PROPOSAL NO. 4 – TO APPROVE THE AMENDED
CAI INTERNATIONAL, INC. 2007 EQUITY INCENTIVE PLAN
The Board of Directors, the Compensation Committee and our management all believe that the effective use of stock-based long-term incentive compensation is important to our success. On April 23, 2015, the Board of Directors amended our 2007 Equity Incentive Plan (as amended, the 2007 Plan) to increase the number of shares reserved for issuance under the 2007 Plan by 200,000 shares, subject to the approval of our stockholders.
In order to continue to have an appropriate supply of shares for equity incentives to recruit, hire and retain the talent required to successfully execute our business plans, the Board of Directors believes that we will need the additional 200,000 new shares to be available under the 2007 Plan. As of April 23, 2015, and prior to the requested increase, there were a total of approximately 64,800 shares available for future grant under the 2007 Plan. As of the record date, the total number of shares of our common stock issued and outstanding was 21,142,521 shares. Although the additional 200,000 new shares to be available under the 2007 Plan will increase the potential dilution to stockholders, the Board of Directors believes our equity compensation plan is well-managed and below norms for our industry.
We anticipate the additional shares for which we are seeking stockholder approval will be sufficient for our equity compensation program through fiscal year 2017, and that we will need to seek stockholder approval for additional shares at our annual stockholders meeting in 2018. While authorizing these additional shares for issuance under the 2007 Plan will increase the potential dilution represented by our equity compensation program, the Board of Directors and Compensation Committee believe that the potential dilution represented by our current outstanding equity compensation awards and the new shares to be authorized for issuance under the 2007 Plan is reasonable.
If stockholders do not approve the amended 2007 Plan, the amended 2007 Plan will not become effective and the remaining shares available for issuance under the 2007 Plan will remain available for new grants until awards have been granted covering all the shares authorized for issuance under the 2007 Plan or it is terminated by the Board of Directors.
If the stockholders approve the amended 2007 Plan, in addition to the 200,000 new shares authorized for issuance under the 2007 Plan, the shares that are subject to outstanding awards under the 2007 Plan that are forfeited or canceled or expire can be reused under the 2007 Plan.
Under applicable rules of the NYSE, we are required to obtain stockholder approval of the 2007 Plan. In addition, stockholder approval of the 2007 Plan is necessary to provide the Compensation Committee with the flexibility to grant incentive stock options to employees under the 2007 Plan and certain awards that qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code. See U.S. Federal Income Tax Consequences below for more information about these issues.
Stockholder approval of the amended 2007 Plan pursuant to this Proposal No. 4 will also constitute re-approval of the 2007 Plan for purposes of Section 162(m). In general, this re-approval is required at least once every five years to comply with certain requirements under Section 162(m). See U.S. Federal Income Tax Consequences below for more information.
The principal features of the amended 2007 Plan are summarized below. This summary does not contain all information about the 2007 Plan. A copy of the complete text of the amended 2007 Plan is included in Appendix A to this proxy statement, and the following description is qualified in its entirety by reference to the text of the 2007 Plan.
Summary of the Amended 2007 Plan
The 2007 Plan authorizes the Compensation Committee to award stock options, stock appreciation rights, restricted stock, stock units, performance shares, performance units and other incentives payable in cash or in shares of our stock for the purpose of recruiting, motivating and retaining the caliber of employees essential for achievement of our success.
Shares Available for Issuance
The number of shares of Company stock available for issuance under the 2007 Plan is 1,921,980. If there is any change in Company stock by reason of any stock split, stock dividend, spin-off, recapitalization, merger, consolidation, combination or exchange of shares, distribution to stockholders other than a normal cash dividend or other change in the Company’s corporate or capital structure, the Committee shall make proportional adjustments to the maximum number and kind of securities, and the price of each security, (i) available for issuance under the 2007 Plan, (ii) available for issuance as incentive stock options, (iii) that may be subject to awards received by any participant in any one calendar year, and (iv) that are subject to any outstanding award.
The 2007 Plan provides that shares covered by an award will not count against the shares available for issuance under the 2007 Plan until they are actually issued and delivered to a participant. If an award granted under the 2007 Plan lapses, expires, terminates or is forfeited, surrendered or canceled without having been fully exercised or without the issuance of all the shares subject to the award, the shares covered by such award (or, if applicable, the portion as to which shares have not been issued) will