RESTRICTED STOCK UNIT AGREEMENT MAKEMUSIC, INC. 2003 EQUITY INCENTIVE PLAN
Exhibit 10.5
MAKEMUSIC, INC.
2003 EQUITY INCENTIVE PLAN
2003 EQUITY INCENTIVE PLAN
THIS AGREEMENT is made effective as of this day of ,
, by and between
MakeMusic, Inc., a Minnesota corporation (the “Company”), and (the “Participant”).
WITNESSETH:
WHEREAS, the Participant on the date hereof is a key employee, officer, director of or
consultant or advisor to, the Company or one of its Subsidiaries;
WHEREAS, the Company wishes to grant a restricted stock unit award to the Participant for
shares of the Company’s Common Stock pursuant to the Company’s 2003 Equity Incentive Plan (the
“Plan”); and
WHEREAS, the Administrator of the Plan has authorized the grant of a restricted stock unit
award to the Participant.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Grant of Restricted Stock Unit Award. The Company hereby grants to the Participant
a restricted stock unit award (the “Award”) for ( ) restricted stock units
on the terms and conditions set forth herein. Each restricted stock unit shall entitle the
Participant to receive one share of the Company’s Common Stock. This Award shall expire ________, unless
terminated earlier under the provisions of Paragraph 2 below.
2. Vesting of Restricted Stock Units.
a. General. Except as provided in Paragraph 3 below, the restricted stock units
subject to this Award shall vest according to the following schedule:
| Number of Restricted Stock Units | ||
| Vesting Date | Available for Exercise | |
, 00
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, 00
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, 00
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, 00
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b. Termination of Relationship. Except as provided in Paragraph 3 below, if, prior to
the vesting of all or any portion of the Award, the Participant ceases to be [a key employee or
officer] [a consultant or advisor] [a director] of the Company or any Affiliate for any reason, the
Participant may be required to forfeit all restricted stock units subject to this Award which have
not vested and this Award may, in the Administrator’s discretion, terminate as of the date of the
act giving rise to such termination. Notwithstanding anything herein to the contrary, if any
payments to be made to the Participant hereunder are subject to the requirements of Code Section
409A and the Company determines that the Participant is a “specified employee” as defined in Code
Section 409A as of the date of the termination, such payments shall not be paid or commence earlier
than the date that is six months after the termination. Any payment
not made during the six month period shall be paid on the first day of the seventh month following
termination.
c. Issuance of Shares; Rights as a Shareholder. On each Vesting Date or in the event
of a termination in connection with a Change of Control (as defined below), the Company shall cause
to be issued a stock certificate representing that number of shares of Common Stock that have
vested as of such Vesting Date, less any shares withheld for payment of taxes as provided in
Paragraph 4(e) below, and shall deliver such certificate to the Participant. Until the issuance of
such shares, the Participant shall not be entitled to receive dividends attributable to such shares
of Common Stock, and shall not have any other rights as a shareholder with respect to such shares.
No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities
or other property), distributions or other rights for which the record date is prior to the date
such shares are issued, except as provided in Section 14 of the Plan and Paragraph 4(c) of this
Agreement.
3. Change of Control.
a. Acceleration. Notwithstanding anything in the Plan or this Agreement to the
contrary, in the event of the termination of the Participant’s relationship with the Company in
connection with a Change of Control (as defined below), this Award shall immediately and fully
vest.
b. Change of Control Defined. For purposes of this Paragraph 3, a “Change of Control”
means:
i. The consummation of any merger, consolidation, exchange, or reorganization to which
the Company is a party if the individuals and entities who were shareholders of the Company
immediately prior to the effective date of such transaction have, immediately following the
effective date of such transaction, beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of less than fifty percent (50%) of the total combined
voting power of all classes of securities issued by the surviving corporation for the
election of directors of the surviving corporation;
ii. The shareholders of the Company approve any plan or proposal for the liquidation
of the Company;
iii. A sale, lease or other transfer of all or substantially all of the assets of the
Company to any person or entity which is not an Affiliate of the Company; or
iv. The acquisition, without prior approval by resolution adopted by the Board, of
direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of securities of the Company representing, in the aggregate, fifty
percent (50%) or more of the total combined voting power of all classes of the Company’s
then-issued and outstanding securities by any person or entity or by a group of associated
persons or entities acting in concert; provided, however, that a Change of Control will not
be deemed to occur if such acquisition is initiated by the Participant or an entity in which
the Participant owns fifty percent (50%) or more of the total combined voting power of all
classes of such entity’s securities, or if the Participant or such entity is a member of the
group of associated persons or entities acting in concert.
In all cases, the determination of whether a Change of Control has occurred shall be made in
accordance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the
regulations, notices and other guidance of general applicability issued thereunder.
c. Limitation on Change of Control Payments. The Participant shall not be entitled to
receive any Change of Control Payment, as defined below, which would constitute a “parachute
payment” for purposes of Code Section 280G, or any successor provision, and the regulations
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thereunder. In the event any Change of Control Payment payable to the Participant would constitute
a “parachute payment,” the Participant shall have the right to designate those Change of Control
Payments which would be reduced or eliminated so that the Participant will not receive a “parachute
payment.” For purposes of this Paragraph 3(c), a “Change of Control Payment” shall mean any
payment, benefit or transfer of property in the nature of compensation paid to or for the benefit
of the Participant under any arrangement which is considered contingent on a Change of Control for
purposes of Code Section 280G, including, without limitation, any and all of the Company’s salary,
bonus, incentive, restricted stock, stock option, equity-based compensation or benefit plans,
programs or other arrangements, and shall include the acceleration of this Award.
4. Miscellaneous.
a. Employment; Rights as Shareholder. This Agreement shall not confer on the
Participant any right with respect to continuance of employment by the Company or any of its
subsidiaries, nor will it interfere in any way with the right of the Company to terminate such
employment. The Participant shall have no rights as a shareholder with respect to shares subject
to this Award until such shares have been issued to the Participant. No adjustments shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the date such shares are
issued, except as provided in Section 14 of the Plan.
b. Securities Law Compliance. The Participant may be required by the Company, as a
condition of the effectiveness of this Award, to agree in writing that all Common Stock subject to
this Agreement shall be held, until such time that such Common Stock is registered or otherwise
freely tradable under applicable state and federal securities laws, for the Participant’s own
account without a view to any further distribution thereof, that the certificates for such shares
shall bear an appropriate legend to that effect and that such shares will be not transferred or
disposed of except in compliance with applicable state and federal securities laws.
c. Mergers, Recapitalizations, Stock Splits, Etc. Except as otherwise specifically
provided in any employment, change of control, severance or similar agreement executed by the
Participant and the Company, pursuant and subject to Section 14 of the Plan and Paragraph 3 hereof,
certain changes in the number or character of the Common Stock of the Company (through sale,
merger, consolidation, exchange, reorganization, divestiture (including a spin-off), liquidation,
recapitalization, stock split, stock dividend or otherwise) shall result in an adjustment,
reduction or enlargement, as appropriate, in the Participant’s rights with respect to any
restricted stock units subject to this Award which continue to be subject to vesting (i.e.,
the Participant shall have such “anti-dilution” rights under the Award with respect to such events,
but shall not have “preemptive” rights).
d. Shares Reserved. The Company shall at all times during the term of this Award
reserve and keep available such number of shares as will be sufficient to satisfy the requirements
of this Agreement.
e. Withholding Taxes. To permit the Company to comply with all applicable federal and
state income tax laws or regulations, the Company may take such action as it deems appropriate to
ensure that, if necessary, all applicable federal and state payroll, income or other taxes
attributable to this Award are withheld from any amounts payable by the Company to the Participant.
If the Company is unable to withhold such federal and state taxes, for whatever reason, the
Participant hereby agrees to pay to the Company an amount
equal to the amount the Company would otherwise be required to withhold under federal or state law
prior to the issuance of any certificates for the shares of Common Stock subject to this Award.
Subject to such rules as the Administrator may adopt, the Administrator may, in its sole
discretion, permit the Participant to satisfy such withholding tax obligations, in whole or in
part, by delivering shares of Common Stock, including shares of Common Stock received pursuant to
this Award upon vesting. Such
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shares shall have a Fair Market Value equal to the minimum required
tax withholding, based on the minimum statutory withholding rates for federal and state tax
purposes, including payroll taxes, that are applicable to the supplemental income attributable to
this Award. In no event may the Participant deliver shares having a Fair Market Value in excess of
such statutory minimum required tax withholding. The Participant’s election to deliver shares or
to have shares withheld for this purpose shall be made on or before the date that the amount of tax
to be withheld is determined under applicable tax law. Such election shall be approved by the
Administrator and otherwise comply with such rules as the Administrator may adopt to assure
compliance with Rule 16b-3, or any successor provision, as then in effect, of the General Rules and
Regulations under the Securities Exchange Act of 1934, if applicable.
f. Nontransferability. During the lifetime of the Participant, this Award shall not
be transferable, in whole or in part, by the Participant, other than by will or by the laws of
descent and distribution. If the Participant shall attempt any transfer of this Award prior to
such date, such transfer shall be void and this Award shall terminate.
g. 2003 Equity Incentive Plan. The Award evidenced by this Agreement is granted
pursuant to the Plan, a copy of which Plan has been made available to the Participant and is hereby
incorporated into this Agreement. This Agreement is subject to and in all respects limited and
conditioned as provided in the Plan. All defined terms of the Plan shall have the same meaning when
used in this Agreement. The Plan governs this Award and, in the event of any questions as to the
construction of this Agreement or in the event of a conflict between the Plan and this Agreement,
the Plan shall govern, except as the Plan otherwise provides.
h. Lockup Period Limitation. The Participant agrees that in the event the Company
advises the Participant that it plans an underwritten public offering of its Common Stock in
compliance with the Securities Act of 1933, as amended, and that the underwriter(s) seek(s) to
impose restrictions under which certain shareholders may not sell or contract to sell or grant any
option to buy or otherwise dispose of part or all of their stock purchase rights of the underlying
Common Stock, the Participant hereby agrees that for a period not to exceed 180 days from the
prospectus, the Participant will not sell or contract to sell or grant an option to buy or
otherwise dispose of this Award or any of the underlying shares of Common Stock without the prior
written consent of the underwriter(s) or its representative(s).
i. Blue Sky Limitation. Notwithstanding anything in this Agreement to the contrary,
in the event the Company makes any public offering of its securities and determines, in its sole
discretion, that it is necessary to reduce the number of issued but unexercised stock purchase
rights so as to comply with any state securities or Blue Sky law limitations with respect thereto,
the Board of Directors of the Company shall have the right to (i) accelerate the vesting of this
restricted stock unit award, provided that the Company gives the Participant 15 days’ prior written
notice of such acceleration, or (ii) cancel any portion of this Award or any other award granted to
the Participant pursuant to the Plan which has not vested prior to or contemporaneously with such
public offering. Notice shall be deemed given when delivered personally or when deposited in the
United States mail, first class postage prepaid and addressed to the Participant at the address of
the Participant on file with the Company.
j. Stock Legend. The Administrator may require that the certificates for any shares
of Common Stock issued to the Participant (or, in the case of death, the Participant’s successors)
under this Agreement shall bear an appropriate legend to reflect the restrictions of this
Agreement; provided, however, that failure to so endorse any of such certificates shall not render
invalid or inapplicable any such restrictions.
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k. Scope of Agreement. This Agreement shall be and inure to the benefit of the
Company and its successors and assigns and the Participant and any successor or successors of the
Participant permitted by Paragraph 4(f) above.
l. Arbitration. Any dispute arising out of or relating to this Agreement or the
alleged breach of it, or the making of this Agreement, including claims of fraud in the inducement,
shall be discussed between the disputing parties in a good faith effort to arrive at a mutual
settlement of any such controversy. If, notwithstanding, such dispute cannot be resolved, such
dispute shall be settled by binding arbitration. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a
retired state or federal judge or an attorney who has practiced securities or business litigation
for at least ten (10) years. If the parties cannot agree on an arbitrator within twenty (20) days,
any party may request that the chief judge of the District Court for Hennepin County, Minnesota
select an arbitrator. Arbitration will be conducted pursuant to the provisions of this Agreement
and the commercial arbitration rules of the American Arbitration Association, unless such rules are
inconsistent with the provisions of this Agreement. Limited civil discovery shall be permitted for
the production of documents and taking of depositions. Unresolved discovery disputes may be
brought to the attention of the arbitrator who may dispose of such dispute. The arbitrator shall
have the authority to award any remedy or relief that a court of this state could order or grant;
provided, however, that punitive or exemplary damages shall not be awarded. The arbitrator may
award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees,
including the arbitrator’s fees, administrative fees, travel expenses, out-of-pocket expenses and
reasonable attorneys’ fees. Unless otherwise agreed by the parties, the place of any arbitration
proceedings shall be Hennepin County, Minnesota.
m. Accounting Compliance. The Participant agrees that, if a “transaction” (as defined
in Section 14 of the Plan) occurs, and the Participant is an “affiliate” of the Company or any
Affiliate (as defined in applicable legal and accounting principles) at the time of such
transaction, the Participant will comply with all requirements of Rule 145 of the Securities Act of
1933, as amended, and the requirements of such other legal or accounting principles, and will
execute any documents necessary to ensure such compliance.
n. Right to Amend. The Company hereby reserves the right to amend this Agreement
without the Participant’s consent to the extent necessary or desirable to comply with the
requirements of Code Section 409A and the regulations, notices and other guidance of general
application issued thereunder.
o. Governing Law. This Agreement and all rights and obligations hereunder shall be
construed in accordance with the Plan and governed by the laws of the State of Minnesota.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day
and year first above written.
| MAKEMUSIC, INC. |
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| By: | ||||
| Its: | ||||
By execution hereof, the Participant acknowledges having received a copy of the Plan. |
PARTICIPANT |
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