|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plans as of July 31, 2018
|
|
Shares
Subject to
Outstanding
Stock Options(1)
|
|
Shares
Subject to
Outstanding
Full Value
Awards(2)
|
|
Shares
Remaining
Available for
Future Grant
|
|
Total
Aggregate
Shares
|
|
2016 Plan
|
|
|
1,858,150
|
|
|
99,938
|
|
|
1,300,902
|
|
|
3,258,990
|
|
Predecessor Plan
|
|
|
2,293,750
|
|
|
45,000
|
|
|
|
|
|
2,338,548
|
|
Total (Before 2016 Plan amendment and restatement is approved)
|
|
|
4,151,900
|
|
|
144,938
|
|
|
1,300,902
|
|
|
5,597,740
|
|
Shares Available for Future Grant Upon Approval of the amendment and restatement of 2016 Plan(3)
|
|
|
4,151,900
|
|
|
144,938
|
|
|
3,700,902
|
|
|
7,997,740
|
|
-
(1)
-
As
of August 30, 2018, the 4,151,900 stock options outstanding had a weighted average exercise price per share of $3.60 and a weighted average life of
7.8 years.
-
(2)
-
Consists
solely of RSUs.
-
(3)
-
This
is subject to adjustment and increase as discussed in the section titled "Securities Subject to 2016 Plan" below.
Based on the Company's common stock outstanding as of July 31, 2018, the aggregate total 5,597,740 shares issuable under the 2016 Plan and the Predecessor Plan as set forth in the
table above represents an overhang of approximately 14.4% of shares. If the amendment and restatement of the 2016 Plan is approved, the additional 2,400,000 shares available for issuance would
increase the overhang to approximately 19.2% if shares available for future grant are expressed in stock options, or 15.8% if shares available for future grant are expressed in full-value shares. The
Company calculates "overhang" as the total of (a) shares underlying outstanding awards plus shares available for issuance under future equity awards, divided by (b) the total number of
shares outstanding, shares underlying outstanding awards and shares available for issuance under future equity awards.
We
recognize that equity awards dilute existing stockholders. In connection with our stock-based compensation programs, we are committed to using equity incentive awards prudently and
within reasonable limits. Accordingly, we closely monitor our stock award "burn rate" each year. Our annual burn rate is determined by dividing the number of shares of our common stock subject to
stock-based
awards we grant in a fiscal year by the weighted average number of our fully-diluted shares of common stock outstanding for that fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Stock
Options
Granted
|
|
RSUs
Granted
|
|
Total
Granted
|
|
Weighted
Average
Common Stock
Outstanding
|
|
Burn Rate
|
|
2018
|
|
|
1,103,150
|
|
|
72,590
|
|
|
1,175,740
|
|
|
32,776,447
|
|
|
4
|
%
|
2017
|
|
|
904,500
|
|
|
141,081
|
|
|
1,045,581
|
|
|
32,174,431
|
|
|
3
|
%
|
2016
|
|
|
1,807,500
|
|
|
62,500
|
|
|
1,870,000
|
|
|
32,048,586
|
|
|
6
|
%
|
3-Year Average
|
|
|
1,271,717
|
|
|
92,057
|
|
|
1,363,774
|
|
|
32,333,155
|
|
|
4
|
%
|
Based
on our current equity award practices, the Board estimates that the authorized shares under the 2016 Plan may be sufficient to provide us with an opportunity to grant equity awards
for approximately two to three years, in amounts determined appropriate by the Compensation Committee or the Board, which will administer the 2016 Plan (as discussed below). This is only an estimate,
and circumstances could cause the share reserve to be used more quickly or more slowly. These
33
Table of Contents
circumstances
include, but are not limited to, the future price of shares of the common stock, the mix of options and full value awards provided as long-term incentive compensation, grant amounts
provided by our competitors, payout of performance-based awards in excess of target in the event of superior performance, hiring activity, and promotions during the next few years.
Highlights of the 2016 Equity Plan
The 2016 Plan contains a number of provisions that we believe are consistent with best practices in equity compensation and which protect the
stockholders' interests, as described below.
Prohibition on repricings:
The 2016 Plan prohibits the reducing of the exercise price in effect for outstanding options or stock
appreciation rights,
the cancellation and replacement of stock options or stock appreciation rights with a grant with a lower exercise price, or a cash buyout of an underwater option or stock appreciation right (except as
permitted in a change in control or in the case of an adjustment event as described in the section titled "Changes in Capitalization" below).
No evergreen authorization:
The 2016 Plan does not have an evergreen provision, which normally permits an automatic annual increase in
the share pool
without further stockholder approval.
Reasonable limit on full value awards:
For purposes of calculating the shares that remain available for issuance under the 2016 Plan,
grants of
options and stock appreciation rights will be counted as the grant of one share for each one share actually granted, as described below. However, to protect stockholders from potentially greater
dilutive effect of full value awards (i.e., awards other than options and stock appreciation rights), all grants of full value awards will be deducted from the 2016 Plan's share reserve as 1.79
shares for every one share actually granted.
No automatic vesting upon a change in control:
The 2016 Plan allows for an acquiring corporation to assume outstanding awards, and if
awards are
assumed, they will generally not accelerate on the change in control. If awards are not assumed, the vesting of such awards will be accelerated. The plan administrator also has the discretion to take
alternative actions such as accelerating the vesting of outstanding awards or requiring that participants exchange outstanding accelerated awards for cash.
Minimum vesting periods:
Options and stock appreciation rights are subject to a minimum vesting period of at least one year. However,
up to 5% of the
available shares of common stock authorized for issuance under the 2016 Plan as of the Plan Effective Date may be issued pursuant to options or stock appreciation rights that vest (in full or in part)
over a period of less than one year from the date of grant of the awards (the
"5% Basket"
). Any option or stock appreciation right granted under the
2016 Plan may vest in full or in part upon death or disability of the participant, or upon a change in control, under the terms of the 2016 Plan or the applicable award agreement, and such vesting
shall not count against the 5% Basket.
No discounted stock options or stock appreciation rights:
Stock options and stock appreciation rights must have an exercise price or
base price at or
above fair market value on the date of grant.
Limit on director pay:
The maximum aggregate grant date fair value (computed as of the date of grant in accordance with applicable
financial
accounting rules) of all awards made to a non-employee director under the 2016 Plan in a single fiscal year, taken together with any cash payments (including the annual retainer and any other
compensation) paid to such non-employee director in respect of such fiscal year, shall not exceed $250,000 in total value.
No tax gross-ups:
The 2016 Plan does not provide for any tax gross-ups.
34
Table of Contents
No liberal change-in-control definition:
The 2016 Plan defines change in control based on the consummation of the transaction rather
than the
announcement or stockholder approval of the transaction.
Limitation on dividends and dividend equivalents:
Any dividends or dividend equivalents payable in connection with a performance-based
award will be
subject to the same performance goal vesting restrictions as the underlying award and will not be paid until and unless such performance goals are met.
Administered by an independent committee:
The 2016 Plan will be administered by our Board's Compensation Committee, which consists
entirely of
independent directors. Administration of the 2016 Plan may also be delegated to a secondary committee or, one or more officers or retained by the Board as described in more detail below.
Summary Description of 2016 Omnibus Incentive Plan
The principal terms and provisions of the 2016 Plan, as amended and restated, are set forth below. The summary, however, is not intended to be a
complete description of all the terms of the 2016 Plan and is qualified in its entirety by reference to the complete text of the 2016 Plan, attached to this proxy statement as Appendix B, which
may be accessed on the SEC's website at www.sec.gov. Any stockholder who wishes to obtain a copy of the actual plan document may do so upon written request to our Corporate Secretary at our principal
offices at 1700 Carnegie Avenue, Suite 100, Santa Ana, CA 92705.
Types of Awards.
The following types of awards may be granted under the 2016 Plan: options, stock appreciation rights, stock
awards, restricted stock
units, cash incentive awards and dividend equivalent rights. The principal features of each type of award are described below.
Administration.
The Compensation Committee has the exclusive authority to administer the 2016 Plan with respect to awards made to
our executive
officers and non-employee directors and has the authority to make awards under the 2016 Plan to all other eligible individuals. However, our Board may, at any time appoint a secondary committee of one
(1) or more Board members to have separate but concurrent authority with the Compensation Committee to make awards under the 2016 Plan to individuals other than executive officers and
non-employee directors or the Board may retain authority to make awards to such persons. To the extent permitted by law, the Board or the Compensation Committee may delegate any or all of its
authority to administer the 2016 Plan to one or more officers (other than with respect to grants to executive officers and non-employee directors). In January 2018, the Board exercised this authority
and delegated to the Company Chief Executive Officer the authority to grant options to purchase up to 60,000 in any fiscal year to key non-executive hires under the 2016 Plan, provided that the
options are granted with an exercise price per share equal to the fair market value of the Company's common stock on the date of grant.
The
term "plan administrator," as used in this summary, will mean our Compensation Committee, the Board and any secondary committee, to the extent each such entity is acting within the
scope of its administrative authority under the 2016 Plan.
Eligibility.
Officers and employees, non-employee directors, as well as consultants and other independent advisors, in our employ or
service or in
the employ or service of our parent or subsidiary companies (whether now existing or subsequently established) are eligible to participate in the 2016 Plan. As of August 30, 2018, approximately
394 persons (including six executive officers) and six non-employee directors were eligible to participate in the 2016 Plan.
Securities Subject to 2016 Plan.
Subject to the capitalization adjustments and the add back provisions related to outstanding
awards under the
Predecessor Plan, each as described below, an
35
Table of Contents
aggregate of up to 5,903,602 shares shall be reserved for issuance under the 2016 Plan. This share reserve is comprised of (i) the 3,400,108 shares available on the Plan Effective Date (after
taking into account awards granted under the Predecessor Plan after July 22, 2016 and prior to the Plan Effective Date); (ii) the 103,494 shares transferred to the 2016 Plan from the
Predecessor Plan since the Plan Effective Date; and (iii) the 2,400,000-share increase approved by the Board on August 6, 2018 subject to stockholder approval at the Annual Meeting.
Shares
subject to outstanding awards under the 2016 Plan and awards granted under the Predecessor Plan that expire or otherwise terminate prior to the issuance of the shares subject to
those awards will be available for subsequent issuance under the 2016 Plan as follows: (a) for each share subject to an expired option or stock appreciation right, one share of common stock
shall become available for subsequent issuance under the 2016 Plan, and (b) for each share subject to an expired award other than an option or stock appreciation right, 1.79 shares shall become
available for subsequent issuance under the 2016 Plan.
Any
unvested shares issued under the 2016 Plan and the Predecessor Plan for cash consideration not less than the fair market value per share on the date of grant that are subsequently
repurchased by us, at a price not greater than the original issue price paid per share, pursuant to our repurchase rights under the 2016 Plan and the Predecessor Plan will be added back to the number
of shares reserved for issuance under the 2016 Plan and will accordingly be available for subsequent issuance.
The
number of shares of common stock reserved for issuance under the 2016 Plan shall be reduced on a one-for-one basis for each share subject to an option or stock appreciation right and
by a fixed ratio of 1.79 shares for each share of common stock subject to an award other than an option or stock appreciation right.
In
addition, the following share counting procedures will apply in determining the number of shares of common stock available from time to time for issuance under the 2016
Plan:
-
-
Should the exercise price of an option or any withholding taxes incurred in connection with the exercise of an option granted under the 2016
Plan or the Predecessor Plan be paid in shares of our common stock (whether through the withholding of a portion of the otherwise issuable shares or through tender of actual outstanding shares), then
in each such case the number of shares so tendered or withheld will be added to the shares reserved for issuance under the 2016 Plan on a one-for-one basis.
-
-
Should shares of common stock be withheld by us, or if shares are tendered by the participant, in each case in satisfaction of the withholding
taxes incurred in connection with the issuance, vesting or settlement of an award (other than an option or stock appreciation right) granted under the 2016 Plan or the Predecessor Plan, then in each
case the number of shares so tendered or withheld will be added to the shares of common stock available for issuance under the 2016 Plan on a 1.79-for-one basis.
Upon
the exercise of any stock appreciation right granted under the 2016 Plan, the share reserve will be reduced by the net number of shares subject to the award.
The
maximum number of shares of common stock that may be issued pursuant to options intended to qualify as incentive stock options under the federal tax laws shall be limited to
5,903,602.
The
Company may grant awards in assumption of, or in substitution or exchange for, awards previously granted by a company acquired by the Company or any subsidiary. Such substitute
awards will not reduce the shares of common stock authorized for issuance under the 2016 Plan or the limitations on grants to a participant during a fiscal year as described above. Additionally, if
the acquired company's equity plan has shares available, such shares may be available for grant under the
36
Table of Contents
terms
of that plan (as adjusted using the exchange ratio described above), which will not reduce the shares authorized for issuance under the 2016 Plan.
The
shares of common stock issuable under the 2016 Plan may be drawn from shares of our authorized but unissued common stock or from shares of our common stock that we acquire, including
shares purchased on the open market.
Participant Award Limits.
The maximum number of shares of common stock which may be issued pursuant to options or stock
appreciation rights that are
settled in shares and granted to any person under the 2016 Plan in any fiscal year shall be limited to 2,000,000 shares.
The
maximum number of shares for which awards (other than options and stock appreciation rights that are settled in shares) may be granted to any person under the 2016 Plan in any fiscal
year shall not exceed 2,000,000 shares (which limit shall refer to the maximum amount that can be earned) in the aggregate.
During
any fiscal year, no participant may be granted cash incentive awards under which a total of more than $3,000,000 may be earned for each 12 months in the performance period.
In
addition, the maximum aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all awards made to a non-employee
director under the 2016 Plan in a single fiscal year, taken together with any cash payments (including the annual retainer and any other compensation) paid to such non-employee director in respect of
such fiscal year, shall not exceed $250,000 in total value.
Awards.
The plan administrator has complete discretion to determine (a) which eligible individuals are to receive awards,
(b) the type,
size, terms and conditions of the awards to be made, (c) the time or times when those awards are to be granted, (d) the number of shares or amount of payment subject to each such award,
(e) the time when the award is to become exercisable, (f) the status of any granted option as either an incentive stock option or a non-statutory option under the federal tax laws,
(g) the maximum term for which the award is to remain outstanding, (h) the vesting and issuance schedules applicable to the shares which are the subject of the award, (i) the cash
consideration (if any) payable per share subject to the award and the form of payment in which the award is to be settled, (j) the vesting schedule for a cash incentive award and
(k) with respect to performance-based awards, the performance objectives, the amount payable at one or more levels of attained performance and the payout schedule.
Stock Options.
Each granted option will have an exercise price per share determined by the plan administrator, but the exercise
price will not be
less than one hundred percent (100%) of the fair market value of the option shares on the grant date. No granted option will have a term in excess of ten (10) years. The shares subject to each
option will generally vest in one or more installments over a specified period of service measured from the grant date or upon the achievement of pre-established performance objectives. However, one
or more options may be structured so that they will be immediately exercisable for any or all of the option shares. The shares acquired under such immediately exercisable options will be subject to
repurchase by us, at the lower of the exercise price paid per share or the fair market value per share, if the optionee ceases service prior to vesting in those shares. Payment of the exercise price
may be paid in one or more of the following forms as determined by the plan administrator: cash, shares of our common stock, through a cashless exercise procedure pursuant to which the optionee
effects a same-day exercise of the option and sale of the purchased shares through a broker in order to cover the exercise price for the purchased shares and the applicable withholding taxes and/or
through a net exercise procedure pursuant to which we withhold a number of shares otherwise issuable upon exercise of the option having a value equal to the exercise price and applicable withholding
taxes.
37
Table of Contents
Upon
cessation of service, the optionee will have a limited period of time in which to exercise his or her outstanding options to the extent exercisable for vested shares. The plan
administrator will have complete discretion to extend the period following the optionee's cessation of service during which his or her outstanding options may be exercised, provide for continued
vesting during the applicable post-service exercise period and/or accelerate the exercisability or vesting of options in whole or in part. Such discretion may be exercised at any time while the
options remain outstanding.
Stock Appreciation Rights.
The 2016 Plan allows the issuance of two types of stock appreciation rights:
-
-
Tandem stock appreciation rights granted in conjunction with options which provide the holders with the right to surrender the related option
grant for an appreciation distribution from us in an amount equal to the excess of (i) the fair market value of the vested shares of our common stock subject to the surrendered option over
(ii) the aggregate exercise price payable for those shares.
-
-
Stand-alone stock appreciation rights which allow the holders to exercise those rights as to a specific number of shares of our common stock
and receive in exchange an appreciation distribution from us in an amount equal to the excess of (i) the fair market value of the shares of common stock as to which those rights are exercised
over (ii) the aggregate exercise price in effect for those shares. The exercise price per share may not be less than the fair market value per share of our common stock on the date the
stand-alone stock appreciation right is granted, and the right may not have a term in excess of ten (10) years.
The
appreciation distribution on any exercised stock appreciation right will be paid in (i) cash, (ii) shares of our common stock or (iii) a combination of cash and
shares of our common stock. Upon cessation of service with us, the holder of a stock appreciation right will have a limited period of time in which to exercise that right to the extent exercisable at
that time. The plan administrator has complete discretion to extend the period following the holder's cessation of service during which his or her outstanding stock appreciation rights may be
exercised, provide for continued vesting during the applicable
post-service exercise period and/or accelerate the exercisability or vesting of stock appreciation rights in whole or in part. Such discretion may be exercised at any time while the stock appreciation
rights remain outstanding.
Repricing.
The plan administrator may not implement any of the following repricing programs (except in the case of a corporate
transaction as
described in the section titled "Changes in Capitalization" below, without stockholder approval): (i) the cancellation of outstanding options or stock appreciation rights in return for new
options or stock appreciation rights with a lower exercise price per share, (ii) the cancellation of outstanding options or stock appreciation rights with exercise prices per share in excess of
the then current fair market value per share of our common stock for consideration payable in cash, other awards or our equity securities (except in the event of a change in control) or
(iii) the direct reduction of the exercise price in effect for outstanding options or stock appreciation rights.
Stock Awards and Restricted Stock Units.
Shares of our common stock may be issued under the 2016 Plan subject to performance or
service vesting
requirements established by the plan administrator or as a fully-vested bonus for past services without any cash outlay required of the recipient. Shares of our common stock may also be issued under
the 2016 Plan pursuant to restricted stock units which entitle the recipients to receive those shares upon the attainment of designated performance goals or the completion of a prescribed service
period or upon the expiration of a designated time period following the vesting of those units, including (without limitation), a deferred distribution date following the termination of the
recipient's service with us.
38
Table of Contents
The plan administrator will have the discretionary authority to structure one or more such awards so that the shares of common stock subject to those awards (or
cash, as applicable) will vest only upon the achievement of certain pre-established corporate performance goals based on one or more of the following criteria: (i) cash flow;
(ii) earnings (including earnings before interest and taxes, earnings before taxes, earnings before interest, taxes, depreciation, amortization and charges for stock-based compensation,
earnings before interest, taxes, depreciation and amortization, and net earnings); (iii) earnings per share; (iv) growth in earnings or earnings per share; (v) stock price;
(vi) return on equity or average stockholder equity; (vii) total stockholder return or growth in total stockholder return either directly or in relation to a comparative group;
(viii) return on capital; (ix) return on assets or net assets; (x) invested capital, required rate of return on capital or return on invested capital; (xi) revenue, growth
in revenue or return on sales; (xii) income or net income; (xiii) operating income, net operating income or net operating income after tax; (xiv) operating profit or net operating
profit; (xv) operating margin or gross margin; (xvi) return on operating revenue or return on operating profit; (xvii) market share, (xviii) market capitalization,
(xix) application approvals, (xx) litigation and regulatory resolution goals, (xxi) implementation, completion or attainment of key projects, product sales or milestones,
(xxii) budget comparisons, (xxiii) growth in stockholder value relative to the growth of a peer group or index; (xxiv) development and implementation of strategic plans and/or
organizational restructuring goals; (xxv) development and implementation of risk and crisis management programs; (xxvi) improvement in workforce diversity; (xxvii) compliance
requirements and compliance relief; (xxviii) productivity goals; (xxix) workforce management and succession planning goals; (xxx) economic value added (including typical
adjustments consistently applied from generally accepted accounting principles required to
determine economic value added performance measures); (xxxi) recruiting and maintaining personnel, employee retention, measures of customer satisfaction, employee satisfaction or staff
development; (xxxii) development or marketing collaborations, formations of joint ventures or partnerships or the completion of other similar transactions intended to enhance the Company's
revenue or profitability or enhance its customer base; and (xxxiii) merger and acquisitions. In addition, such performance criteria may be based upon the attainment of specified levels of the
Company's performance under one or more of the measures described above relative to the performance of other entities and may also be based on the performance of any of the Company's business units or
divisions or any parent or subsidiary. Each applicable performance goal may include a minimum threshold level of performance below which no award will be earned, levels of performance at which
specified portions of an award will be earned and a maximum level of performance at which an award will be fully earned. Each applicable performance goal may be structured at the time of the award to
provide for appropriate adjustment for one or more of the following items: (A) asset impairments or write-downs; (B) litigation or claim judgments or settlements; (C) the effect
of changes in tax law, accounting principles or other such laws or provisions affecting reported results; (D) accruals for reorganization and restructuring programs; (E) the operations
of any business acquired by the Company; (F) the divestiture of one or more business operations or the assets thereof; (G) the effects of any corporate transaction, such as a merger,
consolidation, separation (including spin-off or other distributions of stock or property by the Company) or reorganization; (H) restructurings, discontinued operations, extraordinary items,
and other unusual, infrequently occurring or non-recurring charges or events; (I) acquisitions or divestitures; (J) change in the corporate structure or capital structure of the Company;
(K) an event either not directly related to the operations of the Company, parent, subsidiary, division, business segment or business unit or not within the reasonable control of management;
(L) foreign exchange gains and losses; (M) a change in the fiscal year of the Company; (N) the refinancing or repurchase of bank loans or debt securities; (O) unbudgeted
capital expenditures; (P) the issuance or repurchase of equity securities and other changes in the number of outstanding shares; (Q) conversion of some or all of convertible securities
to common stock; (R) any business interruption event; (S) the cumulative effects of tax or accounting changes in accordance with GAAP; (T) the effect of changes in other laws or
regulatory rules affecting reported results; and (U) any other
39
Table of Contents
adjustment
consistent with the operation of the 2016 Plan. The plan administrator may also grant awards that are subject to vesting based on performance goals other than those set forth above.
Should
the participant cease to remain in service while holding one or more unvested shares or should the performance objectives not be attained with respect to one or more such unvested
shares, then those shares will be immediately subject to cancellation. Outstanding restricted stock units will automatically terminate, and no shares of our common stock will actually be issued in
satisfaction of those awards, if the performance goals or service requirements established for such awards are not attained. The plan administrator, however, will have the discretionary authority to
issue shares of our common stock in satisfaction of one or more outstanding awards as to which the designated performance goals or service requirements are not attained.
Cash Incentive Awards.
The plan administrator may grant cash incentive awards, which need not relate to the value of shares of
common stock. The
terms and conditions for cash incentive awards will be determined by the plan administrator. Cash incentive awards may vest in one or more installments over a specified period of service or upon the
achievement of specified performance objectives. Payment of cash incentive awards may be deferred for a period specified by the plan administrator. Upon cessation of service, the cash incentive award
will automatically terminate without any payment if the designated service or performance goals have not been satisfied. However, the plan administrator has complete discretion to make a payment under
one or more outstanding cash incentive awards as to which the service or performance goals have not been satisfied.
Dividend Equivalent Rights.
Dividend equivalent rights may be issued as stand-alone awards or in tandem with other awards made
under the 2016 Plan,
except that dividend equivalents may not be granted in connection with an option, stock appreciation right or cash incentive award. Each dividend equivalent right award will represent the right to
receive the economic equivalent of each dividend or distribution, whether in cash, securities or other property (other than shares of our common stock) which is made per issued and outstanding share
of common stock during the term the dividend equivalent right remains outstanding. Payment of the amounts attributable to such dividend equivalent rights may be made either concurrently with the
actual dividend or distribution made per issued and outstanding share of our common stock or may be deferred to a later date. Payment may be made in cash or shares of our common stock, or a
combination of cash and shares, as determined by the plan administrator.
New Plan Benefits
No awards have been granted under the amended and restated 2016 Plan. Any awards following approval of this proposal shall be at the discretion
of the plan administrator. Accordingly, the benefits or amounts that may be received by or allocated to each of (i) the officers listed in the Summary Compensation Table, (ii) each of
the nominees for election as a director, (iii) all non-employee directors as a group, (iv) all of our present executive officers as a group, and (v) all of our employees,
including all other current officers, as a group under the 2016 Plan are not determinable at this time.
Outstanding Equity Awards
The following table shows the number of shares of common stock subject to options and restricted stock units awarded under the 2016 Plan between
April 1, 2017 and July 31, 2018 to our named
40
Table of Contents
executive
officers and the other individuals and groups indicated below. No other type of equity award was granted during such period.
|
|
|
|
|
|
|
|
|
|
|
Name and Position
|
|
Number of Shares
Subject to Options
|
|
Weighted
Average
Exercise Price
per Share
|
|
Number of
Shares Subject
to RSU Awards
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
Joe Bergera
|
|
|
250,000
|
|
$
|
5.52
|
|
|
|
|
Chief Executive Officer, President and Director
|
|
|
|
|
|
|
|
|
|
|
Andrew Schmidt
|
|
|
100,000
|
|
|
5.52
|
|
|
|
|
Chief Financial Officer, Vice President of Finance and Secretary
|
|
|
|
|
|
|
|
|
|
|
James Chambers
|
|
|
150,000
|
|
|
5.66
|
|
|
|
|
Senior Vice President and General Manager, Agriculture and Weather Analytics
|
|
|
|
|
|
|
|
|
|
|
Todd Kreter
|
|
|
75,000
|
|
|
5.52
|
|
|
|
|
Senior Vice President and General Manager, Roadway Sensors
|
|
|
|
|
|
|
|
|
|
|
Ramin Massoumi
|
|
|
75,000
|
|
|
5.52
|
|
|
|
|
Senior Vice President and General Manager, Transportation Services
|
|
|
|
|
|
|
|
|
|
|
Non-Employee Directors
|
|
|
|
|
|
|
|
|
|
|
Kevin C. Daly, Ph.D.
|
|
|
|
|
|
|
|
|
5,788
|
|
Scott E. Deeter
|
|
|
|
|
|
|
|
|
5,788
|
|
Gerard M. Mooney
|
|
|
|
|
|
|
|
|
5,788
|
|
Laura L. Siegal
|
|
|
|
|
|
|
|
|
4,180
|
|
Thomas L. Thomas
|
|
|
|
|
|
|
|
|
5,788
|
|
Mikel H. Williams
|
|
|
|
|
|
|
|
|
5,788
|
|
All current executive officers as a group (6 persons)
|
|
|
675,000
|
|
|
5.55
|
|
|
|
|
All current non-employee directors as a group (6 persons)
|
|
|
|
|
|
|
|
|
33,120
|
|
All employees, excluding current executive officers as a group (76 persons)
|
|
|
473,150
|
|
|
5.61
|
|
|
41,350
|
|
General Provisions
Minimum Vesting.
No option or stock appreciation right may vest over a period of less than one year from the date of grant,
except that up to 5% of
the available shares of common stock reserved for issuance under the 2016 Plan as of the Plan Effective Date may be issued pursuant to options or stock appreciation rights that vest over a period of
less than one year from the date of grant. Additionally, any option or stock appreciation right granted under the 2016 Plan may vest upon the participant's death or disability, or upon a change in
control, and such vesting will not count against the 5% Basket described above.
Vesting Acceleration.
In the event we should experience a change in control, the following provisions will be in effect for all
outstanding awards
under the 2016 Plan, unless provided otherwise in an award agreement entered into with the participant:
-
-
Each outstanding award may be assumed, substituted, replaced with a cash retention program that preserves the intrinsic value of the award and
provides for subsequent payout in accordance
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Changes in Capitalization.
In the event any change is made to the outstanding shares of our common stock by reason of any stock
split, stock
dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction or other change in corporate structure effected without our receipt of consideration or should the value of
our outstanding shares of common stock be substantially reduced by reason of a spin-off transaction or extraordinary dividend or distribution or should there occur any merger, consolidation,
reincorporation or other reorganization, equitable adjustments will be made to: (i) the maximum number and/or class of securities issuable under the 2016 Plan; (ii) the maximum number
and/or class of securities for which incentive stock options may be granted under the 2016 Plan; (iii) the maximum number and/or class of securities for which any one (1) person may be
granted common stock-denominated awards under the 2016 Plan per calendar year; (iv) the number and/or class of securities and the exercise price per share in effect for outstanding options and
stock appreciation rights; (v) the number and/or class of securities subject to each outstanding stock award, restricted stock unit, dividend equivalent right and any other award denominated in
shares of our common stock and the consideration (if any) payable per share; and the number and/or class of securities subject to repurchase rights and the repurchase price payment per share. Such
adjustments will be made in such manner as the plan administrator deems appropriate.
Valuation.
The fair market value per share of our common stock on any relevant date under the 2016 Plan is deemed to be equal to
the closing selling
price per share on that date as determined by the NASDAQ Capital Market. As of August 30, 2018, the fair market value of our common stock determined on such basis was $5.09 per share.
Stockholder Rights and Transferability.
No optionee has any stockholder rights with respect to the option shares until such
optionee has exercised
the option and paid the exercise price for the purchased shares. The holder of a stock appreciation right will not have any stockholder rights with respect to the shares subject to that right unless
and until such person exercises the right and becomes the holder of record of any shares of our common stock distributed upon such exercise. Options are not assignable or transferable other than by
will or the laws of inheritance following optionee's death, and during the optionee's lifetime, the option may only be exercised by the optionee. However, the plan administrator may structure one or
more non-statutory options under the 2016 Plan so that those
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options
will be transferable during optionee's lifetime to one or more members of the optionee's family or to a trust established for the optionee and/or one or more such family members or to the
optionee's former spouse, to the extent such transfer is in connection with the optionee's estate plan or pursuant to a domestic relations order. Standalone stock appreciation rights will be subject
to the same transferability restrictions applicable to non-statutory options.
A
participant will have full stockholder rights with respect to any shares of common stock issued to him or her under the 2016 Plan, whether or not his or her interest in those shares is
vested. A participant will not have any stockholder rights with respect to the shares of common stock subject to restricted stock units until that award vests and the shares of common stock are
actually issued thereunder. However, dividend-equivalent units may be paid or credited, either in cash or in actual or phantom shares of common stock, on outstanding restricted stock units, subject to
such terms and conditions as the plan administrator may deem appropriate. Notwithstanding the foregoing, any dividends or dividend equivalents payable in connection with a performance-based award will
be subject to the same restrictions as the underlying award and will not be paid until and unless such performance goals are met.
Special Tax Election.
The plan administrator may provide one or more holders of awards under the 2016 Plan with the right to
have us withhold a
portion of the shares otherwise issuable to such individuals in
satisfaction of the withholding taxes to which they become subject in connection with the issuance, exercise or settlement of those awards. Alternatively, the plan administrator may allow such
individuals to deliver previously acquired shares of our common stock in payment of such withholding tax liability.
Deferral Programs.
The plan administrator may structure one or more awards (other than options and stock appreciation rights) so
that the
participants may be provided with an election to defer the compensation associated with those awards for federal income tax purposes.
The
plan administrator may also implement a non-employee director retainer fee deferral program that allows the non-employee directors the opportunity to elect to convert the Board and
Board committee retainer fees to be earned for a fiscal year into restricted stock units that defer the issuance of the shares of common stock that vest under those units until a permissible date or
event under Internal Revenue Code Section 409A.
To
the extent we maintain one or more separate non-qualified deferred compensation arrangements which allow the participants the opportunity to make notional investments of their
deferred account balances in shares of common stock, the plan administrator may authorize the share reserve under the Plan to serve as the source of any shares of common stock that become payable
under those deferred compensation arrangements.
Amendment and Termination.
Our Board may amend or modify the 2016 Plan at any time subject to stockholder approval to the extent
required under
applicable law or regulation or pursuant to the listing standards of the stock exchange on which our common stock is at the time primarily traded. Unless sooner terminated by our Board, the 2016 Plan
will terminate on the earliest of (i) the date immediately preceding the tenth anniversary of the Plan Effective Date, (ii) the date on which all shares available for issuance under the
2016 Plan have been issued as fully-vested shares (iii) the termination of all outstanding awards in connection with certain changes in control or ownership, or (iv) the termination of
the 2016 Plan by the Board.
Summary of Federal Income Tax Consequences
The following is a summary of the Federal income taxation treatment applicable to us and the participants who receive awards under the 2016
Plan.
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Option Grants.
Options granted under the 2016 Plan may be either incentive stock options which satisfy the requirements of
Section 422 of the
Internal Revenue Code or non-statutory options which are not intended to meet such requirements. The federal income tax treatment for the two types of options differs as follows:
Incentive Options.
No taxable income is recognized by the optionee at the time of the option grant, and no taxable income is
recognized for ordinary
income tax purposes at the time the option is exercised, although taxable income may arise at that time for alternative minimum tax purposes. The optionee will recognize taxable income in the year in
which the purchased shares are sold or otherwise made the subject of certain other dispositions. For Federal tax purposes, dispositions are divided into two categories: (i) qualifying, and
(ii) disqualifying. A qualifying disposition occurs if the sale or other disposition is made more than two (2) years after the date the option for the shares involved in such sale or
disposition is granted and more than one (1) year after the date the option is exercised for those shares. If the sale or disposition occurs before these two periods are satisfied, then a
disqualifying disposition will result.
Upon
a qualifying disposition, the optionee will recognize long-term capital gain in an amount equal to the excess of (i) the amount realized upon the sale or other disposition of
the purchased shares over (ii) the exercise price paid for the shares. If there is a disqualifying disposition of the shares, then the excess of (i) the fair market value of those shares
on the exercise date or (if less) the amount realized upon such sale or disposition over (ii) the exercise price paid for the shares will be taxable as ordinary income to the optionee. Any
additional gain or loss recognized upon the disposition will be a capital gain or loss.
If
the optionee makes a disqualifying disposition of the purchased shares, then we will be entitled to an income tax deduction, for the taxable year in which such disposition occurs,
equal to the amount of ordinary income recognized by the optionee as a result of the disposition. We will not be entitled to any income tax deduction if the optionee makes a qualifying disposition of
the shares.
Non-Statutory Options.
No taxable income is recognized by an optionee upon the grant of a non-statutory option. The optionee will
in general
recognize ordinary income, in the year in which the option is exercised, equal to the excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required to satisfy the tax withholding requirements applicable to such income. We will be entitled to an income tax deduction
equal to the amount of ordinary income recognized by the optionee with respect to the exercised non-statutory option. The deduction will in general be allowed for our taxable year in which such
ordinary income is recognized by the optionee.
Stock Appreciation Rights.
No taxable income is recognized upon receipt of a stock appreciation right. The holder will recognize
ordinary income in
the year in which the stock appreciation right is exercised, in an amount equal to the excess of the fair market value of the underlying shares of common stock on the exercise date over the base price
in effect for the exercised right, and the holder will be required to satisfy the tax withholding requirements applicable to such income. We will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the holder in connection with the exercise of the stock appreciation right. The deduction will be allowed for the taxable year in which such ordinary income is
recognized.
Stock Awards.
The recipient of unvested shares of common stock issued under the 2016 Plan will not recognize any taxable income
at the time those
shares are issued but will have to report as ordinary income, as and when those shares subsequently vest, an amount equal to the excess of (i) the fair market value of the shares on the vesting
date over (ii) the cash consideration (if any) paid for the shares. The recipient may, however, elect under Section 83(b) of the Internal Revenue Code to include as ordinary income in
the year the unvested shares are issued an amount equal to the excess of (i) the
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fair
market value of those shares on the issue date over (ii) the cash consideration (if any) paid for such shares. If the Section 83(b) election is made, the recipient will not
recognize any additional income as and when the shares subsequently vest. We will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the recipient with respect
to the unvested shares. The deduction will in general be allowed for our taxable year in which such ordinary income is recognized by the recipient.
Restricted Stock Units.
No taxable income is recognized upon receipt of restricted stock units. The holder will recognize
ordinary income in the year
in which the shares subject to the units are actually issued to the holder. The amount of that income will be equal to the fair market value of the shares on the date of issuance, and the holder will
be required to satisfy the tax withholding requirements applicable to such income. We will be entitled to an income tax deduction equal to the amount of ordinary income
recognized by the holder at the time the shares are issued. The deduction will be allowed for the taxable year in which such ordinary income is recognized.
Cash Incentive Awards.
In general, no taxable income is recognized upon receipt of cash incentive awards. The holder will
recognize ordinary income
in the year in which the cash incentive awards are actually paid to the participant, and the participant will be required to satisfy the tax withholding requirements applicable to such income. We will
be entitled to an income tax deduction equal to the amount of ordinary income recognized by the participant at the time of payment. The deduction will be allowed for the taxable year in which such
ordinary income is recognized.
Dividend Equivalent Rights.
No taxable income is recognized upon receipt of a dividend equivalent right award. The holder will
recognize ordinary
income in the year in which a dividend or distribution, whether in cash, securities or other property, is paid to the holder. The amount of that income will be equal to the fair market value of the
cash, securities or other property received, and the holder will be required to satisfy the tax withholding requirements applicable to such income. We will be entitled to an income tax deduction equal
to the amount of the ordinary income recognized by the holder of the dividend equivalent right award at the time the dividend or distribution is paid to such holder. That deduction will be allowed for
the taxable year in which such ordinary income is recognized.
Section 162(m) of the Code.
Prior to 2018, Section 162(m) of the Code imposed a $1 million limit on the amount a
public company
may deduct for compensation paid to a company's chief executive officer or any of the company's three other most highly compensated executive officers (other than the chief financial officer) who are
employed as of the end of the year. This limitation did not apply to compensation that meets the tax code requirements for "qualifying performance-based" compensation (i.e., compensation paid
only if the individual's performance meets pre-established objective goals based on performance criteria approved by stockholders, including stock options). We have modified the 2016 Plan to remove
certain restrictions for future awards that previously were required to comply with Section 162(m) of the Code, which are no longer necessary as a result of the recent changes to
Section 162(m) of the Code.
The
performance-based compensation exemption and the exemption of the chief financial officer from Section 162(m)'s deduction limit have been repealed, among other changes,
effective for taxable years beginning after December 31, 2017, such that awards paid to our covered executive officers (including our chief executive officer) in excess of $1 million
will not be deductible in future years, unless it qualifies for transition relief applicable to certain arrangements that were in effect as of November 2, 2017 and are not materially modified
thereafter.
As
in prior years, while deductibility of executive compensation for federal income tax purposes is among the factors the Compensation Committee considers when structuring our executive
compensation arrangements, it is not the sole or primary factor considered. We retain the flexibility to
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authorize
compensation that may not be deductible if we believe it is in the best interests of the Company.
Accounting Treatment.
Pursuant to the accounting standards under Financial Accounting Standards Board
("
FASB
") Accounting Standards Codification Topic 718, we will be required to expense all share-based payments, including grants of stock options, stock
appreciation rights, restricted stock, restricted stock units and all other stock-based awards under the 2016 Plan. Accordingly, stock options and stock appreciation rights which are granted to our
employees and non-employee directors and payable in shares of our common stock will have to be valued at fair value as of the grant date under an appropriate valuation formula, and that value will
then have to be charged as a direct compensation expense against our reported earnings over the designated vesting period of the award. Stock appreciation rights that are to be settled in cash will be
subject to variable mark-to-market accounting until the settlement date. For shares issuable upon the vesting of restricted stock units awarded under the 2016 Plan, we will be required to amortize
over the vesting period a compensation cost equal to the fair market value of the underlying shares on the date of the award. If any other shares are unvested at the time of their direct issuance,
then the fair market value of those shares at that time will be charged to our reported earnings ratably over the vesting period. Such accounting treatment for restricted stock units and direct stock
issuances will be applicable whether vesting is tied to service periods or performance goals, although for performance-based awards, the grant date fair value will initially be determined on the basis
of the probable outcome of performance goal attainment. The issuance of a fully-vested stock bonus will result in an immediate charge to our earnings equal to the fair market value of the bonus shares
on the issuance date. Dividends or dividend equivalents paid on the portion of an award that vests will be charged against our retained earnings. If the award holder is not required to return the
dividends or dividend equivalents if they forfeit their awards, dividends or dividend equivalents paid on instruments that do not vest will be recognized by us as additional compensation cost.
Finally,
it should be noted that the compensation expense accruable for performance-based awards under the 2016 Plan will, in general, be subject to adjustment to reflect the actual
outcome of the applicable performance goals, and any expenses accrued for such performance-based awards will be reversed if the performance goals are not met, unless those performance goals are deemed
to constitute market conditions (i.e., because they are tied to the price of our common stock) under FASB Accounting Standards Codification Topic 718.
Required Vote
Provided a quorum is present, the affirmative vote of the holders of a majority of the shares present in person or represented by proxy and
voting on this Proposal Two is required for approval of the amendment and restatement of the 2016 Plan. Should such approval not be obtained, then the share reserve under the 2016 Plan will not be
increased and awards will continue to be granted under the 2016 Plan, subject to previously authorized share limits.
We
are required to obtain stockholder approval for the amendment and restatement of the 2016 Plan under the rules of The Nasdaq Stock Market. Such approval is also necessary to permit us
to grant incentive stock options to employees under Section 422 of the Internal Revenue Code.
The
Board believes that the amendment and restatement of the 2016 Plan is necessary for us to be able to attract and retain the services of individuals essential to our long-term growth
and success.
Recommendation of the Board of Directors
THE BOARD BELIEVES THAT PROPOSAL TWO IS IN OUR BEST INTERESTS AND IN THE BEST INTERESTS OF OUR STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE 2016 OMNIBUS INCENTIVE PLAN. UNLESS OTHERWISE INDICATED THEREON, THE ACCOMPANYING PROXY WILL BE VOTED FOR APPROVAL OF THE
2016 OMNIBUS INCENTIVE PLAN. YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 2016 OMNIBUS INCENTIVE PLAN.
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