certificates shall remain in the custody of the Company or its designee, and the Holder shall deposit with the custodian stock powers or other instruments of assignment, each endorsed in blank, so as to permit retransfer to the Company of all or any portion of the Restricted Stock and any securities constituting Retained Distributions that shall be forfeited or otherwise not become vested in accordance with the Plan and the applicable Agreement.
Section 8.4 Restrictions. Restricted Stock issued at the beginning of the Restriction Period shall constitute issued and outstanding shares of Common Stock for all corporate purposes. The Holder will have the right to vote such Restricted Stock and to exercise all other rights, powers and privileges of a Holder of shares of Common Stock with respect to such Restricted Stock; except, that, unless otherwise determined by the Committee and provided in the applicable Agreement, (a) the Holder will not be entitled to delivery of the stock certificate or certificates representing such Restricted Stock until the Restriction Period shall have expired and unless all other vesting requirements with respect thereto shall have been fulfilled or waived and the Company or its designee will retain custody of the stock certificate or certificates representing the Restricted Stock during the Restriction Period as provided in Section 8.3; (b) the Holder will not be entitled to dividends except as provided in Section 8.2, (c) the Holder may not sell, assign, transfer, pledge, exchange, encumber or dispose of the Restricted Stock or his or her interest in any of them during the Restriction Period; and (d) a breach of any restrictions, terms or conditions provided in the Plan or established by the Committee with respect to any Restricted Stock will cause a forfeiture of such Restricted Stock with respect thereto.
Section 8.5 Cash Payments. In connection with any Award of Restricted Stock, an Agreement may provide for the payment of a cash amount to the Holder of such Restricted Stock after such Restricted Stock shall have become vested. Such cash amounts shall be payable in accordance with such additional restrictions, terms and conditions as shall be prescribed by the Committee in the Agreement and shall be in addition to any other salary, incentive, bonus or other compensation payments which such Holder shall be otherwise entitled or eligible to receive from the Company.
Section 8.6 Completion of Restriction Period. On the Vesting Date with respect to each Award of Restricted Stock and the satisfaction of any other applicable restrictions, terms and conditions, (a) all or the applicable portion of such Restricted Stock shall become vested, (b) any Retained Distributions with respect to such Restricted Stock shall become vested to the extent that the Restricted Stock related thereto shall have become vested, and (c) any cash amount to be received by the Holder with respect to such Restricted Stock shall become payable, all in accordance with the terms of the applicable Agreement. Any such Restricted Stock and Retained Distributions that shall not become vested shall be forfeited to the Company, and the Holder shall not thereafter have any rights (including dividend and voting rights) with respect to such Restricted Stock and Retained Distributions that shall have been so forfeited.
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Article 9 Restricted Stock Units
Section 9.1 Grant. The Committee shall, subject to the limitations of the Plan, have authority to grant to eligible persons Awards of Restricted Stock Units which may be in the form of shares of Common Stock or units, the value of which is based, in whole or in part, on the Fair Market Value of the shares of Common Stock. Subject to the provisions of the Plan, including any rules established pursuant to Section 9.2, Awards of Restricted Stock Units shall be subject to such terms, restrictions, conditions, vesting requirements and payment rules as the Committee may determine in its discretion, which need not be identical for each Award. The terms of each Award need not be identical, and the Board need not treat Holders uniformly. The determinations made by the Committee pursuant to this Article 9 shall be specified in the applicable Agreement.
Section 9.2 Rules. The Committee may, in its discretion, establish any or all of the following rules for application to an Award of Restricted Stock Units:
(a) Any shares of Common Stock which are part of an Award of Restricted Stock Units may not be assigned, sold, transferred, pledged or otherwise encumbered prior to the date on which the shares of Common Stock are issued or, if later, the date provided by the Committee at the time of the Award.
(b) Such Awards may provide for the payment of cash consideration by the person to whom such Award is granted or provide that the Award, and any shares of Common Stock to be issued in connection therewith, if applicable, shall be delivered without the payment of cash consideration; provided, however, that the issuance of any shares of Common Stock in connection with an Award of Restricted Stock Units shall be for at least the minimum consideration necessary to permit such shares to be deemed fully paid and nonassessable.
(c) Awards of Restricted Stock Units may provide for deferred payment schedules, vesting over a specified period of employment, the payment (on a current or deferred basis) of dividend equivalent amounts with respect to the number of shares of Common Stock covered by the Award, and elections by the employee to defer payment of the Award or the lifting of restrictions on the Award, if any, provided that any such deferrals shall comply with the requirements of Section 409A of the Code. Restricted Stock Units shall not constitute issued and outstanding shares of Common Stock, and the Holder shall not have any of the rights of a stockholder with respect to the shares of Common Stock covered by such an Award of Restricted Stock Units, in each case until Awards have paid out in shares of Common Stock after the end of the Restriction Period.
(d) The Awards of Restricted Stock Units may provide Holders with the right to receive Dividend Equivalents. Dividend Equivalents may be settled in cash and/or shares of Common Stock and will be subject to the same vesting conditions and restrictions on transfer and forfeitability as the Restricted Stock Units with respect to which paid, in each case to the extent provided in the Agreement.
(e) In such circumstances as the Committee may deem advisable, the Committee may waive or otherwise remove, in whole or in part, any restrictions or limitations to which a Restricted Stock Unit was made subject at the time of grant.
Article 10 Cash Awards and Other Stock-Based Awards
Section 10.1 Cash Awards. The Committee shall, subject to the limitations of the Plan, have authority to grant to eligible persons Cash Awards. Each Cash Award shall be subject to such terms and conditions, restrictions and contingencies as the Committee shall determine. Restrictions and contingencies limiting the right to receive a cash payment pursuant to a Cash Award may be based upon the achievement of single or multiple performance objectives over a performance period established by the Committee. The determinations made by the Committee pursuant to this Section 10.1 shall be specified in the applicable Agreement.
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Section 10.2 Other Stock-Based Awards. Other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock, may be granted hereunder to Holders ("Other Stock-Based-Awards"). Such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to which a Holder is otherwise entitled. Other Stock-Based Awards may be paid in shares of Common Stock or cash, as the Committee may determine. Subject to the provisions of the Plan, the Board or the Committee shall determine the terms and conditions of each Other Stock-Based Award, including any purchase price applicable thereto. The determinations made by the Committee pursuant to this Section 10.2 shall be specified in the applicable Agreement.
Article 11 Performance Awards
Section 11.1 Designation as a Performance Award. The Committee shall have the right to designate all or any part of any Award of Options, SARs, Restricted Stock, Restricted Stock Units, Cash Awards or Other Stock-Based Awards as a Performance Award.
Section 11.2 Performance Objectives.
(a) The grant or vesting of a Performance Award shall be subject to the achievement of Performance Objectives over a performance period established by the Committee based upon one or more performance measures that apply to the Holder, one or more business units, divisions or Affiliates of the Company or the applicable sector of the Company, or the Company as a whole, and if so desired by the Committee, by comparison with a peer group of companies, as determined by the Committee in its sole discretion. The Committee shall have the authority to determine whether the Performance Objectives and other terms and conditions of the Award are satisfied, and the Committee's determination as to the achievement of Performance Objectives relating to a Performance Award shall be made in writing.
(b) The Committee may specify that such performance measures shall be adjusted to exclude any one or more of (i) extraordinary items, (ii) gains or losses on the dispositions of discontinued operations, (iii) the cumulative effects of changes in accounting principles, (iv) the write-down of any asset, (v) fluctuation in foreign currency exchange rates, and (vi) charges for restructuring and rationalization programs. Such performance measures: (y) may vary by Holder and may be different for different Awards; and (z) may be particular to a Holder or the department, branch, line of business, subsidiary or other unit in which the Holder works and may cover such period as may be specified by the Committee.
Article 12 General Provisions
Section 12.1 Change in Control.
(a) In the event of a Change in Control, the Committee may, but shall not be obligated to, provide for any one or more of the following (which may vary by Award) (i) the assumption of the Plan and outstanding Awards by the surviving entity or its parent; (ii) the substitution by the surviving entity or its parent of awards with substantially the same terms for such outstanding Awards; (iii) notice to the holders of vested and exercisable Options and Rights of their ability to exercise vested and exercisable Options and Rights effective contingent upon and immediately prior to such transaction followed by the cancellation of all unexercised Options and Rights (whether or not then vested and exercisable); (iv) settlement of the intrinsic value of the outstanding vested Options and Rights in cash or cash equivalents or equity followed by the cancellation of all Options and Rights (whether or not then vested or exercisable); (v) cancellation of all unvested or unexercisable Awards; or (vi) the taking of such other action with respect to Awards as the Committee shall determine to be appropriate in its discretion; provided, however, that in connection with an assumption or substitution of Awards under subsections (i) or (ii) above, the Awards so assumed or substituted shall continue to vest or become exercisable pursuant to the terms of the original Award, except to the extent such terms are otherwise rendered inoperative.
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(b) If the outstanding shares of the Common Stock of the Company are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another entity by reason of any reorganization, merger, or consolidation, or if a change is made to the Common Stock of the Company by reason of any recapitalization, reclassification, change in par value, stock split, reverse stock split, combination of shares or dividends payable in capital stock, or the like, the Company shall make adjustments to such Awards (including, by way of example and not by way of limitation, the grant of substitute Awards under the Plan or under the plan of such other entity or the suspension of the right to exercise an Award for a specified period of time in connection with a corporate transaction) as it may determine to be appropriate under the circumstances, and, in addition, appropriate adjustments shall be made in the number and kind of shares or securities and in the option price per share or security subject to outstanding Awards under the Plan or under the plan of such successor entity. The foregoing notwithstanding, unless the Committee otherwise determines, no such adjustment shall be made to an Option which shall, within the meaning of Sections 424 and 409A of the Code, as applicable, constitute such a modification, extension, or renewal of an option as to cause it to be considered as the grant of a new option.
Section 12.2 Termination of Employment.
(a) General. Except as otherwise provided in the applicable Agreement, if a Holder's employment shall terminate or a non-employee's service on the Board or as an independent contractor shall terminate, any unvested Awards (and any Dividend Equivalents and Retained Distributions) shall immediately terminate and be forfeited and of no further force and effect.
(b) Leave of Absence. The Committee may determine whether any given leave of absence constitutes a termination of employment or cessation of service; provided, however, that for purposes of the Plan, (i) a leave of absence, duly authorized in writing by the Company for military service or sickness, or for any other purpose approved by the Company if the period of such leave does not exceed 90 days, and (ii) a leave of absence in excess of 90 days, duly authorized in writing by the Company provided the employee's right to reemployment is guaranteed either by statute or contract, shall not be deemed a termination of employment. Unless otherwise determined by the Committee and provided in the applicable Agreement, Awards made under the Plan shall not be affected by any change of employment so long as the Holder continues to be an employee of the Company.
(c) Death or Disability. Except as otherwise provided in the applicable Agreement, if a Holder's employment shall terminate or a non-employee's service on the Board or as an independent contractor shall terminate, by reason of death or Disability, the Committee may in its sole discretion at any time (i) terminate restrictions in any Agreements; (ii) accelerate any or all installments and rights; and/or (iii) instruct the Company to pay the total of any accelerated payments in a lump sum to the Holder, the Holder's estate, beneficiaries or representative, notwithstanding that, in the absence of such termination of restrictions or acceleration of payments, any or all of the payments due under the Awards ultimately might have become payable to other beneficiaries.
Section 12.3 Right
Section 12.4 Nonalienation of Benefits; Nontransferability of Awards. Except as set forth below, no right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, hypothecation, pledge, exchange, transfer, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the Person entitled to such benefits. Awards shall not be sold, assigned, transferred, pledged or encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order, and, during the life of the Holder, shall be exercisable only by the Holder; provided, however, that the Board or the Committee may permit or provide in an Award for the gratuitous transfer of the Award by the Holder to or for the benefit of any immediate family member, family trust or other entity established for the benefit of the Holder and/or an immediate family member thereof if the Company would be eligible to use a Form S-8 under the Securities Act for the registration of the sale of the Common Stock subject to such Award to such proposed transferee and with respect to Incentive Stock Options such would not be contrary to Code Section 421 or 422; provided, further, that the Company shall not be required to recognize any such permitted transfer until such time as such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument in form and substance satisfactory to the Company confirming that such transferee shall be bound by all of the terms and conditions of the Award. References to a Holder, to the extent relevant in the context, shall include references to authorized transferees. For the avoidance of doubt, nothing contained in this Section 12.4 shall be deemed to restrict a transfer to the Company.
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Section 12.5 Documentation. Each Award shall be evidenced in such form (written, electronic or otherwise) as the Committee shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan. Any such Agreement may be supplemented or amended from time to time as approved by the Committee as contemplated by Section 12.7(b).
Section 12.6 Designation of Beneficiaries. Each person who shall be granted an Award under the Plan may designate a beneficiary or beneficiaries and may change such designation from time to time by filing a written designation of beneficiary or beneficiaries with the Committee on a form to be prescribed by it, provided that no such designation shall be effective unless so filed prior to the death of such person.
Section 12.7 Termination and Amendment.
(a) General. Unless the Plan shall theretofore have been terminated as hereinafter provided, no Awards may be made under the Plan on or after the tenth anniversary of the Effective Date. The Plan may be terminated at any time prior to the tenth anniversary of the Effective Date and may, from time to time, be suspended or discontinued or modified or amended if such action is deemed advisable by the Committee. The Plan may be amended by the Board and such amendment shall become effective upon adoption by the Board; provided, however, that any amendment shall be subject to the approval of the stockholders of the Company at or before the next annual meeting of the stockholders of the Company if such stockholder approval is required by the Code, any federal or state law or regulation, the rules of any stock exchange or automated quotation system on which the shares of Common Stock may be listed or quoted, or if the Board, in its discretion, determines to submit such changes to the Plan to the Company's stockholders for approval.
(b) Modification. The Board may amend the terms of any Award theretofore granted, prospectively or retroactively, but no such amendment shall (i) materially impair the rights of any Holder without his or her consent or (ii) except for adjustments made pursuant to Section 4.1 or 12.1, reduce the exercise price of outstanding Options or SARs or cancel or amend outstanding Options or SARs for the purpose of repricing, replacing, or regranting such Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs or cancel or amend outstanding Options or SARs with an exercise price that is greater than the Fair Market Value of a share of Common Stock for the purpose of exchanging such Options or SARs for cash or any other Awards without stockholder approval. Notwithstanding anything herein to the contrary, the Board may amend the terms of any Award theretofore granted if the Board, in its discretion, determines that such amendment is necessary to comply with the requirements of Section 409A of the Code, the rules of any stock exchange or automated quotation systems on which the shares of Common Stock may be listed or traded, or changes in tax or other applicable laws or regulatory requirements.
Section 12.8 Government and Other Regulations. The obligation of the Company with respect to Awards shall be subject to all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including the effectiveness of any registration statement required under the Securities Act of 1933, and the rules and regulations of any securities exchange or association on which the Common Stock may be listed or quoted. For so long as Common Stock is registered under the Exchange Act, the Company shall use its reasonable efforts to comply with any legal requirements (a) to maintain a registration statement in effect under the Securities Act of 1933 with respect to all shares of the applicable series of Common Stock that may be issued to Holders under the Plan, and (b) to file in a timely manner all reports required to be filed by it under the Exchange Act.
Section 12.9 Withholding. The Company's obligation to deliver shares of Common Stock or pay cash in respect of any Award under the Plan shall be subject to applicable federal, state and local tax withholding requirements. Federal, state and local withholding tax due at the time of an Award, upon the exercise of any Option or SAR or upon the vesting of, or expiration of restrictions with respect to, Restricted Stock, Restricted Stock Units, Cash Awards or Other Stock-Based Awards or the satisfaction of the Performance Objectives applicable to a Performance Award, as appropriate, may, in the discretion of the Committee, be paid in shares of Common Stock already owned by the Holder or through the withholding of shares otherwise issuable to such Holder, upon such terms and conditions (including the conditions referenced in Section 6.5) as the Committee shall determine. If the Holder shall fail to pay, or make arrangements satisfactory to the Committee for the payment to the Company of, all such federal, state and local taxes required to be withheld by the Company, then the Company shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to such Holder an amount equal to any federal, state or local taxes of any kind required to be withheld by the Company with respect to such Award.
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If provided for in an Agreement or approved by the Committee in its sole discretion, a Holder may satisfy such tax obligations in whole or in part by delivery (either by actual delivery or attestation) of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company's minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). Shares used to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.
Section 12.10 Nonexclusivity of the Plan. The adoption of the Plan by the Board shall not be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including the granting of stock options and the awarding of stock and cash otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
Section 12.11 Treatment with Respect to Other Benefit Programs. By acceptance of an Award, unless otherwise provided in the applicable Agreement or required by law, each Holder shall be deemed to have agreed that such Award is special incentive compensation that will not be taken into account, in any manner, as salary, compensation or bonus in determining the amount of any payment under any pension, retirement or other employee benefit plan, program or policy of the Company or any Affiliate of the Company. In addition, each beneficiary of a deceased Holder shall be deemed to have agreed that such Award will not affect the amount of any life insurance coverage, if any, provided by the Company on the life of the Holder which is payable to such beneficiary under any life insurance plan covering employees of the Company or any Affiliate of the Company.
Section 12.12 Unfunded Plan. Neither the Company nor any Affiliate of the Company shall be required to segregate any cash or any shares of Common Stock which may at any time be represented by Awards, and the Plan shall constitute an "unfunded" plan of the Company. Except as provided in Article 8 with respect to Awards of Restricted Stock and except as expressly set forth in an Agreement, no employee shall have voting or other rights with respect to the shares of Common Stock covered by an Award prior to the delivery of such shares. Neither the Company nor any Affiliate of the Company shall, by any provisions of the Plan, be deemed to be a trustee of any shares of Common Stock or any other property, and the liabilities of the Company and any Affiliate of the Company to any employee pursuant to the Plan shall be those of a debtor pursuant to such contract obligations as are created by or pursuant to the Plan, and the rights of any employee, former employee or beneficiary under the Plan shall be limited to those of a general creditor of the Company or the applicable Affiliate of the Company, as the case may be. In its sole discretion, the Board may authorize the creation of trusts or other arrangements to meet the obligations of the Company under the Plan, provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.
Section 12.13 Governing Law. The Plan shall be governed by, and construed in accordance with, the laws of the
Section 12.14 Exemptions from Section 16(b) Liability. It is the intent of the Company that the grant of any Awards to or other transaction by a Holder who is subject to Section 16(b) of the Exchange Act shall be exempt from Section 16 of the Exchange Act pursuant to an applicable exemption (except for transactions acknowledged in writing to be non-exempt by such Holder). In addition, the Company intends any transaction by which a Holder sells Shares issued in respect of the vesting or exercise of any Award granted hereunder for the purpose of settling any withholding tax liability of such Holder (commonly referred to as a "net settlement," "net exercise," "sell to cover" or "broker-assisted cashless exercise" transaction) that would otherwise be subject to Section 16(b) of the Exchange Act shall be exempt from Section 16 of the Exchange Act pursuant to an applicable exemption. Accordingly, if any provision of this Plan, subplan or any Agreement does not comply with the requirements of Rule 16b-3 then applicable to any such transaction, such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 so that such Holder shall avoid liability under Section 16(b) of the Exchange Act.
Section 12.15 Section 280G. Unless otherwise provided for in the Agreement or in any other agreement between the Company (or an Affiliate) and a Holder, if any payment or right accruing to a Holder under this Plan (without the application of this Section 12.15), either alone or together with other payments or rights accruing to the Holder from the Company or an Affiliate, would constitute a "parachute payment" (as defined in Section 280G of the Code and regulations thereunder), such payment or right shall be reduced to the largest amount or greatest right that will result in no portion of the amount payable or right accruing under the Plan being subject to an excise tax under Section 4999 of the Code or being disallowed as a deduction under Section 280G of the Code. The determination of whether any reduction in the rights or payments under this Plan is necessary shall be made by the Company. The Holder shall cooperate in good faith with the Company in making such determination and providing any necessary information for this purpose.
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Section 12.16 Company's Rights. The grant of Awards pursuant to the Plan shall not affect in any way the right or power of the Company to make reclassifications, reorganizations or other changes of or to its capital or business structure or to merge, consolidate, liquidate, sell or otherwise dispose of all or any part of its business or assets.
Section 12.17 Interpretation. The words "include," "includes," "included" and "including" to the extent used in the Plan shall be deemed in each case to be followed by the words "without limitation."
Section 12.18 Compliance with Section 409A of the Code. Except as provided in individual Agreements initially or by amendment, if and to the extent (i) any portion of any payment, compensation or other benefit provided to a Holder pursuant to the Plan in connection with his or her employment termination constitutes "nonqualified deferred compensation" within the meaning of Section 409A of the Code and (ii) the Holder is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, in each case as determined by the Company in accordance with its procedures, by which determinations the Holder (through accepting the Award) agrees that he or she is bound, such portion of the payment, compensation or other benefit shall not be paid before the day that is six months plus one day after the date of "separation from service" (as determined under Section 409A of the Code) (the "New Payment Date"), except as Section 409A of the Code may then permit. The aggregate of any payments that otherwise would have been paid to the Holder during the period between the date of separation from service and the New Payment Date shall be paid to the Holder in a lump sum on such New Payment Date, without interest, and any remaining payments will be paid on their original schedule.
The Company makes no representations or warranty and shall have no liability to the Holder or any other person if any provisions of or payments, compensation or other benefits under the Plan are determined to constitute nonqualified deferred compensation subject to Section 409A of the Code but do not to satisfy the conditions of that section.
Section 12.19 Authorization of Sub-Plans (including for Grants to non-
Section 12.20 Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, employee or agent of the Company will be liable to any Holder, former Holder, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan, nor will such individual be personally liable with respect to the Plan because of any contract or other instrument he or she executes in his or her capacity as a director, officer, employee or agent of the Company. The Company will indemnify and hold harmless each director, officer, employee or agent of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been or will be delegated, against any cost or expense (including attorneys' fees) or liability (including any sum paid in settlement of a claim with the Board's approval) arising out of any act or omission to act concerning the Plan unless arising out of such person's own fraud or bad faith.
Section 12.21 Recoupment; Forfeiture. All Awards and any and all payments made or required to be made or stock received or required to be issued hereunder and pursuant to any this Plan or any Agreement shall be subject to forfeiture and/or repayment to the Company by the Holder (and the successors, assigns, heirs, estate and personal representative of the Holder) (a) pursuant to the terms of any clawback, recoupment or other policy implemented from time to time by the Board (any such policy, as amended, amended and restated or superseded the "Recoupment Policy"), (b) upon a termination for cause, (c) in the event of a material breach of an Agreement with the Company (including any agreement related to confidential information, non-competition, non-solicitation, or other similar restrictive covenants, and (d) upon a material breach of a material company policy. As additional consideration for any Award granted to a Holder and for any payment made or required to be made or stock received or required to be issued hereunder and pursuant to any Agreement to any Holder, each Holder agrees that he/she is bound by and subject to any Recoupment Policy as in effect at any time and from time to time (whether before, at or after the granting or payment of any award).
Section 12.22 Notice. All notices and other communications required or permitted to be given under the Plan shall be in writing or other form approved by the Committee and shall be deemed to have been duly given as follows (a) if to the Company mailed first class, postage prepaid at the principal business address of the Company to the attention of the Secretary of the Company; or (b) if to any Holder then delivered personally, mailed first class, postage prepaid at the last address of the Holder known to the sender at the time the notice or other communication is sent or delivered, or by e-mail, interoffice mail, intranet or other means of office communication determined by the Committee.
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AMENDMENT NO. 1 TO THE
THIS AMENDMENT NO. 1 TO THE
WHEREAS, pursuant to Section 12.7 of the Plan, the Board and the Compensation Committee of the Board has approved the amendment set forth below.
NOW, THEREFORE, the Plan is hereby amended, effective as of the date hereof, as follows:
| 1. | Amendment. The Plan is hereby amended by the addition of the following sentence at the end of Section 3.2: |
"The Committee, in its discretion, may delegate to one or more officers of the Company all or part of the Committee's authority and duties with respect to Awards to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act, The Committee may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Committee's delegate or delegates that were consistent with the terms of the Plan."
| 2. | No Other Changes. Except as set forth herein, all other terms and provisions of the Plan remain in full force and effect. |
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Attachments
Disclaimer
Additional Proxy Soliciting Materials (Form DEFA14A)
Proxy Statement (Form DEF 14A)
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