UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 14a-12
NTN COMMUNICATIONS, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials:
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
NTN COMMUNICATIONS, INC.
5966 La Place Court
Carlsbad, California 92008
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held September 30, 2004
NOTICE IS HEREBY GIVEN that the Special Meeting of stockholders (the
"Special Meeting") of NTN Communications, Inc. (the "Company") will be held at
the Company's corporate headquarters located at 5966 La Place Court, Carlsbad,
California 92008, at 10:00 a.m. local time, on September 30, 2004, for the
following purposes, as more fully described in the attached Proxy Statement:
1. To vote upon a proposal to adopt the NTN Communications, Inc. 2004
Performance Incentive Plan; and
2. To consider and act upon such other matters as may properly come before
the Special Meeting and any adjournments thereof.
The Board of Directors fixed the close of business on August 16, 2004 as
the record date for determining the stockholders entitled to notice of and to
vote at the Special Meeting or at any adjournment thereof.
You are cordially invited to attend the Special Meeting in person. In order
to ensure your representation at the meeting, however, please promptly complete,
date, sign, and return the enclosed proxy in the accompanying envelope. In
addition to voting by mail, you may vote by telephone or via the Internet. If
you own your shares of common stock through a broker, bank or nominee, you may
vote via the Internet at www.proxyvote.com Use the Internet to transmit your
voting instructions and for electronic delivery of information up until 11:59
p.m. Eastern Time the day before the meeting date. Have your proxy card in hand
when you access the web site. You will be prompted to enter your control number
to obtain your records and to create an electronic voting instruction form. If
you own your shares of common stock directly, rather than through a broker, bank
or nominee, you may vote by telephone by calling (800) 776-9437. Use any
touch-tone telephone to transmit your voting instructions up until 11:59 p.m.
Eastern Time the day before the meeting date. Have your proxy card in hand when
you call. You will be prompted to enter your control number and then follow the
simple instructions the Vote Voice provides you. You do not need to return your
proxy by mail if you have voted by telephone or via the Internet.
The prompt return of your proxy will help to save expenses incurred in
further communication. Your proxy can be revoked as described in the Proxy
Statement and will not affect your right to vote in person should you decide to
attend the Special Meeting.
Sincerely,
James B. Frakes
Chief Financial Officer
and Secretary
Carlsbad, California
August __, 2004
NTN COMMUNICATIONS, INC.
5966 La Place Court
Carlsbad, California 92008
PROXY STATEMENT
Special Meeting to be held September 30, 2004
SOLICITATION AND VOTING
General
The enclosed proxy is being solicited on behalf of the Board of Directors
of NTN Communications, Inc. ("NTN") for use at the Special Meeting of
stockholders to be held at NTN's corporate headquarters located at 5966 La Place
Court, Carlsbad, California 92008, at 10:00 a.m. local time, on September 30,
2004, and at any adjournment or postponement thereof (the "Special Meeting"),
for purposes set forth herein and in the accompanying Notice of Special Meeting
of Stockholders. We are first mailing this Proxy Statement, together with the
accompanying proxy solicitation materials, to stockholders, and posting on our
corporate website at www.ntn.com, on or about August __, 2004.
Voting Securities; Record Date
We have one class of voting stock outstanding, designated common stock,
$.005 par value ("Common Stock"). Each share of our Common Stock is entitled to
one vote for each matter to be voted on at the Special Meeting. Only holders of
record of Common Stock at the close of business on August 16, 2004 are entitled
to notice of and to vote at the Special Meeting There were 52,863,221 shares of
Common Stock outstanding as of the record date. The presence, in person or by
proxy, at the Special Meeting, of stockholders entitled to cast at least a
majority of the votes entitled to be cast by all stockholders will constitute a
quorum for the transaction of business at the Special Meeting For purposes of
determining a quorum, shares held by brokers or nominees will be treated as
present even if the broker or nominee does not have discretionary power to vote
on a particular matter or if instructions were never received from the
beneficial owner. These shares are called "broker non-votes." Abstentions will
be counted as present for quorum purposes and for the purpose of determining the
outcome of any matter submitted to the stockholders for a vote. However,
abstentions do not constitute a vote "for" or "against" any matter and will be
disregarded in the calculation of the plurality. The inspectors of election
appointed for the Special Meeting will tabulate all votes including separate
tabulation of the affirmative and negative votes, abstentions and broker
non-votes.
The proxy holders will vote all shares of Common Stock represented by a
properly completed proxy received in time for the Special Meeting as directed in
the proxy. If no direction is given in the proxy, it will be voted "FOR"
Proposal 1, approval of the NTN Communications, Inc. 2004 Performance Incentive
Plan (except with respect to Broker non-votes). Broker non-votes will not be
considered as voted "for" or "against" Proposal 1 but will be counted as present
for purposes of determining whether a majority of the shares present voted in
favor of adoption. With respect to any other item of business that may come
before the Special Meeting, the proxy holders will vote the proxy in accordance
with their best judgment.
Revocability of Proxies
You may revoke a proxy at any time before it has been exercised by giving
written notice of revocation to our Secretary, by executing and delivering to
the Secretary a proxy dated as of a later date than the accompanying proxy, or
by attending the Special Meeting and voting in person. If, however, your shares
of record are held by a broker, bank or other nominee and you wish to vote in
person at the Special Meeting, you must obtain from that record holder a proxy
issued in your name. Attendance at the Special Meeting, by itself, will not
serve to revoke a proxy.
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Solicitation
We will bear the cost of soliciting proxies. This Proxy Statement and the
accompanying proxy solicitation materials, in addition to being mailed directly
to stockholders, will be distributed through brokers, custodians and other
nominees to beneficial owners of shares of Common Stock. We may reimburse such
parties for their reasonable expenses in forwarding solicitation materials to
beneficial owners. Our directors, officers or regular employees may follow up
the mailing to stockholders by telephone, telegram or personal solicitations,
but no special or additional compensation will be paid to those directors,
officers or employees for doing so.
Stockholder Proposals for 2005 Annual Meeting
Stockholder proposals intended to be included in our proxy materials for
the 2005 Annual Meeting of stockholders must be received by December 29, 2004.
Such proposals should be addressed to our Secretary.
With respect to any stockholder proposals to be presented at the 2005
Annual Meeting which are not included in the 2005 proxy materials, such proposal
shall be considered untimely, unless the proponent notifies us of such proposal
by not later than February 16, 2005 Any proposal must comply with the federal
securities laws.
Selection of Director Nominees
The Nominating Committee of the Board will consider candidates for Board
membership suggested by Board members, as well as by management and
stockholders. As a stockholder, you may recommend any qualified person for
consideration as a nominee for director by writing to the Board of Directors,
c/o NTN Communications, Inc., 5966 La Place Court, Carlsbad, California 92008.
Recommendations must be received by February 16, 2005 to be considered for the
2005 Annual Meeting of stockholders, and must comply with the requirements in
our bylaws. Recommendations must include the name and address of the stockholder
making the recommendation, a representation that the stockholder is a holder of
record of Common Stock, biographical information about the individual
recommended and any other information the stockholder believes would be helpful
to the Board of Directors in evaluating the individual recommended. The
procedures for considering candidates recommended by a stockholder for Board
membership will be no different than the procedures for candidates recommended
by members of the Board or by management.
Corporate Governance
We are committed to integrity, reliability and transparency in our
disclosures to the public. We have enhanced our corporate governance practices
to ensure that our business is operated in the best interests of our
stockholders and in full compliance with our legal obligations including the new
corporate governance listing standards of the American Stock Exchange and
recently adopted regulations of the Securities and Exchange Commission (the
"SEC"). In particular, we have:
o determined that six out of the eight members of our Board of Directors
meet the independence requirements of the American Stock Exchange;
o adopted a policy regarding director attendance at Annual Meetings of
stockholders;
o adopted a policy regarding stockholder communications with the Board
of Directors;
o determined that all of the members of the Audit Committee of the Board
of Directors meet the independence requirements of the American Stock
Exchange and SEC rules;
o determined that all of the members of the Audit Committee of the Board
of Directors are financially literate and that Robert M. Bennett is the
"audit committee financial expert" within the meaning of the American
Stock Exchange and SEC rules;
o instituted procedures for receiving, retaining and treating complaints
from any source regarding accounting, internal accounting controls and
auditing matters, and procedures for the confidential, anonymous
submission by employees of concerns regarding accounting or auditing
matters;
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o adopted pre-approval policies and procedures for audit and non-audit
services;
o appointed a Nominating Committee of independent directors to consider
candidates for Board membership suggested by other Board members,
management and stockholders, as well as to periodically review
committee assignments and make recommendations to the Board for
rotations of assignments.
o appointed a Disclosure Committee tasked with ensuring that our
disclosures to our stockholders and the investment community are
accurate and complete;
o adopted a Code of Values, which applies to all officers, directors and
employees; and adopted a Code of Ethics for Chief Executive and Senior
Financial Officers, which applies to certain senior officers, as
defined therein.
We intend to post the committee charters, the Code of Values, Code of
Ethics for Senior Financial Officers and other corporate governance materials in
the Corporate Governance section of our website at www.ntn.com, or you may
receive copies without charge by writing to us at: NTN Communications, Inc.,
5966 La Place Court, Carlsbad, California 92008, Attention: Investor Relations.
PROPOSAL 1
APPROVAL OF THE NTN COMMUNICATIONS, INC.
2004 PERFORMANCE INCENTIVE PLAN
At the Special Meeting, stockholders will be asked to approve the NTN
Communications, Inc. 2004 Performance Incentive Plan (the "2004 Plan") and to
authorize up to 2,500,000 shares for grant awards under the 2004 Plan, which was
adopted, subject to stockholder approval, by the Board of Directors on February
25, 2004, and subsequently amended on August 13, 2004. This 2,500,000 shares
represents approximately 4.7% of our shares outstanding as of the Record Date.
We believe that incentives and stock-based awards focus employees on the
objective of creating stockholder value and promoting the success of NTN, and
that incentive compensation plans like the proposed 2004 Plan are an important
attraction, retention and motivation tool for participants in the plan.
We currently maintain the NTN Communications, Inc. 1995 Employee Stock
Option Plan (the "1995 Plan"). As of August 10, 2004, a total of 9,946,000
shares of Common Stock were then subject to outstanding awards granted under the
1995 Plan, and an additional 77,000 shares of Common Stock were then available
for new award grants under the 1995 Plan.
The Board of Directors approved the 2004 Plan based, in part, on a belief
that the number of our shares currently available under the 1995 Plan does not
give us sufficient authority and flexibility to adequately provide for future
incentives. These incentives are vital to our ability to attract and retain the
experienced programmers, creative designers and application developers required
for our business to grow. Our success will depend significantly upon hiring and
retaining such experienced, knowledgeable professionals. There is significant
competition for employees with the skills required to develop the products and
perform the services we offer. If we cannot attract, motivate and retain
qualified professionals, our business, financial condition and results of
operations will suffer.
If stockholders approve the 2004 Plan, we will grant no new awards under
the 1995 Plan after the Special Meeting. In that case, the number of shares of
Common Stock that remain available for award grants under the 1995 Plan
immediately prior to the Special Meeting will become available for award grants
under the 2004 Plan. The aforementioned 2,500,000 shares of Common Stock will
also be made available for award grants under the 2004 Plan, so that if
stockholders approve the 2004 Plan, a total of 2,577,000 shares will initially
be available for award grants under that plan. In addition, if stockholders
approve the 2004 Plan, any shares of Common Stock subject to stock option grants
under the 1995 Plan that expire, are cancelled or otherwise terminate after the
Special Meeting will also be available for award grant purposes under the 2004
Plan.
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We will continue to have the authority to grant awards under the 1995 Plan
if stockholders do not approve the 2004 Plan. If stockholders approve the 2004
Plan, the termination of our grant authority under the 1995 Plan will not affect
awards then outstanding under that plan.
Summary Description of the 2004 Performance Incentive Plan
The principal terms of the 2004 Plan are summarized below. The following
summary is qualified in its entirety by the full text of the 2004 Plan, which
appears as Exhibit "A" to this Proxy Statement.
Purpose The purpose of the 2004 Plan is to promote the success of NTN and
the interests of our stockholders by providing an additional means for us to
attract, motivate, retain and reward directors, officers, employees and other
eligible persons through the grant of awards and incentives for high levels of
individual performance and improved financial performance of the company.
Equity-based awards are also intended to further align the interests of award
recipients and our stockholders.
Administration Our Board of Directors or one or more committees appointed
by our Board of Directors will administer the 2004 Plan. Our Board of Directors
has delegated general administrative authority for the 2004 Plan to the
Compensation Committee. A committee may delegate some or all of its authority
with respect to the 2004 Plan to another committee of directors and certain
limited award grant authority to grant awards to employees may be delegated to
one or more officers of NTN. (The appropriate acting body, be it the Board of
Directors, a committee within its delegated authority, or an officer within his
or her delegated authority, is referred to in this proposal as the
"Administrator").
The Administrator has broad authority under the 2004 Plan with respect to
award grants including, without limitation, the authority:
o to select participants and determine the type(s) of award(s)
they are to receive;
o to determine the number of shares that are to be subject
to awards and the terms and conditions of awards, including
the price (if any) to be paid for the shares or the award;
o to cancel, modify, or waive NTN's rights with respect to,
or modify, discontinue, suspend, or terminate any or all
outstanding awards, subject to any required consents;
o to accelerate or extend the vesting or exercisability or
extend the term of any or all outstanding awards;
o subject to the other provisions of the 2004 Plan, to make
certain adjustments to an outstanding award and to
authorize the conversion, succession or substitution of an
award; and
o to allow the purchase price of an award or shares of Common
Stock to be paid in the form of cash, check, or electronic
funds transfer, by the delivery of already-owned shares of our
Common Stock or by a reduction of the number of shares
deliverable pursuant to the award, by services rendered by the
recipient of the award, by notice in third party payment or
cashless exercise on such terms as the Administrator may
authorize, or any other form permitted by law.
No Repricing. In no case (except due to an adjustment to reflect a stock
split or similar event or any repricing that may be approved by stockholders)
will any adjustment be made to a stock option or stock appreciation right award
under the 2004 Plan (by amendment, cancellation and regrant, exchange or other
means) that would constitute a repricing of the per share exercise or base price
of the award.
Eligibility. Persons eligible to receive awards under the 2004 Plan include
officers or employees of NTN or any of our subsidiaries, directors of NTN, and
certain consultants and advisors to NTN or any of our subsidiaries. Currently,
approximately 250 officers and employees of NTN and our subsidiaries (including
all of our named executive officers), and each of our seven non-employee
directors, are considered eligible under the 2004 Plan at the present time.
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Authorized Shares; Limits on Awards The maximum number of shares of Common
Stock that may be issued or transferred pursuant to awards under the 2004 Plan
equals the sum of: (1) 2,500,000 shares, plus (2) the number of shares available
for additional award grant purposes under the 1995 Plan as of the date of the
Special Meeting and determined immediately prior to the termination of the
authority to grant new awards under the 1995 Plan as of the date of the Special
Meeting, plus (3) the number of any shares subject to stock options granted
under the 1995 Plan and outstanding as of the date of the Special Meeting which
expire, or for any reason are cancelled or terminated, after the date of the
Special Meeting without being exercised. As of August 1, 2004, approximately
77,000 shares were available for additional award grant purposes under the 1995
Plan, and approximately 9,946,000 shares were subject to awards then outstanding
under the 1995 Plan. As noted above, no additional awards will be granted under
the 1995 Plan if stockholders approve the 2004 Plan.
The following other limits are also contained in the 2004 Plan:
o The maximum number of shares that may be delivered pursuant to
options qualified as incentive stock options granted under the
plan is 1,250,000 shares.
o The maximum number of shares subject to those options and stock
appreciation rights that are granted during any calendar year to
any individual under the plan is 1,000,000 shares.
o The maximum number of shares that may be delivered pursuant to
awards granted under the plan, other than in the circumstances
described in the next sentence, is 1,250,000 shares. This limit on
so-called "full-value awards" does not apply, however, to the
following: (1) shares delivered in respect of compensation earned
but deferred, and (2) shares delivered pursuant to option or stock
appreciation right grants the per share exercise or base price, as
applicable, of which is at least equal to the fair market value of
a share of Common Stock at the time of grant of the award.
To the extent that an award is settled in cash or a form other than shares,
the shares that would have been delivered had there been no such cash or other
settlement will not be counted against the shares available for issuance under
the 2004 Plan. In the event that shares are delivered in respect of a dividend
equivalent, stock appreciation right, or other award, only the actual number of
shares delivered with respect to the award will be counted against the share
limits of the 2004 Plan. Shares that are subject to or underlie awards which
expire or for any reason are cancelled or terminated, are forfeited, fail to
vest, or for any other reason are not paid or delivered under the 2004 Plan will
again be available for subsequent awards under the 2004 Plan. Shares that are
exchanged by a participant or withheld by us as full or partial payment in
connection with any award under the 2004 Plan or the 1995 Plan, as well as any
shares exchanged by a participant or withheld by us to satisfy the tax
withholding obligations related to any award under the 2004 Plan or the 1995
Plan, will be available for subsequent awards under the 2004 Plan. In addition,
the 2004 Plan generally provides that shares issued in connection with awards
that are granted by or become obligations of the company through the assumption
of awards (or in substitution for awards) in connection with an acquisition of
another company will not count against the shares available for issuance under
the 2004 Plan.
Types of Awards The 2004 Plan authorizes stock options, stock appreciation
rights, restricted stock, stock bonuses and other forms of awards granted or
denominated in Common Stock or units of Common Stock, as well as cash bonus
awards pursuant to Section 5.2 of the 2004 Plan. The 2004 Plan retains
flexibility to offer competitive incentives and to tailor benefits to specific
needs and circumstances. Any award may be paid or settled in cash.
A stock option is the right to purchase shares of Common Stock at a future
date at a specified price per share (the "exercise price"). The per share
exercise price of an option generally may not be less than the fair market value
of a share of Common Stock on the date of grant. The maximum term of an option
is ten years from the date of grant. An option may either be an incentive stock
option or a nonqualified stock option. Incentive stock option benefits are taxed
differently from nonqualified stock options, as described under "Federal Income
Tax Consequences of Awards Under the 2004 Plan" below. Incentive stock options
are also subject to more restrictive terms and are limited in amount by the U.S.
Internal Revenue Code and the 2004 Plan. Incentive stock options may only be
granted to employees of NTN or a subsidiary.
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A stock appreciation right is the right to receive payment of an amount
equal to the excess of the fair market value of share of Common Stock on the
date of exercise of the stock appreciation right over the base price of the
stock appreciation right. The base price will be established by the
Administrator at the time of grant of the stock appreciation right and generally
cannot be less than the fair market value of a share of Common Stock on the date
of grant. Stock appreciation rights may be granted in connection with other
awards or independently. The maximum term of a stock appreciation right is ten
years from the date of grant.
The per share exercise price of an option or the per share base price of a
stock appreciation right may, however, be less than the fair market value of a
share of Common Stock on the date of grant in the case of (1) awards granted
retroactively in tandem with or as a substitution for another award, or (2) if
the option or stock appreciation right will be counted against the plan's limit
on full-value awards (that is, the limit on the number of shares that can be
issued under the 2004 Plan in respect of awards other than options and stock
appreciation rights).
The other types of awards that may be granted under the 2004 Plan include,
without limitation, stock bonuses, restricted stock, performance stock, stock
units, dividend equivalents, or similar rights to purchase or acquire shares,
and cash awards granted consistent with Section 5.2 of the 2004 Plan as
described below.
Performance-Based Awards The Administrator may grant awards that are
intended to be performance-based awards within the meaning of Section 162(m) of
the U.S. Internal Revenue Code ("Performance-Based Awards"). Performance-Based
Awards are in addition to any of the other types of awards that may be granted
under the 2004 Plan (including options and stock appreciation rights which may
also qualify as performance-based awards for Section 162(m) purposes).
Performance-Based Awards may be in the form of restricted stock, performance
stock, stock units, other rights, or cash bonus opportunities.
The vesting or payment of Performance-Based Awards (other than options or
stock appreciation rights) will depend on the absolute or relative performance
of NTN on a consolidated, subsidiary, segment, division, or business unit basis.
The Administrator will establish the criterion or criteria and target(s) on
which performance will be measured. The Administrator must establish criteria
and targets in advance of applicable deadlines under the U.S. Internal Revenue
Code and while the attainment of the performance targets remains substantially
uncertain The criteria that the Administrator may use for this purpose will
include one or more of the following: earnings per share, cash flow (which means
cash and cash equivalents derived from either net cash flow from operations or
net cash flow from operations, financing and investing activities), total
stockholder return, gross revenue, revenue growth, operating income (before or
after taxes), net earnings (before or after interest, taxes, depreciation and/or
amortization), return on equity or on assets or on net investment, cost
containment or reduction, or any combination thereof. The performance
measurement period with respect to an award may range from three months to ten
years. Performance targets will be adjusted to mitigate the unbudgeted impact of
material, unusual or nonrecurring gains and losses, accounting changes or other
extraordinary events not foreseen at the time the targets were set unless the
Administrator provides otherwise at the time of establishing the targets. The
maximum number of shares which may be delivered pursuant to Performance-Based
Awards (other than options or stock appreciation rights, and other than cash
awards covered by the following sentence) that are granted to any one
participant in any one calendar year will not exceed 1,000,000 shares. The
aggregate amount of compensation to be paid to any one participant in respect of
all Performance-Based Awards payable only in cash and not related to shares and
granted to that participant in any one calendar year will not exceed $1,000,000.
Performance-Based Awards may be paid in stock or in cash (in either case,
subject to the limits described under the heading "Authorized Shares; Limits on
Awards" above). Before any Performance-Based Award (other than an option or
stock appreciation right) is paid, the Administrator must certify that the
performance target or targets have been satisfied. The Administrator has
discretion to determine the performance target or targets and any other
restrictions or other limitations of Performance-Based Awards and may reserve
discretion to reduce payments below maximum award limits.
Deferrals The Administrator may provide for the deferred payment of awards,
and may determine the other terms applicable to deferrals. The Administrator may
provide that deferred settlements include the payment or crediting of interest
or other earnings on the deferred amounts, or the payment or crediting of
dividend equivalents where the deferred amounts are denominated in shares.
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Acceleration of Awards; Possible Early Termination of Awards Generally, and
subject to limited exceptions set forth in the 2004 Plan, if any person acquires
more than 33% of the outstanding common stock or combined voting power of NTN,
if certain changes in a majority of our Board of Directors occur over a period
of not longer than two years, if stockholders prior to a transaction do not
continue to own more than 50% of the voting securities of NTN (or a successor or
a parent) following a reorganization, merger, statutory share exchange or
consolidation or similar corporate transaction involving NTN or any of our
subsidiaries, a sale or other disposition of all or substantially all of NTN's
assets or the acquisition of assets or stock of another entity by us or any of
our subsidiaries, or if NTN is dissolved or liquidated, then awards
then-outstanding under the 2004 Plan may become fully vested or paid, as
applicable, and may terminate or be terminated in such circumstances. The
Administrator also has the discretion to establish other change in control
provisions with respect to awards granted under the 2004 Plan. For example, the
Administrator could provide for the acceleration of vesting or payment of an
award in connection with a change in control event that is not described above
and provide that any such acceleration shall be automatic upon the occurrence of
any such event.
Transfer Restrictions Subject to certain exceptions contained in Section
5.7 of the 2004 Plan, awards under the 2004 Plan generally are not transferable
by the recipient other than by will or the laws of descent and distribution and
are generally exercisable, during the recipient's lifetime, only by the
recipient. Any amounts payable or shares issuable pursuant to an award generally
will be paid only to the recipient or the recipient's beneficiary or
representative. The Administrator has discretion, however, to establish written
conditions and procedures for the transfer of awards to other persons or
entities, provided that such transfers comply with applicable federal and state
securities laws.
Adjustments As is customary in incentive plans of this nature, each share
limit and the number and kind of shares available under the 2004 Plan and any
outstanding awards, as well as the exercise or purchase prices of awards, and
performance targets under certain types of performance-based awards, are subject
to adjustment in the event of certain reorganizations, mergers, combinations,
recapitalizations, stock splits, stock dividends, or other similar events that
change the number or kind of shares outstanding, and extraordinary dividends or
distributions of property to the stockholders.
No Limit on Other Authority Except as expressly provided with respect to
the termination of the authority to grant new awards under the 1995 Plan if
stockholders approve the 2004 Plan, the 2004 Plan does not limit the authority
of the Board of Directors or any committee to grant awards or authorize any
other compensation, with or without reference to our common stock, under any
other plan or authority.
Termination of or Changes to the 2004 Plan. The Board of Directors may
amend or terminate the 2004 Plan at any time and in any manner. Stockholder
approval for an amendment will be required only to the extent then required by
applicable law or any applicable listing agency or required under Sections 162,
422 or 424 of the U.S. Internal Revenue Code to preserve the intended tax
consequences of the plan. For example, stockholder approval will be required for
any amendment that proposes to increase the maximum number of shares that may be
delivered with respect to awards granted under the 2004 Plan. (Adjustments as a
result of stock splits or similar events will not, however, be considered an
amendment requiring stockholder approval.) Unless terminated earlier by the
Board of Directors, the authority to grant new awards under the 2004 Plan will
terminate on September 30, 2009. Outstanding awards, as well as the
Administrator's authority with respect thereto, generally will continue
following the expiration or termination of the plan. Generally speaking,
outstanding awards may be amended by the Administrator (except for a repricing),
but the consent of the award holder is required if the amendment (or any plan
amendment) materially and adversely affects the holder.
Federal Income Tax Consequences of Awards under the 2004 Plan
The U.S. federal income tax consequences of the 2004 Plan under current
federal law, which is subject to change, are summarized in the following
discussion of the general tax principles applicable to the 2004 Plan. This
summary is not intended to be exhaustive and, among other considerations, does
not describe state, local, or international tax consequences.
With respect to nonqualified stock options, we are generally entitled to
deduct and the participant recognizes taxable income in an amount equal to the
difference between the option exercise price and the fair market value of the
shares at the time of exercise. With respect to incentive stock options, we are
generally not entitled to a deduction nor does the participant recognize income
at the time of exercise, although the participant may be subject to the U.S.
federal alternative minimum tax.
7
The current federal income tax consequences of other awards authorized
under the 2004 Plan generally follow certain basic patterns: stock appreciation
rights are taxed and deductible in substantially the same manner as nonqualified
stock options; nontransferable restricted stock subject to a substantial risk of
forfeiture results in income recognition equal to the excess of the fair market
value over the price paid (if any) only at the time the restrictions lapse
(unless the recipient elects to accelerate recognition as of the date of grant);
bonuses, cash and stock-based performance awards, dividend equivalents, stock
units, and other types of awards are generally subject to tax at the time of
payment; and compensation otherwise effectively deferred is taxed when paid. In
each of the foregoing cases, we will generally have a corresponding deduction at
the time the participant recognizes income.
If an award is accelerated under the 2004 Plan in connection with a "change
in control" (as this term is used under the U.S. Internal Revenue Code), we may
not be permitted to deduct the portion of the compensation attributable to the
acceleration ("parachute payments") if it exceeds certain threshold limits under
the U.S. Internal Revenue Code (and certain related excise taxes may be
triggered). Furthermore, the aggregate compensation in excess of $1,000,000
attributable to awards that are not "performance-based" within the meaning of
Section 162(m) of the U.S. Internal Revenue Code may not be permitted to be
deducted by us in certain circumstances.
Specific Benefits under the 2004 Performance Incentive Plan
We have approved certain award grants under the 2004 Plan that are
conditioned upon stockholder approval of the 2004 Plan. Each of these
conditional grants is set forth in the following table.
8
2004 Performance Incentive Plan
Awards Subject to Stockholder Approval of 2004 Plan Proposal
Number of Shares Underlying
Name and Position Stock Units and Stock Options(1)
----------------- --------------
Executive Group
Stanley B. Kinsey(1) 50,000
Chief Executive Officer and Chairman of the Board
V. Tyrone Lam(1) 20,000
President and Chief Operating Officer, Buzztime Entertainment, Inc.
Mark deGorter(1) 20,000
President and Chief Operating Officer
James B. Frakes(1) 20,000
Chief Financial Officer ----------
Total for Executive Group 160,000
----------
----------
Non-Executive Director Group (8 persons)(2) 140,000
----------
----------
Non-Executive Officer Employee Group(3) 320,000
----------
----------
(1) These grants of stock units will be paid in an equal number of shares
of Common Stock on the vesting date of the award, subject to any deferred
payment date that the holder may elect. A stock unit award will be paid only to
the extent vested. Vesting generally requires the continued employment by the
award recipient through the respective vesting date, subject to accelerated
vesting in certain circumstances. Mr. Kinsey's award is scheduled to vest as to
50,000 stock units monthly in increments of 1/6 of the total shares commencing
August, 2004 and continuing through February 2005. (This amount is reduced from
the levels disclosed by us in our Proxy Statement filed on April 4, 2004 in
connection with the April 23, 2004 Annual Meeting of Stockholders, which
disclosure proposed that Mr. Kinsey receive 100,000 stock units in the 12 months
from March 2004 through February 2005. No awards were granted to Mr. Kinsey
during the first six months of this term.) The awards to Messrs. Lam, deGorter
and Frakes are each scheduled to vest monthly in increments of 1/12 of the total
shares commencing March 1, 2005 and continuing through February 2006 These stock
unit grants will not be effective if stockholders do not approve the proposed
2004 Plan.
(2) Grants of stock options made in accordance with the Directors
Compensation Plan as hereinafter defined under Executive and Director
Compensation.
(3) Includes the number of shares of Common Stock underlying proposed
option grants to be made to all employees of NTN Canada, Inc. and all new
employees commencing employment from and after April 1, 2004 through the Record
Date. We plan to continue to grant stock options in the ordinary course of
business as we hire new employees. In addition, we plan to continue to grant
stock options from time to time to existing employees as a performance
incentive; most employees received such performance incentive option grants
during 2003 and 2004 under the 1995 Plan.
Except for the grants described in the table above, we have not approved
any other awards that are conditioned upon stockholder approval of the 2004
Plan. We are not currently considering any other specific award grants under the
2004 Plan. If the 2004 Plan had been in existence in fiscal 2003, we expect that
our award grants for fiscal 2003 would not have been substantially different
from those actually made in that year under the 1995 Plan.
9
The closing market price for a share of Common Stock as of August 16, 2004
was $1.86 per share.
EQUITY COMPENSATION PLAN INFORMATION
We currently maintain two equity compensation plans: the 1995 Plan and the
NTN Communications, Inc. 1996 Special Stock Option Plan (the "1996 Plan"). The
1995 Plan and the 1996 Plan have each been approved by NTN's stockholders.
Stockholders are also being asked to approve a new equity compensation plan, the
2004 Plan, as described above.
The following table sets forth, for each of our equity compensation plans,
the number of shares of Common Stock subject to outstanding options, the
weighted-average exercise price of outstanding options, and the number of shares
remaining available for future award grants as of August 10, 2004.
Number of shares of Common
Stock remaining available
Number of shares of for future issuance under
Common Stock to be equity compensation plans
issued upon exercise Weighted-average (excluding shares
of outstanding exercise price of reflected in the first
options outstanding column)
Plan category options
Equity compensation plans
approved by stockholders 9,946,000(1) $1.46 77,000(2)
Equity compensation plans
not approved by stockholders(3) 1,941,119(3) $1.91 0
Total 11,887,119 $1.59 77,000
(1) Of the aggregate number of shares that remained available for future
issuance, 77,000 were available under the 1995 Plan and 0 were available under
the 1996 Plan. The shares available under the 1995 Plan are, subject to certain
other limits under that plan, generally available for awards of stock options
only. No new awards will be granted under the 1995 Plan if stockholders approve
the 2004 Plan. This table does not reflect the 2,500,000 additional shares that
will be available under the 2004 Plan if stockholders approve the 2004 Plan
proposal.
(2) Does not include 300,000 shares of Buzztime Entertainment, Inc. common
stock available for grant under the Buzztime Entertainment, Inc. 2001 Incentive
Stock Option Plan. To date, no options have been granted under this plan.
(3) The 1,941,119 shares issuable that are not pursuant to equity
compensation plans approved by stockholders are all pursuant to warrants granted
in connection with consulting agreements with non-employees or to warrants
associated with equity offerings. Warrants to purchase 514,000 shares were
granted in 2003, 685,000 shares were granted in 2002 and 190,000 shares were
granted in 2001. The remainder of outstanding warrants were issued on or before
2000. As of August 10, 2004, the range of exercise prices and the weighted
average remaining contractual life of outstanding warrants were $0.50 to $3.91
and 4 years, respectively.
Required Vote
A majority of the shares present at the meeting, either in person or by
proxy, must be voted in favor of adoption of the 2004 Plan. Neither Broker
non-votes nor abstentions will be considered voted in favor of adoption of the
2004 Plan. The Board of Directors believes that the adoption of the 2004 Plan
will promote the interests of NTN and our stockholders and will help us and our
subsidiaries continue to be able to attract, retain and reward persons important
to our success.
All members of our Board of Directors are eligible for awards under the
2004 Plan and thus have a personal interest in the approval of the 2004 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE 2004
PERFORMANCE INCENTIVE PLAN AS DESCRIBED ABOVE AND SET FORTH IN APPENDIX A
HERETO. EXCEPT WITH RESPECT TO BROKER NON-VOTES, PROXIES WILL BE VOTED "FOR"
APPROVAL OF THE NTN COMMUNICATIONS, INC. 2004 PERFORMANCE INCENTIVE PLAN IF NO
DIRECTION IS GIVEN IN THE PROXIES.
10
EXECUTIVE AND DIRECTOR COMPENSATION
Summary Compensation Table
The following Summary Compensation Table shows the compensation paid or
accrued as of each of the last three fiscal years to all individuals who served
as our chief executive officer during 2003 and the three other most highly
compensated executive officers who were serving as executive officers at the end
of 2003 whose salary and bonus exceeded $100,000 (collectively, the "Named
Executive Officers"):
Long-Term
Compensation
Annual Compensation Awards
Securities
Other Annual Underlying
Name and Principal Position Year Salary(1) Bonus Compensation Options
---------------------------- ---- ----------- ------------ ------------ --------------
Stanley B. Kinsey(2)........ 2003 $339,834 -- -- 400,000
Chief Executive Officer
and Chairman of the Board 2002 313,542 24,000(3) -- 100,000
2001 305,386 -- -- 350,000
V. Tyrone Lam............... 2003 $250,288 $50,000(6) -- 100,000
President and
Chief Operating Officer 2002 222,156 15,000(3) -- 100,000
Buzztime Entertainment, Inc.
2001 223,077 -- -- --
Mark deGorter............... 2003 $249,615 $50,000(6) -- 100,000
President and Chief
Operating Officer 2002 222,538 60,000(3) -- 250,000
NTN Hospitality Technologies
2001 199,038 25,382(4) -- 150,000
James B. Frakes(5).......... 2003 $189,103 -- -- 100,000
Chief Financial Officer
2002 159,000 $20,000(3) -- --
2001 111,539 10,000 -- 250,000
----------
(1) Includes amounts, if any, deferred under NTN's 401(k) Plan.
(2) Mr. Kinsey waived compensation for serving as a director of NTN.
Mr. Kinsey received perquisites and personal benefits that did not exceed
the lesser of $50,000 or 10% of his annual salary and bonus.
(3) Represents bonus paid out pursuant to the 2002 performance-based
bonus program.
(4) Represents a bonus paid to Mr. deGorter in March 2002 based upon
exceeding established targets for the NTN Network for the fiscal year ended
2001.
(5) Mr. Frakes joined NTN in April 2001.
(6) Represents bonus paid out pursuant to the 2003 performance-based
bonus program.
11
Option Grants in Last Fiscal Year
The following table contains information concerning grants of stock options
during 2003 with respect to the Named Executive Officers:
Individual Grants
Number of % of Total
Shares Options
Underlying Granted to Grant Date
Options Employees in Exercise Expiration Present
Name Granted Fiscal Year Price Date Value(1)
----------------- ------- ------------ ---------- ----------- ----------
Stanley B. Kinsey 400,000(2) %1.7 $1.10 02/17/13 $331,604
V. Tyrone Lam.... 100,000(3) * 1.10 01/30/13 87,631
Mark deGorter.... 100,000(3) * 1.10 01/30/13 87,631
James B. Frakes.. 100,000(3) * 1.10 01/30/03 87,631
----------
(1) The present value of grant on the grant date was estimated using the
Black Scholes option-pricing model with the following weighted average
assumptions: dividend yield of 0%, risk-free interest rate of 2858%, expected
volatility of 113.17%, and expected option life of 4.58 years.
(2) Represents options granted under the 1995 Stock Option Plan, which
became fully vested and exercisable as of January 31, 2004. The options were
granted to Mr. Kinsey in consideration of Mr. Kinsey's agreement to extend the
term of his employment agreement to January 1, 2004. The options were priced at
$1.10 per share in accordance with the terms of the Company's broad-based
employee stock option grant effective January 31, 2003. Such options vested in
twelve (12) equal installments on the last day of each month commencing February
18, 2003.
(3) Represents options granted under the 1995 Stock Option Plan in
accordance with the Company's broad-based stock option grant effective January
31, 2003. Such options vest and become exercisable as to 25% of the total shares
on the first anniversary of the date of grant and will become exercisable as to
an additional 1/36 of the remaining shares on the last day of each of the
thirty-six (36) calendar months immediately following the first anniversary of
the grant date.
Fiscal Year-End Option Values
The following table contains information concerning stock options which
were unexercised at the end of 2003 with respect to the Named Executive
Officers. No stock options were exercised in 2003 by any Named Executive
Officer.
Number of Securities Value of Unexercised
Underlying Unexercised Options in-the-Money
at Fiscal Year-End Options at Fiscal Year-End(1)
Name Exercisable Unexercisable Exercisable Unexercisable
----------------- ----------- ------------- ----------- -------------
Stanley B. Kinsey 2,716,667 33,333 $7,533,334 $86,666
V. Tyrone Lam.... 546,667 153,333 1,491,426 415,199
Mark deGorter.... 228,334 271,666 696,836 770,665
James B. Frakes.. 166,667 183,333 59,375 90,625
----------
(1) Represents the amount by which the aggregate market price on December 31,
2003 of the shares of our Common Stock subject to such options exceeded the
respective exercise prices of such options.
Director Compensation
During 2003, directors were entitled to receive cash compensation of $2,400
per month for their services as directors. Further, directors who serve on
either the audit or compensation committees or the board of directors of
Buzztime Entertainment, Inc. were entitled to receive an additional $3,000
annually for each such service. Directors serving on the Nominating Committee
are entitled to receive $1,000 annually. The lead independent director is
entitled to compensation in the amount of $4,000 annually. In 2003, Mr. Bennett
elected to receive shares of Common Stock in lieu of a portion of the cash
component of director compensation. Directors are also eligible for the grant of
options to purchase Common Stock from time to time for services in their
capacity as directors.
12
Upon the date of commencement of a director's term of service, we grant to
each director options to purchase 20,000 shares of our Common Stock. These
options are priced at the closing market price of the Common Stock on the date
of grant. As of the date of grant, 10,000 options are fully vested and
exercisable; thereafter, the remaining 10,000 options vest and become
exercisable in equal installments each month immediately subsequent to the date
of grant and up to the date of the next annual meeting of shareholders. Further,
after the initial year of a director's term of service, options to purchase an
additional 20,000 shares of Common Stock shall be granted each year on the date
of our annual meeting of shareholders during the remainder of the term of
service. The additional options shall be priced at the closing market price of
the Common Stock on the date of grant and shall vest and become exercisable as
to 1/12 of the shares each month following the date of grant, subject to the
director's continuing service. A director who is re-elected for an additional
term of service will be granted options to purchase 20,000 shares of Common
Stock, priced at the closing market price of the Common Stock on the date of our
annual meeting of shareholders, subject to monthly vesting and continued
service. Finally, all options granted to directors as compensation for service
on the Board of Directors shall expire on the earlier of ten years from the date
of grant or two years from the date the director ceases to serve on the Board of
Directors. The options provide for immediate vesting in full upon the occurrence
of a change of control event.
Employment Agreements and Change in Control Agreements
In October 1998, we entered into a written employment agreement pursuant to
which Mr. Kinsey was to receive a bonus under a bonus program that was agreed
upon by and between Mr. Kinsey and the compensation committee of our board of
directors. On October 7, 1999, we entered into an addendum to the employment
agreement with Mr. Kinsey setting forth the terms of the bonus program. Under
the bonus program, the options granted to Mr. Kinsey in October 1999 were
granted at a preferred, below market, price of $0.98 per share, the average
closing price of our Common Stock during the three calendar quarters immediately
prior to the grant date. The options were granted to Mr. Kinsey pursuant to our
1995 Employee Stock Option Plan and are subject to immediate vesting upon the
occurrence of a change of control event In January 2001, we amended the
employment agreement with Mr. Kinsey to extend the duration of the agreement by
one year until October 6, 2002 and to award options for an additional 350,000
shares of our Common Stock at an exercise price of $0.875 per share. On October
7, 2002, Mr. Kinsey was granted options to purchase 100,000 shares of Common
Stock in exchange for his agreement to reset the commencement of the renewal
term of the employment agreement to January 1, 2003. In February 2003, Mr.
Kinsey accepted an additional term of employment through January 31, 2004. In
connection with the extension, Mr. Kinsey was granted options to purchase
400,000 shares of common stock at $1.10 per share in accordance with the terms
of our broad-based employee stock option grant effective January 31, 2003. All
options granted to Mr. Kinsey have been made at the fair market value as of the
date of each grant. Mr. Kinsey was also paid a cash bonus in accordance with our
2002 bonus plan. Mr. Kinsey and the Compensation Committee are currently
negotiating terms for an extension of Mr. Kinsey's employment.
In the event Mr. Kinsey is terminated upon a change of control of NTN, in
addition to one year's base salary, he shall receive a pro rata portion of his
bonus and continuation of employment benefits for one year.
We have entered into change of control employment agreements with certain
of our executive officers. The agreements provide that, if the executive is
terminated other than for cause within one year after a change of control of the
Company, then the executive is entitled to receive a lump sum severance payment
equal to up to one year's base salary.
Compensation Committee Interlocks and Insider Participation
All compensation determinations for 2003 for our executive officers were
made by the Board of Directors as a whole upon the recommendation of the
Compensation Committee. During 2003, Mr. Arlen and Mr. Bergsman served on the
Compensation Committee and continue such service to date. None of our directors
or executive officers has served on the board of directors or the compensation
committee of any other company or entity, any of whose officers served either on
our Board of Directors or on our Compensation Committee.
On May 8, 2001, we entered into an advertising sales representative
agreement with Baron Enterprises, Inc., a corporation wholly-owned and operated
by Barry Bergsman, a member of our board of directors, pursuant to which Baron
provided advertising sales representation services to us under the direction of
the NTN iTV Network's president and chief operating officer. For Baron's
services under the advertising sales representative agreement, we granted Baron
a three-year warrant to purchase 20,000 shares of Common Stock at an exercise
price of $0.50 per share. The warrant vested and became exercisable as to 1/12
of the total shares on the last business day of each of the twelve months
commencing April 2001, subject to Baron continuing to provide services to us. In
addition, Baron received a commission in the amount of 35% of net advertising
revenues received by the NTN iTV Network from any advertising contract solicited
by Baron. We paid to Baron a monthly recoverable cash advance against
commissions to be earned in the amount of $5,000 per month, not to exceed an
aggregate of $60,000 per year for the initial term of the agreement. The
advertising sales representative agreement expired on April 1, 2002. An
amendment to the agreement was entered into in October 2002, to extend the
contract to October 31, 2003, to reduce the rate of commission to 25% of net
advertising revenues received by us and to include bartered advertising. In
September 2003, we entered into a three year agreement with Baron to negotiate
on our behalf with a third party advertising representative. Baron was to
receive commissions of 3% to 10% based upon the period of time over which the
negotiated advertising would run and upon the related advertising revenue. No
commissions have been paid to Baron to date for this third party work. The
agreement was terminated pursuant to mutual agreement in August 2004.
13
In May 2002, Michael Fleming was appointed Chairman of the Board of our
Buzztime subsidiary after having served, since January 8, 2002, as an
independent consultant. Pursuant to the consulting arrangement, Mr. Fleming
provided general consulting services to us in connection with Buzztime's cable
television initiatives. We paid Mr. Fleming approximately $2,000 per month for
these consulting services. This arrangement was discontinued in September 2003.
In January 2002, we entered into a consulting agreement with Robert Clasen,
on of our directors, whereby Mr. Clasen provided consulting services to us with
respect to Buzztime's cable television initiatives. We paid Mr. Clasen $2,000
per month for the services provided under the consulting agreement. The initial
consulting term of this agreement expired on December 31, 2002. We then
continued the consulting relationship on a month to month basis through June
2003 when we mutually agreed to discontinue the arrangement.
On January 15, 2003, we issued and sold 1,000,000 shares of restricted
Common Stock along with fully vested warrants to purchase 500,000 shares of
Common Stock at $1.15 per share, exercisable through January 15, 2008 through a
private offering to Robert M. Bennett, one of our directors, at a price per
share of $1.00 for an aggregate amount of $1.0 million No commissions or
placement agent fees were paid in connection with the offering.
In connection with the investment by Media General, Inc., we agreed to
increase the size of our Board of Directors and appoint Neal F. Fondren, Vice
President of Media General and President of Media General's Interactive Media
Division to fill the board seat. Media General's ability to maintain that seat
on our Board of Directors is subject to Media General retaining ownership of
certain percentages of the shares they purchased. Media General also received
preemptive rights to purchase on a pro rata basis any new securities that NTN or
Buzztime may subsequently offer The preemptive rights also are dependent upon
Media General maintaining ownership of certain percentages of the shares they
purchased.
14
COMMUNICATIONS WITH DIRECTORS
Shareholders may communicate directly with the Board of Directions or
individual members of the Board of Directors in writing by sending a letter to
the Board at: NTN Communications, Inc. Board of Directors, 5966 La Place Court,
Carlsbad, California 92008 All communications directed to the Board of Directors
will be transmitted to the Chairman of the Board of Directors or other director
identified in the communication without any editing or screening.
OTHER MATTERS
We will furnish, without charge, to each person to whom this Proxy
Statement is being sent a complete copy of our Form 10-K (other than exhibits)
for fiscal 2003. We will furnish any exhibit to our Form 10-K upon the payment
of a fee to cover our reasonable expenses in furnishing such exhibit. Written
requests for the Form 10-K should be directed to Mr. James B. Frakes, Corporate
Secretary, at our corporate offices located at 5966 La Place Court, Carlsbad,
California 92008. Telephone requests may be directed to Mr. Frakes at (760)
438-7400.
We do not know of any matter to be acted upon at the Special Meeting other
than the matters described above. If any other matter properly comes before the
Special Meeting, however, the proxy holders will vote the proxies thereon in
accordance with their best judgment.
THE BOARD OF DIRECTORS
Dated: August __, 2004
15
EXHIBIT "A"
NTN COMMUNICATIONS, INC.
2004 PERFORMANCE INCENTIVE PLAN
1. PURPOSE OF PLAN
The purpose of this NTN Communications, Inc. 2004 Performance
Incentive Plan (this "Plan") of NTN Communications, Inc., a Delaware
corporation (the "Corporation"), is to promote the success of the
Corporation and to increase stockholder value by providing an
additional means through the grant of awards to attract, motivate,
retain and reward selected employees and other eligible persons.
2. ELIGIBILITY
The Administrator (as such term is defined in Section 3.1) may grant
awards under this Plan only to those persons that the Administrator
determines to be Eligible Persons. An "Eligible Person" is any person
who is either: (a) an officer (whether or not a director) or employee
of the Corporation or one of its Subsidiaries; (b) a director of the
Corporation or one of its Subsidiaries; or (c) an individual
consultant or advisor who renders or has rendered bona fide services
(other than services in connection with the offering or sale of
securities of the Corporation or one of its Subsidiaries in a
capital-raising transaction or as a market maker or promoter of
securities of the Corporation or one of its Subsidiaries) to the
Corporation or one of its Subsidiaries and who is selected to
participate in this Plan by the Administrator; provided, however, that
a person who is otherwise an Eligible Person under clause (c) above
may participate in this Plan only if such participation would not
adversely affect either the Corporation's eligibility to use Form S-8
to register under the Securities Act of 1933, as amended (the
"Securities Act"), the offering and sale of shares issuable under this
Plan by the Corporation or the Corporation's compliance with any other
applicable laws. An Eligible Person who has been granted an award (a
"participant") may, if otherwise eligible, be granted additional
awards if the Administrator shall so determine. As used herein,
"Subsidiary" means any corporation or other entity a majority of whose
outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Corporation; and "Board" means the Board
of Directors of the Corporation.
3. PLAN ADMINISTRATION
3.1 The Administrator. This Plan shall be administered by and all
awards under this Plan shall be authorized by the Administrator. The
"Administrator" means the Board or one or more committees appointed by
the Board or another committee (within its delegated authority) to
administer all or certain aspects of this Plan. Any such committee
shall be comprised solely of one or more directors or such number of
directors as may be required under applicable law. A committee may
delegate some or all of its authority to another committee so
constituted. The Board or a committee comprised solely of directors
may also delegate, to the extent permitted by Section 157(c) of the
Delaware General Corporation Law and any other applicable law, to one
or more officers of the Corporation, its powers under this Plan (a) to
designate the officers and employees of the Corporation and its
Subsidiaries who will receive grants of awards under this Plan, and
(b) to determine the number of shares subject to, and the other terms
and conditions of, such awards. The Board may delegate different
levels of authority to different committees with administrative and
grant authority under this Plan. Unless otherwise provided in the
Bylaws of the Corporation or the applicable charter of any
Administrator: (a) a majority of the members of the acting
Administrator shall constitute a quorum, and (b) the vote of a
majority of the members present assuming the presence of a quorum or
the unanimous written consent of the members of the Administrator
shall constitute action by the acting Administrator.
1
With respect to awards intended to satisfy the requirements for
performance-based compensation under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), this Plan shall be
administered by a committee consisting solely of two or more outside
directors (as this requirement is applied under Section 162(m) of the
Code); provided, however, that the failure to satisfy such requirement
shall not affect the validity of the action of any committee otherwise
duly authorized and acting in the matter. Award grants, and
transactions in or involving awards, intended to be exempt under Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), must be duly and timely authorized by the Board or a
committee consisting solely of two or more non-employee directors (as
this requirement is applied under Rule 16b-3 promulgated under the
Exchange Act). To the extent required by any applicable listing
agency, this Plan shall be administered by a committee composed
entirely of independent directors (within the meaning of the
applicable listing agency).
3.2 Powers of the Administrator. Subject to the express provisions of
this Plan, the Administrator is authorized and empowered to do all
things necessary or desirable in connection with the authorization of
awards and the administration of this Plan (in the case of a committee
or delegation to one or more officers, within the authority delegated
to that committee or person(s)), including, without limitation, the
authority to:
(a) determine eligibility and, from among those persons
determined to be eligible, the particular Eligible Persons who
will receive an award under this Plan;
(b) grant awards to Eligible Persons, determine the price at
which securities will be offered or awarded and the number of
securities to be offered or awarded to any of such persons,
determine the other specific terms and conditions of such awards
consistent with the express limits of this Plan, establish the
installments (if any) in which such awards shall become
exercisable or shall vest (which may include, without limitation,
performance and/or time-based schedules), or determine that no
delayed exercisability or vesting is required, establish any
applicable performance targets, and establish the events of
termination or reversion of such awards;
(c) approve the forms of award agreements (which need not be
identical either as to type of award or among participants);
2
(d) construe and interpret this Plan and any agreements defining
the rights and obligations of the Corporation, its Subsidiaries,
and participants under this Plan, further define the terms used
in this Plan, and prescribe, amend and rescind rules and
regulations relating to the administration of this Plan or the
awards granted under this Plan;
(e) cancel, modify, or waive the Corporation's rights with
respect to, or modify, discontinue, suspend, or terminate any or
all outstanding awards, subject to any required consent under
Section 8.6.5;
(f) accelerate or extend the vesting or exercisability or extend
the term of any or all such outstanding awards (in the case of
options or stock appreciation rights, within the maximum ten-year
term of such awards) in such circumstances as the Administrator
may deem appropriate (including, without limitation, in
connection with a termination of employment or services or other
events of a personal nature) subject to any required consent
under Section 8.6.5;
(g) adjust the number of shares of Common Stock subject to any
award, adjust the price of any or all outstanding awards or
otherwise change previously imposed terms and conditions, in such
circumstances as the Administrator may deem appropriate, in each
case subject to Sections 4 and 8.6, and provided that in no case
(except due to an adjustment contemplated by Section 7 or any
repricing that may be approved by stockholders) shall such an
adjustment constitute a repricing (by amendment, cancellation and
regrant, exchange or other means) of the per share exercise or
base price of any option or stock appreciation right;
(h) determine the date of grant of an award, which may be a
designated date after but not before the date of the
Administrator's action (unless otherwise designated by the
Administrator, the date of grant of an award shall be the date
upon which the Administrator took the action granting an award);
(i) determine whether, and the extent to which, adjustments are
required pursuant to Section 7 hereof and authorize the
termination, conversion, substitution or succession of awards
upon the occurrence of an event of the type described in Section
7;
(j) acquire or settle (subject to Sections 7 and 8.6) rights
under awards in cash, stock of equivalent value, or other
consideration; and
(k) determine the fair market value of the Common Stock or awards
under this Plan from time to time and/or the manner in which such
value will be determined.
3.3 Binding Determinations. Any action taken by, or inaction of, the
Corporation, any Subsidiary, or the Administrator relating or pursuant
to this Plan and within its authority hereunder or under applicable
law shall be within the absolute discretion of that entity or body and
shall be conclusive and binding upon all persons. Neither the Board
nor any Board committee, nor any member thereof or person acting at
the direction thereof, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in
connection with this Plan (or any award made under this Plan), and all
such persons shall be entitled to indemnification and reimbursement by
the Corporation in respect of any claim, loss, damage or expense
(including, without limitation, attorneys' fees) arising or resulting
therefrom to the fullest extent permitted by law and/or under any
directors and officers liability insurance coverage that may be in
effect from time to time.
3
3.4 Reliance on Experts. In making any determination or in taking or
not taking any action under this Plan, the Board or a committee, as
the case may be, may obtain and may rely upon the advice of experts,
including employees and professional advisors to the Corporation. No
director, officer or agent of the Corporation or any of its
Subsidiaries shall be liable for any such action or determination
taken or made or omitted in good faith.
3.5 Delegation. The Administrator may delegate ministerial,
non-discretionary functions to individuals who are officers or
employees of the Corporation or any of its Subsidiaries or to third
parties.
4. SHARES OF COMMON STOCK SUBJECT TO THE PLAN; SHARE LIMITS
4.1 Shares Available. Subject to the provisions of Section 7.1, the
capital stock that may be delivered under this Plan shall be shares of
the Corporation's authorized but unissued Common Stock and any shares
of its Common Stock held as treasury shares. For purposes of this
Plan, "Common Stock" shall mean the common stock of the Corporation
and such other securities or property as may become the subject of
awards under this Plan, or may become subject to such awards, pursuant
to an adjustment made under Section 7.1.
4.2 Share Limits. The maximum number of shares of Common Stock that
may be delivered pursuant to awards granted to Eligible Persons under
this Plan (the "Share Limit") is equal to the sum of (a) 2,500,000
shares of Common Stock, plus (b) the number of shares of Common Stock
available for additional award grant purposes under the Corporation's
1995 Employee Stock Option Plan, as amended (the "1995 Plan"), as of
the date of stockholder approval of this Plan (the "Stockholder
Approval Date") and determined immediately prior to the termination of
the authority to grant new awards under the 1995 Plan as of the
Stockholder Approval Date, plus (c) the number of any shares subject
to stock options granted under the 1995 Plan and outstanding on the
Stockholder Approval Date which expire, or for any reason are
cancelled or terminated, after the Stockholder Approval Date without
being exercised; provided that in no event shall the Share Limit
exceed 12,522,861 shares (which is the sum of the 2,500,000 shares set
forth above, plus the number of shares available under the 1995 Plan
for additional award grant purposes as of the Effective Date (as such
term is defined in Section 8.6.1), plus the number of shares subject
to options previously granted and outstanding under the 1995 Plan as
of the Effective Date). The following limits also apply with respect
to awards granted under this Plan:
4
(a) The maximum number of shares of Common Stock that may be
delivered pursuant to options qualified as incentive stock
options granted under this Plan is 1,250,000 shares.
(b) The maximum number of shares of Common Stock subject to those
options and stock appreciation rights that are granted during any
calendar year to any individual under this Plan is 1,000,000
shares.
(c) The maximum number of shares of Common Stock that may be
delivered pursuant to awards granted under this Plan, other than
those described in the next sentence, is 1,250,000 shares. This
limit on so-called "full-value awards" does not apply, however,
to (1) shares delivered in respect of compensation earned but
deferred, (2) except as expressly provided in Section 5.1.1
(which generally requires that shares delivered in respect of
"discounted" stock options be charged against this limit), shares
delivered in respect of stock option grants, and (3) except as
expressly provided in Section 5.1.2 (which generally requires
that shares delivered in respect of "discounted" stock
appreciation right grants be charged against this limit), shares
delivered in respect of stock appreciation right grants.
(d) Additional limits with respect to Performance-Based Awards
are set forth in Section 5.2.3.
Each of the foregoing numerical limits is subject to adjustment
as contemplated by Section 4.3, Section 7.1, and Section 8.10.
4.3 Awards Settled in Cash, Reissue of Awards and Shares. To the
extent that an award is settled in cash or a form other than shares of
Common Stock, the shares that would have been delivered had there been
no such cash or other settlement shall not be counted against the
shares available for issuance under this Plan. In the event that
shares are delivered in respect of a dividend equivalent, stock
appreciation right, or other award, only the actual number of shares
delivered with respect to the award shall be counted against the share
limits of this Plan. Shares that are subject to or underlie awards
which expire or for any reason are cancelled or terminated, are
forfeited, fail to vest, or for any other reason are not paid or
delivered under this Plan shall again be available for subsequent
awards under this Plan. Shares that are exchanged by a participant or
withheld by the Corporation as full or partial payment in connection
with any award under this Plan, as well as any shares exchanged by a
participant or withheld by the Corporation or one of its Subsidiaries
to satisfy the tax withholding obligations related to any award under
this Plan, shall be available for subsequent awards under this Plan.
Refer to Section 8.10 for application of the foregoing share limits
with respect to assumed awards. The foregoing adjustments to the share
limits of this Plan are subject to any applicable limitations under
Section 162(m) of the Code with respect to awards intended as
performance-based compensation thereunder.
4.4 Reservation of Shares; No Fractional Shares; Minimum Issue. The
Corporation shall at all times reserve a number of shares of Common
Stock sufficient to cover the Corporation's obligations and contingent
obligations to deliver shares with respect to awards then outstanding
under this Plan (exclusive of any dividend equivalent obligations to
the extent the Corporation has the right to settle such rights in
cash). No fractional shares shall be delivered under this Plan. The
Administrator may pay cash in lieu of any fractional shares in
settlements of awards under this Plan. No fewer than 100 shares may be
purchased on exercise of any award (or, in the case of stock
appreciation or purchase rights, no fewer than 100 rights may be
exercised at any one time) unless the total number purchased or
exercised is the total number at the time available for purchase or
exercise under the award.
5
5. AWARDS
5.1 Type and Form of Awards. The Administrator shall determine the
type or types of award(s) to be made to each selected Eligible Person.
Awards may be granted singly, in combination or in tandem. Awards also
may be made in combination or in tandem with, in replacement of, as
alternatives to, or as the payment form for grants or rights under any
other employee or compensation plan of the Corporation or one of its
Subsidiaries. The types of awards that may be granted under this Plan
are:
5.1.1 Stock Options. A stock option is the grant of a right to
purchase a specified number of shares of Common Stock during a
specified period as determined by the Administrator. An option may be
intended as an incentive stock option within the meaning of Section
422 of the Code (an "ISO") or a nonqualified stock option (an option
not intended to be an ISO). The award agreement for an option will
indicate if the option is intended as an ISO; otherwise it will be
deemed to be a nonqualified stock option. The maximum term of each
option (ISO or nonqualified) shall be ten (10) years. The per share
exercise price for each option shall be not less than 100% of the fair
market value of a share of Common Stock on the date of grant of the
option, except as follows: (a) in the case of a stock option granted
retroactively in tandem with or as a substitution for another award,
the per share exercise price may be no lower than the fair market
value of a share of Common Stock on the date such other award was
granted (to the extent consistent with Sections 422 and 424 of the
Code in the case of options intended as incentive stock options); and
(b) in any other circumstances, a nonqualified stock option may be
granted with a per share exercise price that is less than the fair
market value of a share of Common Stock on the date of grant, provided
that any shares delivered in respect of such option shall be charged
against the limit of Section 4.2(c) (the limit on full-value awards)
as well as any other applicable limit under Section 4.2. When an
option is exercised, the exercise price for the shares to be purchased
shall be paid in full in cash or such other method permitted by the
Administrator consistent with Section 5.5.
5.1.2 Additional Rules Applicable to ISOs. To the extent that the
aggregate fair market value (determined at the time of grant of the
applicable option) of stock with respect to which ISOs first become
exercisable by a participant in any calendar year exceeds $100,000,
taking into account both Common Stock subject to ISOs under this Plan
and stock subject to ISOs under all other plans of the Corporation or
one of its Subsidiaries (or any parent or predecessor corporation to
the extent required by and within the meaning of Section 422 of the
Code and the regulations promulgated thereunder), such options shall
be treated as nonqualified stock options. In reducing the number of
options treated as ISOs to meet the $100,000 limit, the most recently
6
granted options shall be reduced first. To the extent a reduction of
simultaneously granted options is necessary to meet the $100,000
limit, the Administrator may, in the manner and to the extent
permitted by law, designate which shares of Common Stock are to be
treated as shares acquired pursuant to the exercise of an ISO. ISOs
may only be granted to employees of the Corporation or one of its
subsidiaries (for this purpose, the term "subsidiary" is used as
defined in Section 424(f) of the Code, which generally requires an
unbroken chain of ownership of at least 50% of the total combined
voting power of all classes of stock of each subsidiary in the chain
beginning with the Corporation and ending with the subsidiary in
question). There shall be imposed in any award agreement relating to
ISOs such other terms and conditions as from time to time are required
in order that the option be an "incentive stock option" as that term
is defined in Section 422 of the Code. No ISO may be granted to any
person who, at the time the option is granted, owns (or is deemed to
own under Section 424(d) of the Code) shares of outstanding Common
Stock possessing more than 10% of the total combined voting power of
all classes of stock of the Corporation, unless the exercise price of
such option is at least 110% of the fair market value of the stock
subject to the option and such option by its terms is not exercisable
after the expiration of five years from the date such option is
granted.
5.1.3 Stock Appreciation Rights. A stock appreciation right or "SAR"
is a right to receive a payment, in cash and/or Common Stock, equal to
the excess of the fair market value of a specified number of shares of
Common Stock on the date the SAR is exercised over the fair market
value of a share of Common Stock on the date the SAR was granted (the
"base price") as set forth in the applicable award agreement, except
as follows: (a) in the case of a SAR granted retroactively in tandem
with or as a substitution for another award, the base price may be no
lower than the fair market value of a share of Common Stock on the
date such other award was granted; and (b) in any other circumstances,
a SAR may be granted with a base price that is less than the fair
market value of a share of Common Stock on the date of grant, provided
that any shares actually delivered in respect of such award shall be
charged against the limit of Section 4.2(c) (the limit on full-value
awards) as well as any other applicable limit under Section 4.2. The
maximum term of an SAR shall be ten (10) years.
5.1.4 Other Awards. The other types of awards that may be granted
under this Plan include: (a) stock bonuses, restricted stock,
performance stock, stock units, phantom stock, dividend equivalents,
or similar rights to purchase or acquire shares, whether at a fixed or
variable price or ratio related to the Common Stock, upon the passage
of time, the occurrence of one or more events, or the satisfaction of
performance criteria or other conditions, or any combination thereof;
(b) any similar securities with a value derived from the value of or
related to the Common Stock and/or returns thereon; or (c) cash awards
granted consistent with Section 5.2 below.
7
5.2 Section 162(m) Performance-Based Awards. Without limiting the
generality of the foregoing, any of the types of awards listed in
Section 5.1.4 above may be, and options and SARs granted with an
exercise or base price not less than the fair market value of a share
of Common Stock at the date of grant ("Qualifying Options" and
"Qualifying SARS," respectively) typically will be, granted as awards
intended to satisfy the requirements for "performance-based
compensation" within the meaning of Section 162(m) of the Code
("Performance-Based Awards"). The grant, vesting, exercisability or
payment of Performance-Based Awards may depend (or, in the case of
Qualifying Options or Qualifying SARs, may also depend) on the degree
of achievement of one or more performance goals relative to a
pre-established targeted level or level using one or more of the
Business Criteria set forth below (on an absolute or relative basis)
for the Corporation on a consolidated basis or for one or more of the
Corporation's subsidiaries, segments, divisions or business units, or
any combination of the foregoing. Any Qualifying Option or Qualifying
SAR shall be subject only to the requirements of Section 5.2.1 and
5.2.3 in order for such award to satisfy the requirements for
"performance-based compensation" under Section 162(m) of the Award.
Any other Performance-Based Award shall be subject to all of the
following provisions of this Section 5.2.
5.2.1 Class; Administrator. The eligible class of persons for
Performance-Based Awards under this Section 5.2 shall be officers and
employees of the Corporation or one of its Subsidiaries. The
Administrator approving Performance-Based Awards or making any
certification required pursuant to Section 5.2.4 must be constituted
as provided in Section 3.1 for awards that are intended as
performance-based compensation under Section 162(m) of the Code.
5.2.2 Performance Goals. The specific performance goals for
Performance-Based Awards (other than Qualifying Options and Qualifying
SARs) shall be, on an absolute or relative basis, established based on
one or more of the following business criteria ("Business Criteria")
as selected by the Administrator in its sole discretion: earnings per
share, cash flow (which means cash and cash equivalents derived from
either net cash flow from operations or net cash flow from operations,
financing and investing activities), total stockholder return, gross
revenue, revenue growth, operating income (before or after taxes), net
earnings (before or after interest, taxes, depreciation and/or
amortization), return on equity or on assets or on net investment,
cost containment or reduction, or any combination thereof. These terms
are used as applied under generally accepted accounting principles or
in the financial reporting of the Corporation or of its Subsidiaries.
To qualify awards as performance-based under Section 162(m), the
applicable Business Criterion (or Business Criteria, as the case may
be) and specific performance goal or goals ("targets") must be
established and approved by the Administrator during the first 90 days
of the performance period (and, in the case of performance periods of
less than one year, in no event after 25% or more of the performance
period has elapsed) and while performance relating to such target(s)
remains substantially uncertain within the meaning of Section 162(m)
of the Code. Performance targets shall be adjusted to mitigate the
unbudgeted impact of material, unusual or nonrecurring gains and
losses, accounting changes or other extraordinary events not foreseen
at the time the targets were set unless the Administrator provides
otherwise at the time of establishing the targets. The applicable
performance measurement period may not be less than three months nor
more than 10 years.
8
5.2.3 Form of Payment; Maximum Performance-Based Award. Grants or
awards under this Section 5.2 may be paid in cash or shares of Common
Stock or any combination thereof. Grants of Qualifying Options and
Qualifying SARs to any one participant in any one calendar year shall
be subject to the limit set forth in Section 4.2(b). The maximum
number of shares of Common Stock which may be delivered pursuant to
Performance-Based Awards (other than Qualifying Options and Qualifying
SARs, and other than cash awards covered by the following sentence)
that are granted to any one participant in any one calendar year shall
not exceed 1,000,000 shares, either individually or in the aggregate,
subject to adjustment as provided in Section 7.1. In addition, the
aggregate amount of compensation to be paid to any one participant in
respect of all Performance-Based Awards payable only in cash and not
related to shares of Common Stock and granted to that participant in
any one calendar year shall not exceed $1,000,000.00. Awards that are
cancelled during the year shall be counted against these limits to the
extent permitted by Section 162(m) of the Code.
5.2.4 Certification of Payment. Before any Performance-Based Award
under this Section 5.2 (other than Qualifying Options and Qualifying
SARs) is paid and to the extent required to qualify the award as
performance-based compensation within the meaning of Section 162(m) of
the Code, the Administrator must certify in writing that the
performance target(s) and any other material terms of the
Performance-Based Award were in fact timely satisfied.
5.2.5 Reservation of Discretion. The Administrator will have the
discretion to determine the restrictions or other limitations of the
individual awards granted under this Section 5.2 including the
authority to reduce awards, payouts or vesting or to pay no awards, in
its sole discretion, if the Administrator preserves such authority at
the time of grant by language to this effect in its authorizing
resolutions or otherwise.
5.2.6 Expiration of Grant Authority. As required pursuant to Section
162(m) of the Code and the regulations promulgated thereunder, the
Administrator's authority to grant new awards that are intended to
qualify as performance-based compensation within the meaning of
Section 162(m) of the Code (other than Qualifying Options and
Qualifying SARs) shall terminate upon the first meeting of the
Corporation's stockholders that occurs in the fifth year following the
year in which the Corporation's stockholders first approve this Plan.
5.3 Award Agreements. Each award shall be evidenced by a written award
agreement in the form approved by the Administrator and executed on
behalf of the Corporation and, if required by the Administrator,
executed by the recipient of the award. The Administrator may
authorize any officer of the Corporation (other than the particular
award recipient) to execute any or all award agreements on behalf of
the Corporation. The award agreement shall set forth the material
terms and conditions of the award as established by the Administrator
consistent with the express limitations of this Plan.
9
5.4 Deferrals and Settlements. Payment of awards may be in the form of
cash, Common Stock, other awards or combinations thereof as the
Administrator shall determine, and with such restrictions as it may
impose. The Administrator may also require or permit participants to
elect to defer the issuance of shares or the settlement of awards in
cash under such rules and procedures as it may establish under this
Plan. The Administrator may also provide that deferred settlements
include the payment or crediting of interest or other earnings on the
deferral amounts, or the payment or crediting of dividend equivalents
where the deferred amounts are denominated in shares.
5.5 Consideration for Common Stock or Awards. The purchase price for
any award granted under this Plan or the Common Stock to be delivered
pursuant to an award, as applicable, may be paid by means of any
lawful consideration as determined by the Administrator, including,
without limitation, one or a combination of the following methods: o
services rendered by the recipient of such award;
o cash, check payable to the order of the Corporation, or
electronic funds transfer;
o notice and third party payment in such manner as may be
authorized by the Administrator;
o the delivery of previously owned shares of Common Stock;
o by a reduction in the number of shares otherwise deliverable
pursuant to the award; or
o subject to such procedures as the Administrator may adopt,
pursuant to a "cashless exercise" with a third party who provides
financing for the purposes of (or who otherwise facilitates) the
purchase or exercise of awards.
In no event shall any shares newly-issued by the Corporation be issued
for less than the minimum lawful consideration for such shares or for
consideration other than consideration permitted by applicable state
law. In the event that the Administrator allows a participant to
exercise an award by delivering shares of Common Stock previously
owned by such participant and unless otherwise expressly provided by
the Administrator, any shares delivered which were initially acquired
by the participant from the Corporation (upon exercise of a stock
option or otherwise) must have been owned by the participant at least
six months as of the date of delivery. Shares of Common Stock used to
satisfy the exercise price of an option shall be valued at their fair
market value on the date of exercise. The Corporation will not be
obligated to deliver any shares unless and until it receives full
payment of the exercise or purchase price therefor and any related
withholding obligations under Section 8.5 and any other conditions to
exercise or purchase have been satisfied. Unless otherwise expressly
provided in the applicable award agreement, the Administrator may at
any time eliminate or limit a participant's ability to pay the
purchase or exercise price of any award or shares by any method other
than cash payment to the Corporation.
10
5.6 Definition of Fair Market Value. For purposes of this Plan, "fair
market value" shall mean, unless otherwise determined or provided by
the Administrator in the circumstances, the closing price of a share
of Common Stock as reported on the composite tape for securities
listed on the American Stock Exchange (the "Exchange") for the date in
question or, if no sales of Common Stock were made on the Exchange on
that date, the closing price of a share of Common Stock as reported on
said composite tape for the next preceding day on which sales of
Common Stock were made on the Exchange. The Administrator may,
however, provide with respect to one or more awards that the fair
market value shall equal the last closing price of a share of Common
Stock as reported on the composite tape for securities listed on the
Exchange available on the date in question or the average of the high
and low trading prices of a share of Common Stock as reported on the
composite tape for securities listed on the Exchange for the date in
question or the most recent trading day. If the Common Stock is no
longer listed or is no longer actively traded on the Exchange as of
the applicable date, the fair market value of the Common Stock shall
be the value as reasonably determined by the Administrator for
purposes of the award in the circumstances. The Administrator also may
adopt a different methodology for determining fair market value with
respect to one or more awards if a different methodology is necessary
or advisable to secure any intended favorable tax, legal or other
treatment for the particular award(s) (for example, and without
limitation, the Administrator may provide that fair market value for
purposes of one or more awards will be based on an average of closing
prices (or the average of high and low daily trading prices) for a
specified period preceding the relevant date).
5.7 Transfer Restrictions.
5.7.1 Limitations on Exercise and Transfer. Unless otherwise expressly
provided in (or pursuant to) this Section 5.7, by applicable law and
by the award agreement, as the same may be amended, (a) all awards are
non-transferable and shall not be subject in any manner to sale,
transfer, anticipation, alienation, assignment, pledge, encumbrance or
charge; (b) awards shall be exercised only by the participant; and (c)
amounts payable or shares issuable pursuant to any award shall be
delivered only to (or for the account of) the participant.
5.7.2 Exceptions. The Administrator may permit awards to be exercised
by and paid to, or otherwise transferred to, other persons or entities
pursuant to such conditions and procedures, including limitations on
subsequent transfers, as the Administrator may, in its sole
discretion, establish in writing. Any permitted transfer shall be
subject to compliance with applicable federal and state securities
laws.
5.7.3 Further Exceptions to Limits on Transfer. The exercise and
transfer restrictions in Section 5.7.1 shall not apply to:
(a) transfers to the Corporation,
11
(b) the designation of a beneficiary to receive benefits in the
event of the participant's death or, if the participant has died,
transfers to or exercise by the participant's beneficiary, or, in
the absence of a validly designated beneficiary, transfers by
will or the laws of descent and distribution,
(c) subject to any applicable limitations on ISOs, transfers to a
family member (or former family member) pursuant to a domestic
relations order if approved or ratified by the Administrator,
(d) if the participant has suffered a disability, permitted
transfers or exercises on behalf of the participant by his or her
legal representative, or
(e) the authorization by the Administrator of "cashless exercise"
procedures with third parties who provide financing for the
purpose of (or who otherwise facilitate) the exercise of awards
consistent with applicable laws and the express authorization of
the Administrator.
5.8 International Awards. One or more awards may be granted to
Eligible Persons who provide services to the Corporation or one of its
Subsidiaries outside of the United States. Any awards granted to such
persons may be granted pursuant to the terms and conditions of any
applicable sub-plans, if any, appended to this Plan and approved by
the Administrator.
6. EFFECT OF TERMINATION OF SERVICE ON AWARDS
6.1 General. The Administrator shall establish the effect of a
termination of employment or service on the rights and benefits under
each award under this Plan and in so doing may make distinctions based
upon, inter alia, the cause of termination and type of award. If the
participant is not an employee of the Corporation or one of its
Subsidiaries and provides other services to the Corporation or one of
its Subsidiaries, the Administrator shall be the sole judge for
purposes of this Plan (unless a contract or the award otherwise
provides) of whether the participant continues to render services to
the Corporation or one of its Subsidiaries and the date, if any, upon
which such services shall be deemed to have terminated.
6.2 Events Not Deemed Terminations of Service. Unless the express
policy of the Corporation or one of its Subsidiaries, or the
Administrator, otherwise provides, the employment relationship shall
not be considered terminated in the case of (a) sick leave, (b)
military leave, or (c) any other leave of absence authorized by the
Corporation or one of its Subsidiaries, or the Administrator; provided
that unless reemployment upon the expiration of such leave is
guaranteed by contract or law, such leave is for a period of not more
than 90 days. In the case of any employee of the Corporation or one of
its Subsidiaries on an approved leave of absence, continued vesting of
the award while on leave from the employ of the Corporation or one of
its Subsidiaries may be suspended until the employee returns to
service, unless the Administrator otherwise provides or applicable law
otherwise requires. In no event shall an award be exercised after the
expiration of the term set forth in the award agreement.
12
6.3 Effect of Change of Subsidiary Status. For purposes of this Plan
and any award, if an entity ceases to be a Subsidiary of the
Corporation a termination of employment or service shall be deemed to
have occurred with respect to each Eligible Person in respect of such
Subsidiary who does not continue as an Eligible Person in respect of
another entity within the Corporation or another Subsidiary that
continues as such after giving effect to the transaction or other
event giving rise to the change in status.
7. ADJUSTMENTS; ACCELERATION
7.1 Adjustments. Upon or in contemplation of: any reclassification,
recapitalization, stock split (including a stock split in the form of
a stock dividend) or reverse stock split ("stock split"); any merger,
combination, consolidation, or other reorganization; any spin-off,
split-up, or similar extraordinary dividend distribution in respect of
the Common Stock (whether in the form of securities or property); any
exchange of Common Stock or other securities of the Corporation, or
any similar, unusual or extraordinary corporate transaction in respect
of the Common Stock; or a sale of all or substantially all the
business or assets of the Corporation as an entirety; then the
Administrator shall, in such manner, to such extent (if any) and at
such time as it deems appropriate and equitable in the circumstances:
(a) proportionately adjust any or all of (1) the number and type
of shares of Common Stock (or other securities) that thereafter
may be made the subject of awards (including the specific share
limits, maximums and numbers of shares set forth elsewhere in
this Plan), (2) the number, amount and type of shares of Common
Stock (or other securities or property) subject to any or all
outstanding awards, (3) the grant, purchase, or exercise price
(which term includes the base price of any SAR or similar right)
of any or all outstanding awards, (4) the securities, cash or
other property deliverable upon exercise or payment of any
outstanding awards, or (5) (subject to Sections 7.8 and 8.8.3(a))
the performance standards applicable to any outstanding awards,
or
(b) make provision for a cash payment or for the assumption,
substitution or exchange of any or all outstanding share-based
awards or the cash, securities or property deliverable to the
holder of any or all outstanding share-based awards, based upon
the distribution or consideration payable to holders of the
Common Stock upon or in respect of such event.
The Administrator may adopt such valuation methodologies for
outstanding awards as it deems reasonable in the event of a cash or
property settlement and, in the case of options, SARs or similar
rights, but without limitation on other methodologies, may base such
settlement solely upon the excess if any of the per share amount
payable upon or in respect of such event over the exercise or base
price of the award. With respect to any award of an ISO, the
Administrator may make such an adjustment that causes the option to
cease to qualify as an ISO without the consent of the affected
participant.
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In any of such events, the Administrator may take such action prior to
such event to the extent that the Administrator deems the action
necessary to permit the participant to realize the benefits intended
to be conveyed with respect to the underlying shares in the same
manner as is or will be available to stockholders generally. In the
case of any stock split or reverse stock split, if no action is taken
by the Administrator, the proportionate adjustments contemplated by
clause (a) above shall nevertheless be made.
7.2 Automatic Acceleration of Awards. Upon a dissolution of the
Corporation or other event described in Section 7.1 that the
Corporation does not survive (or does not survive as a public
Corporation or one of its Subsidiaries in respect of its Common
Stock), then each then-outstanding option and SAR shall become fully
vested, all shares of restricted stock then outstanding shall fully
vest free of restrictions, and each other award granted under this
Plan that is then outstanding shall become payable to the holder of
such award; provided that such acceleration provision shall not apply,
unless otherwise expressly provided by the Administrator, with respect
to any award to the extent that the Administrator has made a provision
for the substitution, assumption, exchange or other continuation or
settlement of the award, or the award would otherwise continue in
accordance with its terms, in the circumstances.
7.3 Possible Acceleration of Awards. Without limiting Section 7.2, in
the event of a Change in Control Event (as defined below), the
Administrator may, in its discretion, provide that any outstanding
option or SAR shall become fully vested, that any share of restricted
stock then outstanding shall fully vest free of restrictions, and that
any other award granted under this Plan that is then outstanding shall
be payable to the holder of such award. The Administrator may take
such action with respect to all awards then outstanding or only with
respect to certain specific awards identified by the Administrator in
the circumstances. For purposes of this Plan, "Change in Control
Event" means any of the following:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act
(a "Person")) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 30% or more of
either (1) the then-outstanding shares of common stock of the
Corporation (the "Outstanding Company Common Stock") or (2) the
combined voting power of the then-outstanding voting securities
of the Corporation entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this definition, the
following acquisitions shall not constitute a Change in Control
Event; (A) any acquisition directly from the Corporation, (B) any
acquisition by the Corporation, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained
by the Corporation or any affiliate of the Corporation or a
successor, or (D) any acquisition by any entity pursuant to a
transaction that complies with Sections (c)(1), (2) and (3)
below;
14
(b) Individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the Effective Date
whose election, or nomination for election by the Corporation's
stockholders, was approved by a vote of at least two-thirds of
the directors then comprising the Incumbent Board (including for
these purposes, the new members whose election or nomination was
so approved, without counting the member and his predecessor
twice) shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as
a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board;
(c) Consummation of a reorganization, merger, statutory share
exchange or consolidation or similar corporate transaction
involving the Corporation or any of its Subsidiaries, a sale or
other disposition of all or substantially all of the assets of
the Corporation, or the acquisition of assets or stock of another
entity by the Corporation or any of its Subsidiaries (each, a
"Business Combination"), in each case unless, following such
Business Combination, (1) all or substantially all of the
individuals and entities that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding Company
Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the
then-outstanding shares of common stock and the combined voting
power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of
the entity resulting from such Business Combination (including,
without limitation, an entity that, as a result of such
transaction, owns the Corporation or all or substantially all of
the Corporation's assets directly or through one or more
subsidiaries (a "Parent")) in substantially the same proportions
as their ownership immediately prior to such Business Combination
of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities, as the case may be, (2) no Person
(excluding any entity resulting from such Business Combination or
a Parent or any employee benefit plan (or related trust) of the
Corporation or such entity resulting from such Business
15
Combination or Parent) beneficially owns, directly or indirectly,
30% or more of, respectively, the then-outstanding shares of
common stock of the entity resulting from such Business
Combination or the combined voting power of the then-outstanding
voting securities of such entity, except to the extent that the
ownership in excess of 30% existed prior to the Business
Combination, and (3) at least a majority of the members of the
board of directors or trustees of the entity resulting from such
Business Combination or a Parent were members of the Incumbent
Board at the time of the execution of the initial agreement or of
the action of the Board providing for such Business Combination;
or
(d) Approval by the stockholders of the Corporation of a complete
liquidation or dissolution of the Corporation other than in the
context of a transaction that does not constitute a Change in
Control Event under clause (c) above.
7.4 Early Termination of Awards. Any award that has been accelerated
as required or contemplated by Section 7.2 or 7.3 (or would have been
so accelerated but for Section 7.5, 7.6 or 7.7) shall terminate upon
the related event referred to in Section 7.2 or 7.3, as applicable,
subject to any provision that has been expressly made by the
Administrator, through a plan of reorganization or otherwise, for the
survival, substitution, assumption, exchange or other continuation or
settlement of such award and provided that, in the case of options and
SARs that will not survive, be substituted for, assumed, exchanged, or
otherwise continued or settled in the transaction, the holder of such
award shall be given reasonable advance notice of the impending
termination and a reasonable opportunity to exercise his or her
outstanding options and SARs in accordance with their terms before the
termination of such awards (except that in no case shall more than ten
days' notice of accelerated vesting and the impending termination be
required and any acceleration may be made contingent upon the actual
occurrence of the event).
7.5 Other Acceleration Rules. Any acceleration of awards pursuant to
this Section 7 shall comply with applicable legal requirements and, if
necessary to accomplish the purposes of the acceleration or if the
circumstances require, may be deemed by the Administrator to occur a
limited period of time not greater than 30 days before the event.
Without limiting the generality of the foregoing, the Administrator
may deem an acceleration to occur immediately prior to the applicable
event and/or reinstate the original terms of an award if an event
giving rise to an acceleration does not occur. The Administrator may
override the provisions of Section 7.2, 7.3, 7.4 and/or 7.6 by express
provision in the award agreement and may accord any Eligible Person a
right to refuse any acceleration, whether pursuant to the award
agreement or otherwise, in such circumstances as the Administrator may
approve. The portion of any ISO accelerated in connection with a
Change in Control Event or any other action permitted hereunder shall
remain exercisable as an ISO only to the extent the applicable
$100,000 limitation on ISOs is not exceeded. To the extent exceeded,
the accelerated portion of the option shall be exercisable as a
nonqualified stock option under the Code.
7.6 Possible Rescission of Acceleration. If the vesting of an award
has been accelerated expressly in anticipation of an event or upon
stockholder approval of an event and the Administrator later
determines that the event will not occur, the Administrator may
rescind the effect of the acceleration as to any then outstanding and
unexercised or otherwise unvested awards.
16
7.7 Golden Parachute Limitation. Notwithstanding anything else
contained in this Section 7 to the contrary, in no event shall an
award be accelerated under this Plan to an extent or in a manner which
would not be fully deductible by the Corporation or one of its
Subsidiaries for federal income tax purposes because of Section 280G
of the Code, nor shall any payment hereunder be accelerated to the
extent any portion of such accelerated payment would not be deductible
by the Corporation or one of its Subsidiaries because of Section 280G
of the Code. If a participant would be entitled to benefits or
payments hereunder and under any other plan or program that would
constitute "parachute payments" as defined in Section 280G of the
Code, then the participant may by written notice to the Corporation
designate the order in which such parachute payments will be reduced
or modified so that the Corporation or one of its Subsidiaries is not
denied federal income tax deductions for any "parachute payments"
because of Section 280G of the Code. Notwithstanding the foregoing, if
a participant is a party to an employment or other agreement with the
Corporation or one of its Subsidiaries, or is a participant in a
severance program sponsored by the Corporation or one of its
Subsidiaries, that contains express provisions regarding Section 280G
and/or Section 4999 of the Code (or any similar successor provision),
the Section 280G and/or Section 4999 provisions of such employment or
other agreement or plan, as applicable, shall control as to any awards
held by that participant (for example, and without limitation, a
participant may be a party to an employment agreement with the
Corporation or one of its Subsidiaries that provides for a "gross-up"
as opposed to a "cut-back" in the event that the Section 280G
thresholds are reached or exceeded in connection with a change in
control and, in such event, the Section 280G and/or Section 4999
provisions of such employment agreement shall control as to any awards
held by that participant).
8. OTHER PROVISIONS
8.1 Compliance with Laws. This Plan, the granting and vesting of
awards under this Plan, the offer, issuance and delivery of shares of
Common Stock, the acceptance of promissory notes and/or the payment of
money under this Plan or under awards are subject to compliance with
all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law,
federal margin requirements) and to such approvals by any listing,
regulatory or governmental authority as may, in the opinion of counsel
for the Corporation, be necessary or advisable in connection
therewith. The person acquiring any securities under this Plan will,
if requested by the Corporation or one of its Subsidiaries, provide
such assurances and representations to the Corporation or one of its
Subsidiaries as the Administrator may deem necessary or desirable to
assure compliance with all applicable legal and accounting
requirements.
8.2 Employment Status. No person shall have any claim or rights to be
granted an award (or additional awards, as the case may be) under this
Plan, subject to any express contractual rights (set forth in a
document other than this Plan) to the contrary.
8.3 No Employment/Service Contract. Nothing contained in this Plan (or
in any other documents under this Plan or in any award) shall confer
upon any Eligible Person or other participant any right to continue in
the employ or other service of the Corporation or one of its
Subsidiaries, constitute any contract or agreement of employment or
other service or affect an employee's status as an employee at will,
nor shall interfere in any way with the right of the Corporation or
one of its Subsidiaries to change a person's compensation or other
benefits, or to terminate his or her employment or other service, with
or without cause. Nothing in this Section 8.3, however, is intended to
adversely affect any express independent right of such person under a
separate employment or service contract other than an award agreement.
17
8.4 Plan Not Funded. Awards payable under this Plan shall be payable
in shares or from the general assets of the Corporation, and no
special or separate reserve, fund or deposit shall be made to assure
payment of such awards. No participant, beneficiary or other person
shall have any right, title or interest in any fund or in any specific
asset (including shares of Common Stock, except as expressly otherwise
provided) of the Corporation or one of its Subsidiaries by reason of
any award hereunder. Neither the provisions of this Plan (or of any
related documents), nor the creation or adoption of this Plan, nor any
action taken pursuant to the provisions of this Plan shall create, or
be construed to create, a trust of any kind or a fiduciary
relationship between the Corporation or one of its Subsidiaries and
any participant, beneficiary or other person. To the extent that a
participant, beneficiary or other person acquires a right to receive
payment pursuant to any award hereunder, such right shall be no
greater than the right of any unsecured general creditor of the
Corporation.
8.5 Tax Withholding. Upon any exercise, vesting, or payment of any
award or upon the disposition of shares of Common Stock acquired
pursuant to the exercise of an ISO prior to satisfaction of the
holding period requirements of Section 422 of the Code, the
Corporation or one of its Subsidiaries shall have the right at its
option to:
(a) require the participant (or the participant's personal
representative or beneficiary, as the case may be) to pay or
provide for payment of at least the minimum amount of any taxes
which the Corporation or one of its Subsidiaries may be required
to withhold with respect to such award event or payment; or
(b) deduct from any amount otherwise payable in cash to the
participant (or the participant's personal representative or
beneficiary, as the case may be) the minimum amount of any taxes
which the Corporation or one of its Subsidiaries may be required
to withhold with respect to such cash payment.
In any case where a tax is required to be withheld in connection with
the delivery of shares of Common Stock under this Plan, the
Administrator may in its sole discretion (subject to Section 8.1)
grant (either at the time of the award or thereafter) to the
participant the right to elect, pursuant to such rules and subject to
such conditions as the Administrator may establish, to have the
Corporation reduce the number of shares to be delivered by (or
otherwise reacquire) the appropriate number of shares, valued in a
consistent manner at their fair market value or at the sales price in
accordance with authorized procedures for cashless exercises,
18
necessary to satisfy the minimum applicable withholding obligation on
exercise, vesting or payment. In no event shall the shares withheld
exceed the minimum whole number of shares required for tax withholding
under applicable law. The Corporation may, with the Administrator's
approval, accept one or more promissory notes from any Eligible Person
in connection with taxes required to be withheld upon the exercise,
vesting or payment of any award under this Plan; provided that any
such note shall be subject to terms and conditions established by the
Administrator and the requirements of applicable law.
8.6 Effective Date, Termination and Suspension, Amendments.
8.6.1 Effective Date. This Plan is effective as of August 13, 2004,
the date of its approval by the Board (the "Effective Date"). This
Plan shall be submitted for and subject to stockholder approval no
later than twelve months after the Effective Date. Unless earlier
terminated by the Board, this Plan shall terminate at the close of
business on the day before the fifth anniversary of the Effective
Date. After the termination of this Plan either upon such stated
expiration date or its earlier termination by the Board, no additional
awards may be granted under this Plan, but previously granted awards
(and the authority of the Administrator with respect thereto,
including the authority to amend such awards) shall remain outstanding
in accordance with their applicable terms and conditions and the terms
and conditions of this Plan.
8.6.2 Board Authorization. The Board may, at any time, terminate or,
from time to time, amend, modify or suspend this Plan, in whole or in
part. No awards may be granted during any period that the Board
suspends this Plan.
8.6.3 Stockholder Approval. To the extent then required by applicable
law or any applicable listing agency or required under Sections 162,
422 or 424 of the Code to preserve the intended tax consequences of
this Plan, or deemed necessary or advisable by the Board, any
amendment to this Plan shall be subject to stockholder approval.
8.6.4 Amendments to Awards. Without limiting any other express
authority of the Administrator under (but subject to) the express
limits of this Plan, the Administrator by agreement or resolution may
waive conditions of or limitations on awards to participants that the
Administrator in the prior exercise of its discretion has imposed,
without the consent of a participant, and (subject to the requirements
of Sections 3.2 and 8.6.5) may make other changes to the terms and
conditions of awards. Any amendment or other action that would
constitute a repricing of an award is subject to the limitations set
forth in Section 3.2(g).
8.6.5 Limitations on Amendments to Plan and Awards. No amendment,
suspension or termination of this Plan or change of or affecting any
outstanding award shall, without written consent of the participant,
affect in any manner materially adverse to the participant any rights
or benefits of the participant or obligations of the Corporation under
any award granted under this Plan prior to the effective date of such
change. Changes, settlements and other actions contemplated by Section
7 shall not be deemed to constitute changes or amendments for purposes
of this Section 8.6.
19
8.7 Privileges of Stock Ownership. Except as otherwise expressly
authorized by the Administrator or this Plan, a participant shall not
be entitled to any privilege of stock ownership as to any shares of
Common Stock not actually delivered to and held of record by the
participant. No adjustment will be made for dividends or other rights
as a stockholder for which a record date is prior to such date of
delivery.
8.8 Governing Law; Construction; Severability.
8.8.1 Choice of Law. This Plan, the awards, all documents evidencing
awards and all other related documents shall be governed by, and
construed in accordance with the laws of the State of Delaware.
8.8.2 Severability. If a court of competent jurisdiction holds any
provision invalid and unenforceable, the remaining provisions of this
Plan shall continue in effect.
8.8.3 Plan Construction.
(a) Rule 16b-3. It is the intent of the Corporation that the
awards and transactions permitted by awards be interpreted in a
manner that, in the case of participants who are or may be
subject to Section 16 of the Exchange Act, qualify, to the
maximum extent compatible with the express terms of the award,
for exemption from matching liability under Rule 16b-3
promulgated under the Exchange Act. Notwithstanding the
foregoing, the Corporation shall have no liability to any
participant for Section 16 consequences of awards or events under
awards if an award or event does not so qualify.
(b) Section 162(m). Awards under Section 5.1.4 to persons
described in Section 5.2 that are either granted or become
vested, exercisable or payable based on attainment of one or more
performance goals related to the Business Criteria, as well as
Qualifying Options and Qualifying SARs granted to persons
described in Section 5.2, that are approved by a committee
composed solely of two or more outside directors (as this
requirement is applied under Section 162(m) of the Code) shall be
deemed to be intended as performance-based compensation within
the meaning of Section 162(m) of the Code unless such committee
provides otherwise at the time of grant of the award. It is the
further intent of the Corporation that (to the extent the
Corporation or one of its Subsidiaries or awards under this Plan
may be or become subject to limitations on deductibility under
Section 162(m) of the Code) any such awards and any other
Performance-Based Awards under Section 5.2 that are granted to or
held by a person subject to Section 162(m) will qualify as
performance-based compensation or otherwise be exempt from
deductibility limitations under Section 162(m).
20
8.9 Captions. Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate
reference. Such headings shall not be deemed in any way material or
relevant to the construction or interpretation of this Plan or any
provision thereof.
8.10 Stock-Based Awards in Substitution for Stock Options or Awards
Granted by Other Corporation. Awards may be granted to Eligible
Persons in substitution for or in connection with an assumption of
employee stock options, SARs, restricted stock or other stock-based
awards granted by other entities to persons who are or who will become
Eligible Persons in respect of the Corporation or one of its
Subsidiaries, in connection with a distribution, merger or other
reorganization by or with the granting entity or an affiliated entity,
or the acquisition by the Corporation or one of its Subsidiaries,
directly or indirectly, of all or a substantial part of the stock or
assets of the employing entity. The awards so granted need not comply
with other specific terms of this Plan, provided the awards reflect
only adjustments giving effect to the assumption or substitution
consistent with the conversion applicable to the Common Stock in the
transaction and any change in the issuer of the security. Any shares
that are delivered and any awards that are granted by, or become
obligations of, the Corporation, as a result of the assumption by the
Corporation of, or in substitution for, outstanding awards previously
granted by an acquired company (or previously granted by a predecessor
employer (or direct or indirect parent thereof) in the case of persons
that become employed by the Corporation or one of its Subsidiaries in
connection with a business or asset acquisition or similar
transaction) shall not be counted against the Share Limit or other
limits on the number of shares available for issuance under this Plan.
8.11 Non-Exclusivity of Plan. Nothing in this Plan shall limit or be
deemed to limit the authority of the Board or the Administrator to
grant awards or authorize any other compensation, with or without
reference to the Common Stock, under any other plan or authority.
8.12 No Corporate Action Restriction. The existence of this Plan, the
award agreements and the awards granted hereunder shall not limit,
affect or restrict in any way the right or power of the Board or the
stockholders of the Corporation to make or authorize: (a) any
adjustment, recapitalization, reorganization or other change in the
capital structure or business of the Corporation or any Subsidiary,
(b) any merger, amalgamation, consolidation or change in the ownership
of the Corporation or any Subsidiary, (c) any issue of bonds,
debentures, capital, preferred or prior preference stock ahead of or
affecting the capital stock (or the rights thereof) of the Corporation
or any Subsidiary, (d) any dissolution or liquidation of the
Corporation or any Subsidiary, (e) any sale or transfer of all or any
part of the assets or business of the Corporation or any Subsidiary,
or (f) any other corporate act or proceeding by the Corporation or any
Subsidiary. No participant, beneficiary or any other person shall have
any claim under any award or award agreement against any member of the
Board or the Administrator, or the Corporation or any employees,
officers or agents of the Corporation or any Subsidiary, as a result
of any such action.
21
8.13 Other Company Benefit and Compensation Programs. Payments and
other benefits received by a participant under an award made pursuant
to this Plan shall not be deemed a part of a participant's
compensation for purposes of the determination of benefits under any
other employee welfare or benefit plans or arrangements, if any,
provided by the Corporation or any Subsidiary, except where the
Administrator expressly otherwise provides or authorizes in writing.
Awards under this Plan may be made in addition to, in combination
with, as alternatives to or in payment of grants, awards or
commitments under any other plans or arrangements of the Corporation
or its Subsidiaries.
22
Form of Proxy
NTN COMMUNICATIONS, INC.
5966 La Place Court
Suite 100
Carlsbad, California 92008
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James B. Frakes and Kathy Miles, and each or
either of them, with full power of substitution, as proxy holders to represent
and vote, as designated on the reverse side, all shares of Common Stock of NTN
Communications, Inc. (the "Company") held of record by the undersigned on August
16, 2004, at the Special Meeting of stockholders to be held on September 30,
2004 and at any adjournments thereof.
(Continued and to be signed on the reverse side)
Please date, sign and mail your
proxy card back as soon as possible!
Special Meeting of Stockholders
NTN COMMUNICATIONS, INC.
September 30, 2004
/~ PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED /~
_
|X| Please mark your
votes as in this
example.
(Instructions: To withhold authority to vote for any individual nominee, draw a
line through such nominee's name in the list at left.)
FOR AGAINST ABSTAIN
_ _ _
1. Approval to adopt the NTN Communications, Inc. 2004 Performance |_| |_| |_|
Incentive Plan
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting
Signature Signature if held jointly Date:
---------------- ------------------ ----
NOTE - Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by an authorized partner.