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Horizon Lines DEF 14A 2009 Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Filed by the
Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
o Preliminary
Proxy Statement
þ Definitive
Proxy Statement
o Definitive
Additional Materials
Horizon Lines, Inc.
(Name of Registrant as Specified In
Its Charter)
N/A
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ No
fee required.
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To our stockholders:
You are invited to be present, either in person or by proxy, at
the annual meeting of stockholders (the “Annual
Meeting”) of Horizon Lines, Inc., to be held at
11:00 a.m., local time, on Tuesday, June 2, 2009 at
The Charlotte City Club, Interstate Tower, 31st Floor,
121 West Trade Street, Charlotte, North Carolina 28202. The
Annual Meeting is being held for the following purposes:
1. To elect as Class I directors the three nominees
named in this Proxy Statement to serve a three-year term on the
Company’s Board of Directors;
2. To approve the Horizon Lines, Inc. 2009 Incentive
Compensation Plan;
3. To approve the Horizon Lines, Inc. 2009 Employee Stock
Purchase Plan;
4. To ratify the action of the Company’s Audit
Committee in appointing Ernst & Young LLP as our
independent registered public accounting firm for our fiscal
year ending December 20, 2009; and
5. To transact any other business as may properly come
before the Annual Meeting or any adjournment or postponement of
the Annual Meeting.
The Board of Directors has set the close of business on
April 13, 2009 as the record date for the determination of
Stockholders who will be entitled to notice of and voting rights
at the Annual Meeting (the “Record Date”). The list of
Stockholders entitled to vote at the Annual Meeting will be
available for inspection, as required by the Company’s
Bylaws, at the Company’s headquarters at least ten days
before the Annual Meeting. The Company’s headquarters are
located at 4064 Colony Road in Charlotte, North Carolina 28211.
The Board of Directors recommends voting FOR each of the
above proposals.
Whether or not you expect to be present in person at the
meeting, please sign and date the accompanying proxy and return
it promptly in the enclosed postage paid reply envelope. This
will assist us in preparing for the meeting.
The Proxy Statement and our 2008 Annual Report are
available
on the Company’s website,
http://www.horizonlines.com.
By Order of the Board of Directors,
/s/ Robert
S. Zuckerman
Robert S. Zuckerman,
Secretary
April 16, 2009
Charlotte, North Carolina
HORIZON
LINES, INC.
4064 Colony Road
Charlotte, North Carolina 28211
(704) 973-7000
This Proxy Statement and accompanying proxy card are being
mailed beginning on or around April 16, 2009 in connection
with the solicitation of proxies by the Board of Directors of
Horizon Lines, Inc., for the purposes set forth in the
“Notice of Annual Meeting of Stockholders.”
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GENERAL
INFORMATION
We are providing this Proxy Statement in connection with the
solicitation by our Board of Directors (the “Board”)
of proxies to be voted at the Annual Meeting of our Stockholders
to be held on June 2, 2009, and any adjournment or
postponement thereof (collectively, the “Annual
Meeting”). The meeting will be held at The Charlotte City
Club, Interstate Tower, 31st Floor, 121 West Trade
Street, Charlotte, North Carolina 28202 at 11:00 a.m.,
local time. This Proxy Statement and accompanying form of proxy
are first being sent or given to our stockholders on or about
April 16, 2009. Our annual report (the “Annual
Report”) for the fiscal year ended December 21, 2008
(“fiscal 2008”) is enclosed with this Proxy Statement.
Who is
soliciting my vote?
Our Board is soliciting your vote at the 2009 Annual Meeting.
Our stockholders will vote on the matters described in this
Proxy Statement. Additionally, our management will present a
report on the Company and respond to questions from our
stockholders.
A proxy is a legal designation giving another person permission
to vote stock that you own. The person you designate is called
your “proxy.” The proxy card that is included with
this Proxy Statement permits you to designate Robert S.
Zuckerman, our Vice President, General Counsel and Secretary,
and Michael T. Avara, our Senior Vice President and Chief
Financial Officer, as your proxy for the Annual Meeting.
Only the record holders of our common stock at the close of
business on the Record Date are entitled to vote at the Annual
Meeting. The Record Date for the Annual Meeting is
April 13, 2009. Each outstanding share entitles a
Stockholder as of the Record Date to cast one vote on each
matter to be voted at the Annual Meeting.
If your shares are registered in your name with our transfer
agent, American Stock Transfer and Trust Company, then you
are considered the record holder for those shares. All record
holders receive this Proxy Statement.
If your shares are held through a stock broker, a bank or other
nominee, then you are considered to hold your shares in
“street name.” While you are the beneficial owner of
those shares, you are not considered the “record
holder.” If that is the case, these proxy materials have
been forwarded to you by your stockbroker or bank (who actually
is considered the stockholder of record). As the beneficial
owner of shares of our common stock, you have the right to tell
your broker how to vote using the proxy materials. However,
since you are not the stockholder of record, you may not vote
these shares in person at the Annual Meeting unless you obtain a
legal proxy from the stockholder of record.
All record holders as of the close of business on the Record
Date, or their duly appointed proxies or representatives, may
attend the meeting. We may require stockholders to present valid
picture identification, such as a driver’s license or
passport.
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If you hold your shares in “street name” (that is,
through a broker or other nominee), you will need to bring a
copy of a brokerage statement reflecting your stock ownership as
of the Record Date. If you are a stockholder of record, your
name will appear on our stockholder list.
There are four proposals being presented for shareholder vote at
the Annual Meeting:
What are
the recommendations of our Board?
Our Board recommends that you vote FOR each Proposal.
You have one vote for each share of our common stock that you
own on the Record Date. You are entitled to vote on each
Proposal.
We do not expect any other items of business at the Annual
Meeting. Nonetheless, if there is other business, your proxy
will give discretionary authority to the persons named on the
proxy to vote on any other matters that may properly be brought
before the meeting. Those persons will use their best judgment
in voting your proxy.
Our Certificate of Incorporation provides that each class of
Directors is elected for a term that expires at the third
succeeding annual meeting from the meeting at which those
Directors were nominated. Our Class I Directors were
originally elected to our Board in June 2006.
The presence at the meeting, in person or by proxy, of the
holders of a majority of the voting power of the shares of our
capital stock outstanding on the Record Date and entitled to
vote at the meeting, will constitute a quorum and will permit
business to be conducted at the meeting. 30,785,101 shares
of Common Stock were outstanding as of the Record Date. Proxies
received but marked as abstentions, broker non-votes, and votes
withheld for Director nominees or the ratification of our
independent registered public accounting firm will be included
in the calculation of the number of shares considered to be
present at the meeting.
If your shares are held in “street name” by a broker,
your broker is the record holder; however, the broker is
required to vote the shares in accordance with your
instructions. If you do not give instructions to your broker,
the broker may, but is not required to, exercise discretionary
voting power to vote your shares with respect to
“routine” matters. A broker cannot vote your shares
with respect to “non-routine” matters. A “broker
non-vote” occurs when a bank, broker or other holder of
record holding shares for a beneficial owner does not vote on a
particular proposal because that holder does not have
discretionary voting power for that particular item, and has not
received voting instructions from the beneficial owner.
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Proposal No. 1 and Proposal No. 4 are
routine matters. Proposal No. 2 and
Proposal No. 3 are non-routine matters.
Stockholders can vote prior to the Annual Meeting by the
following methods:
1. By touch-tone telephone or by
internet. — All stockholders of record can
vote their shares by touch-tone telephone within the United
States and Canada, or from anywhere by internet. The proxy card
enclosed with this Proxy Statement provides instructions for
voting by touch-tone telephone and by internet.
Street name record holders may vote by telephone or by internet
if their banks or brokers make those methods available. If that
is the case, your bank or broker will enclose voting
instructions with this Proxy Statement. If you vote through
either of these methods you do not have to return the enclosed
proxy card.
2. By mail. — If you choose to vote by
mail, you must complete the enclosed proxy card and return it in
the postage-paid return envelope.
3. In person. — All stockholders of
record are entitled to vote their shares in person at the Annual
Meeting. Stockholders who hold their shares in “street
name” may also vote their shares in person at the Annual
Meeting if they obtain a legal proxy from the stockholder of
record (the broker, bank or other institution that holds your
shares.).
We request that you vote your shares by telephone or by internet
to help us reduce our postage costs.
Yes. Even after you have submitted your proxy, you may change
your vote at any time before the proxy is exercised by
(i) delivering a written notice of revocation to our
Corporate Secretary; (ii) timely delivering a valid proxy
bearing a later date; or (iii) attending the Annual Meeting
and voting in person. Attendance at the Annual Meeting will not
by itself revoke a previously granted proxy. If you respond to
this solicitation with a valid proxy and do not revoke it before
it is exercised, it will be voted as you specify in the proxy.
Proposal No. 1: Our Bylaws provide
that Directors are elected by a plurality of the votes cast at
the meeting, either in person or by proxy. This means that the
candidate who receives the most votes for a particular slot will
be elected for that slot, whether or not the votes represent a
majority. Broker non-votes and marking your proxy card to
withhold authority for all or some nominees will not be counted
either for or against a Director nominee.
Proposal No. 2, Proposal No. 3 and
Proposal No. 4: Each of these Proposals
require the affirmative vote of a majority of shares present at
the Annual Meeting, either in person or by proxy, and entitled
to vote thereon. Abstentions and broker non-votes will not be
counted either for or against these Proposals.
A majority of the shares of our common stock outstanding on the
Record Date, either in person or by proxy and entitled to vote,
must be present for a quorum at the Annual Meeting. On the
Record Date 30,785,101 shares of our common stock were
outstanding.
Abstentions, broker non-votes and votes withheld for each
Proposal count as “shares present” at the meeting for
the purpose of determining whether a quorum exists.
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If you are a registered stockholder and you return a signed
proxy card without indicating your vote for some or all of the
matters, your shares will be voted FOR each Proposal.
We will pay the entire cost of soliciting proxies for the Annual
Meeting. Proxies will be solicited by mail and through our
website. Proxies may also be solicited by our Directors,
officers and regular employees personally or by telephone or
facsimile, but such persons will not be specifically compensated
for those services. We have also hired The Altman Group, Inc. to
assist us with the solicitation of proxies. We will pay The
Altman Group a fee of $7,000 plus expenses. Banks, brokers,
nominees and other custodians and fiduciaries will be reimbursed
for their reasonable out-of-pocket expenses incurred in
forwarding soliciting material to their principals, the
beneficial owners of our common stock. We will pay the expenses
of preparing, assembling, printing, mailing and soliciting
proxies.
Yes. As permitted by the Securities and Exchange Commission,
(the “SEC”), we are sending a Notice of Internet
Availability of Proxy Materials (the “Notice”), to
certain stockholders who hold shares in “street name”
through a bank, broker or other record holder. These
stockholders will have the ability to access this Proxy
Statement and our 2008 Annual Report on a website identified in
the Notice, or to request a printed set of these materials at no
charge. Instructions on how to access these materials over the
Internet or to request a printed copy may be found in the Notice.
We first made the proxy solicitation materials available to such
beneficial stockholders entitled to vote at the Annual Meeting
at
http://www.proxyvote.com
on or around April 16, 2009. Our 2008 Annual Report was
made available to these beneficial stockholders at the same time
and by the same method. Anyone can access the Proxy Statement
and the Annual Report at
http://www.horizonlines.com.
Any beneficial owner may request to receive his or her proxy
materials in printed form, by mail or electronically, on an
ongoing basis. If you hold your shares through a bank, broker or
other financial institution, please refer to the information
provided by that entity for instructions on how to elect these
options. Choosing to receive future proxy materials
electronically will save us the cost of printing and mailing
documents to stockholders, and will reduce the impact of our
Annual Meetings on the environment. A stockholder’s
election to receive proxy materials by mail or electronically
will remain in effect until the stockholder terminates that
election.
If you received multiple proxy cards, it means that you hold
your shares in different ways (e.g., trust, custodial accounts,
joint tenancy) or in multiple accounts. Each proxy card you
receive should be voted by Internet, telephone or mail.
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Our Board is currently made up of nine Directors, who are
divided into three classes with staggered three-year terms.
James G. Cameron, Alex J. Mandl and Norman Y. Mineta have been
designated as Class I Directors, whose office expires at
the Annual Meeting. Each of them has been nominated for
re-election to our Board. Vern Clark, Dan A. Colussy and William
J. Flynn have been designated as Class II Directors, who
will hold office until the 2010 annual meeting of our
stockholders or until their successors have been duly elected
and qualified. James W. Down, Charles G. Raymond and Thomas P.
Storrs have been designated as Class III Directors who will
hold office until the 2011 annual meeting of our stockholders or
until their successors have been duly elected and qualified.
If you do not want your shares of common stock voted for a
particular Director nominee, you may indicate your preference on
the enclosed proxy card. If, for any reason, any of the nominees
become unavailable for election, the individuals named in the
enclosed proxy card may exercise their discretion to vote for
any substitute proposed by the Board. At this time, the Board
knows of no reason why any nominee might be unavailable to serve.
Our Board recommends a vote FOR each of the following
nominees for election to three-year terms:
Biographical information about these nominees can be found in
the section titled “Identification of Executive Officers
and Directors” on page 10.
CORPORATE
GOVERNANCE MATTERS AND
COMMITTEES OF THE BOARD OF DIRECTORS
Our business and affairs are managed by our Board. To carry out
its responsibilities, the Board has established the three
standing committees described below, in the section titled
“Committees of the Board of Directors.”
In accordance with requirements under the Jones Act and other
federal statutes, our Bylaws provide that no more than a
minority of the members of our Board or any Committee necessary
to constitute a quorum may be
non-U.S. citizens.
In addition, a majority of the members of our Board must be
U.S. citizens. Each member of our Board is a
U.S. Citizen.
The Board believes that a commitment to good corporate
governance enhances shareholder value. To that end, the Board
has adopted governance policies and procedures to ensure
effective governance of the Board and the Company. Our corporate
governance guidelines, as amended from time to time, may be
found on our web site at,
http://www.horizonlines.com.
Our corporate governance guidelines also are available in print
to any stockholder upon written request, directed to our
Corporate Secretary at our principal executive offices, 4064
Colony Road, Suite 200, Charlotte, North Carolina 28211.
Our Board intends to review its corporate governance principles,
Committee charters and corporate governance matters annually or
more often if necessary, to remain current in all aspects of
corporate governance.
We have adopted the Horizon Lines Code of Business Conduct and
Ethics (the “Code of Ethics,”) which is applicable to
all of our Directors, officers and employees, including our
Chief Executive Officer, Chief Financial Officer and other
senior financial officers performing similar functions. The Code
of Ethics satisfies all requirements of the Sarbanes-Oxley Act
and the rules and regulations promulgated by the SEC pursuant to
that Act, as well as the listing standards established by The
New York Stock Exchange. The Code of Ethics is posted on our
website under “Corporate Governance” at
http://www.horizonlines.com.
The Code of Ethics is
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available in print to any stockholder or interested person,
without charge and upon written request directed to our
Corporate Secretary at our principal executive offices.
Waivers of provisions from the Code of Ethics may be granted to
a Director or an executive officer of the Company only by our
Board or by a Committee designated by our Board. Any waiver
granted to any Director or executive officer will be publicly
disclosed as required by the New York Stock Exchange and
applicable laws, rules and regulations.
Our Board, with the assistance of legal counsel, reviews
annually the independence of each Director. During these
reviews, the Board considers all transactions and relationships
between each Director (and his immediate family and affiliates)
and the Company to determine whether any of those transactions
or relationships are inconsistent with a determination of
independence. The Board determined that none of the Directors
who qualify as independent have a material business, financial
or other relationship with the Company, other than as a Director
or stockholder of the Company. In addition, no Director serves
as a director, trustee or executive officer of any charitable
organization that, in any single fiscal year, receives
contributions from the Company in an amount that exceeds the
greater of $1 million or two percent of the revenues of
that organization. Our Board has determined that no transactions
or relationships exist that would disqualify
Messrs. Cameron, Colussy, Down, Flynn, Mineta, Clark, Mandl
or Storrs under the New York Stock Exchange rules and that each
of them satisfies the independence requirements of The New York
Stock Exchange.
In evaluating the independence of Mr. Down, the Board
considered that the Company paid Mr. Down $118,953 for
services he performed as an independent consultant to the
Company during 2006. In determining that Mr. Down is
independent, the Board favorably considered that neither
Mr. Down, nor any immediate family member, has received
more than $120,000 in direct compensation from the Company
during any twelve month period within the last three years,
other than director and committee fees. It is also the
Board’s perception, based on Mr. Down’s past
service and as an independent consultant, that Mr. Down
consistently acts in a manner independent of us.
Our Board also determined that Mr. Raymond, our chief
executive officer, does not satisfy the independence
requirements of the New York Stock Exchange. None of the other
directors determined by the Board to be independent has any
relationship with us other than as director.
In May 2008, the Board created the position of Lead Independent
Director and appointed Mr. Flynn to that position. Pursuant
to our Bylaws, the Lead Independent Director is responsible for
calling, establishing the agendas for, and moderating meetings
or sessions of the non-management or independent directors. The
Lead Independent Director also serves as a liaison between the
Chairman and the independent directors.
Our Board met eleven times and acted by unanimous written
consent two times during fiscal 2008. Each incumbent Director
attended at least 75 percent of the total of all Board and
Committee meetings he was entitled to attend during fiscal 2008,
except Mr. Down who attended 64 percent of the
meetings. All nominees and Directors are invited to attend the
Annual Meeting, but the Company does not have a policy requiring
their attendance. Five Directors attended the 2008 Annual
Meeting in person and two Directors attended that meeting by
telephone.
The non-management directors meet regularly outside the presence
of management in executive sessions. Additionally, certain
independent directors met in executive session two times in
fiscal 2008. After each executive session, a designated Director
updates the chief executive officer on the key items discussed.
The Lead Independent Director presides at all such regularly
scheduled executive sessions of the non-management directors.
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Pursuant to our Bylaws, the Board has established three
committees to perform certain management and administration
functions: the Compensation Committee, the Audit Committee, and
the Nominating and Corporate Governance Committee. The
composition of these Board Committees complies with the rules of
The New York Stock Exchange and the provisions of the
Sarbanes-Oxley Act of 2002, including applicable independence
requirements. The charters of each of the Audit, Compensation
and Nominating and Corporate Governance Committees, as amended
from time to time, are available on our website at
http://www.horizonlines.com
under the “Investors” tab. Once you have accessed
the “Investors” section of our website, click the
“Corporate Governance” link under the “Company
Information” heading. Alternatively, each charter is
available in print to any stockholder, by written request to the
Company’s Corporate Secretary, at the Company’s
principal executive offices, 4064 Colony Road, Suite 200,
Charlotte, North Carolina 28211.
The Compensation Committee was established by the Board to
oversee the determination, implementation and administration of
the compensation for the Company’s executive officers. The
Compensation Committee met six times in fiscal 2008. The members
of the Compensation Committee are Messrs. Flynn (chairman),
Cameron and Colussy. Mr. Jungers also served as a member of
the Compensation Committee until his resignation from the Board
on December 31, 2008. Each member of the Compensation
Committee has been determined by the Board to be independent
under the New York Stock Exchange’s listing requirements,
to be an “outside director” under Section 162(m)
of the Internal Revenue Code and to be a “non-employee
director” under
Rule 16b-3
of the Exchange Act.
The Compensation Committee has the following specific
responsibilities regarding executive compensation:
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The Compensation Committee operates under a written charter that
describes these and other responsibilities that have been
assigned by the Board to the Compensation Committee. The charter
also describes membership standards and procedures of the
Compensation Committee. The Compensation Committee regularly
reports to the Board, reviews the adequacy of its charter at
least annually and conducts an annual evaluation of its
performance.
The Compensation Committee also has the responsibility to review
and evaluate, on at least an annual basis, the compensation for
non-management members of the Board and to make recommendations
to the Board regarding such compensation. Only non-management
Directors are compensated for their service as Directors. The
compensation for non-management Directors is described at
page 36.
Role of Executive Officers in Compensation
Setting. The chief executive officer annually
reviews the performance of each executive officer (other than
the chief executive officer whose performance is reviewed by the
Compensation Committee) and provides recommendations to the
Compensation Committee based on these reviews with respect to
salary adjustments and annual award amounts. Decisions regarding
compensation for other employees are made by the chief executive
officer in consultation with the other executive officers,
except for stock-based compensation which is determined by the
Compensation Committee. The Compensation Committee may exercise
discretion to modify any recommended salary adjustment or
compensation award as it deems appropriate under the
circumstances.
Company management makes recommendations to the Compensation
Committee regarding stock-based compensation for all
non-executive officer employees of the Company. Management also
develops and presents to the Compensation Committee
recommendations for the design of compensation programs,
including stock and cash-based incentives and other programs
designed to attract, motivate and retain key employees.
The Compensation Committee has unrestricted access to management
and may request the participation of management in any
discussion of a particular subject at any meeting. Compensation
Committee meetings are regularly attended by the chief executive
officer and the vice president of human resources, who is
responsible for leading some of the discussions regarding the
Company’s compensation programs. The chief executive
officer and the vice president of human resources do not attend
any meetings held in executive session. The chief executive
officer does not participate in any discussions regarding his
compensation.
The Compensation Committee also meets in executive session
without any members of management present. The Compensation
Committee may request the participation of management or outside
advisers as it deems necessary or appropriate. The Compensation
Committee regularly reports to the Board on compensation matters
and annually reviews the chief executive officer’s
compensation with the Board in executive session of
non-management Directors only.
Use of Compensation Consultants. The
Compensation Committee has the authority, without any further
approval from the Board, to retain advisers and experts as it
deems appropriate, including compensation consultants. In
retaining a compensation consultant, the Compensation Committee
has sole authority to approve the consulting firm’s fees
and other retention terms, and has the sole authority to
terminate the consultant.
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During fiscal 2008, the Compensation Committee engaged an
independent executive compensation consulting firm, Mercer Human
Resource Consulting, to advise it on compensation matters.
Mercer was instructed to help develop a custom peer group and
analyze compensation data for the peer group, to assist in
developing appropriate designs for performance-based
compensation arrangements and to analyze proposed awards of
stock-based compensation and assist in designing the terms of
those awards.
As a result of the departure from Mercer of the Compensation
Committee’s primary consultant in 2008, the Compensation
Committee decided to terminate its engagement with Mercer. The
Compensation Committee then conducted a search for a new
compensation consulting firm. Following this search, the
Compensation Committee engaged the firm of Towers Perrin to
advise it on compensation matters during fiscal 2009. Towers
Perrin does not provide any services to the Company other than
to advise the Compensation Committee on executive and director
compensation.
The members of the Audit Committee are Messrs Storrs (chairman),
Mandl and Cameron. Messrs Storrs and Mandl have each been
designated as “Audit Committee Financial Experts.” The
principal functions of the Audit Committee are:
(i) The Company’s relationship with its independent
auditor; including the auditor’s qualifications,
independence and performance;
(ii) The integrity of the Company’s financial
statements and reporting practices;
(iii) The Company’s compliance with legal and
regulatory requirements; and
(iv) The performance of the Company’s internal audit
function.
The Audit Committee met 4 times in fiscal 2008.
The members of the Nominating and Corporate Governance Committee
are Messrs. Colussy (chairman), Clark and Mineta. The
principal functions of the Nominating and Corporate Governance
Committee are:
The Nominating and Corporate Governance Committee met jointly
with the Board to recommend nominees to the Board of Directors
at a full meeting of the Board in fiscal 2008, though it did not
meet separately from the full Board.
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Pursuant to its charter and our corporate governance guidelines,
the Nominating and Corporate Governance Committee is responsible
for considering and recommending all nominees for election as
Directors, including stockholder nominees. However, the final
approval of any candidate’s nomination is determined by our
Board. The Nominating and Corporate Governance Committee has
established board candidate guidelines which set the criteria to
be considered in evaluating the candidacy of an individual for
membership on the Board. Those Guidelines are attached to our
corporate governance guidelines and are made available on our
website at
http://www.horizonlines.com
under the “Investors” tab.
Suggestions for Directors nominations may be made in writing and
mailed to the Nominating and Corporate Governance Committee,
c/o Robert
S. Zuckerman, Corporate Secretary, at the Company’s
principal executive offices, 4064 Colony Road, Suite 200,
Charlotte, North Carolina 28211. Any such submission must be
accompanied by the written consent of the candidate, which
states that he or she consents to being nominated in the
Company’s Proxy Statement, and serve as a Director, if
elected. Further, such nominations must be submitted in a manner
that complies with Section 2.11 of our Bylaws, which
establishes certain requirements for the information that must
be provided by the nominating stockholder (or Stockholder
Associated Person, as defined in our Bylaws), and the timeliness
of the notice of such nomination. Section 2.11 the
Company’s Bylaws was amended by the Board in January 2009
to ensure that complete information regarding the information
regarding the interest of a nominating stockholder is fully
disclosed. We will furnish a copy of the Bylaws to any person,
without charge, and upon written request directed to our
Corporate Secretary at our principal executive offices.
Our Nominating and Corporate Governance Committee will evaluate
all stockholder-recommended candidates on the same basis as any
other candidate. Among other things, the Nominating and
Corporate Governance Committee will consider the experience and
qualifications of each candidate as well as his or her past or
anticipated contributions to the Board and its Committees.
For more information regarding stockholder nominations of
director candidates for the 2010 Annual Meeting, see the
section titled “Submission of Stockholder Proposals”
in this Proxy Statement, as well as our Bylaws, which are
available at
http://www.horizonlines.com
under the “Investors” tab.
The following table sets forth certain information regarding our
executive officers and the members of our Board, including
nominees for director, as of April 1, 2009:
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Charles G. Raymond has served as President and Chief
Executive Officer and as a director of the Company and Horizon
Lines Holding Corp., or Horizon Lines Holding, since July 2004
and of H-Lines Finance Holding Corp., or H-Lines Finance, since
December 2004, and as a director of Horizon Lines, LLC or
Horizon Lines, since November 1999 and President and Chief
Executive Officer of Horizon Lines since December 1999.
Mr. Raymond became Chairman of our Board in October 2006.
Mr. Raymond has held various senior management positions
during his
42-year
transportation career, including Group Vice
President — Operations and Senior Vice President and
Chief Transportation Officer of
Sea-Land
Service, Inc. from 1994 through 1999. He was an Executive
Officer of CSX Corporation from 1994 to 2003. From 1999 until
2003, he was President and Chief Executive Officer of
Sea-Land
Service Domestic Shipping and CSX Lines, LLC. He currently
serves as a member of the National Maritime Security Advisory
Council. From May 2000 to May 2003, he served as Chairman of the
Marine Transportation National Advisory Council, which was
established by the U.S. Secretary of Transportation. He is
a graduate of the United States Merchant Marine Academy
(1965) and the Harvard Business School Advanced Management
program (1993).
Michael T. Avara was appointed Senior Vice President and
Chief Financial Officer of the Company effective April 4,
2008. Previously, he served as Vice President, Investor
Relations and Treasurer of the Company from September 2007.
Mr. Avara served as Treasurer of the Company, Horizon Lines
Holding and H-Lines Finance from August 2005 through August
2007, as Vice President, Investor Relations, of Horizon Lines
from March 2005 through August 2007 and as Treasurer of Horizon
Lines from March 2004 through August 2007. He is responsible for
the accounting, finance, audit, treasury, risk management,
strategic planning and investor relations functions for Horizon
Lines and its business units. Prior to joining Horizon Lines in
March 2004, Mr. Avara spent 20 years in various
accounting and finance functions at CSX Corporation and its
subsidiaries, where he most recently served for two years as
Assistant Vice President, Corporate Finance, including seven
years with CSX Lines, LLC and
Sea-Land
Service Inc., the predecessors of Horizon Lines, where he held
the position of Controller. Mr. Avara began his career in
public accounting with Coopers & Lybrand and is a
certified public accountant, maintaining a license in the State
of Maryland. Mr. Avara received both an M.B.A. in Finance
and a B.A. in Accounting from Loyola College in Baltimore,
Maryland.
John V. Keenan has served as President and Chief
Operating Officer of Horizon Lines, LLC since September 2007.
Prior to assuming his present position, he served as Senior Vice
President and Chief Transportation Office of the Company from
February 2006 through August 2007, Senior Vice President and
Chief Operating Officer of the Company and Horizon Lines Holding
from July 2004 through January 2006, of Horizon Lines from June
2003 through January 2006 and of H-Lines Finance from December
2004 through January 2006. He is responsible for the integrity
of Horizon Lines’ operational network and oversees vessel
operations, terminal operations, inland operations and equipment
utilization. Mr. Keenan is also responsible for the sales,
marketing and business plan for Horizon Lines, LLC.
Mr. Keenan joined
Sea-Land in
1983 where he held numerous leadership positions. He served as
Vice President, Sales and Marketing for Horizon Lines from
December 2000 to July 2003. A
27-year
veteran of the transportation industry, he began his career in
1979 with the Marine Engineers Benevolent Association, sailing
in the capacity of vessel engineer. He holds a B.E. in Marine
Engineering from the State University of New York at
Fort Schuyler and an M.B.A. from the University of
Tennessee.
Brian W. Taylor has served as President of Horizon
Logistics Holdings, LLC since August 2007. Prior to assuming his
present position, he served as Senior Vice President, Sales and
Marketing, of Horizon Lines, from February 2006 through August
2007. He served as Vice President and General Manager, Hawaii
and Guam, of Horizon Lines from June 2000 through January 2006.
Prior to this appointment, Mr. Taylor was Vice President
and General Manager for the Puerto Rico market from July 1998 to
June 2000. Previously, Mr. Taylor held various management
positions in sales and marketing both in North America and Asia,
including General Manager, of Buyers Consolidated Ltd., Hong
Kong, an affiliate of
Sea-Land. He
joined
Sea-Land in
1984 as a sales representative in Montreal, Canada.
Mr. Taylor received his Bachelor of Commerce and M.B.A. in
Business and Financial Management from Concordia University.
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Robert S. Zuckerman has served as Vice President, General
Counsel and Secretary of the Company and Horizon Lines Holding
since July 2004 and of H-Lines Finance since December 2004,
Secretary of Horizon Lines since January 2000, and Vice
President and General Counsel of Horizon Lines since August
2000. Prior to serving in his current positions,
Mr. Zuckerman was Deputy General Counsel and Secretary of
Sea-Land
Service from 1990 to 2000. He has been with Horizon Lines and
its predecessors for 32 years. Prior to his employment with
Horizon Lines, Mr. Zuckerman served as an Assistant Field
Office Chief with the U.S. Department of Justice, Antitrust
Division, where he worked on the President’s Deregulation
Task Force. Mr. Zuckerman is a former Chairman of the
Transportation and Industry Regulation Committees of the
Antitrust Section of the American Bar Association.
Mr. Zuckerman is a graduate of Brandeis University and
received his law degree from Brooklyn Law School.
James G. Cameron has served as a director of the Company
and Horizon Lines Holding since July 2004 and a director of
H-Lines Finance since December 2004. He also serves as director
of Production Enhancement Group, Inc., an oil field services
company. Mr. Cameron previously served as a director of
Statia Terminals Group N.V., from February 1997, until the
liquidation of such corporation in February 2002.
Mr. Cameron joined a predecessor of Statia Terminals Group
in 1981, and held various positions with predecessors and
subsidiaries of Statia Terminals Group, including President and
Chairman of the Board of Statia Terminals, Inc., the principal
management and administrative subsidiary of Statia Terminals
Group, from 1993 until June 2002. Mr. Cameron is a 1969
graduate of the United States Merchant Marine Academy.
Alex J. Mandl has served as a director of the Company
since June 2007. Mr. Mandl has been the Chairman of the
Board of Gemalto, a global leader in digital security, since
December 2007. From June 2006 to November 2007, he was the
Executive Chairman of Gemalto. Mr. Mandl has also served as
the President and Chief Executive Officer and a member of the
Board of Directors of Gemplus, positions he held since August
2002. He has served as a principal in ASM Investments, a company
focusing on technology investments, since April 2001.
Previously, Mr. Mandl served as Chairman and CEO of
Teligent, President and Chief Operating Officer of AT&T and
Chairman and CEO of
Sea-Land
Service, Inc, the domestic and international predecessor of
Horizon Lines. Mr. Mandl currently serves on the boards of
Gemalto, Dell Inc., Visteon Corporation, Hewitt Associates and
Willamette University. Mr. Mandl holds an MBA from the
University of California at Berkeley and a BA in economics from
Willamette University.
Norman Y. Mineta has served as a director of the Company
since December 2006. Mr. Mineta is currently Vice Chairman
of Hill & Knowlton, one of the world’s premier
communications consultancies. His distinguished career includes
20 years in the U.S. House of Representatives
representing the heart of California’s Silicon Valley, the
chair of the National Civil Aviation Review Commission and
cabinet service under two United States presidents. In December
2006, Mr. Mineta was awarded the Presidential Medal of
Freedom. Mr. Mineta joined the administration of President
George W. Bush in January 2001 and was the longest serving
Secretary of Transportation in the history of that cabinet post.
He also served as U.S. Secretary of Commerce under
President Bill Clinton. Prior to joining the Clinton
Administration, he was vice president of Lockheed Martin.
Dan A. Colussy has served as a director of the Company,
Horizon Lines Holding and H-Lines Finance since April 2005.
Mr. Colussy is the Chairman of Iridium Holdings LLC, the
parent of Iridium Satellite LLC, and, since the inception of
Iridium Satellite in December 2000, has served in senior
management positions with these entities. From 1989 to 1999, he
served as Chairman of CareFirst, Inc. From 1985 to 1997,
Mr. Colussy served as Chairman, President and Chief
Executive Officer of UNC Inc. From 1981 to 1984, he served as
Chairman, President and Chief Executive Officer of Canadian
Pacific Airlines. From 1970 to 1980, Mr. Colussy served in
numerous senior management positions at Pan American World
Airways, including President and Chief Operating Officer from
1977 through 1980. Mr. Colussy holds a B.S. in Engineering
from the U.S. Coast Guard Academy and an M.B.A. from
Harvard University.
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William J. Flynn has served as a director of the Company
since November 2006. Mr. Flynn has served as President and
CEO and as a director of Atlas Air Worldwide Holdings, a
publicly traded provider of air industry operations serving
global freight transportation needs through its two subsidiary
certificated airlines, Atlas Air, Inc. and Polar Air Cargo,
since June 2006. Mr. Flynn served as President and CEO of
GeoLogistics Corp. from August 2002 to June 2006 and as Senior
Vice President of CSX Corporation from April 2000 to July 2002.
He currently serves as a director of Republic Services, Inc.
Mr. Flynn has spent nearly 30 years in the
transportation industry and has also held senior executive
positions with PWC Logistics and
Sea-Land
Service, Inc. He holds a B.A. degree in Latin American Studies
from the University of Rhode Island and a Master’s degree
from the University of Arizona.
Vern Clark U.S.N. (Ret.) has served as a director of the
Company since June 2007. Admiral Clark retired from the Navy in
September 2005 following 37 years of distinguished military
service. Admiral Clark’s Navy experience includes having
served over half his career in command starting with a Patrol
Gunboat as Lieutenant and concluding in the halls of the
Pentagon as the Chief of Naval Operations (CNO) and a member of
the Joint Chiefs of Staff. In between he commanded ships, two
destroyer squadrons, the Atlantic Fleet’s Anti-Submarine
Warfare Training Center, a carrier battle group, the Second
Fleet, NATO’s Striking Fleet, and the Atlantic Fleet.
Admiral Clark operates a private management consulting company,
CVC Associates. In this capacity he serves as a member of the
Board of Directors of Raytheon Company, Rolls Royce North
America, Stanford Research Institute, the Armed Forces YMCA, and
is a member of the World Board of Governors of the USO. In the
world of education he is a member of the Board of Visitors at
Air University and is a Trustee at Regent University where his
is also a visiting professor. He currently serves on the Defense
Policy Board, the advisory board for Computer Science
Corporation, the International Board of Advisors for Fleishman
Hillard, the Strategic Advisory Group at Patriots International,
and the UCAS Board of Visitors for Northrop Grumman Corporation.
He is a Senior Advisor for Booz Allen Hamilton, and serves on
the Executive Committee of Military Ministry. Admiral Clark
earned his undergraduate degree from Evangel College in
Springfield, Missouri, and an MBA from the University of
Arkansas. He has received Honorary Doctorate degrees from the
University of Toledo, Old Dominion University, Northwest
University and Palm Beach Atlantic University.
Charles G. Raymond. See “Identification Of Executive
Officers And Directors — Executive Officers” for
the biography of Mr. Raymond.
James W. Down has served a director of the Company since
November 2006. Mr. Down is the former head of Mercer
Management Consulting where he spent over 20 years. He also
held several management positions with Consolidated Rail
Corporation (Conrail) and Air Products and Chemicals, Inc. Since
retiring from Mercer, Mr. Down has sat on a variety of
non-profit boards doing pro-bono work for numerous
organizations, and performing other independent consulting
services. Mr. Down currently serves on the board of
directors of Shawmut Design and Construction, Agility Holdings,
Oxfam Americas, CDC (Centers for Disease Control) Foundation,
and Outward Bound Professional. He holds a B.S. degree in
Engineering from Columbia University and an M.B.A. from The
Wharton School of the University of Pennsylvania.
Thomas P. Storrs has served as a director of the Company
since June 2007. Mr. Storrs is currently Senior Executive
Officer of Takata Corporation, Tokyo, Japan. Mr. Storrs
served on the board of directors of Takata Corporation from 2005
until 2008 and has held numerous senior management positions
with Takata and affiliated companies since Takata acquired
Burlington Industrial Fabrics in 1988. From 1998 to 2005, he
served as President and Chief Operating Officer, and from 1995
to 1998, he was Treasurer and Chief Financial Officer of TK
Holdings Inc. From 1993 to 1995, Mr. Storrs was President
and Chief Operating Officer of Inflation Systems Inc., and from
1988 to 1993, he was Executive Vice President and Chief
Financial Officer of Highland Industries. Prior to these
positions, he was Vice President of Operations and Controller of
Burlington Industrial Fabrics. Mr. Storrs earned his BA in
economics and mathematics at Yale College and an MBA from the
Darden School of the University of Virginia.
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Stockholders and interested parties who wish to send
communications to our Board, any individual Director, our Lead
Director, or our independent directors or non-management
directors as a group, may do so by addressing their
correspondence to the appropriate party,
c/o Robert
S. Zuckerman, Corporate Secretary, 4064 Colony Road,
Suite 200, Charlotte, North Carolina 28211. Dependant upon
the subject matter of the communication, our Corporate Secretary
will, as appropriate:
Stockholder complaints or concerns relating to financial and
accounting methods, internal accounting controls or auditing
matters should be sent to the attention of the Chairman of the
Audit Committee, Thomas Storrs,
c/o Robert
S. Zuckerman, Corporate Secretary. All stockholder
communications will be periodically summarized for our Board and
each letter will be made available to any Director upon request.
Two securities class action lawsuits were filed in the United
States District Court for the District of Delaware, naming the
Company and five current and former employees, including our
chief executive officer, as defendants. The first complaint was
filed on December 31, 2008 and the second complaint was
filed on January 27, 2009 but was subsequently voluntarily
dismissed by the plaintiffs. Each complaint purports to be on
behalf of purchasers of the Company’s common stock during
the period from March 2, 2007 through April 25, 2008.
The complaints allege, among other things, that the Company made
material misstatements and omissions in connection with alleged
price-fixing in the Company’s shipping business in the
Unites States/Puerto Rico trade in violation of the federal
antitrust laws. The complaints seek compensatory damages for the
alleged damages, as well as costs and attorneys’ fees. The
Company is unable to predict the outcome of these lawsuits;
however, the Company believes that it has appropriate disclosure
practices and intends to vigorously defend against the lawsuits.
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Based on filings with the SEC and other information, we believe
that, as of the dates set forth below, the following
stockholders beneficially owned more than 5% of our common stock:
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The following table sets forth, as of April 1, 2009,
certain information with respect to our common stock owned
beneficially by (1) each director or director nominee,
(2) each of our named executives, and (3) all
executive officers and directors as a group. To our knowledge,
each of the holders of shares of common stock listed below has
sole voting and investment power as to the shares owned by such
holder, unless otherwise noted.
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Section 16(a) of the Exchange Act, as amended, requires our
Directors and executive officers, and persons who own more than
10 percent of our equity securities to file initial reports
of ownership and reports of changes in ownership with the SEC.
Based solely on our review of the reports we received regarding
transactions during fiscal 2008 or written representations made
by certain reporting persons, we believe that all individuals
subject to the Section 16(a) reporting requirements have
complied with those applicable filing requirements for the
fiscal year ended December 21, 2008, with the following
exceptions. Due to an administrative error each of our then
Section 16 executive officers (Messrs. Raymond, Avara,
Handy, Keenan, Taylor and Zuckerman) failed to timely file a
Form 4 to report equity awards granted to them in
connection with their annual compensation awards made in April
2008. Additionally, each incumbent non-management member of our
Board, along with Ernie Danner and Francis Jungers (each of whom
retired from our Board in December 2008), failed to timely file
a Form 4 report with respect to shares awarded to them for
their service on the Board. Messrs. Clark, Danner, Down and
Flynn also failed to timely file a Form 4 report related to
the withholding of common stock to pay taxes with respect to
shares of restricted stock which vested in June 2008.
The Compensation Committee of the Board (the
“Committee”) oversees our executive compensation
program. The Committee makes decisions regarding the
compensation of our executive officers, which include the
“named executives.” The named executives are our chief
executive officer, chief financial officer and three other most
highly compensated executive officers for a particular fiscal
year.
In April 2008, Michael T. Avara succeeded M. Mark Urbania as
chief financial officer. As a result, we had six named
executives for fiscal 2008. The “2008 Summary Compensation
Table” at page 28 includes summaries of the
compensation earned by the named executives in fiscal 2006, 2007
and 2008, including the compensation earned by Mr. Avara in
fiscal 2008.
Our compensation program is intended to help us achieve
strategic business objectives and to maximize our future growth
and profitability. The Committee and our management believe that
compensation should help attract, motivate and appropriately
reward talented executives who help meet these business
objectives and achieve long-term growth and profitability. The
Committee and management also believe that having a stable
executive management team is necessary to achieve our
profitability objectives, particularly during the challenging
economic environment that we and other companies in our industry
currently face.
As a result, a meaningful portion of an executive officer’s
total compensation is based on attainment of pre-determined
measures of Company financial performance. This portion of each
executive officer’s compensation is “at risk.”
This means that it is only earned if at least a threshold level
of targeted performance is met and the amount that may be earned
increases in relationship to the level of such performance).
Performance is measured, and compensation relating to such
performance is paid, on both an annual basis and over longer
periods of time. Final pay-outs of annual performance-based
compensation plan are determined after an evaluation of each
executive’s officer’s individual performance and
contributions during the year. Longer term performance
compensation is earned based on a combination of attainment of
performance objectives and an executive’s continuous
employment over a specified period of time.
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The compensation program uses the following primary elements to
compensate our executive officers:
The Committee annually sets base salaries, establishes annual
cash incentive opportunities and determines long-term incentive
compensation for our executive officers. The process of setting
compensation includes a number of considerations and processes.
The Committee uses benchmarking to a group of peer companies to
evaluate current compensation levels and proposed changes in
compensation. This benchmarking analysis is performed with
assistance from the Committee’s independent compensation
consultant, which for fiscal 2008 was Mercer Human Resources
Consulting. The compensation consultant provides data that
compares the base pay of our named executives with that of
executives of the peer group companies who hold functionally
comparable positions to our named executives. The data provided
by the consultant also compare the total cash compensation (base
pay plus cash incentive compensation) and total direct
compensation (total cash compensation plus stock-based incentive
compensation) of our named executives with that of executives of
the peer group companies.
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The Committee considered benchmarking information prepared by
Mercer for 2007 when setting compensation for the executive
officers for fiscal 2008. This benchmarking information was
based on compensation data for peer group of companies in the
marine/ocean transportation industry, the oil and gas
transportation industry and the road and rail transportation
industry. The companies selected each had certain attributes
similar to those of the Company. The specific attributes that
were considered in developing the peer group were revenues,
earnings and capital structure. The peer group consisted of the
following companies:
Each year the Committee considers which measure of Company
financial performance to use in setting annual and longer-term
incentive compensation for our executive officers. The Committee
has traditionally linked annual cash incentives to the
attainment of objective performance measures such as EBITDA and
earnings per share. For this purpose, EBITDA is a non-GAAP
financial measure defined as net income plus net interest
expense, income taxes, depreciation and amortization. Longer
term incentives have been linked to achievement of targeted
levels of earnings per share growth, typically over a period of
no less than three years.
The Committee believes that EBITDA and earnings per share are
appropriate performance measures on which to base incentive
compensation because those are the same financial measures that
are used by management in setting strategic goals and in making
day-to-day operating decisions. In addition, these measures are
used by the Board in evaluating Company performance. Finally,
EBITDA is a primary measure of the Company’s compliance
with its credit agreements and therefore has a direct impact on
the management of our business.
The Committee normally establishes the target range for
performance compensation based on our internal budget targets.
These budget targets are developed annually by management, are
reviewed in consultation with the Board and are implemented only
after they have been approved by the Board. In establishing
performance targets for incentive compensation, the Committee
considers the aggressiveness of the Board-approved budget
targets, the revenue and earnings growth included in the budget
targets as compared to the prior year, and any significant
strategic initiatives that may impact the budget targets. The
Committee generally consults with the chief executive officer
and other senior executives, the Board and the Committee’s
independent compensation consultant before setting performance
levels for annual and long-term incentive compensation.
Each year the Committee assesses the individual performance of
each executive officer, and considers such performance when
setting an executive officer’s base salary and annual cash
incentive compensation. Individual performance is measured both
on quantitative and qualitative measures. Quantitative measures
are applied to individual executives by an evaluation process
that includes establishing individual objectives for each
executive that support the Company’s financial and
strategic targets and objectives. Qualitative measures for
evaluating individual executive performance include an
assessment of various leadership competencies such as effective
communication, providing strategic direction, motivating others,
fostering teamwork and using sound management principles. The
Committee’s assessment of these qualitative measures with
regard to individual executive performance is conducted
primarily through conversations with the chief executive
officer. The Committee believes that use of individual
performance measures is important because they create incentives
for executives to make specific contributions to the
Company’s financial growth based on their individual levels
of responsibility, and because it allows the Company to reward
those specific contributions.
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The Committee does not have a fixed standard for determining how
an executive officer’s total compensation is allocated
among the various elements of the Company’s compensation
program. Instead, the Committee uses a flexible approach so that
it can structure annual and long-term incentives that are most
likely to enhance stockholder value in light of current and
anticipated market conditions and reward extraordinary
performance, when appropriate. In setting the amounts
potentially payable under the annual cash incentive plan, the
Committee takes into account other annual cash compensation
payable to each executive officer and how the total annual cash
compensation paid to that executive compares to the annual cash
compensation paid by companies in the peer group to executives
in comparable positions. The Committee will generally set total
annual cash compensation close to the 50th percentile of
the peer group for performance that meets the Company’s
annual business objectives and between the 50th and
75th percentile of the peer group for performance that
substantially exceeds annual business objectives. The Committee
and management believe that setting total annual cash
compensation at these levels creates appropriate incentives to
enhance shareholder value.
The Committee also seeks to allocate a portion of total
compensation to long-term stock-based compensation. The portion
of total compensation allocated to stock-based compensation is
determined based on factors such as peer group benchmarking, the
stock-based compensation that has been awarded to executive
officers in prior years and Company performance. The Committee
has historically awarded stock options and performance-based
restricted stock. Stock options provide executives with value
only if the price of the Company stock when the option is
exercised exceeds the option’s exercise price. Executives
therefore have a direct incentive to increase stock price over
the term of the option. Performance-based restricted stock is
earned only if the specific performance measures are met. In
addition, stock option and performance-based restricted stock
are typically subject to vesting schedules which require the
executive to remain employed over a sustained period.
2008
Compensation Decisions
In the first quarter of 2008, the Committee established each
executive officer’s base salary and the terms of the 2008
cash incentive plan. In the second quarter of 2008, the
Committee made certain adjustments to the performance levels and
total cash incentive opportunities under the cash incentive
plan, and approved equity compensation awards for the executive
officers and other employees.
The Committee occasionally will consider base salary adjustments
and incentive compensation awards at other times during the
year, such as if an executive’s primary role and
responsibilities change during the year. The Committee approved
certain adjustments to Mr. Avara’s compensation in
connection with his promotion to the position of chief financial
officer in April 2008
Mr. Raymond recommended to the Committee that his base
salary and the base salaries of the other named executives be
maintained at their 2007 levels. This recommendation was based
on the fact that salary adjustments made in 2007 had brought
base salaries for the named executive group generally in line
with the 50th percentile for the peer group. The
recommendation was also based on management’s view that
2008 compensation should be allocated more heavily to at-risk,
performance-based compensation in order to focus attention on
improving our operating performance in 2008. The Committee
agreed with the recommendation and set 2008 base salaries for
the named executives at the same level as their 2007 base
salaries.
Shortly after Mr. Avara’s promotion to chief financial
officer, the Committee reviewed and considered adjustments to
his base salary to reflect his expanded responsibilities. The
Committee approved a 40% increase in his base salary in
recognition of those new responsibilities and after reviewing
benchmarking data and confirming that such an increase was
reasonable in light of those responsibilities. The Committee
reviewed Mr. Avara’s salary in 2009 and approved an
increase of 12% based on a further consideration of his salary
relative to current benchmarking data.
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The Committee adopted a cash incentive plan for 2008 that was
similar to the plan that had been in place the prior fiscal
year. Incentive opportunities under the plan were conditioned on
the attainment of specified levels of financial performance for
the year, as measured by EBITDA and earnings per share. These
performance measures were chosen for the annual cash incentive
plan because they were the primary components of the business
objectives that we approved immediately before the beginning of
the year.
The specific target levels for each of these performance
measures, as well as minimum and maximum levels, were
established by the Committee in the first quarter of the year
after discussions with Mr. Raymond concerning the
objectives that he believed needed to be achieved for the
Company to be successful. As a result of certain unanticipated
developments, such as a severe escalation in fuel costs and a
significant decline in demand in one of our primary geographic
markets, we reassessed the performance forecasts that were
developed before the beginning of the year and on which the
specific performance targets for the annual cash incentive plan
had been based. To account for the impact of these previously
unanticipated conditions, we developed lower performance targets
based on various levels of predicted results. The Committee
reviewed those new performance forecasts and determined that it
was appropriate to lower both the EBITDA and the earnings per
share targets to levels that were more in line with the new
projections.
Plan funding was based on the total award opportunities for all
participants in the plan. As noted in the executive summary, all
of our regular full-time, non-union salaried employees,
including our executive officers, participated in the plan. The
award opportunity for each participant was expressed as a
percentage of that participant’s base salary.
Mr. Raymond’s target award opportunity was set at 95%
of base salary. The Committee determined that this amount was
appropriate in light of Mr. Raymond’s responsibilities
and because it would place a greater percentage of his total
annual compensation at risk than in the prior year, thereby
providing greater emphasis on attaining 2008 operational
targets. The target award opportunities for the other named
executives were set at 70% of their base salaries for similar
reasons. In connection with Mr. Avara’s promotion to
chief financial officer, his target award opportunity was
increased to 70% to reflect his new job responsibilities. The
Committee also determined that in light of the adjustment of the
plan’s performance targets, the award opportunity for each
of the executive officers and for certain other key management
employees should be subject to a review of their individual
performance for the year. As a result, their full target award
percentages would be payable only if their individual
performance for the year met or exceeded expectations.
The funding levels for 2008 were determined based on the
following principles:
The final adjusted minimum, target and maximum performance
levels, and the corresponding plan funding levels, were as
follows:
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The minimum performance targets were not met in 2008. As a
result, no participants received any payments under the plan,
including the named executives. However, in light of the
Company’s achievement of other business objectives during
2008 and in order to recognize the individual contributions of
certain employees, the Committee authorized management to grant
discretionary merit bonuses totaling $2.0 million to select
employees. None of the named executives were eligible to receive
such a bonus. A merit bonus was awarded to one of the other
executive officers in recognition of his individual performance
for the year, equal to 9% of his base salary.
The Committee awarded a mix of performance-based restricted
stock and stock options to the named executives in 2008. Each
executive officer’s awards were determined based on a
consideration of their previous stock awards, the value of
proposed 2008 stock awards as a percentage of the named
executive’s total compensation and data provided by the
compensation consultant that compared the proposed award values
with the long-term incentive compensation for executives in
comparable positions with the peer group companies. Consistent
with our overall compensation philosophy, named executives will
be rewarded for measurable increases in our long-term growth and
profitability.
The restricted stock awarded in 2008 will be earned by the named
executives if two conditions are met. First, the executive must
be continuously employed with us until April 24, 2011.
Second, our earnings per share for 2010 must meet or exceed a
target tied to a 15% compound annual rate of growth. If these
conditions are not met, the shares may still vest on April 24 of
2012, 2013 or 2014 if the executive remains in continuous
employment to such dates and the Company’s earnings per
share for the immediately prior year meets the 15% compound
annual rate of growth target. Shares that are not earned by one
of these dates will be forfeited by the executive. The awards
provide for partial vesting in the case of retirement after
age 591/2
in order for the awards to provide appropriate incentives for
executives nearing retirement.
The Committee decided to structure the vesting provisions in
this manner in order to enhance retention of our executive
officers and other key managers and to encourage their sustained
efforts achieve our growth objectives, particularly in light of
challenging economic conditions. The Committee selected earnings
per share as a vesting condition because this performance
standard is the primary measure that financial analysts and
shareholders use to assess the Company’s performance. The
Committee determined that a 15% annual growth rate was the
appropriate target because that growth rate closely matched a
moderately aggressive projection for our long-term performance
in light of projected softening of economic growth in both the
United States and abroad, including deterioration in growth
prospects for one of our markets.
The stock options awarded in 2008 will vest if the executive
remains in continuous employment for three years after the date
of grant. The options have a maximum term of ten years from the
date on which they were granted. If the executive retires from
the Company after attaining
age 591/2
but before the end of the three-year vesting period, the
executive is entitled to vesting in a proportionate number of
the options based on his period of employment. Executives
forfeit the right to exercise any options which do not vest.
We maintain a tax-qualified section 401(k) savings plan for
all of our non-union employees, including the executive
officers. The plan provides a matching contribution equal to
100% of an employee’s contributions, up to a maximum
contribution of 6% of the employee’s annual base salary.
All contributions to the section 401(k) savings plan,
including the matching contributions, are fully-vested upon
contribution. The Company’s other benefit plans primarily
include health care insurance and related benefits, group life
insurance, disability, tuition assistance, and an employee stock
purchase plan which allows eligible employees to purchase
Company stock at a 5% discount. The Company does not maintain
any defined benefit pension plans or any nonqualified deferred
compensation arrangements for its executive officers.
No changes were made to any of these benefit plans in 2008.
However, as described on page 24 in the “Actions Taken
in 2009” section, the Company adopted a new employee stock
purchase plan in 2009.
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The named executives receive certain benefits that we believe
are reasonable and consistent with the overall objectives of
attracting, retaining and motivating talented executives for key
positions. These other executive benefits consist of:
The Committee reviewed the types and levels of the executive
benefits provided to the named executives in 2008. The Committee
determined at that time that these benefits continued to promote
the goals of our overall executive compensation program and were
reasonable in light of peer group compensation data. The
Committee intends to review these benefits during 2009 and may
make changes in the types or levels of those benefits as it
deems appropriate. Information concerning the amount of the
perquisites and other personal benefits provided during 2008 to
the named executives is contained in the “Other Benefits
Table” on page 30.
During 2008, Mr. Keenan and Mr. Urbania were each
covered under an employment agreement with a subsidiary of the
Company. Mr. Urbania was not entitled to any compensation
or benefit payments under his employment agreement as a result
of his resignation, and he was not paid any compensation or
benefits when he resigned except for amounts that he had
previously earned. Mr. Urbania’s employment agreement
automatically terminated upon his resignation.
Mr. Keenan continues to be covered under an employment
agreement. His employment agreement was entered into before the
Company’s stock became publicly traded. At that time, we
believed that employment agreements were important to recruit
and retain key executive talent. The Committee and management
have reassessed that policy and have not entered into employment
agreements with any other executives. In 2007, we terminated
Mr. Raymond’s employment agreement in exchange for a
restricted stock award that was designed to retain
Mr. Raymond through the end of 2009. The Committee will
continue to evaluate its policy regarding employment agreements.
More information concerning Mr. Keenan’s employment
agreement is contained at page 32 and in the section titled
“2008 Potential Payments Upon Termination” at
page 34.
In connection with Mr. Handy’s retirement in early
2009, we entered into a retirement agreement and a consulting
agreement with Mr. Handy. The retirement agreement provides
certain benefits to Mr. Handy in recognition of his past
services to the Company and in consideration for his consent to
certain post-termination obligations and a release of claims.
These benefits consist of a single lump-sum cash payment of
$388,881, full vesting of 70,000 shares of restricted stock
which were otherwise scheduled to vest in 2011, payment of
approximately $19,000 for accrued but unpaid dividends on a
portion of the 70,000 shares of restricted stock (plus
interest on those accrued dividends) and full vesting of certain
stock option awards and extension of the period of exercise of
those stock options until their original expiration dates.
Mr. Handy’s post-termination obligations relate to
non-competition, non-solicitation, non-disparagement,
confidentiality and cooperation with
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us in connection with certain matters that may arise following
his retirement. The non-competition and non-solicitation
restrictions apply for one year following Mr. Handy’s
retirement.
Actions
Taken in 2009
In March of 2009, the Committee reviewed and reconsidered the
design of the annual cash incentive plan with assistance from
Towers Perrin, the independent compensation consultant retained
by the Committee at the end of 2008. The Committee determined
that the underlying philosophy of providing incentive
opportunities above the peer group median continued to be
appropriate in light of the fact that base salaries are
traditionally set below the median for the peer group. The
Committee also determined that the following changes should be
made to the plan for fiscal 2009 in order to better align
incentive opportunities with each named executive’s
responsibilities:
In accordance with this approach, the 2009 bonus opportunities
for Mr. Raymond, Mr. Avara and each vice president of
a corporate function are tied to EBITDA and to reduction of the
Company’s net debt obligations. In addition, the bonus
opportunities for Mr. Avara and the corporate vice
presidents are affected by their individual performance for the
year. The bonus opportunities for Mr. Keenan and
Mr. Taylor are based on a combination of Company-wide
performance measures, as well as certain measures of the
financial performance of their specific lines of business and
individual performance. Mr. Handy does not participate in
the plan because he retired in early 2009.
The performance measures for the named executives and the
relative weighting of those measures is described in the
following table:
The funding levels established by the Committee depend upon
meeting a minimum threshold level of Company-wide
and/or
business unit EBITDA for the year, depending on which EBITDA
target or targets apply to the officer. If the appropriate
threshold is not met, no participant will be entitled to receive
a bonus under the plan, even if thresholds are met with respect
to one or more of the other financial or individual performance
measures applicable to that participant. If the applicable
EBITDA threshold is met, funding is computed for each financial
and/or
individual performance measure applicable to a participant. Each
named executive has a prescribed target bonus amount under the
plan, quantified as a percentage of base salary for
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fiscal 2009, as follows: 95% for Mr. Raymond, 70% for
Mr. Avara, 70% for Mr. Keenan and 70% for
Mr. Taylor. Funding is determined as follows:
The funding level for individual performance is 100% of target
opportunity if the named executive met individual performance
objectives, and up to 125% of target opportunity for performance
that exceeds those objectives. The amount funded for each
performance measure is then multiplied by the percentage
weighting applicable to the named executive for that performance
measure. The sum of those weighted amounts equals the named
executive’s earned bonus for the year.
After Committee approval, incentive awards earned under the plan
will be paid as lump-sum cash distributions as soon as
practicable after the end of the Company’s fiscal year. A
named executive officer must be employed by the Company on the
last day of fiscal 2009 and on the date of the bonus payment
(expected within 90 days of fiscal year end) to receive a
bonus under the plan.
The Company-wide and business unit target levels are based on
our internal business plan for the year, and take into account
the particular difficulties posed by the current economic
environment. We believe that these targets will be challenging
to meet.
The Committee awarded shares of restricted stock in March of
2009 to each named executive officer, other than
Mr. Raymond and Mr. Handy (who retired before the
awards were granted). Some of the restricted stock will be
earned if the named executive officer satisfies a three year
service requirement (“Service-Based Awards”), while
the other restricted stock will be earned if specified Company
performance goals are achieved for fiscal 2009 and the named
executive officer satisfies a three year service requirement
(“Performance-Based Awards”). These awards are
designed to promote retention of our executive management team
and reward attainment of specified performance targets. The
awards were granted under the Company’s amended and
restated Equity Incentive Plan.
The Service-Based Awards entitle the named executive officers to
receive a specified number of shares of Company common stock if
they are continuously employed by the Company until
March 18, 2012. These shares are forfeited if the executive
terminates employment before that date, unless termination is on
account of retirement and the sum of the executive’s age
and service is 75 or more, in which case the executive will vest
in a pro-rated portion of the shares.
The Performance-Based Awards entitle the named executive
officers to receive shares of Company common stock based on the
level of the Company’s net income for fiscal 2009. In the
event that the Company does not achieve a minimum threshold net
income level, the executives will not be entitled to receive any
shares of Company stock. If the Company achieves a net income
level greater than a threshold level, the executives will be
entitled to receive at least 50% and up to 200% of the number of
shares awarded to them under their Performance-Based Awards,
depending on the actual net income achieved for fiscal 2009. In
addition to the Company achieving at least a threshold net
income level, the named executive officers must remain
continuously employed by the Company until March 18, 2012
to receive any shares under his Performance-Based Award. Shares
are forfeited if the executive terminates employment before that
date, unless termination is on account of retirement and the sum
of the executive’s age and service is 75 or more, in which
case the executive will vest in a pro-rated portion of the
shares payable based on the net income level achieved for fiscal
2009.
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Dividends on the shares underlying both the Service-Based Awards
and the Performance-Based Awards will be accrued and paid,
without interest, at the time that the underlying shares vest,
and will be forfeited if the underlying shares are forfeited.
The number of shares of restricted stock underlying the awards
granted to each of the named executive officers are as follows:
As with the performance targets for the 2009 cash incentive
plan, the net income target for the Performance-Based Awards is
based on our internal business plan for the year, which we
believe will be challenging to meet.
The Board has adopted at the recommendation of the Committee a
2009 Incentive Compensation Plan and a 2009 Employee Stock
Purchase Plan. Each plan is subject to approval by a majority of
our stockholders.
The 2009 Incentive Compensation Plan was adopted in order to
provide the Committee and the Board with the flexibility to
award various types of long-term compensation to our executives
and non-management directors, and because only a limited number
of shares of our common stock remain available for issuance
under our amended and restated Equity Incentive Plan. The key
terms of the Incentive Compensation Plan are summarized
beginning on page 39. The 2009 Employee Stock Purchase Plan
was adopted because only a limited number of shares remain
available for purchase under our existing employee stock
purchase plan, and because we believe that such a plan provides
an important incentive for our employees and helps to align
their interests with those of our stockholders. The key terms of
the 2009 Employee Stock Purchase Plan are described beginning on
page 46.
To directly align the interests of executive officers with the
interests of the stockholders, the Committee approved a stock
ownership program that requires certain executive officers,
including the named executives, to maintain a minimum equity
ownership interest in the Company. These stock ownership
guidelines apply to each Company executive who is at a vice
president level or above. Each executive’s required level
of stock ownership is determined based on a multiple of the
executive’s annual base salary and is then converted to a
fixed number of shares of the Company’s common stock using
a 365-day
average closing price per share. The base salary multiple varies
depending upon the executive’s position. Executives are
required to achieve their required ownership level within five
years of becoming subject to such guidelines. Once the required
ownership level has been achieved, an executive is expected to
maintain this minimum level of ownership until such time as the
executive is no longer subject to the stock ownership
guidelines. An executive ceases to be subject to the stock
ownership guidelines when the executive’s employment with
the Company terminates or if the executive’s position with
the Company changes to a position that is not subject to the
stock ownership guidelines. If an executive does not meet or
maintain the executive’s required ownership level within
the required timeframe, then the executive’s participation
in any stock-based long-term incentive plan may be restricted,
at the discretion of the Committee.
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The required stock ownership levels for each of the named
executives are based on the following base salary multiples:
Each of the named executives was in compliance with this policy
during 2008. In accordance with the terms of the policy,
Mr. Avara is required to fully comply with the minimum
holding requirement by 2013.
To the extent readily determinable and as one of the factors in
its consideration of compensation matters, the Committee
considers the anticipated tax treatment to the Company and to
the individual executive officers of various compensation
payments and benefits. Interpretations of and changes in the tax
laws and other factors beyond the Committee’s control also
affect the deductibility of compensation. For these and other
reasons, the Company will not necessarily in all circumstances
limit executive compensation to the amount which is permitted to
be deductible as an expense of the Company under
Section 162(m) of the Internal Revenue Code. The Committee
will consider various alternatives to preserving the
deductibility of compensation payments and benefits to the
extent reasonably practicable and to the extent consistent with
its other compensation objectives.
The Committee administers our stock compensation plans and
approves all awards under those plans. These plans are the
amended and restated Equity Incentive Plan and the proposed 2009
Incentive Compensation Plan, which is described beginning on
page 39 of this proxy statement. The grant date of awards
under the plans is the date of the Committee meeting on which
the award is approved, or a future date that the Committee may
designate. The Committee does not grant stock options with an
exercise price that is less than the closing price of the
Company’s common stock on the grant date or grant stock
options which are priced on a date other than the grant date,
unless for some reason the grant date is a future date, in which
case the closing price for that future date is used to determine
the exercise price of stock options granted on that date.
Management prepared the Compensation Discussion and Analysis
describing the Company’s compensation program for executive
officers, which includes the Company’s named executives. In
fulfilling its oversight responsibilities, the Compensation
Committee reviewed and discussed with management the
Compensation Discussion and Analysis. Based on such review and
discussions, the Compensation Committee recommended to the Board
that the Compensation Discussion and Analysis be included in
this proxy statement. This report is provided by the following
independent directors, who comprise the Compensation Committee.
William J. Flynn, Chairman
James G. Cameron Dan A. Colussy
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The following table sets forth information regarding all
compensation earned during fiscal 2006, 2007 and 2008 by our
named executives.
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The following table describes each component of the All Other
Compensation column in the 2008 Summary Compensation Table.
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The following table describes other benefits and the cost to the
Company of providing those benefits. The total amount of these
other benefits is included in the All Other Compensation Table
on the prior page for each named executive.
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2008
GRANTS OF PLAN-BASED AWARDS
The following table provides information about equity and
non-equity awards granted to the named executives in fiscal
2008. This information includes (1) the grant date of the
award; (2) the estimated payouts under non-equity incentive
plan awards, which consist of the potential payout levels under
the 2008 cash incentive plan; (3) the estimated future
payouts under equity incentive plan awards; (4) the number
of shares underlying restricted stock awards; (5) the
number of shares underlying stock option awards; (6) the
exercise price of the stock option awards, based on closing
price of Company common stock on the date of grant and
(7) the grant date fair value of each equity award,
computed under SFAS 123R.
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Employment Agreements. During 2008,
Messrs. Urbania and Keenan were employed pursuant to
employment agreements with Horizon Lines, LLC (“Horizon
Lines”), a wholly-owned subsidiary of the Company. Each
agreement specified their base salary, annual bonus opportunity,
benefits during employment and certain post-termination
benefits. The employment agreements also imposed on each named
executive certain obligations following termination of their
employment.
Mr. Urbania’s employment agreement terminated when he
resigned.
Mr. Keenan’s employment agreement provides for an
initial base salary of $243,000, subject to increase as
determined by the Compensation Committee, and a discretionary
bonus under the Company’s annual cash incentive plan of
between 30% and 102% of his base salary. For fiscal 2008, the
Compensation Committee exercised discretion to set his target
opportunity under the cash incentive plan at 70% of base salary.
Mr. Keenan’s employment agreement also entitles him to
participate in employee benefit plans applicable to the senior
officers of the Company, annual vacation and reimbursement for
reasonable travel and other business expenses. Certain
termination payments and benefits are payable under the
employment agreement if Mr. Keenan’s employment
terminates without cause. For additional information concerning
these termination payments and benefits, see the “2008
Potential Payments Upon Termination” section at
page 34.
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2008
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table provides information about the stock option
and stock awards held by the named executives as of
December 21, 2008. This information includes unexercised
and unvested stock options, and unvested restricted stock
awards. Each equity award is separately shown for each named
executive. The vesting schedule for each equity award is shown
immediately following the table based on the date on which the
equity award was granted and based on whether it is a stock
option award or a restricted stock award. The market value of
restricted stock awards is based on the closing price of Company
common stock as of December 19, 2008 (the last market
trading date during the Company’s 2008 fiscal year), which
was $3.63.
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The following table provides information for the named
executives regarding stock options that were exercised during
fiscal 2008 and shares acquired under stock awards that vested
in fiscal 2008.
Employment Agreements. Mr. Urbania
was not paid any compensation or benefits under his employment
agreement when he resigned, except for amounts that he had
previously earned.
Mr. Keenan is entitled to certain payments and benefits
under his employment agreement if he is terminated by Horizon
Lines or the Company without Cause. “Cause” for this
purpose means termination of Mr. Keenan’s employment
by Horizon Lines or the Company due to his failure to
substantially perform the duties of his position; his failure to
comply with or carry out any lawful and reasonable directive of
the Board, the board of directors of Horizon Lines, or the Chief
Executive Officer of Horizon Lines; his material breach of the
Company’s Code of Business Conduct and Ethics; his
conviction, plea of no contest or imposition of unadjudicated
probation for any felony other than a traffic violation or
purely as a result of his title or position; his unlawful use or
possession of illegal drugs; or his commission of fraud,
embezzlement, misappropriation, willful misconduct, gross
negligence or breach of fiduciary duty against Horizon Lines or
the Company. Mr. Keenan must be given advance notice and a
specified period to remedy certain of these events before his
employment can be terminated for Cause.
If Mr. Keenan’s employment is terminated by the
Company without Cause, Mr. Keenan is entitled to receive an
amount equal to his annual base salary in effect immediately
prior to his termination, payable over a twelve month period
following Mr. Keenan’s termination of employment in
accordance with the Company’s
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normal payroll practices. For one year following the date of his
termination of employment, Mr. Keenan is also entitled to
continue coverage for himself and his eligible dependents under
all Horizon Lines group health benefit plans in which he and his
dependents were participants immediately prior to the date of
his termination of employment. Mr. Keenan is entitled to
the severance benefits described above only if he executes a
general waiver and release.
If Mr. Keenan’s employment terminates for any other
reason during the term of the agreement, including non-extension
of the term by Mr. Keenan or Horizon Lines,
Mr. Keenan’s resignation for any reason,
Mr. Keenan’s termination by Horizon Lines or the
Company for Cause, or Mr. Keenan’s death or
disability, Mr. Keenan is entitled only to his accrued
unpaid annual base salary through the date of termination, plus
any accrued unpaid vacation pay and any unpaid amounts arising
through the date of termination under any employee benefit plans
in which Mr. Keenan participates. Mr. Keenan is
subject to non-competition and non-solicitation restrictions
following termination of his employment for any reason.
The following table describes the potential termination payments
and benefits under Mr. Keenan’s employment agreement.
The amounts shown were computed based on the assumption that he
terminated employment on December 21, 2008 with a base
salary of $325,000.
Stock Option and Restricted Stock
Awards. If Mr. Raymond or Mr. Handy
had retired on December 21, 2008, certain unvested stock
options would have vested and become exercisable. The intrinsic
value of those stock options would have been $0 and $0,
respectively, based on the $3.63 closing price of Company common
stock of as of December 19, 2008 (the last market trading
date during the Company’s 2008 fiscal year). In addition,
if Mr. Raymond’s employment had been terminated by the
Company without cause on December 21, 2008, he would have
become 100% vested in 75,965 shares of restricted stock.
Based on the December 19, 2008 closing price, the value of
the vested shares of restricted stock would have been $275,753.
Life Insurance Benefit. If
Mr. Raymond had died on December 21, 2008, his
survivor would have received $850,000 under a supplemental term
life insurance policy, the premiums for which are annually
reimbursed by the Company. For a description of the premiums
reimbursed and the tax payments made by the Company with respect
to this supplemental term life insurance policy, see the
“All Other Compensation Table” on page 29 and the
“Other Benefits Table” on page 30.
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The Company uses a combination of cash and equity-based
compensation to attract and retain qualified candidates to serve
as non-management directors of the Board. Director compensation
is reviewed annually by the Compensation Committee and changes
in director compensation are made when the Board determines that
such changes are appropriate. The Compensation Committee may
from time to time engage its compensation consultant to evaluate
the Company’s director compensation and to assist it in
developing compensation recommendations for the Board. This
evaluation would generally include a consideration of relevant
benchmarking data. During fiscal 2008, the annual retainer fee
paid to each non-management Director was $50,000. Each
non-management Director also received a restricted stock award
of approximately $60,000. Each Committee chair received an
additional retainer fee and the Lead Independent Director
received an additional retainer fee and restricted stock award,
as described below. All members of the Board are reimbursed for
actual expenses incurred in connection with attendance at Board
and committee meetings.
Share Ownership Requirements. Equity ownership
guidelines have been established for non-management directors
that will require them to hold shares of Company common stock
equal in value to three times their annual retainer. This
ownership level must be attained within five years of the
director’s election to the Board.
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During fiscal 2008, Ernie Danner served as Chairman of the Audit
Committee of the Board of Directors. The other members of the
Audit Committee during fiscal 2008 were Alex Mandl and Thomas
Storrs. Upon Mr. Danner’s retirement from the Board of
Directors in December 2008, James Cameron was appointed to the
Audit Committee and Mr. Storrs was appointed Chairman of
the Committee. The Board of Directors has determined that all
members of the Audit Committee are independent and are
financially literate as required by the NYSE listing standards,
and that Mr. Mandl and Mr. Storrs are “audit
committee financial experts,” as defined by SEC rules, and
have accounting or related financial management expertise, as
required by the NYSE’s listing requirements.
The Audit Committee has met and reviewed and discussed our
audited financial statements for the fiscal year ended
December 21, 2008 with the Company’s management, which
has the primary responsibility for the Company’s financial
statements, as well as with the Company’s independent
registered public accounting firm, Ernst & Young LLP
who are responsible for performing an independent audit of our
consolidated financial statements in accordance with auditing
standards of the Public Company Accounting Oversight Board. The
Audit Committee is not providing any expert or special assurance
as to the Company’s financial statements or providing any
professional certification with respect to the independent
registered public accounting firm’s work product.
The Audit Committee has discussed with Ernst & Young
the matters required to be discussed by Statement on Auditing
Standards No. 61, “Communicating with Audit
Committees,” as amended, as adopted by the Public
Company Accounting Oversight Board. The Audit Committee has
received and reviewed the written disclosures and the letter
from E&Y required by the applicable requirements of the
Public Company Accounting Oversight Board regarding
Ernst & Young communications with the Audit Committee
concerning independence. The Audit Committee also considered
whether Ernst & Young’s non-audit services to the
Company were compatible with the independence requirements and
concluded their independence was not compromised by the
provision of these services.
This report is submitted by Chairman Thomas Storrs, James
Cameron and Alex Mandl.
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Advancement of Legal Expenses. Pursuant to our
Amended and Restated Certificate of Incorporation,
indemnification agreements and certain contractual obligations,
we are obligated to advance legal fees to our directors and
officers under certain circumstances, subject to limitations of
the Delaware General Corporation Law. As part of that
obligation, we have advanced legal fees relating to the
representation of Mr. Raymond in connection with various
litigation matters pending against us related to possible
antitrust violations in the domestic shipping business and
shareholder litigation for alleged misstatements and omissions
in connection with such possible antitrust violations, as
described under “Item 3: Legal Proceedings” in
our
Form 10-K
for the fiscal year ended December 21, 2008. During fiscal
2008, we advanced approximately $264,200 on behalf of
Mr. Raymond.
Severance Agreement with Robert S.
Zuckerman. Mr. Zuckerman has entered into a
severance agreement with Horizon Lines dated March 1, 2004.
The agreement provides that if he is terminated by Horizon Lines
without cause, as defined below, within twenty four
(24) months following a Liquidity Event, as defined below,
Horizon Lines will pay him his annual base salary for one year
after the termination date, in accordance with its regular
payroll practices, and provide him with the continuation of any
medical benefits during the severance period, to run
concurrently with coverage under the Consolidated Omnibus Budget
Reconciliation Act (referred to as COBRA). During the
24-month
period following the termination date, Mr. Zuckerman may
not directly or indirectly engage in, have an equity interest
in, or manage or operate any entity engaging in any
containerized shipping business in the Jones Act trade which
competes with (i) any business of Horizon Lines, Horizon
Lines Holding, their related entities, or their subsidiaries, or
(ii) any entity owned by Horizon Lines, Horizon Lines
Holding, their related entities, or their subsidiaries, anywhere
in the world. Mr. Zuckerman may, however, acquire a passive
stock or equity interest in such a business provided that the
stock or equity interest acquired is not more than five percent
(5%) of the outstanding interest in the business. During this
period, he may not recruit or otherwise solicit any employee,
customer, subscriber or supplier of Horizon Lines to change its
relationship with Horizon Lines or to establish any relationship
with him for any competitive purpose. Upon termination of his
employment for any reason, Mr. Zuckerman is required not to
disclose or disseminate any important, material and confidential
proprietary information or trade secrets of the businesses of
Horizon Lines.
A “Liquidity Event” is defined as the first occurrence
after March 1, 2004 of any of the following: consummation
of the sale, transfer or other disposition of the equity
securities of Horizon Lines held by its indirect stockholder,
Horizon Lines Holding, in exchange for cash such that
immediately following such transaction (or transactions),
(i) any entity
and/or its
affiliates, other than Horizon Lines Holding, acquires more than
50% of the outstanding voting securities of Horizon Lines or
(ii) Horizon Lines Holding ceases to hold at least 30% of
the outstanding voting securities of Horizon Lines and any
entity and its affiliates hold more voting securities of Horizon
Lines than Horizon Lines Holding.
In general, Horizon Lines will have “Cause” to
terminate Mr. Zuckerman’s employment upon the
occurrence of any of the following: (i) the determination
by the board of directors of Horizon Lines that he failed to
substantially perform his duties or comply in any material
respect with any reasonable directive of such board,
(ii) his conviction, plea of no contest, or plea of nolo
contendere of any crime involving moral turpitude,
(iii) his use of illegal drugs while performing his duties,
or (iv) his commission of any act of fraud, embezzlement,
misappropriation, willful misconduct, or breach of fiduciary
duty against Horizon Lines.
Employment of Samuel T. Raymond. Samuel T.
Raymond, a son of Charles G. Raymond who is the chief executive
officer of the Company, was employed by the Company in fiscal
year 2008 and received total compensation of approximately
$132,000, which included base salary, fair market value of
equity awards, the Company’s matching contributions to the
section 401(k) savings plan and health flexible spending
account contributions, and the Company paid portion of health
and welfare benefits.
We have adopted the Horizon Lines Code of Business Conduct and
Ethics, which specifically addresses conflicts of interest. See
“Corporate Governance Guidelines and Code of Ethics”.
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The Compensation Committee is comprised entirely of the three
independent directors listed above under “Corporate
Governance — Committees of the Board of Directors and
Meetings” and none of our executive officers served on the
compensation committee or board of any company that employed any
member of the Compensation Committee or Board of Directors.
Our Board has approved the adoption of the Horizon Lines, Inc.
2009 Incentive Compensation Plan (the “2009 Plan”) and
directed that it be submitted to our stockholders for approval.
The principal features of the 2009 Plan are summarized below.
The complete text of the 2009 Plan is attached as
Appendix A. This summary is not intended to be a complete
description of the 2009 Plan and is qualified in its entirety by
the actual text of the 2009 Plan, as attached to this proxy
statement.
The 2009 Plan is intended to promote our long-term stability and
financial success by attracting and retaining key employees and
other service providers, rewarding our key employees for the
achievement of performance goals that may be attached to their
incentives, and aligning the interests of our key employees with
those of our stockholders. The 2009 Plan is also intended to
allow for awards of compensation to our non-employee directors.
The 2009 Plan will become effective immediately upon your
approval.
A primary reason for adopting the 2009 Plan is to reserve
1,000,000 shares of our common stock for future awards. The
shares are necessary to support our compensation policy of
making annual awards of stock-based compensation to focus key
employees on our performance over time, provide them with
incentives for future performance and link their interests to
yours.
The Horizon Lines, Inc. Amended and Restated Equity Incentive
Plan (the “Prior Plan”) will be replaced by the 2009
Plan upon your approval of the 2009 Plan. No awards will be
granted under the Prior Plan after the 2009 Plan is approved,
although outstanding awards previously granted under the Prior
Plan will continue in effect in accordance with the terms and
conditions of the Prior Plan.
Our Board
recommends a vote FOR the 2009 Plan.
Eligibility
and Administration
All present and future employees and other service providers of
the Company and its related companies are eligible to receive
incentive awards under the 2009 Plan. An employee or other
service provider who receives an award becomes a participant in
the 2009 Plan. Also, all present and future non-employee
directors of the Company are eligible to receive director awards
under the 2009 Plan. We estimate that we have approximately
2100 employees (5 of whom are executive officers),
approximately 75 service providers other than employees,
and 8 non-employee directors who may be eligible for awards
under the 2009 Plan.
Unless otherwise determined by our Board, the Compensation
Committee (the “Committee”) will administer the 2009
Plan with respect to awards for employees and other service
providers. The Committee has the power and complete discretion
to select employees and service providers to receive incentive
awards and to determine for each employee or service provider
the nature of the incentive award and the terms and conditions
of each incentive award. Our Board has these same powers and
responsibilities with respect to awards for our non-employee
directors.
The 2009 Plan is intended to comply with the provisions of SEC
Rule 16b-3
and allows for awards that are intended to meet the requirements
for performance-based compensation under Internal Revenue Code
Section 162(m). Awards under the 2009 Plan that constitute
nonqualified deferred compensation are intended to meet the
requirements of Internal Revenue Code Section 409A, as
discussed below in the section entitled “Federal Income Tax
Consequences.”
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Types
of Awards that may be Granted Under the 2009
Plan
The 2009 Plan authorizes a variety of types of equity-based and
cash-based awards to provide flexibility in our compensation
program.
Employees and other service providers may receive the following
types of incentive awards under the 2009 Plan: performance
grants, performance shares, restricted stock awards, restricted
stock units, performance share units, incentive stock options,
nonstatutory stock options and stock appreciation rights under
the 2009 Plan.
Non-employee directors may receive the following types of
director awards under the 2009 Plan: restricted stock awards,
vested shares, restricted stock units, performance share units,
nonstatutory options and stock appreciation rights.
Amount
of Stock Available for Awards
One million shares of our common stock have been reserved for
issuance under the 2009 Plan. No more than 500,000 shares
may be allocated to the incentive awards granted to a
participant during any single fiscal year of the Company. The
maximum cash payment that can be made to a participant during
any single fiscal year of the Company under an incentive award
granted under the 2009 Plan is $5,000,000. Shares of our common
stock allocable to options, restricted stock or other awards or
any portions thereof previously granted under the Prior Plan
that expire, are forfeited, or otherwise terminate unexercised
will be added to the shares reserved for issuance under the 2009
Plan and may be used for new awards under the 2009 Plan.
However, no new grants of incentive awards may be made under the
Prior Plan after the 2009 Plan is approved by the stockholders.
If an award under the 2009 Plan is cancelled, terminates or
lapses unexercised, any unissued shares allocable to that award
may be used for a new award under the 2009 Plan. Shares
exchanged in payment of an option exercise price or retained to
satisfy applicable withholding taxes may not be subjected to new
awards and the cash proceeds from option exercises may not be
used to purchase open-market shares for reuse under the 2009
Plan. The number of shares that may be issued under the 2009
Plan will be proportionately adjusted in the event of a
recapitalization event like a stock dividend, stock split or
other similar event affecting our common stock. The 2009 Plan
prohibits option repricing without stockholder approval, except
in connection with a recapitalization event.
Our common stock is traded on the New York Stock Exchange under
the symbol “HRZ” On April 1, 2009, the closing
price per share was $3.30.
Performance
Grants
Performance grants are rights to receive cash or shares of our
common stock subject to the achievement of pre-established
performance goals. Performance grants are specifically designed
to qualify as “performance-based compensation” for
purposes of Internal Revenue Code Section 162(m)
(“Code Section 162(m)”).
Performance goals for performance grants are required to use
objective and quantifiable performance criteria. The 2009 Plan
permits the use of a wide variety of performance measures to
provide flexibility in the design of our executive compensation
program while preserving the deductibility of awards under Code
Section 162(m). The permissible performance measures are:
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Performance criteria may be measured with respect to our
performance as a company or the performance of any of our
related companies, subsidiaries, divisions, or business units,
or any individual, on an operating or GAAP basis where
applicable (or based on such other standards as may replace or
succeed GAAP), including or excluding nonrecurring or
extraordinary items where applicable, or relative to a defined
peer group of companies or an index.
The Committee will set target and maximum amounts payable under
the performance grant. Performance grants must be made prior to
the ninetieth day of the period for which the performance grant
relates or, if less, before the completion of 25 percent of
the period. The Committee may not increase the amounts payable
upon achievement of the performance goals after the start of a
performance period, but may reduce or eliminate the payments.
A performance grant is paid only upon certification by the
Committee that the performance goals with respect to the award
are met. The Committee may provide that a performance grant may
be paid at the target level prior to the attainment of
performance goals only in the event of a service provider’s
death, disability or a change in control. Payments under a
performance grant can be in cash, shares of our common stock, or
a fixed combination of both. The Committee may provide for the
deferral of payments under a performance grant. Any deferral
will be subject to the terms established by the Committee and
comply with applicable law.
Performance
Shares
Performance shares are shares of our common stock that will be
issued if performance goals established by the Committee are
attained.
Performance share awards may be designed to qualify as
“performance-based compensation” for purposes of
Internal Revenue Code Section 162(m), in which case the
awards will generally be subject to the same requirements that
apply to performance grants. Otherwise performance goals and
other terms and conditions of the awards may be set by the
Committee in its discretion.
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A performance share award is paid only upon certification by the
Committee that the performance goals with respect to the award
are met. The Committee may provide that a performance share
award may be paid at the target level prior to the attainment of
performance goals only in the event of the service
provider’s death, disability or change in control. All or a
portion of performance share awards may be settled in cash
instead of shares of company stock. The value of any portion of
a performance share award that is settled in cash will be
determined based on the fair market value as of the date of
payment of the shares of company stock otherwise payable under
the award.
The Committee may permit recipients of performance share awards
to defer payment of their awards, subject to such terms
established by the Committee and compliance with applicable law.
Restricted
Stock and Vested Share Awards
Restricted stock awards are shares of our common stock issued
subject to service-based
and/or
performance-based restrictions on transferability. The Committee
(or, in the case of awards to non-management directors, our
Board) determines the restrictions as well as the conditions
under which the restrictions may lapse. Restriction periods
generally must be no less than three years in length and the
participant will generally forfeit the shares if he or she
separates from service before the end of the period or if the
applicable performance goals are not satisfied. However, the
Committee (or, in the case of awards to non-management
directors, our Board) may, in its discretion, provide for
accelerated removal of the restrictions upon such events as the
participant’s disability, death, termination of employment
or the occurrence of a change in control.
Holders of restricted stock have all the rights of stockholders
during the restricted period, including the right to vote the
shares and receive and dividends thereon. Cash dividends will
generally be paid to the restricted stock holder at the time the
dividend is otherwise paid to our stockholders of record, while
stock dividends will generally be credited to the restricted
stock holder as additional shares of restricted stock, subject
to the same restrictions on transferability as the shares with
respect to which the dividends were paid.
Non-management directors may also receive vested share awards.
Vested share awards are shares of our common stock issued
without any restrictions on transferability, other than
restrictions necessary to comply with applicable securities laws.
Restricted
Stock Units and Performance Share Units
Restricted stock units and performance share units are rights to
receive shares of our common stock (or cash in lieu of the
shares) subject to service-
and/or
performance-based vesting conditions. Restricted stock units and
performance share units are similar to restricted stock except
that shares of our common stock are not issued (or cash in lieu
of the shares is not paid) until on or after the time when the
vesting conditions are satisfied, as determined by the Committee
or, with respect to director awards, our Board. Restricted stock
units and performance share units may be settled in shares of
our common stock, in cash, or in a combination of both, or the
Committee (or, with respect to non-management director awards,
our Board) may reserve the right to determine the method of
settlement at the time the award is settled.
The Committee may, in its discretion, provide that a recipient
of a restricted stock unit or performance share unit award
receive dividend equivalents on outstanding units. Dividend
equivalents maybe paid in cash, credited as additional units or
a in a combination of both, or the Committee (or, with respect
to non-management director awards, our Board) may reserve the
right to determine the method of settlement at the time the
award is settled. Cash dividend equivalents will generally be
paid to the participant at the same time the cash dividends are
otherwise paid to our stockholders of record, while stock
dividend equivalents will generally be credited to the
participant as additional units, subject to the same vesting and
other terms and conditions as the units with respect to which
the dividend equivalents were paid.
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Stock
Options and Stock Appreciation Rights
The 2009 Plan authorizes grants of incentive stock options or
nonstatutory stock options. Incentive stock options are designed
to qualify for favorable tax treatment under Internal Revenue
Code Section 422, while nonstatutory stock options are not.
The exercise price of either type of option may not be less than
100 percent of the fair market value per share of our
common stock covered by the option on the date the option is
granted. Fair market value is the closing price per share of our
common stock as reported by the New York Stock Exchange on the
date on which the value of our common stock must be determined
(or if the date is not a trading day, on the most recent prior
trading day).
Options may be exercised at the times specified by the
Committee. The maximum term of any option is ten years from the
date of grant. Incentive stock options may not be exercised
after the first to occur of (i) ten years from the date of
grant, (ii) three months from the participant’s
termination of employment for reasons other than death or
disability, or (iii) one year from the participant’s
termination of employment due to death or disability.
The value of incentive stock options, based on the exercise
price, that can be exercisable for the first time in any
calendar year under the 2009 Plan or any other similar plan we
maintain is limited to $100,000 for each participant. A
participant may pay the purchase price of an option in cash, or,
if the participant’s incentive award and applicable law so
permits, by having us withhold shares sufficient to pay the
exercise price, by delivering shares owned by the participant,
or by exercising in a broker-assisted transaction.
Absent specific written authorization by the Committee, options
may not be repriced except in connection with a recapitalization
event and otherwise generally may not be materially modified
after the date of grant or extended or renewed beyond their
original terms. The Committee may suspend the right to exercise
an option any time it determines that the issuance of our common
stock would violate any securities or other laws and may provide
that the exercise period is tolled during any period of
suspension.
Stock appreciation rights are similar to nonstatutory options
except that, rather than paying an exercise price to exercise
the stock appreciation rights, the excess of the fair market
value of our common stock covered by the stock appreciation
right on the date of settlement over the fair market value of
our common stock on the date of grant is distributed to the
participant. Stock appreciation rights may be settled in cash or
in shares of our common stock or a combination of both, or the
Committee (or, with respect to non-management director awards,
our Board) may reserve the right to determine the method of
settlement at the time of settlement.
Stock appreciation rights may be granted in tandem with
nonstatutory options. When the participant exercises either the
option or the stock appreciation right, the other part of the
tandem award is cancelled without payment.
Transferability
of Awards
Participants’ interests in performance grants, bonus
awards, performance shares, restricted stock units, performance
share units and stock appreciation rights are not transferable
prior to payment, settlement or exercise of the awards, as the
case may be. Restricted stock is not transferable until the
restrictions have lapsed or been removed. Nonstatutory stock
options are transferable only to the extent provided by the
Committee (or, with respect to non-management director awards,
our Board) in the award agreement and permitted by applicable
securities laws. Incentive stock options are not transferable
except by will or the laws of descent and distribution.
Amendment
of the 2009 Plan and Awards
Our Board may amend the 2009 Plan from time to time as it deems
advisable and may terminate the 2009 Plan at any time.
Amendments to increase the total number of shares of our common
stock reserved under the 2009 Plan, or that otherwise constitute
material changes to the 2009 Plan under applicable tax or
securities laws or the listing standards of the New York Stock
Exchange, require stockholder approval. Our Board must obtain
the consent of a participant to an amendment that adversely
affects a participant’s rights
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under an outstanding award. However, our Board may unilaterally
amend the 2009 Plan and awards with respect to participants to
ensure compliance with applicable laws and regulations.
Federal
Income Tax Consequences
Generally, a participant in the 2009 Plan will not incur federal
income tax when he or she initially receives a performance
grant, performance share, restricted stock unit, performance
share unit, incentive stock option, nonstatutory stock option or
stock appreciation right. A participant generally will not incur
federal income tax when he or she is awarded a share of
restricted stock unless the participant makes a valid election
under Internal Revenue Code Section 83(b) with respect to
the award.
If a service provider makes a valid election under Internal
Revenue Code Section 83(b) with respect to an award of
restricted stock, the participant generally will recognize
ordinary income equal to the fair market value of the stock
subject to the award on the date of grant. The amount included
in income will become the participant’s basis in the
shares. If the participant is an employee, this income is
subject to applicable tax withholding. The participant generally
will not recognize any additional income at the time the
restrictions lapse. Any profit or loss realized on the later
sale or exchange of the stock relative to the participant’s
basis in the shares will be treated as a capital gain or a
capital loss.
If the participant does not make a valid election under Internal
Revenue Code Section 83(b), the participant generally will
recognize compensation income with respect to the restricted
stock equal to the fair market value of the stock subject to the
award at the time or times the restrictions lapse. The amount
included in income will become the participant’s basis in
the shares. If the participant is an employee, this income is
subject to applicable tax withholding. Any profit or loss
realized on the later sale or exchange of the stock relative to
the participant’s basis in the shares will be treated as a
capital gain or a capital loss.
A participant who is awarded one or more restricted stock units
and/or
performance awards will not recognize income, and the Company
will not be allowed a deduction, at the time the award is made.
When the participant receives payment for such awards in cash or
shares of common stock, the amount of the cash and the fair
market value of the shares of common stock received will be
ordinary income to the employee and will be allowed as a
deduction for federal income tax purposes to the Company. The
Company will be entitled to a deduction equal in amount to the
ordinary income realized by the recipient in the year paid.
Upon exercise of a nonstatutory stock option, a participant
generally will recognize ordinary income equal to the difference
between the fair market value of the stock acquired on the date
of the exercise and the exercise price. Generally, the amounts
will be included in the participant’s gross income in the
taxable year in which exercise occurs. The purchase price paid
by the participant plus the amount included in income will
become the participant’s basis in the shares. If the
participant is an employee, this income is subject to applicable
tax withholding. Any profit or loss realized on the later sale
or exchange of the stock relative to the participant’s
basis in the shares will be treated as a capital gain or a
capital loss.
Upon exercise of an incentive stock option, a participant
generally will not recognize income subject to tax, unless the
participant is subject to the alternative minimum tax. The
purchase price paid by the participant will become the
participant’s basis in the shares. If the participant holds
the stock purchased upon exercise of an incentive stock option
until the later of two years after the option was awarded to the
participant or one year after the stock was issued to the
participant, then any profit or loss realized on the later sale
or exchange of the stock relative to the participant’s
basis in the shares will be capital gain or loss. If the
participant sells or exchanges the stock prior to expiration of
the holding period, the participant generally will recognize
ordinary income at the time of the sale or exchange equal to the
excess of the fair market value of the shares at the time of
exercise (or, if less, the amount realized upon the sale or
exchange) over the exercise price. This income will become the
participant’s new basis in the shares. Any additional
profit or loss relative to this basis will be treated as a
capital gain or a capital loss.
If the grant agreement so provides, a participant may pay the
exercise price of a nonstatutory stock option or an incentive
stock option by delivery of shares of our common stock. Usually
when a participant delivers shares of our common stock in
satisfaction of all or any part of the exercise price, no
taxable gain is
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recognized on any appreciation in the value of the delivered
shares, unless the shares were previously acquired upon the
exercise of an incentive stock option and the applicable holding
period with respect to the shares has not expired. In that case,
the participant will recognize ordinary income with respect to
the delivered shares in accordance with the principles described
above. Special rules apply to determine the basis of shares of
our common stock purchased upon the exercise of an option by the
delivery of previously owned shares.
A vested share award will generally be treated as ordinary
income to the participant at the time of the award. Payment
under a performance grant, bonus award, performance share award,
restricted stock unit award, performance share unit award or
upon settlement of a stock appreciation right will also
generally be treated as ordinary income to the participant at
the time of payment or settlement of the award. If payment or
settlement is made in shares of our common stock, the amount
includible in income will be equal to the fair market value of
the shares on the date of payment. The amount included in income
will become the participant’s basis in the shares. If the
participant is an employee, this income is subject to applicable
tax withholding. Any profit or loss realized on the later sale
or exchange of the stock relative to the participant’s
basis in the shares will be treated as a capital gain or a
capital loss.
Assuming that a participant’s compensation is otherwise
reasonable and that the statutory limitations on compensation
deductions (including the limitations under Internal Revenue
Code Sections 162(m) and 280G) do not apply, we usually
will be entitled to a business expense deduction when and for
the amount which a participant recognizes ordinary compensation
income in connection with an incentive award, as described
above. We generally do not receive a deduction in connection
with the exercise of an incentive stock option, unless the
participant disposes of the stock purchased on exercise in
violation of the holding period requirements.
The discussion above is subject to the general federal tax
doctrines of constructive receipt and economic benefit and to
the applicable provisions of Internal Revenue Code
Section 409A. If at any time a participant is in
constructive receipt of an incentive award or receives the
economic benefit of the award, the participant may incur federal
tax liabilities with respect to the award earlier than the times
and in a character other than the characters described above.
In addition, if at any time the 2009 Plan, any incentive award
under the 2009 Plan, or any arrangement required to be
aggregated with the 2009 Plan or any incentive award under the
2009 Plan fails to comply with the applicable requirements of
Internal Revenue Code Section 409A, all amounts (including
earnings) deferred under the 2009 Plan or the award for the
taxable year and all preceding taxable years by any participant
with respect to whom the failure relates are includible in that
participant’s gross income for the taxable year, to the
extent the amounts are not subject to a substantial risk of
forfeiture and have not previously been included in the
participant’s gross income. These amounts are also subject
to an additional income tax equal to twenty percent of the
amount required to be included in gross income and to interest
equal to the underpayment rate specified by the Internal Revenue
Service plus one percentage point, imposed on the underpayments
that would have occurred had the compensation been included in
income for the taxable year when first deferred, or if later,
when no longer subject to a substantial risk of forfeiture.
The above description of tax consequences is general in nature
and does not purport to be complete. Moreover, statutory
provisions are subject to change, as are their interpretations,
and their application may vary in individual circumstances.
Finally, the consequences under applicable state and local
income tax laws may not be the same as under federal income tax
laws.
Effective
Date and Termination
The 2009 Plan was adopted by our Board on April 3, 2009 and
will become effective on the date it is approved by our
stockholders. All incentive awards made prior to the
Company’s obtaining stockholder approval of the 2009 Plan
will be made contingent upon stockholder approval of the plan.
Unless sooner terminated by our Board, the 2009 Plan will
terminate on the tenth anniversary of the date on which it was
approved by our stockholders. No awards may be made under the
2009 Plan after its termination.
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New
Plan Benefits
The Compensation Committee is considering awarding a performance
grant under the 2009 Plan to Mr. Raymond before the 2009
Annual Meeting. The performance grant would be contingent on
approval of the 2009 Plan by our stockholders at the Annual
Meeting. The terms of the performance grant, including the
amount that may be payable under the grant, have not been
determined at this time. However, it is anticipated that if such
a performance grant is awarded to Mr. Raymond, the amount
payable under the award would be conditioned on the Company
attaining specified threshold levels of financial performance
and on Mr. Raymond achieving certain strategic objectives
over a pre-determined period of time, and that any payment under
the award would be exempt from the deduction limitation of
Internal Revenue Code Section 162(m). The Compensation
Committee anticipates that it would consult with the Board
before approving such an award.
Other than the performance grant to Mr. Raymond, it is not
possible at this time to determine the benefits that will be
received by executive officers, by other employees or by
non-executive directors under the 2009 Plan if the plan is
approved by our stockholders. Such benefits will depend on
future actions of the Compensation Committee or the Board and on
the fair market value of our common stock at various future
dates and the extent to which performance goals set by the
Compensation Committee are met, and on the individual
performance of the particular executive officer.
Vote
Required
Approval of the 2009 Plan requires the affirmative vote of the
holders of a majority of the shares of our common stock voting
at the 2009 Annual Meeting.
Our Board
recommends a vote FOR approval of the 2009 Plan.
Our Board has approved the adoption of the Horizon Lines, Inc.
2009 Employee Stock Purchase Plan (the “2009 ESPP”)
and directed that it be submitted to our stockholders for
approval. The principal features of the 2009 ESPP are summarized
below. The complete text of the 2009 ESPP is attached as
Appendix B. This summary is not intended to be a complete
description of the 2009 ESPP and is qualified in its entirety by
the actual text of the 2009 ESPP, as attached to this proxy
statement.
The 2009 ESPP is intended to provide eligible employees of the
Company and its subsidiaries with an opportunity to acquire an
ownership interest in the Company through the purchase of our
common stock through payroll deductions. Purchases are made at a
discount, as more fully described below. The 2009 ESPP will
become effective on the date specified by the Compensation
Committee, subject to your approval of the 2009 ESPP.
A primary reason for adopting the 2009 ESPP is to reserve an
additional 600,000 shares of our common stock for future
purchases by our employees. The additional shares are necessary
to support our philosophy of encouraging our employees to
acquire an ownership interest in the Company. We believe that
stock ownership will better link our employees’ interests
with those of our stockholders.
Our Board
recommends a vote FOR the 2009 ESPP.
Eligibility
and Administration
All present and future employees of the Company or its
subsidiaries are eligible to receive options to purchase Company
common stock under the 2009 ESPP. The Company may, in its sole
discretion, exclude the following types of employees from
participating in the 2009 ESPP:
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An eligible employee will become a participant in the 2009 ESPP
by authorizing the Company to make payroll deductions prior to
the commencement of a purchase period. Once authorized, an
eligible employee will remain a participant in the 2009 ESPP
until he or she withdraws from the plan or terminates his or her
employment. We estimate that we have approximately
2100 employees who may be eligible to participate in the
2009 ESPP.
The 2009 ESPP is an “employee stock purchase plan”
that is intended to qualify under Section 423 of the
Internal Revenue Code of 1986, as amended (the Code). The 2009
ESPP is not intended to be a qualified pension, profit sharing
or stock bonus plan under Section 401(a) of the Code nor is
it subject to the provisions of the Employee Retirement Income
Security Act of 1974.
The 2009 ESPP will be administered by the Compensation Committee
(the Committee). The Committee has authority to interpret the
2009 ESPP and to make all other determinations necessary or
advisable in administering it.
Amount
of Stock Available for Purchase
If the 2009 ESPP is approved, 616,829 shares of our common
stock will be available for purchase under the 2009 ESPP. This
includes 16,829 shares which would have been available for
purchase under the Horizon Lines, Inc. Employee Stock Purchase
Plan (the “Prior ESPP”). No additional shares will be
issued under the Prior ESPP if the 2009 ESPP is approved.
Our common stock is traded on the New York Stock Exchange under
the symbol “HRZ”. On April 1, 2009, the closing
price per share was $3.30.
Purchase
Periods
Eligible employees may participate under the 2009 ESPP during
any purchase period, subject to the share limitations discussed
below. The 2009 ESPP contemplates four purchase periods per
calendar year. Each purchase period will begin on the first day
of the Company’s calendar quarter and end on the last day
of the applicable calendar quarter. It is anticipated that the
first purchase period of the 2009 ESPP will begin on
July 1, 2009.
Purchases
Eligible employees may make purchases under the 2009 ESPP by
authorizing the Company to make payroll deductions from their
base salaries. In turn, a participating employee will be granted
an option to purchase Company stock on the first day of the
applicable purchase period. The option price for the option will
be a percentage of the fair market value of the Company’s
common stock as of the first day or last day of the purchase
period, as determined by the Committee. In no event, however,
may the percentage be less than 85% of the fair market value of
the Company’s common stock on the applicable purchase date.
Historically, the option price under the Prior Plan has been set
at 95% of the fair market value of the Company’s common
stock as of the first or last day of the purchase period,
whichever is lower
Adjustments;
Limitations on Share Purchases
In the event of any change in the common stock by reason of any
stock dividend, recapitalization, combination or
reclassification of the Company’s common stock effected
without consideration, the number of shares covered by each
unexercised option under the plan and the number of shares
authorized for issuance under the 2009 ESPP, as well as the
price per share of common stock covered by each option may be
proportionally adjusted.
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Participating employees may only authorize the Company to
withhold a maximum of 15% of their base salary per purchase
period for the purchase of shares under the 2009 ESPP. Moreover,
employees may not purchase shares that would cause them to own
five percent or more of the combined voting power or value of
all classes of the Company’s stock. Additionally, employees
may not purchase shares of Company common stock under the 2009
ESPP whose fair market value exceeds $25,000 during a calendar
year.
Withdrawal
from Purchase Periods
A participating employee may choose to withdraw from the 2009
ESPP at any time, including during a purchase period, by
informing the Committee of his or her desire to cease
participation. Upon a withdrawal from the plan, the employee
will receive a payment of all unused payroll deductions credited
to his or her plan account.
Additionally, an employee’s participation in the 2009 ESPP
will end upon his or her termination of employment for any
reason, including retirement, death or a failure to remain
continuously employed by the Company or any of its subsidiaries
for at least 20 hours per week. Employees who withdraw from
the 2009 ESPP under these circumstances will be returned their
unused payroll deductions.
A participant who withdraws from the 2009 ESPP will be able to
re-enter the plan upon becoming eligible for participation and
informing the plan administrator of his or her desire to have
the Company re-commence making payroll deductions for the
purchase of shares under the plan.
Dividends
Cash dividends for shares of the Company’s common stock
that are held by employees who participate in the 2009 ESPP will
either be distributed to such individuals directly or
automatically invested in shares of the Company’s common
stock, at the full fair market value, as determined by the
Committee. Dividends that are invested in the Company’s
common stock will be held in accounts under the plan.
Sales
of Shares
Participants in the 2009 ESPP may generally sell shares they
acquire through purchases made under the plan at any time. As
discussed below in the section “Federal Income Tax
Consequences,” the length of time an employee holds his or
her shares after acquiring them through the plan may affect the
tax treatment of such a sale.
Transferability
of Shares
The 2009 ESPP does not permit participants to transfer or assign
their payroll deductions nor their rights to purchase shares
under the plan, except by will or the laws of inheritance
following the participant’s death.
Amendment
and Termination of the 2009 ESPP
The Committee may, at any time, amend, alter, suspend or
discontinue the 2009 ESPP. However, such action may not impair
the rights of any participant without his or her consent under a
previously granted option to purchase shares.
Federal
Income Tax Consequences
The 2009 ESPP is intended to be an “employee stock purchase
plan” within the meaning of Code Section 423. Under
Code Section 423, participants are not required to report
taxable income either upon commencement of participation or when
shares of common stock are purchased, even if the purchase price
is less than the fair market value of the shares at the time of
purchase. All contributions to the 2009 ESPP are made with
after-tax dollars.
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Participants are subject to tax upon their disposition of shares
purchased under the 2009 ESPP. A disposition generally means any
transfer of legal title, including a transfer by sale, exchange
or gift, but does not include transfers made to a
participant’s spouse so long as the participant remains a
joint owner.
The tax consequences of a disposition of shares acquired under
the 2009 ESPP will vary depending upon whether the disposition
is a “qualified disposition” or a “disqualifying
disposition.” A qualified disposition occurs if the
disposition occurs more than two years after the date on which
the participant received the option to purchase shares and more
than one year after the purchase of the shares of common stock.
A disqualifying disposition is any disposition that occurs
before this holding period requirement is satisfied.
Qualifying dispositions will generally lead to less ordinary
income and more capital gain (all of which will be long-term
capital gain) for participants. The amount of ordinary income
will equal the lesser of the participant’s actual gain or
the purchase price discount. All additional gains on a sale that
is a qualifying disposition will be treated as long-term capital
gains. In the event a qualifying disposition results in a loss,
the participant will not have any ordinary income and will have
a long-term capital loss for the difference between the sales
price and the purchase price.
Sales that are considered disqualifying dispositions will result
in the participant recognizing ordinary income at the time of
the sale or other disposition equal to the difference between
the fair market value of the stock at the exercise date and the
purchase price. This amount will be considered ordinary income
in the year of the sale or disposition even if the participant
does not recognize any gain when he or she sells the stock.
Additionally, the difference between the sale price and the
stock’s fair market value on the exercise date will be
treated as a capital gain or loss, which will be long-term if
the stock has been held for more than one year.
The estate of a participant who dies while holding shares of
common stock purchased under the 2009 ESPP will recognize
ordinary income in the year of the participant’s death in
an amount equal to the excess of the value of the common stock
when the option to purchase shares was granted over the purchase
price, or, if less, the amount by which the fair market value of
the common stock on the date of death exceeds the purchase price.
The Company is not entitled to a tax deduction upon grant,
exercise or subsequent transfer of shares of common stock
acquired upon exercise of an option to purchase shares granted
under the 2009 ESPP, provided that the participant holds the
shares received upon the exercise of such option for the holding
period discussed above. If the participant transfers the stock
acquired upon the exercise of such option prior to the end of
the holding period, the Company is generally entitled to a
deduction at the time the participant recognizes ordinary income
in an amount equal to the amount of ordinary income recognized
by such participant as a result of such transfer.
The rules governing employee stock ownership plans are highly
technical, so that the above description of tax consequences is
general in nature and does not purport to be complete. Moreover,
statutory provisions are subject to change, as are their
interpretations, and their application may vary in individual
circumstances. Finally, the consequences under applicable state
and local income tax laws may not be the same as under federal
income tax laws.
New
Plan Benefits
The benefits that will be received by or allocated to eligible
employees under the 2009 ESPP in the future cannot be determined
at this time because the decision to participate in the 2009
ESPP and the amount of contributions set aside to purchase
shares of common stock under the 2009 ESPP (subject to the
limitations discussed above) is entirely within the discretion
of each participant.
Vote
Required
Approval of the 2009 ESPP requires the affirmative vote of the
holders of a majority of the shares of our common stock voting
at the 2009 Annual Meeting.
Our Board
recommends a vote FOR approval of the 2009 ESPP.
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The table below sets forth information with respect to
securities issuable, or available for issuance, under our equity
compensation plans as of December 21, 2008.
The Audit Committee of our Board has selected Ernst &
Young LLP to serve as our independent registered public
accounting firm for the fiscal year ending December 20,
2009. Ernst & Young LLP has served as our independent
registered public accounting firm since it was retained to
perform the audit for our fiscal year ended December 24,
2000. While stockholder ratification of the Audit
Committee’s decision to retain Ernst & Young LLP
is not required by our Bylaws or otherwise, our Board has chosen
to submit that selection to our stockholders for ratification.
If our stockholders fail to ratify the selection, the Audit
Committee may, but is not required to, reconsider whether to
retain that firm. Additionally, even if the selection is
ratified, the Audit Committee may in its discretion direct the
appointment of a different independent registered public
accounting firm at any time during the fiscal year, if it
determines that such a change would be in the best interests of
the Company and our stockholders.
Ernst & Young LLP has advised us that the firm is
independent with respect to the Company and it subsidiaries. We
expect that representatives of Ernst & Young LLP will
be present at the Annual Meeting to make statements and to
respond to appropriate questions from our stockholders.
The following fees were paid to Ernst & Young LLP for
services rendered in fiscal 2007 and fiscal 2008:
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The charter of the Audit Committee provides that the Committee
is responsible for the pre-approval of all audit and non-audit
services to be performed by our independent registered public
accounting firm. To the extent required by applicable law, the
fees paid to Ernst and Young LLP in fiscal 2008 were
pre-approved by the Audit Committee. The Audit Committee also is
responsible for maintaining hiring policies for employees and
former employees of the independent registered public accounting
firm. We have not hired any employees or former employees of the
independent registered public accounting firm engaged on our
account for the last three years.
The affirmative vote of the holders of a majority of the shares
of our common stock present or represented by proxy at the
Annual Meeting, and entitled to vote in respect thereto is
required to ratify the selection of Ernst & Young as
the Company’s independent registered public accountants for
fiscal 2009.
Our Board
recommends a vote FOR the ratification of the appointment of
Ernst & Young LLP to serve as our independent
registered public accounting firm for fiscal 2009.
We currently expect to hold our 2010 Annual Meeting of
Stockholders in June 2010. Any stockholder wishing to nominate a
candidate for director or to propose any other business at the
2010 Annual Meeting must give us timely written notice. This
notice must comply with applicable laws and our bylaws. Copies
of our bylaws are available to stockholders free of charge on
request to our Corporate Secretary, Robert S. Zuckerman, at our
principal executive offices, 4064 Colony Road, Suite 200,
Charlotte, North Carolina 28211. They are also available on our
website at https://www.horizonlines.com. To be timely,
notice shall be delivered to our Secretary before
January 16, 2010 (the date that is 90 days before the
anniversary of the date hereof), and no earlier than
December 17, 2009 (the date that is 120 days before
the first anniversary of the date hereof); provided, that, in
the event the date of the 2010 Annual Meeting is more than
30 days before or after the anniversary date of the 2009
Annual Meeting, notice by the stockholder must be delivered no
earlier than 120 days before the 2010 Annual Meeting and no
later than the later of 90 days before the 2010 Annual
Meeting or 10 days following the day on which we make
public announcement of the date of such meeting. The public
announcement of announcement or postponement of an Annual
Meeting of Stockholders shall not commence a new time period (or
extend any time period) for the giving of a stockholder’s
notice as described above. All proposals for our 2010 Annual
Meeting must be addressed to our Corporate Secretary,
Mr. Zuckerman.
Submitting a stockholder proposal does not guarantee that we
will include the proposal in our next Proxy Statement. The Board
reviews all stockholder proposals and determines whether further
action is required.
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APPENDIX A
HORIZON
LINES, INC.
2009 INCENTIVE COMPENSATION PLAN
1. Purpose. This Horizon Lines, Inc. 2009
Incentive Compensation Plan (the “Plan”) is designed
to support the overall compensation philosophy and objectives of
Horizon Lines, Inc. (the “Company”) to attract,
retain, motivate and appropriately reward talented employee and
other service providers who can contribute significantly to the
Company’s financial growth and success and build long-term
value for the Company’s stockholders. The Plan seeks to
further these objectives through the use of equity-based and
cash incentives that provide value to employees and other
service providers in proportion to the Company’s overall
performance or the achievement of key business goals, that align
the interests of the employees and other service providers with
those of the Company’s stockholders and that encourage
employees to remain with the Company and maximize its future
performance. The Plan is also intended to allow for grants of
stock incentives to compensate non-employee members of the
Company’s Board of Directors.
The Plan replaces and supersedes the Horizon Lines, Inc. Amended
and Restated Equity Incentive Plan, effective as of
September 20, 2005 (the “Prior Plan”). Upon
approval of the Plan by the Company’s stockholders, no
additional awards shall be made under the Prior Plan, although
outstanding awards previously made under the Prior Plan shall
continue to be governed by the terms of the Prior Plan. Shares
that are subject to outstanding awards under the Prior Plan that
expire, are forfeited or otherwise terminate unexercised may be
subjected to new awards under the Plan as provided in
Section 4.
2. Definitions. As used in the Plan, the
following terms have the meanings indicated:
(a) “Act” means the Securities Exchange
Act of 1934, as amended.
(b) “Affected Corporation” means, with respect to
a Participant, (i) the corporation for whom the Participant
is performing services at the time of a Change of Control event,
(ii) the corporation that is liable for the payment of the
deferred compensation (or all corporations liable for the
payment if more than one corporation is liable), within the
meaning of
Section 1.409A-3(i)(5)(ii)(2)
of the Treasury Regulations; or (iii) a corporation owning
more than 50 percent of the total fair market value and
total voting power of a corporation described in
subsections (i) or (ii) above, or any corporation in a
chain of corporations in which each corporation owns more than
50 percent of the total fair market value and total voting
power of another corporation in the chain, ending in a
corporation described in subsections (i) or (ii) above.
(c) “Applicable Withholding Taxes” means
the aggregate amount of federal, state and local income and
employment taxes that an Employer is required to withhold in
connection with any Performance Grant, award of Performance
Shares, any lapse of restrictions on Restricted Stock, any
compensatory dividends paid on Restricted Stock, any vesting of
Restricted Stock Units or Performance Share Units, or any
exercise of a Nonstatutory Stock Option or Stock Appreciation
Right.
(d) “Award” means any Incentive Award or
Director Award.
(e) “Board” means the Board of Directors
of the Company.
(f) “Change of Control” means the date on
which the Affected Corporation experiences a change in ownership
(as described in subsection (i)), a change in effective control
(as described in subsection (ii)), or a change in the ownership
of a substantial portion of its assets (as described in
subsection (iii)):
(i) where any person or more than one person acting as a
group acquires beneficial ownership of stock of the Affected
Corporation that, together with the Affected Corporation stock
already held by such person or group, represents more than
50 percent of the total fair market value or total voting
power of the Affected Corporation stock; provided, however, that
if any one person or more than one person acting as a group is
considered to own more than 50 percent of the total fair
market value or total voting power of the Affected Corporation
stock, the acquisition of additional stock by
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the same person or persons is not considered to cause a change
in the ownership of the Affected Corporation for purposes of
this subsection (i) or to cause a change in effective
control of the Affected Corporation for purposes of subsection
(ii);
(ii) where (1) any person or more than one person
acting as a group acquires (or has acquired during the
twelve-consecutive-month period ending on the date of the most
recent acquisition by such person or persons) beneficial
ownership of Affected Corporation stock possessing
30 percent or more of the total voting power of the
Affected Corporation stock; or (2) a majority of members of
the Board is replaced during a twelve-consecutive-month period
by directors whose appointment or election is not endorsed by a
majority of the members of the Board before the date of the
appointment or election; provided, however, that if any one
person or more than one person acting as a group is considered
to effectively control the Affected Corporation for purposes of
this subsection (ii), the acquisition of additional control of
the corporation by the same person or persons is not considered
to cause a change in the effective control for purposes of this
subsection (ii) or to cause a change in ownership of the
Affected Corporation for purposes of subsection (i); or
(iii) where any person or more than one person acting as a
group acquires (or has acquired during the
twelve-consecutive-month period ending on the date of the most
recent acquisition by such person or group) assets from the
Affected Corporation having a total gross fair market value
equal to 40 percent or more of the total gross fair market
value of all of the assets of the Affected Corporation
immediately prior to such acquisition or acquisitions; provided
that a transfer of assets by an Affected Corporation is not
treated as a change in the ownership of such assets if the
assets are transferred to (I) a stockholder of the Affected
Corporation immediately before the asset transfer in exchange
for or with respect to Affected Corporation stock; (II) an
entity, 50 percent or more of the total fair market value
or total voting power of which is owned, directly or indirectly,
by the Affected Corporation; (III) a person or more than
one person acting as a group that owns, directly or indirectly,
50 percent or more of the total fair market value or total
voting power of all outstanding Affected Corporation stock; or
(IV) an entity, at least 50 percent of the total fair
market value or total voting power of which is owned, directly
or indirectly, by a person described in (III) above. Except
as otherwise provided in this subsection (iii), a person’s
status is determined immediately after the transfer of the
assets. For purposes of this subsection (iii), “gross fair
market value” means the value of the assets of the Affected
Corporation, or the value of the assets being disposed of,
determined without regard to any liabilities associated with
such assets.
For purposes of this Section 2(f), the term
“group” shall have the meaning provided in
Sections 1.409A-3(i)(5)(v)(B),
(vi)(D) or (vii)(C) of the Treasury Regulations (or any
successor provisions), as applicable. The term “beneficial
ownership” shall have the meaning provided in
Section 1.409A-3(i)(5)(v)(iii)
of the Treasury Regulations (or any successor provision).
Notwithstanding anything in this Section 2(f) to the
contrary, unless otherwise provided in the Grant Agreement with
respect to a particular Award, an event which does not
constitute a change in the ownership, a change in the effective
control, or a change in the ownership of a substantial portion
of the assets of the Affected Corporation, each as defined in
Section 1.409A-3(i)(5)
of the Treasury Regulations (or any successor provision), shall
not constitute a Change of Control for purposes of this Plan.
(g) “Code” means the Internal Revenue Code
of 1986, as amended.
(h) “Consultant” means a Service Provider
who is not an Employee or Outside Director.
(i) “Committee” means the Compensation
Committee of the Board (or any successor Board committee
designated by the Board to administer the Plan), provided that,
if any member of the Compensation Committee does not qualify as
(i) an outside director for purposes of Code section
162(m), (ii) a non-employee director for purposes of
Rule 16b-3,
and (iii) an independent director for purposes of the rules
of the exchange on which the Company Stock is traded, the
remaining members of the Committee (but not less than two
members) shall be constituted as a subcommittee to act as the
Committee for purposes of the Plan.
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(j) “Company” means Horizon Lines, Inc.
(k) “Company Stock” means the common stock
of the Company, par value $.01 per share. In the event of a
change in the capital structure of the Company (as provided in
Section 16), the shares resulting from the change shall be
deemed to be Company Stock within the meaning of the Plan.
Shares of Company Stock may be issued under this Plan without
cash consideration.
(l) “Date of Grant” means (i) with
respect to a Non-Option Award, the date on which the Committee
(or, with respect to a Director Award, the Board) grants the
award; (ii) with respect to a Nonstatutory Option or Stock
Appreciation Right, the date on which the Committee (or, with
respect to a Director Award, the Board) completes the corporate
action necessary to create a legally binding right constituting
the Nonstatutory Stock Option or Stock Appreciation Right; or
(iii) with respect to an Incentive Stock Option, the date
on which the Committee completes the corporate action
constituting an offer of stock for sale to a Participant under
the terms and conditions of the Incentive Stock Option. With
respect to any Award, the Committee (and, with respect to any
Director Award, the Board) may specify a future date on which
the grant is to be granted or become effective.
(m) “Director Award” means any
Nonstatutory Option, Stock Appreciation Right, share of
Restricted Stock, Vested Share, Restricted Stock Unit or
Performance Share Unit awarded to an Outside Director under the
Plan.
(n) “Disability” means, as to an Incentive
Stock Option, a Disability within the meaning of Code
section 22(e)(3). As to all other Awards, Disability (or
variations thereof) means, unless otherwise provided in the
Grant Agreement with respect to the award, a Disability within
the meaning of Code section 409A(a)(2)(C) and Section
1.409A-3(i)(4) of the Treasury Regulations (or any successor
provision). The Committee (or, with respect to a Director Award,
the Board) shall determine whether a Disability exists and the
determination shall be conclusive.
(o) “Effective Date” means the date
described in Section 13 of the Plan.
(p) “Employee” means an individual
employed by the Company or a Related Company as a common-law
employee.
(q) “Employer” means the Company or
Related Company with respect to which an Employee provides
services.
(r) “Fair Market Value” means the closing
price per share of Company Stock on the exchange on which the
Company Stock has the highest trading volume on the Date of
Grant or any other date for which the value of Company Stock
must be determined under the Plan, or, if the determination date
is not a trading day, on the most recent trading day immediately
preceding the determination date.
(s) ‘‘Grant Agreement” means the
written agreement between the Company and a Participant
containing the terms and conditions with respect to an Award.
(t) ‘‘Incentive Award” means any
Performance Grant, Performance Share, Option, Stock Appreciation
Right, share of Restricted Stock, Vested Share, Restricted Stock
Unit or Performance Share Unit awarded to a Service Provider
under the Plan.
(u) ‘‘Incentive Stock Option” means
an Option intended to meet the requirements of, and qualify for
favorable federal income tax treatment under, Code
section 422.
(v) ‘‘Non-Option Award” means an
Award other than an Option or Stock Appreciation Right.
(w) ‘‘Nonstatutory Stock Option”
means an Option that does not meet the requirements of Code
section 422, or, even if meeting the requirements of Code
section 422, is not intended to be an Incentive Stock
Option and is so designated.
(x) ‘‘Option” means a right to
purchase Company Stock granted under the Plan, at a price
determined in accordance with the Plan granted under
Section 10.
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(y) ‘‘Outside Director” means a
member of the Board who is not an Employee and who meets any
other qualifications that may be established by the Board to be
treated as an Outside Director under the Plan.
(z) ‘‘Participant” means any Service
Provider or Outside Director who receives an Award under the
Plan.
(aa) ‘‘Performance Criteria” means
the performance of the Company, any Related Company, any
subsidiary, division, business unit thereof, or any individual
using one or more of the following measures, either on an
operating or GAAP basis where applicable (or on the basis of
such other standards as may replace or succeed GAAP), including
or excluding nonrecurring or extraordinary items where
applicable, and including measuring the performance of any of
the following relative to a defined peer group of companies or
an index: market value of the Company’s Common Stock;
pre-tax profits; unit production costs; asset growth; pre-tax
earnings; debt to equity ratio; earnings per share; revenues;
operating income; operating costs and efficiencies; operating
cash flow; net income, before or after taxes; net income before
income taxes, incentive payments and accounting for minority
interest; return on total capital, equity, revenue or assets;
market share; unit production and sales volume; earnings before
interest, taxes, depreciation, rent and amortization expenses;
earnings before interest, taxes, depreciation and amortization;
earnings before interest and taxes; any of the prior measures or
earnings before taxes and unusual or nonrecurring items as
measured either against the annual budget or as a ratio to
revenue or return on total capital; net earnings; profit margin;
operating margin; operating income; net worth; cash flow; cash
flow per share; total stockholder return; revenues; capital
expenditures; improvements in capital structure; industry
indices; expenses and expense ratio management; debt reduction;
profitability of an identifiable business unit or product; or
levels of expense, cost or liability by category, operating unit
or any other delineation.
(bb) ‘‘Performance Goal” means an
objectively determinable performance goal established by the
Committee that relates to one or more Performance Criteria.
(cc) ‘‘Performance Grant” means a
right to receive cash or Company Stock subject to the attainment
of Performance Goals as set forth under Section 6.
(dd) ‘‘Performance Share” means a
right to receive a share of Company Stock subject to the
satisfaction of performance conditions as set forth in
Section 7.
(ee) ‘‘Performance Share Unit” means
a right to receive Company Stock or cash awarded upon the terms
and subject to grant and vesting conditions as set forth in
Section 9.
(ff) ‘‘Plan” means this Horizon
Lines, Inc. 2009 Incentive Compensation Plan, as it may be
amended from time to time.
(gg) ‘‘Plan Year” means the calendar
year.
(hh) ‘‘Related Company” means,
(i) for purposes of determining eligibility to receive an
Incentive Stock Option, any “parent corporation” with
respect to the Company within the meaning of Code
section 424(e) or any “subsidiary corporation”
with respect to the Company within the meaning of Code
section 424(f); (ii) for purposes of determining
eligibility to receive a Nonstatutory Stock Option or Stock
Appreciation Right, any corporation or other entity in a chain
of corporations or other entities in which each corporation or
other entity has a controlling interest (within the meaning of
Section 1.409A-1(b)(5)(E)(1) of the Treasury Regulations (or any
successor provision)) in another corporation or other entity in
the chain, beginning with a corporation or other entity in which
the Company has a controlling interest; and (iii) for all
other purposes under the Plan, any corporation, trade or
business that would be required to be treated as a single
employer with the Company under Code sections 414(b) or
(c), provided that, in applying Code sections 1563(a)(1),
(2) and (3) for purposes of determining a controlled
group of corporations, or in applying
Section 1.414(c)-2
of the Treasury Regulations for purposes of determining trades
or businesses under common control, the phrase “at least
50%” shall replace the phrase “at least 80%” each
time it appears in those sections.
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(ii) ‘‘Repricing” means, with respect
to an Option or Stock Appreciation Right, any of the following:
(i) the lowering of the exercise price after the Date of
Grant; (ii) the taking of any other action that is treated
as a repricing under generally accepted accounting principles;
or (iii) the cancellation of the Option or Stock
Appreciation Right at a time when its exercise price (or, with
respect to the Stock Appreciation Right, the Fair Market Value
of the Company Stock covered by the Stock Appreciation Right on
the Date of Grant) exceeds the Fair Market Value of the
underlying Company Stock in exchange for any other Award, unless
the cancellation and exchange occurs in connection with a
Corporate Event (as defined in Section 16(b) below).
(jj) ‘‘Restricted Stock” means
Company Stock awarded upon the terms and subject to restrictions
as set forth in Section 8.
(kk) ‘‘Restricted Stock Unit” means a
right to receive Company Stock or cash awarded upon the terms
and subject to vesting conditions as set forth in Section 9.
(ll) ‘‘Retirement” means, unless
otherwise provided in the Grant Agreement for a particular
Award, a Participant’s termination of employment or other
separation from service on or after age 65.
(mm) ‘‘Rule 16b-3”
means
Rule 16b-3
of the Securities and Exchange Commission promulgated under the
Act, as amended from time to time.
(nn) ‘‘Service Provider” means an
Employee, Consultant or other natural person employed by or
providing bona fide services to the Company or a Related
Company, excluding any Outside Director.
(oo) ‘‘Stock Appreciation Right”
means a right to receive Company Stock or cash granted under
Section 11.
(pp) ‘‘Tandem Right” means a kind of
Stock Appreciation Right granted in connection with a
Nonstatutory Stock Option as described in Section 11.
(qq) ‘‘Taxable Year” means the fiscal
period used by the Company for reporting taxes on its income
under the Code.
(rr) ‘‘Ten Percent Stockholder”
means a person who owns, directly or indirectly, stock
possessing more than ten percent of the total combined voting
power of all classes of stock of the Company or any Related
Company. Indirect ownership of stock shall be determined in
accordance with Code section 424(d).
(ss) ‘‘Treasury Regulations” mean the
final, temporary or proposed regulations issued by the Treasury
Department
and/or
Internal Revenue Service as codified in Title 26 of the
United States Code of Federal Regulations. Any references made
in the Plan to specific Treasury Regulations shall also refer to
any successor or replacement regulations thereto.
(tt) ‘‘Vested Share” means a share of
Company Stock awarded upon the terms set forth in
Section 12.
3. General. The following types of Awards
may be granted under the Plan: Performance Grants, Performance
Shares, shares of Restricted Stock, Vested Shares, Restricted
Stock Units, Performance Share Units, Options, or Stock
Appreciation Rights. Options granted under the Plan may be
Incentive Stock Options or Nonstatutory Stock Options.
4. Stock.
(a) Reserve. Subject to Section 16
of the Plan, there shall be reserved for issuance under the Plan
an aggregate of 1,000,000 shares of Company Stock, which
shall be authorized but unissued shares. Any shares subject to
an award under the Prior Plan that is outstanding as of the date
on which the Plan was approved by the Board and which expires,
is forfeited or otherwise terminates unexercised, shall be added
to the shares reserved for issuance under the Plan.
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(b) Share Use. Shares allocable to Awards
or portions thereof granted under the Plan or to incentive
awards granted under the Prior Plan that expire, are forfeited,
or that terminate unexercised may be subjected to a new Award
under the Plan. Any shares of Company Stock tendered or
exchanged by a Participant as full or partial payment to the
Company of the exercise price under an Option and any shares
retained or withheld by the Employer in satisfaction of an
Employee’s obligations to pay Applicable Withholding Taxes
with respect to any Incentive Award shall not be available for
issuance, subjected to new Awards or otherwise used to increase
the share reserve under the Plan. The cash proceeds from Option
exercises shall not be used to repurchase shares on the open
market for reuse under the Plan.
(c) Prior Plan. Upon approval of the Plan
by the Company’s stockholders, no additional grants of
incentive awards shall be made under the Prior Plan.
(d) Plan Limits. All of the shares of
Company Stock that may be issued under this Plan may be issued
upon the exercise of Options that qualify as Incentive Stock
Options. No more than 500,000 shares may be allocated to
Awards, including the maximum amounts payable under a
Performance Grant, that are granted to any individual
Participant during any single Taxable Year. The aggregate
maximum cash amount payable under the Plan to any Participant in
any single Taxable Year shall not exceed $5,000,000.
5. Eligibility.
(a) Incentive Awards. All present and
future Service Providers of the Company or any Related Company
(whether now existing or hereafter created or acquired) who have
contributed or who can be expected to contribute significantly
to the Company or a Related Company shall be eligible to receive
Incentive Awards under the Plan. The Committee shall have the
power and complete discretion, as provided in Section 17,
to select eligible Service Providers to receive Incentive Awards
and to determine for each Service Provider the nature of the
award and the terms and conditions of each Incentive Award.
(b) Director Awards. All present and
future Outside Directors shall be eligible to receive Director
Awards under the Plan. The Board shall have the power and
complete discretion to select eligible Outside Directors to
receive Director Awards and to determine for each Outside
Director the nature of the award and the terms and conditions of
each Director Award.
(c) No Contract of Employment or
Services. The grant of an Award shall not
obligate the Company or any Related Company to pay any Service
Provider or Outside Director any particular amount of
remuneration, to continue the employment or services of the
Service Provider or Outside Director after the grant or to make
further grants to the Service Provider or Outside Director at
any time thereafter.
(d) Foreign Awards. When granting Awards
to Service Providers or Outside Directors who are not United
States residents, the Committee (or with respect to Director
Awards, the Board) shall have complete discretion and authority
to grant such Awards in compliance with all present and future
laws of the country or countries with laws that may apply to the
grant of the Award or the issuance of Company Stock pursuant to
the Award. Such authorization shall extend to and include
establishing one or more separate sub-plans which include
provisions not inconsistent with the Plan that comply with
statutory or regulatory requirements imposed by the foreign
country or countries in which the Participant resides.
6. Performance Grants.
(a) The Committee may make Performance Grants to eligible
Service Providers. Each Performance Grant shall include the
Performance Goals for the award, the Performance Criteria with
respect to which such goals are to be measured, the target and
maximum amounts payable under the award, the period over which
the award is to be earned, and any other terms and conditions as
are applicable to the Performance Grant. The terms of a
Performance Grant may be set in an annual or long-term bonus
plan or other similar document. In the event of any conflict
between such document and the Plan, the terms of the Plan shall
control. Performance Grants shall be granted and administered in
such a way as to qualify as “performance-based
compensation” for purposes of Code section 162(m).
(b) The Committee shall establish the Performance Goals for
Performance Grants. The Committee shall determine the extent to
which any Performance Criteria shall be used and weighted in
determining
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Performance Grants. The Committee may vary the Performance
Criteria, Performance Goals and weightings from Participant to
Participant, Performance Grant to Performance Grant and Taxable
Year to Taxable Year. The Committee may increase, but not
decrease, the minimum and target levels (but not increase the
amount payable) with respect to any Performance Goal after the
start of a Performance Period.
(c) The Committee shall establish for each Performance
Grant the amount of cash or Company Stock payable at specified
levels of performance, based on the Performance Goal or Goals
with respect to each Performance Criterion. Any Performance
Grant shall be made not later than the earlier of
(i) 90 days after the start of the period for which
the Performance Grant relates and (ii) the completion of
25% of such period. All determinations regarding the achievement
of any Performance Goals will be made by the Committee. The
Committee may not increase during a Taxable Year the amount of
cash or Company Stock that would otherwise be payable upon
achievement of the Performance Goal or Goals but may reduce or
eliminate the payments unless otherwise provided in a
Performance Grant. The Committee may provide for a Performance
Grant to be payable at the target level (or other level as
determined by the Committee in its discretion) prior to the
attainment of a Performance Goal or Goals solely upon the
Participant’s death, Disability, or the occurrence of a
Change of Control.
(d) The actual payments to a Participant under a
Performance Grant will be calculated by measuring the
achievement of the Performance Goals with respect to the
Performance Criteria as established in the Performance Grant.
All calculations of actual payments shall be made by the
Committee and the Committee shall certify in minutes of a
meeting or other writing the extent, if any, to which the
Performance Goals have been met.
(e) Performance Grants may be paid in cash, Company Stock,
or a fixed combination of Company Stock or cash as provided by
the Committee at the time of grant, or the Committee may reserve
the right to determine the manner of payment at the time the
Performance Grant becomes payable. The Committee may provide in
the Grant Agreement that the Participant may make an election to
defer the payment under a Performance Grant subject to such
terms as the Committee may determine in accordance with Code
section 409A.
(f) A Participant who receives a Performance Grant payable
in Company Stock shall have no rights as a stockholder until the
Company Stock is issued pursuant to the terms of the Performance
Grant and all requirements with respect to the issuance of such
shares have been satisfied.
(g) A Participant’s interest in a Performance Grant
may not be sold, assigned, transferred, pledged, hypothecated,
or otherwise encumbered.
(h) Whenever payments under a Performance Grant are to be
made in cash to a Participant who is an Employee, his Employer
will withhold therefrom an amount sufficient to satisfy any
Applicable Withholding Taxes. Each Participant who is an
Employee shall agree as a condition of receiving a Performance
Grant payable in Company Stock to pay to his Employer, or make
arrangements satisfactory to his Employer regarding the payment
to his Employer of, Applicable Withholding Taxes. Until the
amount has been paid or arrangements satisfactory to the
Employer have been made, no stock certificate shall be issued to
the Participant. Payment to the Employer in satisfaction of
Applicable Withholding Taxes may be in cash. In addition, if the
Committee allows or the Grant Agreement so provides,
(A) payment to the Employer in satisfaction of Applicable
Withholding Taxes may be made in shares of Company Stock (valued
at their Fair Market Value as of the date of payment) to which
the Participant has good title, free and clear of all liens and
encumbrances; (B) the Participant may elect to have his
Employer retain that number of shares of Company Stock (valued
at their Fair Market Value as of the date of such retention)
that would satisfy all or a specified portion of the Applicable
Withholding Taxes; or (C) unless prohibited by law, the
Participant may deliver irrevocable instructions to a broker to
deliver promptly to the Employer, from the sale or loan proceeds
with respect to the sale of Company Stock or a loan secured by
Company Stock, the amount necessary to pay the Applicable
Withholding Taxes.
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7. Performance Shares.
(a) The Committee may grant Performance Shares to eligible
Service Providers. Whenever the Committee grants Performance
Shares, notice shall be given to the Service Provider stating
the number of Performance Shares granted and the terms and
conditions to which the grant of Performance Shares is subject.
This notice shall become the Grant Agreement between the Company
and the Service Provider and, at that time, the Service Provider
shall become a Participant. Performance Shares may or may not be
intended to qualify as “performance-based
compensation” for purposes of Code section 162(m). If
intended to so qualify, the award shall be governed by the
provisions of Section 6.
(b) The Committee shall establish the performance goals to
which each award of Performance Shares shall be subject. The
performance goals need not be objective and may be based on any
performance conditions selected by the Committee in its
discretion. The performance period with respect to an award
shall not be less than twelve consecutive months in length and
the performance goals with respect to such award may be
established at any time after the start of such period in the
Committee’s discretion. The Committee may vary the
performance and other terms and conditions from Participant to
Participant, grant to grant and Taxable Year to Taxable Year.
The Committee may increase or decrease the minimum, target or
maximum levels with respect to any performance goal after the
start of a performance period in its discretion.
(c) The Committee shall establish for each award the number
of shares of Company Stock payable at specified levels of
performance. All determinations regarding the achievement of any
performance goals will be made by the Committee. The actual
number of shares to be paid to a Participant under an award will
be calculated by measuring the achievement of the performance
goal(s) with respect to the performance criteria as established
by the Committee. All calculations of actual payments shall be
made by the Committee whose decision shall be final and binding
on all parties.
(d) The Committee may reserve the right in a Grant
Agreement to settle all or portion of an award of Performance
Shares in cash instead of shares of Company Stock, with the cash
portion to be determined based on the Fair Market Value as of
the date of payment of the shares of Company Stock otherwise
payable under the award, or to allow the Participant to defer
payment under the award, subject to such terms as the Committee
may determine in accordance with Code section 409A.
(e) A Participant shall have no rights as a stockholder
until shares of Company Stock are issued under the Performance
Share award and all requirements with respect to the issuance of
such shares have been satisfied.
(f) A Participant’s interest in an award of
Performance Shares may not be sold, assigned, transferred,
pledged, hypothecated, or otherwise encumbered.
(g) Each Participant who is an Employee shall agree at the
time of receiving an award of Performance Shares, and as a
condition thereof, to pay to the Employer, or make arrangements
satisfactory to the Employer regarding the payment to the
Employer of, Applicable Withholding Taxes. Until the amount has
been paid or arrangements satisfactory to the Employer have been
made, no stock certificate shall be issued to the Participant.
Payment to the Employer in satisfaction of Applicable
Withholding Taxes may be in cash. In addition, if the Committee
allows or the Grant Agreement so provides, (A) payment to
the Employer in satisfaction of Applicable Withholding Taxes may
be made in shares of Company Stock (valued at their Fair Market
Value as of the date of payment) to which the Participant has
good title, free and clear of all liens and encumbrances;
(B) the Participant may elect to have his Employer retain
that number of shares of Company Stock (valued at their Fair
Market Value as of the date of such retention) that would
satisfy all or a specified portion of the Applicable Withholding
Taxes; or (C) unless prohibited by law, the Participant may
deliver irrevocable instructions to a broker to deliver promptly
to the Employer, from the sale or loan proceeds with respect to
the sale of Company Stock or a loan secured by Company Stock,
the amount necessary to pay the Applicable Withholding Taxes.
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8. Restricted Stock Awards.
(a) The Committee may grant Restricted Stock to eligible
Service Providers. Whenever the Committee deems it appropriate
to grant Restricted Stock, notice shall be given to the Service
Provider stating the number of shares of Restricted Stock
granted and the terms and conditions to which the Restricted
Stock is subject. This notice shall become the Grant Agreement
between the Company and the Service Provider and, at that time,
the Service Provider shall become a Participant.
(b) The Committee shall establish as to each award of
Restricted Stock the terms and conditions upon which the
restrictions set forth in paragraph (c) below shall lapse.
The terms and conditions may include the continued performance
of services or the achievement of performance conditions
measured on an individual, corporate or other basis, or any
combination thereof. Any service period shall not be less than
three consecutive years in length and any performance period
shall not be less than twelve consecutive months in length;
provided, however, that the Committee may, in its discretion and
without limitation, provide in the Grant Agreement that
restrictions will lapse prior to the expiration of the service
or performance period as a result of the Disability, death or
Retirement of the Participant or the occurrence of a Change of
Control. If the award is intended to qualify as
“performance-based compensation” for purposes of Code
section 162(m), the award shall be governed by the
provisions of
Section 6(b)-(d).
(c) No shares of Restricted Stock may be sold, assigned,
transferred, pledged, hypothecated, or otherwise encumbered or
disposed of until the restrictions on the shares established by
the Committee have lapsed or been removed.
(d) Upon the acceptance by a Participant of an award of
Restricted Stock, the Participant shall, subject to the
restrictions set forth in paragraph (c) above, have all the
rights of a stockholder with respect to the shares of Restricted
Stock, including, but not limited to, the right to vote the
shares of Restricted Stock and the right to receive all
dividends and other distributions paid thereon. Unless otherwise
provided in the Grant Agreement, dividends or other
distributions paid in shares of Company Stock or cash shall be
subject to the same restrictions set forth in paragraph
(c) as the shares of Restricted Stock with respect to which
the dividends or other distributions are paid. Certificates
representing Restricted Stock shall be held by the Company until
the restrictions lapse and upon request the Participant shall
provide the Company with appropriate stock powers endorsed in
blank.
(e) Each Participant who is an Employee shall agree at the
time his or her Restricted Stock is granted, and as a condition
thereof, to pay to his Employer, or make arrangements
satisfactory to his Employer regarding the payment to his
Employer of, Applicable Withholding Taxes. Until the amount has
been paid or arrangements satisfactory to the Employer have been
made, no stock certificate shall be issued to the Participant.
Payment to the Employer in satisfaction of Applicable
Withholding Taxes may be in cash. In addition, if the Committee
allows or the Grant Agreement so provides, (A) payment to
the Employer in satisfaction of Applicable Withholding Taxes may
be made in shares of Company Stock (valued at their Fair Market
Value as of the date of payment) to which the Participant has
good title, free and clear of all liens and encumbrances;
(B) the Participant may elect to have his Employer retain
that number of shares of Company Stock (valued at their Fair
Market Value as of the date of such retention) that would
satisfy all or a specified portion of the Applicable Withholding
Taxes; or (C) unless prohibited by law, the Participant may
deliver irrevocable instructions to a broker to deliver promptly
to the Employer, from the sale or loan proceeds with respect to
the sale of Company Stock or a loan secured by Company Stock,
the amount necessary to pay the Applicable Withholding Taxes.
9. Performance Share Units and Restricted Stock
Units.
(a) The Committee may grant Performance Share Units and
Restricted Stock Units to eligible Service Providers. Whenever
the Committee deems it appropriate to grant Performance Share
Units or Restricted Stock Units, notice shall be given to the
Service Provider stating the number of Performance Share Units
or Restricted Stock Units granted and the terms and conditions
to which the Performance Share Units or Restricted Stock Units
are subject. This notice shall become the Grant Agreement
between the Company and the Service Provider and, at that time,
the Service Provider shall become a Participant.
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(b) The Committee shall establish as to each award of
Performance Share Units the terms and conditions upon which the
Performance Share Units shall be earned, vest and be paid. The
issuance and vesting of Performance Share Units may be
conditioned on the achievement of performance conditions
measured on an individual, corporate, or other basis, or any
combination thereof and on the continued performance of
services. The Committee shall establish as to each award of
Restricted Stock Units the terms and conditions upon which the
Restricted Stock Units shall vest and be paid. Vesting may be
conditioned on the continued performance of services or the
achievement of performance conditions measured on an individual,
corporate, or other basis, or any combination thereof. A
Restricted Stock Unit the vesting of which is conditioned on
employment and the passage of time shall not vest less than
three years from the Date of Grant of the Restricted Stock Unit.
A Performance Share Unit or Restricted Stock Unit the vesting of
which is conditioned on the achievement of Performance Goals or
other performance conditions shall not vest less than one year
from the Date of Grant. Notwithstanding the foregoing; the
Committee may, in its discretion and without limitation, provide
in the Grant Agreement that restrictions will expire as a result
of one or more of the Disability, death or Retirement of the
Participant or the occurrence of a Change of Control. If the
award is intended to qualify as “performance-based
compensation” for purposes of Code section 162(m), the
award shall be governed by the provisions of
Section 6(b)-(d).
(c) Performance Share Units and Restricted Stock Units may
be paid in cash, Company Stock, or a fixed combination of
Company Stock or cash as provided in the Grant Agreement, or the
Committee may reserve the right to determine the manner of
payment at the time the Performance Share Units or Restricted
Stock Units become payable. The delivery of Company Stock in
payment of Performance Share Units or Restricted Stock Units may
be subject to additional conditions established in the Grant
Agreement.
(d) A Participant who receives Performance Share Units or
Restricted Stock Units payable in Company Stock shall have no
rights as a stockholder until the Company Stock is issued
pursuant to the terms of the Grant Agreement and all
requirements with respect to the issuance of such shares have
been satisfied. The Committee may, in its discretion, provide
that a Participant shall be entitled to receive dividend
equivalents on outstanding Performance Share Units or Restricted
Stock Units. Dividend equivalents may be (i) paid in cash,
(ii) credited to the Participant as additional Performance
Share Units or Restricted Stock Units, or (iii) a fixed
combination of cash and additional Performance Share Units or
Restricted Stock Units as provided in the Grant Agreement, or
the Committee may reserve the right to determine the manner of
payment at the time dividends are paid to stockholders of
record. Unless otherwise provided in the Grant Agreement,
(i) dividend equivalents with respect to dividends or other
distributions that are paid in shares of Company Stock or cash
shall be credited to the Participant as additional Restricted
Stock Units subject to the same restrictions as the Restricted
Stock Units with respect to which the dividend equivalents are
paid, and (ii) the same provisions will apply to
outstanding Performance Share Units following the end of the
performance period.
(e) A Participant’s interest in Performance Share
Units or Restricted Stock Units may not be sold, assigned,
transferred, pledged, hypothecated, or otherwise encumbered.
(f) Whenever payments under Performance Share Units or
Restricted Stock Units are to be made in cash to a Participant
who is an Employee, his Employer will withhold therefrom an
amount sufficient to satisfy any Applicable Withholding Taxes.
Each Participant who is an Employee shall agree as a condition
of receiving Performance Share Units or Restricted Stock Units
payable in the form of Company Stock to pay to his Employer, or
make arrangements satisfactory to his Employer regarding the
payment to his Employer of, Applicable Withholding Taxes. Until
the amount has been paid or arrangements satisfactory to the
Employer have been made, no stock certificate shall be issued to
the Participant. Payment to the Employer in satisfaction of
Applicable Withholding Taxes may be in cash. In addition, if the
Committee allows or the Grant Agreement so provides,
(A) payment to the Employer in satisfaction of Applicable
Withholding Taxes may be made in shares of Company Stock (valued
at their Fair Market Value as of the date of payment) to which
the Participant has good title, free and clear of all liens and
encumbrances; (B) the Participant may elect to have his
Employer retain that number of shares of Company Stock (valued
at their Fair Market Value as of the date of such retention)
that would satisfy all or a specified portion of the Applicable
Withholding Taxes; or (C) unless prohibited by law, the
Participant may deliver irrevocable instructions to a broker to
deliver
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promptly to the Employer, from the sale or loan proceeds with
respect to the sale of Company Stock or a loan secured by
Company Stock, the amount necessary to pay the Applicable
Withholding Taxes.
10. Stock Options.
(a) The Committee may grant Options to eligible Service
Providers. Whenever the Committee grants Options, notice shall
be given to the Service Provider stating the number of shares
for which Options are granted, the Option exercise price per
share, whether the Options are Incentive Stock Options or
Nonstatutory Stock Options, the extent, if any, to which
associated Stock Appreciation Rights are granted, and the
conditions to which the grant and exercise of the Options are
subject. This notice shall become the Grant Agreement between
the Company and the Service Provider and, at that time, the
Service Provider shall become a Participant.
(b) The exercise price of shares of Company Stock covered
by an Option shall not be, and shall never become, less than
100 percent of the Fair Market Value of the shares on the
Date of Grant, except as may be provided in Section 16
(regarding certain changes affecting Company Stock). If the
Participant is a Ten Percent Stockholder and the Option is
intended to qualify as an Incentive Stock Option, the exercise
price shall be not less than 110 percent of the Fair Market
Value of such shares on the Date of Grant.
(c) Options may be exercised in whole or in part at the
times as may be specified by the Committee in the
Participant’s Grant Agreement; provided that no Option may
be exercised after the expiration of ten (10) years from
the Date of Grant. If the Participant is a Ten Percent
Stockholder and the Option is intended to qualify as an
Incentive Stock Option, the Option may not be exercised after
the expiration of five (5) years from the Date of Grant.
(d) Options shall not be transferable except to the extent
specifically provided in the Grant Agreement in accordance with
applicable securities laws. Incentive Stock Options, by their
terms, shall not be transferable except by will or the laws of
descent and distribution and shall be exercisable, during the
Participant’s lifetime, only by the Participant.
(e) Options that are intended to qualify as Incentive Stock
Options shall be granted only to Employees who meet the
eligibility requirements of Section 5.
(f) Options that are intended to qualify as Incentive Stock
Options shall, by their terms, not be exercisable after the
first to occur of (x) ten years from the Date of Grant
(five years if the Participant to whom the Option has been
granted is a Ten Percent Stockholder), (y) three
months following the date of the Participant’s termination
of employment with the Company and all Related Companies for
reasons other than Disability or death, or (z) one year
following the date of the Participant’s termination of
employment on account of Disability or death.
(g) Options that are intended to qualify as Incentive Stock
Options shall, by their terms, be exercisable in any calendar
year only to the extent that the aggregate Fair Market Value
(determined as of the Date of Grant) of the Company Stock with
respect to which Incentive Stock Options are exercisable for the
first time during the Plan Year does not exceed $100,000 (the
“Limitation Amount”). Incentive Stock Options granted
under the Plan and all other plans of the Company and all
Related Companies shall be aggregated for purposes of
determining whether the Limitation Amount has been exceeded. The
Committee may impose any conditions as it deems appropriate on
an Incentive Stock Option to ensure that the foregoing
requirement is met. If Incentive Stock Options that first become
exercisable in a Plan Year exceed the Limitation Amount, the
excess Options shall be treated as Nonstatutory Stock Options to
the extent permitted by law.
(h) A Participant who purchases shares of Company Stock
under an Option shall have no rights as a stockholder until the
Company Stock is issued pursuant to the terms of the Grant
Agreement and all requirements with respect to the issuance of
such shares have been satisfied.
(i) Options may be exercised by the Participant giving
written notice of the exercise to the Company, stating the
number of shares the Participant has elected to purchase under
the Option. The notice shall be effective only if accompanied by
the exercise price in full in cash; provided, however, that if
the terms of an Option or the Committee in its discretion so
permits, the Participant (i), unless prohibited by law, may
deliver
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a properly executed exercise notice together with irrevocable
instructions to a broker to deliver promptly to the Company,
from the sale or loan proceeds with respect to the sale of
Company Stock or a loan secured by Company Stock, the amount
necessary to pay the exercise price and, if required by the
terms of the Option or the Committee in its discretion,
Applicable Withholding Taxes, (ii) may deliver shares of
Company Stock for which the holder thereof has good title, free
and clear of all liens and encumbrances (valued at their Fair
Market Value on the date of exercise) in satisfaction of all or
any part of the exercise price, or (iii) may cause to be
withheld from the Option shares, shares of Company Stock (valued
at their Fair Market Value on the date of exercise) in
satisfaction of all or any part of the exercise price; or
(iv) may use any other methods of payment as the Committee,
at its discretion, deems appropriate. Until the Participant has
paid the exercise price and any Applicable Withholding Taxes, no
stock certificate shall be issued.
(j) Each Participant who is an Employee shall agree as a
condition of the exercise of an Option to pay to his Employer,
or make arrangements satisfactory to his Employer regarding the
payment to his Employer of, Applicable Withholding Taxes. Until
the amount has been paid or arrangements satisfactory to the
Employer have been made, no stock certificate shall be issued
upon the exercise of an Option. Payment to the Employer in
satisfaction of Applicable Withholding Taxes may be in cash. In
addition, if the Committee allows or the Grant Agreement so
provides, (A) payment to the Employer in satisfaction of
Applicable Withholding Taxes may be made in shares of Company
Stock (valued at their Fair Market Value as of the date of
payment) to which the Participant has good title, free and clear
of all liens and encumbrances; (B) the Participant may
elect to have his Employer retain that number of shares of
Company Stock (valued at their Fair Market Value as of the date
of such retention) that would satisfy all or a specified portion
of the Applicable Withholding Taxes, or (C) unless
prohibited by law, the Participant may deliver irrevocable
instructions to a broker to deliver promptly to the Employer,
from the sale or loan proceeds with respect to the sale of
Company Stock or a loan secured by Company Stock, the amount
necessary to pay the Applicable Withholding Taxes.
(k) Unless specifically provided in the discretion of the
Committee in a writing that references and supersedes this
Section 10(k), (i) no Modification shall be made in
respect to any Option if such Modification would result in the
Option constituting a deferral of compensation, and (ii) no
Extension shall be made in respect to any Option if such
Extension would result in the Option having an additional
deferral feature from the Date of Grant, in each case within the
meaning of applicable Treasury Regulations under Code
section 409A. Subject to the remaining part of this
subsection (k), (i) a “Modification” means any
change in the terms of the Option (or change in the terms of the
Plan or applicable Grant Agreement) that may provide the holder
of the Option with a direct or indirect reduction in the
exercise price of the Option, regardless of whether the holder
in fact benefits from the change in terms; and (ii) an
“Extension” means either (A) the provision to the
holder of an additional period of time within which to exercise
the Option beyond the time originally prescribed, (B) the
conversion or exchange of the Option for a legally binding right
to compensation in a future taxable year, (C) the addition
of any feature for the deferral of compensation to the terms of
the Option, or (D) any renewal of the Option that has the
effect of (A) through (C) above. Notwithstanding the
preceding sentence, it shall not be a Modification or an
Extension, respectively, to change the terms of an Option in
accordance with Section 16 of the Plan, or in any of the
other ways or for any of the other purposes provided in
applicable Treasury Regulations or other generally applicable
guidance under Code section 409A as not resulting in a
Modification or Extension for purposes of that section. In
particular, it shall not be an Extension to extend the exercise
period of an Option to a date no later than the earlier of
(i) the latest date upon which the Option could have
expired by its original terms under any circumstances or
(ii) the tenth anniversary of the original Date of Grant.
11. Stock Appreciation Rights.
(a) The Committee may grant Stock Appreciation Rights to
eligible Service Providers. Whenever the Committee grants Stock
Appreciation Rights, notice shall be given to the Service
Provider stating the number of shares with respect to which
Stock Appreciation Rights are granted, the extent, if any, to
which the Stock Appreciation Rights are granted in connection
with all or any part of a Nonstatutory Stock Option
(“Tandem Rights”), and the conditions to which the
grant and exercise of the Stock Appreciation Rights are subject.
This notice shall become the Grant Agreement between the Company
and the Service Provider and, at that time, the Service Provider
shall become a Participant.
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(b) Stock Appreciation Rights (other than Tandem Rights)
shall entitle the Participant, upon exercise of all or any part
of the Stock Appreciation Rights, to receive in exchange from
the Company an amount equal to the excess of (x) the Fair
Market Value on the date of exercise of the Company Stock
covered by the surrendered Stock Appreciation Right over
(y) the Fair Market Value of the Company Stock on the Date
of Grant of the Stock Appreciation Right.
(c) Tandem Rights shall entitle the Participant, upon
exercise of all or any part of the Tandem Rights, to surrender
to the Company unexercised that portion of the underlying
Nonstatutory Stock Option relating to the same number of shares
of Company Stock as is covered by the Tandem Right (or the
portion of the Tandem Right so exercised) and to receive in
exchange from the Company an amount equal to the excess of
(x) the Fair Market Value on the date of exercise of the
Company Stock covered by the surrendered portion of the
underlying Nonstatutory Stock Option over (y) the exercise
price of the Company Stock covered by the surrendered portion of
the underlying Nonstatutory Stock Option.
(d) Upon the exercise of a Tandem Right and surrender of
the related portion of the underlying Nonstatutory Stock Option,
the Nonstatutory Stock Option, to the extent surrendered, shall
not thereafter be exercisable.
(e) Subject to any further conditions upon exercise imposed
by the Committee, a Tandem Right shall be granted on the same
Date of Grant as the related Nonstatutory Stock Option, be
transferable only to the extent that the related Nonstatutory
Stock Option is transferable, be exercisable only to the extent
that the related Nonstatutory Stock Option is exercisable and
shall expire no later than the date on which the related
Nonstatutory Stock Option expires.
(f) The Committee may limit the amount that the Participant
will be entitled to receive upon exercise of Stock Appreciation
Rights.
(g) Stock Appreciation Rights shall not be transferable
except to the extent specifically provided in the Grant
Agreement in accordance with applicable securities laws.
(h) Stock Appreciation Rights may be exercised in whole or
in part at the times as may be specified by the Committee in the
Participant’s Grant Agreement; provided that no Stock
Appreciation Right may be exercised after the expiration of ten
(10) years from the Date of Grant.
(i) A Stock Appreciation Right may only be exercised at a
time when the Fair Market Value of the Company Stock covered by
the Stock Appreciation Right exceeds the Fair Market Value of
the Company Stock on the Date of Grant of the Stock Appreciation
Right (or, in the case of a Tandem Right, only to the extent it
exceeds the exercise price of the Company Stock covered by the
underlying Nonstatutory Stock Option).
(j) The manner in which the Company’s obligation
arising upon the exercise of a Stock Appreciation Right shall be
paid shall be determined by the Committee and shall be set forth
in the Grant Agreement. The Grant Agreement may provide for
payment in Company Stock or cash, or a fixed combination of
Company Stock or cash, or the Committee may reserve the right to
determine the manner of payment at the time the Stock
Appreciation Right is exercised. Shares of Company Stock issued
upon the exercise of a Stock Appreciation Right shall be valued
at their Fair Market Value on the date of exercise.
(k) A Participant who acquires shares of Company Stock upon
exercise of a Stock Appreciation Right shall have no rights as a
stockholder until the Company Stock is issued pursuant to the
terms of the Grant Agreement and all requirements with respect
to the issuance of such shares have been satisfied.
(l) Stock Appreciation Rights may be exercised by the
Participant giving written notice of the exercise to the
Company, stating the number of Stock Appreciation Rights the
Participant has elected to exercise.
(m) Whenever payments upon exercise of Stock Appreciation
Rights are to be made in cash to a Participant who is an
Employee, the Employer will withhold therefrom an amount
sufficient to satisfy any Applicable Withholding Taxes. Each
Participant who is an Employee shall agree as a condition of
receiving Stock Appreciation Rights payable in the form of
Company Stock to pay to his Employer, or make
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arrangements satisfactory to his Employer regarding the payment
to his Employer of, Applicable Withholding Taxes. Until the
amount has been paid or arrangements satisfactory to the
Employer have been made, no stock certificate shall be issued to
the Participant. Payment to the Employer in satisfaction of
Applicable Withholding Taxes may be in cash. In addition, if the
Committee allows or the Grant Agreement so provides,
(A) payment to the Employer in satisfaction of Applicable
Withholding Taxes may be made in shares of Company Stock (valued
at their Fair Market Value as of the date of payment) to which
the Participant has good title, free and clear of all liens and
encumbrances; (B) the Participant may elect to have his
Employer retain that number of shares of Company Stock (valued
at their Fair Market Value as of the date of such retention)
that would satisfy all or a specified portion of the Applicable
Withholding Taxes; or (C) unless prohibited by law, the
Participant may deliver irrevocable instructions to a broker to
deliver promptly to the Employer, from the sale or loan proceeds
with respect to the sale of Company Stock or a loan secured by
Company Stock, the amount necessary to pay the Applicable
Withholding Taxes.
(n) Unless specifically provided in the discretion of the
Committee in a writing that references and supersedes this
Section 11(n), (i) no Modification shall be made in
respect to any Stock Appreciation Right if such Modification
would result in the Stock Appreciation Right constituting a
deferral of compensation, and (ii) no Extension shall be
made in respect to any Stock Appreciation Right if such
Extension would result in the Stock Appreciation Right having an
additional deferral feature from the Date of Grant, in each case
within the meaning of applicable Treasury Regulations under Code
section 409A. Subject to the remaining part of this
subsection (n), (i) a “Modification” means any
change in the terms of the Stock Appreciation Right (or change
in the terms of the Plan or applicable Grant Agreement) that may
provide the holder of the Stock Appreciation Right with a direct
or indirect reduction in the exercise price of the Stock
Appreciation Right, regardless of whether the holder in fact
benefits from the change in terms; and (ii) an
“Extension” means either (A) the provision to the
holder of an additional period of time within which to exercise
the Stock Appreciation Right beyond the time originally
prescribed, (B) the conversion or exchange of the Stock
Appreciation Right for a legally binding right to compensation
in a future taxable year, (C) the addition of any feature
for the deferral of compensation to the terms of the Stock
Appreciation Right, or (D) any renewal of the Stock
Appreciation Right that has the effect of (A) through
(C) above. Notwithstanding the preceding sentence, it shall
not be a Modification or an Extension, respectively, to change
the terms of a Stock Appreciation Right in accordance with
Section 16 of the Plan, or in any of the other ways or for
any of the other purposes provided in applicable Treasury
Regulations or other generally applicable guidance under Code
section 409A as not resulting in a Modification or
Extension for purposes of that section. In particular, it shall
not be an Extension to extend the exercise period of a Stock
Appreciation Right to a date no later than the earlier of
(i) the latest date upon which the Stock Appreciation Right
could have expired by its original terms under any circumstances
or (ii) the tenth anniversary of the original Date of Grant.
12. Director Awards.
(a) General. The Board may grant Director
Awards to Outside Directors in the form of shares of Restricted
Stock, Restricted Stock Units, Performance Share Units,
Nonstatutory Options, or Stock Appreciation Rights as provided
in Sections 8 through 11 above, or in the form of Vested
Shares as provided in subsection (b) below. The Board may
also grant to Consultants awards in the same forms as Director
Awards. Whenever the Board grants shares of Restricted Stock,
Restricted Stock Units, Performance Share Units, Nonstatutory
Options, or Stock Appreciation Rights to an Outside Director,
notice shall be given to the Outside Director stating the type
of award being made, the number of shares with respect to which
the award is granted and the terms and conditions to which the
award and (where applicable) the exercise of the award is
subject. This notice shall become the Grant Agreement between
the Company and the Outside Director and, at that time, the
Outside Director shall become a Participant. Restricted Stock,
Restricted Stock Units, Performance Share Units, Nonstatutory
Options, or Stock Appreciation Rights granted to Outside
Directors shall otherwise be subject to the terms of the Plan
applicable to each type of award as set forth in Sections 8
through 11 above; provided, however, that, notwithstanding
anything in Sections 8(b) or 9(b) to the contrary, any
service or performance period with respect to Restricted Stock,
Restricted Stock Units or Performance Share Units granted to
Outside Directors or Consultants shall not be less than six
consecutive months in length; and provided further, that where
context reasonably requires, references throughout
Sections 8 through
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11 above to the “Committee” shall be read instead as
references to the Board wherever the award is to be granted to
an Outside Director. The Board shall have all the same rights
and powers with respect to the administration of Director Awards
as the Committee has with respect to Incentive Awards as
provided in Section 17 below (provided that the Board may
not delegate its authority with respect to the granting of
Director Awards pursuant to Section 17(a)(viii)), and the Board
shall be subject to the same limitations with respect to the
modification and Repricing of outstanding Director Awards as
provided therein.
(b) Vested Shares. The Board may grant
Vested Shares to Outside Directors or Consultants. Vested Shares
shall be immediately transferable (subject to compliance with
any applicable securities laws) and the Participant receiving an
award of Vested Shares shall have all the rights of a
stockholder with respect to such shares as of the Date of Grant.
13. Effective Date of the Plan. The Plan
shall become effective as of the date on which it is approved by
the stockholders of the Company. Until (i) the Plan has
been approved by the Company’s stockholders, and
(ii) the requirements of any applicable federal or state
securities laws have been met, no shares of Company Stock
issuable under Non-Option Awards shall be issued and no Options
or Stock Appreciation Rights shall be exercisable that, in
either case, are not contingent on the occurrence of both such
events.
14. Continuing Securities Law
Compliance. If at any time on or after the
effective date of the Plan as described in Section 13
above, the requirements of any applicable federal or state
securities laws should fail to be met, no shares of Company
Stock issuable under Non-Option Awards shall be issued and no
Options or Stock Appreciation Rights shall be exercisable until
the Committee (or, with respect to a Director Award, the Board)
has determined that these requirements have again been met. The
Committee (or, with respect to a Director Award, the Board) may
suspend the right to exercise an Option or Stock Appreciation
Right at any time when it determines that allowing the exercise
and issuance of Company Stock would violate any federal or state
securities or other laws, and may provide that any time periods
to exercise the Option or Stock Appreciation Right are extended
during a period of suspension.
15. Termination, Modification, Change. If
not sooner terminated by the Board, this Plan shall terminate at
the close of business on the date that immediately follows the
tenth anniversary of the date on which the Plan was approved by
the Company’s stockholders. No new Awards shall be granted
under the Plan after its termination. The Board may terminate
the Plan at any time and may amend the Plan at any time in any
respect as it shall deem advisable; provided that no change
shall be made that increases the total number of shares of
Company Stock reserved for issuance under the Plan (except
pursuant to Section 16), materially modifies the
requirements as to eligibility for participation in the Plan, or
that would otherwise be considered a material revision or
amendment under Code section 422 or the listing standards
of the exchange on which the Company Stock is traded, unless the
change is authorized by the stockholders of the Company.
Notwithstanding the foregoing, the Board may unilaterally amend
the Plan and outstanding Awards with respect to Participants as
it deems appropriate to ensure compliance with
Rule 16b-3
and other applicable federal or state securities laws and to
meet the requirements of the Code and applicable regulations or
other generally applicable guidance thereunder. Except as
provided in the preceding sentence, a termination or amendment
of the Plan shall not, without the consent of the Participant,
adversely affect a Participant’s rights under an Award
previously granted to him or her.
16. Change in Capital Structure.
(a) The Committee (or, with respect to a Director Award,
the Board) shall proportionately adjust the number and kind of
shares of stock or securities of the Company to be subject to
the Plan and to Awards then outstanding or to be granted
thereunder, the maximum number of shares or securities which may
be delivered under the Plan (including the maximum limit on
Non-Option Awards or Incentive Stock Options under
Section 4), the maximum number of shares or securities that
can be granted to an individual Participant under
Section 4, the exercise price of Options, the initial Fair
Market Value of Company Stock under Stock Appreciation Rights,
and other relevant terms of the Plan and any Awards whenever, in
the event of a stock dividend, stock split or combination of
shares, recapitalization or merger in which the Company is the
surviving corporation, or other change in the Company’s
corporate structure or capital stock (including, but not limited
to, the creation or issuance to stockholders generally of
rights, options or warrants for the purchase
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of common stock or preferred stock of the Company), it deems any
such adjustment necessary or desirable to preserve the intended
benefits of the Plan and any outstanding Awards for the Company
and the Participants. The Committee’s (or, with respect to
a Director Award, the Board’s) determination in this regard
shall be binding on all persons. If the adjustment would produce
fractional shares with respect to any unexercised Option or
Stock Appreciation Right or fractional cents with respect to the
exercise price thereof, the Committee (or, with respect to a
Director Award, the Board) shall round down the number of shares
covered by the Option or Stock Appreciation Right to the nearest
whole share and round up the exercise price to the nearest whole
cent.
(b) In the event of a Change of Control as described in
Sections 2(f)(i), (ii)(1) or (iii), or if the Company is
otherwise a party to a consolidation or a merger in which the
Company is not the surviving corporation, a transaction that
results in the acquisition of substantially all of the
Company’s outstanding stock by a single person or entity,
or a sale or transfer of substantially all of the Company’s
assets occurs (in any such case, a “Corporate Event”),
then the Committee (or, with respect to a Director Award, the
Board) may take any actions with respect to outstanding Awards
as it deems appropriate, consistent with applicable provisions
of the Code and any applicable federal or state securities laws.
(c) Notwithstanding anything in the Plan to the contrary,
the Committee (or, with respect to a Director Award, the Board)
may take the foregoing actions without the consent of any
Participant, and its determination shall be conclusive and
binding on all persons and for all purposes.
17. Administration of the Plan.
(a) The Plan shall be administered by the Committee.
Subject to the express provisions and limitations set forth in
this Plan or the Committee’s charter or as otherwise
established by the Board, the Committee shall be authorized and
empowered to do all things necessary or desirable, in its sole
discretion, in connection with the administration of this Plan,
including, without limitation, the following:
(i) to prescribe, amend and rescind policies relating to
this Plan, and to interpret the Plan, including defining terms
not otherwise defined;
(ii) to determine which persons are eligible Service
Providers, to which of the Service Providers, if any, Incentive
Awards shall be granted hereunder and the timing of any
Incentive Awards;
(iii) to grant Incentive Awards to Service Providers and
determine the terms and conditions thereof, including the number
of shares of Company Stock subject to Incentive Awards and the
exercise or purchase price of the shares of Company Stock and
the circumstances under which Incentive Awards become
exercisable or vested or are forfeited or expire, which terms
may but need not be conditioned upon the passage of time,
continued employment, the satisfaction of performance conditions
(including Performance Goals), the occurrence of certain events,
or other factors;
(iv) to establish or verify the extent of satisfaction of
any Performance Goals or other conditions applicable to the
grant, issuance, exercisability, vesting
and/or
ability to retain any Incentive Award;
(v) to prescribe and amend the terms of the Grant
Agreements or other documents evidencing Incentive Awards made
under this Plan (which need not be identical);
(vi) to determine whether, and the extent to which,
adjustments are required pursuant to Section 16;
(vii) to interpret and construe this Plan, any policies
under this Plan and the terms and conditions of any Incentive
Award granted hereunder, and to make exceptions to any
provisions for the benefit of the Company;
(viii) to delegate, to the extent permitted by
Section 157(c) of the Delaware General Corporation Law, any
portion of its authority under the Plan to make Incentive Awards
to an executive officer of the Company, subject to any
conditions that the Committee may establish (including but not
limited to conditions on such officer’s ability to make
awards to “executive officers” within the meaning of
Section 16 of the Act or to “covered employees”
within the meaning of Code section 162(m)(3)); and
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(ix) to make all other determinations deemed necessary or
advisable for the administration of this Plan.
The Committee may amend the terms of previously granted
Incentive Awards so long as the terms as amended are consistent
with the terms of the Plan and provided that the consent of the
Participant is obtained with respect to any amendment that would
be detrimental to him or her, except that the consent will not
be required if the amendment is for the purpose of complying
with applicable provisions of the Code or any federal or state
securities laws.
The Committee is prohibited from Repricing any Option or Stock
Appreciation Right without the prior approval of the
stockholders of the Company with respect to the proposed
Repricing.
(b) The interpretation and construction of any provision of
the Plan by the Committee shall be final and conclusive as to
any Participant. The Committee may consult with counsel, who may
be counsel to the Company, and shall not incur any liability for
any action taken in good faith in reliance upon the advice of
counsel.
(c) A majority of the members of the Committee shall
constitute a quorum, and all actions of the Committee shall be
taken by a majority of the members present. Any action may be
taken by the Committee in writing or by electronic transmission
or transmissions as permitted by the Bylaws of the Company, and
any action so taken shall be fully effective as if it had been
taken at a meeting.
(d) The Committee may delegate the administration of the
Plan to an officer or officers of the Company, and such
officer(s) may have the authority to execute and distribute
agreements or other documents evidencing or relating to
Incentive Awards granted by the Committee under this Plan, to
maintain records relating to the grant, vesting, exercise,
forfeiture or expiration of Incentive Awards, to process or
oversee the issuance of shares of Company Stock upon the
exercise, vesting
and/or
settlement of an Incentive Award, to interpret the terms of
Incentive Awards and to take any other actions as the Committee
may specify, provided that in no case shall any such officer(s)
be authorized to grant Incentive Awards under the Plan, except
in accordance with Section 17(a)(viii) above. Any action by an
administrator within the scope of its delegation shall be deemed
for all purposes to have been taken by the Committee and
references in this Plan to the Committee shall include any such
officer(s), provided that the actions and interpretations of any
such officer(s) shall be subject to review and approval,
disapproval or modification by the Committee.
18. Notice. All notices and other
communications required or permitted to be given under this Plan
shall be in writing and shall be deemed to have been duly given
if delivered personally or mailed first class, postage prepaid,
as follows (a) if to the Company — at the
principal business address of the Company to the attention of
the Corporate Secretary of the Company; and (b) if to any
Participant — at the last address of the Participant
known to the sender at the time the notice or other
communication is sent.
19. No Effect on Other Plans. Except as
provided in Section 4(c), nothing contained in the Plan
will be deemed in any way to limit or restrict the Company or
any Related Company from making any award or payment to any
person under any other plan, arrangement or understanding,
whether now existing or hereafter in effect.
20. Interpretation. The Plan is intended
to operate in compliance with the provisions of
Rule 16b-3
and to facilitate compliance with, and optimize the benefits
from, Code section 162(m). The terms of this Plan are
subject to all present and future regulations and rulings of the
Secretary of the Treasury of the United States or his or her
delegate relating to the qualification of Incentive Stock
Options under the Code. This Plan and the individual Awards
under the Plan are intended to comply with any applicable
requirements of Code section 409A and shall be interpreted
to the extent context reasonably permits in accordance with such
requirements. If any provision of the Plan conflicts with any
such regulation or ruling, then that provision of the Plan shall
be void and of no effect. The terms of this Plan shall be
governed by the laws of the State of Delaware.
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APPENDIX B
HORIZON
LINES, INC.
2009 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the Horizon Lines,
Inc. 2009 Employee Stock Purchase Plan (the “Plan”) of
Horizon Lines, Inc. (the “Company”).
1. Purpose. The purpose of the
Plan is to provide employees of the Company and its Subsidiaries
with an opportunity to purchase shares of Common Stock of the
Company through payroll deductions. It is the intention of the
Company to have the Plan qualify as an “employee stock
purchase plan” under Section 423 of the Internal
Revenue Code of 1986, as amended (the “Code”). The
provisions of the Plan shall, accordingly, be construed so as to
extend and limit participation in a manner consistent with the
requirements of that section of the Code. The Plan supercedes
and replaces in its entirety the Horizon Lines, Inc. Employee
Stock Purchase Plan (the “Prior Plan”).
2. Definitions.
(a) ‘‘Account” shall mean the account
established for each Participant under the Plan.
(b) ‘‘Base Salary” shall mean an
Employee’s salary or wages, tips and overtime for each pay
period during any Purchase Period as determined from the payroll
records of the Company; provided, however, that
the Committee may, in its discretion, limit the amount of a
Participant’s Base Salary that may be considered under the
Plan.
(c) ‘‘Beginning Date” shall mean the
first business day of each Purchase Period.
(d) ‘‘Beneficial Ownership” shall
have the meaning ascribed to such term in the Company Charter.
(e) ‘‘Board” shall mean the Board of
Directors of the Company.
(f) ‘‘Broker” shall mean the
brokerage firm selected and designated by the Company or the
Committee in the event that the shares of Common Stock made
available for sale under, or sold pursuant to, the Plan are
registered under the Securities Act pursuant to an effective
registration statement.
(g) ‘‘Closing Date” shall mean the
last business day of each Purchase Period.
(h) ‘‘Code” shall mean the Internal
Revenue Code of 1986, as amended.
(i) ‘‘Committee” shall mean the
Compensation Committee of the Board.
(j) ‘‘Common Stock” shall mean the
Class A Common Stock of the Company par value $.01 per
share.
(k) ‘‘Company” shall mean Horizon
Lines, Inc., a Delaware corporation.
(l) ‘‘Company Charter” means the
certificate of incorporation of the Company, as the same exists
or may hereafter be amended or otherwise supplemented from time
to time and including any certificates of designation filed with
the Secretary of State of the State of Delaware from time to
time in accordance with the terms thereof.
(m) ‘‘Employee” shall mean any person
who is customarily employed for more than twenty (20) hours
per week by the Company or a Subsidiary, including, to the
extent permitted by the Committee, senior officers of the
Company, and who is identified by the Company or a Subsidiary as
an employee for Internal Revenue Service purposes.
(n) ‘‘Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended.
(o) ‘‘Fair Market Value” shall mean,
on any day, with respect to shares of Common Stock which are
(i) listed on a United States securities exchange, the last
sales price of such stock on such day on the largest United
States securities exchange on which such stock shall have traded
on such day, or if such day is not a day on which a United
States securities exchange is open for trading, on the
immediately preceding day on
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which such securities exchange was open, (ii) not listed on
a United States securities exchange but are included in The
NASDAQ Stock Market System (including The NASDAQ National
Market), the last sales price on such system of such stock on
such day, or if such day is not a trading day, on the
immediately preceding trading day, or (iii) neither listed
on a United States securities exchange nor included in The
NASDAQ Stock Market System, the fair market value of such stock
as determined by the Board, in its sole discretion.
(p) ‘‘Non-U.S. Citizen”
shall have the meaning ascribed to such term in the Company
Charter.
(q) ‘‘Option” shall mean the right of
a Participant to purchase shares of Common Stock of the Company
under the Plan.
(r) ‘‘Participant” shall mean an
Employee of the Company or a Subsidiary who is enrolled in the
Plan in accordance with Section 3 hereof.
(s) ‘‘Permitted Percentage” shall
have the meaning ascribed to such term in the Company Charter.
(t) ‘‘Person” shall mean any
individual, partnership, firm, trust, corporation, limited
liability company or other similar entity. When two or more
Persons act as a partnership, limited partnership, syndicate or
other group for the purpose of acquiring, holding or disposing
of shares of Common Stock, such partnership, limited
partnership, syndicate or group shall be deemed a
“Person.”
(u) ‘‘Plan” shall mean the Horizon
Lines, Inc. 2009 Employee Stock Purchase Plan.
(v) ‘‘Purchase Period” shall mean
each three (3) month period when Options for shares of
Common Stock are sold by the Company.
(w) ‘‘Securities Act” shall mean the
Securities Act of 1933, as amended.
(x) ‘‘Subsidiary” shall mean any
Person more than 50% of the outstanding voting or equity
securities of which, or any partnership, joint venture or other
entity more than 50% of the total equity or other economic
interest of which, is directly or indirectly owned by the
Company.
3. Eligibility.
(a) As soon as administratively possible, any Employee who
shall be employed by the Company or one of its Subsidiaries
shall be eligible to participate in the Plan as of the date of
the first Purchase Period following the Employee’s
commencement of employment with the Company or a Subsidiary.
Notwithstanding the foregoing, the Committee may exclude from
participation in the Plan (i) Employees who have been
employed by the Company or a Subsidiary for less than two
(2) years, (ii) Employees whose customary employment
is twenty hours or less per week, (iii) Employees whose
customary employment is not more than five (5) months in
any calendar year and (iv) “highly compensated
employees” (as defined in Section 414(q) of the Code)
(A) whose compensation is above a certain level or
(B) who are officers or subject to the disclosure
requirements of Section 16(a) of the Securities Exchange
Act of 1934 (provided that the exclusion is applied in an
identical manner to all highly compensated employees of the
Company or Subsidiary whose Employees are granted Options under
the Plan).
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an Option under
the Plan (i) if, immediately after the grant, such Employee
would own shares of Common Stock, whether restricted or
otherwise, or hold outstanding options to purchase shares of
Common Stock, possessing in the aggregate five percent (5%) or
more of the total combined voting power or value of all classes
of shares of the Company or of any Subsidiary of the Company, or
(ii) which causes him or her to purchase shares of Common
Stock under all “employee stock purchase plans” as
such term is defined by Section 423 of the Code, of the
Company and its Subsidiaries which have a Fair Market Value
which exceeds Twenty-Five Thousand Dollars ($25,000) (determined
at the time such Option is granted) for each calendar year in
which such Option is outstanding at any time.
4. Purchase Periods. The Plan
shall be implemented by a series of four Purchase Periods in
each calendar year, commencing on the first day of each calendar
quarter on which the Common Stock is traded on
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the New York Stock Exchange and ending on the last day of each
calendar quarter on which the Common Stock is traded on the New
York Stock Exchange; provided that the first Purchase Period
shall commence on the Effective Date and shall end at the
completion of the calendar quarter in which the Effective Date
occurs unless otherwise determined by the Committee. Subsequent
Purchase Periods shall run consecutively after the termination
of the preceding Purchase Period until the Plan is terminated in
accordance with Section 21 hereof.
The Committee shall have the power to change the duration of
Purchase Periods with respect to future Purchase Periods without
stockholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the
first Purchase Period to be affected. With respect to any
Purchase Period, if any eligible Employee of the Company is
granted an Option under the Purchase Period then all eligible
Employees of the Company shall be granted Options under the same
Purchase Period, and if any eligible Employee of a Subsidiary is
granted an Option under the Purchase Period then all eligible
Employees of such Subsidiary shall be granted Options under the
same Purchase Period. Except as otherwise specifically permitted
under
Section 1.423-2(f)
of the U.S. Treasury Regulations and the Plan, all
Employees granted Options under any Purchase Period shall have
the same rights and privileges, and the provisions applying to
any one Option under a Purchase Period (including without
limitation the provisions relating to the method of payment for
the Common Stock and the determination of the applicable
exercise price) shall be the same as the provisions which apply
to any other Option granted under the same Purchase Period.
5. Participation. An eligible
Employee may become a Participant in the Plan by authorizing
payroll deductions in such form or manner as the Committee may
prescribe prior to the applicable Beginning Date. Once
authorized, such authorization for payroll deductions shall
commence on the first Beginning Date after authorization is
effected and shall remain effective for all subsequent Purchase
Periods in the calendar year in which the Participant commences
participation unless the Participant withdraws from the Plan as
provided in Section 11 hereof or, subject to Section 6
hereof, authorizes a change in the amount of his or her payroll
deductions. A Participant shall be required to confirm his or
her payroll deduction authorization each calendar year in
writing, in such form or manner as the Committee may prescribe.
6. Payroll Deductions.
(a) At the time a Participant authorizes payroll
deductions, he or she shall elect to have payroll deductions
made from each paycheck during subsequent Purchase Periods at a
rate equal to a percentage of Base Salary (such percentage
representing a whole number percentage), within a percentage
range determined by the Committee from time to time and in its
sole discretion.
(b) All payroll deductions made by a Participant shall be
credited to his or her Account under the Plan. A Participant may
not make any additional payments into such Account.
(c) A Participant may increase or decrease his or her rate
of payroll deductions (within the limitations set forth in
Section 6(a) hereof) to be effective for the next Purchase
Period by authorizing in writing a new rate of payroll
deductions at least fifteen (15) days before the beginning
of such Purchase Period. A Participant may not increase or
decrease the rate of payroll deductions during a Purchase Period
to be effective for that Purchase Period.
(d) A Participant must continue payroll deductions for the
duration of the Purchase Period in order to exercise an Option
in accordance with Section 8 hereof. In the event that a
Participant does not continue payroll deductions for the entire
Purchase Period, such Participant shall be treated as
withdrawing from such Purchase Period in accordance with
Section 11(a) hereof.
7. Grant of Option.
(a) On each Beginning Date, each eligible Employee
participating in the Plan shall be granted an Option to purchase
(at the per share Option price) up to a number of shares of the
Company’s Common Stock determined by dividing the
Employee’s to be accumulated payroll deductions for the
applicable Purchase Period (not to exceed an amount equal to
fifteen percent (15%) of his or her Base Salary, or such lesser
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percentage of Base Salary as determined by the Committee, during
the applicable Purchase Period) by the Option price, as
determined in accordance with Section 7(b).
(b) The Option price per share of such shares of Common
Stock for a Purchase Period shall be shall be the lesser of
(i) a percentage, as determined by the Committee (the
“Percentage”), of the Fair Market Value of a share of
Common Stock of the Company on the Beginning Date of such
Purchase Period or (ii) the Percentage of the Fair Market
Value of a share of Common Stock of the Company on the Closing
Date of such Purchase Period; provided that the Percentage shall
not be less than 85%.
8. Exercise of Option.
(a) Subject to the provisions of Section 8(b) hereof,
unless a Participant withdraws from the Plan as provided in
Section 11 hereof, his or her Option for the purchase of
shares of Common Stock will be exercised automatically on the
Closing Date, and the maximum number of whole shares of Common
Stock subject to the Option will be purchased for him or her at
the applicable Option price with the accumulated payroll
deductions in his or her Account. All of the unused payroll
deductions credited to a Participant’s Account, after
giving effect to the payment of the aggregate Option price for
the shares of the Company’s Common Stock purchased by the
Participant upon the exercise of his or her Option (as adjusted
pursuant to Section 8(b) below) or the termination of his
or her Option in its entirety pursuant to Section 8(b)
below, shall be returned to the Participant. During his or her
lifetime, a Participant’s Option to purchase shares of
Common Stock hereunder is exercisable only by him or her.
(b) If a Participant is not a citizen of the United States
by birth, naturalization or as otherwise authorized by
applicable law, and if, in the reasonable determination of the
Committee, such Participant’s purchase of shares of Common
Stock upon the automatic exercise of his or her Option on a
Closing Date would result in Beneficial Ownership by
Non-U.S. Citizens
of shares of such class of capital stock of the Company in the
aggregate in excess of the Permitted Percentage for such class,
then the Committee, upon written notice to the Participant, may,
in its sole discretion, elect that all or a portion of such
Option, as determined by the Committee in its sole discretion,
shall be deemed not to have been exercised on such Closing Date
and shall be permanently terminated (and such Participant shall
have no further rights with respect thereto).
9. Broker and Participant’s Account with
Broker. The Broker is authorized to open and
maintain an Account for each Participant. The Company reserves
the right to change the designation of the Broker at any time
without prior notice to Participants. The Broker shall deliver
to each Participant as promptly as practicable, by mail or
otherwise, all notices of meetings, proxy statements and other
materials distributed by the Company to its stockholders. The
whole shares in each Participant’s Account shall be voted
in accordance with the Participant’s signed proxy
instructions duly delivered to the Broker by mail or otherwise,
in accordance with the rules applicable to stock listed on the
New York Stock Exchange.
10. Delivery of Certificates. A
Participant may request, in accordance with Section 22
hereof, that the Company arrange for the delivery of a
certificate representing the number of whole shares of Common
Stock of the Company purchased upon exercise of the
Participant’s Option as promptly as practicable after each
Closing Date. In connection with the delivery of certificates to
a Participant, the Committee may, in its sole discretion, impose
a reasonable charge.
11. Withdrawal; Termination of Employment.
(a) A Participant may withdraw all but not less than all
the unused payroll deductions credited to his or her Account
under the Plan during the course of a given Purchase Period at
any time prior to the Closing Date of that Purchase Period by
giving notice to the Committee in such form or manner as the
Committee may prescribe. All of the Participant’s unused
payroll deductions credited to his or her Account will be paid
to him or her as soon as administratively possible after receipt
of his or her written notice of withdrawal and his or her Option
for the current Purchase Period will be automatically
terminated, and no further payroll deductions for the purchase
of shares of Common Stock will be made during such Purchase
Period.
(b) Upon termination of the Participant’s employment
prior to the Closing Date for any reason, including retirement
or death, the payroll deductions credited to his or her Account
will be returned to him or her or, in
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the case of his or her death, to the person or persons entitled
thereto under Section 16 hereof, as soon as
administratively possible, and his or her Option will be
automatically terminated.
(c) In the event an Employee fails to remain in the
continuous employ of the Company or one of its Subsidiaries for
at least twenty (20) hours per week during the Purchase
Period in which the employee is a Participant, he or she will be
deemed to have elected to withdraw from the Plan and the payroll
deductions credited to his or her Account will be returned to
him or her as soon as administratively possible and his or her
Option will be terminated.
(d) A Participant’s withdrawal from a Purchase Period
will not have any effect upon his or her eligibility to
participate in a succeeding Purchase Period or in any similar
plan which may hereafter be adopted by the Company. However, in
such a case, the Participant must authorize the resumption of
payroll deductions and the rate of such payroll deductions.
12. No Interest. No interest shall
accrue on the payroll deductions held in the Account of a
Participant in the Plan.
13. Stock.
(a) The maximum number of shares of Common Stock which
shall be made available for sale under the Plan shall be
616,829 shares of Common Stock, subject to adjustment upon
changes in capitalization of the Company as provided in
Section 20 hereof. The 616,829 shares of Common Stock
authorized for issuance under the Plan includes all of the
shares authorized and reserved for issuance under the Prior Plan
but were not issued thereunder (“Unissued Prior Plan
Shares”), plus additional shares, which, when added to the
Unissued Prior Plan Shares, total 616,829 shares.
(b) The shares of Common Stock to be sold to Participants
under the Plan may, at the election of the Company, be either
treasury shares, authorized but unissued shares or publicly
traded shares. If at the termination of any Purchase Period the
total number of shares of Common Stock which would otherwise be
subject to Options granted pursuant to Section 7(a) hereof
exceeds the number of shares of Common Stock then available
under the Plan (after deduction of all shares of Common Stock
for which Options have been exercised or are then outstanding),
the Company shall promptly notify the Participants, and shall,
in its sole discretion (i) make a pro rata allocation of
the shares of Common Stock remaining available for Option grant
in as uniform a manner as shall be practicable and as it shall
determine to be equitable, (ii) terminate the Purchase
Period without issuance of any shares of Common Stock or
(iii) obtain stockholder approval for an increase in the
number of shares of Common Stock authorized under the Plan such
that all Options could be exercised in full. The Company may
delay determining which of (i), (ii) or (iii) above it
shall decide to effect, and may accordingly delay issuances of
any shares of Common Stock under the Plan for such time as may
be necessary to attempt to obtain stockholder approval for any
increase in shares of Common Stock authorized under the Plan.
The Company shall promptly notify Participants of its
determination to effect (i), (ii) or (iii) above upon
making such decision. A Participant may withdraw all but not
less than all the payroll deductions credited to his or her
Account under the Plan at any time prior to such notification
from the Company. In the event the Company determines to effect
(i) or (ii) above, it shall promptly upon such
determination return to each Participant all payroll deductions
not applied towards the purchase of shares of Common Stock.
(c) The Participant will have no interest or voting right
in shares of Common Stock covered by his or her Option until
such Option has been exercised.
(d) Shares of Common Stock to be delivered to a Participant
under the Plan shall be registered in the name of the
Participant.
14. Dividends. Cash dividends for
shares of Common Stock in Participants’ Accounts under the
Plan shall, as determined by the Committee in its discretion,
either be distributed to Participants directly or automatically
invested in shares of Common Stock at the full Fair Market Value
on the date of such investment as soon as administratively
possible after such dividends are paid by the Company. In the
event
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cash dividends are automatically invested in shares of Common
Stock, such shares of Common Stock will be held in Accounts
under the Plan.
15. Administration. The Plan shall
be administered by the Committee; provided,
however, that the day to day responsibilities with
respect to the administration of the Plan may be delegated to
the Company or any officer of the Company, as determined by the
Committee. The administration, interpretation or application of
the Plan by the Committee, or such other person or persons who
have been delegated the responsibility to administer the Plan,
shall be final, conclusive and binding upon all Participants.
16. Designation of
Beneficiary. The Participant shall designate
in writing the beneficiary or beneficiaries of the Participant
to receive any shares of Common Stock and cash, if any, from the
Participant’s Account under the Plan in the event of such
Participant’s death prior to delivery to him or her of such
shares of Common Stock and cash. In the absence of a valid
designation or if no validly designated beneficiary survives the
Participant or if each surviving validly designated beneficiary
is legally impaired or prohibited from receiving shares of
Common Stock and cash, if any, from the Participant’s
Account under the Plan, then the Participant’s beneficiary
shall be the Participant’s estate.
17. Transferability. Neither
payroll deductions credited to a Participant’s Account nor
any rights with regard to the exercise of an Option or to
receive shares of Common Stock under the Plan may be assigned,
transferred, pledged or otherwise disposed of in any way (other
than by will, the laws of descent and distribution or as
provided in Section 16 hereof) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition
shall be without effect, except that the Company may treat such
act as an election to withdraw funds in accordance with
Section 11 hereof.
18. No Segregation of Funds. The
Company shall not be obligated to segregate payroll deductions
received or held by the Company under the Plan. Such payroll
deductions shall be used to purchase shares of Common Stock
under the Plan in accordance with Section 8 hereof.
19. Reports. Individual Accounts
will be maintained for each Participant in the Plan. Statements
of Account will be given to Participants within a reasonable
period of time following each Closing Date.
20. Adjustments Upon Changes in
Capitalization.
(a) The number of shares of Common Stock covered by each
unexercised Option under the Plan and the number of shares of
Common Stock which have been authorized for issuance under the
Plan but which have not yet been issued and are not subject of
an unexercised Option (collectively, the “Reserves”),
as well as the price per share of Common Stock covered by each
Option under the Plan for which the exercise price has been
determined but which has not yet been exercised, shall be
proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected
without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the
Company shall not be deemed to have been “effected without
receipt of consideration”. Such adjustments shall be made
by the Board, whose determination in that respect shall be
final, binding and conclusive. Except as expressly provided
herein, no issue by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock
subject to an option.
(b) In the event of the proposed dissolution or liquidation
of the Company, the then current Purchase Period will terminate
immediately prior to the consummation of such proposed action,
unless otherwise provided by the Committee. In the event of a
proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another
corporation, each Option under the Plan shall be assumed or an
equivalent Option shall be substituted by such successor
corporation or a parent or subsidiary of such successor
corporation, unless the Committee determines, in the exercise of
its sole discretion and in lieu of such assumption or
substitution, to shorten the Purchase Period then in progress by
setting a new Beginning Date (the “New Beginning
Date”). If the Committee shortens the Purchase Period then
in progress in lieu of assumption or substitution in the event
of a merger or sale of assets, the Committee shall use its best
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efforts to notify each participant in writing, at least ten
(10) days prior to the New Beginning Date, that the
Beginning Date for his or her option has been changed to the New
Beginning Date and that his or her Option will be exercised
automatically on the New Beginning Date, unless prior to such
date he or she has withdrawn from the Purchase Period as
provided in Section 11. For purposes of this
Section 20, an Option granted under the Plan shall be
deemed to be assumed if, following the sale of assets or merger,
the Option confers the right to purchase, for each share of
Common Stock subject to the Option immediately prior to the sale
of assets or merger, the consideration (whether stock, cash or
other securities or property) received in the sale of assets or
merger by holders of Common Stock for each share of Common Stock
held on the effective date of the transaction (and if such
holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the
outstanding shares of Common Stock).
21. Amendment and Termination of the Plan.
(a) Amendment and Termination. The
Committee may at any time amend, alter, suspend or discontinue
the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of
any Participant under any Option theretofore granted without his
or her consent.
(b) Stockholder Approval of
Amendments. The Company shall obtain
stockholder approval of any Plan amendment to the extent
necessary and desirable to comply with
Rule 16b-3
promulgated under the Exchange Act or with Section 423 of
the Code (or any successor statute or rule or other applicable
law, rule or regulation), such stockholder approval to be
obtained in such a manner and to such a degree as is required by
the applicable law, rule or regulation.
(c) Contemplated Amendments. It is
expressly contemplated that the Committee may amend the Plan in
any respect that the Committee deems necessary or advisable in
the event the financial accounting treatment with respect to the
Plan changes from the financial accounting treatment in effect
on the date the Plan is adopted by the Board.
(d) Effect of Amendment or
Termination. Any such amendment or
termination of the Plan shall not affect Options already granted
hereunder and such Options shall remain in full force and effect
as if this Plan had not been amended or terminated.
(e) Section 409A of the
Code. The Plan and all compensation derived
therefrom are intended not to constitute compensation deferred
under a nonqualified deferred compensation plan as contemplated
in Section 409A of the Code. Accordingly, notwithstanding
any other provision of the Plan, the provisions of the Plan will
be interpreted consistent with the preceding sentence, and the
Committee may modify the Plan to the extent it deems advisable
to prevent the application of Section 409A of the Code.
22. Notices. All notices or other
communications by a Participant to the Company under or in
connection with the Plan shall be deemed to have been duly given
when received in the form specified by the Company at the
location, or by the person, designated by the Company for the
receipt thereof. All notices or other communications to a
Participant by the Company shall be deemed to have been duly
given when sent by the Company by regular mail to the address of
the Participant on the human resources records of the Company.
23. Conditions Upon Issuance of Shares of Common
Stock. Shares of Common Stock shall not be
issued with respect to an Option unless the exercise of such
Option and the issuance and delivery of such shares of Common
Stock pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without
limitation, the Securities Act, the Exchange Act, and the rules
and regulations promulgated thereunder, and the requirements of
any stock exchange or automated quotation system upon which the
shares of Common Stock may then be listed or quoted as the
Committee or the Board may determine, and shall be further
subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to (i) represent
and warrant at the time of any such exercise that the shares of
Common Stock are being purchased only for investment and without
any present intention to sell or distribute such shares of
Common
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Stock if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned
applicable provisions of law, and (ii) covenant to comply
with the provisions of the Company Charter that by their terms
are applicable to holders of shares of any class or series of
capital stock of the Company as a condition to acquiring and
holding title to or a beneficial interest in such shares.
24. No Contract of Employment. The
Plan is not and shall not be deemed to constitute a contract of
employment between the Company and any Employee or other
individual, nor shall anything herein contained be deemed to
give any Employee or other individual any right to be retained
in the Company’s employ or to in any way limit or restrict
the Company’s right or power to discharge any Employee or
other individual at any time and to treat him without any regard
to the effect which such treatment might have upon him as a
Participant of the Plan.
25. Governing Law. The Plan shall
be construed in accordance with and governed by the laws of the
State of Delaware.
26. Effective Date and Approval of Plan by
Stockholders. The Plan shall become effective
on a date (if any) specified by the Committee, subject however,
to receipt of approval of the Plan by stockholders of the
Company in accordance with Section 423 of the Code.
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