employee and may not be sold, pledged, assigned or otherwise transferred. An employee’s violation of these restrictions may lead to termination of his or her options by the Company.
Employment Rights. Nothing in the 2012 Plan is to be construed so as to give any employee the right to be
retained in the service of the Company or any subsidiary nor to give the Company or any subsidiary the right to require the employee remain in its service or to interfere with an employee’s right to terminate employment at any time.
Change in Capitalization. In the event there is a change in the outstanding stock of the Company due to a
stock dividend, split-up, recapitalization, merger, consolidation or other reorganization, the aggregate number and class of shares available under the 2012 Plan and under any outstanding options, as well as the option price, will be appropriately adjusted, but only if the Company determines that the adjustment will not constitute a modification of options granted under the 2012 Plan or otherwise disqualify the 2012 Plan under Section 423 of the Internal Revenue Code.
Administration of 2012 Plan. The Company will administer the 2012 Plan, determine all questions arising
thereunder and adopt, administer and interpret the rules and regulations relating to the Plan as it deems necessary or advisable.
Amendment and Termination of 2012 Plan. The Company will have the right to amend the 2012 Plan at
any time, but cannot make a Plan amendment relating to the aggregate number of shares available under the 2012 Plan and the class of employees eligible to participate without the approval of the Company’s stockholders. If the Company terminates the Plan, it may leave outstanding options in place or provide for acceleration of the option exercise date.
B. Tax Consequences. The 2012 Plan is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423
of the Internal Revenue Code of 1986, as amended. The U.S. federal tax treatment of such plans under current tax rules is as follows: An employee who has purchased shares pursuant to an option and who disposes of such shares within 12 months after the transfer of shares to the employee, or within two years from the date of grant of the option, will realize ordinary income for U.S. federal income tax purposes, based on the difference between the option price and the fair market value of the shares on the date of exercise of the option. If an employee disposes of such shares at any time after satisfying these holding periods or if the employee should die while owning such shares, ordinary income for U.S. federal income tax purposes will be realized based upon the lesser of (i) the excess of the fair market value of the shares at the time of disposition or death over the price paid for the shares or (ii) the excess of the fair market value of the shares at the time the option was granted over the option price, computed as if the option has been exercised at such time. Any additional gain or loss recognized on the disposition will be treated as a capital gain or loss.
For purposes of computing capital gain or loss on the sale or exchange of shares by the employee, the
employee’s tax basis for the shares is equal to the price paid for the shares plus the amount of any ordinary income realized by the employee as a result of the disposition of the shares. Capital gain or loss recognized upon a sale or exchange of shares will be taxable as long-term capital gain or loss if the employee has owned the shares for more than 12 months on the date of disposition and otherwise as short-term capital gain or loss.
The Company is entitled to a deduction with respect to ordinary income realized by an employee as a result of
the disposition of stock issued to a participant in an “employee stock purchase plan” only in the event that the disposition occurs prior to satisfaction of the holding periods described in the first paragraph of this Section.
The Board of Directors recommends that stockholders vote to approve the 2012 Employee’s Stock Purchase Plan.
25 A22
Proxy
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