The following table sets forth, for each Named Executive Officer, information regarding unexercised options, unvested stock awards and other equity incentive plan awards outstanding as of December 31, 2016.
We do not sponsor any qualified or non-qualified pension benefit plans, nor do we maintain any non-qualified defined contribution or deferred compensation plans. We sponsor a tax-qualified defined contribution 401(k) plan in which employees are eligible for participation on the next entry date after one year of service and 1,000 hours worked.
The Company has purchased directors and officers liability insurance. This insurance provides financial protection for our directors and officers in the event that they are sued in connection with the performance of their duties as they relate to the Company and also provides employment practices liability coverage, which insures for harassment and discrimination suits.
The Company’s 2012 Plan and Fourth Amended and Restated Stock Option Plan (“Stock Option Plan”) each provide for immediate vesting of all outstanding awards held thereunder by plan participants if any such person’s employment, directorship, or other association, as the case may be, with the Company is terminated (other than for cause) prior to the expiry of such awards by virtue of, or in connection with, a change of control (as this term is defined in each respective plan) of the Company. The Board of the Company may also provide in its discretion for vesting under such plans if there is a take-over bid or issuer bid (as such terms are defined in each plan with such a provision) or in the event of a change of control.
The Company is not a party to any contract, agreement, plan or arrangement (written or unwritten) that provides for payment following a change in an officer’s responsibilities or following a change in control. The Company has no other plan that provides for the payment of retirement benefits, or other benefits that will be paid primarily following retirement, or at, following, or in connection with resignation, retirement or other termination of an officer.
Certain Relationships and Related Transactions
The Company has entered into certain transactions and agreements in the normal course of operations with businesses that are related parties. In evaluating these transactions, the Board establishes a special committee to review the proposed matters and make recommendations to the Board on the course of action, and in a case where a director is the related party, such individual abstains from voting to approve the transaction. The hiring of children of executive officers for non-executive positions, as well as their compensation, is approved by the President and Chief Executive Officer. Significant related party transactions in which the Company was a participant in 2016 and 2015 are set forth immediately below.
KyLin TV
KyLin TV, Inc. (“KyLin TV”), an IPTV company that is controlled by Mr. Wang, a member of the Board, is a customer of the Company. For the years ended December 31, 2016 and 2015, we recognized revenue of $362,823 and $552,870, respectively, from KyLin TV.
We also provide and charge KyLin TV for administrative and general corporate support. The amounts charged for these services provided by us for the years ended December 31, 2016 and 2015 were $97,060 and $117,930, respectively, and are recorded as a recovery in selling, general and administrative expense.
New York Islanders
We provide IT-related professional services and administrative services to the New York Islanders, which is minority-owned by Mr. Wang. For the years ended December 31, 2016 and 2015, we recognized revenue of $279,553 and $291,735, respectively, from the sale of such services to the New York Islanders.
Renaissance Property Associates
We provide IT-related professional services to Renaissance Property Associates, LLC (“Renaissance”), a real estate management company 100% owned by Mr. Wang. For the years ended December 31, 2016 and 2015, we recognized revenue of $120,000 and $120,000, respectively, from the sale of such services to Renaissance.
In June 2009, we signed a sublease agreement with Renaissance for office space in Plainview, New York. Rent expense paid to Renaissance of $565,272 and $430,344, inclusive of taxes and utilities, is included in selling, general and administrative expense for the years ended December 31, 2016 and 2015, respectively.
Smile Train
We provide IT-related professional services to Smile Train, Inc. (“Smile Train”), a public charity whose founder and significant benefactor is Mr. Wang. For the years ended December 31, 2016 and 2015, we recognized revenue of $96,000 and $96,000, respectively, from the sale of such services to Smile Train.
The amounts due from (to) these related parties are as follows:
|
|
As of December 31,
|
|
|
|
2016
|
|
|
2015
|
|
New York Islanders
|
|
$
|
102,447
|
|
|
$
|
(17,680
|
)
|
Renaissance
|
|
|
25,904
|
|
|
|
75
|
|
KyLin TV
|
|
|
422,408
|
|
|
|
304,884
|
|
|
|
$
|
550,789
|
|
|
$
|
287,279
|
|
Stockholders’ Agreement
We are party to a Stockholders’ Agreement, dated January 30, 2015, with PCF, Mr. Wang, Ms. Li, and AvantaLion, an entity controlled by Mr. Wang, entered into in connection with our acquisition of DivX. The Stockholders’ Agreement, among other things:
·
|
grants PCF certain registration rights with respect to shares of our Common Stock;
|
·
|
grants PCF a preemptive right to participate in sales of our securities by us, subject to specified exceptions, to PCF;
|
·
|
obligates us to deliver periodic financial statements to PCF and grants PCF certain inspection rights;
|
·
|
entitles PCF to designate two members of the Board, at least one of whom will serve on each of the Audit, Compensation and Nominating Committees, along with an agreement by Mr. Wang, Ms. Li and AvantaLion to vote in favor of such designees; and
|
·
|
grants PCF approval rights with respect to certain key stockholder transaction and liquidation events.
|
The preemptive right, designee, voting and approval provisions will terminate on the date on which PCF and its affiliates cease to collectively beneficially own, in the aggregate, at least fifty percent of the total number of shares it acquired as consideration in the acquisition of DivX. The preemptive right will also terminate immediately prior to the date on which we complete a public offering resulting in gross proceeds of at least $25,000,000 or the listing of the Common Stock on The Nasdaq Stock Market or the NYSE MKT. A copy of the Stockholders’ Agreement is included as an exhibit to the Merger Agreement that was filed as Exhibit 10.1 to the Current Report on Form 8-K filed by the Company with the SEC on January 5, 2015.
Employees
Paul Wagner, Director, Advertising Sales, of the Company, is the son of J. Christopher Wagner, Executive Vice President, Marketplace Strategy, of the Company. In 2016, the younger Mr. Wagner earned $133,440 in salary and commissions from the Company and was granted 25,000 options with a fair market value of $0.59 as of March 7, 2016, the effective date of the grant.
Equity Awards
For information regarding equity awards granted to our Named Executive Officers and directors, see “STATEMENT OF EXECUTIVE COMPENSATION – COMPENSATION DISCUSSION AND ANALYSIS – Executive Compensation Tables” and “CORPORATE GOVERNANCE MATTERS – Compensation of Directors – 2016 DIRECTOR COMPENSATION.”
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides information as of December 31, 2016 with respect to compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance:
Equity Compensation Plan Information
Plan Category
|
|
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
(5)
|
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
|
|
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity compensation plans
approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended and Restated NeuLion, Inc.
2012 Omnibus Securities and
Incentive Plan
(1)
|
|
|
32,028,450
|
|
|
|
$0.47
|
|
|
|
14,552,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Amended and Restated Stock
Option Plan
(2)
|
|
|
2,038,750
|
|
|
|
$0.18
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended and Restated Directors’
Compensation Plan
(3)
|
|
|
0
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,984,853
|
|
Employee Share Purchase Plan
(4)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans
not approved by security
holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Total
|
|
|
34,067,200
|
|
|
|
$0.45
|
|
|
|
16,537,828
|
|
(1)
The maximum number of shares of Common Stock issuable upon exercise of securities granted pursuant to the 2012 Plan is 50,000,000.
(2)
The maximum number of shares of Common Stock issuable upon exercise of options granted pursuant to the Stock Option Plan is equal to the greater of (i) 4,000,000 shares of Common Stock and (ii) 12.5% of the number of issued and outstanding shares of Common Stock from time to time. As a result, any increase in the issued and outstanding shares will result in an increase in the number of shares of Common Stock available for issuance under the Stock Option Plan, and any exercises of options will make new grants available under the Stock Option Plan. No new option awards will be made under the Stock Option Plan; however, outstanding awards under the Stock Option Plan will remain in effect pursuant to their terms. All awards of options are currently made under the 2012 Plan.
(3)
Shares of Common Stock are issued directly under the Directors’ Compensation Plan without exercise of any option, warrant or right.
(4)
We have not issued shares under the Employee Share Purchase Plan since its approval by our stockholders.
(5)
This column reflects grants of options and RSU Awards.
On May 9, 2012 (“Issuance Date”), we executed a warrant certificate in favor of Raine Advisors LLC, a consultant, for the issuance of up to 3,789,482 warrants to purchase up to such number of shares of Common Stock of the Company at an exercise price of $0.2201 per share (a weighted-average exercise price of $0.2201 per share). On the Issuance Date, 1,894,741 warrants automatically vested. The remaining 1,894,741 warrants shall vest on such date that occurs prior to the expiration date, which shall be 10 years from the Issuance Date, upon Raine’s satisfaction of certain conditions set forth in the warrant certificate. All of such warrants were outstanding as of December 31, 2016.
On November 13, 2007, the Company issued 30,000 warrants to a sports media entity at an exercise price of $2.20 per warrant. Each warrant is exercisable into one share of Common Stock of the Company, vested immediately and expire after 10 years.
For more information, see “STATEMENT OF EXECUTIVE COMPENSATION – COMPENSATION DISCUSSION AND ANALYSIS – Consulting Arrangements.”
DESCRIPTION OF EQUITY COMPENSATION PLANS
The following are summary descriptions of the Company’s equity-based compensation plans, and is qualified by the text of the plans themselves.
2012 Plan
The following is a summary of the material provisions of the 2012 Plan, and is qualified in its entirety by reference to the complete text of the 2012 Plan, a copy of which is found at Exhibit 10.8 to our Annual Report on Form 10-K filed with the SEC on March 1, 2017. For the purposes of this general description, references to capitalized terms not defined here have the meanings ascribed to them in the 2012 Plan.
Administration
. The 2012 Plan is administered by the Compensation Committee of the Board, which consists of three members of the Board, each of whom is a “non-employee director” within the meaning of Rule 16b-3 promulgated under the Exchange Act and an “outside director” within the meaning of Internal Revenue Code of 1986, as amended (“IRC”), Section 162(m). Among other things, the Compensation Committee has complete discretion, subject to the express limits of the 2012 Plan, to determine the non-employee directors, employees and non-employee consultants to be granted an award, the type of award to be granted, the terms and conditions of the award, the form of payment to be made and/or the number of shares of Common Stock subject to each award, the exercise price of each award which is an Option and the base value of each award which is a stock appreciation right (“SAR”), the term of each award, the vesting schedule for an award, whether to accelerate vesting, the value of the Common Stock underlying the award, and the required withholding, if any. Subject to the express limits of the 2012 Plan and any applicable stock exchange rule on which the shares of Common Stock trade at the applicable time, the Board may amend, modify or terminate any outstanding award, provided that the participant’s consent to such action is required if the action would impair the participant’s rights or entitlements with respect to that award. The Compensation Committee is also authorized to construe the award agreements, and may prescribe rules relating to the 2012 Plan. Notwithstanding the foregoing, the Compensation Committee does not have any authority to grant or modify an award under the 2012 Plan with terms or conditions that would cause the grant, vesting or exercise thereof to be considered nonqualified “deferred compensation” subject to IRC Section 409A.
Grant of Awards; Shares Available for Awards
. The 2012 Plan provides for the grant of Options, SARs, performance share awards, performance unit awards, distribution equivalent rights, restricted stock awards, restricted stock unit awards and unrestricted stock awards to non-employee directors, employees and non-employee consultants of the Company and its affiliates. The Company has reserved a total of 50,000,000 shares of Common Stock for issuance as or under awards to be made under the 2012 Plan. If any award lapses, expires, is cancelled, is terminated unexercised or ceases to be exercisable or issuable for any reason, or the rights of its holder terminate, the number of shares of Common Stock subject thereto is again available for grant under the 2012 Plan. The number of shares of Common Stock for which awards of Options or SARs may be granted under the 2012 Plan to an employee is limited in any calendar year to 1,000,000 shares.
Currently, all of our employees, our seven non-employee directors and our non-employee consultants are eligible to receive Awards under the 2012 Plan. Future new hires and additional non-employee directors and/or consultants would be eligible to receive Awards under the 2012 Plan as well. The number of Awards to be granted to executives and non-employee directors cannot be determined at this time as the grant of Awards is dependent upon various factors such as hiring requirements and job performance.
Options
. Options granted under the 2012 Plan may be either “incentive stock options” (“ISOs”), which are intended to meet the requirements for special federal income tax treatment under the IRC, or “nonqualified stock options” (“NQSOs”). Options may be granted on such terms and conditions as the Compensation Committee may determine; provided, however, that the per share exercise price under an Option may not be less than the fair market value of a share of Common Stock on the date of grant calculated using the five-day volume weighted average trading price of Common Stock and the term of the Option may not exceed 10 years (110% of such value and 5 years in the case of an ISO granted to an employee who owns (or is deemed to own) more than 10% of the total combined voting power of all classes of capital stock of the Company or a parent or subsidiary of the Company). ISOs may only be granted to participants who are employees. In addition, the aggregate fair market value of the Common Stock covered by one or more ISOs (determined at the time of grant) which are exercisable for the first time by a participant who is an employee during any calendar year may not exceed $100,000. Any excess is treated as a NQSO.
SARs
. A SAR entitles the participant, upon exercise, to receive an amount, in cash or stock or a combination thereof, equal to the increase in the fair market value of the underlying Common Stock between the date of grant and the date of exercise. SARs may be granted in tandem with, or independently of, Options granted under the 2012 Plan. A SAR granted in tandem with a Option: (i) is exercisable only at such times, and to the extent, that the related Option is exercisable in accordance with the procedure for exercise of the related Option; (ii) terminates upon termination or exercise of the related Option (likewise, an Option granted in tandem with a SAR terminates upon exercise of the SAR); (iii) is transferable (in the very limited contexts permitted under the 2012 Plan) only with the related Option; and (iv) may be exercised only when the value of the stock subject to the Option exceeds the exercise price under the Option. A SAR that is not granted in tandem with a Option is exercisable at such times as the Compensation Committee may specify.
Performance Unit Awards and Performance Share Awards
. Performance unit awards and performance share awards entitle the participant to receive cash or shares of Common Stock upon the attainment of specified performance goals. In the case of performance unit awards, the right to acquire the units is denominated in cash values.
Distribution Equivalent Rights Awards
. A distribution equivalent rights award entitles the participant to receive bookkeeping credits, cash payments and/or distributions of Common Stock equal in amount to the distributions that would have been made to the participant had the participant held a specified number of shares of Common Stock during the period the participant held the distribution equivalent rights. A distribution equivalent right may be awarded as a component of another award, other than an Option, under the 2012 Plan, where, if so awarded, such distribution equivalent right will expire or be forfeited by the participant under the same conditions as under such other award. Distribution equivalent rights may not be awarded as a component of an Option.
Restricted Stock Awards and Restricted Stock Unit Awards
. A restricted stock award is a grant or sale of Common Stock to the participant, subject to the Company’s right to repurchase all or part of the shares at their purchase price (or to require forfeiture of such shares if issued to the participant at no cost) in the event that conditions specified by the Compensation Committee in the award are not satisfied prior to the end of the time period during which the shares subject to the award may be repurchased by or forfeited to the Company. A restricted stock unit entitles the participant to receive (i) a cash payment equal to the fair market value of a share of Common Stock or (ii) a share of Common Stock, as determined by the Compensation Committee, for each restricted stock unit subject to such restricted stock unit award, if the participant satisfies the applicable vesting requirements.
Unrestricted Stock Awards
. An unrestricted stock award is a grant or sale of shares of Common Stock to the participant that is not subject to transfer, forfeiture or other restrictions, in consideration for past services rendered to the Company or an affiliate or for other valid consideration.
Change of Control Provisions
. In the event of a change of control of the Company (as defined in the 2012 Plan), all then-outstanding awards will automatically become fully vested and, as applicable, immediately and fully exercisable.
Amendment and Termination
. The Compensation Committee may adopt, amend and rescind rules relating to the administration of the 2012 Plan. The Board may in its discretion at any time terminate the 2012 Plan with respect to any shares of Common Stock for which awards have not yet been granted; provided, that the 2012 Plan’s termination may not materially and adversely impair the rights of a participant with respect to any award granted to the participant before that time, without the participant’s consent. The Board may without stockholder approval but subject to receipt of the approval of the TSX, in its sole discretion make: (i) amendments to the 2012 Plan of a housekeeping nature; (ii) a change to the vesting provisions of an award or the 2012 Plan; (iii) a change to the termination provisions of an award or the 2012 Plan which does not entail an extension beyond the original expiry date, except as contemplated in the 2012 Plan; and (iv) the addition of a cashless exercise feature, payable in cash or securities, which provides for a full deduction of the number of underlying securities from the 2012 Plan reserve; provided, however (and subject to the following sentence), that without the approval by a majority of the votes cast at a meeting of stockholders at which a quorum representing a majority of the shares of the Company entitled to vote generally in the election of directors is present in person or by proxy, no amendment or modification of the 2012 Plan may:
·
|
modify the limits with respect to the maximum number of shares of Common Stock reserved for grant under the 2012 Plan;
|
·
|
amend the article of the 2012 Plan addressing amendments and terminations;
|
·
|
amend, modify or suspend certain repricing prohibitions of the 2012 Plan, including reducing the exercise price of an award which is an Option benefiting an insider;
|
·
|
extend the term of an award which is an Option benefiting an insider;
|
·
|
disproportionately increase the benefits accruing to insiders; or
|
·
|
amend the limits with respect to insiders set forth in the 2012 Plan.
|
With respect to the last four bullets, any stockholder approval at a meeting of stockholders must exclude any shares of the Company voted by any insiders benefiting from the amendment or modification. For greater certainty, shares of the Company voted by any holder and any insider will be included in the applicable quorum and stockholder vote with respect to an increase in the maximum number of shares issuable under the 2012 Plan.
Except as expressly provided in the 2012 Plan, the issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor or upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect previously granted Awards, and no adjustment by reason thereof shall be made with respect to the number of shares of Common Stock subject to Awards theretofore granted or the purchase price per share, if applicable.
Assignability
. No Award under the 2012 Plan or any Award Agreement and no rights or interests in the 2012 Plan or any Award Agreement, shall or may be assigned, transferred, sold, exchanged, encumbered, pledged or otherwise hypothecated or disposed of by a Holder except (i) by will or by the laws of descent and distribution, or (ii) except for an ISO, by gift to any Family Member of the Holder. An Award may be exercisable during the lifetime of the Holder only by such Holder or by the Holder’s guardian or legal representative unless it has been transferred by gift to a Family Member of the Holder, in which case it shall be exercisable solely by such transferee. Notwithstanding any such transfer, the Holder shall continue to be subject to the withholding requirements provided for under Section 17.3 of the 2012 Plan.
Cessation
. Except to the extent inconsistent with the terms of the applicable Award Agreement and/or the provisions of Section 6.4 or 6.5 of the 2012 Plan, the following terms and conditions shall apply with respect to the termination of a Holder’s employment with, or status as a Director of, the Company or an Affiliate, as applicable, for any reason, including, without limitation, Total and Permanent Disability or death:
·
|
The Holder’s rights, if any, to exercise any then exercisable NQSOs and/or SARs shall terminate:
|
|
o
|
If such termination is for a reason other than the Holder’s Total and Permanent Disability or death, three months after the date of such termination of employment or after the date of such termination of Director status;
|
|
o
|
If such termination is on account of the Holder’s Total and Permanent Disability, one year after the date of such termination of employment or Director status; or
|
|
o
|
If such termination is on account of the Holder’s death, one year after the date of the Holder’s death.
|
Upon such applicable date the Holder (and such Holder’s estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in or with respect to any such NQSOs and SARs.
·
|
The Holder’s rights, if any, to exercise any then exercisable ISO shall terminate:
|
|
o
|
If such termination is for a reason other than the Holder’s Total and Permanent Disability or death, three months after the date of such termination of employment;
|
|
o
|
If such termination is on account of the Holder’s Total and Permanent Disability, one year after the date of such termination of employment; or
|
|
o
|
If such termination is on account of the Holder’s death, one year after the date of the Holder’s death.
|
Upon such applicable date the Holder (and such Holder’s estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in or with respect to any such ISOs.
·
|
If a Holder’s employment with, or status as a Director of, the Company or an Affiliate, as applicable, terminates for any reason prior to the actual or deemed satisfaction and/or lapse of the Restrictions, vesting requirements, terms and conditions applicable to a Restricted Stock Award and/or Restricted Stock Unit Award, such Restricted Stock and/or Restricted Stock Units shall immediately be canceled, and the Holder (and such Holder’s estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in and with respect to any such Restricted Stock and/or Restricted Stock Units. The immediately preceding sentence to the contrary notwithstanding, the Committee, in its sole discretion, may determine, prior to or within 30 days after the date of such termination of employment or Director status, that all or a portion of any such Holder’s Restricted Stock and/or Restricted Stock Units shall not be so canceled and forfeited.
|
Except to the extent inconsistent with the terms of the applicable Award Agreement and/or the provisions of Section 6.4 or 6.5 of the 2012 Plan, the following terms and conditions shall apply with respect to the termination of a Holder’s status as a Consultant, for any reason:
·
|
The Holder’s rights, if any, to exercise any then exercisable NQSOs and/or SARs shall terminate:
|
|
o
|
If such termination is for a reason other than the Holder’s death, three months after the date of such termination; or
|
|
o
|
If such termination is on account of the Holder’s death, one year after the date of the Holder’s death.
|
·
|
If the status of a Holder as a Consultant terminates for any reason prior to the actual or deemed satisfaction and/or lapse of the Restrictions, vesting requirements, terms and conditions applicable to a Restricted Stock Award and/or Restricted Stock Unit Award, such Restricted Stock and/or Restricted Stock Units shall immediately be canceled, and the Holder (and such Holder’s estate, designated beneficiary or other legal representative) shall forfeit any rights or interests in and with respect to any such Restricted Stock and/or Restricted Stock Units. The immediately preceding sentence to the contrary notwithstanding, the Committee, in its sole discretion, may determine, prior to or within 30 days after the date of such termination of such a Holder’s status as a Consultant, that all or a portion of any such Holder’s Restricted Stock and/or Restricted Stock Units shall not be so canceled and forfeited.
|
Except to the extent inconsistent with the terms of the applicable Award Agreement, and notwithstanding anything to the contrary contained in Article VI of the 2012 Plan, if a Holder’s employment with, or status as a Director of, the Company or an Affiliate shall terminate, and if, within ninety days of such termination, such Holder shall become a Consultant, such Holder’s rights with respect to any Award or portion thereof granted thereto prior to the date of such termination may be preserved, if and to the extent determined by the Committee in its sole discretion, as if such Holder had been a Consultant for the entire period during which such Award or portion thereof had been outstanding. Should the Committee effect such determination with respect to such Holder, for all purposes of the Plan, such Holder shall not be treated as if his or her employment or Director status had terminated until such time as his or her Consultant status shall terminate, in which case his or her Award, as it may have been reduced in connection with the Holder’s becoming a Consultant, shall be treated pursuant to the provisions of Section 6.3 of the 2012 Plan; provided, however, that any such Award which is intended to be an ISO shall, upon the Holder’s no longer being an Employee, automatically convert to a NQSO. Should a Holder’s status as a Consultant terminate, and if, within ninety days of such termination, such Holder shall become an Employee or a Director, such Holder’s rights with respect to any Award or portion thereof granted thereto prior to the date of such termination may be preserved, if and to the extent determined by the Committee in its sole discretion, as if such Holder had been an Employee or a Director, as applicable, for the entire period during which such Award or portion thereof had been outstanding, and, should the Committee effect such determination with respect to such Holder, for all purposes of the Plan, such Holder shall not be treated as if his or her Consultant status had terminated until such time as his or her employment with the Company or an Affiliate, or his or her Director status, as applicable, shall terminate, in which case his or her Award shall be treated pursuant to the provisions of Section 6.2 of the 2012 Plan.
Notwithstanding anything in Article VI or elsewhere in the 2012 Plan to the contrary, and unless a Holder’s Award Agreement specifically provides otherwise, should a Holder’s employment, Director status or engagement as a Consultant with or for the Company or an Affiliate be terminated by the Company or Affiliate for Cause, all of such Holder’s then outstanding Awards shall expire immediately and be forfeited in their entirety upon such termination.
Terms and Conditions
Options
. The term of each Option shall be as specified in the Option Agreement; provided, however, that except as set forth in Section 7.3 of the 2012 Plan, no Option shall be exercisable after the expiration of ten years from the date of its grant. An Option shall be exercisable in whole or in such installments and at such times as specified in the Option Agreement. The price at which a share of Common Stock may be purchased upon exercise of an Option shall be determined by the Committee; provided, however, that such Option price (i) shall not be less than the Fair Market Value of a share of Common Stock on the date such Option is granted, and (ii) shall be subject to adjustment as provided in Article XV of the 2012 Plan. The Option or portion thereof may be exercised by delivery of an irrevocable notice of exercise to the Company. The Option price for the Option or portion thereof shall be paid in full in the manner prescribed by the Committee as set forth in the 2012 Plan and the applicable Option Agreement, which manner, with the consent of the Committee, may include the withholding of shares of Common Stock otherwise issuable in connection with the exercise of the Option, for purposes of Section 7.4(b) of the 2012 Plan. Separate stock certificates shall be issued by the Company for those shares of Common Stock acquired pursuant to the exercise of an ISO and for those shares of Common Stock acquired pursuant to the exercise of a NQSO.
Restricted Stock Awards
. At the time a Restricted Stock Award is made, the Committee shall establish the Restriction Period applicable to such Award. Each Restricted Stock Award may have a different Restriction Period, in the discretion of the Committee. The Restriction Period applicable to a particular Restricted Stock Award shall not be changed except as permitted by Section 8.2 of the 2012 Plan.
Common Stock awarded pursuant to a Restricted Stock Award shall be represented by a stock certificate registered in the name of the Holder of such Restricted Stock Award. The Holder shall have the right to receive dividends on the Common Stock during the Restriction Period, except that (i) the Holder shall not be entitled to delivery of the stock certificate until the Restriction Period shall have expired, (ii) the Company shall retain custody of the stock certificate during the Restriction Period (with a stock power endorsed by the Holder in blank), (iii) the Holder may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the Common Stock during the Restriction Period and (iv) a breach of the terms and conditions established by the Committee pursuant to the Restricted Stock Award Agreement shall cause a forfeiture of the Restricted Stock Award. At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions relating to Restricted Stock Awards, including, but not limited to, rules pertaining to the effect of termination of employment, Director status or Consultant status prior to expiration of the Restriction Period. Such additional terms, conditions or restrictions shall, to the extent inconsistent with the provisions of Sections 6.2, 6.3 and 6.4 of the 2012 Plan, as applicable, be set forth in a Restricted Stock Award Agreement made in conjunction with the Award. Such Restricted Stock Award Agreement may also include provisions relating to (i) subject to the provisions hereof, accelerated vesting of Awards, including but not limited to accelerated vesting upon the occurrence of a Change of Control, (ii) tax matters (including provisions covering any applicable Employee wage withholding requirements and requiring additional “gross-up” payments to Holders to meet any excise taxes or other additional income tax liability imposed as a result of a payment made in connection with a Change of Control resulting from the operation of the Plan or of such Restricted Stock Award Agreement) and (iii) any other matters not inconsistent with the terms and provisions of the Plan that the Committee shall in its sole discretion determine. The terms and conditions of the respective Restricted Stock Agreements need not be identical. All shares of Common Stock delivered to a Holder as part of a Restricted Stock Award shall be delivered and reported by the Company or the Affiliate, as applicable, to the Holder by no later than by the fifteenth day of the third calendar month next following the end of the Company’s fiscal year in which the Holder’s entitlement to such shares becomes vested.
The Committee shall determine the amount and form of any payment from a Holder for Common Stock received pursuant to a Restricted Stock Award, if any, provided that in the absence of such a determination, a Holder shall not be required to make any payment for Common Stock received pursuant to a Restricted Stock Award, except to the extent otherwise required by law.
Unrestricted Stock Awards
. Pursuant to the terms of the applicable Unrestricted Stock Award Agreement, a Holder may be awarded (or sold) shares of Common Stock which are not subject to Restrictions, in consideration for past services rendered thereby to the Company or an Affiliate or for other valid consideration.
Restricted Stock Unit Awards
. The Committee shall set forth in the applicable Restricted Stock Unit Award Agreement the individual service-based vesting requirement which the Holder would be required to satisfy before the Holder would become entitled to payment pursuant to Section 10.2 of the 2012 Plan and the number of Units awarded to the Holder. Such payment shall be subject to a “substantial risk of forfeiture” under Section 409A of the Code. At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions relating to Restricted Stock Unit Awards, including, but not limited to, rules pertaining to the effect of termination of employment, Director status or Consultant status prior to expiration of the applicable vesting period. The terms and conditions of the respective Restricted Stock Unit Award Agreements need not be identical. The Holder of a Restricted Stock Unit shall be entitled to receive a cash payment equal to the Fair Market Value of a share of Common Stock, or one share of Common Stock, as determined in the sole discretion of the Committee and as set forth in the Restricted Stock Unit Award Agreement, for each Restricted Stock Unit subject to such Restricted Stock Unit Award, if the Holder satisfies the applicable vesting requirement. Such payment shall be made no later than by the fifteenth day of the third calendar month next following the end of the calendar year in which the Restricted Stock Unit first becomes vested.
Performance Unit Awards
. The Committee shall set forth in the applicable Performance Unit Award Agreement the performance goals and objectives (and the period of time to which such goals and objectives shall apply) which the Holder and/or the Company would be required to satisfy before the Holder would become entitled to payment pursuant to Section 11.2 of the 2012 Plan, the number of Units awarded to the Holder and the dollar value assigned to each such Unit. Such payment shall be subject to a “substantial risk of forfeiture” under Section 409A of the Code. At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions relating to Performance Unit Awards, including, but not limited to, rules pertaining to the effect of termination of employment, Director status or Consultant status prior to expiration of the applicable performance period. The terms and conditions of the respective Performance Unit Award Agreements need not be identical. The Holder of a Performance Unit shall be entitled to receive a cash payment equal to the dollar value assigned to such Unit under the applicable Performance Unit Award Agreement if the Holder and/or the Company satisfy (or partially satisfy, if applicable under the applicable Performance Unit Award Agreement) the performance goals and objectives set forth in such Performance Unit Award Agreement. If achieved, such payment shall be made no later than by the fifteenth day of the third calendar month next following the end of the Company’s fiscal year to which such performance goals and objectives relate.
Performance Share Awards
. The Committee shall set forth in the applicable Performance Share Award Agreement the performance goals and objectives (and the period of time to which such goals and objectives shall apply) which the Holder and/or the Company would be required to satisfy before the Holder would become entitled to the receipt of shares of Common Stock pursuant to such Holder’s Performance Share Award and the number of shares of Common Stock subject to such Performance Share Award. Such payment shall be subject to a “substantial risk of forfeiture” under Section 409A of the Code and, if such goals and objectives are achieved, the distribution of such Common Shares shall be made no later than by the fifteenth day of the third calendar month next following the end of the Company’s fiscal year to which such goals and objectives relate. At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions relating to Performance Share Awards, including, but not limited to, rules pertaining to the effect of termination of the Holder’s employment, Director status or Consultant status prior to the expiration of the applicable performance period. The terms and conditions of the respective Performance Share Award Agreements need not be identical.
Distribution Equivalent Rights
. The Committee shall set forth in the applicable Distribution Equivalent Rights Award Agreement the terms and conditions applicable to such Award, including whether the Holder is to receive credits currently in cash, is to have such credits reinvested (at Fair Market Value determined as of the date of reinvestment) in additional shares of Common Stock or is to be entitled to choose among such alternatives. Such receipt shall be subject to a “substantial risk of forfeiture” under Section 409A of the Code and, if such Award becomes vested, the distribution of such cash or shares of Common Stock shall be made no later than by the fifteenth day of the third calendar month next following the end of the Company’s fiscal year in which the Holder’s interest in the Award vests. Distribution Equivalent Rights Awards may be settled in cash or in shares of Common Stock, as set forth in the applicable Distribution Equivalent Rights Award Agreement. A Distribution Equivalent Rights Award may, but need not be, awarded in tandem with another Award (but not an Option), whereby, if so awarded, such Distribution Equivalent Rights Award shall expire, terminate or be forfeited by the Holder, as applicable, under the same conditions as under such other Award. The Distribution Equivalent Rights Award Agreement for a Distribution Equivalent Rights Award may provide for the crediting of interest on a Distribution Rights Award to be settled in cash at a future date (but in no event later than by the fifteenth day of the third calendar month next following the end of the Company’s fiscal year in which such interest was credited), at a rate set forth in the applicable Distribution Equivalent Rights Award Agreement, on the amount of cash payable thereunder.
SARs
. The Committee shall set forth in the applicable SAR Award Agreement the terms and conditions of the SAR, including (i) the base value (“Base Value”) for the SAR, which for purposes of a SAR which is not a Tandem SAR, shall be not less than the Fair Market Value of a share of the Common Stock on the date of grant of the SAR, (ii) the number of shares of Common Stock subject to the SAR, (iii) the period during which the SAR may be exercised; provided, however, that no SAR shall be exercisable after the expiration of ten years from the date of its grant, and (iv) any other special rules and/or requirements which the Committee imposes upon the SAR. Upon the exercise of some or all of a SAR, the Holder shall receive a payment from the Company, in cash or in the form of shares of Common Stock having an equivalent Fair Market Value or in a combination of both, as determined in the sole discretion of the Committee, equal to the product of:
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The excess of (i) the Fair Market Value of a share of the Common Stock on the date of exercise, over (ii) the Base Value, multiplied by;
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The number of shares of Common Stock with respect to which the SAR is exercised.
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If the Committee grants a SAR which is intended to be a Tandem SAR, the Tandem SAR shall be granted at the same time as the related Option, and the following special rules shall apply:
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The Base Value shall be equal to or greater than the per share exercise price under the related Option;
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The Tandem SAR may be exercised for all or part of the shares of Common Stock which are subject to the related Option, but solely upon the surrender by the Holder of the Holder’s right to exercise the equivalent portion of the related Option (and when a share of Common Stock is purchased under the related Option, an equivalent portion of the related Tandem SAR shall be cancelled);
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The Tandem SAR shall expire no later than the date of the expiration of the related Option;
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The value of the payment with respect to the Tandem SAR may be no more than 100% of the difference between the per share exercise price under the related Option and the Fair Market Value of the shares of Common Stock subject to the related Option at the time the Tandem SAR is exercised, multiplied by the number of shares of Common Stock with respect to which the Tandem SAR is exercised; and
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The Tandem SAR may be exercised solely when the Fair Market Value of a share of Common Stock subject to the related Option exceeds the per share exercise price under the related Option.
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IRC Section 162(m)
. The Company has attempted to structure the 2012 Plan so that remuneration attributable to Options and other awards may, at the discretion of the Committee, be structured so as to not be subject to the deduction limitation contained in IRC Section 162(m).
Recapitalization or Reorganization
. Subject to certain restrictions, the 2012 Plan provides for the adjustment of shares of Common Stock underlying awards previously granted if, and whenever, prior to the expiration or distribution to the holder of shares of Common Stock underlying an award theretofore granted, the Company shall effect a subdivision or consolidation of the shares of Common Stock or the payment of a dividend on shares of Common Stock without receipt of consideration by the Company. If the Company recapitalizes or otherwise changes its capital structure, thereafter upon any exercise or satisfaction, as applicable, of a previously granted award, the holder shall be entitled to receive (or entitled to purchase, if applicable) under such award, in lieu of the number of shares of Common Stock then covered by such award, the number and class of shares and securities to which the participant would have been entitled pursuant to the terms of the recapitalization if, immediately prior to such recapitalization, the participant had been the holder of record of the number of shares of Common Stock then covered by such award. The 2012 Plan also provides for the adjustment of shares underlying awards previously granted by the Board in the event of changes to the outstanding shares of Common Stock by reason of an extraordinary cash dividend, reorganization, merger, consolidation, combination, split up, spin off, exchange or other relevant change in capitalization occurring after the date of the grant of any award, subject to certain restrictions.
Limitation on Insiders
. Pursuant to Section 613(h)(i) of the Toronto Stock Exchange Company Manual, in no event will awards issued under the 2012 Plan, alone or when combined with awards made under all other securities-based compensation arrangements of the Company, result in shares of Common Stock being issued during any one-year period or issuable at any time, in either case to Insiders, in excess of 10% of the Company’s issued and outstanding shares of Common Stock (calculated on a non-dilutive basis). Notwithstanding any provision in the 2012 Plan to the contrary, the maximum number of shares of Common Stock that may be subject to Awards of Options under Article VII of the 2012 Plan and/or SARs under Article XIV of the 2012 Plan, in either or both cases granted to any one Insider during any calendar year, shall be 1,000,000 shares (subject to adjustment in the same manner as provided in Article XV of the 2012 Plan with respect to shares of Common Stock subject to Awards then outstanding).
As of April 15, 2017, the maximum number of shares of Common Stock issuable under the 2012 Plan was 50,000,000 (representing 18% of the issued and outstanding Common Stock). Of that number, 36,922,465 shares of Common Stock (representing 13% of the issued and outstanding shares of Common Stock) have been or may be issued per the terms of the various awards, leaving 13,077,535 shares of Common Stock (representing 5% of the issued and outstanding Common Stock) available for future grants. Since its inception, 4,523,515 shares of Common Stock have been issued pursuant to the 2012 Plan, which represents 2% of the issued and outstanding shares of Common Stock.
Stock Option Plan
The following is a summary of the material provisions of the Stock Option Plan, and is qualified in its entirety by reference to the complete text of the Stock Option Plan, a copy of which is found at Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on November 12, 2013. For the purposes of this general description, references to capitalized terms not defined here have the meanings ascribed to them in the Stock Option Plan.
The Stock Option Plan was established to advance the interests of the Company by:
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providing Eligible Persons (as defined below) with additional incentives;
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encouraging stock ownership by Eligible Persons;
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increasing the proprietary interest of Eligible Persons in the success of the Company;
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encouraging Eligible Persons to remain loyal to the Company or a related entity; and
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attracting new employees, officers, directors and consultants to the Company or a related entity.
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The Stock Option Plan is administered by the Board, or if so authorized by the Board, the Compensation Committee. Under the Stock Option Plan, options to purchase shares of Common Stock may be granted by the Board to employees, directors, officers and consultants of the Company or any related entity (“Eligible Persons”).
The Board or Compensation Committee, as the case may be, also has the authority, subject to the terms of the Stock Option Plan, among other things, to determine the terms of grants, suspend or terminate the Stock Option Plan or any option agreement thereunder and make determinations under the Stock Option Plan.
The exercise price for any option granted under the Stock Option Plan is determined as follows:
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If the Common Stock trades on a market,
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the exercise price is based on the closing market price of the Common Stock on the market with the largest trading volume of the Common Stock on the last trading date preceding the date of the grant; and
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if there is no trading on that date, the exercise price will be the average of the bid and ask on the date preceding the date of the grant.
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If there is no trading market for the Common Stock, the Board will in good faith determine the exercise price of an option based on the fair market value of the Common Stock on the date of the grant.
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If the option is to be granted on a pre-determined date in the future, the exercise price will be the weighted average trading price, rounding up to the nearest cent, of the Common Stock on the stock exchange or quotation system upon which any shares of the Company are then listed and posted or quoted for trading for the five trading dates preceding the date of the grant.
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In all instances the exercise price shall not be less than the fair market value as determined by IRC Section 409A.
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Options are exercisable during a period established at the time of their grant provided that such period will expire no later than five years after the date of grant, subject to early termination. Until April 29, 2010, options granted under the Stock Option Plan vested over a 48-month period and could be exercised after they vested until the end of the five-year period. The Board has discretion under the Stock Option Plan to change the vesting schedule, and on April 29, 2010, the Board approved a new vesting schedule which provided that options granted under the Stock Option Plan after May 31, 2010 would vest in equal increments of 25% on each anniversary of the date of grant. Options not exercised prior to the expiry date will become null and void and the Common Stock reserved for such issuance would then be available for subsequent option grants.
A holder of options (an “Optionholder”) may pay the option price by bank draft or certified check, or elect either of a “cashless” or “net” exercise.
If an Optionholder ceases to be an Eligible Person on a particular date (“Termination Date”) for any reason whatsoever other than death, each option held by such Optionholder, its permitted assigns or the Optionholder’s Registered Retirement Savings Plan (“RRSP”) or a Registered Retirement Income Fund (“RRIF”) will cease to be exercisable 90 days after the Termination Date. If any portion of an option has not vested by the Termination Date, that portion of the option may not under any circumstances be exercised by the Optionholder, or the Optionholder’s RRSP or RRIF or its permitted assigns. In the event that an Optionholder’s employment, consultancy or directorship, as applicable, is terminated by the Company for cause (as defined in such Optionholder’s employment or consulting agreement, as applicable), such Optionholder’s options, whether vested or otherwise, shall immediately terminate unless the Board determines otherwise within 30 days. If an Optionholder dies, the legal representatives of the Optionholder may exercise the Optionholder’s options within 120 days after the date of such Optionholder’s death (but only to the extent the options were by their terms exercisable on the date of death).
If there is a “take-over bid” or an “issuer bid” other than a “normal course issuer bid” (within the meaning of each of these terms under applicable securities laws and stock exchange rules) made for all or any of the issued and outstanding Common Stock, then the Board may, in its sole discretion, permit any or all unvested options of any or all Optionholders outstanding under the Stock Option Plan to become immediately exercisable (subject to any limitations that the Board may impose) in order to permit Common Stock issuable upon the exercise of such options to be tendered to such bid. Unvested options do not automatically vest in the event of a Change of Control (as defined in the Stock Option Plan) unless otherwise agreed in an employment or consulting agreement between the Optionholder and the Company or unless an Optionholder’s employment is terminated other than for cause, in connection with a Change of Control. However, the Board may, in its sole discretion, permit any or all unvested options of any or all Optionholders outstanding under the Stock Option Plan to become immediately exercisable (subject to any limitations the Board may impose) in the event of such a Change of Control.
Options are personal to each Eligible Person and its permitted assigns. No Eligible Person may deal with any options or any interest in them or transfer any options held by the Eligible Person except in accordance with the Stock Option Plan.
Grants under the Stock Option Plan are restricted to insiders to:
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10% of the shares of Common Stock outstanding under all share compensation arrangements;
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10% of the shares of Common Stock outstanding issuable to insiders within a one-year period; and
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5% of the shares of Common Stock outstanding issuable to any one insider within a one-year period.
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Stockholder approval is required for the following amendments:
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to increase the maximum number of shares of Common Stock that may be issued pursuant to options granted under the Stock Option Plan;
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to reduce the exercise price of options for the benefit of an insider;
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to extend the expiry date of options for the benefit of an insider; and
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to amend the section of the Stock Option Plan that addresses these types of amendments.
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The maximum number of shares of Common Stock issuable upon exercise of options granted pursuant to the Stock Option Plan is equal to the greater of (i) 4,000,000 shares of Common Stock; and (ii) 12.5% of the number of issued and outstanding shares of Common Stock from time to time. As of April 15, 2017, the maximum number of shares of Common Stock issuable upon exercise of options was 34,617,721 (representing 12.5% of the issued and outstanding Common Stock). Of that number, options to purchase 1,998,750 shares of Common Stock (representing less than 1% (0.7%) of the issued and outstanding Common Stock) had been granted and are currently outstanding, leaving options to purchase 32,618,971 shares of Common Stock (representing 11.8% of the issued and outstanding Common Stock) available for grant. No new option awards will be made under the Stock Option Plan, however, and all awards of options are currently made under the 2012 Plan.
Directors’ Compensation Plan
The following is a summary of the material provisions of the Directors’ Compensation Plan, and is qualified in its entirety by reference to the complete text of the Directors’ Compensation Plan, a copy of which is found at Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on June 5, 2012.
The purpose of the Directors’ Compensation Plan is to advance the interests of the Company by (i) encouraging its directors to acquire shares of Common Stock, thereby increasing the proprietary interests of such persons in the Company and aligning the interests of such persons with the interests of stockholders generally and (ii) preserving the Company’s cash for other corporate purposes.
The Directors’ Compensation Plan is administered by the Board or the Compensation Committee. Subject to the limitations of the Directors’ Compensation Plan, the administrator has the authority to:
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issue shares of Common Stock to non-executive directors under the Directors’ Compensation Plan;
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determine the terms, including the limitations, restrictions and conditions, if any, upon such grants;
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interpret the Directors’ Compensation Plan and adopt, amend and rescind such administrative guidelines and other rules and regulations relating to the Directors’ Compensation Plan as it may from time to time deem advisable, subject to required prior approval by any applicable regulatory authority;
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suspend or terminate the Directors’ Compensation Plan; and
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make all other determinations and to take all other actions in connection with the implementation and administration of the Directors’ Compensation Plan as it may deem necessary or advisable.
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Management directors are not eligible to receive shares of Common Stock under the Directors’ Compensation Plan because they do not receive compensation as directors.
Under the Directors’ Compensation Plan, the non-executive directors of the Company receive at least 50% of their annual retainers and Board and committee meeting fees in the form of shares of Common Stock and may elect to receive up to 100% of their retainers and fees in shares of Common Stock in lieu of cash compensation.
Non-executive directors are reimbursed for any out-of-pocket travel expenses incurred in order to attend meetings. Subject to the overall maximum shares authorized for issuance under the Directors’ Compensation Plan, there is no individual cap on the maximum number of shares of Common Stock available to be issued by NeuLion to any individual non-executive director under the Directors’ Compensation Plan.
Upon ceasing to be a non-executive director, a director will no longer be eligible to receive shares of Common Stock under the Directors’ Compensation Plan and any remaining amounts payable to such director shall be paid in cash.
Common Stock is issued as soon as is administratively practicable following receipt of a notice from the applicable director at the same time cash compensation would otherwise be payable to the director during the months of June and December, as determined in the discretion of the Board.
As of April 15, 2017, the maximum number of shares of Common Stock issuable under the Directors’ Compensation Plan was 5,000,000. Of that number, 3,015,147 shares of Common Stock (representing 1% of the issued and outstanding shares of Common Stock) has been issued, leaving 1,984,853 shares of Common Stock (representing less than 1% (0.7%) of the issued and outstanding Common Stock) available for issuance.
Employee Share Purchase Plan (“ESPP”)
The following is a summary of the material provisions of the ESPP, and is qualified in its entirety by reference to the complete text of the Directors’ Compensation Plan, a copy of which is found at Exhibit 10.17 to our Registration Statement on Form 10 filed with the SEC on April 9, 2009.
At the annual and special meeting of stockholders of the Company held on June 26, 2008, stockholders approved the Company’s ESPP, pursuant to which certain employees of the Company may elect to purchase Common Stock from the Company. Upon implementation of the ESPP, senior employees of the Company will be eligible to participate in the ESPP following six months of continuous employment with the Company. Participating employees will be able to make contributions, by payroll deduction only, at a rate of not less than 10% of their salary or such other integer percentage rate up to and including 100% of their salary as such participating employee shall elect, which contribution rate may be changed at the election of the employee from time to time in accordance with the terms of the ESPP. Participating employees will be able to choose to suspend participation in the ESPP provided proper notice in writing is filed with the Company at least 15 days prior to the first of the month in which payroll deductions are to be suspended.
The Board has the power and authority, without notice or stockholder approval, at any time and from time to time, to suspend or terminate the ESPP and to establish the rules and regulations relating to ESPP and to make all determinations necessary or advisable for administration of the ESPP. Without limiting the foregoing, the Board shall have the authority to amend the ESPP as follows without seeking stockholder approval:
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amendments as may be necessary to comply with applicable law or the requirements of any applicable regulatory authority or stock exchange;
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an amendment to correct or rectify any ambiguity, defective provision, error or omission in the ESPP;
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an amendment to change the provisions relating to the administration of the ESPP; and
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to make any other amendment to the ESPP that does not require stockholder approval by virtue of the provisions of the ESPP, applicable laws or relevant regulatory or stock exchange requirements.
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In the event of termination of the ESPP, each participating employee shall receive the number of whole Common Stock in his or her account and a cash payment by check for any fractional Common Stock held in his account, as soon as practicable following the effective date of termination of the ESPP.
Any amendment of the ESPP to increase the maximum number of shares of Common Stock issuable under the ESPP shall become effective only upon stockholder approval thereof, such approval to be obtained in accordance with applicable corporate and securities laws and the rules of the stock exchanges on which the Common Stock is listed.
A maximum of 2,000,000 shares of Common Stock have been reserved for issuance under the ESPP from treasury shares of the Company at a 15% discount to the 10 day volume weighted average price of the Common Stock traded on the TSX provided, however, that the aggregate of the Company’s securities (i) issued to insiders of the Company, within any one-year period, and (ii) issuable to insiders of the Company, at any time, under the ESPP, or when combined with all of the Company’s other security based compensation arrangements, could not exceed 10% of the Company’s total issued and outstanding securities.
The administrator of the ESPP will hold the Common Stock credited to a participating employee’s account for the whole period of participation of such participating employee in the ESPP. A participating employee, who terminates employment (with or without cause at law), retires or otherwise elects to withdraw from participation in the ESPP, or, the participating employee’s beneficiary in the event of the participating employee’s death, shall receive, subject to applicable withholding taxes:
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the number of whole Common Stock credited to his or her account; or
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the cash equivalent of the value of the whole Common Stock to his or her account, less any brokerage fees, as determined by the administrator, as of the date of termination of employment, retirement, death or withdrawal from the ESPP, whichever the case may be.
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Any fractional Common Stock remaining in the participating employee’s account will be paid in cash by check in an amount equal to the value of the fractional Common Stock as determined by the administrator.
A participating employee who terminates employment (with or without cause) may, upon notice to the Company, request that all or a portion of the Common Stock in that participating employee’s account be transferred to his or her name, or an external account in his or her name, or be sold or, where the participating employee holds Common Stock in a registered retirement plan, that all or a portion of the Common Stock in that participating employees’ registered retirement plan be transferred to, be sold and the proceeds transferred to another registered retirement plan in the participating employee’s name, or be sold and the proceeds, net of withholding tax, be remitted to the participating employee. Any fractional Common Stock credited to the participating employee’s account shall be disregarded on any sale or transfer and the participating employee shall be entitled to receive the cash equivalent thereof.
Each participating employee of a subsidiary company shall, upon such company ceasing to be a subsidiary, cease to be a participating employee of the ESPP and will receive the number of whole Common Stock in his account and a cash payment by check for any fractional shares held in his account as soon as practicable following such participating employee ceasing to be a participant of the ESPP.
The Company is responsible for the administration of the ESPP and the payment of any fees or charges incurred in the operation of the ESPP, including payments to the administrator, counsel and other agents employed by the Company in connection with the operation of the ESPP.
Although the Effective Date of the ESPP was July 1, 2008, the Company has not implemented the ESPP since its approval by stockholders.
Indemnification Obligations
Our Bylaws require us to indemnify our directors to the fullest extent not prohibited by Delaware law. Subject to certain limitations, our Bylaws also require us to advance expenses incurred by our directors and officers.