The following table provides information with respect to outstanding stock options, restricted stock, and restricted stock units held as of August 31, 2017,September 3, 2020, by our Named Executive Officers.
Compensation Plan. Participants will be 100% vested at all times in their deferral accounts; provided, however, that matching and/or discretionary contributions by the Company, if any, may be subject to a vesting schedule as provided by the Company. Participants may elect to receive payment of their account balances upon a fixed date, or their separation
from service with the Company, or the earlier of a fixed date or their separation from service. Participants may elect to receive payment of their account balances in a single sum cash payment or in substantially equal annual cash installments over not less than two years and not more than ten years. Account balances will become payable immediately in a single sum cash payment upon a participant’s death or disability, or upon a change in control. Account balances under the Deferred Compensation Plan earn or lose value based on the investment performance of one or more of the various investment funds offered under the Deferred Compensation Plan and selected by the participants. Compensation deferred under the Deferred Compensation Plan represents an unsecured obligation of the Company. Amounts deferred under the Deferred Compensation Plan are expected to be held in a separate rabbi trust established to pay Plan benefits.
The following tables quantify the estimated payments and benefits for each of the Named Executive Officers pursuant to the Executive Agreement and NEO Severance Agreements and in the event of a change ofin control as
|
| | | | | | | |
| Equity Plan | | (a) Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants and Rights | | (b) Number of Securities Available for Issuance (Excluding Securities Reflected in Column (a)) |
| Plans Approved by Shareholders | | | | | |
| 2004 Plan | | 12,514,293 |
| (1) | | 23,681,033 |
|
| 2007 Plan | | 24,795,519 |
| (2) | | 70,559,162 |
|
| Numonyx Plan | | 194,228 |
| | | 3,254,436 |
|
| Approved Plan Total | | 37,504,040 |
| | | 97,494,631 |
|
| | | | | | |
| Plans Not Approved by Shareholders | | | | | |
| NSOP | | 12,536,094 |
| | | 3,209,654 |
|
| Not Approved Plan Total | | 12,536,094 |
| | | 3,209,654 |
|
| Grand Total | | 50,040,134 |
| | | 100,704,285 |
|
| |
(1) | Includes 4,757,221 restricted stock units and excludes 1,877,165 shares of restricted stock. |
| |
(2) | Includes 12,287,478 restricted stock units and excludes 86,160 shares of restricted stock. |
(1)Excludes restricted stock that converts to shares of Common Stock for no consideration and excludes ESPP shares for which the exercise price will not be fixed until the purchase date.
(2)Includes shares issuable or available pursuant to our 2004 Equity Incentive Plan (the “2004 Plan”), 2007 Plan, and Employee Stock Purchase Plan (the “ESPP”). The 2004 Plan and the 2007 Plan provide for a maximum term for options and Stock Appreciation Rights (“SARs”) of eight years. The 2004 Plan and 2007 Plan are our only plans that permit granting of awards other than stock options. The 2004 Plan and the 2007 Plan provide that awards other than stock options or SARs reduce the number of available shares under the plan by two shares for each one share covered by the award. In addition, none of our equity plans contain provisions that are commonly known as “liberal share counting provisions” or permit the grant of discounted options or SARs.
(3)If issuing full-value awards, the number of available shares is 56,287,419. The 2004 Plan and 2007 Plan permit granting options and full-value awards.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related party transactions(4)Includes shares issuable or available pursuant to our Nonstatutory Stock Option Plan (the “NSOP”). Options granted under the NSOP have terms ranging from six to ten years. The exercise price and the vesting schedule of the options granted under this plan are revieweddetermined by the administrators of the plan or our Board of Directors. Related parties include ourExecutive officers and directors and officers, their family members and affiliates, and certain beneficial owners. In cases where the related party is a director or an affiliate of a director, that director doesdo not participate in the reviewNSOP.
(5)None of these shares are available to grant as full-value awards.
(6)The following table contains further information as to awards outstanding and available for issuance under each of our equity plans:
| | | | | | | | | | | | | | |
| Equity Plan | (a)
Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants and Rights | (b)
Number of Securities Available for Issuance (Excluding Securities Reflected in Column (a)) |
| | | | |
| Plans Approved by Shareholders | | | | |
| 2004 Plan | 11,056,375 | | (1) | — | | (2) |
| 2007 Plan | 8,488,542 | | (3) | 61,562,891 | | |
| ESPP | 1,650,000 | | | 25,505,973 | | |
| Approved Plan Total | 21,194,917 | | | 87,068,864 | | |
| | | | |
| Plans Not Approved by Shareholders | | | | |
| NSOP | 2,250,487 | | | 3,233,400 | | |
| Not Approved Plan Total | 2,250,487 | | | 3,233,400 | | |
| Grand Total | 23,445,404 | | | 90,302,264 | | |
(1)Includes 8,751,750 restricted stock units and excludes 939,193 shares of restricted stock.
(2)Subsequent to September 3, 2020, the proposed transaction.number of securities available for issuance increased as a result of awards that were forfeited, including RSU awards, which reduce the number of shares available for grant by two shares for each one share covered by the award, as required under the 2004 Plan. In reviewing a proposed related party transaction, the Board of Directors considers all the relevant facts and circumstances of the transaction, such as (i) the nature and terms of the transactions, (ii) the dollar value of the transaction, (iii) whether the terms of the transaction are at least as favorable as they would have been if a related party was not involved, (iv) the business reasons for the transaction, (v) whether the transaction would result in an improper conflict of interest, and (vi) the effects of the transaction on the ongoing relationship between us and the related party. Other than as noted below, there were no other related party transactions in excess of $120,000 for fiscal 2017 and through November 20, 2017.
Through December 6, 2016, we held a 33% ownership interest in Inotera (now known as MTTW), Nanya Technology Corporation ("Nanya") and certain of its affiliates held a 32% ownership interest, and the remaining ownership interest was publicly held. On December 6, 2016, we acquired the 67% remaining interest in Inotera not owned by us (the "Inotera Acquisition"). The cash paid for the Inotera Acquisition was funded, in part, with proceedsaddition, PRSUs granted from the sale of 58 million2004 Plan had been counted at the maximum number that could be earned under the award at the same two-to-one ratio and any unearned shares from such PRSUs were returned to the 2004 Plan after September 3, 2020.
(3)Includes 6,166,686 restricted stock units and excludes 32,693 shares of our common stock to Nanya for $986 million in cash. Through this transaction, Nanya became a beneficial owner of more than 5% of the Company's outstanding commonrestricted stock. In a form filed with the SEC, Nanya indicated that as of June 28, 2017, their ownership interest was below 5%.
Since 2009, Inotera has leased production facilities from Nanya which we assumed through the Inotera Acquisition. Under this arrangement, we paid $10 million for facility rent and utility expenses to Nanya from December 6, 2016 through June 28, 2017. We received $10 million in exchange for the sale of intellectual property, consulting, facility and parking lot rent, and facility utilities from December 6, 2016 through June 28, 2017. Since 2010, we have received royalty payments from Nanya for sales of certain DRAM process nodes, including $8 million from the beginning of fiscal 2017 through June 28, 2017.
DELINQUENT SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEREPORTS
Section 16(a) of the Securities and Exchange Act of 1934 (the "Exchange Act") requires our directors, and executive officers, and persons who own beneficially more than 10% of our Common Stock to file reports of ownership and changes of ownership with the SecuritiesSEC and Exchange Commission and the NASDAQ.Nasdaq. Copies of all filed reports are required to be furnished to us pursuant to Section 16(a) of the Exchange Act. AllWith the exception of Mses. Arnzen and Wright, and Messrs. Bokan, Byrne, and Poppen, who each had one late filing due to clerical errors by Company personnel, all directors, executive officers, and greater than 10% beneficial owners
57
complied with all applicable filing requirements during the fiscal year ended August 31, 2017,September 3, 2020, based on the reports received or written representations from reporting persons.
PROPOSAL 2 – APPROVAL OF EMPLOYEE STOCK PURCHASE | | |
PROPOSAL 3 – APPROVAL OF AMENDED AND RESTATED
2007 EQUITY INCENTIVE PLAN |
|
We are seeking your vote to approvecurrently maintain the Micron Technology, Inc. Amended and Restated 2007 Equity Incentive Plan (the “Plan”). The Plan has been effective in attracting and retaining highly-qualified employees and non-employee directors and has provided incentives that align the economic interests of plan participants with those of our Employee Stock Purchaseshareholders. The Plan which we refer to as the "ESPP." The ESPP was last approved and adopted by shareholders at our Fiscal 2016 Annual Meeting.
The Board of Directors on December 5, 2017, subjectis requesting that you approve an amended and restated version of the Plan. The amended and restated version of the Plan is referred to approval byin this Proposal 3 as the shareholders“2007 Plan.” The 2007 Plan includes the following material changes as compared to the version of the Plan that was approved at the Fiscal 20172016 Annual Meeting, and will become effective upon receiving shareholder approval at the Fiscal 2017 Annual Meeting.Meeting:
The purpose of the ESPP is to provide eligible employees of the Company and certain of its affiliates and subsidiaries 1.an opportunity to use payroll deductions to purchase shares of our common stock and thereby acquire an ownership interest in the Company. The ESPP consists of two components: a 423 component which is intended to (the "423 Component"), and a non-423 component (the "Non-423 Component") which does not, qualify as an "employee stock purchase plan" within the meaning of Section 423 of the Code ("Section 423").
The maximum aggregate number of shares of our common stock that may be purchased under the ESPP will be 33 million shares, subject to adjustment as provided for in the ESPP. The share pool for the ESPP represents approximately 3% of the total number of shares of our common stock outstanding as of November 20, 2017. In determining the number of shares to reserve for the ESPP, our Board of Directors considered the potential dilutive impact to shareholders, the projected participation rate over the ten-year term of the ESPP, and equity plan guidelines established by certain proxy advisory firms.
Summary of Material Terms of the ESPP
A summary of the material terms of the ESPP is set forth below. The summary is qualified in its entirety by reference to the full text of the ESPP, which is filed with this Proxy Statement as Appendix A.
Authorized Shares
Subject to adjustment as provided in the ESPP, a total of 33additional 35 million shares of our Common Stock will be made available for saleissuance under the ESPP.2007 Plan; and
2.certain technical provisions in the Plan relating to compliance with the now-inapplicable performance-based exception under Section 162(m) of the Internal Revenue Code (the “Code”) have been removed from the 2007 Plan. Those provisions no longer are necessary because the performance-based exception under Section 162(m) of the Code was eliminated by The Tax Cut and Jobs Act of 2017. Importantly, the 2007 Plan nevertheless retains many of the key governance aspects of the performance-based exception, including the per-person limits on grants that may be made to any individual during any fiscal year. The 2007 Plan also continues to permit the grant of awards that vest based on the achievement of performance goals. We have a track record of granting performance-based awards to our executive officers, as shown in the executive compensation sections of this Proxy Statement.
Other than as described above, the 2007 Plan does not contain any material changes as compared to the Plan.
APPROVAL OF 35 MILLION ADDITIONAL SHARES OF COMMON STOCK FOR ISSUANCE UNDER THE 2007 PLAN
Under the Plan, as of the Record Date, November 18, 2020, equity awards covering 78,355,117 shares had been granted, net of cancellations. Due to the fungible share pool provision of the Plan (see “Important Provisions of the 2007 Plan - Fungible Share Pool” below), the equity awards granted as of the Record Date counted as 123,018,699 shares against the Plan share reserve. As of the Record Date, approximately 41,981,301 shares remained available for future grants, subject to the fungible share pool provision. We expect to exhaust the existing share reserve in the next two years. Our calculations suggest that it is prudent to replenish the share reserve at this time. Without the additional shares, we would need to make changes to our long-term incentives program in order to conserve the remaining share reserve. In order to enable us to continue offering meaningful equity-based incentives to key employees and non-employee directors, the eventBoard of Directors believes that it is both necessary and appropriate to increase the number of shares of Common Stock available for these purposes. Accordingly, we are asking our shareholders to approve an amendment and restatement of the Plan that would increase the total number of shares of Common Stock available for grant under the Plan by 35 million, which would make available for grant under the 2007 Plan a total of approximately 200 million shares of Common Stock. If shareholders approve the 2007 Plan, we expect that the shares available under the 2007 Plan will meet our anticipated needs for approximately three years, subject to changes in business conditions or other trends.
59
Background for the Current Request to Increase the Share Reserve for Equity Incentive Awards
Significant Historical Award Information
Common measures of a stock dividend, stock splitplan’s cost include burn rate, dilution, and overhang. The burn rate, or combinationrun rate, refers to how fast a company uses the supply of shares recapitalization or other changeauthorized for issuance under its stock plan. Over the last three years, we have maintained an average equity run rate of only 0.9% of shares of Common Stock outstanding per year. Dilution measures the degree to which our shareholders’ ownership has been diluted by stock-based compensation awarded under our various equity plans and also includes shares that may be awarded under our various equity plans in the Company’s capitalization, or other distribution with respect tofuture (“overhang”).
The following table shows how our shareholders other than normal cash dividends, an automatic adjustment will be made inkey equity metrics have changed over the number and kind of shares as to which outstanding options then unexercised will be exercisable, in the available shares reserved for sale under the ESPP, and in the purchase period limit, in order to maintain the proportionate interest of the participants before and after the event.
As of November 20, 2017, the closing price of our common stock on NASDAQ was $47.64 per share.
Plan Administration
Our Compensation Committee will administer the ESPP, and will have full and exclusive authority to interpret the terms of the ESPP and determine eligibility to participate, subject to the conditions of the ESPP. The Board of Directors and the Compensation Committee are also authorized to adopt rules, procedures and subplanspast three fiscal years with respect to the Non-423 ComponentPlan:
| | | | | | | | | | | |
| Key Equity Metrics | 2020 | 2019 | 2018 |
| | | |
| Equity Run Rate(1) | 1.0% | 1.1% | 0.7% |
| Overhang(2) | 10.2% | 12.3% | 13.4% |
| Dilution(3) | 2.1% | 2.4% | 2.7% |
(1)Equity run rate is calculated by dividing the number of shares subject to equity awards granted during the fiscal year by the weighted-average number of shares outstanding during the fiscal year.
(2)Overhang is calculated by dividing (a) the sum of (x) the number of shares subject to equity awards outstanding at the end of the ESPPfiscal year and (y) the number of shares available for future grants at the end of the fiscal year, by (b) the number of shares outstanding at the end of the fiscal year.
(3)Dilution is calculated by dividing the number of shares subject to equity awards outstanding at the end of the fiscal year by the number of shares outstanding at the end of the fiscal year.
Number of Shares Requested
We considered several factors in determining to request 35 million additional shares for the operation2007 Plan:
•Assuming shareholder approval of the ESPP in jurisdictions outside2007 Plan, 76,981,301 shares will be available for future grants (which is the sum of the United States.
Eligibility
Generally, employees35,000,000 additional shares and the 41,981,301 shares available as of the Company and any of its designated subsidiaries and affiliates are eligibleRecord Date). We expect this amount to participate in the ESPP, subject to the procedural enrollment and other requirements in the ESPP. However, our Compensation Committee may, in its discretion, determine prior to the beginning of an offering period that employees will not be eligible to participate if they: (i) have not completed at least twolast for approximately three years of service since their last hire date (or such lesser periodawards. Such shares would represent approximately 6.9% of timeour total outstanding common shares as may be determined by our Compensation Committee in its discretion), (ii) customarily work not more than 20 hours per week (or such lesser period of time as may be determined by our Compensation Committee in its discretion), (iii) customarily work not more than five months per calendar year (or such lesser period of time as may be determined by our Compensation Committee in its discretion), or (iv) are highly compensated employee within the meaning of Section 414(q) of the Code.
No employee may be granted options to purchaseRecord Date. This estimate assumes that we continue our current practices of issuing grants. While we believe this modeling provides a reasonable estimate of how long such a share reserve would last, there are a number of factors that could impact our future actual equity share usage and the shares of our Common Stockavailable under the 423 Component of2007 Plan may last longer or shorter than three years.
•The total overhang resulting from the ESPP if such employee (i) immediately after the grant would own capital stock possessing 5% or more of the total combined voting power or value of all classes of our capital stock, or (ii) holds rights to purchase shares of our common stockshare request, including awards outstanding under all of our employee stock purchaseequity plans, (as defined in Section 423) that accrue at a rate that exceeds $25,000 worthrepresents approximately 12.2% of the shares of Common Stock outstanding as of the Record Date.
•Once the small number of remaining shares available for grant under our common stock for each calendar year. Employees who are citizens or residents of a non-U.S. jurisdiction may be excluded from participation in2004 Plan is exhausted, we expect that future equity-based compensation awards, other than the ESPP, will be made under the 2007 Plan or a specific offering if such participation is prohibited under applicable local law or would violate Section 423its successors.
•Given the significant institutional share ownership of Micron, we considered the stated policies of those institutions and of certain proxy advisory services.
Effect of Shareholder Approval of 2007 Plan
If shareholders approve the 2007 Plan, it will replace the version of the Internal Revenue Code.Plan that was approved by shareholders at the Fiscal 2016 Annual Meeting. If shareholders do not approve the 2007 Plan as described herein, we will continue to use the Plan as last approved by shareholders. However, as described above, without the share increase proposed above, the shares that remain available for issuance under the Plan may not be sufficient for us to be able to achieve our goals of attracting, motivating, and retaining our employees through grants of equity awards.
For purposes of the ESPP, designated subsidiaries include any subsidiary (within the meaning of Section 424(f) of the Code) of the Company that has been designated by our Compensation Committee as eligible to participate in the 423 Component of the ESPP and designated affiliates include any of our affiliates that have been designated by our Compensation Committee as eligible to participate in the Non-423 Component of the ESPP.Limitations on Individual Awards
As of November 20, 2017, approximately 33 thousand employees would be eligible to participate in the ESPP.
Offering Periods
Pursuant to the terms of the ESPP, on the first trading day of an offering period, each eligible employee will be granted an option to purchase shares of our Common Stock on the last day of such offering period. Our Compensation Committee will determine the length of each offering period, provided that no offering period may exceed 27 months in length.
Contributions
The ESPP permits each participant to purchase shares of our common stock through payroll deductions of up to 10% of their eligible compensation; provided, however, that a participant may not purchase more than a specific maximum number of
shares, which limit will be determined by our Compensation Committee prior to the commencement of the offering period. No interest will accrue on a participant’s contributions to the ESPP, unless required by law in certain jurisdictions. A participant may withdraw during the offering period and may decrease (but not increase) their contributions.
Purchases
Unless a participant terminates employment or withdraws from the ESPP or an offering period before the last trading day of an offering period, the participant’s option will automatically be exercised on the last trading day of each offering period. Theaggregate number of shares of our Common Stock purchased willsubject to stock-based awards that may be determined by dividinggranted under the payroll contributions accumulated2007 Plan during any one calendar year to any one participant is as follows:
| | | | | |
| |
| Options | 5,000,000 | |
| Stock Appreciation Rights (SARs) | 5,000,000 | |
| Other Stock-Based Awards (other than Options or SARs) | 5,000,000 | |
These limits are unchanged as compared to the Plan and are subject to anti-dilution adjustments in the
event of corporate events such as stock splits, mergers, consolidations, stock dividends, recapitalizations and similar transactions.
IMPORTANT PROVISIONS OF THE 2007 PLAN
The 2007 Plan contains a number of provisions that we believe are consistent with the interests of shareholders and sound corporate governance practices, including:
•Fungible Share Pool. The 2007 Plan uses a fungible share pool under which each stock option and SAR counts as one share against the plan share reserve and each stock-based full-value award (which includes any stock-based or stock-settled award other than options or SARs) counts as two shares against the plan share reserve.
•No Liberal Share Counting for Stock Options or SARs. The 2007 Plan prohibits the reuse of shares withheld, repurchased or delivered to satisfy the exercise price or tax withholding requirements relating to a stock option or SAR. The Plan also prohibits “net share counting” upon the exercise of options or SARs.
•No Repricing of Stock Options or SARs. The 2007 Plan generally prohibits the repricing of stock options or SARs without shareholder approval. As provided in the 2007 Plan, the following actions are generally prohibited: (i) reducing the exercise price or base price of an option or SAR after the date of grant, (ii) canceling an option or SAR in exchange for cash, other awards, or options or SARS with an exercise price or base price that is less than the exercise price or base price of the original option or SAR, or otherwise, and (iii) any repurchasing of an option or SAR for value (in cash or otherwise) if the current fair market value of the shares of Common Stock underlying the option or SAR is lower than the exercise price or base price per share of the option or SAR.
•No Discounted Stock Options or SARs. All stock options and SARs must have an exercise price or base price equal to or greater than the fair market value of the underlying Common Stock on the date of grant.
•“Double-trigger” Change in Control Vesting. If awards granted under the 2007 Plan are assumed by a successor in connection with a change in control, such awards will not automatically vest and pay out solely as a result of the change in control. Instead, such awards will only vest in accordance with their existing vesting schedule, except that they will vest upon termination or resignation if within one year after
61
the effective date of the change in control, the participant’s account byemployment is terminated without cause or, in the applicable purchase price,case of certain participants, if the participant resigns for good reason.
•No Award may be Transferred for Value. The 2007 Plan prohibits the transfer of unexercised, unvested or restricted awards to third parties for value.
•No Liberal Definition of “Change in Control.” The change in control definition contained in the 2007 Plan is not a “liberal” definition that would be activated on mere shareholder approval of a transaction.
•Minimum Vesting Requirements. Subject to certain limited exceptions, full-value awards granted under the 2007 Plan (other than awards granted to non-employee directors) will either (i) be subject to a minimum vesting period of three years (which may include graduated vesting within such three-year period), or one year if the maximum share limit discussed above. vesting is based on performance criteria other than continued service, or (ii) be granted solely in exchange for foregone cash compensation.
•No fractionalDividends on Unearned Awards. The 2007 Plan prohibits the current payment of dividends or dividend equivalent rights on unearned performance shares.
•Limitation on Amendments. No material amendments to the 2007 Plan can be made without shareholder approval. For example, an amendment that would materially increase the number of shares reserved under the plan, or that would diminish the prohibitions on repricing stock options or SARs, would require shareholder approval. The types of amendments that require shareholder approval are described in the 2007 Plan.
SUMMARY OF THE 2007 PLAN AS PROPOSED
TO BE AMENDED AND RESTATED
The following summary is qualified in its entirety by reference to the complete text of the 2007 Plan, which is provided with this Proxy Statement as Appendix A.
Purpose
The purpose of the 2007 Plan is to promote our success and enhance our value by linking the personal interests of our employees, officers, and directors to those of our shareholders, and by providing participants with an incentive for outstanding performance.
Permissible Awards
The plan authorizes the grant of awards in any of the following forms:
•Options to purchase shares of Common Stock, which may be nonstatutory stock options or incentive stock options under the U.S. Internal Revenue Code (the “Code”). The exercise price of an option granted under the 2007 Plan may not be less than the fair market value of our Common Stock will be purchased. Any contributions accumulated in a participant’s account which are not sufficient to purchase a full shareon the date of our Common Stock will be rolled overgrant (except to the next offering period, without interest, or will be refundedlimited extent permitted by the Code when we issue options in substitution for options held by employees of companies acquired by us). Stock options granted under the 2007 Plan may have a term of up to them, without interest.eight years.
Until otherwise determined by our Compensation Committee,•SARs, which give the purchase price ofholder the shares will be 85% ofright to receive the lowerexcess, if any, of the fair market value of our common stockone share of Common Stock on the first trading daydate of each offering period orexercise, over the base price of the SAR. The base price of a SAR may not be less than the fair market value of our Common Stock on the last trading daydate of each offering period (whichgrant (except to the limited extent permitted by the Code when we referissue SARs in substitution for SARs held by employees of companies acquired by us). SARs granted under the 2007 Plan may have a term of up to eight years.
•Performance shares, which are payable in Common Stock (or an equivalent value in cash or other property) upon the attainment of performance goals set by the Compensation Committee of our Board of Directors (the “Committee”).
•Restricted stock, which is subject to restrictions on transferability and subject to forfeiture on terms set by the Committee.
•Restricted stock units, which represent the right to receive shares of Common Stock (or an equivalent value in cash or other property) in the future, based upon the attainment of stated vesting or performance goals set by the Committee.
•Deferred stock units, which represent the right to receive shares of Common Stock (or an equivalent value in cash or other property) in the future, generally without any vesting or performance restrictions.
•Other stock-based awards in the discretion of the Committee, including unrestricted stock grants.
All awards will be evidenced by a written award certificate between us and the participant, which will include such provisions as may be specified by the "purchase date").Committee. Dividend equivalent rights, which entitle the participant to payments by reference to the amount of ordinary cash dividends or distributions paid on the shares of stock underlying an award, may not be granted with respect to options or SARs, but may be granted with other awards. Dividend equivalent rights may be deemed reinvested (in shares or otherwise) or may be paid out or distributed as accrued, as determined by the Committee, except that dividend equivalent rights on performance shares may not be paid out or distributed as accrued, and can be paid or distributed only if the performance-based vesting restrictions on the performance shares lapse. Unless determined otherwise by the Committee, dividend equivalent rights accruing on unvested awards will vest when the award vests and otherwise will be forfeited if the award on which the dividend equivalent rights accrued is forfeited.
Withdrawals; TerminationShares Available for Awards
The proposed amendment of Employmentthe Plan would increase the number of shares that may be issued under the 2007 Plan by 35 million shares. If the shareholders approve the proposed amendment to the Plan, the aggregate number of shares of Common Stock reserved and available for issuance pursuant to awards granted under the 2007 Plan will be 200 million. The maximum number of shares that may be issued to one person upon exercise of incentive stock options granted under the 2007 Plan is 2 million. Each share issued pursuant to “full value” awards, such as restricted stock, unrestricted stock, restricted stock units, deferred stock units, performance shares, or other stock-based awards (other than options or stock appreciation rights) payable in stock, will reduce the number of shares available for grant by two shares.
A participantUnder the Plan, as of the Record Date, November 18, 2020, equity awards covering an aggregate of 78,355,117 shares had been granted, net of cancellations. As of that date, no awards had been granted under the 2007 Plan, the amended and restated version of the Plan that is being submitted for shareholder approval. Due to the fungible share pool provision of the Plan and the 2007 Plan (see “Important Provisions of the 2007 Plan - Fungible Share Pool” above), the equity awards granted as of the Record Date counted as 123,018,699 shares against the Plan share reserve, resulting in 41,981,301 shares still available for grant as of November 18, 2020. As of the same date, equity awards covering an aggregate of 16,880,340 shares were outstanding under the Plan, of which 1,956,770 shares were subject to stock options, 13,651,030 shares were subject to restricted stock awards, and 1,272,540 shares were subject to performance restricted stock units. The weighted-average remaining contractual term of the outstanding stock options as of the Record Date, was 2.84 years and the weighted-average exercise price per share of those stock options was $24.89. Any stock issued under the 2007 Plan may end their participation at any time during an offering periodconsist of authorized and all, but not less than all, of their accrued contributions not yet used to purchaseunissued shares of our commonCommon Stock, treasury shares of our Common Stock, or shares of our Common Stock purchased on the open market.
As noted above, the maximum number of shares of Common Stock subject to awards that may be granted under the 2007 Plan during any one calendar year to any one participant will be 5,000,000 with respect to options and/or SARs; and 5,000,000 with respect to awards of restricted stock, restricted stock units, deferred stock units, performance shares or other stock-based awards (other than options and SARs). In addition, the maximum number of shares of Common Stock subject to awards granted during any single fiscal year of ours to any
63
nonemployee director, taken together with any cash fees paid to such non-employee director during that fiscal year, will not exceed $750,000 in total value. For this purpose, the value of any such awards will be based on the grant date fair value as determined for financial reporting purposes.
Share Counting
Shares subject to awards that terminate or expire unexercised, or are cancelled, forfeited or lapse for any reason, and shares underlying awards that are ultimately settled in cash, will become available for future grants of awards under the 2007 Plan. The following shares of Common Stock may not again be made available for issuance as awards under the 2007 Plan: (i) shares of Common Stock not issued or delivered as a result of the net settlement of an outstanding option or SAR, (ii) shares of Common Stock used to pay the exercise price or withholding taxes related to an outstanding option or SAR, or (iii) shares of Common Stock repurchased on the open market with the proceeds of the exercise price of an option. If any part of a “full value” award (as defined in the “Shares Available for Awards” section immediately above) is cancelled, forfeited, or lapses for any reason, or the shares underlying the award are settled in cash, twice the number of such full value awards will be returned to them, orthe 2007 Plan to correspond to the formula described above for reducing the number of shares available for grant under the 2007 Plan when granting full value awards.
Minimum Vesting Requirements
Full-value awards granted under the 2007 Plan will be rolled oversubject to a minimum vesting period of three years (which may include graduated vesting) or one year if the vesting is performance-based, except to the next offering period,limited extent provided in the 2007 Plan. These exceptions include awards issued in substitution for awards in a business combination, awards issued for foregone cash compensation, accelerated vesting in the case of death, disability or retirement, or the occurrence of a change in control (as defined in the 2007 Plan), awards covering 5% or fewer of the total number of shares of Common Stock authorized under the 2007 Plan, and awards granted to non-employee directors.
Administration
The plan will be administered by the Committee. The Committee will have the authority to grant awards; designate participants; determine the type or types of awards to be granted to each participant and the number, terms and conditions thereof, including without interest.limitation exercisability, exercise or purchase prices, and term to expiration; establish, adopt or revise any rules and regulations as it may deem necessary or advisable to administer the 2007 Plan; and make all other decisions and determinations that may be required under the 2007 Plan. However, the Committee may not grant discretionary awards under the 2007 Plan to our non-employee directors and our non-employee directors will be granted awards under the 2007 Plan only in accordance with the terms, conditions and parameters of a plan, program or policy for compensating our non-employee directors as may be in effect from time to time. Our Board of Directors may at any time administer the 2007 Plan. If it does so, it will have all the powers of the Committee under the 2007 Plan.
In addition, our Board of Directors may expressly delegate to a special committee some or all of the Committee’s authority, within specified parameters, to grant awards to eligible participants who, at the time of grant, are not executive officers. The Board has delegated to our Chief Executive Officer limited authority to grant awards under the Plan to employees who are not executive officers of the Company. The Chief Executive Officer is authorized to grant awards to employees provided Equity Awards granted to any employee do not have a grant date value in excess $1,000,000, in the aggregate in any fiscal year of the Company. The Board at any time may revoke the authority of the Chief Executive Officer to grant these awards. The Chief Executive Officer is not authorized to grant awards to members of the Board or to executive officers of the Company.
Eligibility
Employees (including officers) and non-employee directors of the Company or any affiliate of the Company, including its subsidiaries, are eligible to be selected to receive awards under the 2007 Plan. These are the same groups of individuals eligible under the Plan. The actual number of individuals who will receive awards cannot be determined in advance because the Committee has the discretion to select the participants. As of November 18, 2020, approximately 40,536 persons, including approximately 40,529 employees, and 7 non-employee directors,
were eligible to be selected to receive awards under the Plan and therefore, approximately the same number are expected to be eligible to be selected to receive awards under the 2007 Plan. As of the same date, 27,561 persons, including 27,553 employees, and 8 current and former non-employee directors had outstanding awards under the Plan. Consultants of the Company or its affiliates also are eligible to be selected to receive awards under the 2007 Plan.
Limitations on Transfer; Beneficiaries
No award will be assignable or transferable by a participant withdraws from an offering period, they must re-enroll in the ESPP in order to re-commence participation.
If a participant ceases to be an eligible employee for any reason, they will be deemed to have elected to withdraw from the ESPP and their contributions not yet used to purchase shares of our common stock will be returned to them.
Non-Transferability
A participant may not assign, transfer, pledge or otherwise dispose of in any way (otherother than by will or the laws of descent and distribution) their rights with regard to options granted under the ESPPdistribution or contributions credited to their account.
Corporate Transactions
The ESPP provides that(except in the eventcase of an incentive stock option) pursuant to a reorganization, merger, or consolidation of the Company with one or more corporations in which the Company is not the surviving corporation (or survives as a direct or indirect subsidiary of such other constituent corporation or its parent), or upon a sale of substantially all of the property or stock of the Company to another corporation, a successor corporation may assume or substitute each outstanding option. If the successor corporation refuses to assume or substitute for the outstanding option, the offering period then in progress will be shortened, and a new purchase date will be set. The Company will notify each participantqualified domestic relations order; provided, however, that the purchase date has been changed and that the participant’s option will be exercised automatically on the new purchase date unless prior to such date the participant has withdrawn from the offering period.
Amendment; Termination
Subject to applicable law, our Compensation Committee, in its sole discretion, may amend, suspend, or terminate the ESPP at any time and for any reason, without shareholder approval.
Our Compensation Committee may changepermit other transfers (other than transfers for value) where the offering periods, designate separate offerings, limit the frequency and/or number of changesCommittee concludes that such transferability does not result in the amount withheld duringaccelerated taxation, does not cause any option intended to be an offering period, establish the exchange rate applicableincentive stock option to amounts withheld in a currency other than U.S. dollars, permit contributions in excess of the amount designated by a participant in orderfail to adjust for delaysqualify as such, and is otherwise appropriate and desirable, taking into account any factors deemed relevant, including without limitation, any state or mistakes in the Company’s processing of properly completed contribution elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of our common stock for each participant properly correspond with contribution amounts, and establish such other limitations or procedures as our Compensation Committee determines in its sole discretion advisable that are consistent with the ESPP. Such modifications will not require shareholder approval or the consent of any ESPP participants.
The ESPP automatically will terminate on January 17, 2028, unless we terminate it sooner.
Sub-Plans
Consistent with the requirements of Section 423, our Compensation Committee may amend the terms of the ESPP, or an offering, or provide for separate offerings under the ESPP to, among other things, reflect the impact of local law outside of the United States as applied to one or more eligible employees of a designated subsidiary and may, where appropriate, establish one or more sub-plans to reflect such amended provisions.
Certain Federal Income Tax Effects
The following summary briefly describes U.S. federal income tax consequences of options granted under the ESPP, but is not a detailed or complete description of all U.S. federal tax or securities laws or regulations thatapplicable to transferable awards. A participant may, apply, and does not address any local, state or other country laws. Therefore, no one should rely on this summary for individual tax compliance, planning or decisions. Participants in the ESPP should consult their own professional tax advisors concerning tax aspects of options granted under the ESPP. The discussion below concerning tax deductions that may become available to the Company under U.S. federal tax law is not intended to imply that the Company will necessarily obtain a tax benefit from those deductions. Taxation of equity-based payments in other countries is complex, does not generally correspond to U.S. federal tax laws, and is not covered by the summary below.
The 423 Component of the ESPP is intended to qualify as an "employee stock purchase plan" meeting the requirements of Section 423. Under these provisions, a participant will not recognize taxable income until they sell or otherwise dispose of the shares purchased under the ESPP. If a participant disposes of the shares acquired under the ESPP more than two years from the option grant date and more than one year from the date the stock is purchased, then the participant must treat as ordinary income the amount by which the lesser of (i) the fair market value of the shares at the time of disposition, or (ii) the fair market value of the shares at the option grant date, exceeds the purchase price. Any gain in addition to this amount will be treated as a capital gain. If a participant holds shares at the time of their death, the holding period requirements are automatically deemed to have been satisfied and they will realize ordinary income in the amount by which the lesser of (i) the fair market value of the shares at the time of death, or (ii) the fair market value of the shares at the option grant date exceeds the purchase price. The Company will not be allowed a deduction if the holding period requirements are satisfied.
If a participant disposes of shares before expiration of two years from the date of grant and one year from the date of exercise, then the participant must treat as ordinary income the excess of the fair market value of the shares on the purchase date over the purchase price. Any additional gain will be treated as long-term or short-term capital gain or loss, as the case may be. The Company will be allowed a deduction equal to the amount of ordinary income recognized by the participant.
The Non-423 Component of the ESPP does not qualify under the provisions of Section 423. Under the applicable Code provisions, a participant will recognize ordinary income at the time the shares are purchased measured as the excess of the fair market value of the shares purchased over the purchase price and the Company will be entitled to a corresponding deduction. Any additional gain or loss on the subsequent sale or disposition will be long-term or short-term capital gain or loss, depending on the capital gain holding period.
New Plan Benefits
As of the date of this Proxy Statement, no employee has been granted any options under the proposed ESPP. Accordingly, the benefits to be received pursuant to the ESPP by the Company’s officers and employees are not determinable at this time.
The Board of Directors recommends voting "FOR" approval of the Employee Stock Purchase Plan.
PROPOSAL 3 – APPROVAL OF THE MATERIAL TERMS OF PERFORMANCE GOALS UNDER THE EXECUTIVE OFFICER PERFORMANCE
The Executive Officer Performance Incentive Plan (the "Plan") was first approved by our Board of Directors and shareholders in 2004, and most recently by our Board of Directors and shareholders in fiscal 2015. Our Board of Directors is requesting that our shareholders re-approve the material terms of the performance goals under the Plan in order to preserve the Company's ability to continue to grant fully tax-deductible performance-based awards thereunder. For purposes of Section 162(m), the material terms of the performance goals under the Plan must be approved by our shareholders every five
years. For purposes of Section 162(m), the material terms of the performance goals include: (i) the employees eligible to receive compensation; (ii) the description of the performance objectives on which the performance goals may be based; and (iii) the maximum amount, or the formula used to calculate the maximum amount, of compensation that can be paid to an employee under the performance goals. Each of these aspects is discussed below, and shareholder approval of this Proposal 3 constitutes approval of each of these aspects for purposes of the Section 162(m) shareholder approval requirements.
In August 2017, the Compensation Committee approved an amendment to the Plan to increase the maximum award limit under the Plan from $3,000,000 to $10,000,000, subject to shareholder approval at the Fiscal 2017 Annual Meeting of Shareholders. The original limit of $3,000,000 was set when the Plan was first adopted in 2004 and has never been increased. The Compensation Committee undertook a review of peer practices with regard to plan limits and determined it was appropriate to increase the maximum award limit to $10,000,000.
If the shareholders do not re-approve the material terms of the performance goals under the Plan at the Fiscal 2017 Annual Meeting of Shareholders, then the Plan will continue in effect with the material terms last approved by the shareholders in fiscal 2015.
A summary of the Plan is set forth below. This summary is qualified in its entirety by the full text of the Plan which is attached to the Proxy Statement as Appendix B.
Deductibility under Section 162(m)
Section 162(m) imposes a $1,000,000 limit on the amount that a public company may deduct for compensation paid to the company’s CEO or any of the company’s three most highly compensated executive officers (other than the Chief Financial Officer) who are employed as of the end of the year. This limitation does not apply to compensation that meets the requirements under Section 162(m) for "performance-based" compensation. Cash awards that are granted pursuant to pre-established objective performance formulas may qualify as fully-deductible performance-based compensation, so long as certain requirements are met. One of the requirements for compensation to qualify as performance-based under Section 162(m) is that the material terms of the performance goals, including the list of permissible business criteria for performance objectives under the plan, be disclosed to and approved by shareholders at least every five years.
Shareholder approval of the material terms of performance goals under the Plan is only one of several requirements under Section 162(m) that must be satisfied for amounts realized under the Plan to qualify for the performance-based compensation exemption under Section 162(m), and shareholder approval of the material terms of the performance goals of the Plan does not alone ensure that all compensation paid under the Plan will qualify as tax-deductible compensation. There can be no guarantee that amounts payable under the Plan will be treated as qualified performance-based compensation under Section 162(m). In addition, nothing in this proposal precludes us from granting awards that do not meet the requirements for tax-deductible compensation under Section 162(m).
Summary of the Plan
Purpose
The purpose of the Plan is to attract, retain, and reward qualified executives who are important to our success by providing performance-based, incentive cash awards ("Awards") for outstanding performance at the individual, business-unit and company-wide level.
Eligible Participants
Individuals who are eligible to participate in the Plan are our officers who are subject to Section 16 of the Securities Exchange Act or identified as a "Senior Officer" in the charter of our Compensation Committee ("Eligible Participants"). Actual participation by any given Eligible Participant for any particular performance period ("Participant") ismanner determined by the Compensation Committee. Currently, 8 of our officers participate inCommittee, designate a beneficiary to exercise the Plan.
Administration
The Plan will be administered by the Compensation Committeerights of the Board of Directors (the "Committee")participant and will qualify as an independent compensation committee under Section 162(m). The Committee will have full power and authority to construe, interpret and administer the Plan.
Performance Objectives
The Committee may designatereceive any award under the Plan as a "qualified performance-based award" intended to qualify for the Section 162(m) exemption. If an award is so designated, the Committee must establish objectively determinable performance goals for such award within the time period prescribed by Section 162(m) based on one or more of the following business criteria: (i) gross and/or net revenue (including whether in the aggregate or attributable to specific products); (ii) cost of goods sold and gross margin; (iii) costs and expenses, including research & development and selling, general & administrative; (iv) income (gross, operating, net, etc.); (v) earnings, including before interest, taxes, depreciation and amortization (whether in the aggregate or on a per share basis); (vi) cash flows and share price; (vii) return on investment, capital and equity; (viii) manufacturing efficiency (including yield enhancement and cycle time reductions), quality improvements and customer satisfaction; (ix) product life cycle management (including product and technology design, development, transfer, manufacturing introduction, and sales price optimization and management); (x) economic profit or loss; (xi) market share; (xii) employee retention, compensation, training and development, including succession planning; and (xiii) objective goals consistent with the participant’s specific officer duties and responsibilities, designed to further the financial, operational and other business interests of the Company, including goals and objectivesdistribution with respect to regulatory compliance matters. The business criteria may be expressed or measured atany award upon the individual, function, department, region, unit, subsidiary, affiliate or Company levels or any combination of the foregoing.participant’s death.
With respect to each performance period, the Committee will establish the following: (1) the length of the performance period with respect to each participant (which will coincide with our fiscal year unless a shorter performance period is established); (2) the participants in the Plan for such period; (3) the specific Company, subsidiary, affiliate, group, division, unit, department, function and/or individual business criterion or criteria, or combination thereof, that will be measured with respect to each participant; (4) the specific results, or range of results, to be achieved with respect to the selected criterion or criteria; (5) any special adjustments that may need to be applied in calculating whether the performance goals have been met to factor out extraordinary items; (6) the formula for calculating the awards under the Plan in relation to the performance goals (including instructions for extrapolating the amounts payable when performance results fall in a range between threshold, target and maximum goals); and (7) the targeted bonus amounts or awards (expressed in absolute terms or as a percentage of base compensation fixed at the time the performance formula is established) for each participant.
The Committee will establish performance goals within the first 90 days after the beginning of the measurement period for which such performance goal relates (or such other time as may be required or permitted under Section 162(m)).
Modification of Performance Goals
With respect to Awards not intended to satisfy Section 162(m), if the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, including any acquisition, disposition or merger, or the manner in which we or a subsidiary or affiliate conducts our or its business, or other events or circumstances (including a change in a Participant’s duties) render performance goals to be unsuitable for a performance period, the Committee may modify such performance period and/or performance goals in whole or in part, and/or such performance period, as the Committee deems appropriate.
Subject to the requirements of Section 162(m), in the event we acquire or dispose of significant interests or assets, as more fully defined in the Plan, the performance goals will be adjusted, as called for in the Plan, to reflect the business disposition or acquisition, effective as of the last day of the fiscal quarter immediately prior to the disposition or acquisition.
Acceleration Upon Certain Events
UponChange in Control. Unless otherwise provided in an award certificate or any special plan document governing an award, upon the occurrence of a "change“change in control"control” (as defined in the 2007 Plan), performance periodsawards that are assumed by the surviving entity will not automatically accelerate vesting or pay out. Awards that are not assumed by the surviving entity or otherwise equitably converted or substituted in connection with the change in control in a manner approved by the Committee or our Board of Directors, will be deemed to have endedtreated as follows:
•all outstanding options, SARs, and other awards in the nature of rights that may be exercised will become fully exercisable;
•all time-based vesting restrictions on outstanding awards will lapse; and
•the payout opportunities attainable under all outstanding performance-based awards will vest based on target performance and the Committeeawards will determine whetherpay out on a pro rata basis, based on the time within the performance goals were "achieved"period that has elapsed prior to the change in control.
With respect to awards assumed by the surviving entity or otherwise equitably converted or substituted in connection with a change in control, if within one year after the effective date of the change in control, a participant’s employment is terminated without Cause (as defined in the Plan)2007 Plan, unless otherwise provided in an award certificate or any special plan document or other agreement governing an award) or the participant resigns for Good Reason (if and as defined in the award certificate, unless otherwise provided in any special plan document or other agreement governing an award), then:
•all of that participant’s outstanding options, SARs, and other awards in the nature of rights that may be exercised will become fully exercisable;
•all time-based vesting restrictions on that participant’s outstanding awards will lapse; and
•the payout opportunities attainable under all of that participant’s outstanding performance-based awards will vest based on target performance and the awards will pay out on a pro rata basis, based on the time within the performance period that has elapsed prior to the date of termination.
Death or Disability. Unless otherwise provided in an award certificate or other governing document, if a participant’s service terminates by reason of death or disability, all of such participant’s outstanding options, SARs, and other awards in the nature of rights that may be exercised that are solely subject to time-based vesting restrictions will become fully exercisable for a period of up to 12 months following the termination of service, all time-based vesting restrictions on outstanding awards will lapse, all outstanding performance-based awards will be fully earned based upon an assumed achievement of all relevant performance goals at “target” levels and there will
65
be a pro-rata payout of such performance awards based upon the length of time within the performance period that has elapsed prior to the termination of service.
Discretionary Acceleration. In addition, the Committee may in its discretion accelerate the vesting and (as applicable) exercisability of awards for any other reason, subject to the above described minimum vesting requirements. The Committee may discriminate among participants or among awards in exercising such discretion.
Adjustments
If a nonreciprocal transaction between us and our shareholders occurs that causes the per-share value of the shares of Common Stock to change, such as a stock dividend, stock split, spin-off, rights offering, or large nonrecurring cash dividend, then the number of shares issuable under the 2007 Plan and the per-participant share limits in the 2007 Plan will be adjusted proportionately. The Committee will make other adjustments to the 2007 Plan and awards granted under it that the Committee deems necessary to prevent dilution or enlargement of rights, including adjustments to the number and type of shares covered by outstanding awards or deliverable under the 2007 Plan and the price per share of Common Stock covered by each outstanding award. Also, in the case of a stock split, stock dividend or stock consolidation, the share authorization limits under the 2007 Plan and shares subject to, and terms of, outstanding awards will be adjusted proportionately. These adjustments may be made notwithstanding the other limits and restrictions of the 2007 Plan.
Termination and Amendment
If the 2007 Plan is approved by our shareholders at the Annual Meeting, it will be scheduled to terminate on January 14, 2031, unless we terminate it earlier. The Plan as originally adopted and as last approved by shareholders, and the 2007 Plan, provide that the expiration date of the applicable plan automatically is extended to the 10th anniversary of shareholder approval of any addition of shares to the applicable plan. Therefore, the 2007 Plan, if approved, will be scheduled to expire on January 14, 2031, which is the tenth anniversary of the Annual Meeting. If shareholders do not approve the 2007 Plan, the Plan will expire on January 18, 2027, which is 10 years from the last shareholder approval of the Plan. Our Board of Directors or the Committee may, at any time and from time to time, terminate or amend the 2007 Plan, but if an amendment to the 2007 Plan would materially increase the number of shares of stock issuable under the 2007 Plan, expand the types of awards provided under the 2007 Plan, materially expand the class of participants eligible to participate in the 2007 Plan, materially extend the term of the 2007 Plan or otherwise constitute a material amendment requiring shareholder approval under applicable listing requirements, laws, policies or regulations, then such amendment will be subject to shareholder approval. No termination or amendment of the 2007 Plan may adversely affect any award previously granted under the 2007 Plan without the written consent of the participant as provided in the 2007 Plan.
The Committee may amend or terminate outstanding awards. However, such amendments may require the consent of the participant in certain circumstances. Also, unless approved by the Participants. Subject toshareholders or otherwise permitted by the Committee’s discretion to reduce an Award, any Awards achieved asanti-dilution or adjustment provisions of the last day2007 Plan, (i) the exercise price or base price of an option or SAR may not be reduced, directly or indirectly, (ii) an option or SAR may not be cancelled in exchange for cash, other awards, or options or SARS with an exercise price or base price that is less than the exercise price or base price of the fiscal month immediately precedingoriginal option or SAR, or otherwise, (iii) we may not repurchase an option or SAR for value (in cash or otherwise) from a participant if the change in control will be paid tocurrent fair market value of a share of Common Stock underlying the Participants within thirty daysoption or SAR is lower than the exercise price or base price per share of the Committee’s certificationoption or SAR, and (iv) the original term of results.an option or SAR may not be extended.
Prohibition on Repricing
As indicated above under “Termination and Amendment,” outstanding stock options and SARs cannot be repriced, directly or indirectly, without the prior consent of our shareholders. The exchange of an “underwater” option or stock appreciation right (i.e., an option or stock appreciation right having an exercise price or base price in excess of the current market value of the underlying stock) for cash or for another award would be considered an indirect repricing and would, therefore, require the prior consent of our shareholders.
66 |2020 Proxy Statement
47
Section 409A
We currently intend to operate the Plan in a manner exempt from Section 409A. If not exempt, awards under the Plan would need to be specially designed to meet the requirements of Section 409A in order to avoid early taxation and penalties.
Certification
Any payment of an Award will be conditioned on the written certification of the Committee in each case that the performance goals and any other material conditions were satisfied.
PaymentForfeiture of Awards
Awards under the 2007 Plan are towill be paid in cash, in a single lump sum unless, subject to any applicable laws,compensation recoupment policy that we adopt from time to time, as required by law or otherwise. In addition, the Committee permitsmay specify in an award certificate that a participant’s award will be subject to reduction, cancellation, forfeiture, or requiresrecoupment upon certain specified events, in addition to any otherwise applicable vesting or performance requirements. These event may include without limitation, termination for cause, violation of our material policies, breach of certain restrictive covenants, or other conduct by a participant detrimental to our business or reputation, or later determination that the Participantvesting of or amount realized from a performance-based award was based on materially inaccurate financial statements or performance metric criteria, whether or not the participant caused or contributed to defer the receiptsuch material inaccuracy.
CERTAIN FEDERAL TAX EFFECTS
The following discussion is limited to a summary of the Award.
Limitations on Awards
SubjectU.S. federal income tax provisions relating to shareholder approval, the maximum Award for any twelve-month period for any Participant will not exceed $10,000,000. The Committee will have the fullgrant, exercise and exclusive right to make reductions in Awardsvesting of awards under the 2007 Plan and the subsequent sale of Common Stock acquired under the 2007 Plan. In determining whetherThe tax consequences of awards may vary according to reduce any Awardcountry of participation. Also, the tax consequences of the grant, exercise or vesting of awards vary depending upon the particular circumstances, and it should be noted that the income tax laws, regulations and interpretations thereof change frequently. Participants should rely upon their own tax advisors for advice concerning the specific tax consequences applicable to them, including the applicability and effect of state, local, and foreign tax laws.
Nonstatutory Stock Options. Generally, there will be no federal income tax consequences to the optionee upon the grant of a nonstatutory stock option under the 2007 Plan. When the optionee exercises a nonstatutory stock option, however, he or she will recognize ordinary income in an amount equal to the excess of the fair market value of the Common Stock received upon exercise of the option at the time of exercise over the exercise price. Any gain that the optionee realizes when he or she later sells or disposes of the option shares will be short-term or long-term capital gain, depending on how long the shares were held.
Incentive Stock Options. There typically will be no federal income tax consequences to the optionee upon the grant or exercise of an incentive stock option. If the optionee holds the option shares for the required holding period of more than two years after the date the option was granted or one year after exercise, the difference between the exercise price and the amount realized upon sale or disposition of the option shares will be long-term capital gain or loss. If the optionee disposes of the option shares in a sale, exchange, or other disqualifying disposition before the required holding period ends, he or she will recognize taxable ordinary income in an amount equal to the excess of the fair market value of the option shares at the time of exercise (or, if less, the amount realized on the disposition of the shares) over the exercise price. While the exercise of an incentive stock option does not result in current taxable income, the excess of the fair market value of the option shares at the time of exercise over the exercise price will be an item of adjustment for purposes of determining the optionee’s alternative minimum taxable income.
Stock Appreciation Rights. A participant receiving a stock appreciation right generally will not recognize income at the time the award is granted. When the participant exercises the stock appreciation right, the amount of cash and the fair market value of any shares of Common Stock received will be ordinary income to the participant.
Restricted Stock. Unless a participant makes an election to accelerate recognition of income to the date of grant as described below, the participant generally will not recognize income at the time a restricted stock award is granted, provided that the award is subject to restrictions on transfer and is subject to a substantial risk of forfeiture. When the restrictions lapse, the participant generally will recognize ordinary income equal to the fair market value of the Common Stock as of that date, less any amount he or she paid for the stock. If the participant files an election under Code Section 83(b) within 30 days after the date of grant of the restricted stock, he or she will recognize ordinary income as of the date of grant equal to the fair market value of the stock as of that date, less any amount paid for the stock. Any future appreciation in the stock will be taxable to the participant at capital gains rates. However, if the stock is later forfeited, the participant will not be able to recover the tax previously paid pursuant to the Code Section 83(b) election.
67
Restricted or Deferred Stock Units. A participant generally will not recognize income at the time a stock unit award is granted. Upon receipt of shares of Common Stock (or the equivalent value in cash) in settlement of a stock unit award, a participant will recognize ordinary income equal to the fair market value of the Common Stock or other property as of that date.
Performance Shares. A participant generally will not recognize income at the time performance shares are granted. When the participant receives settlement of the award, the fair market value of the shares of stock (or cash payment) will be ordinary income to the participant.
Tax Effect for the Company. The Company generally will be entitled to a tax deduction in connection with an award under the 2007 Plan in an amount equal to the ordinary income recognized by a participant and at the time that the participant recognizes such reduction,income (for example, the Committeeexercise of a nonqualified stock option), except as follows. Under Section 162(m) of the Code, the deductibility of compensation paid to certain individuals is limited to $1,000,000 per person per year. These individuals include our Chief Executive Officer, Chief Financial Officer and certain other individuals (including, but not necessarily limited to, our next three other most highly compensated named executive officers other than the Chief Executive Officer and Chief Financial Officer and certain individuals who were subject to Section 162(m) while employees at Micron). Under a special Code Section 162(m) transition rule, compensation received from the exercise of non-qualified stock options that we granted prior to November 2, 2017 is expected to be fully deductible although this tax treatment is not guaranteed.
BENEFITS TO NAMED EXECUTIVE
OFFICERS AND OTHERS
The number and type of equity awards that a service provider may receive under the 2007 Plan (if any) is in the discretion of the Committee. Therefore, the amount that may be received by any individual under the 2007 Plan cannot be determined in advance. Our executive officers and non-employee directors will take into consideration such factorsbe eligible to receive awards under the 2007 Plan, and therefore, our executive officers and non-employee directors have an interest in the approval of the 2007 Plan by shareholders. For purposes of illustration only, the following table sets forth information with respect to the awards that were granted under the Plan during fiscal 2020 to the executive officers named in the Summary Compensation Table, to all executive officers as a group, to all non-employee directors as a group, and to all non-executive officer employees as a group. Additional awards may be granted under the Committee determines appropriate,2007 Plan to these individuals and groups in its sole and absolute discretion.the future, as determined in the discretion of the Committee. No stock options, SARs, or performance-based restricted stock awards were granted under the Plan in fiscal 2020. Our executive officers received equity awards under our 2004 Plan in fiscal 2020. See “Grants of Plan-Based Awards in Fiscal 2020” above. We expect that future equity awards to our executive officers may be made under the 2007 Plan or a successor to the 2007 Plan. As of November 24, 2020, the closing price of our Common Stock was $63.95.
| | | | | |
| Name and Position | Time-Based Restricted Stock Awards
(#) |
| |
| Sanjay Mehrotra, President and Chief Executive Officer | — |
| David A. Zinsner, Senior Vice President and Chief Financial Officer | — |
| Manish Bhatia, Executive Vice President, Global Operations | — |
| Scott J. DeBoer, Executive Vice President, Technology and Products | — |
| Sumit Sadana, Executive Vice President and Chief Business Officer | — |
| All Executive Officers as a Group | — |
| All Non-Executive Officer Employees as a Group (Including all Officers who are not Executive Officers) | 4,278,712 |
| All Non-Employee Directors as a Group | 39,384 |
The Board of Directors recommends voting "FOR" the“FOR” approval of the material terms of the performance goals under Executive Officer Performance Incentive2007 Plan.
69
| | |
| PROPOSAL 4 – RATIFICATION OF PRICEWATERHOUSECOOPERS LLP |
|
The Audit Committee of the Board of Directors has retained PricewaterhouseCoopers LLP ("PwC"(“PwC”) as our Independent Registered Public Accounting Firm to audit our consolidated financial statements for the fiscal year ending August 30, 2018.September 2, 2021. PwC has been our Independent Registered Public Accounting Firm since fiscal 1985. If the ratification of PwC'sPwC’s appointment is not approved by a majority of the shares voting thereon, the Audit Committee may reconsider its decision to appoint PwC as our Independent Registered Public Accounting Firm. Representatives of PwC are expected to be present at the Annual Meeting and will have the opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions.
The Board of Directors recommends voting "FOR"“FOR” the ratification of the appointment of PricewaterhouseCoopers LLP.
Fees Paid
Fees charged for services performed by PwC for fiscal 20172020 and 20162019 were as follows:
| | | | | | | | |
| 2020 | 2019 |
| (amounts in millions) |
| | |
| Audit fees(1) | $ | 7.7 | | $ | 9.1 | |
| Audit-related fees(2) | 0.3 | | 0.1 | |
| Tax fees(3) | 2.2 | | 5.0 | |
| All other fees(4) | — | | — | |
| $ | 10.2 | | $ | 14.2 | |
| | |
(1)Includes fees related to the audit of our financial statements, fees for services provided in connection with statutory and regulatory filings, and fees for attestation services related to our securities offerings and internal control over financial reporting as required by the Sarbanes-Oxley Act of 2002.
(2)Primarily reflects fees for services in connection with government grant certifications.
(3)Primarily reflects fees for services in connection with tax planning, tax consulting, and tax compliance.
(4)Reflects fees for services not included in the categories above, including services related to other regulatory reporting requirements.
|
| | | | | | | | |
| | | 2017 | | 2016 |
| | | | | |
| | | (amounts in millions) |
| Audit fees(1) | | $ | 8.7 |
| | $ | 8.1 |
|
| Audit-related fees(2) | | 0.2 |
| | 0.1 |
|
| Tax fees(3) | | 3.4 |
| | 1.7 |
|
| All other fees(4) | | — |
| | 0.1 |
|
| | | $ | 12.3 |
| | $ | 10.0 |
|
| | | | | |
(1)PRE-APPROVAL POLICY | Includes fees related to the audit of our financial statements, fees for services provided in connection with statutory and regulatory filings and fees for attestation services related to our securities offerings and internal control over financial reporting as required by the Sarbanes-Oxley Act of 2002. |
| |
(2) | Primarily reflects fees for services in connection with government grant certifications. |
| |
(3) | Primarily reflects fees for services in connection with tax planning, tax consulting, and tax compliance. |
| |
(4) | Reflects fees for services in connection with our Conflict Mineral Reports. |
Pre-Approval Policy
The Audit Committee Charter provides that the Audit Committee will pre-approve all audit and non-audit services provided to us by the independent auditors, except for such de minimis non-audit services for which the pre-approved requirements are waived in accordance with the rules and regulations of the SEC. In fiscal 20172020 and 2016,2019, all audit, non-audit, tax services, and all other fees for services provided by PwC were approved by the Audit Committee in advance of services being provided.
Report of the Audit Committee of the Board of Directors
| | | | | |
| REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS | |
| |
This report has been prepared by members of the Audit Committee of the Board of Directors who served on the Audit Committee at the end of fiscal 2017.Directors. The Board of Directors determined that each Audit Committee member qualified as an "audit“audit committee financial expert"expert” for purposes of the rules and regulations of the SEC. The Board of Directors also determined that during their period of service on the Audit Committee, each member satisfied the independence requirements of applicable federal laws and the Listing Rules of NASDAQ.Nasdaq.
The purpose of the Audit Committee is to assist the Board of Directors in overseeing and monitoring (i) the integrity of our financial statements, (ii) the adequacy of our internal controls and procedures, (iii) the performance of our internal audit function, (iii)(iv) the performance of our Independent Registered Public Accounting Firm, (iv)(v) the qualifications and independence of our Independent Registered Public Accounting Firm, and (v)(vi) our compliance with legal and regulatory requirements.
The Audit Committee has reviewed and discussed our audited financial statements with our management, which has primary responsibility for such financial statements. PwC, our Independent Registered Public Accounting Firm for fiscal 2017,2020, has expressed in our Annual Report on Form 10-K its opinion as to the conformity of our consolidated financial statements with accounting principles generally accepted in the United States. The Audit Committee has discussed with PwC the matters that are required to be discussed by Statement on Auditing Standards No. 61, as amended (Publicthe standards of the Public Company Accounting Oversight Board, Professional Standards, Volume 1, AU Section 380).Board. PwC has provided to the Audit Committee the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board. The Audit Committee and PWCPwC also discussed PWC'sPwC’s independence, including the non-audit services PWCPwC provided to us as described above, and concluded that PwC was independent for fiscal 2017.2020.
On the basis of the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that they approve the inclusion ofinclude our audited consolidated financial statements in our Annual Report on Form 10-K for fiscal 2017,2020, appointed PwC as our Independent Registered Public Accounting Firm for the fiscal year ending August 30, 2018,September 2, 2021, and approved and authorized PwC to carry out and perform certain specified non-audit services for us in fiscal 2018.2021.
While the Audit Committee has performed the above functions, management, and not the Audit Committee, has the primary responsibility for (i) preparing our consolidated financial statements and for the reporting process in general and (ii) establishing and maintaining internal controls. Similarly, it is the responsibility of the Independent Registered Public Accounting Firm, and not the Audit Committee, to conduct the audit of our consolidated financial statements and express an opinion as to the conformity of the financial statements with accounting principles generally accepted in the United States.
|
| | | | |
| The Audit Committee
Robert L. Bailey
Mercedes JohnsonSteven J. Gomo
Robert E. SwitzMary Pat McCarthy |
71 49
APPENDIX A
MICRON TECHNOLOGY, INC.
EMPLOYEE STOCK PURCHASEAMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN
(January 14, 2021 Amendment and Restatement)
ARTICLE 1.
PURPOSE
1. 1.1PurposeGENERAL. The purpose of the Micron Technology, Inc. Amended and Restated 2007 Equity Incentive Plan (the “Plan”) is to promote the success, and enhance the value, of Micron Technology, Inc. (the “Company”), by linking the personal interests of employees, officers, non-employee directors and consultants of the Company or any Affiliate (as defined below) to those of Company shareholders and by providing such persons with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of employees, officers, non-employee directors and consultants upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent. Accordingly, the Plan permits the grant of incentive awards from time to time to selected employees, officers, non-employee directors and consultants of the Company and its Designated SubsidiariesAffiliates.
ARTICLE 2.
DEFINITIONS
2.1DEFINITIONS. When a word or phrase appears in this Plan with the initial letter capitalized, and Designated Affiliates with an opportunitythe word or phrase does not commence a sentence, the word or phrase shall generally be given the meaning ascribed to purchase shares of Common Stock through accumulated Contributions. This Plan includes two components:it in this Section or in Section 1.1 unless a Code Section 423 Component (the "423 Component")clearly different meaning is required by the context. The following words and a non-Code Section 423 Component (the "Non-423 Component"). It is the intention of the Company tophrases shall have the 423 Component qualify as an "employee stock purchase plan" under Section 423 of the Code. The provisions of the 423 Component, accordingly, shall be construed so as to extend and limit participation in a uniform and nondiscriminatory basis consistent with the requirements of Section 423 of the Code. In addition, this Plan authorizes the grant of options under the Non-423 Component that does not qualify as an "employee stock purchase plan" under Section 423 of the Code; such options shall be granted pursuant to rules, procedures or subplans adopted by the Committee designed to achieve tax, securities laws or other objectives for Eligible Employees and the Company. Except as otherwise provided herein, the Non-423 Component will be operated and administered in the same manner as the 423 Component.following meanings:
2. Definitions.
(a) "Administrator"“Affiliate” means the Committee(i) any Subsidiary or subject to Applicable Laws, oneParent, or more of the Company’s officers or management team appointed by the Board or Committee to administer the day-to-day operations of the Plan.
(b) "Affiliate" means (a) any(ii) an entity that directly or indirectly,through one or more intermediaries controls, is controlled by controls or is under common control with, the Company, and (b) any entity in which the Company has a significant equity interest, in either case as determined by the Committee, whether nowCommittee.
(b)“Award” means any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Deferred Stock Unit Award, Performance Share, Other Stock-Based Award, or hereafter existing.
(c) "Applicable Laws" means the requirementsany other right or interest relating to the administration of equity-based awards and the related issuance of shares of Common Stock under U.S. state corporate laws, U.S. federal and state securities laws, the Code, the rules of any Exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any non-U.S. jurisdiction where optionscash, granted to purchase shares of Common Stock are, or will be, granteda Participant under the Plan.
(c)“Award Certificate” means a written document, in such form as the Committee prescribes from time to time, setting forth the terms and conditions of an Award. Award Certificates may be in the form of individual award agreements or certificates or a program document describing the terms and provisions of an Awards or series of Awards under the Plan. The Committee may provide for the use of electronic, internet or other non-paper Award Certificates, and the use of electronic, internet or other non-paper means for the acceptance thereof and actions thereunder by a Participant.
(d) "Board"“Board” means the Board of Directors of the Company.
(e) "Code" means“Cause” as a reason for a Participant’s termination of employment shall have the U.S. Internal Revenue Code of 1986, as amended. Reference to a specific section ofmeaning assigned such term in the Codeemployment, consulting, severance or U.S. Treasury Regulation thereunder will includesimilar agreement, if any, between such section or regulation, any valid regulation or other official applicable guidance promulgated under such section,Participant and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.
(f) "Committee" means the Compensation Committee of the Board, or any subcommittee referred to in Section 14(d).
(g) "Common Stock" means the common stock of the Company.
(h) "Company" means Micron Technology, Inc., a Delaware corporation, or any successor thereto.
(i) "Compensation" shall be defined from time to time by the Committee in its sole discretion with respect to any Offering Period. Except as otherwise defined by the Committee from time to time in its sole discretion, "Compensation" means wages and salary. Except as otherwise determined by the Committee, "Compensation" does not include: (1) any bonuses or commissions, (2) overtime pay and regularly paid wage premiums (such as evening or shift premiums), (3) any amounts contributed by the Company or a Designated Subsidiary or Designated Affiliate to any pension plan, (4) any automobile or relocation allowances (or reimbursement for any such expenses), (5) any amounts realized from the exercise of any stock options or other equity incentive awards, (6) any amounts paid by the Company or a Designated Subsidiary or Designated Affiliate for other fringe benefits, such as health and welfare, hospitalization and group life insurance benefits, or perquisites, or paid in lieu of such benefits, or (7) other similar forms of extraordinary
compensation. The Administrator shall have the discretion to determine the application of this definition to employees outside the United States.
(j) "Contributions" means the payroll deductions or, if permitted by the Administrator to comply with non-U.S. requirements, amounts contributed to the Plan via cash, check or other means, used to fund the exercise of options granted pursuant to the Plan.
(k) "Designated Affiliate" means any Affiliate that has been designated by the Administrator from time to time in its sole discretion as eligible to participate in the Non-423 Component.
(l) "Designated Subsidiary" means any Subsidiary that has been designated by the Administrator from time to time in its sole discretion as eligible to participate in the 423 Component.
(m) "Designated Percent" means the percentage of Fair Market Value determined by the Administrator for purposes of determining the Purchase Price.
(n) "Effective Date" means the date that the Company’s stockholders approve the Plan.
(o) "Eligible Employee" means (i) any individual who is an employee providing services to the Company or a Designated Subsidiary, or (ii) any individual who is an employee providing services to the Company or any Designated Affiliate, unless any such employee is specifically excluded by the Administrator from participation. The Administrator, in its discretion, from time to time may, prior to an Offering Date for all options to be granted on such Offering Date in an Offering, determine that the definition of Eligible Employee will or will not include an individual if he or she: (i) has not completed at least two (2) years of service since his or her last hire date (or such lesser period of time as may be determined by the Administrator in its discretion), (ii) customarily works not more than twenty (20) hours per week (or such lesser period of time as may be determined by the Administrator in its discretion), (iii) customarily works not more than five (5) months per calendar year (or such lesser period of time as may be determined by the Administrator in its discretion), or (iv) is a highly compensated employee within the meaning of Section 414(q) of the Code, provided that any such exclusion is applied with respect to each Offering in a uniform manner to all similarly-situated employees who otherwise would be Eligible Employees for that Offering. For purposes of the 423 Component, the employment relationship shall be treated as continuing intact while the individual is on military or sick leave or other bona fide leave of absence approved by the Company or the Designated Subsidiary so long as the leave does not exceed three (3) months or if longer than three (3) months, the individual’s right to reemployment is provided by statute or has been agreed to by contract or in a written policy of the Company which provides for a right of reemployment following the leave of absence. The employment relationship shall be treated as continuing intact where an Eligible Employee transfers employment between the Company, Designated Subsidiaries and/or Designated Affiliates;Affiliate; provided, however, that an individual whoif there is not employedno such employment, consulting, severance or similar agreement in which such term is defined, and unless otherwise defined in the applicable Award Certificate, “Cause” shall mean any of the following acts by the Company or a Designated Subsidiary on the Offering Date and through a date that is no more than three (3) months prior to the Exercise Date will participate only in the Non-423 Component unless the individual continues to have a right to reemployment with the Company or a Designated Subsidiary provided by statute or contract or in a written policy of the Company which provides for a right of reemployment following the leave of absence. The Administrator shall establish rules to govern other transfers into the 423 Component, and between any separate Offerings established thereunder, consistent with the applicable requirements of Section 423 of the Code.
(p) "Exchange" means any national securities exchange or national market system on which the Stock may from time to time be listed or traded.
(q) "Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated thereunder.
(r) "Exercise Date" means the last Trading Day of the Offering Period.
(s) "Fair Market Value" means, as of any date and unless the Administrator determines otherwise, (i) if the Common Stock is listed or traded on any Exchange, the closing price for such Common Stock (or the closing bid, if no sales were reported) as quoted on such Exchange (or the Exchange with the greatest volume of trading in the Common Stock) for the last market trading day prior to the day of determination, as reported by Bloomberg L.P. or such other source as the Administrator deems reliable; (ii) if the Common Stock is quoted on the over-the-counter market or is regularly quoted by a recognized securities dealer, but selling prices are not reported, the Fair Market Value of the Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market
trading day prior to the day of determination, as reported by Bloomberg L.P. or such other source as the Administrator deems reliable, or (iii) in the absence of an established market for the Common Stock, the Fair Market Value shall be determined by such other method as the Administrator determines in good faith to be reasonable.
(t) "Maximum Share Amount" means the maximum number of shares of Common Stock that a Participant, may purchase on any given Exercise Date, as determined by the Committee in its sole discretion prior toCommittee: (i) the commencement of the Offering Period.
(u) "New Exercise Date" means a new Exercise Date if the Administrator shortens any Offering Period then in progress.
(v) "Offering" means an offer under the Plan of an option that may be exercised during an Offering Period. For purposes of this Plan, the Committee may designate separate Offerings under the Plan (the terms of which need not be identical) in which Eligible Employees of one or more Designated Subsidiaries or Designated Affiliates will participate, even if the dates of the applicable Offering Periods of each such Offering are identical.
(w) "Offering Date" means the first Trading Day of each Offering Period.
(x) "Offering Periods" means the period of time during which offers to purchase shares of Common Stock are outstanding under the Plan. The Committee shall determine the length of each Offering Period, which need not be uniform; provided that no Offering Period shall exceed twenty-seven (27) months in length. No voluntary payroll deductions shall be solicited until after the effective date of a registration statement on Form S-8 filed under the Securities Act of 1933, as amended, covering the shares to be issued under the Plan.
(y) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code.
(z) "Participant" means an Eligible Employee that participates in the Plan.
(aa) "Plan" means this Micron Technology, Inc. Employee Stock Purchase Plan, including both the 423 Component and the Non-423 Component.
(bb) "Purchase Price" means the Designated Percent of the Fair Market Value of a share of Common Stock on the Offering Date or on the Exercise Date, whichever is lower. Unless otherwise determinedcommission by the Administrator,Participant of, or the Designated Percent for purposes of the foregoing sentence is eighty-five percent (85%). The Administrator may change the Designated Percent for any Offering Period but in no event shall the Designated Percent be less than eighty-five percent (85%). Such Purchase Price may be established by the Committee by any mannerParticipant’s pleading guilty or method the Committee determines, pursuant to Section 14, and subject to (i) with respect to the 423 Component, compliance with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or Exchange rule) or (ii) with respect to the Non-423 Component, pursuant to such manner or method as determined by the Committee to comply with applicable local law.
(cc) "Securities Act" means the Securities Act of 1933, as amended from time to time.
(dd) "Subsidiary" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Code.
(ee) "Trading Day" means a day on which NASDAQ is open for trading.
(ff) "U.S." means United States.
(gg) "U.S. Treasury Regulations" means the Treasury regulations of the Code. Referencenolo contendere to, a specific Treasury Regulationfelony or Section of the Code shall includea crime involving moral turpitude (including pleading guilty or nolo contendere to a felony or lesser charge
75
which results from plea bargaining), whether or not such Treasury Regulationfelony, crime or Section, any valid regulation promulgated under such Section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such Section or regulation.
3. Eligibility.
(a) Offering Periods. Any Eligible Employee on a given Offering Date will be eligible to participate in the Plan, subject to the requirements of Section 5, provided, however, that employees who are citizens or residents of a non-U.S. jurisdiction may be excluded from participation in the Plan or an Offering if the participation of such Employeeslesser offense is prohibited under the laws of the applicable jurisdiction or if complyingconnected with the laws of the applicable jurisdiction would cause the Plan or an Offering to violate Section 423 of the Code.
(b) Limitations. Any provisions of the Plan to the contrary notwithstanding, no Eligible Employee will be granted an option under the 423 Component of the Plan (i) to the extent that, immediately after the grant, such Eligible Employee (or any other person whose stock would be attributed to such Eligible Employee pursuant to Section 424(d) of the Code) would own capital stockbusiness of the Company or any Parentof its Affiliates; (ii) the Participant’s engaging in any other act of dishonesty, fraud, intentional misrepresentation, moral turpitude, illegality or Subsidiary ofharassment, whether or not such act was committed in connection with the Company and/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Parent or Subsidiary of the Company, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans (as defined in Section 423 of the Code)business of the Company or any Parent or Subsidiary of its Affiliates; (iii) the Company accrues at a rate which exceeds twenty-five thousand U.S. dollars (USD 25,000) worth of stock (determined at the Fair Market Value of the stock at the time such option is granted) for each calendar year in which such option is outstanding at any time, as determined in accordance with Section 423 of the Codewillful and the regulations thereunder.
4. Offering Periods. Within the limitations set forth in Section 2(w), the Administrator will have the power to change the duration of Offering Periods (including the commencement dates thereof) without stockholder approval. Any such change shall be announced prior to the scheduled beginning of the first Offering Period to be affected thereafter.
5. Participation. An Eligible Employee may become a participant in the Plan by following an electronic or other enrollment procedure as may be established by the Administrator from time to time.
6. Contributions.
(a) At the time a Participant enrolls in the Plan pursuant to Section 5, he or she will elect to have Contributions made on each pay day during the Offering Period in an amount not exceeding ten percent (10%) of the Compensation which he or she receives on each pay day during the Offering Period. The Administrator may permit Eligible Employees participating in a specified Offering to contribute amounts to the Plan through payment by cash, check or other means to comply with non-U.S. requirements, provided, that such contributions shall not exceed ten percent (10%) of the Compensation received each pay period, during the Offering Period. A Participant’s subscription agreement will remain in effect for successive Offering Periods unless terminated as provided in Section 10 hereof.
(b) Payroll deductions or contributions, as applicable, for a Participant will commence on the first pay day following the Offering Date and will end on the last pay day prior to the Exercise Date of such Offering Period to which such authorization is applicable, unless sooner terminatedrepeated failure by the Participant as provided in Section 10 hereof.
(c) All Contributions made for a Participant will be credited to his or her account underfollow the Plan and Contributions will be made in whole percentages only.
(d) Subject to Applicable Laws, a Participant may discontinue his or her participation in the Plan as provided in Section 10 by completing any forms and following any procedures (including specified deadlines) established by the Administrator or its designee. The change will become effective as soon as administratively practicable after receipt.
(e) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b), a Participant’s Contributions may be decreased to zero percent (0%) at any time during an Offering Period. Subject to Section 423(b)(8) of the Code, Contributions will recommence at the rate originally elected by the Participant effective as of the beginning of the first Offering Period scheduled to end in the following calendar year, unless terminated by the Participant as provided in Section 10.
(f) At the time the option is exercised, in whole or in part, or at the time some or all of the Common Stock issued under the Plan is disposed of (or any other time that a taxable event related to the Plan occurs),
the Participant must make adequate provision for the Company’s or its Subsidiary’s or Affiliate’s federal, state, local or any other tax liability payable to any authority, national insurance, social security, payment-on-account or other tax obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock (or any other time that a taxable event related to the Plan occurs), including, for the avoidance of doubt, any liability of the Participant to pay an employer tax or social insurance contribution obligation, which liability has been shifted to the Participant as a matter of law or contract. At any time, the Company or its Subsidiary or Affiliate, as applicable, may, but will not be obligated to, withhold from the Participant’s compensation the amount necessary for the Company or its Subsidiary or Affiliate, as applicable, to meet applicable withholding obligations, including any withholding required to make available to the Company or its Subsidiary or Affiliate, as applicable, any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Eligible Employee. In addition, the Company or its Subsidiary or Affiliate, as applicable, may (i) withhold from the proceeds of the sale of Common Stock, (ii) withhold a sufficient whole number of shares of Common Stock otherwise issuable following purchase having an aggregate fair market value sufficient to pay applicable withholding obligations, or (iii) may withhold by any other means set forth in the applicable subscription agreement.
7. Grant of Option. On the Offering Date of each Offering Period, each Eligible Employee participating in such Offering Period will be granted an option to purchase on each Exercise Date during such Offering Period (at the applicable Purchase Price) up to a number of shares of Common Stock determined by dividing such Eligible Employee’s Contributions accumulated during such Offering Period prior to such Exercise Date and retained in the Eligible Employee’s account as of the Exercise Date by the applicable Purchase Price; provided that in no event will an Eligible Employee be permitted to purchase during each Offering Period more than the Maximum Share Amount, subject to adjustment pursuant to Section 19(a), and provided further that such purchase will be subject to the limitations set forth in Sections 3(b) and 13. The Eligible Employee may accept the grant of such option by electing to participate in the Plan in accordance with the requirements of Section 5. The Administrator may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximum number of shares of Common Stock that an Eligible Employee may purchase during each Offering Period. Exercise of the option will occur as provided in Section 8, unless the Participant has withdrawn pursuant to Section 10. The option will expire on the last day of the Offering Period.
8. Exercise of Option.
(a) Unless a Participant withdraws from the Plan as provided in Section 10, his or her option for the purchase of shares of Common Stock will be exercised automatically on the Exercise Date, and the maximum number of full shares subject to the option will be purchased for such Participant at the applicable Purchase Price with the accumulated Contributions from his or her account; provided that in no event will an Eligible Employee be permitted to purchase during each Offering Period more than the Maximum Share Amount, subject to adjustment pursuant to Section 19(a), and provided further that such purchase will be subject to the limitations set forth in Sections 3(b) and 13. No fractional shares of Common Stock will be purchased. Any Contributions accumulated in a Participant’s account which are not sufficient to purchase a full share will, at the discretion of the Administrator, be refunded to the Participant, without interest, or be retained in the Participant’s account for the subsequent Offering Period. During a Participant’s lifetime, a Participant’s option to purchase shares hereunder is exercisable only by him or her.
(b) In the event that the number of shares of Common Stock to be purchased by all Participants in any Offering Period exceeds the number of shares of Common Stock then available for issuance under the Plan, (i) the Company shall make a pro rata allocation of the remaining shares of Common Stock in as uniform a manner as shall be practicable and as the Committee shall, in its sole discretion, determine to be equitable and (ii) all funds not used to purchase shares of Common Stock on the Exercise Date shall be returned, without interest to the Participants.
9. Delivery. By enrolling in the Plan, each Participant shall be deemed to have authorized the establishment of a brokerage account on his or her behalf at a securities brokerage firm selected by the Company. As soon as reasonably practicable after each Exercise Date on which a purchase of shares of Common Stock occurs, the Company shall arrange for the delivery to each Participant of the shares of Common Stock purchased upon exercise of his or her option to the Participant’s brokerage or Plan share account in a form determined by the Company. Notwithstanding any other provision of the Plan, unless otherwise determined by the Administrator or required by any applicable law, rule or regulation, the Company shall not deliver to any Participant certificates evidencing shares of Common Stock issued in connection with any purchase under the Plan, and instead such shares of Common Stock shall be recorded in the books of the brokerage firm or, as applicable, the Company, its transfer agent, stock plan administrator or such other outside entity which is not a brokerage firm.
10. Withdrawal.
(a) A Participant may withdraw all but not less than all the Contributions credited to his or her account and not yet used to exercise his or her option under the Plan at any time by following an electronic or other withdrawal procedure determined by the Administrator from time to time. All of the Participant’s Contributions credited to his or her account will, at the discretion of the Administrator, (i) be retained in Participant’s account and used to purchase shares of Common Stock at the next Exercise Date, or (ii) be paid to such Participant as soon as reasonably practicable after receipt of notice of withdrawal and such Participant’s options for the Offering Period shall be terminated automatically, and no further payroll deductions or contributions for the purchase of shares of Common Stock shall be made for such Offering Period. If a Participant withdraws from an Offering Period, Contributions will not resume at the beginning of the succeeding Offering Period, unless the Participant re-enrolls in the Plan as prescribed by the Administrator from time to time.
(b) A Participant’s withdrawal from an Offering Period will not have any effect upon his or her eligibility to participate in any similar plan that may hereafter be adopted by the Company or in succeeding Offering Periods that commence after the termination of the Offering Period from which the Participant withdraws.
11. Termination of Employment. Unless otherwise determined by the Administrator, upon a Participant’s ceasing to be an Eligible Employee for any reason, he or she will be deemed to have elected to withdraw from the Plan and the Contributions credited to such Participant’s account during the Offering Period but not yet used to purchase shares of Common Stock under the Plan will be returned to such Participant or, in the case of his or her death, to the person or persons entitled thereto under Section 15, and such Participant’s option will be automatically terminated. Unless determined otherwise by the Administrator in a manner that is permitted by, and compliant with, Section 423 of the Code, a Participant whose employment transfers between entities through a termination with an immediate rehire (with no break in service) by the Company or a Designated Subsidiary or Designated Affiliate shall not be treated as terminated under the Plan.
12. Interest. No interest will accrue on the Contributions of a Participant in the Plan, except as may be required by applicable law, as determined by the Administrator.
13. Stock. Subject to adjustment as provided in Section 19 hereof, the maximum number of shares of Common Stock that will be made available for sale under the Plan will be 33,000,000 shares of Common Stock. The limitation set forth in this section may be used to satisfy purchases of shares of Common Stock under either the 423 Component or the Non-423 Component of the Plan.
14. Administration.
(a) Unless otherwise designated by the Board, the Committee shall serve as the Administrator. The Administrator will have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to designate separate Offerings under the Plan, to designate Subsidiaries or Affiliates as participating in the Plan, to determine eligibility and adjudicate all disputed claims filed under the Plan, including whether Eligible Employees shall participate in the 423 Component or the Non-423 Component and which entities shall be Designated Subsidiaries or Designated Affiliates, and to establish such procedures that it deems necessary for the administration of the Plan. Notwithstanding any provision to the contrary in this Plan, the Administrator may adopt rules or procedures relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures for jurisdictions outside of the United States. Without limiting the generality of the foregoing, the Committee is specifically authorized to adopt rules, procedures and subplans, which, for purposes of the Non-423 Component, may be outside the scope of Section 423 of the Code, regarding, without limitation, eligibility to participate, the definition of Compensation, handling of Contributions, making of Contributions to the Plan (including, without limitation, in forms other than payroll deductions), establishment of bank or trust accounts to hold Contributions, payment of interest, conversion of local currency, obligations to pay payroll tax, determination of beneficiary designation requirements, withholding procedures and handling of stock certificates that vary with applicable local requirements.
(b) Every finding, decision and determination made by the Administrator will, to the full extent permitted by law, be final and binding upon all parties, including the Company, Designated Subsidiary, Designated Affiliate, Participant, Eligible Employee, or any beneficiary of such person, as applicable.
(c) To the extent allowable pursuant to applicable law, each memberlawful directives of the Board the Committee, the Administrator or any employee of the Company, a Designated Subsidiary, or a Designated Affiliate (each such person,
a "Covered Person") shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such Covered Person in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided, however, that he or she has acted in accordance with his or her duties and responsibilities to the Company under applicable law, and provided that he or she gives the Company an opportunity, at its own expense, to handle and defend any claim, action, suit, or proceeding to which he or she is a party before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such Covered Persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
(d) To the extent not prohibited by Applicable Law, the Committee may, from time to time, delegate some or all of its authority under the Plan to a subcommittee or subcommittees of the Committee, the Administrator or other persons or groups of persons as it deems necessary, appropriate or advisable under conditions or limitations that it may set at or after the time of the delegation. For purposes of the Plan, reference to the Committee will be deemed to refer to any subcommittee, subcommittees, or other persons or groups of persons to whom the Committee delegates authority pursuant to this Section 14(d).
15. Designation of Beneficiary.
(a) If permitted by the Administrator, a Participant may file a designation of a beneficiary who is 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 subsequent to an Exercise Date on which the option is exercised but prior to delivery to such Participant of such shares and cash. In addition, if permitted by the Administrator, a Participant may file a designation of a beneficiary who is to receivesupervisor; (iv) any cash from the Participant’s account under the Plan in the event of such Participant’s death prior to exercise of the option. If a Participant is married and the designated beneficiary is not the spouse, spousal consent will be required for such designation to be effective.
(b) Such designation of beneficiary, if permitted, may be changed by the Participant at any time by notice in a form determined by the Administrator. In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant’s death, the Company will deliver such shares and/or cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
(c) All beneficiary designations will be in such form and manner as the Administrator may designate from time to time.
16. Transferability. Neither Contributions 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 15 hereof) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition will be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. The Company may use all Contributions received or held by it under the Plan for any corporate purpose, and the Company will not be obligated to segregate such Contributions, except as may be required by applicable local law, as determined by the Administrator. Until shares of Common Stock are issued, Participants will only have the rights of an unsecured creditor with respect to the Plan, although Participants in specified Offerings may have additional rights where required under local law, as determined by the Administrator.
18. Reports. Individual accounts will be maintained for each Participant in the Plan. Statements of account will be given to participating Eligible Employees at least annually, which statements will set forth the amounts of Contributions, the Purchase Price, the number of shares of Common Stock purchased and the remaining cash balance, if any.
19. Adjustments; Dissolution or Liquidation; Corporate Transactions.
(a) Adjustments. Subject to any required action by the shareholders of the Company, the maximum number of shares of Common Stock that shall be made available for sale under the Plan, the maximum number of shares of Common Stock that each Participant may purchase during the Offering Period pursuant to the Maximum Share Amount or over a calendar year under the USD 25,000 limitation (pursuant to Section 3(b)) and the per share price used to determine the Purchase Price shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from any nonreciprocal transaction between the Company and its shareholders, (such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend), that affects the Common Stock (or other securities of the Company) or the price of shares of Common Stock (or other securities) and causes a change in the per share value of the Common Stock underlying outstanding options. Such adjustment shall be made by the Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance 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) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, any Offering Period then in progress will be shortened by setting a New Exercise Date, and will terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Administrator. The New Exercise Date will be before the datematerial violation of the Company’s proposed dissolution or liquidation. The Administrator will notify each Participant in writing or electronically, prior to the New Exercise Date, that the Exercise Date for the Participant’s option has been changed to the New Exercise Date and that the Participant’s option will be exercised automatically on the New Exercise Date, unless prior to such datewritten policies; (v) any intentional misconduct by the Participant has withdrawn from the Offering Period as provided in Section 10 hereof.
(c) Certain Corporate Transactions. In the event of a reorganization, merger, or consolidation of the Company with one or more corporations in which the Company is not the surviving corporation (or survives as a direct or indirect subsidiary of such other constituent corporation or its parent), or upon a sale of substantially all of the property or stock of the Company to another corporation, each outstanding option will be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the option, the Offering Period with respect to which such option relates will be shortened by setting a New Exercise Date on which such Offering Period shall end. The New Exercise Date will occur before the date of the Company’s proposed merger or Change in Control. The Administrator will notify each Participant in writing or electronically prior to the New Exercise Date, that the Exercise Date for the Participant’s option has been changed to the New Exercise Date and that the Participant’s option will be exercised automatically on the New Exercise Date, unless prior to such date the Participant has withdrawn from the Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) Subject to any applicable law or government regulation and to the rules of any Exchange or quotation system on which the shares of Common Stock may be listed or quoted, the Plan may be amended, modified, suspended or terminated by the Board without the approval of the shareholders of the Company. Except as provided in Section 19, no amendment may make any change in any option previously granted which adversely affects the rights of any Participant or any beneficiary (as applicable) without the consent of the affected Participant or beneficiary. To the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or Exchange rule), the Company shall obtain shareholder approval of any amendment in such a manner and to such a degree as required.
(b) Without shareholder approval and without regard to whether any Participant rights may be considered to have been "adversely affected," the Administrator or its delegate, to the extent permitted under the terms of the Plan, applicable law, the Bylaws of the Company and under the Committee charter, may change the Offering Periods, limit the frequency or number of changes in the amount withheld during an Offering Period, establish the exchange rate applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant to adjust for delays or mistakes in the Company’s processing of properly completed Contribution elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of shares of Common Stock for each Participant properly
correspond with amounts withheld from the Participant’s Compensation, and establish such other limitations or procedures as the Committee deems appropriate.
21. Notices. All notices or other communications by a Participant to the Company under or in connection with the Plan will be deemedCompany and any of its Affiliate’s business or relating to have been duly given when received in the form and manner specified byParticipant’s duties, or any willful violation of any laws, rules or regulations; or (vi) the Participant’s material breach of any employment, severance, non-competition, non-solicitation, confidential information, or restrictive covenant agreement, or similar agreement, with the Company ator an Affiliate. The determination of the location, or byCommittee as to the person, designated byexistence of “Cause” shall be conclusive on the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares of Common Stock will not be issued with respect to an option unless the exercise of such optionParticipant and the issuanceCompany.
(f)“Change in Control” means and delivery of such shares pursuant thereto will comply with all applicable provisions of U.S. and non-U.S. law, including, without limitation,includes the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, and the requirementsoccurrence of any Exchange, and will 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 represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by anyone of the aforementioned applicable provisions of law.
23. Notification of Sale of Shares of Common Stock. Each Participant shall give the Administrator prompt notice of any disposition of Common Stock acquired pursuant to the option granted under the Plan in accordance with such procedures as may be established by the Administrator. The Administrator may require that until such time as a Participant disposes of shares of Common Stock acquired pursuant to the option granted under the Plan, the Participant shall hold all such shares of Common Stock in the Participant's name and with a third-party broker/administrator designated by the Company until the lapse of any time period(s) established by the Administrator.
24. Clawback/Recoupment Policy. Notwithstanding anything contained herein to the contrary, all shares of Common Stock acquired pursuant to the Plan shall be and remain subject to any incentive compensation clawback or recoupment policy currently in effect or as may be adopted by the Board and, in each case, as may be amended from time to time. No such policy adoption or amendment shall in any event require the prior consent of any Participant.
25. Code Section 409A; Tax Qualification.
(a) Options granted under the 423 Component are exempt from the application of Section 409A of the Code. Options granted under the Non-423 Component to U.S. taxpayers are intended to be exempt from the application of Section 409A under the short-term deferral exception and any ambiguities shall be construed and interpreted in accordance with such intent. Subject to Section 23(b), options granted to U.S. taxpayers under the Non-423 Component are subject to such terms and conditions that will permit such options to satisfy the requirements of the short-term deferral exception available under Section 409A of the Code, including the requirement that the shares of Common Stock subject to an option be delivered within the short-term deferral period. Subject to Section 23(b), in the case of a Participant who would otherwise be subject to Section 409A of the Code, to the extent the Company determines that an option or the exercise, payment, settlement or deferral is subject to Section 409A of the Code, the option shall be granted, exercised, paid, settled or deferred in a manner that will comply with Section 409A of the Code, including Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Anything in the foregoing to the contrary notwithstanding, the Company shall have no liability to a Participant or any other party if the option that is intended to be exempt from, or compliant with Section 409A of the Code is not so exempt or compliant or for any action taken by the Company with respect thereto.
(b) Although the Company may endeavor to (i) qualify an option for favorable tax treatment under the laws of the U.S. or jurisdictions outside of the U.S. or (ii) avoid adverse tax treatment (e.g., under Section 409A of the Code), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan, including Section 26(a). The Company is not constrained in its corporate activities by any potential negative tax impact on Participants under the Plan.
26. Term of Plan. The Plan will be effective as of the Effective Date and will continue in effect through the tenth (10th) anniversary thereof, unless sooner terminated under Section 20.
27. Stockholder Approval. The Plan will be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws.
28. Governing Law and Jurisdiction. The Plan shall be governed by, and construed in accordance with, the laws of the U.S. State of Delaware (except its choice-of-law provisions). The jurisdiction and venue for any disputes arising under, or any action brought to enforce (or otherwise relating to) this Plan shall be exclusively in the courts in the U.S. State of [____], County of [__] including the U.S. federal courts located therein (should federal jurisdiction exist).
29. No Right to Employment. Participation in the Plan by a Participant shall not be construed as giving a Participant the right to be retained as an employee of the Company, a Subsidiary or an Affiliate, as applicable. Furthermore, the Company, a Subsidiary or an Affiliate may dismiss a Participant from employment at any time, free from any liability or any claim under the Plan.
30. Severability. If any provision of the Plan is or becomes or is deemed to be invalid, illegal, or unenforceable for any reason in any jurisdiction or as to any Participant, such invalidity, illegality or unenforceability shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as to such jurisdiction or Participant as if the invalid, illegal or unenforceable provision had not been included.
31. Compliance with Applicable Laws. The terms of this Plan are intended to comply with all Applicable Laws and will be construed accordingly.
APPENDIX B
MICRON TECHNOLOGY, INC.
EXECUTIVE OFFICER PERFORMANCE INCENTIVE PLAN
Effective as of September 3, 2004
Amended and Restated as of August 22, 2017
The purpose of the Plan is to promote the success of the Company by providing performance-based incentive compensation in the form of cash payments to Executive Officers (as defined herein) of the Company, which are designed to attract, retain and reward such Executive Officers for outstanding business performance.
The following terms shall have the following meanings for purposes of this Plan, unless the context in which they are used clearly indicates that some other meaning is intended.
| |
(a) | "Award" means the cash incentive award payable to a Participant under this Plan calculated by reference to the achievement of applicable Performance Goals, as determined in accordance with Article 5 and 6.
|
| |
(b) | "Change in Control" means and includes the occurrence of any one of the following events:
|
(i)individuals who, on the date this Plan becomes effective ("Effective Date"),Date, constitute the Board of Directors of the Company (the "Incumbent Directors"“Incumbent Directors”) and who cease for any reason to constitute at least a majority of such Board, provided that any person becoming a director after the Effective Date and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to the election or removal of directors ("(“Election Contest"Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board ("(“Proxy Contest"Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director; or
(ii)any person is or becomes a "beneficial owner"“beneficial owner” (as defined in Rule 13d-3 under the 1934 Securities Exchange Act), directly or indirectly, of either (A) 35% or more of the then-outstanding shares of common stock of the Company ("(“Company Common Stock"Stock”) or (B) securities of the Company representing 35% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of directors (the "Company“Company Voting Securities"Securities”); provided, however, that for purposes of this subsection (ii), the following acquisitions shall not constitute a Change in Control: (w) an acquisition directly from the Company, (x) an acquisition by the Company or a subsidiary of the Company,Subsidiary, (y) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company,Subsidiary, or (z) an acquisition pursuant to a Non-Qualifying Transaction (as defined in subsection (iii) below); or
(iii)the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or a subsidiarySubsidiary (a "Reorganization"“Reorganization”), or the sale or other disposition of all or substantially all of the Company’s assets (a "Sale"“Sale”) or the acquisition of assets or stock of another corporation (an "Acquisition"“Acquisition”), unless immediately following such Reorganization, Sale or Acquisition: (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company Common Stock and outstanding Company Voting Securities immediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Reorganization, Sale or Acquisition (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets or stock either directly or through one or more subsidiaries, the "Surviving Corporation"“Surviving Corporation”) in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition, of the outstanding Company Common Stock and the outstanding Company Voting Securities, as the case may be, and (B) no person (other than (x) the Company or any subsidiary of the Company,Subsidiary, (y) the Surviving Corporation or its ultimate parent corporation, or (z) any employee benefit plan (or
or related trust) sponsored or maintained by any of the foregoing is the beneficial owner, directly or indirectly, of 35% or more of the total common stock or 35% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Surviving Corporation, and (C) at least a majority of the members of the board of directors of the Surviving Corporation were Incumbent Directors at the time of the Board’s approval of the execution of the initial
agreement providing for such Reorganization, Sale or Acquisition (any Reorganization, Sale or Acquisition which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a "Non-Qualifying Transaction"“Non-Qualifying Transaction”); or
(iv)approval by the stockholdersshareholders of the Company of a complete liquidation or dissolution of the Company.
| |
(c) | "(g)“Code” means the Internal Revenue Code of 1986, as amended from time to time. Reference to a specific Section of the Code or regulation thereunder shall include such Section or regulation, any valid regulation promulgated under such Section, and any comparable provision of any future law, legislation or regulation amending, supplementing or superseding such Section or regulation.Code" means the Internal Revenue Code of 1986, as amended.
|
| |
(d) | "Committee" means the Compensation Committee of the Board of Directors of the Company.
|
| |
(e) | "Company" means Micron Technology, Inc., a Delaware corporation, or any successor corporation.
|
| |
(f) | "Executive Officer" for purposes of this Plan means a Participant who, as of the beginning of the applicable Measurement Period, is (i) an officer subject to Section 16 of the Securities Exchange Act of 1934, as amended from time to time, or (ii) is identified as a Senior Officer in the Committee’s Charter.
|
| |
(g) | "Measurement Period" means the period with respect to which a Participant may be granted an Award.
|
| |
(h) | "Participant" means an Executive Officer who has been selected by the Committee to participate in the Plan.
|
| |
(i) | "Performance Goals" means the performance goals established by the Committee for a Measurement Period.
|
| |
(j) | "Plan" means this Micron Technology, Inc. Executive Officer Performance Incentive Plan, as amended and restated as of October 20, 2014, together with any subsequent amendments hereto.
|
| |
(k) | "Qualified Performance-Based Award" means an Award that is intended to satisfy the requirements for "qualified performance-based compensation" under Section 162(m) of the Code. The Committee shall designate any Qualified Performance-Based Award as such at the time of grant.
|
(h)“Committee” means the committee of the Board described in Article 4.
(i)“Company” means Micron Technology, Inc., a Delaware corporation, or any successor corporation.
(j)“Continuous Status as a Participant” means the absence of any interruption or termination of service as an employee, officer, consultant or non-employee director of the Company or any Affiliate, as applicable; provided, however, that for purposes of an Incentive Stock Option, or a Stock Appreciation Right issued in tandem with an Incentive Stock Option, “Continuous Status as a Participant” means the absence of any interruption or termination of service as an employee of the Company or any Parent or Subsidiary, as applicable, pursuant to applicable tax regulations. Continuous Status as a Participant shall not be considered interrupted in the case of any leave of absence authorized in writing by the Company prior to its commencement; provided, however, that for purposes of Incentive Stock Options, no such leave may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 91st day of such leave any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
(k) “Disability” or “Disabled” means the applicable authorized party under the long-term disability plan (the “LTD Plan”) maintained by the Participant’s employer (either the Company or an Affiliate) has provided written notification that the Participant qualifies for disability benefits under the LTD Plan (a “Disability Notice”). If the Participant is not eligible for disability benefits under any applicable LTD Plan, then the Participant shall not qualify as Disabled under this Plan.
(l)“Deferred Stock Unit” means a right granted to a Participant under Article 11.
(m)“Dividend Equivalent” means a right granted with respect to an Award, as provided in Article 12.
(n)“Effective Date” has the meaning assigned such term in Section 3.1.
(o)“Eligible Participant” means an employee, officer, non-employee director or consultant of the Company or any Affiliate.
(p)“Exchange” means any national securities exchange or national market system on which the Stock may from time to time be listed or traded.
(q)“Fair Market Value” of the Stock, on any date, means: (i) if the Stock is listed or traded on any Exchange, the closing price for such Stock (or the closing bid, if no sales were reported) as quoted on such Exchange (or the Exchange with the greatest volume of trading in the Stock) for the last market trading day prior to the day of determination, as reported by Bloomberg L.P. or such other source as the Committee deems reliable; (ii) if the Stock is quoted on the over-the-counter market or is regularly quoted by a recognized securities dealer, but selling prices are not reported, the Fair Market Value of the Stock shall be the mean between the high bid and low asked prices for the Stock on the last market trading day prior to the day of determination, as reported by Bloomberg L.P. or such other source as the Committee deems reliable, or (iii) in the absence of an established
77
market for the Stock, the Fair Market Value shall be determined by such other method as the Committee determines in good faith to be reasonable and in compliance with Code Section 409A.
(r)“Full Value Award” means an Award other than in the form of an Option or SAR, and which is settled by the issuance of Stock (or at the discretion of the Committee, settled in cash valued by reference to Stock value).
(s) “Good Reason” shall have the meaning, if any, given such term in the applicable Award Certificate. If not defined in the applicable Award Certificate, the term “Good Reason” as used herein shall not apply to a particular Award.
(t)“Grant Date” of an Award means the first date on which all necessary corporate action has been taken to approve the grant of the Award as provided in the Plan, or such later date as is determined and specified as part of that authorization process. Notice of the grant shall be provided to the grantee within a reasonable time after the Grant Date.
(u)“Incentive Stock Option” means an Option that is intended to be an incentive stock option and meets the requirements of Section 422 of the Code or any successor provision thereto.
(v)“Non-Employee Director” means a director of the Company who is not a common law employee of the Company or an Affiliate.
(w)“Nonstatutory Stock Option” means an Option that is not an Incentive Stock Option.
(x)“Option” means a right granted to a Participant under Article 7 of the Plan to purchase Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option.
(y)“Other Stock-Based Award” means a right, granted to a Participant under Article 13 that relates to or is valued by reference to Stock or other Awards relating to Stock.
(z)“Parent” means a corporation, limited liability company, partnership or other entity which owns or beneficially owns a majority of the outstanding voting stock or voting power of the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Parent shall have the meaning set forth in Section 424(e) of the Code.
(aa)“Participant” means a person who, as an employee, officer, non-employee director or consultant of the Company or any Affiliate, has been granted an Award under the Plan; provided that in the case of the death of a Participant, the term “Participant” refers to a beneficiary designated pursuant to Section 14.5 or the legal guardian or other legal representative acting in a fiduciary capacity on behalf of the Participant under applicable state law and court supervision.
(bb) “Performance Share” means any right granted to a Participant under Article 9 to a unit to be valued by reference to a designated number of Shares to be paid upon achievement of such performance goals as the Committee establishes with regard to such Performance Share.
(cc) “Person” means any individual, entity or group, within the meaning of Section 3(a)(9) of the 1934 Act and as used in Section 13(d)(3) or 14(d)(2) of the 1934 Act.
(dd) “Plan” means the Micron Technology, Inc. Amended and Restated 2007 Equity Incentive Plan, as amended from time to time.
(ee) “Restricted Stock Award” means Stock granted to a Participant under Article 10 that is subject to certain restrictions and to risk of forfeiture.
(ff) “Restricted Stock Unit Award” means the right granted to a Participant under Article 10 to receive shares of Stock (or the equivalent value in cash or other property if the Committee so provides) in the future, which right is subject to certain restrictions and to risk of forfeiture.
(gg) “Shares” means shares of the Company’s Stock. If there has been an adjustment or substitution pursuant to Section 15.1, the term “Shares” shall also include any shares of stock or other securities that are substituted for Shares or into which Shares are adjusted pursuant to Section 15.1.
(hh) “Stock” means the $.10 par value common stock of the Company and such other securities of the Company as may be substituted for Stock pursuant to Article 15.
(ii) “Stock Appreciation Right” or “SAR” means a right granted to a Participant under Article 8 to receive a payment equal to the difference between the Fair Market Value of a Share as of the date of exercise of the SAR over the base price of the SAR, all as determined pursuant to Article 8.
(jj) “Subsidiary” means any corporation, limited liability company, partnership or other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Subsidiary shall have the meaning set forth in Section 424(f) of the Code.
(kk) “1933 Act” means the Securities Act of 1933, as amended from time to time.
(ll) “1934 Act” means the Securities Exchange Act of 1934, as amended from time to time.
ARTICLE 3.
EFFECTIVE TERM OF PLAN
3.1EFFECTIVE DATE. The Plan originally was adopted by the Board effective as of October 9, 2007 (the “Effective Date”), and last was amended and restated effective as of January 18, 2017. This amended and restated version of the Plan is effective as of January 14, 2021.
3.2TERMINATION OF PLAN. Unless earlier terminated as provided herein, the Plan shall continue in effect until the tenth anniversary of the Effective Date or, if the shareholders approve an amendment to the Plan that increases the number of Shares subject to the Plan, the tenth anniversary of the date of such approval. The termination of the Plan on such date shall not affect the validity of any Award outstanding on the date of termination, which shall continue to be governed by the applicable terms and conditions of the Plan. No Incentive Stock Options may be granted more than ten years after the earlier of (a) adoption of this Plan by the Board, or (b) the Effective Date.
ARTICLE 4.
ADMINISTRATION
4.1COMMITTEE. The Plan shall be administered by a Committee appointed by the Committee. TheBoard (which Committee shall consist of at least two directors) or, at the discretion of the Board from time to time, the Plan may be administered by the Board. It is intended that at least two of the directors appointed to serve on the Committee shall be composed solely“non-employee directors” (within the meaning of two or more outside directors as defined in Section 162(m)Rule 16b-3 promulgated under the 1934 Act) and that any such members of the Code andCommittee who do not so qualify shall qualify as an independent compensation committee underabstain from participating in any decision to make or administer Awards that are made to Eligible Participants who at the time of consideration for such Award are persons subject to the short-swing profit rules of Section 162(m)16 of the Code.1934 Act. However, the mere fact that a Committee member shall fail to qualify under either of the foregoing requirements or shall fail to abstain from such action shall not invalidate any Award made by the Committee which Award is otherwise validly made under the Plan. The members of the Committee shall be appointed by, and may be changed at any time and from time to time in the discretion of, the Board. Unless and until changed by the Board, the Compensation Committee of the Board is designated as the Committee to administer the Plan. The Board may reserve to itself any or all of the authority and responsibility of the Committee under the Plan or may act as administrator of the Plan for any and all purposes. To the extent the Board has reserved any authority and responsibility or during any time that the Board
79
is acting as administrator of the Plan, it shall have fullall the powers of the Committee hereunder, and any reference herein to the Committee (other than in this Section 4.1) shall include the Board. To the extent any action of the Board under the Plan conflicts with actions taken by the Committee, the actions of the Board shall control.
4.2ACTION AND INTERPRETATIONS BY THE COMMITTEE. For purposes of administering the Plan, the Committee may from time to time adopt rules, regulations, guidelines and procedures for carrying out the provisions and purposes of the Plan and make such other determinations, not inconsistent with the Plan, as the Committee may deem appropriate. The Committee’s interpretation of the Plan, any Awards granted under the Plan, any Award Certificate and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Affiliate, the Company’s or an Affiliate’s independent certified public accountants, Company counsel or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.
4.3AUTHORITY OF COMMITTEE. Except as provided below, the Committee has the exclusive power, authority and authoritydiscretion to:
(a)Grant Awards;
(b)Designate Participants;
(c)Determine the type or types of Awards to (i) designate Participantsbe granted to each Participant;
(d)Determine the number of Awards to be granted and the number of Shares or dollar amount to which an Award will relate;
(e)Determine the terms and conditions of any Award granted under the Plan, including but not limited to, the exercise price, base price, or purchase price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, based in each Measurement Period; (ii) establish and review Performance Goals and weightings forcase on such considerations as the Committee in its sole discretion determines;
(f)Accelerate the vesting, exercisability or lapse of restrictions of any outstanding Award, in accordance with Article 14, based in each Measurement Period; (iii) establish target Awards for Participants for each Measurement Period; (iv) determinecase on such considerations as the Committee in its sole discretion determines;
(g)Determine whether, and to what extent, Performance Goals were achievedand under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;
(h)Prescribe the form of each Award Certificate, which need not be identical for each Measurement Period; (v) increase or decrease the Award otherwise payable to any Participant resulting from the achievement of Performance GoalsParticipant;
(i)Decide all other matters that must be determined in any Measurement Period, based on such objective or subjective factors as the Committee shall deem relevant; (vi) establish,connection with an Award;
(j)Establish, adopt or revise any rules, and regulations, guidelines or procedures as it may deem necessary or advisable to administer thisthe Plan; (vii) make
(k)Make all other decisions and determinations that may be required under thisthe Plan or as the Committee deems necessary or advisable to administer thisthe Plan; and (viii) amend this
(l)Amend the Plan or any Award Certificate as provided herein.herein; and
All decisions(m)Adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of the United States or any non-U.S. jurisdictions in which the Company or any Affiliate may operate, in order to assure the viability of the benefits of Awards granted to participants located in such other jurisdictions and to meet the objectives of the Plan.
Notwithstanding the foregoing, grants of Awards to Non-Employee Directors hereunder shall be made only in accordance with the terms, conditions and parameters of a plan, program or policy for the compensation of Non-Employee Directors as in effect from time to time, and the Committee may not make discretionary grants hereunder to Non-Employee Directors.
Notwithstanding the above, the Board may, by resolution, expressly delegate to a special committee, consisting of one or more directors who may but need not be officers of the Company, the authority, within specified parameters as to the number and terms of Awards, to (i) designate officers, employees and/or consultants of the Company or any of its Affiliates to be recipients of Awards under the Plan, and (ii) to determine the number of such Awards to be received by any such Participants; provided, however, that such delegation of duties and responsibilities to an officer of the Company may not be made with respect to matters relatedthe grant of Awards to eligible participants who are subject to Section 16(a) of the 1934 Act at the Grant Date. The acts of such delegates shall be treated hereunder as acts of the Board and such delegates shall report regularly to the PlanBoard and the Committee regarding the delegated duties and responsibilities and any Awards so granted.
4.4AWARD CERTIFICATES. Each Award shall be final, conclusive and binding upon all persons, including the Company, stockholders, employees, Company successors and assigns and a Participant’s spouse, if any, and his or her guardian, estate and/or heirs. All expenses of the administration ofevidenced by an Award Certificate. Each Award Certificate shall include such provisions, not inconsistent with the Plan, shallas may be bornespecified by the Company, including all Awards, if any, paidCommittee.
ARTICLE 5.
SHARES SUBJECT TO THE PLAN
5.1NUMBER OF SHARES. Subject to adjustment as provided in Sections 5.2 and 15.1, the aggregate number of Shares reserved and available for issuance pursuant to the terms of the Plan.
For each Measurement Period, the Committee will choose, in its sole discretion, the Executive Officers who will participate in the Plan. No employee shall have any right to be selected to participate in this Plan. Nothing in this Plan shall be construed as precluding or prohibiting an employee from being eligible to participate in any other bonus or compensation arrangement of the Company, whether or not currently established. Inclusion as a Participant in the Plan for any Measurement Period does not guarantee that such Participant will be included as a Participant in the Plan for any future Measurement Period, nor does it guarantee that such Participant will receive any amount in payment of an Award.
| |
4. | Business Criteria on Which Performance Goals Shall be Based. |
Awards granted under the Plan shall be 200,000,000; provided, however, that each Share issued under the Plan pursuant to a Full Value Award that is settled in Stock shall reduce the number of available Shares by two (2) shares. The maximum number of Shares that may be issued upon exercise of Incentive Stock Options granted under the Plan shall be 2,000,000.
5.2SHARE COUNTING. Shares covered by an Award shall be subtracted from the Plan share reserve as of the date of grant, but shall be added back to the Plan share reserve in accordance with this Section 5.2.
(a)To the extent that an Award is canceled, terminates, expires, is forfeited or lapses for any reason, any unissued or forfeited Shares originally subject to the Award will be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan.
(b)Shares subject to Awards settled in cash will be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan.
(c)Substitute Awards granted pursuant to Section 14.13 of the Plan shall not count against the Shares otherwise available for issuance under the Plan under Section 5.1.
(d)The following shares of Stock may not again be made available for issuance as Awards under the Plan: (i) shares of Stock not issued or delivered as a result of the net settlement of an outstanding Option or SAR, (ii) shares of Stock used to pay the exercise price or withholding taxes related to an outstanding Option or SAR, or (iii) shares of Stock repurchased on the open market with the proceeds of the exercise price of an Option.
5.3STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.
5.4LIMITATION ON AWARDS.
(a)Notwithstanding any provision in the Plan to the contrary (but subject to adjustment as provided in Section 15.1), the maximum number of Shares with respect to one or more Options and/or SARs that may be granted during any one calendar year under the Plan to any one Participant shall be 5,000,000. The maximum aggregate grant with respect to Awards of Restricted Stock, Restricted Stock Units, Deferred Stock Units, Performance Shares or other Stock-Based Awards (other than Options or SARs) granted in any one calendar year to any one Participant shall be 5,000,000.
81
(b)The maximum number of Shares subject to Awards granted during a single fiscal year to any Non-Employee Director, taken together with any cash fees paid to such Non-Employee Director during the fiscal year, shall not exceed $750,000 in total value (calculating the value of any such Awards based on the attainmentgrant date fair value of Performance Goalssuch Awards for financial reporting purposes).
5.5MINIMUM VESTING REQUIREMENTS. Except in the specified Measurement Period. Any Performance Goal applicablecase of substitute Awards granted pursuant to Section 14.13, Full-Value Awards granted under the Plan to an Award intendedEligible Participant shall either (i) be subject to qualify as a Qualified Performance-Based Award shallminimum vesting period of three years (which may include graduated vesting within such three-year period), or one year if the vesting is based on performance criteria other than continued service, or (ii) be limited to specified levelsgranted solely in exchange for foregone cash compensation. Notwithstanding the foregoing, (i) the Committee may at its discretion permit and authorize acceleration of one or morevesting of such Full-Value Awards in the event of the following objective business criteria,Participant’s death, Disability, or any combinationretirement, or portion thereof:the occurrence of a Change in Control, (ii) the Committee may grant Full-Value Awards without the above-described minimum vesting requirements, or may permit and authorize acceleration of vesting of Full-Value Awards otherwise subject to the above-described minimum vesting requirements, with respect to Awards covering five percent (5%) or fewer of the total number of Shares authorized under the Plan, and (iii) this Section 5.5 shall not apply to Awards granted to Non-Employee Directors.
ARTICLE 6.
Gross and/or net revenue (including whether in the aggregate or attributableELIGIBILITY
6.1GENERAL. Awards may be granted only to specific products)
Cost of Goods Sold and Gross Margin
Costs and expenses, including Research & Development and Selling, General & Administrative
Income (gross, operating, net, etc.)
Earnings, including before interest, taxes, depreciation and amortization (whether in the aggregate or on a per share basis
Cash flows and share price
Return on investment, capital, equity, assets
Manufacturing efficiency (including yield enhancement and cycle time reductions), quality improvements and customer satisfaction
Product life cycle management (including product and technology design, development, transfer, manufacturing introduction, and sales price optimization and management)
Economic profit or loss
Market share
Employee retention, compensation, training and development, including succession planning
Results of customer satisfaction surveys, questionnaires or other measures of customer satisfaction or performanceEligible Participants; except that Incentive Stock Options may be granted to customer
Objective goals consistent with the Participant’s specific officer duties and responsibilities, designedonly to further the financial, operational and other business interestsEligible Participants who are employees of the Company including goalsor a Parent or Subsidiary as defined in Section 424(e) and objectives(f) of the Code. Eligible Participants who are service providers to an Affiliate may be granted Options or SARs under this Plan only if the Affiliate qualifies as an “eligible issuer of service recipient stock” within the meaning of §1.409A-1(b)(5)(iii)(E) of the final regulations under Code Section 409A.
ARTICLE 7.
STOCK OPTIONS
7.1GENERAL. The Committee is authorized to grant Options to Participants on the following terms and conditions:
(a)EXERCISE PRICE. The exercise price per Share under an Option shall be determined by the Committee; provided that the exercise price for any Option (other than an Option issued as a substitute Award pursuant to Section 14.13) shall not be less than the Fair Market Value as of the Grant Date.
(b)PROHIBITION ON REPRICING. Except as otherwise provided in Article 15, without the prior approval of shareholders of the Company: (i) the exercise price of an Option may not be reduced, directly or indirectly, (ii) an Option may not be cancelled in exchange for cash, other Awards, or Options or SARs with an exercise or base price that is less than the exercise price of the original Option or otherwise, and (iii) the Company may not repurchase an Option for value (in cash or otherwise) from a Participant if the current Fair Market Value of the Shares underlying the Option is lower than the exercise price per share of the Option.
(c)TIME AND CONDITIONS OF EXERCISE. The Committee shall determine the time or times at which an Option may be exercised in whole or in part, subject to Section 7.1(e). The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised or vested.
(d)PAYMENT. The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment and the methods by which Shares shall be delivered or deemed to be delivered to Participants. As determined by the Committee at or after the Grant Date, payment of the exercise price of an Option may be made, in whole or in part, in the form of (i) cash or cash equivalents, (ii) delivery (by either actual delivery or attestation) of previously-acquired Shares based on the Fair Market Value of the Shares on the date the Option is exercised, (iii) withholding of Shares from the Option based on the Fair Market Value of the
Shares on the date the Option is exercised, (iv) broker-assisted market sales, or (v) any other “cashless exercise” arrangement.
(e)EXERCISE TERM. No option granted under the Plan shall be exercisable for more than eight (8) years from the Grant Date.
(f)NO DEFERRAL FEATURE. No Option shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the Option.
(g)NO DIVIDEND EQUIVALENTS. No Option shall provide for Dividend Equivalents.
(h)SUSPENSION. Any Participant who is also a participant in the Retirement at Micron (“RAM”) Section 401(k) Plan and who requests and receives a hardship distribution from the RAM Plan, is prohibited from making, and must suspend, his or her employee elective contributions to the Plan.
7.2INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options granted under the Plan must comply with the requirements of Section 422 of the Code. If all of the requirements of Section 422 of the Code are not met, the Option shall automatically become a Nonstatutory Stock Option.
ARTICLE 8.
STOCK APPRECIATION RIGHTS
8.1GRANT OF STOCK APPRECIATION RIGHTS. The Committee is authorized to grant Stock Appreciation Rights to Participants on the following terms and conditions:
(a)RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation Right, the Participant to whom it is granted has the right to receive, for each Share with respect to regulatory compliance matters.which the Stock Appreciation Right is being exercised, the excess, if any, of:
(1)The Fair Market Value of one Share on the date of exercise; over
(2)The business criteriabase price of the Stock Appreciation Right as determined by the Committee, which shall not be less than the Fair Market Value of one Share on the Grant Date.
(b)PROHIBITION ON REPRICING. Except as otherwise provided in Article 15, without the prior approval of shareholders of the Company: (i) the base price of a SAR may not be reduced, directly or indirectly, (ii) a SAR may not be cancelled in exchange for cash, other Awards, or Options or SARs with an exercise or base price that is less than the base price of the original SAR, and (iii) the Company may not repurchase a SAR for value (in cash or otherwise) from a Participant if the current Fair Market Value of the Shares underlying the SAR is lower than the base price per share of the SAR.
(c)TIME AND CONDITIONS OF EXERCISE. The Committee shall determine the time or times at which a SAR may be expressedexercised in whole or measuredin part. No SAR granted under the Plan shall be exercisable for more than eight (8) years from the Grant Date.
(d)NO DEFERRAL FEATURE. No SAR shall provide for any feature for the deferral of compensation other than the deferral of recognition of income until the exercise or disposition of the SAR.
(e)NO DIVIDEND EQUIVALENTS. No SAR shall provide for Dividend Equivalents.
(f)OTHER TERMS. All awards of Stock Appreciation Rights shall be evidenced by an Award Certificate. Subject to the limitations of this Article 8, the terms, methods of exercise, methods of settlement, form of consideration payable in settlement, and any other terms and conditions of any Stock Appreciation Right shall be determined by the Committee at the individual, function, department, region, unit, subsidiary, affiliate or Company levels or any combinationtime of the foregoing.grant of the Award and shall be reflected in the Award Certificate.
83
ARTICLE 9.
PERFORMANCE SHARES
9.1GRANT OF PERFORMANCE SHARES. The Committee is authorized to grant Performance Goals with respectShares to the foregoing business criteriaParticipants on such terms and conditions as may be specifiedselected by the Committee. The Committee shall have the complete discretion to determine the number of Performance Shares granted to each Participant, subject to Section 5.4, and to designate the provisions of such Performance Shares as provided in absolute terms (including completion of pre-established projects, such as the introduction of specified products), in ratios, in percentages, or in terms of growth from period to period, growth rates over time as well as in terms of performance measured relative to an established or specially-created performance index of Company competitors, peers or other members of high tech industries. Any member of an index that disappears during a measurement periodSection 4.3. All Performance Shares shall be disregarded forevidenced by an Award Certificate or a written program established by the entire measurement period.Committee, pursuant to which Performance Goals need not be based upon an increase or positive resultShares are awarded under a business criterionthe Plan under uniform terms, conditions and could include, for example, the maintenance of the status quo or the limitation of economic losses (measured,restrictions set forth in each case, by reference to a specific business criterion).such written program.
With respect to Awards not intended to qualify as Qualified Performance-Based Awards, the9.2PERFORMANCE GOALS. The Committee may establish performance goals for Performance GoalsShares which may be based on any criteria selected by the Committee.
| |
5. | Establishment of Performance Goals. |
(a) Committee Action. For each Measurement Period the Committee shall establish the following: (1) the length of the Measurement Period with respect to each Participant; (2) the Participants in the Plan for such Measurement Period; (3) the specific Company, subsidiary, affiliate, group, division, unit, department, function and/or individual business criterion or
criteria, or combination thereof, that will be measured with respect to each Participant; (4) the Performance Goals; (5) any special adjustments that may need to be applied in calculating whether the Performance Goals have been met to factor out extraordinary items; (6) the formula for calculating the awards under the Plan in relation to the Performance Goals (including instructions for extrapolating the amounts payable when Such performance results fall in a range between threshold, target and maximum goals); and (7) the target Awards (expressed in absolute terms or as a percentage of base compensation fixed at the time the performance formula is established) for each Participant.
(b) Timing of Action. The Committee shall make the above determinations in writing no later than ninety (90) days after the start of each Measurement Period, on or before twenty-five percent (25%) of the Measurement Period has elapsed, and while the outcome of achievement of the relevant Performance Goals is substantially uncertain.
(c) Maximum Award. The maximum Award thatgoals may be paid to any one Participant with respect to the aggregatedescribed in terms of all Measurement PeriodsCompany-wide objectives or in any fiscal year shall not exceed $10,000,000.
(d) Measurement Periods. Measurement Periods need not be the same for each Participant. Measurement Periods will coincide with the Company’s fiscal year unless the Committee determines otherwise; provided, however, in no event will a Measurement Period be less than a three-month period for any Participant.
(e) Awards Intended to be "performance based compensation" under Section 409A. With respect to Awards intended to be "performance based compensation" as defined in Treas. Reg. §1.409A-1(e), (1) the Measurement Period shall be at least 12 consecutive months; (2) Performance Goals shall be established in writing no later than ninety (90) days after the commencementterms of the period of service to which the criteria relates, providedobjectives that the outcome must be substantially uncertain at the time the criteria are established; (3) the Performance Goals may include subjective performance criteria, provided that the subjective performance criteria are bona fide and relate to the performance of the Participant, a group of service providers that includes the Participant,an Affiliate or a business unit for whichdivision, region, department or function within the Participant provides services (which may include the entire organization); and (4) the Award must meet other applicable requirements of Code Section 409A.
(f) Changes in the Business; Promotions, Demotions and Transfers.
(1) Awards Not Intended to Qualify as Qualified Performance-Based Awards. With respect to Awards not intended to qualify as Qualified Performance-Based Awards: (i) ifCompany or an Affiliate. If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company including any acquisition, disposition or merger, or the manner in which the Company or a subsidiary or affiliatean Affiliate conducts its business, or other events or circumstances render Performance Goalsperformance goals to be unsuitable, for a Measurement Period, the Committee may modify such Performance Goalsperformance goals in whole or in part, and/or such Measurement Period, as the Committee deems appropriate; or (ii) ifappropriate. If a Participant is promoted, demoted or transferred to a different business unit or function during a Measurement Period,performance period, the Committee may determine that the Performance Goalsperformance goals or Measurement Periodperformance period are no longer appropriate and may (A)(i) adjust, change or eliminate the Performance Goalsperformance goals or the applicable Measurement Periodperformance period as it deems appropriate to make such goals and period comparable to the initial Performance Goalsgoals and Measurement Period,period, or (B)(ii) make an Awarda cash payment to the Participantparticipant in amount determined by the Committee to be in the best interests of the Company, in the sole discretion of the Committee.
(2)9.3 Awards IntendedRIGHT TO PAYMENT. The grant of a Performance Share to Qualify as Qualified Performance-Based Awards. With respecta Participant will entitle the Participant to Awards intended to qualify as Qualified Performance-Based Awards, unless otherwisereceive at a specified later time a specified number of Shares, or the equivalent value in cash or other property, if the performance goals established by the Committee are achieved and the other terms and conditions thereof are satisfied. The Committee shall set performance goals and other terms or conditions to payment of the Performance Shares in its written determinations establishingdiscretion which, depending on the business criteria forextent to which they are met, will determine the particular Measurement Period, if priornumber of the Performance Shares that will be earned by the Participant.
9.4OTHER TERMS. Performance Shares may be payable in cash, Stock, or other property, and have such other terms and conditions as determined by the Committee and reflected in the Award Certificate.
ARTICLE 10.
RESTRICTED STOCK AND RESTRICTED STOCK UNIT AWARDS
10.1GRANT OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS. Subject to the endterms and conditions of this Article 10, the Committee is authorized to make Awards of Restricted Stock or Restricted Stock Units to Participants in such Measurement Periodamounts and subject to such terms and conditions as may be selected by the Company (i) disposesCommittee. An Award of businessesRestricted Stock or interests that, individually or in the aggregate, represent either (A) five percent (5%) or more of the Company’s consolidated gross revenues for the four fiscal quarters completed immediately preceding the consummation of the dispositions or (B) five percent (5%) of the Company’s consolidated property, plant and equipment, net, measured as of the last day of the fiscal quarter immediately preceding the disposition or (ii) consummates one or more acquisitions during the Measurement Period that, individually or in the aggregate, constitute a Triggering Acquisition (as defined below), in each case a "Re-Set Event," then the Performance GoalsRestricted Stock Units shall be adjusted, effective as ofevidenced by an Award Certificate setting forth the last day of the fiscal quarter immediately before the consummation of the Re-Set Event, (x) to reflect the business disposition by eliminating from the Performance Goals the projected business results relatingterms, conditions, and restrictions applicable to the disposed business for the remainder of the fiscal quarters of the Measurement Period,Award.
10.2ISSUANCE AND RESTRICTIONS. Restricted Stock or Restricted Stock Units shall be subject to such restrictions on transferability and (y) to reflect any business acquisition, by establishing supplemental performance criteria in compliance with Sections 4 and 5 (a) through (c) above,other restrictions as the Committee deems appropriate,may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). Subject to the terms and conditions of the Plan, these restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, upon the satisfaction of performance goals or otherwise, as the Committee determines at the time of the grant of the Award or thereafter. Except as otherwise provided in an Award Certificate or any special Plan document governing an Award, the Participant shall have all of the rights of a stockholder with respect to the acquired business (which businessRestricted Stock, and the Participant shall be tracked separately as an independent business unit for purposes of any such supplemental performance criteria). For purposes of this Section, a "Triggering Acquisition"
means an acquisition (or combination of acquisitions) in which either (i) the acquired entity’s gross revenues for the four quarters completed immediately prior to consummationhave none of the acquisition is equal to five percent (5%) or more of the pro-forma gross revenues for the same four quarters for the combination of the Company and its affiliates and the acquired entity, or (ii) the acquired entity’s property, plant and equipment, net, equals or exceeds five percent (5%) of the pro-forma property, plant and equipment, net, for the combination of the Company and its affiliates and the acquired entity. (If either the Company and its affiliates or the entity being acquired had consummated other acquisitions during the four quarters in question, the calculation described in the prior sentence shall be made using pro-forma earnings for each member of the combined entity.) Notwithstanding the foregoing, nothing in this Section 5(f)(2) will be construed to authorize the Committee to take actions under this Section 5(f)(2) that are not permitted by Section 162(m) of the Code.
(g) Change in Control. Notwithstanding Section 5(d), in the eventrights of a Change in Control, each Measurement Period shall be deemed to have ended as of the last day of the fiscal month immediately preceding such Change in Control (the "CIC Termination Date"). The Committee shall determinestockholder with respect to each Participant whether his or her Performance Goal(s) were "Achieved" (as defined below)Restricted Stock Units until such time as Shares of Stock are paid in settlement of the CIC Termination Date and, inRestricted Stock Units.
10.3FORFEITURE. Except as otherwise determined by the caseCommittee at the time of any such achievement,the grant of the Award or thereafter, upon termination of Continuous Status as a Participant during the applicable restriction period or upon failure to satisfy a performance goal during the applicable restriction period, Restricted Stock or Restricted
Stock Units that are at that time subject to restrictions shall receive,be forfeited; provided, however, that the Committee may provide in any Award Certificate, subject to the terms and conditions of the Plan, payment within thirty days following such determination bythat restrictions or forfeiture conditions relating to Restricted Stock or Restricted Stock Units will be waived in whole or in part in the Committee. Subjectevent of terminations resulting from specified causes, including, but not limited to, death, Disability, or for the convenience or in the best interests of the Company.
10.4DELIVERY OF RESTRICTED STOCK. Shares of Restricted Stock shall be delivered to the Committee’s discretion set forth in Section 6(b), Awards that are Achieved as defined in clause (i)Participant at the time of the definition of "Achieved" shall not be pro-rated and Awards that are Achieved as defined in clause (ii) of such definition shall be pro-rated. For purposes of this Section 5(g), "Achieved" shall mean with respect to (i) a non-financialgrant either by book-entry registration or non-numerical Performance Goal, the full achievement of such Performance Goal [as of the CIC Termination Date]; and (ii) a financial or numerical Performance Goal, the achievement of results which, when extrapolated over the remainder of the full measurement period, disregarding the CIC Termination Date, would result in the Performance Goal being satisfied.
| |
6. | Determination and Certification of Attainment of Performance Goals; Committee Discretion. |
(a) Determination and Certification of Awards. As soon as practicable following the completion of a Measurement Period, the Committee shall determine whether and to what extent the Performance Goals and other requirements established pursuant to Section 5 above have been satisfied. The Committee shall certify in writing whether the Performance Goals for the Measurement Period have been met and, if they have been met, certify the amount of the applicable Award, priorby delivering to the paymentParticipant, or a custodian or escrow agent (including, without limitation, the Company or one or more of any such Award, which writing may take the form of a Committee resolution passed by a majority of the Committee at a properly convened meeting or through unanimous actionits employees) designated by the Committee, via action by written consent.a stock certificate or certificates registered in the name of the Participant. If physical certificates representing shares of Restricted Stock are registered in the name of the Participant, such certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock.
(b)10.5 Committee Discretion.DIVIDENDS ON RESTRICTED STOCK The Committee, in its sole discretion, based on any factors. In the case of Restricted Stock, the Committee deems appropriate, may reduceprovide that ordinary cash dividends declared on the AwardShares before they are vested (i) will be forfeited, (ii) will be deemed to any Participanthave been reinvested in any Measurement Period (including reductionadditional Shares or otherwise reinvested (subject to zero if the Committee so determines). The Committee shall make a determination of whether and to what extent to reduce AwardsShare availability under the Plan for each Measurement Period at such timeSection 5.1 hereof), or times following the close of the Measurement Period as the Committee shall deem appropriate. The reduction(iii) in the amountcase of an AwardRestricted Stock that is not subject to any Participant for a Measurement Period shall have no effect on (i.e., shall neither increase nor decrease) the amount of the Award to any other Participant for such Measurement Period.
Awards shall be paid in cash, in a single lump sum, to the Participants as soon as practicable after the Committee determines whether and to what extent Performance Goals were achieved, provided that any Award intended to satisfy the short-term deferral exemption specified in Treas. Reg. §1.409A-1(b)(4)performance-based vesting, will be paid on or beforedistributed to the Participant as accrued (in which case, such dividends must be paid or distributed no later ofthan the 15th15th day of the third3rd month following the endlater of (A) the Participant’s first taxablecalendar year in which the corresponding dividends were paid to shareholders, or (B) the first calendar year in which the Participant’s right to the paymentsuch dividends is no longer subject to a substantial risk of forfeitureforfeiture). Unless otherwise provided by the Committee, dividends accrued on Shares of Restricted Stock before they are vested shall, as provided in the Award Certificate, either (i) be reinvested in the form of additional Shares, which shall be subject to the same vesting provisions as provided for the host Award, or (ii) be credited by the Company to an account for the Participant and accumulated without interest until the date upon which the host Award becomes vested, and any dividends accrued with respect to forfeited Restricted Stock will be reconveyed to the Company without further consideration or any act or action by the Participant. In no event shall dividends with respect to Restricted Stock that is subject to performance-based vesting be paid or distributed until the performance-based vesting restrictions of such Restricted Stock lapse.
ARTICLE 11.
DEFERRED STOCK UNITS
11.1GRANT OF DEFERRED STOCK UNITS. The Committee is authorized to grant Deferred Stock Units to Participants subject to such terms and conditions as may be selected by the Committee. Deferred Stock Units shall entitle the Participant to receive Shares of Stock (or the equivalent value in cash or other property if so determined by the Committee) at a future time as determined by the Committee, or as determined by the Participant within guidelines established by the Committee in the case of voluntary deferral elections. An Award of Deferred Stock Units shall be evidenced by an Award Certificate setting forth the terms and conditions applicable to the Award.
ARTICLE 12.
DIVIDEND EQUIVALENTS
12.1GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend Equivalents with respect to Full-Value Awards granted hereunder to Participants subject to such terms and conditions as may be selected by the Committee. Dividend Equivalents shall entitle the Participant to receive payments equal to ordinary cash dividends or distributions with respect to all or a portion of the number of Shares subject to a Full-Value Award, as determined by the Committee. The Committee may provide that Dividend Equivalents (i) will be deemed to have been reinvested in additional Shares or otherwise reinvested, or (ii) except in the case of Performance Shares, will be paid or distributed as accrued (in which case, such Dividend Equivalents must be paid or distributed no later than the 15th day of the third3rd month following the endlater of (i) the Company’s first taxablecalendar year in which the corresponding dividends were paid to shareholders, or (ii) the first calendar year in which the Participant’s right to the paymentsuch Dividends Equivalents is no longer subject to a substantial risk of forfeiture. NotwithstandingUnless otherwise provided by the foregoing,Committee, Dividend Equivalents accruing on unvested Full-Value Awards shall, as provided in the Award Certificate, either (i) be reinvested in the form of additional Shares, which shall be subject to the same vesting provisions as provided for the host Award, or (ii) be credited by the Company to an account for
85
the Participant and accumulated without interest until the date upon which the host Award becomes vested, and any Dividend Equivalents accrued with respect to forfeited Awards will be reconveyed to the Company without further consideration or any act or action by the Participant. In no event shall Dividend Equivalents with respect to Performance Shares be paid or distributed until the performance-based vesting restrictions of the Performance Shares lapse.
ARTICLE 13.
STOCK OR OTHER STOCK-BASED AWARDS
13.1GRANT OF STOCK OR OTHER STOCK-BASED AWARDS. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to Shares, as deemed by the Committee may permitto be consistent with the purposes of the Plan, including without limitation (but subject to Section 10.2) Shares awarded purely as a “bonus” and not subject to any restrictions or require a Participantconditions, convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, and Awards valued by reference to deferbook value of Shares or the receiptvalue of an Award. If anysecurities of or the performance of specified Parents or Subsidiaries. The Committee shall determine the terms and conditions of such deferral is permitted or required, the Board shall, in its sole discretion, establish rules and procedures for such Award deferrals which are compliant with Section 409A.Awards.
ARTICLE 14.
Unless otherwisePROVISIONS APPLICABLE TO AWARDS
14.1STAND-ALONE AND TANDEM AWARDS. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, any other Award granted under the Plan. Subject to Section 16.2, awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.
14.2TERM OF AWARD. The term of each Award shall be for the period as determined by the Committee, provided that in no event shall the term of any Incentive Stock Option or a Stock Appreciation Right granted in tandem with the Incentive Stock Option exceed a period of eight years from its Grant Date.
14.3FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and any applicable law or Award Certificate, payments or transfers to be made by the Company or an Affiliate on the grant or exercise of an Award may be made in such form as the Committee determines at or after the Grant Date, including without limitation, cash, Stock, other Awards, or other property, or any combination, and may be made in a single payment or transfer, in installments, or (except with respect to Options or SARs) on a deferred basis, in each case determined in accordance with rules adopted by, and at the discretion andof, the Committee.
14.4LIMITS ON TRANSFER. No right or interest of a Participant in any unexercised or restricted Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or an Affiliate, or shall be subject to any contrary provisionlien, obligation, or liability of such Participant to any other party other than the Company or an Affiliate. No unexercised or restricted Award shall be assignable or transferable by a Participant other than by will or the laws of descent and distribution or, except in the case of an individual employment, severanceIncentive Stock Option, pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Award under the Plan; provided, however, that the Committee may (but need not) permit other transfers (other than transfers for value) where the Committee concludes that such transferability (i) does not result in accelerated taxation, (ii) does not cause any Option intended to be an Incentive Stock Option to fail to so qualify, and (iii) is otherwise appropriate and desirable, taking into account any factors deemed relevant, including without limitation, state or similarfederal tax or securities laws applicable to transferable Awards.
14.5BENEFICIARIES. Notwithstanding Section 14.4, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Award Certificate applicable to the Participant, except to the extent the Plan and Award Certificate otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If no beneficiary has been designated or survives the Participant, any payment due to the Participant shall be made to the Participant’s
estate. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant, in the manner provided by the Company, at any time provided the change or revocation is filed with the Committee.
14.6STOCK TRADING RESTRICTIONS. All Stock issuable under the Plan is subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal or state securities laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate or issue instructions to the transfer agent to reference restrictions applicable to the Stock.
14.7EFFECT OF A CHANGE IN CONTROL. The provisions of this Section 14.7 shall apply in the case of a Change in Control, unless otherwise provided in the Award Certificate or any special Plan document or separate agreement with a Participant governing an Award.
(a)AWARDS ASSUMED OR SUBSTITUTED BY SURVIVING CORPORATION. With respect to Awards assumed by the Surviving Corporation or otherwise equitably converted or substituted in connection with a Change in Control: if within one year after the effective date of the Change in Control, a Participant’s employment is terminated without Cause or the Participant mustresigns for Good Reason, then:
(i)each of that Participant’s outstanding Options, SARs, and other Awards in the nature of rights that may be actively employedexercised that are subject to time-based vesting requirements shall become vested and in good standing or on approved leave of absencefully exercisable as of the date of payment in ordertermination;
(ii)each of that Participant’s outstanding Awards other than Options and SARs that are subject to be eligible to receive paymenttime-based vesting restrictions shall become vested and such restrictions shall lapse as of an Award for such Measurement Period and a Participant whose employment terminates for any reason prior to the date of payment shall forfeit his or her righttermination; and
(iii)the payout level under each of that Participant’s outstanding Awards that are subject to receive payment of an Award for such Measurement Period. Notwithstanding the foregoing, with respect to any given Measurement Period, a Participant who (i) terminates employment (regardless of cause)
prior to the payment date, and (ii) pursuant to a separate contractual arrangement with the Company is entitled to receive payments from the Company thereunder extending to or beyond such payment date as a result of such termination,performance-based vesting requirements shall be deemed to have been employedearned as of the date of termination based upon an assumed achievement of all relevant performance goals at the “target” level, and there shall be a pro rata payout to such Participant within thirty (30) days following the date of termination of employment (unless a later date is required by Section 17.3 hereof), based upon the length of time within the performance period that has elapsed prior to the date of termination of employment.
With regard to each Award, a Participant shall not be considered to have resigned for Good Reason unless the Award Certificate includes such provision. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Code Section 422(d), the excess Options shall be deemed to be Nonstatutory Stock Options.
(b)AWARDS NOT ASSUMED OR SUBSTITUTED BY SURVIVING CORPORATION. Upon the occurrence of a Change in Control, and except with respect to any Awards assumed by the Surviving Corporation or otherwise equitably converted or substituted in connection with the Change in Control in a manner approved by the Committee or the Board:
(i)all outstanding Options, SARs, and other Awards in the nature of rights that may be exercised that are subject to time-based vesting requirements shall become vested and fully exercisable as of the effective date of the Change in Control;
(ii)all outstanding Awards other than Options and SARs that are subject to time-based vesting restrictions shall become vested and such restrictions shall lapse as of the effective date of the Change in Control, and
(iii)the payout level under all outstanding Awards that are subject to performance-based vesting requirements shall be deemed to have been earned as of the effective date of the Change in Control based upon an assumed achievement of all relevant performance goals at the “target” level, and there shall be a pro rata payout to Participants within thirty (30) days following the Change in Control (unless a later date is required by Section 17.3 hereof), based upon the length of time within the performance period that has elapsed prior to the Change in Control.
87
To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Code Section 422(d), the excess Options shall be deemed to be Nonstatutory Stock Options.
14.8ACCELERATION UPON DEATH OR DISABILITY. Except as otherwise provided in the Award Certificate or any special Plan document governing an Award, upon the termination of a Participant’s Continuous Status as a Participant by reason of his or her death or Disability:
(i)all of such Participant’s outstanding Options, SARs, and other Awards in the nature of rights that may be exercised that are solely subject to time-based vesting requirements shall become vested and fully exercisable as of the date of termination of Continuous Status as a Participant, and shall thereafter remain exercisable for a period of twelve (12) months or until the earlier expiration of the original term of the Option, SAR or other Award; provided, however, the to the extent that an Incentive Stock Option is exercised more than three (3) months after a Participant’s Continuous Status as a Participant terminates by reason of his or her Disability, the Option shall be deemed to be Nonstatutory Stock Option,
(ii)all time-based vesting restrictions on the Participant’s outstanding Awards shall lapse as of the date of termination of Continuous Status as a Participant, and
(iii)the target payout opportunities attainable under all of such Participant’s outstanding performance-based Awards shall be deemed to have been fully earned as of the date of termination of Continuous Status as a Participant based upon an assumed achievement of all relevant performance goals at the “target” level and there shall be a prorata payout to the Participant or his or her estate within thirty (30) days following the date of termination (or any later date required by Section 17.3 of the Plan) based upon the length of time within the performance period that has elapsed prior to the date of termination of Continuous Status as a Participant.
Except as otherwise provided in this Section 14.8, any Awards shall thereafter continue or lapse in accordance with the other provisions of the Plan and the Awards Certificate. Notwithstanding the foregoing, in the case of a Participant’s termination of Continuous Status as a Participant by reason of Disability, this Section 14.8 shall apply to such Participant only if the designated person in the Participant’s employer’s Human Resources Department has received a copy of the Disability Notice before processing the Participant’s termination. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Code Section 422(d), the excess Options shall be deemed to be Nonstatutory Stock Options.
14.9ACCELERATION FOR ANY OTHER REASON. Regardless of whether an event has occurred as described in Section 14.7 or 14.8 above, and subject to Section 5.5 as to Full-Value Awards, the Committee may in its sole discretion at any time determine that all or a portion of a Participant’s Options, SARs, and other Awards in the nature of rights that may be exercised shall become fully or partially exercisable, that all or a part of the time-based vesting restrictions on all or a portion of the outstanding Awards shall lapse, and/or that any performance-based criteria with respect to any Awards shall be deemed to be wholly or partially satisfied, in each case, as of such date as the Committee may, in its sole discretion, declare. The Committee may discriminate among Participants and among Awards granted to a Participant in exercising its discretion pursuant to this Section 14.9.
14.10EFFECT OF ACCELERATION. If an Award is accelerated under Section 14.7, Section 14.8 or Section 14.9, the Committee may, in its sole discretion, provide (i) that the Award will expire after a designated period of time after such acceleration to the extent not then exercised, (ii) that the Award will be settled in cash rather than Stock, (iii) that the Award will be assumed by another party to a transaction giving rise to the acceleration or otherwise be equitably converted or substituted in connection with such transaction, (iv) that the Award may be settled by payment in cash or cash equivalents equal to the excess of the Fair Market Value of the underlying Stock, as of a specified date associated with the transaction, over the exercise price of the Award, or (v) any combination of the foregoing. The Committee’s determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated. To the extent that such acceleration causes Incentive Stock Options to exceed the dollar limitation set forth in Code Section 422(d), the excess Options shall be deemed to be Nonstatutory Stock Options.
14.11TERMINATION OF EMPLOYMENT. Whether military, government or other service or other leave of absence shall constitute a termination of employment shall be determined in each case by the Committee at its discretion, and any determination by the Committee shall be final and conclusive. A Participant’s Continuous Status as a Participant shall not be deemed to terminate (i) in a circumstance in which a Participant transfers from the Company throughto an Affiliate, transfers from an Affiliate to the paymentCompany, or transfers from one Affiliate to another Affiliate, or (ii) in the discretion of the Committee as specified at or prior to such occurrence, in the case of a spin-off, sale or disposition of the Participant’s employer from the Company or any Affiliate. To the extent that this provision causes Incentive Stock Options to extend beyond three months from the date a Participant is deemed to be an employee of the Company, a Parent or Subsidiary for purposes of Award eligibility.
Payments of Awards to Participants, if any, who are employees of subsidiaries or affiliatesSections 424(e) and 424(f) of the CompanyCode, the Options held by such Participant shall be paid directly by such subsidiaries or affiliates. The Company (or such subsidiary or affiliate asdeemed to be Nonstatutory Stock Options.
14.12FORFEITURE EVENTS. Awards under the case may be)Plan shall be authorizedsubject to withhold applicable taxesany compensation recoupment policy that the Company will adopt from an Award and such other amountstime to time, as shall be required by law or as have been previously authorizedotherwise, to the extent applicable. In addition, the Committee may specify in an Award Certificate that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events shall include, but shall not be limited to, termination of employment for cause, violation of material Company or Affiliate policies, breach of noncompetition, confidentiality or other restrictive covenants that may apply to the Participant, or other conduct by the Participant.Participant that is detrimental to the business or reputation of the Company or any Affiliate, or a later determination that the vesting of, or amount realized from, a Performance Award was based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria, whether or not the Participant caused or contributed to such material inaccuracy.
| |
8. | Amendment; Termination. |
14.13SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in substitution for stock and stock-based awards held by employees of another entity who become employees of the Company or an Affiliate as a result of a merger or consolidation of the former employing entity with the Company or an Affiliate or the acquisition by the Company or an Affiliate of property or stock of the former employing corporation. The Committee may direct that the substitute awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances.
ARTICLE 15.
CHANGES IN CAPITAL STRUCTURE
15.1MANDATORY ADJUSTMENTS. In the event of a nonreciprocal transaction between the Company and its shareholders that causes the per-share value of the Stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering, or large nonrecurring cash dividend), the authorization limits under Section 5.1 and 5.4 shall be authorizedadjusted proportionately, and the Committee shall make such adjustments to the Plan and Awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting from such transaction. Action by the Committee may include: (i) adjustment of the number and kind of shares that may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding Awards; (iii) adjustment of the exercise price of outstanding Awards or the measure to be used to determine the amount of the benefit payable on an Award; and (iv) any other adjustments that the Committee determines to be equitable. Notwithstanding the foregoing, the Committee shall not make any adjustments to outstanding Options or SARs that would constitute a modification or substitution of the stock right under Treas. Reg. Sections 1.409A-1(b)(5)(v) that would be treated as the grant of a new stock right or change in the form of payment for purposes of Code Section 409A. Without limiting the foregoing, in the event of a subdivision of the outstanding Stock (stock-split), a declaration of a dividend payable in Shares, or a combination or consolidation of the outstanding Stock into a lesser number of Shares, the authorization limits under Section 5.1 and 5.4 shall automatically be adjusted proportionately, and the Shares then subject to each Award shall automatically, without the necessity for any additional action by the Committee, be adjusted proportionately without any change in the aggregate purchase price therefore.
15.2DISCRETIONARY ADJUSTMENTS. Upon the occurrence or in anticipation of any corporate event or transaction involving the Company (including, without limitation, any merger, reorganization, recapitalization, combination or exchange of shares, or any transaction described in Section 15.1), the Committee may, in its sole discretion, provide (i) that Awards will be settled in cash rather than Stock, (ii) that Awards will become immediately vested and non-forfeitable and exercisable (in whole or in part) and will expire after a designated period of time to
89
the extent not then exercised, (iii) that Awards will be assumed by another party to a transaction or otherwise be equitably converted or substituted in connection with such transaction, (iv) that outstanding Awards may be settled by payment in cash or cash equivalents equal to the excess of the Fair Market Value of the underlying Stock, as of a specified date associated with the transaction (or the per-share transaction price), over the exercise or base price of the Award, (v) that performance targets and performance periods for Performance Shares will be modified, or (vi) any combination of the foregoing. The Committee’s determination need not be uniform and may be different for different Participants whether or not such Participants are similarly situated.
15.3GENERAL. Any discretionary adjustments made pursuant to this Article 15 shall be subject to the provisions of Section 16.2. To the extent that any adjustments made pursuant to this Article 15 cause Incentive Stock Options to cease to qualify as Incentive Stock Options, such Options shall be deemed to be Nonstatutory Stock Options.
ARTICLE 16.
AMENDMENT, MODIFICATION AND TERMINATION
16.1AMENDMENT, MODIFICATION AND TERMINATION. The Board or the Committee may, at any time and from time to time, amend, modify suspend or terminate the Plan without stockholder approval; provided, however, that if an amendment to the Plan would, in wholethe reasonable opinion of the Board or in part, as the Committee, shall deem proper andeither (i) materially increase the number of Shares available under the Plan, (ii) expand the types of awards under the Plan, (iii) materially expand the class of participants eligible to participate in the best interestsPlan, (iv) materially extend the term of the Plan, or (v) otherwise constitute a material change requiring stockholder approval under applicable laws, policies or regulations or the applicable listing or other requirements of an Exchange, then such amendment shall be subject to stockholder approval; and provided, further, that the Board or Committee may condition any other amendment or modification on the approval of shareholders of the Company atfor any reason, including by reason of such approval being necessary or deemed advisable to (i) to comply with the listing or other requirements of an Exchange, or (ii) to satisfy any other tax, securities or other applicable laws, policies or regulations. Without the prior approval of the shareholders of the Company, the Plan may not be amended to permit: (i) the exercise price or base price of an Option or SAR to be reduced, directly or indirectly, (ii) an Option or SAR to be cancelled in exchange for cash, other Awards, or Options or SARs with an exercise or base price that is less than the exercise price or base price of the original Option or SAR, or otherwise, or (iii) the Company to repurchase an Option or SAR for value (in cash or otherwise) from a Participant if the current Fair Market Value of the Shares underlying the Option or SAR is lower than the exercise price or base price per share of the Option or SAR.
16.2AWARDS PREVIOUSLY GRANTED. At any time forand from time to time, the purpose of meetingCommittee may amend, modify or addressingterminate any changes in legal requirements or for any other purpose permitted by law. The Committee will seek stockholderoutstanding Award without approval of any amendment determinedthe Participant; provided, however:
(a)Subject to require stockholder approval pursuant to Section 162(m)the terms of the Codeapplicable Award Certificate, such amendment, modification or termination shall not, without the Participant’s consent, reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment or termination (with the per-share value of an Option or Stock Appreciation Right for this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment or termination over the exercise or base price of such Award);
(b)The original term of an Option or Stock Appreciation Right may not be extended without the prior approval of the shareholders of the Company;
(c)Except as otherwise provided in Article 15, without the prior approval of the shareholders of the Company, (i) the exercise price of an Option or SAR may not be reduced, directly or indirectly, (ii) an option or SAR may not be cancelled in exchange for cash, other applicable law, rule regulationAwards or listing requirement.Options or SARs with an exercise or base price that is less than the exercise price or base price of the original Option or SAR, or otherwise, and (iii) the Company may not repurchase an Option or SAR for value (in cash or otherwise) from a Participant if the current Fair Market Value of the Shares underlying the Option or SAR is lower than the exercise price or base price per share of the Option or SAR; and
(d)No termination, amendment, or modification of the Plan shall adversely affect any Award previously granted under the Plan, without the written consent of the Participant affected thereby. An outstanding
Award shall not be deemed to be “adversely affected” by a Plan amendment if such amendment would not reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise settled on the date of such amendment (with the per-share value of an Option or Stock Appreciation Right for this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment over the exercise or base price of such Award).
16.3COMPLIANCE AMENDMENTS. Notwithstanding anything in the Plan or the terms ofin any Award or other applicable agreementCertificate to the contrary, the Committee may amend the Plan or anyan Award or other applicable agreement,Certificate, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan or Award or other applicable agreementCertificate to any present or future law relating to plans of this or similar nature (including, but not limited to, Section 409A of the Code), and to the administrative regulations and rulings promulgated thereunder. By participating inaccepting an Award under this Plan, a Participant agrees to any amendment made pursuant to this Section 16.3 to any Award granted under the Plan without further consideration or action.
ARTICLE 17.
GENERAL PROVISIONS
17.1NO RIGHTS TO AWARDS; NON-UNIFORM DETERMINATIONS. No AwardParticipant or any other rightEligible Participant shall have any claim to be granted any Award under the Plan. Neither the Company, its Affiliates nor the Committee is obligated to treat Participants or obligationEligible Participants uniformly, and determinations made under the Plan shallmay be conveyed, assigned, encumbered,made by the Committee selectively among Eligible Participants who receive, or transferred by any Participantare eligible to receive, Awards (whether or not such Eligible Participant hereunder, and any such attempted conveyance, assignment, encumbrance or transfer shall be void.Participants are similarly situated).
| |
10. | No Right to Continued Employment. |
Nothing in this Plan shall confer upon any17.2NO STOCKHOLDER RIGHTS. No Award gives a Participant any right to continue inof the employrights of a stockholder of the Company or shall interfereunless and until Shares are in fact issued to such person in connection with or restrict in any way the right of the Company to discharge such employee at any time for any reason whatsoever, with or without good cause.
The Plan is effective for Measurement Periods beginning on or after September 3, 2004.
| |
12. | Compensation Recoupment Policy.
|
Awards granted under this Plan shall be subject to any compensation recoupment policy that the Company may adopt from time to time that is applicable by its terms to the recipient of such Award.
| |
13. | Special Provisions Related To Section 409A of the Code. |
17.3SPECIAL PROVISIONS RELATED TO SECTION 409A OF THE CODE.
(a)It is intended that the payments and benefits provided under the Plan and any Award shall either be exempt from the application of, or comply with, the requirements of Section 409A of the Code. The Plan and all AwardsAward Certificates shall be construed in a manner that effects such intent. Nevertheless, the tax treatment of the benefits provided under the Plan or any Award is not warranted or guaranteed. Neither the Company, its affiliatesAffiliates nor their respective directors, officers, employees or advisers (other than in his or her capacity as a Participant) shall be held liable for any taxes, interest, penalties or other monetary amounts owed by any Participant or other taxpayer as a result of the Plan or any Award.
(b)Notwithstanding anything in the Plan or in any Award or other applicable agreementCertificate to the contrary, to the extent that any amount or benefit that would constitute non-exempt "deferred compensation"“deferred compensation” for purposes of Section 409A of the Code (“Non-Exempt Deferred Compensation”) would otherwise be payable or distributable, or a different form of payment (e.g., lump sum or installment) would be effected, under the Plan or any Award or other applicable agreementCertificate by reason of the occurrence of a changeChange in control,Control, or the participant’s disabilityParticipant’s Disability or separation from service, such amount or benefitNon-Exempt Deferred Compensation will not be
payable or distributable to the Participant, and/or such different form of payment will not be effected, by reason of such circumstance unless (i) the circumstances giving rise to such changeChange in control, disabilityControl, Disability or separation from service meet any description or definition of "change“change in control event"event”, "disability"“disability” or "separation“separation from service"service”, as the case may be, in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition), or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A by reason of the short-term deferral exemption or otherwise.. This provision does not prohibit the vesting of any Award upon a changeChange in control, disabilityControl, Disability or separation from service, however defined. If this provision prevents the payment or distribution of any amount or benefit, or the application of a different form of payment of any amount or benefit, such payment or distribution shall be made onat the next earliest payment or distribution date or event specifiedtime and in the Awardform that would have applied absent the Change in Control, Disability or other applicable agreement that is permissible under Section 409A.separation from service, as applicable.
(c)If any one or more Awards granted under the Plan to a Participant could qualify for any separation pay exemption described in Treas. Reg. Section 1.409A-1(b)(9), but such Awards in the aggregate exceedsexceed the dollar limit permitted for the separation pay exemptions, the Company (acting through the Committee or the Head of Human Resources)Company’s Chief Executive Officer) shall determine which Awards or portions thereof will be subject to such exemptions.
91
(d)Notwithstanding anything in the Plan or in any Award or other applicable agreementCertificate to the contrary, if any amount or benefit that would constitute non-exempt "deferred compensation" for purposes of Section 409ANon-Exempt Deferred Compensation would otherwise be payable or distributable under this Plan or in any Award or other applicable agreementCertificate by reason of a Participant’s separation from service during a period in which the Participant is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Committee under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes):
(i)if the payment or distribution is payable in a lump sum, the Participant’s right to receive payment or distribution of such non-exempt deferred compensationNon-Exempt Deferred Compensation will be delayed until the earlier of the Participant’s death or the first day of the seventh month following the Participant’s separation from service; and
(ii)if the payment or distribution is payable over time, the amount of such non-exempt deferred compensationNon-Exempt Deferred Compensation that would otherwise be payable during the six-month period immediately following the Participant’s separation from service will be accumulated and the Participant’s right to receive payment or distribution of such accumulated amount will be delayed until the earlier of the Participant’s death or the first day of the seventh month following the Participant’s separation from service, whereupon the accumulated amount will be paid or distributed to the Participant and the normal payment or distribution schedule for any remaining payments or distributions will resume.
For purposes of this Plan, the term "Specified Employee"“Specified Employee” has the meaning given such term in Code Section 409A and the final regulations thereunder, provided, however, that, as permitted in such final regulations, the Company’s Specified Employees and its application of the six-month delay rule of Code Section 409A(a)(2)(B)(i) shall be determined in accordance with rules adopted by the Board or any committee of the Board, which shall be applied consistently with respect to all nonqualified deferred compensation arrangements of the Company, including this Plan.
(e)If, pursuant to an Award, a Participant is entitled to a series of installment payments, such Participant’s right to the series of installment payments shall be treated as a right to a series of separate payments and not to a single payment. For purposes of the preceding sentence, the term “series of installment payments” has the meaning provided in Treas. Reg. Section 1.409A-2(b)(2)(iii) (or any successor thereto).
(f)The Company shall have the sole authority to make any accelerated distribution permissible under Treas. Reg. section 1.409A-3(j)(4) to Participants of deferred amounts, provided that such distribution(s) meets the requirements of Treas. Reg. section 1.409A-3(j)(4).
(g)Whenever an Award conditions a payment or benefit on the Participant’s execution and non-revocation of a release of claims, such release must be executed and all revocation periods shall have expired within 60 days after the date of termination of the Participant’s employment; failing which such payment or benefit shall be forfeited. If such payment or benefit is exempt from Section 409A of the Code, the Company may elect to make or commence payment at any time during such 60-day period. If such payment or benefit constitutes Non-Exempt Deferred Compensation, then, subject to subsection (d) above, (i) if such 60-day period begins and ends in a single calendar year, the Company may make or commence payment at any time during such period at its discretion, and (ii) if such 60-day period begins in one calendar year and ends in the next calendar year, the payment shall be made or commence during the second such calendar year (or any later date specified for such payment under the applicable Award), even if such signing and non-revocation of the release occur during the first such calendar year included within such 60-day period.
17.4WITHHOLDING. The Company or any Affiliate shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to any exercise, lapse of restriction or other taxable event arising as a result of the Plan. With respect to withholding required upon any taxable event under the Plan, the Committee may, at the time the Award is granted or thereafter, require or permit that any such withholding requirement be satisfied, in whole or in part, by withholding from the Award Shares having a Fair Market Value on the date of withholding equal to the minimum amount (and not any greater amount) required to be withheld for tax purposes, all in accordance with such procedures as the Committee establishes. All
B-892 |2020 Proxy Statement
such elections shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.
17.5NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan, any Award Certificate or any other document or statement made with respect to the Plan, shall interfere with or limit in any way the right of the Company or any Affiliate to terminate any Participant’s employment or status as an officer, director or consultant at any time, nor confer upon any Participant any right to continue as an employee, officer, director or consultant of the Company or any Affiliate, whether for the duration of a Participant’s Award or otherwise. Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company or any Affiliate and, accordingly, subject to Article 16, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Board of Directors without giving rise to any liability on the part of the Company or an of its Affiliates.
17.6UNFUNDED STATUS OF AWARDS. The Plan is intended to be an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Certificate shall give the Participant any rights that are greater than those of a general creditor of the Company or any Affiliate. This Plan is not intended to be subject to ERISA.
17.7RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or benefit plan of the Company or any Affiliate unless provided otherwise in such other plan.
17.8EXPENSES. The expenses of administering the Plan shall be borne by the Company and its Affiliates.
17.9TITLES AND HEADINGS. The titles and headings of the Sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
17.10GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural.
17.11FRACTIONAL SHARES. No fractional Shares shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding up or down.
17.12GOVERNMENT AND OTHER REGULATIONS.
(a)Notwithstanding any other provision of the Plan, no Participant who acquires Shares pursuant to the Plan may, during any period of time that such Participant is an affiliate of the Company (within the meaning of the rules and regulations of the Securities and Exchange Commission under the 1933 Act), sell such Shares, unless such offer and sale is made (i) pursuant to an effective registration statement under the 1933 Act, which is current and includes the Shares to be sold, or (ii) pursuant to an appropriate exemption from the registration requirement of the 1933 Act, such as that set forth in Rule 144 promulgated under the 1933 Act.
(b)Notwithstanding any other provision of the Plan, if at any time the Committee shall determine that the registration, listing or qualification of the Shares covered by an Award upon any Exchange or under any foreign, federal, state or local law or practice, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Award or the purchase or receipt of Shares thereunder, no Shares may be purchased, delivered or received pursuant to such Award unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Committee. Any Participant receiving or purchasing Shares pursuant to an Award shall make such representations and agreements and furnish such information as the Committee may request to assure compliance with the foregoing or any other applicable legal requirements. The Company shall not be required to issue or deliver any certificate or certificates for Shares under the Plan prior to the Committee’s determination that all related requirements have been fulfilled. The Company shall in no event be obligated to
93
register any securities pursuant to the 1933 Act or applicable state or foreign law or to take any other action in order to cause the issuance and delivery of such certificates to comply with any such law, regulation or requirement.
17.13GOVERNING LAW. To the extent not governed by federal law, the Plan and all Award Certificates shall be construed in accordance with and governed by the laws of the State of Delaware.
17.14ADDITIONAL PROVISIONS. Each Award Certificate may contain such other terms and conditions as the Committee may determine; provided that such other terms and conditions are not inconsistent with the provisions of the Plan.
17.15NO LIMITATIONS ON RIGHTS OF COMPANY. The grant of any Award shall not in any way affect the right or power of the Company to make adjustments, reclassification or changes in its capital or business structure or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets. The Plan shall not restrict the authority of the Company, for proper corporate purposes, to draft or assume awards, other than under the Plan, to or with respect to any person. If the Committee so directs, the Company may issue or transfer Shares to an Affiliate, for such lawful consideration as the Committee may specify, upon the condition or understanding that the Affiliate will transfer such Shares to a Participant in accordance with the terms of an Award granted to such Participant and specified by the Committee pursuant to the provisions of the Plan.
17.16INDEMNIFICATION. Each person who is or shall have been a member of the Committee, or of the Board, or an officer of the Company to whom authority was delegated in accordance with Article 4 shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
17.17SEVERABILITY. In the event that any provision of this Plan is found to be invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability will not be construed as rendering any other provisions contained herein as invalid or unenforceable, and all such other provisions will be given full force and effect to the same extent as though the invalid or unenforceable provision was not contained herein.
