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UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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SCHEDULE 14A
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Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant x
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Filed by a Party other than the Registranto
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Check the appropriate box:
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| Preliminary Proxy Statement
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| Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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| Definitive Proxy Statement
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| Definitive Additional Materials
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| Soliciting Material under §240.14a-12
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Monster Beverage Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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x
| No fee required.
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| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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| Title of each class of securities to which transaction applies:
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| Aggregate number of securities to which transaction applies:
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| Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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| Proposed maximum aggregate value of transaction:
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| Total fee paid:
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| Fee paid previously with preliminary materials.
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| Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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| Amount Previously Paid:
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| Form, Schedule or Registration Statement No.:
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Table of Contents
1 Monster Way
Corona, California 92879
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 19, 20173, 2020
April 28, 201721, 2020
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of Monster Beverage Corporation (the “Company”) to be held on Monday,Wednesday, June 19, 20173, 2020 at 2:0030 p.m. local time at our corporate offices, located at 1 Monster Way, Corona, California 92879 (the “Annual Meeting”). This year, in light of the public health impact of the novel coronavirus (COVID-19) pandemic and the protocols that federal, state and local governments have imposed, we will conduct our Annual Meeting exclusively as a virtual meeting via live webcast. You will not be able to attend the Annual Meeting in person. We believe that a virtual meeting will provide meaningful stockholder access and participation and also protect the health and safety of the Company’s stockholders, employees and other stakeholders. During the virtual meeting, you may ask questions and will be able to vote your shares electronically. Stockholders can access the Annual Meeting by visiting:www.virtualshareholdermeeting.com/MNST2020. This proxy is solicited on behalf of the Board of Directors of the Company.
In addition to the specific matters to be voted on at the Annual Meeting that are listed in the accompanying notice, there will be a report on the Company’s business and an opportunity for stockholders of the Company to ask questions.
We are pleased to take advantage of the U.S. Securities and Exchange Commission rule that allows companies to furnish proxy materials to their stockholders over the internet. As a result, we are mailing to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of this proxy statement and our Annual Report to Stockholders for the fiscal year ended December 31, 2016.2019. We believe this process allows us to provide our stockholders with the information they need in a timely manner, while reducing the environmental impact and lowering costs of printing and distributing our proxy materials. The Notice contains instructions on how to access those documents over the internet. The Notice also contains instructions on how to request a paper copy of our proxy materials, including this proxy statement, our Annual Report to Stockholders for the fiscal year ended December 31, 20162019 and a form of proxy card or voting instruction card.
I hope that you will be able to join us. Your vote is important to us and to our business. I encourage you to vote by telephone, over the internet, or if you requested to receive printed proxy materials, by marking, signing, dating and returning your proxy card so that your shares will be represented and voted at the Annual Meeting, whether or not you plan to attend. If you attend the Annual Meeting via live webcast, you will, of course, have the right to revoke the proxy and vote your shares in person.electronically.
The proxy materials, including this proxy statement and our Annual Report to Stockholders for the fiscal year ended December 31, 2016,2019, are being distributed and made available on or about April 28, 2017.21, 2020.
| Sincerely, |
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| /s/ Rodney C. Sacks |
| Rodney C. Sacks |
| Chairman of the Board of Directors |
MONSTER BEVERAGE CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 19, 20173, 2020
TO THE STOCKHOLDERS OF THE COMPANY:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Monster Beverage Corporation (“Monster” or the “Company”) will be held on Monday,Wednesday, June 19, 20173, 2020 at 2:0030 p.m. local time at the Company’s corporate offices, located at 1 Monster Way, Corona, California 92879 (the “Annual Meeting”),. Due to the ongoing public health impact of the novel coronavirus (COVID-19) pandemic and the protocols that federal, state and local governments have imposed, this year’s Annual Meeting will be exclusively conducted as a virtual meeting via live webcast. You will be able to attend the Annual Meeting, vote your shares electronically and submit questions during the meeting by visitingwww.virtualshareholdermeeting.com/MNST2020. You will not be able to attend the Annual Meeting in person. Additional information regarding attending the Annual Meeting, voting your shares and submitting questions can be found in the Proxy Statement for the Annual Meeting of Stockholders. The Annual Meeting is being held for the following purposes:
1.To elect ten directors to serve until the 2018 annual meeting of stockholders of the Company;
2.To ratify the appointment of Deloitte & Touche LLP to serve as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2017;
3.To approve the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors;
4.To approve, on a non-binding, advisory basis, the compensation of the Company’s named executive officers;
5.To approve, on a non-binding, advisory basis, the frequency with which stockholders will approve the compensation of the Company’s named executive officers;
6.To consider a stockholder proposal requesting the Company’s Board of Directors adopt a “proxy access” bylaw, if properly presented at the Annual Meeting;
7.To consider a stockholder proposal regarding a sustainability report related to key environmental, social and governance risks and opportunities including an analysis of material water-related risks, if properly presented at the Annual Meeting; and
8.To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.
| 1. | To elect ten directors to serve until the 2021 annual meeting of stockholders of the Company; |
| 2. | To ratify the appointment of Deloitte & Touche LLP to serve as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2020; |
| 3. | To approve, on a non-binding, advisory basis, the compensation of the Company’s named executive officers; |
| 4. | To approve the Monster Beverage Corporation 2020 Omnibus Incentive Plan; and |
| 5. | To transact such other business as may properly come before the meeting or any adjournment or postponement thereof. |
The foregoing items of business are more fully described in the Proxy Statement for the Annual Meeting of Stockholders accompanying this Notice. Only stockholders of the Company of record at the close of business on April 24, 201713, 2020 are entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof.
We will make available a list of stockholders as of the close of business on April 24, 2017 for inspection by stockholders during normal business hours from 9:00 a.m. to 5:00 p.m. local time, from June 6, 2017 through June 16, 2017, at the Company’s executive offices, 1 Monster Way, Corona, CA 92879. This list will also be available to stockholders at the Annual Meeting.
All stockholders of the Company are cordially invited to attend the Annual Meeting via live webcast atwww.virtualshareholdermeeting.com/MNST2020 and use their 16-digit control number provided in person.the Notice of Internet Availability of Proxy Materials or on the proxy card. We encourage stockholders to log in to this website and access the webcast before the Annual Meeting’s start time. Please note that there is no in-person annual meeting for you to attend. However, to ensure your representation at the Annual Meeting, you are urged to vote by telephone, over the internet, or if you requested to receive printed proxy materials, by marking, signing, dating and returning your proxy card.card prior to the Annual Meeting. We encourage you to send your proxies in as early as possible. You may revoke your voted proxy at any time prior to the Annual Meeting or vote in personelectronically if you attend the Annual Meeting.Meeting via live webcast. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again at the Annual Meeting electronically via live webcast, specifically request in writing that your prior proxy be revoked, or are a beneficial holder who requests a legal proxy.
If you encounter any technical difficulties with the virtual meeting platform on the Annual Meeting day, please call the technical support line number that will be posted on the virtual meeting login page.
| Sincerely, |
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| /s/ Rodney C. Sacks |
| Rodney C. Sacks |
| Chairman of the Board of Directors |
Corona, California
April 28, 2017
Table of Contents21, 2020
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO VOTE YOUR SHARES AS PROMPTLY AS POSSIBLE. IN ADDITION TO VOTING IN PERSON,ELECTRONICALLY VIA LIVE WEBCAST, STOCKHOLDERS OF RECORD MAY VOTE VIA A TOLL FREE TELEPHONE NUMBER OR OVER THE INTERNET AS INSTRUCTED IN THESE MATERIALS. IF YOU REQUESTED TO RECEIVE A PROXY CARD OR VOTING INSTRUCTION CARD BY MAIL, YOU MAY ALSO VOTE BY MARKING, SIGNING, DATING AND MAILING THE PROXY CARD PROMPTLY IN THE RETURN ENVELOPE PROVIDED. PLEASE NOTE THAT IF YOUR SHARES ARE HELD BY A BROKER OR OTHER INTERMEDIARY AND YOU WISH TO VOTE AT THE ANNUAL MEETING, YOU MUST OBTAIN A LEGAL PROXY FORM FROMAND VOTE YOUR SHARES IN THE MANNER PRESCRIBED BY THAT RECORD HOLDER.
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| Important Notice Regarding the Availability of Proxy Materials for the 20172020 Annual Meeting of Stockholders to be Held on June 19, 2017. 3, 2020. |
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The Company’s Proxy Statement and the Company’s Annual Report to Stockholders for the fiscal year ended December 31, 20162019 are available at https://materials.proxyvote.com/61174X. | |
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TABLE OF CONTENTS
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Table of Contents
MONSTER BEVERAGE CORPORATION
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The Board of Directors of Monster Beverage Corporation (“Monster” or the “Company”) is soliciting proxies to be voted at the Annual Meeting of Stockholders of the Company (the “Annual Meeting”) to be held on Monday,Wednesday, June 19, 20173, 2020 at 2:0030 p.m. local time, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Stockholders of the Company. The Annual Meeting will be held atexclusively conducted as a virtual meeting via live webcast. You will be able to attend the Company’s executive offices located at 1 Monster Way, Corona, California 92879.Annual Meeting, vote your shares electronically, examine a list of stockholders as of the close of business on April 13, 2020 and submit questions during the meeting by visitingwww.virtualshareholdermeeting.com/MNST2020. To enter the annual meeting, you will need the 16-digit control number that is printed on your proxy card. We encourage stockholders to log in to this website and access the webcast before the Annual Meeting’s start time. You will not be able to attend the Annual Meeting in person. In this proxy, unless the context requires otherwise, references to “we”, “our”, or “us” refer to Monster.
The proxy materials, including this proxy statement and our Annual Report to Stockholders for the fiscal year ended December 31, 2016,2019, are being distributed and made available on or about April 28, 2017.21, 2020. This proxy statement contains important information for you to consider when deciding how to vote on matters brought before the Annual Meeting. Please read it carefully.
Notice of Internet Availability of Proxy Materials
In accordance with rules and regulations adopted by the U.S. Securities and Exchange Commission (the “SEC”),SEC, we have elected to provide our stockholders access to our proxy materials over the internet. Accordingly, a Notice of Internet Availability of Proxy Materials (the “Notice”) will be mailed on or about April 28, 201721, 2020 to our stockholders who owned the Company’s common stock, par value $0.005 per share (the “Common(“Common Stock”), at the close of business on April 24, 2017.13, 2020. Stockholders will have the ability to access the proxy materials on a website referred to in the Notice, or request that a printed set of the proxy materials be sent to them by following the instructions in the Notice.
Householding
If you are a beneficial owner, your bank or broker may deliver a single proxy statement, along with individual proxy cards, or individual Notices to any household at which two or more stockholders reside unless contrary instructions have been received from you. This procedure, referred to as householding, reduces the volume of duplicate materials shareholdersstockholders receive and reduces mailing expenses. Stockholders may revoke their consent to future householding mailings or enroll in householding mailings by contacting American Stock Transfer and& Trust Company, LLC, 1-800-937-5449, or by writing to American Stock Transfer and& Trust Company, LLC, 6201 15th Ave, Brooklyn, NY 11219. Alternatively, if you wish to receive a separate set of proxy materials for this year’s Annual Meeting, we will deliver them promptly upon request to Monster Beverage Corporation, 1 Monster Way, Corona, CA 92879, or by calling (951) 739-6200 or (800) 426-7367.
Record Date, Outstanding Voting Securities
Holders of record of Common Stock at the close of business on April 24, 201713, 2020 are entitled to notice of, and to vote at, the Annual Meeting. Each share entitles its holder to one vote. As of the record
date, 567,811,810526,547,394 shares of our Common Stock were issued and outstanding. There are no other outstanding voting securities of the Company.
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Quorum
The presence, in personvia live webcast or by proxy, of the holders of one-third of the shares of Common Stock entitled to vote at the Annual Meeting is necessary to constitute a quorum at the Annual Meeting. Such stockholders are counted as present at the Annual Meeting if they (i) are present in personvia live webcast at the Annual Meeting or (ii) have properly submitted their vote by telephone, over the internet, or by returning their proxy card. Abstentions and withheld votes will be counted for determining whether a quorum is present for the Annual Meeting.
Required Vote
In accordance with the Company’s by-laws:
·Directors are elected by the affirmative vote of a plurality of the votes cast in person or by proxy by the holders of shares of Common Stock entitled to vote in the election at the Annual Meeting (if any nominee for director receives a greater number of votes “withheld” than votes “for” such election, our director resignation policy requires that such person must promptly tender his or her resignation to the Board following certification of the results);
·The ratification of Deloitte & Touche LLP as the Company’s independent registered public accounting firm shall be by the affirmative vote of the majority of the votes cast on the proposal in person or by proxy at the Annual Meeting (meaning the number of shares voted “for” a proposal must exceed the number of shares voted “against” such proposal);
·The approval of the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors (the “2017 Non-Employee Directors Compensation Plan”) shall be by the affirmative vote of the majority of the votes cast on the proposal in person or by proxy at the Annual Meeting;
·The approval, on a non-binding, advisory basis, of the compensation of the Company’s named executive officers shall be by the affirmative vote of the majority of the votes cast on the proposal in person or by proxy at the Annual Meeting (the “Say-on-Pay Proposal”);
·The approval, on a non-binding, advisory basis, of the frequency with which our stockholders will approve the composition of our named executive officers shall be by the affirmative vote of the majority of the votes cast on the proposal in person or by proxy at the Annual Meeting (the “Say-on-Frequency Proposal”);
·The approval of a stockholder proposal requesting the Company’s Board of Directors to adopt a “proxy access” bylaw, if properly presented at the Annual Meeting, shall be by the affirmative vote of the majority of the votes cast on the proposal in person or by proxy at the Annual Meeting (the “Proxy Access Proposal”); and
·The approval of a stockholder proposal regarding a sustainability report, related to key environmental, social and governance risks and opportunities including an analysis of material water-related risks, if properly presented at the Annual Meeting, shall be by the affirmative vote of the majority of the votes cast on the proposal in person or by proxy at the Annual Meeting (the “Sustainability Report Proposal”);
| · | Directors are elected by the affirmative vote of a plurality of the votes cast electronically via live webcast or by proxy by the holders of shares of Common Stock entitled to vote in the election at the Annual Meeting (if any nominee for director receives a greater number of votes “withheld” than votes “for” such election, our director resignation policy requires that such person must promptly tender his or her resignation to the Board following certification of the results); |
| · | The ratification of Deloitte & Touche LLP as the Company’s independent registered public accounting firm shall be by the affirmative vote of the majority of the votes cast on the proposal electronically via live webcast or by proxy at the Annual Meeting (meaning the number of shares voted “for” a proposal must exceed the number of shares voted “against” such proposal); |
| · | The approval, on a non-binding, advisory basis, of the compensation of the Company’s named executive officers shall be by the affirmative vote of the majority of the votes cast on the proposal electronically via live webcast or by proxy at the Annual Meeting (the “Say-on-Pay Proposal”); and |
| · | The approval of the Monster Beverage Corporation 2020 Omnibus Incentive Plan (the “2020 Omnibus Incentive Plan”) shall be by the affirmative vote of the majority of the votes cast on the proposal electronically via live webcast or by proxy at the Annual Meeting. |
in each case, provided a quorum is present.
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With respect to the election of directors, you may vote “for” or “withhold” authority to vote for each of the nominees for the Board. If you “withhold” authority to vote with respect to one or more director nominees, your vote will have no effect on the election of such nominees (except with respect to the director resignation policy). Broker non-votes will have no effect on the election of the nominees. With respect to the other proposals, you may vote “for”, “against” or “abstain” from voting. If you “abstain” from voting, your vote will have no effect on these proposals. Broker non-votes will also have no effect on the vote for these proposals.
Non-Non-Discretionary ProposalsDiscretionary Proposals
If you are a beneficial owner and hold your shares in street name and do not provide the organization that holds your shares with voting instructions, the broker or other intermediary will determine if it has the discretionary authority to vote on the particular matter. Brokers and other intermediaries may not vote uninstructed shares in (i) the election of directors,directors; (ii) the approval of the 2017 Non-Employee Directors Compensation Plan, (iii) the approval of the Say-on-Pay Proposal (iv)and (iii) the approval of the Say-on-Frequency Proposal, (v) the approval of the Proxy Access Proposal, and (vi) the approval of the Sustainability Report Proposal.2020 Omnibus Incentive Plan. If your shares are held
by a broker or other intermediary and you do not instruct your broker or other intermediary how to vote for each of these proposals, no votes will be cast on your behalf. Therefore, it is important that you cast your vote if you want it to count for each of these proposals.
Discretionary Proposals
Brokers that do not receive instructions are entitled to vote on the ratification of the independent registered public accounting firm.
No stockholder shall be entitled to cumulative voting. American Stock Transfer & Trust Company (“AST”)Broadridge Financial Solutions, Inc. will receive and tabulate the proxies.
Board of Directors’ Recommendations
The Board of Directors of the Company (the “Board of Directors” or the “Board”) recommends a vote:
·“FOR” each of the nominees to the Board (Proposal One);
| · | “FOR” each of the nominees to the Board (Proposal One); |
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| · | “FOR” the ratification of Deloitte & Touche LLP as our independent registered public accountants for fiscal year 2020 (Proposal Two); |
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| · | “FOR” the Say-on-Pay Proposal (Proposal Three); and |
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| · | “FOR” the proposal to approve the 2020 Omnibus Incentive Plan (Proposal Four). |
·“FOR” the ratification of Deloitte & Touche LLP as our independent registered public accountants for fiscal year 2017 (Proposal Two);
·“FOR” the proposal to approve the 2017 Non-Employee Directors Compensation Plan (Proposal Three);
·“FOR” the Say-on-Pay Proposal (Proposal Four);
·“FOR EACH YEAR” regarding the Say-on-Frequency Proposal (Proposal Five);
·“AGAINST” the Proxy Access Proposal (Proposal Six); and
·“AGAINST” the Sustainability Report Proposal (Proposal Seven).
How to Vote
If on April 24, 201713, 2020 your shares are registered directly in your name with the Company’s registrar and transfer agent, AST,American Stock Transfer & Trust Company, LLC, you are considered a stockholder of record with respect to those shares and the Notice was sent to you directly by the Company. As the stockholder of record, you have the right to grant your voting proxy directly to the Company or to vote in personelectronically via live webcast at the Annual Meeting.
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If you are a stockholder of record and you sign and submit a proxy card, but you do not provide voting instructions on the card, your shares will be voted “FOR” proposals 1, 2, 3 and 4, “FOR EACH YEAR” for proposal 5 and “AGAINST” proposals 6 and 7.4.
If on April 24, 201713, 2020 your shares are held in a brokerage account, bank, broker-dealer, trust or similar organization, you are considered the “beneficial owner” of those shares held in street name and the Notice was forwarded to you by that organization. The organization that holds your shares is considered the stockholder of record for purposes of voting at the Annual Meeting. Because you are not the stockholder of record, you may not vote your shares at the Annual Meeting unless you request and obtain a valid proxy from the organization that holds your shares giving you the right to vote your shares at the Annual Meeting. As the beneficial owner, you have the right to direct your broker or other intermediary how to vote your shares and you are also invited to attend the Annual Meeting.Meeting via live webcast.
Your vote is very important to us and we hope that you will attend the Annual Meeting.Meeting via live webcast. However, whether or not you plan to attend the Annual Meeting, please vote by proxy in accordance with the instructions on your proxy card, voting instruction form (from your broker or other intermediary) or the instructions that you received through electronic mail. There are three convenient ways of submitting your vote:
| · | By Telephone or Internet - All stockholders of record can vote by touchtone telephone from the U.S. using the toll free telephone number on the proxy card, or over the internet using the procedures and instructions described on the proxy card. Beneficial owners may vote by telephone or internet if their broker or other intermediary makes those methods available, in which case the broker or other intermediary will enclose the instructions with the proxy materials. The telephone and internet voting procedures are designed to authenticate stockholders’ identities, to allow stockholders to vote their shares and to confirm that their instructions have been recorded properly. |
·By Telephone or Internet - All stockholders of record can vote by touchtone telephone from the U.S. using the toll free telephone number on the proxy card, or over the internet using the procedures and instructions described on the proxy card. Beneficial owners may vote by telephone or internet if their broker or other intermediary makes those methods available, in which case the broker or other intermediary will enclose the instructions with the proxy materials. The telephone and internet voting procedures are designed to authenticate stockholders’ identities, to allow stockholders to vote their shares, and to confirm that their instructions have been recorded properly.
| · | Via Live Webcast - All stockholders of record may vote electronically via live webcast at the virtual Annual Meeting atwww.virtualshareholdermeeting.com/MNST2020 and using their 16-digit control number provided in their proxy card. Beneficial owners may vote electronically via live webcast at the Annual Meeting if their broker or other intermediary has furnished a legal proxy. If you are a beneficial owner and would like to vote your shares by proxy, you will need to ask your broker or other intermediary to furnish you with a legal proxy. Attendance at the Annual Meeting will not cause your previously granted proxy to be revoked, unless you vote again at the Annual Meeting electronically via live webcast, specifically request in writing that your prior proxy be revoked, or are a beneficial holder who requests a legal proxy. |
| · | By Written Proxy - All stockholders of record can vote by written proxy card, if they have requested to receive printed proxy materials. If you are a beneficial holder and you requested to receive printed proxy materials, you will receive a written proxy card and a voting instruction form from your broker or other intermediary. |
·In Person - All stockholders of record may vote in person at the Annual Meeting. Beneficial owners may vote in person at the Annual Meeting if their broker or other intermediary has furnished a legal proxy. If you are a beneficial owner and would like to vote your shares by proxy, you will need to ask your broker or other intermediary to furnish you with a legal proxy. You will need to bring the legal proxy with you to the Annual Meeting and hand it in with a signed ballot that will be provided to you at the Annual Meeting. You will not be able to vote your shares without a legal proxy.
·By Written Proxy - All stockholders of record can vote by written proxy card, if they have requested to receive printed proxy materials. If you are a beneficial holder and you requested to receive printed proxy materials, you will receive a written proxy card and a voting instruction form from your broker or other intermediary.
Revocability of Proxies
If you are a stockholder of record, you may revoke your proxy and change your vote at any time before the Annual Meeting by: (i) delivering a written notice of revocation to the Office of the Secretary at the Company’s principal executive offices; (ii) voting again over the internet or by telephone (only your latest internet or telephone proxy submitted prior to the Annual Meeting will be counted) or, if you requested and received written proxy materials, by signing and returning a new proxy card with a later date; or (iii) by attending the Annual Meeting via live webcast and voting in person.
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If you are a beneficial owner, you may revoke your proxy and change your vote at any time before the Annual Meeting by: (i) submitting new voting instructions to your broker or other intermediary; or (ii) if you have obtained a legal proxy from your broker or other intermediary, by attending the Annual Meeting via live webcast and voting in person.electronically.
However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again at the Annual Meeting electronically via live webcast, specifically request in writing that your prior proxy be revoked, or are a beneficial holder who requests a legal proxy.
Solicitation
The cost of soliciting proxies will be borne by the Company. The Company will reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation material to such beneficial owners. In addition to solicitation by use of the mail or via the internet, proxies may also be solicited by certain of the Company’s directors, officers and regular employees, without additional compensation, personally or by telephone, facsimile or letter. In addition,
the Company has engaged D.F. King & Co., Inc. to act as its proxy solicitor and has agreed to pay approximately $9,500.00$11,500.00 plus reasonable expenses for such services.
6Questions
In order to submit a question at the Annual Meeting, you will need your 16-digit control number provided in the Notice of Internet Availability of Proxy Materials or on the proxy card and visitwww.virtualshareholdermeeting.com/MNST2020. You may log in 15 minutes before the start of the Annual Meeting and submit questions online, and you will be able to submit questions during the Annual Meeting as well. We encourage you to submit any question that is relevant to the business of the meeting. Relevant questions will be read and addressed during the meeting, subject to time limitations. The questions and answers from the Annual Meeting will be available atwww.monsterbevcorp.com in the “Events & Presentations Section” as soon as practicable following the Annual Meeting and archived for approximately one year.
Technical Support
If you encounter any technical difficulties with the virtual meeting platform on the Annual Meeting day, please call the technical support line number that will be posted on the virtual meeting login page.
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PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of the most recent practical date, April 10, 20178, 2020 (unless otherwise noted below), the beneficial ownership of the Company’s Common Stock of (a) those persons known to the Company to be the beneficial owners of more than 5% of the Company’s Common Stock; (b) each of the Company’s directors and nominees for director; (c) the Company’s named executive officers; and (d) all of the Company’s current directors and executive officers as a group. In computing the number and percentage of shares beneficially owned by each person, we include any shares of Common Stock that could be acquired within 60 days of April 10, 20178, 2020 by the exercise of options or the vesting of restricted stock units. Such shares, however, are not counted in computing the percentage ownership of any other person.
Name and Address of Beneficial Owner* | | Amount and Nature of
Beneficial Ownership | | Percent of
Class |
Brandon Limited Partnership No. 11
| | 5,645,568 | | 1.0% |
Brandon Limited Partnership No. 22 | | 29,386,944 | | 5.2% |
Hilrod Holdings IV, L.P. | | 104,772 | | **% |
Hilrod Holdings V, L.P. | | 214,284 | | **% |
Hilrod Holdings VI, L.P. | | 323,700 | | **% |
Hilrod Holdings VII, L.P. | | 120,216 | | **% |
Hilrod Holdings VIII, L.P. | | 568,584 | | **% |
Hilrod Holdings IX, L.P. | | 453,444 | | **% |
Hilrod Holdings X, L.P. | | 249,918 | | **% |
Hilrod Holdings XI, L.P. | | 505,242 | | **% |
Hilrod Holdings XII, L.P. | | 327,186 | | **% |
Hilrod Holdings XIII, L.P. | | 1,440,954 | | **% |
Hilrod Holdings XIV, L.P. | | 925,878 | | **% |
Hilrod Holdings XV, L.P. | | 8,832 | | **% |
Hilrod Holdings XVI, L.P. | | 2,249,190 | | **% |
Rodney C. Sacks 2008 GRAT #2 | | 90,204 | | **% |
Rodney C. Sacks 2009 GRAT #2 | | 231,363 | | **% |
RCS Direct 2010 GRAT | | 105,486 | | **% |
RCS Direct 2010 GRAT #2 | | 4,836 | | **% |
RCS Direct 2011 GRAT | | 80,598 | | **% |
HHS 2014 GRAT #2 | | 28,722 | | **% |
FMR LLC3 | | 44,625,735 | | 7.9% |
Wellington Management Company, LLP4 | | 33,564,885 | | 5.9% |
The Coca-Cola Company5 | | 102,121,602 | | 18.0% |
Rodney C. Sacks6 | | 46,611,813 | | 8.2% |
Hilton H. Schlosberg7 | | 48,133,326 | | 8.4% |
Gary P. Fayard8 | | 2,916 | | **% |
Mark J. Hall9 | | 971,808 | | **% |
Thomas J. Kelly10 | | 86,301 | | **% |
Sydney Selati11 | | 50,000 | | **% |
Norman C. Epstein12 | | 42,813 | | **% |
Harold C. Taber, Jr.13 | | 85,773 | | **% |
Benjamin M. Polk14 | | 44,580 | | **% |
Kathy N. Waller15 | | 2,916 | | **% |
Mark S. Vidergauz16 | | 64,380 | | **% |
| Name and Address of Beneficial Owner* | | | Amount and Nature of Beneficial Ownership | | | Percent of Class |
| Brandon Limited Partnership No. 11 | | | 5,645,568 | | | 1.1% |
| Brandon Limited Partnership No. 22 | | | 29,386,944 | | | 5.6% |
| Hilrod Holdings IV, L.P. | | | 104,772 | | | **% |
| Hilrod Holdings V, L.P. | | | 214,284 | | | **% |
| Hilrod Holdings VI, L.P. | | | 323,700 | | | **% |
| Hilrod Holdings VII, L.P. | | | 120,216 | | | **% |
| Hilrod Holdings VIII, L.P. | | | 568,584 | | | **% |
| Hilrod Holdings IX, L.P. | | | 453,444 | | | **% |
| Hilrod Holdings X, L.P. | | | 249,918 | | | **% |
| Hilrod Holdings XI, L.P. | | | 505,242 | | | **% |
| Hilrod Holdings XII, L.P. | | | 327,186 | | | **% |
| Hilrod Holdings XIII, L.P. | | | 1,440,954 | | | **% |
| Hilrod Holdings XIV, L.P. | | | 186,790 | | | **% |
| Hilrod Holdings XV, L.P. | | | 4,176 | | | **% |
| Hilrod Holdings XVI, L.P. | | | 462,826 | | | **% |
| Hilrod Holdings XVII, L.P. | | | 1,678,336 | | | **% |
| Hilrod Holdings XIX, L.P. | | | 506,566 | | | **% |
| Rodney C. Sacks 2008 GRAT #2 | | | 90,204 | | | **% |
| Rodney C. Sacks 2009 GRAT #2 | | | 231,363 | | | **% |
| RCS Direct 2010 GRAT | | | 105,486 | | | **% |
| RCS Direct 2010 GRAT #2 | | | 4,836 | | | **% |
| RCS Direct 2011 GRAT | | | 80,598 | | | **% |
| HHS 2010 GRAT #3 | | | 3,091,215 | | | **% |
| RCS 2010 GRAT #3 | | | 1,639,842 | | | **% |
| HHS 2014 GRAT #2 | | | 28,722 | | | **% |
| The Vanguard Group3 | | | 30,381,014 | | | 5.8% |
| The Coca-Cola Company4 | | | 102,121,602 | | | 19.4% |
| Rodney C. Sacks5 | | | 48,911,233 | | | 9.2% |
| Hilton H. Schlosberg6 | | | 47,961,253 | | | 9.1% |
| Mark J. Hall7 | | | 965,850 | | | **% |
| Kathleen E. Ciaramello8 | | | 2,585 | | | **% |
| Gary P. Fayard9 | | | 8,738 | | | **% |
| Jeanne P. Jackson10 | | | 2,585 | | | **% |
| Steven G. Pizula11 | | | 2,585 | | | **% |
| Benjamin M. Polk12 | | | 45,346 | | | **% |
| Sydney Selati13 | | | 43,030 | | | **% |
| Mark S. Vidergauz14 | | | 53,325 | | | **% |
| Guy P. Carling15 | | | 92,135 | | | **% |
| Thomas J. Kelly16 | | | 62,192 | | | **% |
| Emelie C. Tirre17 | | | 309,903 | | | **% |
Officers and Directors as a group (11(13 members: 53,571,91456,281,254 shares or 9.4%10.6% in aggregate).
* Except as noted otherwise, the address for each of the named stockholders is 1 Monster Way, Corona, California 92879.
** Less than 1%.
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1The mailing address of Brandon Limited Partnership No. 1 (‘‘(“Brandon No. 1’’1”) is 56 Conduit Street, London W1S 2YZ England. The general partners of Brandon No. 1 are Rodney C. Sacks and Hilton H. Schlosberg.
2The mailing address of Brandon Limited Partnership No. 2 (‘‘(“Brandon No. 2’’2”) is 56 Conduit Street, London W1S 2YZ England. The general partners of Brandon No. 2 are Rodney C. Sacks and Hilton H. Schlosberg.
3Based on Schedule 13G/A, filed February 14, 201712, 2020 by FMR LLC,The Vanguard Group, based on common shares held on December 31, 2016.2019. The mailing address of this reporting person is 245 Summer Street, Boston, MA 02210.100 Vanguard Blvd., Malvern, PA 19355.
4Based on Schedule 13G/13D/A, filed February 12, 2015 by Wellington Management Company, LLP, based on common shares held on December 31, 2014. The mailing address of this reporting person is 280 Congress Street, Boston, MA 02210.
5 Based on Schedule 13D, filed June 22, 2015March 20, 2018 by The Coca-Cola Company and European Refreshments, based on common shares held on June 12, 2015,December 31, 2017, for which they have shared beneficial ownership. The mailing address of The Coca-Cola Company is One Coca-Cola Plaza, Atlanta, GA 30313. The mailing address of European Refreshments is Southgate, Dublin Road, Drogheda, County Meath, Ireland.
65Includes 1,758,7651,220,490 common shares owned by Mr. Sacks; 5,645,568 shares beneficially held by Brandon No. 1 because Mr. Sacks is one of Brandon No. 1’s general partners; 29,386,944 shares beneficially held by Brandon No. 2 because Mr. Sacks is one of Brandon No. 2’s general partners; 104,772 shares beneficially held by Hilrod Holdings IV, L.P. because Mr. Sacks is one of Hilrod Holdings IV’s general partners; 214,284 shares beneficially held by Hilrod Holdings V, L.P. because Mr. Sacks is one of Hilrod Holdings V’s general partners; 323,700 shares beneficially held by Hilrod Holdings VI, L.P. because Mr. Sacks is one of Hilrod Holdings VI’s general partners; 120,216 shares beneficially held by Hilrod Holdings VII, L.P. because Mr. Sacks is one of Hilrod Holdings VII’s general partners; 568,584 shares beneficially held by Hilrod Holdings VIII, L.P. because Mr. Sacks is one of Hilrod Holdings VIII’s general partners; 453,444 shares beneficially held by Hilrod Holdings IX, L.P. because Mr. Sacks is one of Hilrod Holdings IX’s general partners; 249,918 shares beneficially held by Hilrod Holdings X, L.P. because Mr. Sacks is one of Hilrod Holdings X’s general partners; 505,242 shares beneficially held by Hilrod Holdings XI, L.P. because Mr. Sacks is one of Hilrod Holdings XI’s general partners; 327,186 shares beneficially held by Hilrod Holdings XII, L.P. because Mr. Sacks is one of Hilrod Holdings XII’s general partners; 1,440,954 shares beneficially held by Hilrod Holdings XIII, L.P. because Mr. Sacks is one of Hilrod Holdings XIII’s general partners; 925,878186,790 shares beneficially held by Hilrod Holdings XIV, L.P. because Mr. Sacks is one of Hilrod Holdings XIV’s general partners; 8,8324,176 shares beneficially held by Hilrod Holdings XV, L.P. because Mr. Sacks is one of Hilrod Holdings XV’s general partners; 2,249,190462,826 shares beneficially held by Hilrod Holdings XVI, L.P. because Mr. Sacks is one of Hilrod Holdings XVI’s general partners; 231,3631,678,336 shares beneficially held by Hilrod Holdings XVII, L.P. because Mr. Sacks is one of Hilrod Holdings XVII’s general partners; 506,566 shares beneficially held by Hilrod Holdings XIX, L.P. because Mr. Sacks is one of Hilrod Holdings XIX’s general partners; 3,091,215 shares beneficially held by the RCS 2009HHS 2010 GRAT #2#3 because Mr. Sacks is the trustee of the RCS 2009HHS 2010 GRAT #2;#3; and 28,722 shares beneficially held by the HHS 2014 GRAT #2 because Mr. Sacks is the trustee of the HHS 2014 GRAT #2. Also includes options presently exercisable to purchase 244,851 common shares, exercisable at $5.29 per share, granted pursuant to a stock option agreement dated June 2, 2008 between the Company and Mr. Sacks (of which options to purchase 186,228 common shares are currently held by Hilrod Holdings XVI, L.P.); options presently exercisable to purchase 300,000 common shares, exercisable at $5.94 per share, granted pursuant to a stock option agreement dated December 1, 2009 between the Company and Mr. Sacks (of which options to purchase 283,170 common shares are currently held by Hilrod Holdings XVI, L.P.) ; options presently exercisable or exercisable within 60 days to purchase 630,000 common shares, exercisable at $17.99 per share, granted pursuant to a stock option agreement dated June 3, 2013 between the Company and Mr. Sacks (of which options to purchase 210,000 common shares are currently held by Hilrod Holdings XV, L.P. and options to purchase 408,882 common shares are currently held by Hilrod Holdings XVI, L.P.); options presently exercisable to purchase 630,000 common shares, exercisable at $23.35 per share, granted pursuant to a stock option agreement dated March 14, 2014 between the Company and Mr. Sacks (of which options to purchase 420,000 common shares are currently held by Hilrod Holdings XVI, L.P. and options to purchase 205,719 common shares are currently held by Hilrod Holdings XVIII, L.P.); options presently exercisable to purchase 158,400237,600 common shares, exercisable at $45.16 per share, granted pursuant to a stock option agreement dated March 13, 2015 between the Company and Mr. Sacks (of which options to purchase 79,200 common shares are currently held by Hilrod Holdings XVI, L.P. and options to purchase 156,186 common shares are currently held by Hilrod Holdings XVIII, L.P.); and options presently exercisable to purchase 105,000315,000 common shares, exercisable at $43.99 per share, granted pursuant to a stock option agreement dated March 14, 2016 between the Company and Mr. Sacks.Sacks (of which options to purchase 97,257 common shares are currently held by Hilrod Holdings XVIII, L.P. and options to purchase 215,472 common shares are currently held by Hilrod Holdings XXI, L.P.); options presently exercisable to purchase 305,500 common shares, exercisable at $46.27 per share, granted pursuant to a stock option agreement dated March 14, 2017 between the Company and Mr. Sacks (of which options to purchase 101,834 common shares are currently held by Hilrod Holdings XVIII, L.P. and options to purchase 201,503 common shares are currently held by Hilrod Holdings XXI, L.P.); options presently exercisable to purchase 176,000 common shares, exercisable at $58.73 per share, granted pursuant to a stock option agreement dated March 14, 2018 between the Company and Mr. Sacks (of which options to purchase 176,000 common shares are currently held by Hilrod Holdings XXI, L.P.) and options presently exercisable to purchase 97,200 common shares, exercisable at $59.67 per share, granted pursuant to a stock option agreement dated March 14, 2019 between the Company and Mr. Sacks (of which options to purchase 97,200 common shares are currently held by Hilrod Holdings XXI, L.P.). Mr. Sacks has pledged 581,8621,220,490 common shares.
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Mr. Sacks disclaims beneficial ownership of all shares deemed beneficially owned by him hereunder except (i) 1,758,7651,220,490 common shares; (ii) 2,068,2512,391,300 shares presently exercisable or exercisable within 60 days under the stock option agreements; (iii) 1,048 shares beneficially held by Hilrod Holdings IV, L.P. because Mr. Sacks is one of Hilrod Holdings IV’s general partners; (iv) 2,143 shares beneficially held by Hilrod Holdings V, L.P. because Mr. Sacks is one of Hilrod Holdings V’s general partners; (v) 3,237 shares beneficially held by Hilrod Holdings VI, L.P. because Mr. Sacks is one
of Hilrod Holdings VI’s general partners; (vi) 1,202 shares beneficially held by Hilrod Holdings VII, L.P. because Mr. Sacks is one of Hilrod Holdings VII’s general partners; (vii) 5,686 shares beneficially held by Hilrod Holdings VIII, L.P. because Mr. Sacks is one of Hilrod Holdings VIII’s general partners; (viii) 4,534 shares beneficially held by Hilrod Holdings IX, L.P. because Mr. Sacks is one of Hilrod Holdings IX’s general partners; (ix) 2,499 shares beneficially held by Hilrod Holdings X, L.P. because Mr. Sacks is one of Hilrod Holdings X’s general partners; (x) 5,052 shares beneficially held by Hilrod Holdings XI, L.P. because Mr. Sacks is one of Hilrod Holdings XI’s general partners; (xi) 3,272 shares beneficially held by Hilrod Holdings XII, L.P. because Mr. Sacks is one of Hilrod Holdings XII’s general partners; (xii) 14,410 shares beneficially held by Hilrod Holdings XIII, L.P. because Mr. Sacks is one of Hilrod Holdings XIII’s general partners; (xiii) 9,2591,868 shares beneficially held by Hilrod Holdings XIV, L.P. because Mr. Sacks is one of Hilrod Holdings XIV’s general partners; (xiv) 8842 shares beneficially held by Hilrod Holdings XV, L.P. because Mr. Sacks is one of Hilrod Holdings XV’s general partners andpartners; (xv) 22,4924,628 shares beneficially held by Hilrod Holdings XVI, L.P. because Mr. Sacks is one of Hilrod Holdings XVI’s general partners; (xvi) 16,783 shares beneficially held by Hilrod Holdings XVII, L.P. because Mr. Sacks is one of Hilrod Holdings XVII’s general partners and (xvii) 5,066 shares beneficially held by Hilrod Holdings XIX, L.P. because Mr. Sacks is one of Hilrod Holdings XIX’s general partners.
76 Includes 3,259,2391,238,118 common shares owned by Mr. Schlosberg; 5,645,568 shares beneficially held by Brandon No. 1 because Mr. Schlosberg is one of Brandon No. 1’s general partners; 29,386,944 shares beneficially held by Brandon No. 2 because Mr. Schlosberg is one of Brandon No. 2’s general partners; 104,772 shares beneficially held by Hilrod Holdings IV, L.P. because Mr. Schlosberg is one of Hilrod Holdings IV’s general partners; 214,284 shares beneficially held by Hilrod Holdings V, L.P. because Mr. Schlosberg is one of Hilrod Holdings V’s general partners; 323,700 shares beneficially held by Hilrod Holdings VI, L.P. because Mr. Schlosberg is one of Hilrod Holdings VI’s general partners; 120,216 shares beneficially held by Hilrod Holdings VII, L.P. because Mr. Schlosberg is one of Hilrod Holdings VII’s general partners; 568,584 shares beneficially held by Hilrod Holdings VIII, L.P. because Mr. Schlosberg is one of Hilrod Holdings VIII’s general partners; 453,444 shares beneficially held by Hilrod Holdings IX, L.P. because Mr. Schlosberg is one of Hilrod Holdings IX’s general partners; 249,918 shares beneficially held by Hilrod Holdings X, L.P. because Mr. Schlosberg is one of Hilrod Holdings X’s general partners; 505,242 shares beneficially held by Hilrod Holdings XI, L.P. because Mr. Schlosberg is one of Hilrod Holdings XI’s general partners; 327,186 shares beneficially held by Hilrod Holdings XII, L.P. because Mr. Schlosberg is one of Hilrod Holdings XII’s general partners; 1,440,954 shares beneficially held by Hilrod Holdings XIII, L.P. because Mr. Schlosberg is one of Hilrod Holdings XIII’s general partners; 925,878186,790 shares beneficially held by Hilrod Holdings XIV, L.P. because Mr. Schlosberg is one of Hilrod Holdings XIV’s general partners; 8,8324,176 shares beneficially held by Hilrod Holdings XV, L.P. because Mr. Schlosberg is one of Hilrod Holdings XV’s general partners; 2,249,190462,826 shares beneficially held by Hilrod Holdings XVI, L.P. because Mr. Schlosberg is one of Hilrod Holdings XVI’s general partners; 1,678,336 shares beneficially held by Hilrod Holdings XVII, L.P. because Mr. Schlosberg is one of Hilrod Holdings XVII’s general partners; 506,566 shares beneficially held by Hilrod Holdings XIX, L.P. because Mr. Schlosberg is one of Hilrod Holdings XIX’s general partners; 90,204 shares beneficially held by the RCS 2008 GRAT #2 because Mr. Schlosberg is the co-trustee of the RCS 2008 GRAT #2; 231,363 shares beneficially held by the RCS 2009 GRAT #2 because Mr. Schlosberg is the trustee of the RCS 2009 GRAT #2; 105,486 shares beneficially held by the RCS Direct 2010 GRAT because Mr. Schlosberg is the trustee of the RCS Direct 2010 GRAT; 4,836 shares beneficially held by the RCS Direct 2010 GRAT #2 because Mr. Schlosberg is the trustee of the RCS Direct 2010 GRAT #2#2; 1,639,842 shares beneficially held by the RCS 2010 GRAT #3 because Mr. Schlosberg is the trustee of the RCS 2010 GRAT #3; and 80,598 shares beneficially held by the RCS Direct 2011 GRAT because Mr. Schlosberg is the trustee of the RCS Direct 2011 GRAT. Also includes options presently exercisable to purchase 244,851 common shares,or exercisable at $5.29 per share, granted pursuant to a stock option agreement dated June 2, 2008 between the Company and Mr. Schlosberg (of which options to purchase 186,228 common shares are currently held by Hilrod Holdings XVI, L.P.); options presently exercisable to purchase 300,000 common shares, exercisable at $5.94 per share, granted pursuant to a stock option agreement dated December 1, 2009 between the Company and Mr. Schlosberg (of which options to purchase 283,170 common shares are currently held by Hilrod Holdings XVI, L.P.); options presently exercisablewithin 60 days to purchase 630,000 common shares, exercisable at $17.99 per share, granted pursuant to a stock option agreement dated June 3, 2013 between the Company and Mr. Schlosberg (of which options to purchase 210,000 common shares are currently held by Hilrod Holdings XV, L.P. and options to purchase 408,882 common shares are currently held by Hilrod Holdings XVI, L.P.); options presently exercisable to purchase 630,000 common shares, exercisable at $23.35 per share, granted pursuant to a stock option agreement dated March 14, 2014 between the Company and Mr. Schlosberg (of which options to purchase 420,000 common shares are currently held by Hilrod Holdings XVI, L.P. and options to purchase 205,719 common shares are currently held by Hilrod Holdings XVIII, L.P.); options presently exercisable to purchase 158,400237,600 common shares, exercisable at $45.16 per share, granted pursuant to a stock option agreement dated March 13, 2015 between the Company and Mr. Schlosberg (of which options to purchase 79,200 common shares are currently held by Hilrod Holdings XVI, L.P. and options to purchase 156,186 common shares are currently held by Hilrod Holdings XVIII, L.P.); and options presently exercisable to purchase 105,000315,000 common shares, exercisable at $43.99 per share, granted pursuant to a stock option agreement dated March 14, 2016 between the Company and Mr. Schlosberg.Schlosberg (of which options to purchase 97,257 common shares are currently held by Hilrod Holdings XVIII, L.P. and options to purchase 215,472 common shares are currently held by Hilrod Holdings XXI, L.P.); options presently exercisable to purchase 305,500
common shares, exercisable at $46.27 per share, granted pursuant to a stock option agreement dated March 14, 2017 between the Company and Mr. Schlosberg (of which options to purchase 101,834 common shares are currently held by Hilrod Holdings XVIII, L.P. and options to purchase 201,503 common shares are currently held by Hilrod Holdings XXI, L.P.); options presently exercisable to purchase 176,000 common shares, exercisable at $58.73 per share, granted pursuant to a stock option agreement dated March 14, 2018 between the Company and Mr. Schlosberg (of which options to purchase 176,000 common shares are currently held by Hilrod Holdings XXI, L.P.) and options presently exercisable to purchase 97,200 common shares, exercisable at $59.67 per share, granted pursuant to a stock option agreement dated March 14, 2019 between the Company and Mr. Schlosberg (of which options to purchase 97,200 common shares are currently held by Hilrod Holdings XXI, L.P.). Mr. Schlosberg has pledged 630,9631,238,118 common shares.
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Mr. Schlosberg disclaims beneficial ownership of all shares deemed beneficially owned by him hereunder except (i) 3,259,2391,238,118 common shares; (ii) 2,068,2512,391,300 shares presently exercisable or exercisable within 60 days under the stock option agreements; (iii) 1,048 shares beneficially held by Hilrod Holdings IV, L.P. because Mr. Schlosberg is one of Hilrod Holdings IV’s general partners; (iv) 2,143 shares beneficially held by Hilrod Holdings V, L.P. because Mr. Schlosberg is one of Hilrod Holdings V’s general partners; (v) 3,237 shares beneficially held by Hilrod Holdings VI, L.P. because Mr. Schlosberg is one of Hilrod Holdings VI’s general partners; (vi) 1,202 shares beneficially held by Hilrod Holdings VII, L.P. because Mr. Schlosberg is one of Hilrod Holdings VII’s general partners; (vii) 5,686 shares beneficially held by Hilrod Holdings VIII, L.P. because Mr. Schlosberg is one of Hilrod Holdings VIII’s general partners; (viii) 4,534 shares beneficially held by Hilrod Holdings IX, L.P. because Mr. Schlosberg is one of Hilrod Holdings IX’s general partners; (ix) 2,499 shares beneficially held by Hilrod Holdings X, L.P. because Mr. Schlosberg is one of Hilrod Holdings X’s general partners; (x) 5,052 shares beneficially held by Hilrod Holdings XI, L.P. because Mr. Schlosberg is one of Hilrod Holdings XI’s general partners; (xi) 3,272 shares beneficially held by Hilrod Holdings XII, L.P. because Mr. Schlosberg is one of Hilrod Holdings XII’s general partners; (xii) 14,410 shares beneficially held by Hilrod Holdings XIII, L.P. because Mr. Schlosberg is one of Hilrod Holdings XIII’s general partners; (xiii) 9,2591,868 shares beneficially held by Hilrod Holdings XIV, L.P. because Mr. Schlosberg is one of Hilrod Holdings XIV’s general partners; (xiv) 8842 shares beneficially held by Hilrod Holdings XV, L.P. because Mr. Schlosberg is one of Hilrod Holdings XV’s general partners andpartners; (xv) 22,4924,628 shares beneficially held by Hilrod Holdings XVI, L.P. because Mr. Schlosberg is one of Hilrod Holdings XVI’s general partners; (xvi) 16,783 shares beneficially held by Hilrod Holdings XVII, L.P. because Mr. Schlosberg is one of Hilrod Holdings XVII’s general partners and (xvii) 5,066 shares beneficially held by Hilrod Holdings XIX, L.P. because Mr. Schlosberg is one of Hilrod Holdings XIX’s general partners.
87 Includes 2,916 common shares owned by Mr. Fayard.
9 Includes 791,808 common shares owned by Mr. Hall; 30,000870,850 shares beneficially held by the MJCF Hall Family Trust the beneficiaries of which areas Mr. Hall and his spouse;spouse are trustees and beneficiaries of the MJCF Hall Family Trust; options presently exercisable to purchase 120,00060,000 common shares, exercisable at $45.16 per share, granted pursuant to a stock option agreement dated March 13, 2015 between the Company and Mr. Hall; options presently exercisable to purchase 20,000 common shares, exercisable at $43.64 per share, granted pursuant to a stock option agreement dated December 1, 2016 between the Company and Mr. Hall; options presently exercisable to purchase 12,500 common shares, exercisable at $58.73 per share, granted pursuant to a stock option agreement dated March 14, 2018 between the Company and Mr. Hall and options presently exercisable to purchase 30,0002,500 common shares, exercisable at $59.67 per share, granted pursuant to a stock option agreement dated March 14, 2019 between the Company and Mr. Hall.
8 Includes 2,585 restricted stock units granted pursuant to a restricted stock unit agreement dated June 6, 2019 between the Company and Ms. Ciaramello.
9 Includes 6,153 common shares owned by Mr. Fayard and 2,585 restricted stock units granted pursuant to a restricted stock unit agreement dated June 6, 2019 between the Company and Mr. Fayard.
10 Includes 2,585 restricted stock units granted pursuant to a restricted stock unit agreement dated June 6, 2019 between the Company and Ms. Jackson.
11 Includes 2,585 restricted stock units granted pursuant to a restricted stock unit agreement dated June 6, 2019 between the Company and Mr. Pizula.
12 Includes 34,991 common shares owned by Mr. Polk; options presently exercisable to purchase 7,770 common shares, exercisable at $11.35 per share, granted pursuant to a stock option agreement dated May 18, 2011 between the Company and Mr. Polk; and 2,585 restricted stock units granted pursuant to a restricted stock unit agreement dated June 6, 2019 between the Company and Mr. Polk.
13 Includes 40,445 common shares owned by Mr. Selati and 2,585 restricted stock units granted pursuant to a restricted stock unit agreement dated June 6, 2019 between the Company and Mr. Selati.
14 Includes 50,740 common shares owned by Mr. Vidergauz and 2,585 restricted stock units granted pursuant to a restricted stock unit agreement dated June 6, 2019 between the Company and Mr. Vidergauz.
15 Includes 20,885 common shares owned by Mr. Carling; options presently exercisable to purchase 4,500 common shares, exercisable at $37.10 per share, granted pursuant to a stock option agreement dated December 1, 2014 between the Company and Mr. Carling; options presently exercisable to purchase 6,750 common shares, exercisable at $45.16 per share, granted pursuant to a stock option agreement dated March 13, 2015 between the Company and Mr. Carling; options presently exercisable to purchase 15,000 common shares, exercisable at $43.99 per share, granted pursuant to a stock option agreement dated March 14, 2016 between the Company and Mr. Hall.
10 Includes 18,651 common shares owned by Mr. Kelly;Carling; options presently exercisable to purchase 20,25027,000 common shares, exercisable at $15.71$43.64 per share, granted pursuant to a stock option agreement dated December 1, 2016 between the Company and Mr. Carling; options presently exercisable to purchase 12,500 common shares, exercisable at $58.73 per share, granted pursuant to a stock option agreement dated March 14, 20132018 between the Company and Mr. Kelly;Carling; options presently exercisable to purchase 13,5002,500 common shares, exercisable at $23.35$59.67 per share, granted pursuant to a stock option agreement dated March 14, 20142019 between the Company and Mr. Carling and 3,000 restricted stock units granted pursuant to a restricted stock unit agreement dated June 1, 2018 between the Company and Mr. Carling.
16 Includes 28,117 common shares owned by Mr. Kelly; options presently exercisable to purchase 11,250 common shares, exercisable at $37.10 per share, granted pursuant to a stock option agreement dated December 1, 2014 between the Company and Mr. Kelly; options presently exercisable to purchase 14,4007,200 common shares, exercisable at $45.16 per share, granted pursuant to a stock option agreement dated March 13, 2015 between the Company and Mr. Kelly; options presently exercisable to purchase 3,7509,375 common shares, exercisable at $43.99 per share, granted pursuant to a stock option agreement dated March 14, 2016 between the Company and Mr. Kelly; options presently exercisable to purchase 12,500 common shares, exercisable at $58.73 per share, granted pursuant to a stock option agreement dated March 14, 2018 between the Company and 4,500Mr. Kelly and options presently exercisable to purchase 5,000 common shares, exercisable at $59.67 per share, granted pursuant to a stock option agreement dated March 14, 2019 between the Company and Mr. Kelly.
17 Includes 57,438 common shares owned by Ms. Tirre; options presently exercisable to purchase 39,465 common shares, exercisable at $23.35 per share, granted pursuant to a stock option agreement dated March 14, 2014 between the Company and Ms. Tirre; options presently exercisable to purchase 45,000 common shares, exercisable at $37.10 per share, granted pursuant to a stock option agreement dated December 1, 2014 between the Company and Ms. Tirre; options presently exercisable to purchase 45,000 common shares, exercisable at $45.16 per share, granted pursuant to a stock option agreement dated March 13, 2015 between the Company and Ms. Tirre; options presently exercisable to purchase 42,000 common shares, exercisable at $43.99 per share, granted pursuant to a stock option agreement dated March 14, 2016 between the Company and Ms. Tirre; options presently exercisable to purchase 45,000 common shares, exercisable at $43.64 per share, granted pursuant to a stock option agreement dated December 1, 2016 between the Company and Ms. Tirre; options presently exercisable to purchase 18,000 common shares, exercisable at $46.27 per share, granted pursuant to a stock option agreement dated March 14, 2017 between the Company and Ms. Tirre; options presently exercisable to purchase 12,500 common shares, exercisable at $58.73 per share, granted pursuant to a stock option agreement dated March 14, 2018 between the Company and Ms. Tirre; options presently exercisable to purchase 2,500 common shares, exercisable at $59.67 per share, granted pursuant to a stock option agreement dated March 14, 2019 between the Company and Ms. Tirre and 3,000 restricted stock units granted pursuant to a restricted stock unit agreement dated June 1, 20122018 between the Company and Mr. KellyMs. Tirre.
11 Includes 50,000 common shares owned by Mr. Selati.
12 Includes 18,813 common shares owned by Mr. Epstein; and 24,000 shares beneficially held by Shoreland Investments because Mr. Epstein is one of Shoreland Investment’s general partners.
13 Includes 65,001 common shares owned by Mr. Taber; options presently exercisable to purchase 13,002 common shares, exercisable at $6.40 per share, granted pursuant to a stock option agreement dated June 9, 2010 between the Company and Mr. Taber; and options presently exercisable to purchase 7,770 common shares, exercisable at $11.35 per share, granted pursuant to a stock option agreement dated May 18, 2011 between the Company and Mr. Taber.
14 Includes 23,808 common shares owned by Mr. Polk; options presently exercisable to purchase 13,002 common shares, exercisable at $6.40 per share, granted pursuant to a stock option agreement dated June 9, 2010 between the Company and Mr. Polk; and options presently exercisable to purchase 7,770 common shares, exercisable at $11.35 per share, granted pursuant to a stock option agreement dated May 18, 2011 between the Company and Mr. Polk.
15 Includes 2,916 common shares owned by Ms. Waller.
16 Includes 64,380 common shares owned by Mr. Vidergauz.
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DELINQUENT SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE16(A) REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires the Company’s directors, executive officers and persons who own more than ten percent of a registered class of the Company’s equity securities to file by specific dates with the SEC initial reports of ownership and reports of changes in ownership of equity securities of the Company. Directors, executive officers and greater than ten percent stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms that they file. The Company is required to report in this proxy statement any failure of its directors, executive officers and greater than ten percent stockholders to file by the relevant due date any of these reports during the most recent fiscal year or prior fiscal years.
To the Company’s knowledge, based solely on review of copies of such reports furnished to the Company during the fiscal year ended December 31, 2016,2019, all Section 16(a) filing requirements applicable to the Company’s directors, executive officers and greater than ten percent stockholders were complied with, except that Harold Taber’sfor the following:
Unknown to Mr. Sacks, RCS Family Limited Partnership, a limited partnership of which Mr. Sacks is a general partner, inadvertently acquired and sold 40 shares of Common Stock through a broker managed discretionary account. These purchases and the sale were not reported at the time of the purchases and the sale and were subsequently reported on a Form 4 filed by Mr. Sacks.
Additionally, Mr. Schlosberg’s Form 4 filing in June, 2016,December 2019 inadvertently omitted four transactions giftingone transaction donating a total of 9,000455 shares of the Company’s common stock. ACommon Stock. The transaction was subsequently reported on a Form 4/A was4 filed by Mr. Schlosberg in February, 2017 to report ownership of these shares promptly after becoming aware of the omission.March 2020.
DEADLINES FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholders may present a proper proposal for consideration at the 20172021 annual meeting of stockholders by submitting their proposal in writing to the Office of the Secretary of the Company at the Company’s principal executive offices in a timely manner.
For stockholders who wish to present a proposal, other than a director nomination to the proxy access provision of our by-laws (the “Proxy Access Bylaw”), to be considered for inclusion in our proxy statement and for consideration at the 20182021 annual meeting, pursuant to Rule 14a-8 under the Exchange Act, the proposal must be delivered to the Office of the Secretary at the Company’s principal executive offices no later than December 29, 2017.22, 2020. Stockholder proposals must otherwise comply with the requirements of Rule 14a-8 of the Exchange Act.
For stockholders who wish to present a proposal for nominations or other business for consideration at the 20182021 annual meeting, but who do not intend for the proposal to be included in our proxy statement, pursuant to the advance notice provisions contained in our by-laws, the proposal must be delivered to the Office of the Secretary at the Company’s principal executive offices no earlier than February 19, 20183, 2021 and no later than March 21, 2018,5, 2021, provided, however, that in the event that the date of the 20182021 annual meeting is more than thirty days before or more than seventy days after the first anniversary of the preceding year’s annual meeting, notice by the stockholder must be so delivered no earlier than the close of business on the one hundred twentieth day prior to the 20182021 annual meeting and no later than the close of business on the later of the ninetieth day prior to the 20182021 annual meeting or the tenth day following the day on which public announcement of the date of the 20182021 annual meeting is first made by the Company.
In 2018, the Board adopted the Proxy Access Bylaw. The Proxy Access Bylaw permits a stockholder, or a group of up to twenty stockholders, owning three percent or more of the Company’s outstanding Common Stock continuously for at least three years to nominate and include in the Company’s proxy materials Director nominees consisting of two nominees or twenty percent of the Board, whichever is greater, provided that the stockholder(s) and nominee(s) comply with the requirements of Article 1, Section 16 of our by-laws. To be timely for inclusion in the Company’s proxy materials for our 2021 annual meeting, pursuant to the Proxy Access Bylaw, the stockholder(s) notice to nominate a Director must be delivered to the Office of the Secretary at the Company’s principal executive offices no earlier than November 22, 2020 and no later than December 22, 2020. The notice must contain the information required by our by-laws, and the stockholder(s) and nominee(s) must comply with the information and other requirements in our by-laws relating to the inclusion of stockholder nominees in our proxy materials.
It is presently intended that the 20182021 annual meeting will be held in June 2018.2021.
Proposals should be sent to the Office of the Secretary by mail to Monster Beverage Corporation, 1 Monster Way, Corona, California, 92879.
11PROPOSAL ONE
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ELECTION OF DIRECTORS
PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees
The Board is currently comprised of ten members, eachmembers. Upon the recommendation of whom is a director nominee to be electedthe Nominating and Corporate Governance Committee of the Board of Directors (the “Nominating and Corporate Governance Committee”), our Board has nominated 10 directors identified on the following pages for election at the Annual Meeting. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the Company’s ten nominees named below. In the event that any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee designated by the present Board to fill the vacancy. The Company is not aware of any nominee who will be unable or expects to decline to serve as a director. The term of office of each person elected as a director will continue until the 20182021 annual meeting or until a successor has been elected and qualified.
The Board has a director resignation policy. This policy provides that, in an uncontested election, any incumbent director nominee who receives a greater number of votes “WITHHELD” from his or her election than votes “FOR” his or her election must promptly tender his or her resignation to the Board following certification of the election results. The Nominating and Corporate Governance Committee of the Board of Directors (the “Nominating Committee”) will review the circumstances surrounding the election and recommend to the Board whether to accept or reject the resignation. The Board must act on the tendered resignation. If such resignation is rejected, the Board must publicly disclose its decision, together with the rationale supporting its decision, within 90 days after certification of the election results. A copy of the director resignation policy is available on our website athttp://investors.monsterbevcorp.com/governance.cfm.investors.monsterbevcorp.com/governance.cfm.
The names of the nominees, and certain biographical information about them, are set forth below.
Name | | Age | | | Position |
| | | | |
Rodney C. Sacks11 | | 67
70 | | | Chairman of the Board of Directors and Chief Executive Officer |
| | | | |
Hilton H. Schlosberg11 | | 64
67 | | | Vice Chairman of the Board of Directors, President, Chief Financial Officer, Chief Operating Officer and Secretary |
Mark J. Hall | | 61
64 | | | Director |
Norman C. Epstein Kathleen E. Ciaramello2,3,4
| | 76
56 | | | Director |
Gary P. Fayard22 | | 65
68 | | | Director |
Jeanne P. Jackson | | 68 | | | Director |
| Steven G. Pizula2 | | 64 | | | Director |
| Benjamin M. Polk3,4 | | 66
69 | | | Director |
Sydney Selati2,3,42,3,4 | | 78
81 | | | Director |
Harold C. Taber, Jr. 2,4
| | 78
| | Director
|
Kathy N. Waller
| | 58
| | Director
|
Mark S. Vidergauz3,4,53,5 | | 66 | | | Director |
| 1If re-elected, to serve as member of the Executive Committee. |
| 63
| | Director
2If re-elected, to serve as member of the Audit Committee. If re-elected, Mr. Selati to serve as Chairman of the Audit Committee. |
1 Member of the Executive Committee of the Board of Directors.
2 Member of the Audit Committee of the Board of Directors.
3 Member of the Compensation Committee of the Board of Directors.
4 Member of the Nominating Committee of the Board of Directors.
5 Lead Independent Director.
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| 3If re-elected, to serve as member of the Compensation Committee. If re-elected, Mr. Vidergauz to serve as Chairman of the Compensation Committee. |
| 4If re-elected, to serve as member of the Nominating and Corporate Governance Committee. If re-elected, Mr. Polk to serve as Chairman of the Nominating and Corporate Governance Committee. |
| 5If re-elected, to serve as Lead Independent Director. |
Each of our directors brings extensive management and leadership experience gained through their service in our industry and other diverse businesses. In these roles, they have assumed day-to-day leadership or other senior leadership responsibilities. In addition, most current directors bring board experience acquired by either significant experience on other boards or long service on our Board of Directors that broadens their knowledge of board policies and processes, rules and regulations, issues and solutions. The Nominating and Corporate Governance Committee’s process for selecting and nominating qualified director candidates is described under the section entitled “Nominating and Corporate Governance Committee.” In the paragraphs below, we describe specific individual qualifications and skills of our directors that contribute to the overall effectiveness of our Board of Directors and its committees.
Rodney C. Sacks—Chairman of the Board of Directors of the Company, Chief Executive Officer and a director of the Company from November 1990 to the present. Member of the Executive Committee of the Board of Directors (the “Executive Committee”) since October 1992. Chairman of the Board of Directors and a director of Monster Energy Company (“MEC”). Mr. Sacks has led the Company for over 2730 years and has extensive experience in the food and beverage industry. Mr. Sacks has detailed knowledge and valuable perspective and insights regarding our business and has responsibility for development and implementation of our business strategy.
Hilton H. Schlosberg—Vice Chairman of the Board of Directors of the Company, President, Chief Operating Officer, Secretary and a director of the Company from November 1990 to the present. Chief Financial Officer of the Company since July 1996. Member of the Executive Committee of the Board of Directors since October 1992. Vice Chairman, President, Chief Financial Officer and a director of MEC. Mr. Schlosberg has held senior leadership positions with the Company for over 2730 years, has been the Company’s Chief Financial Officer for 2123 years and has extensive experience in the food and beverage industry. Mr. Schlosberg has a high level of financial literacy, and his day-to-day supervision of business operations and co-leadership with Mr. Sacks brings valuable insight to the Board. Mr. Schlosberg has detailed knowledge and valuable perspective and insights regarding our business and has responsibility for development and implementation of our business strategy.
Mark J. Hall—Director of the Company since January 1, 2014. Employee2014 and employee of MEC focusing on ideation, design and development of new products fromsince May 1, 2017. Chief Marketing Officer of MEC from January 2015 to May 1, 2017,2017. Chief Brand Officer of MEC from January 2014 to December 2014, and President of the Monster Beverage Division from January 2007 to December 2013. Mr. Hall joined MEC in 1997 as a Senior Vice President. Prior to joining MEC, Mr. Hall was employed by the Arizona Beverage Co. as Vice President of Sales, where he was responsible for sales and distribution of products through a national network of beer distributors and soft drink bottlers in the United States. Mr. Hall has detailed knowledge of and valuable perspectives and insights into both our business and the beverage business in general.
Norman C. EpsteinKathleen E. Ciaramello—Director of the Company since June 2019. President, Foodservice and memberOn-Premise Business Unit of The Coca-Cola Company (“TCCC”) from 2013 to the present. Ms. Ciaramello joined The Coca-Cola Company in 1985 and has served in various account management, sales and marketing roles of increasing responsibility, including Group Vice President, Strategic Partnership Marketing from 2006 to 2009 and Vice President East Zone from 2009 to 2013, as well as one of the Compensation Committeeinaugural members of Coca-Cola’s Women’s Leadership Council. Ms. Ciaramello has served on the
Board of Directors and other various roles of the National Restaurant Association since 2016, the Women’s Foodservice Forum Board of Directors since 2016, and the Board of Directors (the “Compensation Committee”)of the Jack & Jill Late Stage Cancer Foundation. Ms. Ciaramello is European Refreshments (an indirect wholly owned subsidiary of TCCC) designee to the Board. Ms. Ciaramello has substantial business and leadership experience in the beverage industry.
Gary P. Fayard—Director of the Company since June 1992, member of the Nominating Committee since September 20042015 and member of the Audit Committee of the Board of Directors (the “Audit Committee”) since September 1997. Mr. Epstein has served as the Chairman of the Compensation Committee since September 1997. Mr. Epstein served as Chairman of the Audit Committee from September 1997 to February 27, 2015. Director of MEC from July 1992 to February 2016. Managing Director of Cheval Property Finance PLC, a mortgage finance company based in London, England from 1997 to 2006. Director of Clermont Consultants UK Ltd. from 1997 to April 2013. Director of Spring Finance UK, a UK mortgage lender from July 2012 to the present. Partner with Moore Stephens, an international accounting firm, from 1974 to December 1996 (Senior Partner beginning in 1989 and the Managing Partner of Moore
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Stephens, New York from 1993 until 1995). Mr. Epstein has a strong background in accounting and finance as well as substantial experience in public company accounting. Mr. Epstein has substantial experience serving on boards, both the Company’s and others, and has experience in other industries, which allows him to bring additional perspective to the Board. Mr. Epstein is a Chartered Accountant (UK).
Gary P. Fayard—Director of the Company since June 2015 and member of the Audit Committee since February 2016. Executive Vice President and Chief Financial Officer of The Coca-Cola Company from February 2003 to April 2014. Mr. Fayard joined The Coca-Cola Company in 1994, and in July 1994, he was elected Vice President and Controller, a position he held until December 1999 when he was elected Senior Vice President and Chief Financial Officer. Mr. Fayard has also served on the board of directors of Coca-Cola FEMSA, S.A.B. de C.V., the largest bottler in the world of Coca-Cola trademark beverages by unit case volume operating in territories in Mexico, Central and South America and the Philippines, from 2004 to March 2016 and2016. Mr. Fayard has been on the board of directors of Genuine Parts Company from 2014 to the present.since 2014. Mr. Fayard has a strong background in accounting and finance as well as substantial business and leadership experience in the beverage industry.
Jeanne P. Jackson—Director of the Company since June 2019. At Nike, Inc., Ms. Jackson served as President and Senior Strategic Advisor to the Chief Executive Officer from June 2016 to August 2017, President of Product & Merchandising from July 2013 to April 2016, President of Direct to Consumer from March 2009 to July 2013. Director of Delta Air Lines, Inc. since January 2017 and director of The Kraft Heinz Company since July 2015 (previously director of Kraft Foods Group, Inc. from October 2012 to July 2015). Ms. Jackson has previously served on the boards of McDonald’s Corporation, Nike, Inc., Nordstrom, Inc., Williams-Sonoma, Inc., Motorola Mobility Holdings, Inc., Harrah’s Entertainment Inc. and others. Ms. Jackson is the founder of MSP Capital and served as its Chief Executive Officer from 2002 to 2009 and is again serving as its Chief Executive Officer from 2017 to present. Ms. Jackson has served in senior leadership roles in many organizations, including Wal-Mart.com USA, LLC, the Gap, Inc., Banana Republic, Victoria’s Secret, Saks Fifth Avenue, Walt Disney Attractions, Inc. and Federated Department Stores, Inc. Ms. Jackson brings knowledge and experience of over thirty years as a senior executive and director in an array of large, public companies.
Steven G. Pizula—Director of the Company and member of the Audit Committee since June 2019. Partner at Deloitte & Touche LLP from September 1977 to June 2018. Since joining Deloitte & Touche LLP (then Haskins & Sells) in 1977, Mr. Pizula served as the supervising audit partner on a number of large, multinational public companies in a wide range of industries, including consumer products. Mr. Pizula held various leadership positions at Deloitte & Touche LLP, most recently as Practice Growth Leader for the Pacific Southwest Region and as a Member of the National Committee for Audit Quality, and National Partner Admissions Committee. Mr. Pizula is currently a board member of The Whittier Trust Company, the Arnold and Mabel Beckman Foundation and the Forum for Corporate Directors. Mr. Pizula is a Certified Public Accountant and member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants. Mr. Pizula brings extensive experience in accounting and audit matters.
Benjamin M. Polk—Director of the Company since November 1990. Assistant Secretary1990, member of MEC from October 1992 to February 2016the Nominating and a directorCorporate Governance Committee since June 2019 (Chairman since June 2019) and member of the Compensation Committee since June 2019. Director of MEC from July 1992 to February 2016. Partner with Veritas Capital, a private equity firm, since July 2011. Director of Aeroflex Holding Corp. from November 2012 to September 2014. Director of CPI International, Inc. from October 2012 to the present. July 2017.
Director of Truven Health Analytics, Inc. from October 2012 to April 7, 2016. Mr. Polk was a partner with the law firm of Schulte Roth & Zabel LLP from May 2004 to July 2011 and prior to that, a partner with the law firm of Winston & Strawn LLP, where Mr. Polk practiced law with that firm and its predecessor firm, from August 1976 to May 2004. Mr. Polk has gained detailed knowledge of the Company during his service as a director since 1990 and as outside counsel from 1990 to July 2011. Mr. Polk has extensive experience in matters relating to mergers, acquisitions and corporate finance.
Sydney Selati—Director of the Company and member of the Audit Committee since September 2004 (Chairman since February 2015), member of the Compensation Committee of the Board of Directors (the “Compensation Committee”) since March 2007 and member of the Nominating and Corporate Governance Committee since April 2009. Mr. Selati was named Chairman of the Audit Committee on February 27, 2015. Mr. Selati has been a director and Chairman of the Audit Committee of the San Diego Jewish Community Foundation sincefrom July 2010 to June 2017 and has beenwas Chairman of its Audit Committee from August 2011 to June 2019. Mr. Selati was Chairman of the board of directors of the San Diego Jewish Community Foundation sincefrom July 2016.2016 to June 2017. Mr. Selati was a director of Barbeques Galore Ltd. from 1997 to 2005 and was President and Chairman of the board of directors of The Galore Group (U.S.A.), Inc. from 1988 to 2005. Mr. Selati was President of Sussex Group Limited from 1984 to 1988. Mr. Selati has extensive experience as a chief executive and board member of companies in other industries, which allows him to bring additional perspective to the board.Board. Mr. Selati is a Chartered Accountant (South Africa).
Harold C. Taber, Jr.—Director of the Company since July 1992, member of the Audit Committee since April 2000, member of the Compensation Committee from April 2009 to March 2017 and member of the Nominating Committee since September 2004. Mr. Taber was appointed by the Board of Directors to be Chairman of the Nominating Committee in April 2009. Mr. Taber worked for the Coca-Cola Bottling Company of Los Angeles in various positions from 1976 to 1987, including Group President, West Region. President and Chief Executive Officer of MEC from July 1992 to June 1997. Consultant for The Joseph Company from October 1997 to March 1999 and for Costa Macaroni Manufacturing Company from July 2000 to January 2002. Executive Assistant to the Dean at the Biola University School of Business from July 2002 to January 2015. Mr. Taber has extensive knowledge of the Company’s historical and current operations and brings leadership and management skills to the Board.
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Kathy N. Waller—Director of the Company since June 2015. Executive Vice President and Chief Financial Officer of The Coca-Cola Company from April 2014 to the present. Ms. Waller joined The Coca-Cola Company in 1987 as a Senior Accountant in the Accounting Research Department and has served in a number of accounting and finance roles of increasing responsibility. From July 2004 to August 2009, Ms. Waller served as Chief of Internal Audit. In December 2005, she was elected a Vice President of The Coca-Cola Company and in August 2009 she was elected Controller. In August 2013, she became Vice President, Finance and Controller of The Coca-Cola Company, assuming additional responsibilities for corporate treasury, corporate tax and finance capabilities. Ms. Waller also serves on the board of directors of Coca-Cola FEMSA, S.A.B. de C.V., from April 2014 and on the board of directors of Delta Airlines, Inc. from July 2015. Ms. Waller has a strong background in accounting and finance as well as substantial business and leadership experience in the beverage industry.
Mark S. Vidergauz—Director of the Company and member of the Compensation Committee since June 1998 (Chairman since June 2019), member of the Audit Committee from April 2000 through May 2004, member of the Nominating and Corporate Governance Committee since June 2019 and Lead Independent Director since March 2014. Chief Executive Officer of The Sage Group LLC, an investment banking firm, from April 2000 to the present. The Sage Group, LLC provides merger, acquisition and capital formation advisory services to a wide range of companies in the consumer sector. Managing Director at the Los Angeles office of ING Barings LLC, a diversified financial service institution headquartered in the Netherlands, from April 1995 to April 2000. Mr. Vidergauz brings strong merger and acquisition, corporate finance, corporate governance and leadership experience to the board.Board.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR SET FORTH ABOVE.
MANAGEMENT
Board Meetings and Committees; Annual Meeting Attendance
The Board is comprised of Rodney C. Sacks, Hilton H. Schlosberg, Mark J. Hall, Norman C. Epstein,Kathleen E. Ciaramello, Gary P. Fayard, Jeanne P. Jackson, Steven G. Pizula, Benjamin M. Polk, Sydney Selati Harold C. Taber, Jr., Kathy N. Waller and Mark S. Vidergauz. The Board held sixfour meetings during the fiscal year ended December 31, 2016.2019. Each director attended the annual meeting held on June 14, 2016.6, 2019. During the 20162019 period in which he or she was a director, each director attended at least 75% of the aggregate total number of meetings of the Board of Directors and Board committees in which he or she was a member. The Board has determined that Messrs. Epstein, Fayard, Pizula, Polk, Selati Taber and Vidergauz and Ms. Jackson are independent, as that term is defined in the NASDAQ MarketplaceNasdaq Stock Market Rules and SEC regulations. Our independent directors met in executive session four times during the fiscal year ended December 31, 2016.2019. The executive sessions include reviewing and assessing succession plans for the Chief Executive Officer, President and other key members of executive management. The Board does not have a policy requiring the attendance by the directors at the Annual Meeting.
During the fiscal year ended December 31, 2016,2019, the Audit Committee was comprised of Norman C. Epstein (Chairman until February 27, 2015)(until June 2019), Gary P. Fayard, Steven G. Pizula (since June 2019), Sydney Selati and Harold C. Taber, Jr. and Sydney(until June 2019). Mr. Selati (Chairman since February 27, 2015).served as Chairman. The Board of Directors has adopted aan amended and restated written charter for the Audit Committee in February 2019, which is available on our website athttp://investors.monsterbevcorp.com/governance.cfm. The Audit Committee held four meetings during the fiscal year ended December 31, 2016.2019. The Audit Committee last met in February 20172020 in connection with the review of the Company’s financial statements for the fiscal year ended December 31, 2016.2019. See “Audit Committee” below for more information.
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During the fiscal year ended December 31, 2016,2019, the Compensation Committee was comprised of Norman C. Epstein (Chairman)(until June 2019), Mark S. Vidergauz,Benjamin M. Polk (since June 2019), Sydney Selati and Harold C. Taber, Jr.Mark S. Vidergauz. Mr. Epstein served as Chairman until June 2019 and Mr. Vidergauz has served as Chairman since June 2019. All members of the Board who serve on the Compensation Committee meet the independence requirements of the Nasdaq Stock Market Rules. The Compensation Committee held threesix meetings during the fiscal year ended December 31, 2016.2019. Under the Monster Beverage Corporation 2011 Omnibus Incentive Plan (the “2011 Omnibus Incentive Plan”), and the grant procedures adopted by the Board for grants of equity awards, the Compensation Committee has sole and exclusive authority to grant equity awards to all employees and consultants who are not new hires and to all new hires and promotions who are subject to Section 16 of the Exchange Act. The Compensation Committee and the Executive Committee each independently has the authority to grant awards for new hires and promotions for employees who are not Section 16 employees. The Board of Directors has adopted aan amended and restated written charter for the Compensation Committee in February 2019, which is available on our website athttp://investors. monsterbevcorp.com/investors.monsterbevcorp.com/governance.cfm. The Board has adopted written Equity Grant Procedures(see “Compensation Discussion and Analysis – Compensation Program Components - Long-Term Incentive Program” and “Compensation Committee” below for more information).
During the fiscal year ended December 31, 2016,2019, the Nominating and Corporate Governance Committee was comprised of Norman C. Epstein (until June 2019), Benjamin M. Polk (since June 2019), Sydney Selati, Harold C. Taber, Jr. (Chairman), Norman C. Epstein(until June 2019) and Sydney Selati.Mark S. Vidergauz (since June 2019). Mr. Taber served as Chairman until June 2019 and Mr. Polk has served as Chairman since June 2019. In February 2019, the Board of Directors renamed the Nominating Committee the “Nominating and Corporate Governance Committee.” The Board has adopted a written charter for the Nominating and Corporate Governance Committee, which is available on our website athttp://investors. monsterbevcorp. com/investors.monsterbevcorp.com/governance.cfm. The Nominating and Corporate Governance Committee held two meetings during the fiscal year ended December 31, 20162019 (see “Nominating and Corporate Governance Committee” below for more information).
The Executive Committee, comprised of Rodney C. Sacks and Hilton H. Schlosberg, held eighteensix meetings during the fiscal year ended December 31, 2016.2019. The Executive Committee manages and directs the business of the Company between meetings of the Board. Under the 2011 Omnibus Incentive Plan equity grant procedures, each of the Compensation Committee and the Executive Committee of the Board independently has the authority to grant equity awards for new hires and promotions for employees who are not Section 16 employees. AwardsEquity awards granted by the Executive Committee are not subject to approval or ratification by the Board or the Compensation Committee, as set forth in the written Equity Grant Procedures adopted by the Board (see “Compensation Discussion and Analysis – Compensation Program Components - Long-Term Incentive Program”Equity Grant Procedures” below for more information).
Non-Employee Director Stock Ownership Policy
The Board has adopted stock ownership requirements for non-employee directors. These requirements provide that each non-employee director of the Company has three years from the date of
appointment to satisfy the minimum stock ownership requirement and hold a minimum of 9,000 shares of Common Stock.Stock (including vested restricted stock units and deferred stock units). During 2016,2019, all non-employee directors complied with the non-employee director stock ownership policy. See “Proposal Three - Approval of Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors” below.
Anti-Hedging Policy
The Company’s insider trading policy prohibits the Company’s directors, officers and employees from engaging in transactions that use any financial instrument that is designed to hedge or offset any decrease in the market value of Company securities, including prepaid variable forward contracts, collars and exchange funds.
Anti-Pledging Policy
The Company’s insider trading policy prohibits employees and directors from pledging Company securities. However, in certain limited circumstances the Company’s compliance officer may allow an employee or director to pledge certain Company securities. As of April 8, 2020, only two employees, Mr. Sacks and Mr. Schlosberg, pledged approximately 2.6% of the shares of Common Stock they beneficially own.
Director Resignation Policy
The Board has a director resignation policy. This policy provides that, in an uncontested election, any incumbent director nominee who receives a greater number of votes “WITHHELD” from his or her election than votes “FOR” his or her election must promptly tender his or her resignation to the Board following certification of the election results. The Nominating and Corporate Governance Committee will review the circumstances surrounding the election and recommend to the Board whether to accept or reject the resignation. The Board must act on the tendered resignation. If such resignation is rejected, the Board must publicly disclose its decision, together with the rationale supporting its decision, within 90 days after certification of the election results. A copy of the director resignation policy is available on our website athttp://investors. monsterbevcorp.com/governance.cfm.investors.monsterbevcorp.com/governance.cfm.
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Board Leadership Structure
The Board of Directors does not have a policy on whether or not the roles of Chief Executive Officer and Chairman of the Board should be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or be an employee. The Corporate Governance Guidelines state the Board’s belief that whether to have the same person occupy the offices of chairperson of the Board of Directors believes that itand Chief Executive Officer should be free to make a choicedecided by the Board, from time to time, in any manner thataccordance with the Company’s by-laws and its business judgment after considering relevant factors, including the specific needs of the business and what is in the best interestsinterest of the Company and itsCompany’s stockholders. The Board believes that the Company’s current Chief Executive Officer is best situated to serve as Chairman of the Board. Rodney C. Sacks has led the Company for over 2730 years and therefore is highly knowledgeable with respect to the Company’s business, operations and industry. Mr. Sacks is well positioned to identify strategic priorities and lead the Board’s consideration and analysis of such priorities. The Board believes that the combined role of Chairman and CEOChief Executive Officer (“CEO”) promotes consistency and efficiency in the development and execution of the Company’s business strategy. Further, the Board recognizes that Mr. Sacks and Mr. Schlosberg serve as co-leaders and bring valuable insight to the Board. Additionally, it is the Company’s practice that in the absence of
Mr. Sacks, Mr. Schlosberg assumes sole leadership responsibilities. A copy of the Corporate Governance Guidelines is available on our website athttp://investors.monsterbevcorp.com/governance.cfm.
Lead Independent Director
In March 2014, the independent directors of the Board approved a Lead Independent Director Charter. Under the Lead Independent Director Charter, if the offices of Chairman of the Board and Chief Executive Officer are held by the same person, the independent members of the Board of Directors will annually elect with a majority vote an independent director to serve in a lead capacity. Although elected annually, the Lead Independent Director is generally expected to serve for more than one year. The Lead Independent Director may be removed or replaced at any time with or without cause by a majority vote of the independent members of the Board.
Mr. Vidergauz is currently the Lead Independent Director. In this capacity, Mr. Vidergauz is, among other things, responsible for leading executive sessions of the independent directors and serving as the principal liaison between the Chairman, Vice Chairman and the independent directors. A copy of the Lead Independent Director Charter is available on our website athttp://investors.monsterbevcorp.com/ governance.cfm.governance.cfm.
The Board’s Role in Risk Oversight
The Board of Directors plays an active role in overseeing and managing the Company’s risks. The full Board and its Executive Committee regularly review the Company’s results, performance, operations, competitive position, business strategy, liquidity, capital resources, product distribution and development, material contingencies and senior personnel, as well as the risks associated with each of these matters. The Board implements its risk oversight function both as a whole and through its standing committees. Certain of the work is delegated to committees, which meet regularly and report back to the full Board. The Compensation Committee oversees management of risks related toreviews the Company’s compensation policiespractices and practices.discerns the relationship among risk, risk management and compensation in light of the Company’s objectives. The Audit Committee overseesreviews and discusses with management ofthe risks faced by the Company and the policies, guidelines and process by which management assesses and manages the Company’s risks, including the Company’s major financial risk exposures and risks related to financial statements, the financial reporting process and internal controls.accounting and legal matters, as well as the steps management has taken to monitor and control such exposures. The full Board also discusses risk throughout the year during meetings in relation to specific proposed actions including risks related to cybersecurity.cybersecurity and reputation. These processes are designed to ensure that risks are taken knowingly and purposefully. The Board believes that its role in oversight of risk management (as well as the role of the Compensation Committee and the Audit Committee) has not adversely affected its leadership structure or results of operations.
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The names and ages of our named executive officers at December 31, 2016, who we refer to as our NEOs,2019, and certain biographical information about them, are set forth on page 1213 and below.
Name | | Age | | Position |
| | | | |
Rodney C. Sacks | | 70 | | | 67
| | Chairman of the Board of Directors and
Chief Executive Officer |
| | | | |
Hilton H. Schlosberg | | 67 | | | 64
| | Vice Chairman of the Board of
Directors, President, Chief Financial Officer, Chief Operating Officer and Secretary |
| Guy P. Carling | | 43 | | President, EMEA |
Mark J. Hall1
| | 61
| | Director
|
| | | | |
Thomas J. Kelly | | 63
65 | | SeniorExecutive Vice President, Finance,
MEC |
| Emelie C. Tirre | | 50 | | President, Americas |
1Mark J. Hall resigned fromGuy P. Carling—President of EMEA since 2018. In his position as President of EMEA, Mr. Carling oversees the Company’s sales, development and expansion in markets in Europe, the Middle East, Africa, and Central Asia, and frequently reports directly to the Executive Committee and our Board of Directors. Mr. Carling joined MEC in December 2007, and previously served as Chief MarketingCommercial Officer & Managing Director of MEC, effective May 1, 2017.EMEA. Mr. Hall will continue to serve as an employee ofCarling has worked in the MEC, focusing on ideation, design and development of new products.beverage business for over 22 years.
Thomas J. Kelly – Senior—Executive Vice President, Finance, and/or Controller and Secretary of MEC since 1992. In his position as SeniorExecutive Vice President, Finance, Mr. Kelly frequently reports directly to the Executive Committee and our Board of Directors. Prior to joining MEC, Mr. Kelly served as controller for California Copackers Corporation. Mr. Kelly is a Certified Public Accountant (inactive) and has worked in the beverage business for over 3134 years.
Emelie C. Tirre—President of the Americas since July 2018. In her position as President of the Americas, Ms. Tirre oversees the Company’s sales, development and expansion in markets in the United States, Canada, Latin America, Oceania and the Caribbean. She frequently reports directly to the Executive Committee and our Board of Directors. Ms. Tirre joined MEC in July 2010, and previously served as Chief Commercial Officer and the Senior Vice President of Sales for North America. Ms. Tirre has worked in the beverage business for over 28 years.
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
The Company’s financial performance remained robust during 2019, as evidenced in part by the following:
| · | Net sales of $4.20 billion, up 10.3% from 2018. |
| · | Operating income of $1.40 billion, up 9.3% from 2018. |
| · | Net income per diluted share of $2.03, up 15.2% from 2018. |
As a result, earned bonuses for our named executive officers (“NEOs”) ranged from 50% to 120% of base salary under our discretionary plan for 2019. In determining 2019 bonus awards, our Compensation Committee and Executive Committee considered our performance achievements and various strategic factors, including sales revenues, high relative profit growth, distribution levels, introduction of new products, corporate partnerships, overall operating performance, profitability and Total Shareholder Return (“TSR”). No single performance achievement or strategic factor was weighed more heavily than others. Instead, each of these measures of overall Company performance guided the determination of the bonus awards. The long-term incentive program remained unchanged in 2019, as it was delivered through a mix of stock options and time-vested restricted stock units (“RSUs”) for all NEOs including Mr. Sacks and Mr. Schlosberg, whose annual long-term incentive grant value remained unchanged from 2018.
Importantly, this bonus structure and the long-term incentive grants represented the prior compensation program, before the implementation of formulaic annual and long-term incentive programs for 2020 and beyond, as discussed below.
2019 “Say-on-Pay” Vote Results and Stockholder Engagement
At our 2019 annual meeting of stockholders, 64.4% of the votes cast were in favor of our advisory resolution regarding the compensation of our NEOs.
The Compensation Committee, with the assistance of its independent compensation advisor, Frederic W. Cook & Co., Inc. (“F.W. Cook”), has continued to evaluate our compensation program and decided to adopt a formulaic approach for its annual incentive and long-term incentive programs for 2020 and beyond, as described in detail below, which was also discussed with stockholders holding approximately 60% of the issued and outstanding shares of our Common Stock. These discussions took place primarily between June 2019 and September 2019. Such stockholders included representatives from 14 of our largest institutional stockholders and a majority of our 10 largest institutional stockholders. Participants in these discussions included members of senior management, who provided feedback to the Compensation Committee.
During these discussions, we communicated the formulaic incentive programs that we were adopting, which were regarded positively in these discussions and no other significant concerns were raised by stockholders regarding the amount of pay or other executive compensation practices and policies.
Executive Compensation Program Changes for 2020 and Beyond
Three significant changes were made to the executive compensation program for 2020 and beyond to align the executive compensation program with market practices and make the executive compensation program more formulaic and objective in nature.
Change #1 - Annual Incentive Program Re-Design
The Compensation Committee’s prior practice was to determine annual incentive payouts on an entirely discretionary basis. Beginning with the 2020 fiscal year, the Compensation Committee transitioned to a formulaic approach, whereby each NEO has a pre-established target bonus opportunity which will be earned based on pre-established financial and individual performance, weighted 75% and 25%, respectively. In developing the performance goals for the 2020 annual incentive awards, the Compensation Committee worked with F.W. Cook to develop a target goal that represented a meaningful level of growth relative to prior year performance with sufficient rigor to be challenging, but not impossible, to achieve. The key elements of the 2020 annual incentive program are as follows:
| · | in March 2020, the Compensation Committee granted the 2020 annual incentive award to the NEOs with a target bonus opportunity ranging from 50% to 120% of each NEO’s 2020 base salary (the “2020 Award”); |
| · | payouts for the 2020 Award are dependent upon adjusted operating income (75% weighting) and individual performance (25% weighting); |
| · | with respect to both the Company’s adjusted operating income and the individual performance components, the payout may range from 0% to 200% of target, and no payout will be earned for performance below a threshold level; |
| · | achievement under either of these components are independent of each other (i.e., a payout can be made under one component even if no payout is made under the other); |
| · | consistent with past practice, the 2020 Award payout (if any) will be made in cash or shares of our Common Stock (or a combination thereof) at the Compensation Committee’s discretion, and will equal the weighted sum of the achievement for each performance metric; and |
| · | in the event of a NEO’s termination of employment during the fiscal year due to death, disability, termination by the Company without cause or for a NEO’s voluntary termination for “good reason,” he or she will receive a pro-rata portion of the award based on actual performance through the end of the performance period. |
Change #2 - Long-Term Incentive Re-Design
The Compensation Committee historically made annual grants to our NEOs consisting of a mix of stock options and time-vested RSUs for its long-term incentive program. With the assistance of F.W. Cook, the Compensation Committee approved in March 2020 a new ongoing long-term incentive program structure for all NEOs consisting of stock options (25% weighting), time-vested RSUs (25% weighting) and performance share units (“PSUs”) (50% weighting). The stock options will vest ratably over three or five years, subject to continued service, and will have a 10-year term. The RSUs will also vest ratably over three or five years, subject to continued service. The PSUs will cliff vest after three years based on performance achievement versus the pre-established performance goal, subject to continued service during the period.
The mechanics of the new PSU awards are as follows:
| · | each NEO receives a target allocation of PSUs at the beginning of the performance period equal to 50% of their annual long-term incentive award grant value; |
| · | a single three-year performance period with cliff vesting, subject to continued service; |
| · | the performance metric is three-year cumulative adjusted diluted earnings per share (“EPS”) growth; and |
| · | the number of PSUs earned ranges from 0% to 200% of target versus the pre-established performance goals; the determination of PSUs earned are similar to the mechanism of the annual incentive program with threshold, target and maximum performance levels earning 50%, 100% and 200% of target PSUs, respectively. |
The long-term incentive program structure approved in March 2020, as described above, will be implemented in March 2021, the grant sizes for which will be determined based on the Company’s performance during 2020 and with a single three-year performance period with cliff vesting.
Solely with respect to 2020 and as a one-time transition, the Compensation Committee determined that the March 2020 long-term incentive grant would be split among stock options (30% weighting), time-vested RSUs (30% weighting) and PSUs (40% weighting). The following summarizes key elements of the 2020 grant of PSUs (the “2020 PSU Award”):
| · | the number of PSUs that vest during the performance periods will be based on the Company’s adjusted diluted EPS (as discussed below); |
| · | the performance periods will track: |
| o | for 16.67% of the target shares, 2020 adjusted diluted EPS, with any earned PSUs vesting on December 31, 2020; |
| o | for 41.67% of the target shares, two-year cumulative adjusted diluted EPS from 2020 through 2021, with any earned PSUs vesting on December 31, 2021; and |
| o | for 41.67% of the target shares, three-year cumulative adjusted diluted EPS from 2020 through 2022, with any earned PSUs vesting on December 31, 2022; |
| · | the threshold, target and maximum performance goals for each of the three performance periods were approved in March 2020 by the Compensation Committee and similarly represented challenging but achievable levels of growth from 2019 actual performance; |
| · | vested PSUs will be settled in shares of our Common Stock no later than March 15th of the year following the year in which such PSUs vest; and |
| · | in the event of a NEO’s termination of employment with the Company prior to a vesting date, any unvested portion of the 2020 PSU Award will be forfeited (except in connection with a Change in Control, as described below). |
Change #3 – Change in Control Equity Vesting
The Company historically granted stock option and time-vested RSU awards that provided for “single-trigger” equity vesting, whereby vesting was accelerated solely upon the occurrence of a change in control. The 2020 PSU Award, granted in March 2020, contains “double-trigger” vesting provisions, which provide for accelerated vesting upon the occurrence of a change in control and a qualifying termination of employment. Upon a change in control, the 2020 PSU Award will automatically convert into time-vested RSUs, with vesting occurring on the original vesting dates of the 2020 PSU Award; provided that, such time-vested RSUs will automatically accelerate upon a subsequent qualifying termination of employment. The number of time-vested RSUs that a portion of the 2020 PSU Award could convert to depends on the timing of a change in control. If a change in control occurs during calendar year 2020, the entire portion of the 2020 PSU Award will automatically convert into time-vested RSUs, with the number of shares of Common Stock underlying such RSUs based on the number of shares deliverable at target performance (as outlined in the applicable award agreement). If a change in control occurs during calendar years 2021 or 2022, only the remaining unvested portion of the 2020 PSU Award will automatically convert into time-vested RSUs, with the number of shares of Common Stock underlying such RSUs deliverable at actual performance for the most recently completed performance period that ended before the change in control (as outlined in the applicable award agreement). Further, the Compensation Committee agreed that equity awards granted to NEOs under the 2020 Omnibus Incentive Plan, if approved by stockholders, will be subject to “double-trigger” vesting.
2019 Compensation Program
Compensation Philosophy
Our executive compensation program for our NEOs, as described in the following pages, is designed to emphasize equity compensation in the form of stock options, restricted stock and/or restricted stock units in addition to cash compensation as a means of motivating and retaining executive talent, rewarding executives fairly over time for performance relative to business plan goals and creating sustainable shareholder value through continued profitable growth. The program is designed to reinforce ownership and overall entrepreneurialism and to link rewards to measurable corporate and qualitative individual performance. The program is based on principlesprogram’s primary objectives are to motivate and is not formulaic in its approach. When making compensation decisions, the Company’sretain executive talent and to reward executives fairly over time for performance versus its internalrelative to business plan goals and external benchmarks are considered. Consideration is also given to operating performance and shareholder returns, as well each NEO’s role in enhancing operating performance and shareholder returns. create sustainable stockholder value through continued profitable growth.
In applyingexecuting on these principles we integrateobjectives, the Compensation Committee has integrated cash and equity incentive compensation programs with our short- and long-term strategic plans in order to align the interests of our NEOs with the long-term interests of our stockholders. The Compensation Committee annually evaluates risks and rewards associated with the Company’s overall compensation philosophy and structure and does not believe the program promotes excessive risk-taking.
With respect to specific elements of compensation, base salary is a fixed amount to secure executive service, the annual cash bonus opportunity is designed to incentivize and reward achievement of short-term financial and operating performance and equity grants that vest over multi-year periods are designed to reward long-term financial and stock price performance as well as serve as a key retention vehicle for our executive talent. While the Compensation Committee intends for compensation levels to be competitive relative to similarly-situated executives at companies of comparable size and scope of operations, no specific market positioning or percentile is targeted as a matter of practice.
The Compensation Committee annually evaluates risks and rewards associated with the Company’s overall compensation philosophy and structure, and does not believe the program promotes excessive risk-taking.
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Setting Executive Compensation for 2019
The compensation programs for our NEOs are generally administered by or under the direction of the Compensation Committee (in the case of Rodney Sacks, the Chairman and Chief Executive Officer, and Hilton Schlosberg, the Vice Chairman and President) and, the Executive Committee (inin the case of the other NEOs).NEOs, by our Compensation Committee, based on the recommendation of the Executive Committee. The compensation program is benchmarked annually by the Compensation Committee’s independent consultants to ensure that remuneration levels and benefits are competitive and reasonable and continue to achieve the goals set forth in our compensation philosophy. In reviewing the compensation for Mr. Sacks and Mr. Schlosberg, the Compensation Committee recognizes that Mr. Sacks and Mr. Schlosberg serve as our co-leaders. Given the long-term complementary nature of their leadership and their contributions to our success, the Compensation Committee has determined it is appropriate to continue to compensate them equally.
For 20162019 compensation decisions, the Compensation Committee again retained the independent compensation consulting firm, Frederic W.F.W. Cook & Co., Inc. (“FW Cook”), to provide competitive market data and make recommendations to the Board with respect to compensation for non-employee directors, to the Compensation Committee with respect to compensation for Mr. Sacks and Mr. Schlosberg and to the Executive Committee with respect to compensation for our other NEOs and senior management. FWF.W. Cook reports directly to the Compensation Committee and did not perform any other services for the Company in 2016.2019. Following an independence assessment of FWF.W. Cook during 2016,2019, the Compensation Committee determined that the services provided by FWF.W. Cook did not raise any conflicts of interest.
The Compensation Committee considers relevant market pay practices and individual and Company performance when setting executive compensation. We do not set compensation at a targeted percentile level relative to the market, but we seek to provide salary, incentive compensation opportunities and employee benefits that are generally competitive within the consumer products industry, the food and beverage industry and within the labor markets in which we participate. Within this framework, we generally seek to keep salary and cash bonuses below the median for our NEOs,Mr. Sacks and Mr. Schlosberg, with equity awards providing enhanced compensation opportunities. We gather market compensation data to provide context, but we also consider Company and individual performance, as well as our recruiting and internal retention experience when making executive compensation decisions.
The Compensation Committee consulted with FWF.W. Cook in late 20152018 to conduct a 20162019 competitive market analysis (the “Early 20162019 Market Analysis”) using a comparison group of similarly-sized, high-performing U.S. food and beverage and consumer products companies (the “Early 20162019 Peers”). As market compensation levels are correlated to revenues for cash compensation and market capitalization for equity compensation, the Compensation Committee selects its peer companies using objective size criteria for each metric. ForRelative to the Early 20162019 Peers, and based onrevenue was below the Company’s size at that time,median, operating income approximated the size criteria used for the peer group screening were revenues less than $20.0 billionmedian, and market capitalizations between $7.5 billion and $120 billion (25% to 400% ofcapitalization approximated the Company’s market capitalization, consistent with broad market practice).75th percentile. The Early 20162019 Peers were the same as the peers referenced in 20152019, with the exceptionsexception of the removalchange of Nu Skin and Whitewave Foods (which were no longer within the objective size criteria described above) and the additionMichael Kors Holdings Limited’s name to Capri Holdings Limited (following its acquisition of L Brands, PVH, Starbucks, V.F. Corporation and Yum! Brands.Gianni Versace S.p.A.). The resulting Early 20162019 Peers composed of 2118 companies isare shown below:
| · | Brown-Forman Corporation | · | Ralph Lauren Corporation |
| · | Campbell Soup Company | · | Starbucks Corporation |
| · | Capri Holdings Limited | · | The Estée Lauder Companies Inc. |
·Brown-Forman Corporation | | ·The Hershey Company
|
·Campbell Soup Company
·Chipotle Mexican Grill, Inc.
| · | ·The J.M. Smucker Company
·Mead Johnson Nutrition Company
Hain Celestial Group, Inc. |
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·Coca-Cola Enterprises Inc. ·
| Constellation Brands, Inc. | ·Dr. | The Hershey Company |
| · | Keurig Dr Pepper Snapple Group, Inc.·Keurig Green Mountain, Inc.
| · | The J. M. Smucker Company |
·Michael Kors Holdings Limited | L Brands, Inc. | · | Under Armour, Inc. |
| · | Molson Coors Brewing Company | ·PVH·Ralph Lauren
| V.F. Corporation |
·The Estee Lauder Cos. ·The Hain Celestial Group. Inc.
| PVH Corp. | ·Under Armour, Inc. ·V.F. Corporation
|
·L Brands
| | ·Starbucks
|
·Yum! Brands,
| | Inc. |
The Early 20162019 Market Analysis was considered in determining the NEOs’ 2016 compensation.2019 base salaries and equity award grant values.
In December 2016,2019, subsequent to FWF.W. Cook’s review of the Early 20162019 Peers, no changes to the Committee removed Coca-Cola Enterprises, Inc. and Keurig Green Mountain, Inc.,peer group were deemed necessary, resulting in the 19-company18-company Late 20162019 Peer Group (the “Late 20162019 Peers”). As such, compensation and performance data of the Late 20162019 Peers were considered in determining 2016annual cash compensation and bonuses and 2017 base salaries for our NEOs.the 2019 performance year.
Taking into consideration the Early 20162019 Market Analysis, the Compensation Committee set Mr. Sacks’ and Mr. Schlosberg’s 20162019 cash compensation below the median of the Early 20162019 Peers, and granted them above-median equity compensation in order to them,align their interests over the long-term with the result that their total compensation was roughly consistent with the Early 2016 Peers 75th percentile.those of our stockholders. The Early 20162019 Market Analysis noted that the performance of the Company (through the third quarter of 2018) was above the peer median in three-year revenue (89th percentile) and earnings per share (“EPS”)EPS growth (66th percentile), and return on invested capital and both one- and three-year Total Shareholder Return (“TSR”)(71st percentile) as well as on five-year TSR (91st percentile). This level of operating and TSR performance, which was considered significant by the Compensation Committee, was factored into the compensation decisions. This long-term high operating performance and high market capitalization guided the Compensation Committee’s determination of the total compensation of Mr. Sacks and Mr. Schlosberg being in line with the Early 2019 Peers 75th percentile. The peer group data isare only one reference point used by us when making compensation decisions. However, we generally believe that reviewing and analyzing thissuch pay and performance information is an important component of our executive compensation decision-making process.
The Company historically did not grant equity awards annually to Mr. Sacks and Mr. Schlosberg, but instead provided periodic equity awards to align their compensation with performance on a discretionary basis. Equity awards were granted to Mr. Sacks and Mr. Schlosberg in 2013 to reward them for the Company’s strong performance in 2011 and 2012 to further align their interests with our stockholders. Beginning in 2014, the Company moved to an annual grant philosophy to overlap vesting and provide a portfolio of vesting dates (and, for2019 stock option awards, exercise prices) for equity awards. The 2016 option and restricted stock unitRSU awards granted to Mr. Sacks and Mr. Schlosberg were made under thisour annual grant philosophy as well as to reward for the Company’s continued strong performance in 20152018 and further align their interests with our stockholders. The grant date fair market value of their 2019 equity awards remained unchanged from 2018. Recent equity awards granted to Mr. Sacks and Mr. Schlosberg vest over a three-year period with the exception of certain stock awards granted in March 20162019 and 2017,2020, which were granted in lieu of a portion of 2015the cash bonus awarded for 2018 and 2016 cash bonuses,2019 performance, and as a result, were fully vested at grant to equate to a cash award.
CompensationFor 2019, the compensation decisions for Mr. Carling, Mr. Kelly and Mr. HallMs. Tirre were discretionary and not based on specific performance targets. However,targets, however, the Company considered FWF.W. Cook’s competitive market analysis for guidance in determining the total compensation for Mr. Carling, Mr. Kelly and Mr. Hall.Ms. Tirre. The compensation levels for Mr. Carling, Mr. Kelly and Mr. HallMs. Tirre were generally set relative to the market data in a manner similar to Mr. Sacks’ and Mr. Schlosberg’s, with below-median salaries and cash bonuses offset by above-median long-term equity compensation value through stock options and RSUs, in order to emphasize the Company’s commitment to continued shareholderstockholder growth and to recognize that options and RSUs have been an effective incentive for motivating performance.performance, and annual cash compensation value that is comparable to the compensation received by similarly situated individuals employed by the Early 2019 Peers. Recent equity awards granted to Mr. HallCarling, Mr. Kelly and Ms. Tirre vest over a three- or five-year period. Recent equity awards granted to Mr. Kelly vest over a five-year period.
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We view all components of compensation as related but distinct. We determine the appropriate level for each compensation component, based in part, but not exclusively, on competitive benchmarks
gathered through our recruitment and retention experience, information relating to market data, such as the Early 2019 Market Analysis discussed above, and our review of internal comparatives as well as other considerations we deem relevant, such as rewarding for individual, as well as for corporate performance. We believe that equity awards effectively reward for long-term performance and are an important compensation-related motivator to attract and retain executives through the various vesting periods and, promote sharingfor awards to be granted in the 2020 fiscal year and later years, performance thresholds. In addition, we believe equity awards allow executives to share in the value that they may create. Except as described herein, neither our Compensation Committee nor our Executive Committee have adopted any formal or informal policies or guidelines for allocating compensation between short-term and long-term and current compensation between cash and non-cash compensation. However, our Compensation Committee and Executive Committee’s respective philosophy is that a greater percentage of our NEOs’ compensation should be rewarded in long-term equity rather than short-term cash, and we believe that this philosophy has benefited our long-term performance by attracting, retaining and motivating a long-tenured NEO group that has built significant long-term value for our shareholders.stockholders. Compensation packages for each of our NEOs are tailored to each individual NEO’s circumstances by the Compensation Committee and/or the Executive Committee, as appropriate, andappropriate. Those decisions are largely based on subjective evaluations of Company and individual performance.performance, with consideration given to compensation of comparable officers at companies who are in our peer group. As noted above in the “Executive Compensation Program Changes for 2020 and Beyond” section, the Compensation Committee is working with F.W. Cook to develop pre-determined, objective factors for the 2020 fiscal year and later years. Each element of compensation is determined differently for each individual NEO, based on a variety of facts and circumstances applicable at the time and specific to that NEO.
Our Compensation Committee and Executive Committee perform an annual strategic review of long-term incentive compensation paid to our NEOs to determine whether they havethe Company has provided adequate incentives and motivation to such NEOs, and whether theythe Company adequately compensatecompensates our NEOs relative to comparable officers in other companies with which we compete for executives. For compensation decisions, including decisions regarding the grant of equity compensation relating to NEOs, other than our Chairman and Chief Executive Officer and our Vice Chairman and President, the Compensation Committee specifically considers recommendations from the Executive Committee.
Results of 2016 Advisory Vote to Approve Executive Compensation
At our 2016 annual meeting of Stockholders, 86.5% of the votes cast were in favor of our advisory resolution regarding the compensation of our NEOs. The Compensation Committee believes this affirms the stockholders’ support of the Company’s pay-for-performance philosophy with respect to executive compensation. No changes were made to the compensation program for NEOs as a direct response to the result of the vote. The Compensation Committee will continue to consider the results of future advisory votes on executive compensation.
2019 Compensation Program Components
Our NEO compensation currentlyprogram for 2019 has three primary components: base compensation or salary, annual cash bonus and equity awards granted pursuant to our 2011 Omnibus Incentive Plan.
Each of the primary components of NEO compensation for 2019 is discussed below.
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2019 Base Salary
Base salaries for our NEOs are established based on the scope of their individual responsibilities, taking into account competitive market remuneration paid by other companies for individuals in similar positions. We set NEO base compensationsalaries at levels which we believe enable us to retain individuals in a competitive environment (but without any fixed formula) and reward performance based upon contributions to our overall business goals. We may also utilize input on compensation from compensation consultants, executive search firms and market data when making crucial hiring decisions.
TheFor 2019, the Compensation Committee of the Board determinesdetermined the base salaries for Mr. Sacks and Mr. Schlosberg and the Executive Committee (comprised of the Chairman and Chief Executive Officer and the Vice Chairman and President) determinesdetermined the base salaries for the other NEOs.
For 2016,Following the Compensation Committee’s discussions with F.W. Cook, for 2019, base salaries for all NEOs were increased in connection with market adjustments based on the Early 2019 Market Analysis. The annual base salary for each of Mr. Sacks and Mr. Schlosberg were increased from $625,000$800,000 to $700,000$850,000 to alignmaintain their base salaries with approximatelymarket positioning for this compensation element at the 2025th percentile of our Early 20162019 Peers. For 2016,2019, Mr. Hall’sCarling’s annual base salary was increased from $500,000$507,469 to $550,000$549,652 (Mr. Carling’s compensation, including bonus, as presented herein was paid in Pound Sterling (“GBP”) and converted to align his base salary with our peer group. For 2016,United States Dollars (“USD”) using the average exchange rate of GBP to USD on a monthly basis for the year ended December 31, 2019), Mr. Kelly’s annual base salary was increased from $300,000$400,000 to $330,000 to align his$450,000 and Ms. Tirre’s annual base salary with our peer group.was increased from $554,615 to $630,000.
2019 Annual Cash Bonus Opportunity
We provideprovided incentive compensation to our NEOs partly in the form of a discretionary annual cash bonus based on a qualitative review of individual and company-wide financial and operational performance, consistent with our emphasis on pay-for-performance incentive compensation programs. The Compensation Committee determines the annual bonuses for Mr. Sacks and Mr. Schlosberg and the annual bonuses for the other NEOs are also determined by the Compensation Committee based on the recommendation of the Executive Committee (comprised of the Chairman and Chief Executive Officer and the Vice Chairman and President) determines the annual bonuses for the other NEOs..
The 2016 cashConsistent with prior years, the 2019 bonuses were not determined inprovided on a formulaic manner. In determining 2016 bonus awards, our Compensation Committee and Executive Committee considered all of our performance achievements and reviewed various strategic factors, including sales revenues, high relative profit growth, distribution levels, introduction of new products, corporate partnerships, overall operating performance, contribution margins, profitability and TSR, which are used as a broad guide of overall performance.discretionary basis, without any pre-established formula. We generally utilize annual cash bonuses to reward performance for the time horizon of one year. Consistent with the Company’s strategy of focusing on long-term equity over short-term cash compensation, the bonus payments have been relatively low compared to our peer group.
The actual amount of the annual bonus is determinedbonuses are approved by the Compensation Committee and paid in the first quarter following a qualitative review of each NEO’s individual performance and contribution to our strategic goals during the prior year. The 2016total 2019 bonus awards for each of Mr. Sacks and Mr. Schlosberg were $833,456, $325,000$1,016,000, $279,154 for Mr. Hall and $165,000Carling, $225,000 for Mr. Kelly.Kelly, and $320,000 for Ms. Tirre. In early 2017,2020, Mr. Sacks and Mr. Schlosberg were each awarded 5,9108,140 fully vested shares of stock valued at $273,456;$508,000; this stock grant represented approximately one-thirdone-half of their total bonus payout for 2016.as part of their 2019 performance. The purpose of paying a portion of their 20162019 bonus in equity was to increase the alignment of their interests with shareholders.stockholders. The remaining portion of their 20162019 bonus awards, and the full 20162019 bonus awards for the other NEOs, were paid in cash.
22The 2019 annual incentive program was consistent with prior years and was approved by the Compensation Committee in early 2019 and before the 2019 annual meeting. Please refer to the “Executive Compensation Program Changes for 2020 and Beyond” section for a discussion of changes to the annual incentive program for 2020.
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2019 Long-Term Incentive Program
We believe that long-term performance is achieved through an ownership culture that encourages superior performance by our NEOs through the use of equity awards and, as a result, the compensation program emphasizes equity awards over cash compensation. Our equity compensation plans have been established to provide our NEOs with incentives to further align their interests with the interests of the stockholders and such interests are aligned through the granting of options and restricted stock units. Equity compensation to our NEOs generally vests over three to five years. Stock options are our preferred form of long-term incentive compensation because we believe they are simple, tax-deferred, and inherently performance-based with value earned only if the price of our common stock appreciates after the options are granted. In 2016, Mr. Sacks and Mr. Schlosberg were granted an equal, value-based mix of options and restricted stock units in order to provide a growth incentive as well as a long-term employment retention incentive.
The Compensation Committee of the Board reviews and approves equity awards to our NEOs based upon compensation data principally gathered through a market analysis conducted by our independent compensation consultants, our recruiting and retention experience and our qualitative assessment of individual performance, as well as a review of each NEO’s current long-term incentives and retention considerations.
On March 14, 2016, the NEOs were granted the following number of non-qualified stock option grants with a per share exercise price of $43.99, the fair market value of a share of our stock on the date of grant, as determined under the 2011 Incentive Plan: Mr. Sacks – 315,000 options; Mr. Schlosberg – 315,000 options; Mr. Hall – 90,000 options; and Mr. Kelly – 37,500 options. The options granted to each of Mr. Sacks, Mr. Schlosberg and Mr. Hall vest in three equal annual installments on each of March 14, 2017, 2018 and 2019, subject to their continued employment through each vesting date. The options granted to Mr. Kelly vest in five installments as follows: 3,750 shares on March 14, 2017; 5,625 shares on March 14, 2018; 7,500 shares on March 14, 2019; 9,375 shares on March 14, 2020; and 11,250 shares on March 14, 2021, subject to his continued employment through each vesting date.
On March 14, 2016, each of Mr. Sacks and Mr. Schlosberg were granted 117,000 restricted291,600 stock unitsoptions under the 2011 Omnibus Incentive Plan that vest in three equal annual installments on each of March 14, 2017,2020, 2021 and 2022, subject to their continued employment through each vesting date. Additionally, on the same day, each of Mr. Sacks and Mr. Schlosberg were granted 100,600 RSUs that vest in three equal annual installments on each of March 14, 2020, 2021 and 2022, subject to their continued employment through each vesting date. These grants represented an aggregate annual grant value of approximately $12.0 million, which was unchanged from the value of the 2018 annual grant value.
On March 14, 2019, Mr. Carling and Ms. Tirre were each granted 25,000 stock options under the 2011 Omnibus Incentive Plan that vest in five annual installments starting on March 14, 2020, and Mr. Kelly was granted 15,000 stock options under the 2011 Omnibus Incentive Plan that vest in three annual installments starting on March 14, 2020. On March 14, 2019, Mr. Carling and Ms. Tirre were each granted 8,500 RSUs that vest in five annual installments starting on March 14, 2020, and Mr. Kelly was granted 5,200 RSUs that vest in three annual installments starting on March 14, 2020, subject to their continued employment through each vesting date.
On December 1, 2016, Mr. HallThe 2019 annual long-term incentive program structure was consistent with prior years and Mr. Kelly were grantedwas approved by the following number of non-qualified stock option grants with a per share exercise price of $43.64,Compensation Committee in early 2019 and before the fair market value of a share of our stock on2019 annual meeting. Please refer to the date of grant, as determined under the 2011 Incentive Plan: Mr. Hall – 100,000 options; and Mr. Kelly – 40,000 options. The options granted to Mr. Hall vest in five equal annual installments on each of December 1, 2017, 2018, 2019,“Executive Compensation Program Changes for 2020 and 2021, subjectBeyond” section above for a discussion of changes to the his continued employment through each vesting date. The options granted to Mr. Kelly vest in five installments as follows: 4,000 shares on December 1, 2017; 6,000 shares on December 1, 2018; 8,000 shares on December 1, 2019; 10,000 shares on December 1, 2020; 12,000 shares on December 1, 2021, subject to his continued employment through each vesting date.long-term incentive program approved for 2020 and future years.
Deferred Compensation
In December 2016, we adopted theThe Monster Beverage Corporation Deferred Compensation Plan (the “Deferred Compensation Plan”) as(amended effective January 1, 2017) is a sub plan to our 2011 Omnibus Incentive Plan. Under the Deferred Compensation Plan, pursuant to which eligible employees may elect to defer cash and/or equity basedequity-based compensation and to receive the deferred amounts, together with an investment return (positive or negative), in the future. No deferrals were madeWe believe that maintaining the Deferred Compensation Plan provides value to our NEOs who may otherwise not be able to fully participate in our qualified retirement plans due to certain limitations under the Internal Revenue Code (the “Code”). Deferrals under the Deferred Compensation Plan are unfunded and unsecured. Mr. Schlosberg is the only NEO who currently participates in the Deferred Compensation Plan. See “2019 Non-Qualified Deferred Compensation Table” for 2016 compensation.
further information.
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Table of Contents
Other CompensationEmployment Agreements
Certain NEOs who are parties to employment agreements will continue to be subject to such agreements in their current form based on the terms of such agreements, or upon renewal should the Compensation Committee determine in its discretion that revisions to such employment agreements are recommended. We believe that having employment agreements with Mr. Sacks and Mr. Schlosberg is beneficial to us because it provides retentive value and subjects each of them to restrictive covenants. For a summary description of the terms of these agreements, see “Discussion of“Narrative to 2019 Summary Compensation Table -and 2019 Grants of Plan-Based Awards Table – Employment Agreements with Named Executive Officers”and Arrangements” below.
Perquisites
In addition, we intend to continue to maintain our current benefits and perquisites for our NEOs. The perquisites include payment of the cost and expense for personal use of a Company automobile or an automobile allowance and the Company’s payment of benefit premiums under certain employee benefit
plans. For Mr. Sacks and Mr. Schlosberg, the perquisites include the use of an office desk for a personal accountant on an occasional basis, at no cost to the Company. In addition, pursuant to their employment agreements, Mr. Sacks and Mr. Schlosberg are entitled to receive initial and annual fees and all other reasonable expenses relating to membership in up to two business or social clubs selected by the executive. Ms. Tirre is entitled to receive 50% of the annual fees relating to the membership in one business or social club selected by the executive. However, the Compensation Committee in its discretion may revise, amend or add to such NEO’sthe employee benefits and perquisites of a NEO if it deems it advisable. We believe these employee benefits and perquisites are currently in line with those provided by comparable companies within the consumer products industry, the food and beverage industry and within the labor markets in which we participate, for similarly situated executives, based principally on information gathered through our recruiting and retention experience. Executives bear all taxes associated with these employee benefits and perquisites and these arrangements do not provide for tax gross ups.
Stock Ownership Guidelines for Chief Executive Officer, President and Chief Financial Officer
The Board maintains stock ownership guidelines (the “Executive Officer Stock Ownership Guidelines”) to further align the interests of the Company’s CEO, President and Chief Financial Officer (“CFO”) with the interests of stockholders and to further promote the Company’s commitment to sound corporate governance. The guidelines require the Company’s CEO, President and Chief Financial Officer to hold an amount of stock at least equal to six (6) times annual base salary, which is then converted to a fixed number of shares. Shares that satisfy the stock ownership guidelines include: Company stock owned directly or indirectly with, or separately by, his or her immediate family members residing in the same household; shares held in trust for the benefit of the executive or his or her immediate family members; all unvested restricted stock with time-based vesting; shares issuable upon the settlement of RSUs; and shares held in the Deferred Compensation Plan. Unexercised stock options, or the non-vested portion of any performance-based restricted stock, do not count towards satisfying the guidelines. Any newly appointed CEO, President and CFO will have five (5) years from the date of his or her appointment to comply with the guidelines. The Compensation Committee will monitor compliance with the stock ownership guidelines and has the authority to establish, review and approve the guidelines as it deems appropriate. During 2019, both executives were in compliance with the stock ownership guidelines by holding the required number of shares.
Clawback Policy
Pursuant to the 2011 Omnibus Incentive Plan, the Compensation Committee may specify in an award agreement that a participant’s rights, payments, and benefits with respect to an award granted under the 2011 Omnibus Incentive Plan will be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events. If the Company is required to file an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, if a participant knowingly or recklessly engaged in the misconduct, or knowingly or recklessly failed to prevent or report the misconduct, or if a participant is subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, such participant will reimburse the Company the amount of any payment in settlement of an award earned or accrued under the 2011 Omnibus Incentive Plan for such period as determined by the Compensation Committee following the first public issuance or filing with the SEC (whichever just occurred) of the financial document reflecting such material noncompliance.
Equity Grant Procedures
The Board maintains equity grant procedures, which sets forth, among other things, the authorities of the Compensation Committee and Executive Committee to make grants under the 2011 Omnibus Incentive Plan under certain circumstances and the timing of our grants of equity awards. Under the equity grant procedures, other than awards granted to new hires, awards may only be granted during an applicable window period.
Employee Benefit Plans
Our employees, including our NEOs who generally participate on the same basis as our broader employee population, are entitled to various employee benefits, which generally include health care plans, flexible spending accounts, life and disability insurance, 401(k) Plan and paid time off, automobile benefits, as well as other allowances.off.
401(k) Plan
Our employees, including our NEOs, may participate in our 401(k) Plan, a defined contribution plan that qualifies under Section 401(k) of the Internal Revenue Code. Participating employees may contribute up to statutory limits. We make discretionary matching contributions, and currently (from January 1, 2016) match 50% of our employee contributions, up to 6% of each employee’s earnings (8% starting January 1, 2020) on a per pay period basis, which vest at a rate of 25%50% upon completion of two years of service, 50%75% upon completion of three years of service and 100% upon completion of four years of service.
Separation and Change in Control Arrangements
Certain of our NEOs, per the terms of their respective employment agreements and/or equity award agreements, are eligible for certain benefits and/or payments if there is a change in control and/or a termination of their employment, as described under “Potential Payments Upon Termination or Change in Control” beginning on page 30.37.
We believe these arrangements are an important part of overall compensation and will help to secure the continued employment and dedication of our NEOs prior to or following a change in control, notwithstanding any concern that they may have at such time regarding their own future and continued employment. In addition, we believe that these arrangements are an important recruitment and retention incentive. These arrangements do not provide for tax gross ups.
Tax Implications
TheWe considered the taxation and accounting consequences of our executive officer compensation programs as part of our internal evaluation of such programs and awards made under them. However, those consequences were are not material factorsa deciding factor in our decisions in establishing or administering our executive officer compensation programs for fiscal year 2016.2019. We retain the discretion to structure compensation in ways that may result in less than full deductibility, that may not maximize tax savings and that may not minimize the accounting cost to the Company. Pursuant to the Tax Cuts and Jobs Act, the exemption from deduction limit under Section 162(m) of the Code for performance-based compensation has been repealed, effective for tax years beginning after December 31, 2017, such that compensation paid to covered executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. Compensation paid in or awarded for 2019 and 2020 described above will not be eligible for such transition relief.
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Table of ContentsCompensation Committee Report
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis referred to above be included in this proxy statement.
| Compensation Committee |
| Mark S. Vidergauz, Chairman |
| Benjamin M. Polk |
| Sydney Selati |
2019 Summary Compensation Table
The following table summarizes the total compensation of our NEOs during the fiscal years ended December 31, 2016, 20152019, 2018 and 2014.2017. During the fiscal year ended December 31, 2016,2019, our NEOs were Rodney C. Sacks, Hilton H. Schlosberg, Mark J. Hall andGuy P. Carling, Thomas J. Kelly.Kelly and Emelie C. Tirre. Mr. Carling’s compensation as presented in the following and subsequent tables was paid in GBP and converted to USD using the average exchange rate of GBP to USD on a monthly basis for the year ended December 31, 2019.
Name and Principal
Position | Year | Salary
($) | Bonus
($) | Stock
Awards
($) | Option
Awards
($)(1) | All Other
Compensation
($) (A) | Total ($) |
| | | | | | | |
Rodney C. Sacks
Chairman, CEO and Director | 2016 | 700,000 | 560,000 | 5,410,360 | 5,280,881 | 77,714 | 12,028,955 |
2015 | 625,000 | 500,000 | 5,161,788 | 4,070,484 | 77,716 | 10,434,988 |
2014 | 600,000 | 400,000 | - | 6,606,390 | 76,023 | 7,682,413 |
Hilton H. Schlosberg
Vice-Chairman, CFO,
COO, President,
Secretary and Director | | | | | | | |
2016 | 700,000 | 560,000 | 5,410,360 | 5,280,881 | 44,545 | 11,995,786 |
2015 | 625,000 | 500,000 | 5,161,788 | 4,070,484 | 42,543 | 10,399,815 |
2014 | 600,000 | 400,000 | - | 6,606,390 | 43,189 | 7,649,579 |
Mark J. Hall
Chief Marketing
Officer and Director | | | | | | | |
2016 | 550,000 | 325,000 | - | 3,193,413 | 24,158 | 4,092,571 |
2015 | 500,000 | 300,000 | - | 5,139,500 | 22,169 | 5,961,669 |
2014 | 254,711 | 100,000 | - | 943,770 | 21,477 | 1,319,958 |
Thomas J. Kelly
Senior Vice President Finance | | | | | | | |
2016 | 330,000 | 165,000 | - | 1,298,777 | 23,521 | 1,817,298 |
2015 | 300,000 | 150,000 | - | 608,431 | 20,531 | 1,078,962 |
2014 | 270,000 | 125,000 | 166,950 | 873,675 | 20,824 | 1,456,449 |
Name and Principal
Position | Year | Salary
($) | Bonus
($) | Stock
Awards
($)(1) | Option
Awards
($)(2) | All Other
Compensation
($)(3) | Total
($)(4) |
Rodney C. Sacks
Chairman, CEO and
Director | 2019 | 850,000 | 508,000 | 6,486,726 | 6,012,646 | 125,062 | 13,982,434 |
| 2018 | 800,000 | 484,000 | 6,464,411 | 6,063,050 | 103,470 | 13,914,931 |
| 2017 | 750,000 | 462,000 | 5,645,403 | 5,550,232 | 97,445 | 12,505,080 |
Hilton H. Schlosberg
Vice Chairman, CFO, COO, President,
Secretary and Director | 2019 | 850,000 | 508,000 | 6,486,726 | 6,012,646 | 81,927 | 13,939,299 |
| 2018 | 800,000 | 484,000 | 6,464,411 | 6,063,050 | 73,746 | 13,885,207 |
| 2017 | 750,000 | 462,000 | 5,645,403 | 5,550,232 | 44,652 | 12,452,287 |
Guy P. Carling
President,
EMEA | 2019 2018 | 549,652 507,469 | 279,154 227,406 | 507,195 618,000 | 504,393 1,641,518 | 45,557 44,778 | 1,885,951 3,039,171 |
Thomas J. Kelly
Executive Vice President,
Finance, MEC | 2019 2018 2017 | 450,000 400,000 350,000 | 225,000 200,000 180,000 | 310,284 - - | 302,636 1,239,216 - | 38,781 36,408 33,667 | 1,326,701 1,875,624 563,667 |
Emelie C. Tirre
President,
Americas | 2019 2018 | 630,000 554,615 | 320,000 275,000 | 507,195 618,000 | 504,393 1,641,518 | 35,345 33,645 | 1,996,933 3,122,778 |
| (1) | The amounts in this column represent the aggregate grant date fair value of awards of shares of our Common Stock (in the case of Messrs. Sacks and Schlosberg) and restricted stock units (in the case of all NEOs) granted under the 2011 Omnibus Incentive Plan, computed in accordance with Accounting Standards Codification (“ASC”) Topic 718, modified to exclude the effect of estimated forfeitures related to service-based vesting conditions. The assumptions used in the valuation of equity awards are disclosed in Note 15 to the Audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. The amounts do not reflect the value actually realized or that ultimately may be realized by the NEOs. |
(1) The amounts represent the current year grant date fair value for all share-based payment awards computed in accordance with Accounting Standards Codification (“ASC”) 718 based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton
| (2) | The amounts represent the aggregate grant date fair value for option awards computed in accordance with ASC Topic 718, modified to exclude the effect of estimated forfeitures related to service-based vesting conditions, and are based on the estimated fair value of the options on the date of grant using the Black-Scholes-Merton |
option pricing formula withassumptions disclosed in Note 15 to the following assumptions:Audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. The amounts do not reflect the value actually realized or that ultimately may be realized by the NEOs.
Name | Date | Dividend
Yield | Expected
Volatility | Risk-Free
Interest
Rate | Expected Term |
Mr. Sacks | 3/14/2016 | 0% | 36.12% | 1.49% | 6.33 |
Mr. Schlosberg | 3/14/2016 | 0% | 36.12% | 1.49% | 6.33 |
Mr. Hall | 3/14/2016 | 0% | 36.12% | 1.49% | 6.33 |
Mr. Hall | 12/1/2016 | 0% | 36.28% | 1.90% | 6.17 |
Mr. Kelly | 3/14/2016 | 0% | 36.12% | 1.49% | 6.33 |
Mr. Kelly | 12/1/2016 | 0% | 36.40% | 1.90% | 6.06 |
| (3) | The amounts reported in this column for 2019 include the items set forth in the table below, as applicable to each NEO: |
Name | Company
Automobile ($) | Automobile
Allowance ($) | 401(k) Matching
Contribution ($) | Benefit
Premiums ($)(a) | Other
Perquisites
($)(b) | Total ($) |
| Rodney C. Sacks | 66,687 | - | 8,400 | 47,010 | 2,965 | 125,062 |
| Hilton H. Schlosberg | 41,839 | - | 8,400 | 31,688 | - | 81,927 |
| Guy P. Carling | - | 15,339 | 27,483 | 2,735 | - | 45,557 |
| Thomas J. Kelly | - | 9,260 | 8,400 | 21,121 | - | 38,781 |
| Emelie C. Tirre | - | 10,462 | 8,400 | 8,803 | 7,680 | 35,345 |
(A)All Other Compensation
| (a) | For Mr. Sacks, the amount in this column represents premiums paid by the Company for coverage for himself, his spouse, and certain dependents, as the case may be, under all medical, dental, disability, group life, accidental death and travel accident insurance plans and programs. For Mr. Schlosberg, the amounts in this column represent premiums paid by the Company for coverage for himself and the members of his immediate family (to the extent permitted by the applicable plan), as the case may be, under all medical, dental, disability, group life, accidental death and travel accident insurance plans and programs. For Mr. Carling, the amounts in this column represent premiums paid by the Company for coverage for himself and the members of his immediate family (to the extent permitted by the applicable plan), as the case may be, under all medical, dental, critical illness, group life, accidental death and travel accident insurance plans and programs. For Mr. Kelly, the amounts in this column represent premiums paid by the Company for coverage for himself and his spouse, as the case may be, under all medical, dental, disability, group life, accidental death and travel accident insurance plans and programs. For Ms. Tirre, the amounts in this column represent premiums paid by the Company for coverage for herself, as the case may be, under all medical, dental, disability, group life, accidental death and travel accident insurance plans and programs. |
Name | Year | Automobile
($) | 401(k) Match
($) | Benefit
Premiums ($) | Perquisites
($) | Total
($) |
| 2016 | 36,362 | 7,950 | 31,389 | 2,013 | 77,714 |
| 2015 | 35,715 | 5,300 | 31,661 | 5,040 | 77,716 |
Rodney C. Sacks | 2014 | 38,710 | 5,200 | 24,274 | 7,839 | 76,023 |
| 2016 | 21,425 | 7,950 | 15,169 | - | 44,544 |
| 2015 | 22,195 | 5,300 | 15,048 | - | 42,543 |
Hilton H. Schlosberg | 2014 | 23,408 | 5,200 | 14,581 | - | 43,189 |
| 2016 | 8,676 | 7,950 | 7,533 | - | 24,159 |
| 2015 | 10,884 | 4,077 | 7,208 | - | 22,169 |
Mark J. Hall | 2014 | 10,159 | 4,077 | 7,241 | - | 21,477 |
| 2016 | 8,038 | 7,950 | 7,533 | - | 23,521 |
| 2015 | 8,023 | 5,300 | 7,208 | - | 20,531 |
Thomas J. Kelly | 2014 | 8,383 | 5,200 | 7,241 | - | 20,824 |
| (b) | For Mr. Sacks, the amount in this column represents the entitlement to receive initial and annual fees and all other reasonable expenses relating to membership in up to two business or social clubs selected by Mr. Sacks. For Ms. Tirre, the amount in this column represents the entitlement to receive 50% of the annual fees relating to the membership in one business or social club selected by Ms. Tirre. |
| (4) | For Mr. Carling, the amounts reported in this column were paid in GBP and converted to USD using the average exchange rate of GBP to USD on a monthly basis for the year ended December 31, 2019. |
25
Table2019 Grants of ContentsPlan-Based Awards
The following table summarizes grants of plan-based awards granted to our NEOs during the fiscal year ended December 31, 2019.
| Name | Grant Date | All Other Stock
Awards:
Number of
Shares of Stock
or Units (#) | All Other Option
Awards: Number of
Shares Underlying
Options (#)(3) | Exercise or Base
Price of Option
Awards
($/Share) | Grant Date Fair
Value of Stock
and Option
Awards
($) |
| Rodney C. Sacks | | | | | |
| RSUs (1) | 3/14/2019 | 100,600 | - | - | 6,002,802 |
| Common Stock (2) | 3/14/2019 | 8,110 | - | - | 483,924 |
| Options | 3/14/2019 | - | 291,600 | 59.67 | 6,012,646 |
Hilton H. Schlosberg
RSUs (1) | 3/14/2019 | 100,600 | - | - | 6,002,802 |
| Common Stock (2) | 3/14/2019 | 8,110 | - | - | 483,924 |
| Options | 3/14/2019 | - | 291,600 | 59.67 | 6,012,646 |
Guy P. Carling
RSUs (1) | 3/14/2019 | 8,500 | - | - | 507,195 |
| Options | 3/14/2019 | - | 25,000 | 59.67 | 504,393 |
Thomas J. Kelly
RSUs (1) | 3/14/2019 | 5,200 | - | - | 310,284 |
| Options | 3/14/2019 | - | 15,000 | 59.67 | 302,636 |
Emelie C. Tirre
RSUs (1) | 3/14/2019 | 8,500 | - | - | 507,195 |
| Options | 3/14/2019 | - | 25,000 | 59.67 | 504,393 |
| (1) | The amounts represent shares of RSUs granted under our 2011 Omnibus Incentive Plan. |
| (2) | The amounts represent shares of our Common Stock granted under our 2011 Omnibus Incentive Plan that were immediately vested at grant. |
| (3) | The amounts represent options granted under our 2011 Omnibus Incentive Plan. |
Discussion ofNarrative to 2019 Summary Compensation Table and 2019 Grants of Plan-Based Awards Table
Employment Agreements and Arrangements. The principal terms of the employment agreements and arrangements with Named Executive Officers:our NEOs are set forth below.
Rodney C. Sacks – On March 18, 2014, we entered into a newan employment agreement with Mr. Sacks (the “Sacks Employment Agreement”), pursuant to which Mr. Sacks renders services as our Chairman and Chief Executive Officer. Under the Sacks Employment Agreement, Mr. Sacks’ annual base salary will be reviewed annually and increased at the discretion of our Board. Mr. Sacks is eligible to receive an annual bonus in an amount determined at the discretion of our Board as well as certain fringe benefits. The initial employment period of this agreement commenced on January 1, 2014 and continuescontinued through December 31, 2018, subject to automatic one year renewal periods beginning on2018. Beginning December 31, 2018, the agreement automatically renews for successive one-year renewal periods, unless notice of intent to not renew is given by either us or Mr. Sacks by June 30 2018 orof any subsequent June 30, as may be applicable.renewal year. Under the Sacks Employment Agreement, Mr. Sacks is subject to a confidentiality covenant and a six-month post-termination non-competition covenant. The Sacks Employment Agreement is subject to termination (i) upon the death or disability of Mr. Sacks, (ii) voluntarily by Mr. Sacks on 90 days’ written notice, (iii) for Cause (as defined therein) by us, or (iv) upon Constructive Termination (as defined therein) by Mr. Sacks. The severance provisions in the Sacks Employment Agreement are discussed in the “Potential Payments Upon Termination or Change in Control” section below. Since January 1, 2009,During 2019, we have entered into certain equity compensation agreements with Mr. Sacks as disclosed in the “Grants“2019 Grants of Plan-Based Awards” table below.above.
Hilton H. Schlosberg – On March 18, 2014, we entered into a newan employment agreement with Mr. Schlosberg (the “Schlosberg Employment Agreement”), pursuant to which Mr. Schlosberg renders services as our Vice Chairman, President, Chief Operating Officer and Chief Financial Officer. Under the Schlosberg Employment Agreement, Mr. Schlosberg’s annual base salary will be reviewed annually and increased at the discretion of our Board. Mr. Schlosberg is eligible to receive an annual bonus in an amount determined at the discretion of our Board as well as certain fringe benefits. The initial employment period of this agreement commenced on January 1, 2014 and continuescontinued through December 31, 2018, subject to automatic one year renewal periods beginning on2018. Beginning December 31, 2018, the agreement automatically renews for successive one-year renewal periods, unless notice of intent to not renew is given by either us or Mr. Schlosberg by June 30 2018 orof any subsequent June 30, as may be applicable.renewal year. Under the Schlosberg Employment Agreement, Mr. Schlosberg is subject to a
confidentiality covenant and a six-month post-termination non-competition covenant. The Schlosberg Employment Agreement is subject to termination (i) upon the death or disability of Mr. Schlosberg, (ii) voluntarily by Mr. Schlosberg on 90 days’ written notice, (iii) for Cause (as defined therein) by us, or (iv) upon Constructive Termination (as defined therein) by Mr. Schlosberg. The severance provisions in the Schlosberg Employment Agreement are discussed in the “Potential Payments Upon Termination or Change in Control” section below. Since January 1, 2009,During 2019, we have entered into certain equity compensation agreements with Mr. Schlosberg as disclosed in the “Grants“2019 Grants of Plan-Based Awards” table below.
Mark J. Hall – On October 28, 2013, Mr. Hall entered into an agreement (the “Hall 2013 Agreement”) with MEC. Pursuant to the Hall 2013 Agreement, Mr. Hall agreed to serve as a member of the Board for at least one year, effective January 1, 2014. Effective January 1, 2014, Mr. Hall resigned as President of the Monster Beverage Division and was appointed Chief Brand Officer of MEC.
On March 12, 2015, Mr. Hall entered into a new employment agreement (the “Hall 2015 Agreement”) with MEC. The Hall 2015 Agreement documented Mr. Hall’s position change from Chief Brand Officer to Chief Marketing Officer of MEC on a full-time basis, effective as of January 1, 2015. As Chief Marketing Officer of MEC, Mr. Hall received an annual base salary of $550,000 in 2016. Mr. Hall isabove.
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Table of Contents
also eligible to receive an annual bonus in an amount to be determined at the discretion of our Executive Committee. The Hall 2015 Agreement provides that Mr. Hall’s employment as Chief Marketing Officer of MEC is of an at-will nature, for no specified period of time. Pursuant to the Hall 2015 Agreement, if Mr. Hall’s employment with MEC is terminated without cause, Mr. Hall will be entitled to receive three months of severance pay (or severance pay as negotiated between the parties), subject to certain restrictions, as well as all applicable employee benefits of MEC during such three-month period. On April 21, 2017, Mark J. Hall resigned from his position as Chief Marketing Officer of MEC, effective May 1, 2017. Mr. Hall will continue to serve as an employee of MEC, focusing on ideation, design and development of new products and will continue as a Director of the Company. Since January 1, 2009, we have entered into certain equity compensation agreements with Mr. Hall as disclosed in the “Grants of Plan-Based Awards” table below.
Guy P. Carling, Thomas J. Kelly and Emelie C. Tirre –Mr. Kelly’sCarling, Mr. Kelly and Ms. Tirre’s employment, respectively, is “at will” and thus may be terminated at any time for any or no reason. Mr. Kelly received an annual base salary of $330,000 in 2016.Carling, Mr. Kelly isand Ms. Tirre are each eligible to receive an annual bonus in an amount determined at the discretion of our Executive Committee as well as certain fringe benefits. Since January 1, 2009, we have entered into certain equity compensation agreements with Mr. Kelly as disclosed in the “Grants of Plan-Based Awards” table below.
Grants2011 Omnibus Incentive Plan. The principal terms of Plan-Based Awards
The following table summarizes grants of plan-basedthe awards granted to our NEOs duringunder the fiscal year ended December 31, 2016.
Name | Grant Date | All Other Stock
Awards: Number
of Shares of Stock
or Units (#) | All Other Option
Awards: Number
of Shares
Underlying Options
(#) | Exercise or Base
Price of Option
Awards
($/Share) | Grant Date Fair
Value of Stock and
Option Awards
($)(1) |
Rodney C. Sacks | 3/14/2016 | | 315,000 | $ 43.99 | $ 5,280,881 |
Rodney C. Sacks | 3/14/2016 | 123,000 | | | $ 5,410,360 |
Hilton H. Schlosberg | 3/14/2016 | | 315,000 | $ 43.99 | $ 5,280,881 |
Hilton H. Schlosberg | 3/14/2016 | 123,000 | | | $ 5,410,360 |
Mark J. Hall | 3/14/2016 | | 90,000 | $ 43.99 | $ 1,508,823 |
Mark J. Hall | 12/1/2016 | | 100,000 | $ 43.64 | $ 1,684,590 |
Thomas J. Kelly | 3/14/2016 | | 37,500 | $ 43.99 | $ 629,161 |
Thomas J. Kelly | 12/1/2016 | | 40,000 | $ 43.64 | $ 669,616 |
(1)The amounts represent the current year grant date fair value for all share-based payment awards computed in accordance with ASC 718.2011 Omnibus Incentive Plan are set forth below.
27
TableOptions.Options granted in 2019 to our NEOs under the 2011 Omnibus Incentive Plan have a ten-year term. For Mr. Sacks, Mr. Schlosberg and Mr. Kelly, the options are scheduled to vest in three, equal one-third annual installments on the first three anniversaries of Contentsthe grant date, subject to continued employment. For Mr. Carling and Ms. Tirre, the options are scheduled to vest in five annual installments with 10% vesting on the first anniversary of the grant date, 15% vesting on the second anniversary of the grant date, 20% vesting on the third anniversary of the grant date, 25% vesting on the fourth anniversary of the grant date and 30% vesting on the fifth anniversary of the grant date, subject to continuous employment. The effect of termination and change in control on vesting of options for our NEOs is discussed in the “Potential Payments Upon Termination or Change in Control” section below.
RSUs.For Mr. Sacks, Mr. Schlosberg and Mr. Kelly, the RSUs are scheduled to vest in three, equal one-third annual installments on the first three anniversaries of the grant date, subject to continued employment. For Mr. Carling and Ms. Tirre, the RSUs are scheduled to vest in five annual installments with 10% vesting on the first anniversary of the grant date, 15% vesting on the second anniversary of the grant date, 20% vesting on the third anniversary of the grant date, 25% vesting on the fourth anniversary of the grant date and 30% vesting on the fifth anniversary of the grant date, subject to continuous employment. The effect of termination and change in control on vesting of RSUs for our NEOs is discussed in the “Potential Payments Upon Termination or Change in Control” section below.
2019 Outstanding Equity Awards at Fiscal Year-End Table
The following table summarizes the outstanding equity awards held by our NEOs at December 31, 2016.2019.
| | Option Awards | | Stock Awards | | Option Awards | Stock Awards |
Name | Grant Date | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) | Option
Exercise
Price ($) | Option
Exercise
Expiration
Date | Number of Shares
or Units of Stock
That Have Not
Vested (#) | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($) | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested (#) | Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested ($) | Grant Date | Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#) | Number of
Securities
Underlying
Unexercised
Unearned
Options
Unexercisable
(#) | Option
Exercise
Price
($) | Option
Expiration
Date | Number of Shares
or Units of Stock
That Have Not
Vested
(#) | Market Value of
Shares or Units of
Stock That Have Not
Vested
($) |
Rodney C. Sacks | 06/02/2008 | 244,851 | - | | - | 5.29 | 06/02/2018 | - | | - | - | - | 06/03/2013 | 630,000 | - | 17.99 | 06/03/2023 | - | - |
12/01/2009 | 300,000 | - | | - | 5.94 | 12/01/2019 | - | | - | - | - | 03/14/2014 | 630,000 | - | 23.35 | 03/14/2024 | - | - |
06/03/2013 | 630,000 | | | - | 17.99 | 06/03/2023 | - | | - | - | - | 03/13/2015 | 237,600 | - | 45.16 | 03/13/2025 | - | - |
03/14/2014 | 420,000 | 210,000 | (1) | - | 23.35 | 03/14/2024 | - | | - | - | - | 03/14/2016 | 315,000 | - | 43.99 | 03/14/2026 | - | - |
03/13/2015 | - | - | | - | - | - | 76,200 | (2) | 3,378,708 | - | - | 03/14/2017 | - | - | | 38,700 | 2,459,385 |
03/13/2015 | 79,200 | 158,400 | (3) | - | 45.16 | 03/13/2025 | - | - | - | - | - | 03/14/2017 | 203,667 | 101,833 | 46.27 | 03/14/2027 | - | - |
03/14/2016 | - | - | | - | - | - | 117,000 | (4) | 5,187,780 | - | - | 03/14/2018 | - | | 68,134 | 4,329,916 |
03/14/2016 | - | 315,000 | (5) | - | 43.99 | 03/14/2026 | - | - | - | - | - | 03/14/2018 | 88,000 | 176,000 | 58.73 | 03/14/2028 | - | - |
Hilton H. Schlosberg | 06/02/2008 | 244,851 | - | | - | 5.29 | 06/02/2018 | - | | - | - | - | |
12/01/2009 | 300,000 | - | | - | 5.94 | 12/01/2019 | - | | - | - | - | |
06/03/2013 | 630,000 | | | - | 17.99 | 06/03/2023 | - | | - | - | - | |
03/14/2014 | 420,000 | 210,000 | (1) | - | 23.35 | 03/14/2024 | - | | - | - | - | |
03/13/2015 | - | - | | - | - | - | 76,200 | (2) | 3,378,708 | - | - | |
03/13/2015 | 79,200 | 158,400 | (3) | - | 45.16 | 03/13/2025 | - | - | - | - | - | |
03/14/2016 | - | - | | - | - | - | 117,000 | (4) | 5,187,780 | - | - | |
03/14/2016 | - | 315,000 | (5) | - | 43.99 | 03/14/2026 | - | - | - | - | - | |
Mark J. Hall | 12/01/2009 | 240,000 | - | | - | 5.94 | 12/01/2019 | - | | - | - | - | |
12/01/2010 | 120,000 | - | | - | 8.75 | 12/01/2020 | - | | - | - | - | |
03/14/2013 | 105,000 | 165,000 | (6) | - | 15.71 | 03/14/2023 | - | | - | - | - | |
03/14/2014 | 22,500 | 67,500 | (7) | - | 23.35 | 03/14/2024 | - | | - | - | - | |
03/13/2015 | 60,000 | 240,000 | (8) | - | 45.16 | 03/13/2025 | - | | - | - | - | |
03/14/2016 | - | 90,000 | (9) | - | 43.99 | 03/14/2026 | - | - | - | - | - | |
12/01/2016 | - | 100,000 | (10) | - | 43.64 | 12/01/2026 | - | - | - | - | - | |
| 03/14/2019 | | - | | 100,600 | 6,393,130 |
| 03/14/2019 | | - | 291,600 | 59.67 | 03/14/2029 | - | - |
| Hilton H. Schlosberg (1) | | 06/03/2013 | 630,000 | - | 17.99 | 06/03/2023 | - | - |
| 03/14/2014 | 630,000 | - | 23.35 | 03/14/2024 | - | - |
| 03/13/2015 | 237,600 | - | 45.16 | 03/13/2025 | - | - |
| 03/14/2016 | 315,000 | - | 43.99 | 03/14/2026 | - | - |
| 03/14/2017 | - | - | | 38,700 | 2,459,385 |
| 03/14/2017 | 203,667 | 101,833 | 46.27 | 03/14/2027 | - | - |
| 03/14/2018 | - | | 68,134 | 4,329,916 |
| 03/14/2018 | 88,000 | 176,000 | 58.73 | 03/14/2028 | - | - |
| 03/14/2019 | - | | 100,600 | 6,393,130 |
| 03/14/2019 | - | 291,600 | 59.67 | 03/14/2029 | - | - |
| Guy P. Carling | | 12/01/2014 (2) | 4,500 | - | 37.10 | 12/01/2024 | - | - |
| 03/13/2015 (2) | - | 6,750 | 45.16 | 03/13/2025 | - | - |
| 03/14/2016 (2) | - | 33,000 | 43.99 | 03/14/2026 | - | - |
| 12/01/2016 (2) | 27,000 | 33,000 | 43.64 | 12/01/2026 | - | - |
| 03/14/2018 (2) | 5,000 | 45,000 | 58.73 | 03/14/2028 | - | - |
| 06/01/2018 (3) | - | | 12,000 | 762,600 |
| 06/01/2018 (4) | - | 25,000 | 51.50 | 06/01/2028 | - | - |
| 03/14/2019 (5) | - | | 8,500 | 540,175 |
| 03/14/2019 (2) | - | 25,000 | 59.67 | 03/14/2029 | - | - |
Thomas J. Kelly | 06/01/2012 | - | - | | - | | | 4,500 | (11) | 199,530 | - | - | 12/01/2014 (2) | 13,500 | - | 37.10 | 12/01/2024 | - | - |
03/14/2013 | 9,000 | 24,750 | (12) | - | 15.71 | 03/14/2023 | - | | - | - | - | 03/13/2015 (6) | 28,800 | 7,200 | 45.16 | 03/13/2025 | - | - |
03/14/2014 | 7,500 | 22,500 | (13) | - | 23.35 | 03/14/2024 | - | | - | - | - | 03/14/2016 (2) | 16,875 | 20,625 | 43.99 | 03/14/2026 | - | - |
12/01/2014 | - | - | | - | - | - | 1,500 | (14) | 66,510 | - | - | 12/01/2016 (2) | 18,000 | 22,000 | 43.64 | 12/01/2026 | - | - |
12/01/2014 | 11,250 | 33,750 | (15) | - | 37.10 | 12/01/2024 | - | | - | - | - | 03/14/2018 (2) | 5,000 | 45,000 | 58.73 | 03/14/2028 | - | - |
03/13/2015 | 7,200 | 28,800 | (16) | - | 45.16 | 03/13/2025 | - | | - | - | - | 06/01/2018 (4) | - | 5,000 | 51.50 | 06/01/2028 | - | - |
| 03/14/2016 | | 37,500 | (17) | - | 43.99 | 03/14/2026 | - | | - | - | - | |
| 12/01/2016 | | 40,000 | (18) | - | 43.64 | 12/01/2016 | - | | - | - | - | |
| Thomas J. Kelly | | 03/14/2019 (7) | - | | 5,200 | 330,460 |
| 03/14/2019 (8) | - | 15,000 | 59.67 | 03/14/2029 | - | - |
| 03/14/2014 (2) | 39,465 | - | 23.35 | 03/14/2024 | - | - |
| 12/01/2014 (2) | 45,000 | - | 37.10 | 12/01/2024 | - | - |
| 03/13/2015 (2) | 31,500 | 13,500 | 45.16 | 03/13/2025 | - | - |
| 03/14/2016 (2) | 27,000 | 33,000 | 43.99 | 03/14/2026 | - | - |
| 12/01/2016 (2) | 45,000 | 55,000 | 43.64 | 12/01/2026 | - | - |
| 03/14/2017 (2) | 10,000 | 30,000 | 46.27 | 03/14/2027 | - | - |
| Emelie C. Tirre | | 03/14/2018 (2) | 5,000 | 45,000 | 58.73 | 03/14/2028 | - | - |
| 06/01/2018 (3) | - | | 12,000 | 762,600 |
| 06/01/2018 (4) | - | 25,000 | 51.50 | 06/01/2028 | - | - |
| 03/14/2019 (5) | - | | 8,500 | 540,175 |
| 03/14/2019 (2) | - | 25,000 | 59.67 | 03/14/2029 | - | - |
| (1) | Awards of stock options and RSUs included in each applicable row have vested, or, to the extent not yet vested, are subject to vest, in three, equal one-third annual installments on the first three anniversaries of the grant date, subject to continuous employment. |
| (2) | Award of stock options in this row has vested, or, to the extent not yet vested, is subject to vest in five, annual installments with 10% vesting on the first anniversary of the grant date, 15% vesting on the second anniversary of the grant date, 20% vesting on the third anniversary of the grant date, 25% vesting on the fourth anniversary of the grant date and 30% vesting on the fifth anniversary of the grant date, subject to continuous employment. |
| (3) | Award of RSUs in this row is subject to vest in four, equal one-fourth annual installments on the second, third, fourth and fifth anniversaries of the grant date, subject to continuous employment. |
| (4) | Award of stock options in this row is subject to vest in three, equal one-third annual installments on the third, fourth and fifth anniversaries of the grant date, subject to continuous employment. |
| (5) | Award of RSUs in this row is subject to vest in five, annual installments with 10% vesting on the first anniversary of the grant date, 15% vesting on the second anniversary of the grant date, 20% vesting on the third anniversary of the grant date, 25% vesting on the fourth anniversary of the grant date and 30% vesting on the fifth anniversary of the grant date, subject to continuous employment. |
| (6) | Award of stock options in this row is subject to vest in five equal one-fifth annual installments on the first five anniversaries of the grant date, subject to continuous employment. |
| (7) | Award of RSUs in this row is subject to vest in three equal one-third annual installments on the first three anniversaries of the grant date, subject to continuous employment. |
| (8) | Award of stock options in this row is subject to vest in three equal one-third annual installments on the first three anniversaries of the grant date, subject to continuous employment. |
28
Table of Contents
(1) Vest as follows: 210,000 on March 14, 2017
(2) Vest as follows: 38,100 on March 13, 2017; 38,100 on March 13, 2018
(3) Vest as follows: 79,200 on March 13, 2017; 79,200 on March 13, 2018
(4) Vest as follows: 39,000 on March 14, 2017; 39,000 on March 14 2018; 39,000 on March 14, 2019
(5) Vest as follows: 105,000 on March 14, 2017; 105,000 on March 14, 2018; 105,000 on March 14, 2019
(6) Vest as follows: 75,000 on March 14, 2017; 90,000 on March 14, 2018
(7) Vest as follows: 18,000 on March 14, 2017; 22,500 on March 14, 2018; 27,000 on March 14, 2019
(8) Vest as follows: 60,000 on March 13, 2017; 60,000 on March 13, 2018; 60,000 on March 13, 2019; 60,000 on March 13, 2020
(9) Vest as follows: 30,000 on March 14, 2017; 30,000 on March 14, 2018; 30,000 on March 14, 2019
(10) Vest as follows: 20,000 on December 1, 2017; 20,000 on December 1, 2018; 20,000 on December 1, 2019; 20,000 on December 1, 2020; 20,000 on December 1, 2021
(11) Vest as follows: 4,500 on June 1, 2017
(12) Vest as follows: 11,250 on March 14, 2017; 13,500 on March 14, 2018
(13) Vest as follows: 6,000 on March 14, 2017; 7,500 on March 14, 2018; 9,000 on March 14, 2019
(14) Vest as follows: 1,500 on December 1, 2017
(15) Vest as follows: 9,000 on December 1, 2017; 11,250 on December 1, 2018; 13,500 on December 1, 2019
(16) Vest as follows: 7,200 on March 13, 2017; 7,200 on March 13, 2018; 7,200 March 13, 2019; 7,200 March 13, 2020
(17) Vest as follows: 3,750 on March 14, 2017; 5,625 on March 14, 2018; 7,500 on March 14, 2019; 9,375 on March 14, 2020; 11,250 on March 14, 2021
(18) Vest as follows: 4,000 on December 1, 2017; 6,000 on December 1, 2018; 8,000 on December 1, 2019; 10,000 on December 1, 2020; 12,000 on December 1, 2021
Options Exercised and Stock Vested Table
The following table summarizes exercise of stock options and stock vested by our NEOs during the Company’s fiscal year ended December 31, 2016.2019.
| Option Awards | Stock Awards | Option Awards | Stock Awards |
Name | Number of Shares
Acquired on
Exercise (#) | Value Realized on
Exercise ($)(1) | Number of
Shares Acquired
on Vesting (#) | Value Realized on
Vesting ($)(2) | Number of Shares
Acquired on
Exercise
(#) | Value Realized on
Exercise
($)(1) | Number of
Shares Acquired
on Vesting
(#) | Value Realized on
Vesting
($)(2) |
Rodney C. Sacks | | | 38,100 | 1,675,892 | 300,000 | 17,589,000 | 111,766 | 6,669,077 |
Hilton H. Schlosberg | | | 38,100 | 1,675,892 | 300,000 | 17,589,000 | 111,766 | 6,669,077 |
Mark J. Hall | | | 15,000 | 771,650 | |
| Guy P. Carling | | 145,500 | 9,359,085 | - | - |
Thomas J. Kelly | | | 6,000 | 292,560 | 80,589 | 4,917,092 | - | - |
| Emelie C. Tirre | | 64,305 | 3,977,656 | - | - |
| (1) | The value realized upon the exercise of the stock options reflects the number of options multiplied by the difference between the closing stock price of our Common Stock on the date of the exercise and the exercise price of the options. |
| (2) | The value realized upon vesting of the RSU awards represents the number of shares multiplied by the closing stock price of our Common Stock on the date the awards vested. |
(1)The value realized upon the exercise of the stock options reflect the number of options multiplied by the difference between the closing stock price of our common stock on the date of the exercise and the exercise price of the options.
(2)The value realized upon vesting of the stock awards is based on the closing stock price of our common stock on the date the awards vested.
Pension Benefits
We do not maintain or make contributions to a defined benefit plan for any of our NEOs.
2019 Non-Qualified Deferred Compensation
As of December 31, 2016, none of our NEOs participated or have account balances in non-qualified defined contribution plans or other deferred compensation plans maintained by us. The Compensation Committee may elect to provide our NEOs or other employees with non-qualified defined contribution or deferred compensation benefits should they deem such benefits appropriate. In December 2016, we adopted the Deferred Compensation Plan as a sub plan to our 2011 Incentive Plan, pursuant to which eligible employees may elect to defer cash and/or equity based compensation and to receive the deferred amounts, together with an investment return (positive or negative), in the future. Deferrals under the Deferred Compensation Plan are unfunded and unsecured. No deferrals were made for 2016 compensation.
29
Table of Contents
The following table summarizes the contributions, earnings (loss) and withdrawals by our NEOs during the Company’s fiscal year ended December 31, 2019.
| Name | Executive
Contributions
in Last FY(1) | Registrant
Contributions
in Last FY | Aggregate
Earnings (Loss) in Last
FY | Aggregate
Withdrawals/
Distributions | Aggregate
Balance at
Last FYE |
| Rodney C. Sacks | - | - | - | - | - |
| Hilton H. Schlosberg | $266,800 | $0 | $67,679 | $0 | $731,047 |
| Guy P. Carling | - | - | - | - | - |
| Thomas J. Kelly | - | - | - | - | - |
| Emelie C. Tirre | - | - | - | - | - |
| (1) | All contributions shown are included in the “Salary” column of the 2019 Summary Compensation Table. |
Potential Payments Uponupon Termination or Change in Control
We have entered into certain agreements and maintain certain plans that may require us to make certain payments and/or provide certain benefits to our NEOs in the event of a termination of their employment or a change of control. The following tables and narrative disclosure summarize the potential payments to each of our NEOs assuming that one of the events listed in the tables below occurs. The tables assume that the event occurred on December 31, 2016,2019, the last day of our most recently completed fiscal year.
Key Employment Agreement and Equity Award Agreement Definitions
For purposes of the Sacks Employment Agreement and the Schlosberg Employment Agreement described in this section, “cause” (under which we may terminate their employment) is defined as: (i) an act or acts of dishonesty or gross misconduct on the executive’s part which results or is intended to result in material damage to our business or reputation; or (ii) repeated material violations by the executive of his obligations relating to his position and duties, which violations are demonstrably willful and deliberate on the executive’s part and which result in material damage to our business or reputation and as to which material violations our Board has notified the executive in writing.
For purposes of the Sacks Employment Agreement and the Schlosberg Employment Agreement described in this section, “constructive termination” (under which they may terminate their employment) is defined as: (i) without the written consent of the executive, (A) the assignment to the executive of any duties inconsistent in any substantial respect with the executive’s position, authority or responsibilities as contemplated by the position and duties described in his employment agreement, or (B) any other substantial adverse change in such position, including titles, authority or responsibilities; (ii) any failure by us to comply with any of the provisions of his employment agreement, other than an insubstantial or inadvertent failure, remedied by us promptly after receipt of notice thereof given by the executive; (iii) our requiring the executive without his consent to be based at any office location outside of Riverside County, California or Orange County, California, except for travel reasonably required in the performance of the executive’s responsibilities; or (iv) any failure by the Company to obtain the assumption and agreement by a successor entity to perform his employment agreement, provided that the successor entity has had actual written notice of the existence of his employment agreement and its terms and an opportunity to assume the Company’s responsibilities under his employment agreement during a period of 10 business days after receipt of such notice.
For purposes of the Sacks Employment Agreement and the Schlosberg Employment Agreement described in this section, “disability” is defined as any disability which would entitle the executive to receive full long-term disability benefits under our long-term disability plan, or if no such plan will then be in effect, any physical or mental disability or incapacity which renders the executive incapable of performing the services and obligations required of him relating to the executive’s position and duties for a period of more than 120 days in the aggregate during any 12-month period during the employment period.
For purposes of the restricted stock unitRSU agreements with Mr. Sacks and Mr. Schlosberg, “good reason” is defined as termination of employment on or after a reduction in his compensation or benefits, his removal from his current position, or his being assigned duties and responsibilities that are inconsistent with the dignity, importance or scope of his position.
For purposes of the restricted stock unitRSU agreements with Mr. Sacks and Mr. Schlosberg, “cause” is defined as an act of fraud or dishonesty, knowing and material failure to comply with applicable laws or regulations, or drug or alcohol abuse, in any case as determined by the Board.
30
Table of Contents
For purposes of the stock option agreements with Mr. Sacks and Mr. Schlosberg, “change in control” is defined as: (i) the acquisition of “Beneficial Ownership” by any person (as defined in ruleRule 13(d)–3 and 13(d)-5 under the Exchange Act), corporation or other entity other than us or a wholly-owned subsidiary of ours of 20%50% or more of our outstanding stock; (ii) the sale or disposition of substantially all of our assets; or (iii) our merger with another corporation in which our Common Stock is no longer outstanding after such merger.
For purposes of the stock option agreements with Mr. Sacks and Mr. Schlosberg, “cause” (under which we may terminate their employment) is defined as the individual’s act of fraud or dishonesty, knowing and material failure to comply with applicable laws or regulations or drug or alcohol abuse; and good reason“good reason” (under which they may terminate their employment) is defined as a reduction in the individual’s compensation or benefits, the individual’s removal from his current position or the assignment to the individual of duties or responsibilities that are inconsistent with the dignity, importance or scope of histhe individual’s position with us.
For purposes of all the stock option agreements, “total disability” is defined as the complete and permanent inability of the executive to perform all his duties of employment with us.
| Rodney C. Sacks |
| Circumstances of Termination | |
| Payments and Benefits | Death
($) | Disability
($) | Non-
Renewal
by
Executive
($) | Cause
($) | Voluntary
Termination
($) | Termination by
Corporation
other than for
Cause or
Disability or
Termination by
the Executive for
Constructive
Termination or
Good Reason
($) | Change in
Control
($) |
| | (a) | (a) | (b) | (c) | (d) | (e) | (f) |
| Base Salary | 850,000 | 850,000 | - | - | 425,000 | 1,732,692 | - |
| Bonus | - | - | - | - | - | 508,000 | - |
| Vacation | 130,769 | 130,769 | 130,769 | 130,769 | 130,769 | 130,769 | - |
| Benefit Plans | 36,443 | 48,236 | - | 24,118 | 24,118 | 72,353 | - |
| Automobile | 66,687 | 66,687 | - | - | - | 100,030 | - |
| Perquisites & other personal benefits | - | - | - | - | - | - | - |
| Acceleration of equity awards | - | - | - | - | - | 16,921,833 | 16,921,833 |
| Total | 1,083,899 | 1,095,692 | 130,769 | 154,887 | 579,887 | 19,465,677 | 16,921,833 |
For purposes of the Hall 2015 Agreement, “good cause” (under which we may terminate employment with no obligation to pay severance) will include: (i) the neglect, breach of duty, or any failure to perform, to the reasonable satisfaction of the Executive Committee; (ii) the conviction of a felony, or any determination by the Executive Committee of the commission of theft, larceny, embezzlement, fraud, dishonesty, illegality, moral turpitude, harassment or gross mismanagement; (iii) the death or material disability to such an extent that, even with reasonable accommodation, the executive is precluded from performing the essential duties of his position; or (iv) the breach of the Hall 2015 Agreement or any fiduciary duties to MEC.
| (a) | Under the Sacks Employment Agreement, upon termination due to death or disability, Mr. Sacks, or his legal representative, would be entitled to continuation of base salary, payment of benefit premiums for himself and his family and automobile benefits for a period of one year from the date of termination and payment for accrued vacation. |
| | |
| (b) | Under the Sacks Employment Agreement, upon non-renewal by Mr. Sacks, Mr. Sacks would be entitled to payment for accrued vacation. |
| | |
| (c) | Under the Sacks Employment Agreement, upon termination by us for cause, Mr. Sacks would be entitled to payment of benefit premiums for himself and his family for a period of six months from the date of termination and payment for accrued vacation. |
| | |
| (d) | Upon voluntary termination by Mr. Sacks, Mr. Sacks would be entitled to payment of his full base salary for a period of six months from the date of termination, payment of benefit premiums for himself and his family for a period of six months from the date of termination and payment for accrued vacation. |
| | |
| (e) | Under the Sacks Employment Agreement, upon termination by us without cause or termination by Mr. Sacks for constructive termination, or if we elected not to renew his employment agreement, Mr. Sacks would be entitled to a payment of two times his base salary, at the rate in effect on the date of termination, and a pro-rata portion of the bonus received in the year immediately prior to the year of the termination date, payable in the same manner and at the same time as the other senior officers of the Company, as if he remained employed through the applicable payment date. In addition, Mr. Sacks would be entitled to payment of all benefit premiums and automobile benefits for the period from the date of termination through the date which is eighteen months from the date of termination. Also, in the case of termination without cause, Mr. Sacks would be entitled to two weeks base salary in lieu of notice at the rate in effect on the date of termination. In addition, under Mr. Sacks’ RSU and stock option agreements, if Mr. Sacks’ employment is terminated by us without cause or by Mr. Sacks for good reason, all equity awards will immediately become exercisable in their entirety. |
| | |
| (f) | Under Mr. Sacks’ RSU and stock option agreements, upon a change in control, all RSU and stock option awards, as applicable, will immediately vest or become exercisable in their entirety. With respect to Mr. Sacks’ stock option agreements, options may, with the consent of Mr. Sacks, be purchased by the Company for cash at a price equal to the aggregate of the fair market value for one (1) share of our Common Stock less the purchase price payable by Mr. Sacks to exercise the options as set forth under each option agreement, multiplied by the number of shares of Common Stock which Mr. Sacks has the option to purchase. |
| Hilton H. Schlosberg |
| Circumstances of Termination | |
| Payments and Benefits | Death
($) | Disability
($) | Non-
Renewal
by
Executive
($) | Cause
($) | Voluntary
Termination
($) | Termination by
Corporation other
than for Cause or
Disability or
Termination by the
Executive for
Constructive
Termination or
Good Reason
($) | Change in
Control
($) |
| | (a) | (a) | (b) | (c) | (d) | (e) | (f) |
| Base Salary | 850,000 | 850,000 | - | - | 425,000 | 1,732,692 | - |
| Bonus | - | - | - | - | - | 508,000 | - |
| Vacation | 130,769 | 130,769 | 130,769 | 130,769 | 130,769 | 130,769 | - |
| Benefit Plans | 31,749 | 32,914 | - | 16,457 | 16,457 | 49,371 | - |
| Automobile | 41,839 | 41,839 | - | - | - | 62,758 | - |
| Perquisites & other personal benefits | - | - | - | - | - | - | - |
| Acceleration of equity awards | - | - | - | - | - | 16,921,833 | 16,921,833 |
| Total | 1,054,357 | 1,055,522 | 130,769 | 147,226 | 572,226 | 19,405,423 | 16,921,833 |
| (a) | Under the Schlosberg Employment Agreement, upon termination due to death or disability, Mr. Schlosberg, or his legal representative, would be entitled to continuation of base salary, payment of benefit premiums for himself and his family and automobile benefits for a period of one year from the date of termination and payment for accrued vacation. |
| | |
| (b) | Under the Schlosberg Employment Agreement, upon non-renewal by Mr. Schlosberg, Mr. Schlosberg would be entitled to payment for accrued vacation. |
| | |
| (c) | Under the Schlosberg Employment Agreement, upon termination by us for cause, Mr. Schlosberg would be entitled to payment of benefit premiums for himself and his family for a period of six months from the date of termination and payment for accrued vacation. |
| | |
| (d) | Upon voluntary termination by Mr. Schlosberg, Mr. Schlosberg would be entitled to payment of his full base salary for a period of six months from the date of termination, payment of benefit premiums for himself and his family for a period of six months from the date of termination and payment for accrued vacation. |
| | |
| (e) | Under the Schlosberg Employment Agreement, upon termination by us without cause or termination by Mr. Schlosberg for constructive termination, or if we elected not to renew his employment agreement, Mr. Schlosberg would be entitled to a payment of two times his base salary, at the rate in effect on the date of termination, and a pro-rata portion of the bonus received in the year immediately prior to the year of the termination date, payable in the same manner and at the same time as the other senior officers of the Company, as if he remained employed through the applicable payment date. In addition, Mr. Schlosberg would be entitled to payment of all benefit premiums and automobile benefits for the period from the date of termination through the date which is eighteen months from the date of termination. Also, in the case of termination without cause, Mr. Schlosberg would be entitled to two weeks base salary in lieu of notice at the rate in effect on the date of termination. In addition, under Mr. Schlosberg’s RSU and stock option agreements, if Mr. Schlosberg’s employment is terminated by us without cause or by Mr. Schlosberg for good reason, all equity awards will immediately become exercisable in their entirety. |
| | |
| (f) | Under Mr. Schlosberg’s RSU and stock option agreements, upon a change in control, all RSU and stock option awards, as applicable, will immediately vest or become exercisable in their entirety. With respect to Mr. Schlosberg’s stock option agreements, options may, with the consent of Mr. Schlosberg, be purchased by the Company for cash at a price equal to the aggregate of the fair market value for one (1) share of our Common Stock less the purchase price payable by Mr. Schlosberg to exercise the options as set forth under each option agreement, multiplied by the number of shares of Common Stock which Mr. Schlosberg has the option to purchase. |
For purposes of the stock option agreements with Mr. Hall, “change in control” is generally defined as: (i) the acquisition of “Beneficial Ownership” by any person (as defined in Rule 13(d)–3 under the Exchange Act), corporation or other entity other than us or a wholly-owned subsidiary of ours of 50% or more of our outstanding stock; (ii) the sale or disposition of substantially all of our assets; or (iii) our merger with another corporation in which our Common Stock is no longer outstanding after such merger.
| Guy P. Carling | |
| |
| Circumstances of Termination | | |
| Payments and Benefits | Death ($) | Disability
($) | Cause or
Voluntary
Termination
($) | Termination by
Corporation
other than for
Cause or
Disability ($) | Termination
without Cause
or Constructive
Dismissal
following a
Change in
Control ($) | |
| | (a) | (a) | (b) | (c) | (d) | |
| Base Salary | - | - | - | 126,843 | 126,843 | |
| Vacation | - | - | - | - | - | |
| Benefit Plans | - | - | - | - | - | |
| Automobile | - | - | - | - | - | |
| Perquisites & other personal benefits | - | - | - | - | - | |
| Acceleration of equity awards | - | - | - | - | - | |
| Total | - | - | - | 126,843 | 126,843 | |
For purposes of the stock option agreements with Mr. Hall and Mr. Kelly, “cause” (under which we may terminate their employment) is defined as the individual’s act of fraud or dishonesty, knowing and material failure to comply with applicable laws or regulations or satisfactory performance of his duties of employment, insubordination or drug or alcohol abuse.
| (a) | Under our general employment practices, upon termination due to death or disability, Mr. Carling, or his legal representative, is entitled to payment for accrued vacation. |
| | |
| (b) | Under our general employment practices, upon termination by us for cause or voluntary termination by Mr. Carling, Mr. Carling is entitled to payment for accrued vacation. |
| | |
| (c) | Under our general employment practices, upon termination by us without cause, Mr. Carling is entitled to payment for accrued vacation. |
| | |
| (d) | Under Mr. Carling’s stock option agreements, the Board may, at any time, in its sole discretion, provide that upon the occurrence of a change in control (as determined by the Board), all or a specified portion of any outstanding options not theretofore exercisable, will immediately become exercisable and that any options not exercised prior to such change in control will be canceled. Under the Statement of Terms and Conditions of Employment of Mr. Carling dated February 2007, if Mr. Carling’s employment is terminated, he is entitled to twelve (12) weeks of notice. In lieu of this notice, the Company may terminate Mr. Carling’s employment summarily upon payment equal to Mr. Carling’s salary calculated over Mr. Carling’s entitlement or remaining entitlement to notice. |
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Table of Contents
| Thomas J. Kelly | |
| |
| Circumstances of Termination | | |
| Payments and Benefits | Death ($) | Disability
($) | Cause or
Voluntary
Termination
($) | Termination by
Corporation
other than for
Cause or
Disability ($) | Termination
without Cause
or Constructive
Dismissal
following a
Change in
Control ($) | |
| | (a) | (a) | (b) | (c) | (d) | |
| Base Salary | - | - | - | - | 225,000 | |
| Vacation | 16,481 | 16,481 | 16,481 | 16,481 | - | |
| Benefit Plans | 1,765 | 1,765 | 1,765 | 1,765 | - | |
| Automobile | - | - | - | - | - | |
| Perquisites & other personal benefits | - | - | - | - | - | |
| Acceleration of equity awards | - | - | - | - | - | |
| Total | 18,246 | 18,246 | 18,246 | 18,246 | 225,000 | |
Rodney C. Sacks |
Circumstances of Termination | |
Payments and
Benefits | Death
($) | Disability
($) | Non-
Renewal
by
Executive
($) | Cause
($) | Voluntary
Termination
($) | Termination by
Corporation other
than for Cause or
Disability or
Termination by the
Executive for
Constructive
Termination or
Good Reason
($) | Change in
control
($) |
| (a) | (a) | (b) | (c) | (d) | (e) | (f) |
Base Salary | 700,000 | 700,000 | - | - | 350,000 | 1,426,923 | - |
Bonus | - | - | - | - | - | 500,000 | - |
Vacation | 107,692 | 107,692 | 107,692 | 107,692 | 107,692 | 107,692 | - |
Benefit Plans | 31,389 | 40,177 | - | 20,088 | 20,088 | 80,353 | - |
Automobile | 36,362 | 36,362 | - | - | - | 109,087 | - |
Perquisites & other personal benefits | - | - | - | - | - | - | - |
Acceleration of stock option awards | - | - | - | - | - | 13,084,988 | 13,084,988 |
Total | 875,443 | 884,231 | 107,692 | 127,780 | 477,780 | 15,309,043 | 13,084,988 |
(a)Under the Sacks Employment Agreement, upon termination due to death or disability, Mr. Sacks, or his legal representative, would be entitled to continuation of base salary, payment of benefit premiums for himself and his family and automobile benefits for a period of one year from the date of termination and payment for accrued vacation.
(b)Under the Sacks Employment Agreement, upon non-renewal by Mr. Sacks, Mr. Sacks would be entitled to payment for accrued vacation.
(c)Under the Sacks Employment Agreement, upon termination by us for cause, Mr. Sacks would be entitled to payment of benefit premiums for himself and his family for a period of six months from the date of termination and payment for accrued vacation.
(d)Upon voluntary termination by Mr. Sacks, Mr. Sacks would be entitled to payment of his full base salary for a period of six months from the date of termination, payment of benefit premiums for himself and his family for a period of six months from the date of termination and payment for accrued vacation.
(e)Under the Sacks Employment Agreement, upon termination by us without cause or termination by Mr. Sacks for constructive termination, or if we elected not to renew his employment agreement, Mr. Sacks would be entitled to a payment of two times his base salary, at the rate in effect on the date of termination, and a pro-rata portion of the bonus received in the year immediately prior to the year of the termination date, payable in the same manner and at the same time as the other senior officers of the Company, as if he remained employed through the applicable payment date. In addition, Mr. Sacks would be entitled to payment of all benefit premiums and automobile benefits for the period from the date of termination to December 31, 2018, or through the date which is eighteen months from the date of termination, whichever period is longer. Also, in the case of termination without cause, Mr. Sacks would be entitled to two weeks base salary in lieu of notice at the rate in effect on the date of termination. In addition, under Mr. Sacks’ stock equity agreements, if Mr. Sacks’ employment is terminated by us without cause or by Mr. Sacks for good reason, all equity awards will immediately become exercisable in their entirety.
(f)Under Mr. Sacks’ equity agreements, upon a change in control, all equity awards will immediately become exercisable in their entirety. With respect to Mr. Sacks’ stock option agreements, options may, with the consent of Mr. Sacks, be purchased by the Company for cash at a price equal to the aggregate of the fair market value for one (1) share of our common stock less the purchase price payable by Mr. Sacks to exercise the options as set forth under each option agreement, multiplied by the number of shares of Common Stock which Mr. Sacks has the option to purchase.
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Table of Contents
Hilton H. Schlosberg |
Circumstances of Termination | |
Payments and
Benefits | Death
($) | Disability
($) | Non-
Renewal
by
Executive
($) | Cause
($) | Voluntary
Termination
($) | Termination by
Corporation other
than for Cause or
Disability or
Termination by the
Executive for
Constructive
Termination or
Good Reason
($) | Change in control
($) |
| (a) | (a) | (b) | (c) | (d) | (e) | (f) |
Base Salary | 700,000 | 700,000 | - | - | 350,000 | 1,426,923 | - |
Bonus | - | - | - | - | - | 500,000 | - |
Vacation | 107,692 | 107,692 | 107,692 | 107,692 | 107,692 | 107,692 | - |
Benefit Plans | 15,169 | 23,964 | - | 11,982 | 11,982 | 47,928 | - |
Automobile | 21,425 | 21,425 | - | - | - | 64,276 | - |
Perquisites & other personal benefits | - | - | - | - | - | - | - |
Acceleration of stock option awards | - | - | - | - | - | 13,084,988 | 13,084,988 |
Total | 844,286 | 853,081 | 107,692 | 119,674 | 469,674 | 15,231,807 | 13,084,988 |
(a)Under the Schlosberg Employment Agreement, upon termination due to death or disability, Mr. Schlosberg, or his legal representative, would be entitled to continuation of base salary, payment of benefit premiums for himself and his family and automobile benefits for a period of one year from the date of termination and payment for accrued vacation.
(b)Under the Schlosberg Employment Agreement, upon non-renewal by Mr. Schlosberg, Mr. Schlosberg would be entitled to payment for accrued vacation.
(c)Under the Schlosberg Employment Agreement, upon termination by us for cause, Mr. Schlosberg would be entitled to payment of benefit premiums for himself and his family for a period of six months from the date of termination and payment for accrued vacation.
(d)Upon voluntary termination by Mr. Schlosberg, Mr. Schlosberg would be entitled to payment of his full base salary for a period of six months from the date of termination, payment of benefit premiums for himself and his family for a period of six months from the date of termination and payment for accrued vacation.
(e)Under the Schlosberg Employment Agreement, upon termination by us without cause or termination by Mr. Schlosberg for constructive termination, or if we elected not to renew his employment agreement, Mr. Schlosberg would be entitled to a payment of two times his base salary, at the rate in effect on the date of termination, and a pro-rata portion of the bonus received in the year immediately prior to the year of the termination date, payable in the same manner and at the same time as the other senior officers of the Company, as if he remained employed through the applicable payment date. In addition, Mr. Schlosberg would be entitled to payment of all benefit premiums and automobile benefits for the period from the date of termination to December 31, 2018, or through the date which is eighteen months from the date of termination, whichever period is longer. Also, in the case of termination without cause, Mr. Schlosberg would be entitled to two weeks base salary in lieu of notice at the rate in effect on the date of termination. In addition, under Schlosberg’s stock equity agreements, if Mr. Schlosberg’s employment is terminated by us without cause or by Mr. Schlosberg for good reason, all equity awards will immediately become exercisable in their entirety.
(f)Under Mr. Schlosberg’s equity agreements, upon a change in control, all equity awards will immediately become exercisable in their entirety. With respect to Mr. Schlosberg’s stock option agreements, options may, with the consent of Mr. Schlosberg, be purchased by the Company for cash at a price equal to the aggregate of the fair market value for one (1) share of our common stock less the purchase price payable by Mr. Schlosberg to exercise the options as set forth under each option agreement, multiplied by the number of shares of Common Stock which Mr. Schlosberg has the option to purchase.
33
Table of Contents
Mark J. Hall |
Circumstances of Termination | |
Payments and Benefits | Death
($) | Disability
($) | Cause or
Voluntary
Termination
($) | Termination by
Corporation other
than for Cause or
Disability
($) | Change in
control
($) |
| (a) | (a) | (b) | (c) | (d) |
Base Salary | - | - | - | 137,500 | - |
Vacation | 84,614 | 84,614 | 84,614 | 84,614 | - |
Benefit Plans | 628 | 1,263 | 1,263 | 4,080 | - |
Automobile | - | - | - | 2,169 | - |
Perquisites & other personal benefits | - | - | - | - | - |
Acceleration of stock option awards | - | - | - | - | - |
Total | 85,242 | 85,877 | 85,877 | 228,363 | - |
(a)Under our general employment practices, upon termination due to death or disability, Mr. Hall, or his legal representative, is entitled to payment for accrued vacation.
(b)Under our general employment practices, upon termination by us for cause or voluntary termination by Mr. Hall, Mr. Hall is entitled to payment for accrued vacation.
(c)Under the Hall 2015 Employment Agreement, upon termination by us without cause, Mr. Hall would be entitled to three months of severance pay and the continuation of health plan benefits coverage for both himself and his family for a period of three months. In addition, under our general employment practices, upon termination by us without cause, Mr. Hall is entitled to payment for accrued vacation.
(d)Under Mr. Hall’s stock option agreements, the Board may, at any time, in its sole discretion, provide that upon the occurrence of a change in control (as determined by the Board), all or a specified portion of any outstanding options not theretofore exercisable, will immediately become exercisable and that any options not exercised prior to such change in control will be canceled.
Thomas J. Kelly |
Circumstances of Termination | |
Payments and Benefits | Death ($) | Disability
($) | Cause or
Voluntary
Termination
($) | Termination by
Corporation other
than for Cause or
Disability ($) | Termination
without Cause
or Constructive
Dismissal
following a
Change in
Control ($) |
| (a) | (a) | (b) | (c) | (d) |
Base Salary | - | - | - | - | 165,000 |
Vacation | 28,586 | 28,586 | 28,586 | 28,586 | 28,586 |
Benefit Plans | 628 | 1,263 | 1,263 | 1,263 | 1,263 |
Automobile | - | - | - | - | - |
Perquisites & other personal benefits | - | - | - | - | - |
Acceleration of stock option awards | - | - | - | - | - |
Total | 29,214 | 29,849 | 29,849 | 29,849 | 194,849 |
34
Table of Contents
(a)Under our general employment practices, upon termination due to death or disability, Mr. Kelly or his legal representative, is entitled to payment for accrued vacation.
(b)Under our general employment practices, upon termination by us for cause or voluntary termination by Mr. Kelly, Mr. Kelly is entitled to payment for accrued vacation.
(c)Under our general employment practices, upon termination by us without cause, Mr. Kelly is entitled to payment for accrued vacation.
(d) | (a) | Under our general employment practices, upon termination due to death or disability, Mr. Kelly, or his legal representative, is entitled to payment for accrued vacation. |
| | |
| (b) | Under our general employment practices, upon termination by us for cause or voluntary termination by Mr. Kelly, Mr. Kelly is entitled to payment for accrued vacation. |
| | |
| (c) | Under our general employment practices, upon termination by us without cause, Mr. Kelly is entitled to payment for accrued vacation. |
| | |
| (d) | Under Mr. Kelly’s stock option agreements, the Board may, at any time, in its sole discretion, provide that upon the occurrence of a change in control (as determined by the Board), all or a specified portion of any outstanding options not theretofore exercisable, will immediately become exercisable and that any options not exercised prior to such change in control will be canceled. Under the Amendment to Conditions of Employment of Mr. Kelly dated December 7, 1999, if, following a change in control, Mr. Kelly’s employment with us is terminated by us other than for cause or in the event that Mr. Kelly resigns under circumstances which constitute constructive dismissal by us of Mr. Kelly, then Mr. Kelly will be entitled to receive severance pay from us as follows: if termination occurs within the first six (6) months after the change in control occurs, Mr. Kelly will be entitled to six (6) months’ severance pay in the amount of $225,000; if termination occurs between six (6) and twelve (12) months after the change in control occurs, Mr. Kelly will be entitled to five (5) months’ severance pay in the amount of $187,500; if termination occurs between twelve (12) and eighteen (18) months after the change in control occurs, Mr. Kelly will be entitled to four (4) months’ severance pay in the amount of $150,000 and if the termination occurs between eighteen (18) and twenty-four (24) months after the change in control occurs, Mr. Kelly will be entitled to three (3) months’ severance pay in the amount of $112,500. |
| Emelie C. Tirre | |
| |
| Circumstances of Termination | | |
| Payments and Benefits | Death ($) | Disability
($) | Cause or
Voluntary
Termination
($) | Termination by
Corporation
other than for
Cause or
Disability ($) | Termination
without Cause or
Constructive
Dismissal
following a
Change in
Control ($) | |
| | (a) | (a) | (b) | (c) | (d) | |
| Base Salary | - | - | - | 262,500 | 262,500 | |
| Vacation | 53,308 | 53,308 | 53,308 | 53,308 | - | |
| Benefit Plans | 739 | 739 | 739 | 739 | - | |
| Automobile | - | - | - | - | - | |
| Perquisites & other personal benefits | - | - | - | - | - | |
| Acceleration of equity awards | - | - | - | - | - | |
| Total | 54,047 | 54,047 | 54,047 | 316,547 | 262,500 | |
| (a) | Under our general employment practices, upon termination due to death or disability, Ms. Tirre, or her legal representative, is entitled to payment for accrued vacation. |
| | |
| (b) | Under our general employment practices, upon termination by us for cause or voluntary termination by Ms. Tirre, Ms. Tirre is entitled to payment for accrued vacation. |
| | |
| (c) | Under our general employment practices, upon termination by us without cause, Ms. Tirre is entitled to payment for accrued vacation. |
| | |
| (d) | Under Ms. Tirre’s stock option agreements, the Board may, at any time, in its sole discretion, provide that upon the occurrence of a change in control (as determined by the Board), all or a specified portion of any outstanding options not theretofore exercisable, will immediately become exercisable and that any options not exercised prior to such change in control will be canceled. Under the Agreement of Ms. Tirre dated May 31, 2018, if, Ms. Tirre’s employment with us is terminated by us other than for cause or in the event that Ms. Tirre resigns under circumstances which constitute constructive dismissal by us of Ms. Tirre, then Ms. Tirre will be entitled to receive severance pay from us |
as follows: if termination occurs within the first twelve (12) months after May 31, 2018, Ms. Tirre will be entitled to four (4) months’ severance pay in the amount of $210,000; if termination occurs between thirteen (13) and twenty-four (24) months after May 31, 2018, Ms. Tirre will be entitled to five (5) months’ severance pay in the amount of $262,500; if termination occurs in month twenty-five (25) after May 31, 2018, or thereafter Ms. Tirre will be entitled to six (6) months’ severance pay in the amount of $165,000; if termination occurs between six (6) and twelve (12) months after the change in control occurs, Mr. Kelly will be entitled to five (5) months’ severance pay in the amount of $137,500; if termination occurs between twelve (12) and eighteen (18) months after the change in control occurs, Mr. Kelly will be entitled to four (4) months’ severance pay in the amount of $110,000 and if the termination occurs between eighteen and twenty-four (24) months after the change in control occurs, Mr. Kelly will be entitled to three (3) months’ severance pay in the amount of $82,000.
$315,000.
DIRECTOR COMPENSATION
The following table sets forth a summary of the fees earned bycompensation paid to our non-employee directors and Mr. Hall (an employee director) during the fiscal year ended December 31, 2016.2019.
Name | Fees Earned
or Paid in
Cash ($) | Stock
Awards
($)(1) | Option
Awards
($)(2) | Total
($) | Fees Earned
or Paid in
Cash ($)(1) | Stock
Awards
($)(2)(3) | Option
Awards
($)(4) | All Other
Compensation
($)(5)(6) | Total ($) |
| Kathleen E. Ciaramello | | 33,956 | 165,026 | - | 198,982 |
Norman C. Epstein | | 43,406 | - | 25,000 | 68,406 |
| Gary P. Fayard | | 70,000 | 235,006 | - | 305,006 |
| Mark J. Hall (6) | | - | 507,195 | 515,488 | 1,038,430 | 2,061,113 |
| Jeanne P. Jackson | | 33,956 | 183,978 | - | - | 217,934 |
| Steven G. Pizula | | 39,615 | 165,026 | - | - | 204,641 |
Benjamin M. Polk | 60,000 | 165,065 | | 225,065 | 76,979 | 234,525 | - | - | 311,504 |
Norman C. Epstein | 100,000 | 165,065 | | 265,065 | |
Sydney Selati | 102,500 | 165,065 | | 267,565 | 102,500 | 165,026 | - | - | 267,526 |
Harold C. Taber, Jr. | 100,000 | 165,065 | | 265,065 | |
| Harold C. Taber, Jr. (7) | | 40,151 | - | - | 40,151 |
Mark S. Vidergauz | 87,500 | 165,065 | | 252,565 | 100,234 | 165,026 | - | - | 265,260 |
Kathy N. Waller | 60,000 | 165,065 | | 225,065 | |
Gary P. Fayard | 68,333 | 165,065 | | 233,398 | |
| Kathy N. Waller (7) | | 26,044 | - | - | 26,044 |
1.The non-employee directors held the following numbers of restricted stock units as of December 31, 2016, which vest on the last business day prior to the Company’s 2017 annual shareholder meeting: Benjamin M. Polk, 3,237; Norman C. Epstein, 3,237; Harold C. Taber, Jr. 3,237; Mark S. Vidergauz, 3,237; Sydney Selati, 3,237; Kathy N. Waller, 3,237; Gary P. Fayard, 3,237. Each restricted stock unit represents either (i) a contingent right to receive one share of the Common Stock or (ii) a cash amount equal to the number of shares received as of the vesting date (the last business day prior to the Company’s 2017 annual meeting of stockholders (the “Annual Meeting”).
| (1) | The amounts reported in this column reflect the cash fees earned by each non-employee director in 2019, whether or not such fees were deferred. The non-employee directors held the following numbers of outstanding deferred stock units as of December 31, 2019: Ms. Ciaramello, 0; Mr. Epstein, 6,367; Mr. Fayard, 9,119; Ms. Jackson, 329; Mr. Pizula, 0; Mr. Polk, 8,891; Mr. Selati, 0; Mr. Taber, 6,367; Mr. Vidergauz, 3,244; and Ms. Waller, 6,872. Only Mr. Fayard, Ms. Jackson, and Mr. Polk elected to defer a portion of their 2019 cash compensation into deferred stock units, as reflected in further detail in the table below. |
2.The non-employee directors held the following numbers of outstanding stock options as of December 31, 2016; Benjamin M. Polk, 20,772; Norman C. Epstein, 0; Harold C. Taber, Jr. 20,772; Mark S. Vidergauz, 0; Sydney Selati, 0; Kathy N. Waller, 0; and Gary P. Fayard, 0.
| Name | Grant Date
of Deferred
Stock Units | Number of
Deferred
Stock Units
(#) | Grant Date Fair
Value of Deferred
Stock Units
($) |
| Gary P. Fayard | 01/08/2019 04/05/2019 07/08/2019 10/07/2019 | 331
331
265
314 | 17,487
17,503
17,490
17,499 |
| Jeanne P. Jackson | 07/08/2019 10/07/2019 | 60
269 | 3,960
14,991 |
| Benjamin M. Polk | 01/08/2019 04/05/2019 07/08/2019 10/07/2019 | 284
284
257
404 | 15,004
15,018
16,962
22,515 |
35
| (2) | The amounts reported in this column are valued based on the aggregate grant date fair value computed in accordance with ASC Topic 718. The assumptions used in the valuation of equity awards are disclosed in Note 15 to the Audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. |
| (3) | The non-employee directors held the following numbers of RSUs as of December 31, 2019: Ms. Ciaramello, 2,585; Mr. Epstein, 0; Mr. Fayard, 2,585; Ms. Jackson, 2,585; Mr. Pizula, 2,585; Mr. Polk, 2,585; Mr. Selati, 2,585; Mr. Taber, 0; Mr. Vidergauz, 2,585; and Ms. Waller, 0. For those non-employee directors who held RSUs as of December 31, 2019, such restricted stock units were granted on June 6, 2019 and will vest on the last business day prior to the Annual Meeting. The aggregate grant date fair value for each such grant of RSUs was $165,026, which amount, as applicable, is reflected in this column. Each restricted stock unit represents either (i) a contingent right to receive one share of the Common Stock or (ii) a cash amount equal to the number of shares received as of the vesting date (the last business day prior to the Annual Meeting). |
Table of Contents
| (4) | The non-employee directors held the following numbers of outstanding stock options as of December 31, 2019: Ms. Ciaramello, 0; Mr. Epstein, 0; Mr. Fayard, 0; Ms. Jackson, 0; Mr. Pizula, 0; Mr. Polk, 20,772; Mr. Selati, 0; Mr. Taber, 0; Mr. Vidergauz, 0; and Ms. Waller, 0. Of Mr. Polk’s 20,772 stock options, 13,002 had an exercise price of $6.40 and 7,770 had an exercise price of $11.35. |
| (5) | Subsequent to Mr. Epstein’s retirement from the Board, in September 2019, Mr. Epstein entered into a short-term consulting agreement with MEC. As a consultant of MEC, in 2019, Mr. Epstein received a consulting fee of $25,000. |
| (6) | Mr. Hall received no compensation as a director in 2019. As an employee of MEC, in 2019, Mr. Hall received a base salary of $650,000, a cash bonus award of $350,000, other compensation of $38,430, was granted 25,000 stock options under the 2011 Omnibus Incentive Plan that vest in five annual installments starting on March 14, 2020 and was granted 8,500 RSUs that vest in five annual installments starting on March 14, 2020. Mr. Hall held 475,000 outstanding stock options as of December 31, 2019. |
| (7) | Mr. Epstein, Mr. Taber and Ms. Waller did not stand for reelection at the Company’s 2019 annual meeting of stockholders. |
In 20162019, non-employee directors were entitled to receive an annual cash retainer of $60,000. Except for committee chairs, members of the Audit Committee received an additional annual cash retainer of $10,000 and members of the Compensation Committee and the Nominating and Corporate Governance Committee received an additional annual retainer of $7,500. The chairman of the Audit Committee received an additional annual retainer of $17,500 and the chairs of the Compensation Committee and the Nominating and Corporate Governance Committee each received an additional annual cash retainer of $15,000.The Lead Independent Director received an additional annual cash retainer of $20,000. In 2016,2019, non-employee directors were entitled to receive an annual equity retainer of approximately $165,000. These awards$165,000, delivered in the form of RSUs that vest one day prior to the Annual Meeting. As further described below under “Non-Employee Directors Equity Compensation Plans,” RSUs may be deferred under the Deferred Compensation Plan for Non-Employee Directors.
Non-employeeAs described below under “Non-Employee Directors Equity Compensation Plans,” non-employee directors are subject to stock ownership guidelines that require directors to hold and retain 9,000 shares of the CompanyCommon Stock within three years from the date of appointment.
Non-Employee Directors Equity Compensation Plans
Subject to stockholder approval,In 2017, the Company will adoptadopted the 2017 Non-Employee Directors Compensation Plan. See “Proposal Three - Approval of Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors” below forDirectors (the “2017 Directors Plan”), a summary description of the terms of the 2017 Non-Employee Directors Compensation Plan, which will replacesuccessor plan to the 2009 Monster Beverage Corporation Stock Incentive Plan for Non-Employee Directors (the “2009 Directors Plan”).
Directors. The 20092017 Directors Plan permits the granting of stock options, stock appreciation rights, (each, a “SAR”)restricted shares or RSUs, deferred awards, dividend equivalents and other stock-based awards to purchaseshare based-awards up to an aggregate of 4,800,0001,250,000 shares of common stock of the CompanyCommon Stock to non-employee directors of the Company.
Each calendar year, a non-employee director will receive an annual cash retainer and an annual equity retainer, as provided for in the 2017 Directors Plan, which may be modified from time to time.
Currently, with respect to equity awards, each non-employee director receives an award of RSUs at each annual meeting of the Company’s stockholders or promptly thereafter. A non-employee director’s annual award of RSUs will generally vest on earliest to occur of: (a) the last business day immediately preceding the annual meeting of the Company’s stockholders in the calendar year following the calendar year in which the grant date occurs, (b) a Change of Control (as defined in the 2017 Directors Plan), (c) the non-employee director’s death, or (d) the date of the non-employee director’s separation from service due to disability, so long as the non-employee director remains a non-employee director through such date. The 2009Board of Directors may in its discretion award stock options, stock appreciation rights, restricted stock and other share-based awards to non-employee directors in lieu of or in addition to RSUs. The Board of Directors may amend or terminate the 2017 Directors Plan at any time, subject to certain limitations set forth in the 2017 Directors Plan.
In 2017, the Company adopted the Monster Beverage Corporation Deferred Compensation Plan for Non-Employee Directors (as a sub plan to the 2017 Directors Plan), pursuant to which the Board of Directors may permit non-employee directors to elect, at such times and in accordance with rules and procedures (or sub-plan) adopted by the Board of Directors (which are intended to comply with Code Section 409A, as applicable), to receive all or any portion of such non-employee director’s compensation, whether payable in cash or in equity, on a deferred basis. The 2017 Directors Plan was adopted to effectuate any such deferrals. The 2017 Directors Plan is administered by the Board of Directors. Each award granted under the 20092017 Directors Plan will be evidenced by a written agreement and will contain the terms and conditions that the Board of Directors deems appropriate. The Board of
Under the 2017 Directors may grant such awards on the last business day prior to the date of the annual meeting of stockholders. Any award granted under the 2009 Directors Plan, will vest, with respect to 100% of such award, on the last business day prior to the date of the annual meeting, in the calendar year following the calendar year in which such award is granted. The Board of Directors may determine the exercise price per share of the Company’s common stock under each option, but such price may not be less than 100% of the closing price of the Company’s common stock on the date an option is granted. Option grants may be made under the 2009 Directors Plan for 10 years from June 4, 2009. The Board of Directors may also grant SARs, independently, or in connection with an option grant. The Board of Directors may determine the exercise price per share of the Company’s common stock under each SAR, but such price may not be less than the greater of (i) the fair market value of a share on the date the SAR is granted and (ii) the price of the related option, if the SAR is granted in connection with an option grant. Additionally, the Board of Directors requires each non-employee director to satisfy the share ownership guidelines set forth below, as may grant other stock-based awards, which include awardsbe amended by the Board of sharesDirectors from time to time. The current share ownership guidelines provide that non-employee directors of the Company’s common stock, restricted shares of the Company’s common stock, and awards that are valued based on the fair market value of shares of the Company’s common stock. SARs and other stock-based awards are subject to the general provisions of the 2009 Directors Plan.Company must:
| · | Hold at least 9,000 shares of Common Stock. For this purpose, deferred shares or deferred RSUs, to the extent vested, are deemed held. |
| · | The minimum stock ownership level must be achieved by each non-employee director by the third (3rd) anniversary of such non-employee director’s initial appointment to the Board of Directors. |
| · | Once achieved, ownership of the guideline amount should be maintained for so long as the non-employee director retains his or her seat on the Board of Directors. |
| · | There may be rare instances where these guidelines would place a hardship on a non-employee director. In these cases or in similar circumstances, the Board of Directors will make the final decision as to developing an alternative stock ownership guideline for a non-employee director that reflects the intention of these guidelines and his or her personal circumstances. |
EMPLOYEE EQUITY COMPENSATION PLAN INFORMATION
Employee Equity Compensation Plans
The Monster Beverage Corporation 2011 Omnibus Incentive Plan (the “2011replaced the Hansen Natural Corporation 2001 Amended Option Plan, which was terminated effective as of May 19, 2011. The 2020 Omnibus Incentive Plan was approved by the Board on April 14, 2020, subject to stockholder approval at the Annual Meeting. The 2011 Omnibus Incentive Plan has a ten (10) year term and no awards can be granted under the 2011 Omnibus Incentive Plan after February 25, 2021, or June 3, 2020 if the 2020 Omnibus Incentive Plan is
approved by stockholders at the Annual Meeting.See “Proposal Four – Approval of the 2020 Omnibus Incentive Plan”) below for more information.
The 2011 Omnibus Incentive Plan permits the granting of options, stock appreciation rights, restricted stock, restricted stock units,RSUs, performance awards and other stock-based awards up to an aggregate of 43,500,000 shares of the common stock of the CompanyCommon Stock to employees or consultants of the Company and its subsidiaries. Shares authorized under the 2011 Omnibus Incentive Plan are reduced by 2.16 shares for each share granted or issued with respect to a Full Value Award. A Full Value Award is an award other than an incentive stock option, a non-qualified stock option,
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or a stock appreciation right, which is settled by the issuance of shares. Options granted under the 2011 Omnibus Incentive Plan may be incentive stock options under Section 422 of the Internal Revenue Code, as amended, or non-qualified stock options. The Compensation Committee has sole and exclusive authority to grant stock awards to all employees who are not new hires and to all new hires who are subject to Section 16 of the Exchange Act. The Compensation Committee and the Executive Committee each independently has the authority to grant stock awards to new hires and employees receiving a promotion who are not Section 16 employees. Awards granted by the Executive Committee are not subject to approval or ratification by the Board or the Compensation Committee. Options granted under the 2011 Omnibus Incentive Plan generally vest over a five-year period from the grant date and are generally exercisable up to 10 years after the grant date. Restricted stock granted under the 2011 Omnibus Incentive Plan generally vests over a two- to three-year period from the grant date. Restricted stock unitsRSUs granted under the 2011 Omnibus Incentive Plan generally vests over a two- to five-year period from the grant date. The 2011 Incentive Plan replaced the Hansen Natural Corporation 2001 Amended Option Plan, which was terminated effective as of May 19, 2011.
In December 2016,2017, we adoptedamended and restated the Monster Beverage Corporation Deferred Compensation Plan, (the “Deferred Compensation Plan”) aswhich is a sub plan to the 2011Incentive2011 Omnibus Incentive Plan. Under the Deferred Compensation Plan, pursuant to which eligible employees may elect to defer cash and/or equity based compensation and to receive the deferred amounts, together with an investment return (positive or negative), either at a pre-determined time in the future or upon termination of their employment with the Company or its subsidiaries or affiliates that are participating employers under the Deferred Compensation Plan, as provided under the Deferred Compensation Plan and in relevant deferral elections. Deferrals under the Deferred Compensation Plan are unfunded and unsecured.
The 2011 Omnibus Incentive Plan is administered by the Compensation Committee. Grants under the 2011 Omnibus Incentive Plan are made pursuant to individual agreements between the Company and each grantee that specifies the terms of the grant, including the exercise price, exercise period, vesting and other terms thereof.
The following table sets forth information as of December 31, 20162019 with respect to shares of our Common Stock that may be issued under our equity compensation plans.
Plan category | | Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a) | | Weighted-average
exercise price of
outstanding
options, warrants
and rights
(b) | | Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c) | |
| | | | | | | |
Equity compensation plans approved by stockholders | | 23,199,548 | | $23.55 | | 25,633,600 | |
| | | | | | | |
Equity compensation plans not approved by stockholders | | - | | - | | - | |
| | | | | | | |
Total | | 23,199,548 | | $23.55 | | 25,633,600 | |
| Plan category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a) | | | Weighted-average exercise price of
outstanding
options, warrants
and rights
(b) | | | Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities reflected in column (a))
(c) | |
| Equity compensation plans approved by stockholders | | 15,765,754 | | | $42.88 | | | 15,350,593 | |
| | | | | | | | | | |
| Equity compensation plans not approved by stockholders | | - | | | - | | | - | |
| | | | | | | | | | |
| Total | | 15,765,754 | | | $42.88 | | | 15,350,593 | |
As of April 10, 2017, 23,885,8378, 2020, 13,510,656 shares were available for grant under equity compensation plans.
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Table of ContentsCEO PAY RATIO
Pursuant to Item 402(u) of Regulation S-K and Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Company is required to provide the ratio of the annual total compensation of Mr. Sacks, who has served as the Company’s Chief Executive Officer since November 1990, to the annual total compensation of the median employee of the Company.
As reported in the Summary Compensation Table, Mr. Sacks’ annual total compensation for 2019 was $13,982,434. In accordance with Item 402(u), we are using the same “median employee” identified in our 2019 and 2018 pay ratio calculations, as we believe that there has been no change in our employee population or employee compensation arrangements that we believe would result in a significant change to our pay ratio disclosure. See our 2019 and 2018 proxy statements for information regarding the process we utilized to identify our “median employee.” We then identified and calculated the elements of this employee’s total compensation for 2019 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in a median annual total compensation of all employees of the Company and its subsidiaries (other than the Chief Executive Officer) of $55,169. Based on this information, for 2019, the ratio of the compensation of the Chief Executive Officer to the median annual total compensation of all other employees (other than the Chief Executive Officer) was estimated to be 253:1.
Because the SEC rules for identifying the median employee and calculating the pay ratio to allow companies to use different methodologies, exemptions, estimates and assumptions, the above disclosure may not be comparable to the pay ratio reported by other companies and is only a reasonable estimate.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The Board has determined that Messrs. Epstein, Fayard, Pizula, Polk, Selati Taber and Vidergauz and Ms. Jackson, are independent directors under applicable NASDAQ MarketplaceNasdaq Stock Market Rules and SEC regulations.
Each director and nominee for election as a director delivers to the Company annually a questionnaire that includes, among other things, information relating to any transactions the director or nominee, or their family members, may have with the Company, or in which the director or nominee, or such family member, has a direct or indirect material interest.
The Board, as well as its Audit Committee, reviews, approves and monitorsoversees all related-party transactions. The Audit Committee’s policies and procedures for related-party transactions are not in writing, but the proceedings are documented in the minutes of the Board and/or Audit Committee meetings. The Audit Committee will assess, among factors it deems appropriate, whether the transaction is on terms no more favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction. The Audit Committee is responsible for reviewing all related-party transactions on a continuing basis as well as potential conflict of interest situations where appropriate. No director will participate in any discussion or approval of a transaction for which he is a related party, except that this director will provide all material information concerning the transaction to the Audit Committee.
During 2016,2019, we purchased promotional items from IFM Group, Inc. (“IFM”). Rodney C. Sacks, together with members of his family,through certain trusts, owns approximately 27% of the issued shares in IFM. Hilton H. Schlosberg, together with membersMembers of hisMr. Schlosberg’s family ownsown approximately 58%53% of the issued shares in IFM. Expenses incurred with such company in connection with promotional materials purchased during the fiscal years ended December 31, 20162019 and 20152018 were $1.5 million and $1.9$1.8 million, respectively. We continue to purchase promotional items from IFM in 2017.2020.
In December 2018, the Company and Mark J. Hall, an employee and director of the Company, entered into a 50-50 partnership that purchased land in Kona, Hawaii for the purpose of producing coffee products. The Company’s $1.9 million 50% contribution is accounted for as an equity investment.
Carly Rothenberg, who joined the Company’s legal department in August 2016 from a top-tier international law firm, is Mr. Schlosberg’s daughter. The aggregate value of compensation paid to Ms. Rothenberg in 20162019 was less than $350,000,$265,000, including the grant date fair value for her new hire equity award,awards, computed in accordance with ASC Topic 718. Her compensation, including her new hire equity award,awards, is comparable to other employees of the Company who hold analogous positions.
AUDIT COMMITTEE
For the fiscal year ended December 31, 2016,2019, the Company’s Audit Committee was comprised of Mr. Epstein (Chairman until February 27, 2015)(until June 2019), Mr. TaberFayard, Mr. Pizula (since June 2019), Mr. Selati, and Mr. Selati (Chairman since February 27, 2015)Taber (until June 2019). Mr. Fayard was appointed toSelati served as Chairman. The Board of Directors amended and restated the written charter for the Audit Committee in February 2016. The Board of Directors has adopted a written charter for the Audit Committee,2019, a copy of which is available on our website athttp://investors.monsterbevcorp.com/governance.cfm.governance.cfm. The Board of Directors has determined that the members of the Audit Committee are “independent,” as defined in the NASDAQ MarketplaceNasdaq Stock Market Rules and SEC regulations relating to audit committees, meaning that they have no relationship to the Company that may interfere with the exercise of independent judgment in carrying out their responsibilities of a director.
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Duties and Responsibilities
The Audit Committee consists of fourthree or more independent directors (as independence is defined by NASDNasdaq Stock Market Rule 5605(a)(2)) and SEC regulations). Our Board of Directors has determined that each of Mr. Selati isand Mr. Pizula qualify as (1) an “audit committee financial expert,” as that term is
defined in Item 407(d)(5) of Regulation S-K of the Exchange Act, and (2) independent as defined by the NASDAQ MarketplaceNasdaq Stock Market Rules and Section 10A(m)(3) of the Exchange Act. The Audit Committee appoints, determines funding for, oversees and evaluates the independent registered public accounting firm with respect to accounting, internal controls and other matters and makes other decisions with respect to audit and finance matters, including the review of our quarterly and annual filings on Form 10-Q and Form 10-K.10-K, respectively. The Audit Committee also pre-approves the retention of the independent registered public accounting firm and the independent registered public accounting firm’s fees for all audit and non-audit services provided by the independent registered public accounting firm, and determines whether the provision of non-audit services is compatible with maintaining the independence of the independent registered public accounting firm. In addition, during 2019, the principal internal auditor and management documented, tested and evaluated the Company’s internal control over financial reporting system in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations. The Audit Committee was kept apprised of the progress of the evaluation and provided oversight and advice during the process. In connection with this oversight, the Audit Committee received periodic updates provided by the principal internal auditor, management and Deloitte & Touche LLP, the Company’s independent registered public accounting firm at least quarterly at an Audit Committee meeting. All members of the Audit Committee are ablehave a working familiarity with basic finance and accounting practices, including the ability to read and understand financial statements and all have experience in finance and accounting that provides them withaccount or related financial sophistication.management expertise.
Pursuant to authority delegated by the Board of Directors and the Audit Committee’s written charter, the Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to:
· the integrity of the Company’s financial statements;
·the Company’s systems of internal controls regarding finance and accounting as established by management;
· the qualifications and independence of the independent registered public accounting firm;
· the performance of the Company’s independent registered public accounting firm;
· the Company’s auditing, accounting and financial reporting processes generally; and
· compliance with the Company’s ethical standards for senior financial officers and all personnel.
| · the integrity of the Company’s financial statements; |
| · the Company’s systems of internal controls regarding finance and accounting as established by management; |
| · the qualifications and independence of the independent registered public accounting firm; |
| · the performance of the Company’s independent registered public accounting firm; |
| · the Company’s auditing, accounting and financial reporting processes generally; and |
| · compliance with the Company’s ethical standards for senior financial officers and all personnel. |
In fulfilling its duties, the Audit Committee maintains free and open communication with the Board, the independent registered public accounting firm, financial management and all employees.
Report of the Audit Committee
In connection with these responsibilities, the Audit Committee met with management and Deloitte & Touche LLP, the Company’s independent registered public accounting firm, to review and discuss the Company’s audited financial statements for the fiscal year ended December 31, 2016.2019. The Company believes that its choice to use Deloitte & Touche LLP to review, audit and discuss the Company’s audited financial statements for the fiscal year ended December 31, 20162019 is in the best interests of the Company and its shareholders.stockholders. The Audit Committee also discussed with the independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) AU Section 325 “Communications about Control Deficiencies in an Audit of Financial Statements” and AU Section 380 “Communications with Audit Committees”, as may be modified or supplemented.the SEC. The Audit Committee also received from Deloitte & Touche LLP the written disclosures and the letter required by the applicable requirements of the PCAOB Rule 3526 “Communicationregarding Deloitte & Touche LLP’s communications with the Audit Committees Concerning Independence”, as may be modified or supplemented,Committee concerning independence, and has discussed with Deloitte & Touche LLP its independence. The Audit Committee
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Table of Contentsis actively engaged in a dialogue with Deloitte & Touche LLP with respect to any disclosed relationships or services that might affect Deloitte & Touche LLP’s objectivity and independence.
Based on the foregoing reviews and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2019.
| Audit Committee |
| Sydney Selati, Chairman Norman C. Epstein
Harold C. Taber, Jr.
|
| Gary P. Fayard |
| Steven G. Pizula |
Principal Accounting Firm Fees and Services
Fees of Independent Registered Public Accounting Firm for 20162019 and 20152018
Aggregate fees billed and unbilled to the Company for service provided for the fiscal years ended December 31, 20162019 and 20152018 by the Company’s independent registered public accounting firm, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively “Deloitte & Touche”):
| | Year ended December 31, | | | Year ended December 31, | |
| | 2016 | | 2015 | | | 2019 | | 2018 | |
Audit Fees | | $1,471,072 | | $1,395,475 | | | $1,760,953 | | | $1,859,479 | |
Tax Fees1 | | 957,307 | | 631,950 | | | 925,175 | | | 960,432 | |
All Other Fees2 | | 6,000 | | 406,976 | | | - | | | - | |
Total Fees3 | | $2,434,379 | | $2,434,401 | | | $2,686,128 | | | $2,819,911 | |
1Tax fees consisted of fees for tax consultation services including advisory services for a state tax analysis and domestic and international tax advice.
2All other fees consisted of fees incurred in connection with other transactions for the Company.
3For the years ended December 31, 20162019 and 2015,2018, all of the services performed by Deloitte & Touche were approved by the Audit Committee.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee’s policy is to pre-approveCommittee pre-approves all audit, non-audit and non-audittax services provided by the Company’s independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally providedIn August 2019, the Audit Committee adopted a policy for up to one year, and anythe pre-approval is detailed as to the particular service or category of services provided by the Company’s independent registered public accounting firm. The policy provides for (i) general pre-approval of certain audit, non-audit and is generally subject totax services which do not exceed a specific budget. The Audit Committee has delegated pre-approval authority to its Chairman when necessary due to timing and logistical considerations. Any servicesspecified dollar threshold approved by the Audit Committee; (ii) specific pre-approval by the Chairman must be reported toof the Audit Committee of certain audit, non-audit and tax services between the dollar threshold referenced in (i) above and a specified dollar threshold approved by the Audit Committee, and (iii) specific pre-approval by a quorum of the full Audit Committee at its next scheduled meeting. The independent registered public accounting firmof certain audit, non-audit and management are required to periodically report totax services above the threshold referenced in (ii) above. Any services not listed in the policy must be preapproved individually by the full Audit Committee. The Audit Committee is provided updates, at least quarterly, regarding the extent of services provided by the independent registered public accounting firm in accordance with the pre-approval policies, and the fees for the services performed to date.policies. All services in the table above were approved by the Audit Committee.
COMPENSATION COMMITTEE
For the fiscal year ended December 31, 2016,2019, the Company’s Compensation Committee was comprised of Mr. Epstein (Chairman)(until June 2019), Mr. Polk (since June 2019), Mr. Selati Mr. Taber and Mr. Vidergauz. Mr. Epstein served as Chairman until June 2019 and Mr. Vidergauz has served as Chairman since June 2019. The Board of Directors amended and restated the written charter for the Compensation Committee in February 2019, a copy of which is available on our website athttp://investors.monsterbevcorp.com/governance.cfm. The Compensation Committee is responsible for reviewing, developing and recommending to the Board the appropriate management compensation policies, programs and levels, and reviewing the performances of the Chief Executive Officer, President and other senior executive officers periodically in relation to certain objectives.
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The Compensation Committee is ultimately responsible for determining, affirming or amending the level and nature of executive compensation of the Company. The Compensation Committee has access, at the Company’s expense, to independent, outside compensation consultants for both advice and competitive data for the purpose of making such determinations. The Compensation Committee believes that the compensation policies and programs as outlined above in “Compensation Discussion and Analysis” ensure that levels of executive compensation fairly reflect the performance of the Company, thereby serving the best interests of its stockholders. The Board has adopted written Equity Grant Procedures.
Compensation Committee Interlocks and Insider Participation in Compensation Decisions
Norman CMr. Epstein Sydney(until June 2019), Mr. Polk (since June 2019), Mr. Selati Harold C. Taber, Jr. and Mark S.Mr. Vidergauz served on the Compensation Committee during the 20162019 fiscal year. No member of the Compensation Committee is now, or during 20162019 was, an officer or employee of the Company or any of its subsidiaries. Other than Mr. Taber, who served as President and Chief Executive Officer of MEC from July 1992 to June 1997, noNo member of the Compensation Committee was formerly an officer of the Company or any of its subsidiaries. During 2016,2019, no member of the Compensation Committee had a relationship that must be described under the SEC rules relating to disclosure of related person transactions. In 2016,2019, none of our executive officers served on the board of directors or compensation committee of any entity that had one or more of its executive officers serving on the Board or the Compensation Committee of the Company.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis referred to above be included in this proxy statement.
| Compensation Committee
Norman C. Epstein, Chairman
Sydney Selati
Harold C. Taber, Jr.
Mark S. Vidergauz
|
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
For the fiscal year ended December 31, 2016,2019, the Company’s Nominating and Corporate Governance Committee was comprised of Mr. Taber (Chairman)Epstein (until June 2019), Mr. EpsteinPolk (since June 2019), Mr. Selati, Mr. Taber (until June 2019) and Mr. Selati.Vidergauz (since June 2019). Mr. Taber served as Chairman until June 2019 and Mr. Vidergauz has served as Chairman since June 2019. In February 2019, the Board of Directors renamed the Nominating Committee the “Nominating and Corporate Governance Committee.” The Nominating and Corporate Governance Committee assists the Board in fulfilling its responsibilities by establishing, and submitting to the Board for approval, criteria for the selection of new directors, identifying and approving individuals qualified to serve as members of the Board, selecting director nominees for our annual meetings of stockholders, evaluating the performance of the Board, reviewing and recommending to the Board any appropriate changes to the committees of the Board, and developing and recommending to the Board corporate governance guidelines and oversight with respect to corporate governance and ethical conduct.governance. The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee, a copy of which is available on our website athttp://investors.monsterbevcorp.com/ governance.cfm.governance.cfm.
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Process for Selection and Nomination of Directors
In connection with the process of selecting and nominating candidates for election to the Board, the Nominating and Corporate Governance Committee reviews the desired experience, mix of skills and other qualities to assure appropriate Board composition, taking into account the current Board members and the specific needs of the Company and the Board. Among the qualifications to be considered in the selection of candidates, the Nominating and Corporate Governance Committee considers the experience,
knowledge, skills, expertise, diversity, personal and professional integrity, character, business judgment, time available in light of other commitments and dedication of any particular candidate, as well as such candidate’s past or anticipated contributions to the Board and its committees so that the Board includes members, where appropriate, with diverse backgrounds, knowledge and skills relevant to the business of the Company. In April 2015, theThe charter for the Nominating and Corporate Governance Committee was amended to statespecifically states that diversity of race, ethnicity, gender, sexual orientation and gender identity are factors in evaluating suitable candidates for Board membership. See “Deadlines for Receipt of Stockholder Proposals” for information regarding nominations of director candidates by stockholders for the 20182021 annual meeting of stockholders.
Though the Nominating and Corporate Governance Committee does not solicit recommendations for director candidates, the Nominating and Corporate Governance Committee has a policy regarding the consideration of any director candidates recommended by stockholders. Suggestions for candidates to the Board may be made in writing and mailed to the Nominating and Corporate Governance Committee, c/o Office of the Secretary, Monster Beverage Corporation, 1 Monster Way, Corona, CA 92879. Nominations must be submitted in a manner consistent with our by-laws. We will furnish a copy of the by-laws to any person, without charge, upon written request directed to the Office of the Secretary at our principal executive offices. Each candidate suggestion made by a stockholder must include the following:
·the candidate’s name, contact information, detailed biographical material, qualifications and an explanation of the reasons why the stockholder believes that this candidate is qualified for service on the Board;
·all information relating to the candidate that is required to be disclosed in solicitations of proxies for elections of directors in an election contest, or as otherwise required, under the securities laws;
·a written consent of the candidate to be named in a Company proxy statement as a nominee and to serve as a director, if elected; and
·a description of any arrangements or undertakings between the stockholder and the candidate regarding the nomination.
| · | the candidate’s name, contact information, detailed biographical material, qualifications and an explanation of the reasons why the stockholder believes that this candidate is qualified for service on the Board; |
| · | all information relating to the candidate that is required to be disclosed in solicitations of proxies for elections of directors in an election contest, or as otherwise required, under the securities laws; |
| · | a written consent of the candidate to be named in a Company proxy statement as a nominee and to serve as a director, if elected; and |
| · | a description of any arrangements or undertakings between the stockholder and the candidate regarding the nomination. |
Our Nominating and Corporate Governance Committee will evaluate all stockholder-recommended candidates on the same basis as any other candidate.
Director Resignation Policy
The Board has a director resignation policy. This policy provides that, in an uncontested election, any incumbent director nominee who receives a greater number of votes “WITHHELD” from his or her election than votes “FOR” his or her election must promptly tender his or her resignation to the Board following certification of the election results. The Nominating and Corporate Governance Committee will review the circumstances surrounding the election and recommend to the Board whether to accept or reject the resignation. The Board must act on the tendered resignation. If such resignation is rejected, the Board must publicly disclose its decision, together with the rationale supporting its decision, within 90 days after certification of the election results. A copy of the director resignation policy is available on our website athttp://investors. monsterbevcorp.com /governance.cfm.investors.monsterbevcorp.com/governance.cfm.
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PROPOSAL TWO
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 20172020
The Audit Committee has appointed Deloitte & Touche LLP, an independent registered public accounting firm, to audit the financial statements of the Company for the fiscal year ending December 31, 2017.2020. In the event of a negative vote on such ratification, the Audit Committee will reconsider its selection.
Representatives of Deloitte & Touche LLP are expected to be present at the Annual Meeting with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions from stockholders of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
PROPOSAL THREE
APPROVAL OF MONSTER BEVERAGE CORPORATION
2017 COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
The following is a summary of the material terms of the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors (the “2017 Director Plan”), which includes current retainer compensation for non-employee directors and the Company’s share ownership guidelines for non-employee directors. The full text of the 2017 Director Plan is attached as Appendix A to this proxy statement, and the following summary is qualified in its entirety by reference to the terms of the 2017 Director Plan. Stockholders are urged to review the 2017 Director Plan before determining how to vote on this proposal.
The 2017 Director Plan is intended to be the successor plan to the 2009 Monster Beverage Corporation Stock Incentive Plan for Non-Employee Directors (the “2009 Director Plan”), as amended. The 2017 Director Plan was approved by the Board on April 24, 2017, subject to stockholder approval at the Annual Meeting. Provided that the 2017 Director Plan is approved by the stockholders, no additional awards will be made under the 2009 Director Plan, and the 2009 Director Plan shall remain in effect with respect to, and govern, awards made thereunder for so long as awards thereunder remain outstanding. The 2017 Director Plan provides for an expanded set of awards that may be awarded to Non-Employee Directors (as defined below) and, subject to Board approval, the 2017 Director Plan permits Non-Employee Directors to make a Deferral Election (as defined below) with respect to all of a Non-Employee Director’s compensation. The Board believes that it is in the best interests of the Company and its stockholders to approve the 2017 Director Plan.
Purpose of Stockholder Approval
Your approval of the 2017 Director Plan will allow the Company to attract and retain persons of ability as non-employee directors of the Company and to further align the economic interests of such directors with the stockholders of the Company.
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The 2017 Director Plan will become effective upon approval by the stockholders and will terminate on the tenth (10th) anniversary of that date, unless otherwise terminated pursuant to Section 12.1 of the 2017 Director Plan. The Board may amend the Plan pursuant to Section 12.1 of the 2017 Director Plan; provided that, no amendment shall, without proper approval of the Company’s stockholders, increase the maximum number of shares which are available for awards under the 2017 Director Plan.
SUMMARY OF THE 2017 DIRECTOR PLAN
Administration of the Plan
The 2017 Director Plan will be administered by the Board. The 2017 Director Plan has the authority to select the non-employee directors who will receive awards under the 2017 Director Plan, to determine the type and terms of the awards and to interpret and to administer the 2017 Director Plan. While the 2017 Director Plan is designed to provide the Board with flexibility to grant different types of awards, the current compensation program for non-employee directors is set forth in the 2017 Director Plan and more fully described below. The 2017 Director Plan allows the Board to award stock options, stock appreciation rights, restricted shares or restricted stock units (“RSUs”), deferred awards, dividend equivalents and other share-based awards. The Board may permit a Non-Employee Director to elect (a “Deferral Election”), at such times and in accordance with rules and procedures (or sub-plan) adopted by the Board (which are intended to comply with Code Section 409A, as applicable), to receive all or any portion of such Non-Employee Director’s compensation, whether payable in cash or in equity, on a deferred basis.
Eligibility to Participate in the Plan
Awards may be granted under the 2017 Director Plan to any individual who (a) is a member of the Board of Directors and (b) is not an employee of the Company or any of its affiliates at the time in question (a “Non-Employee Director”).
Type and Amount of Securities Offered
Subject to adjustment as provided in the 2017 Director Plan, a total of 1,250,000 shares shall be authorized for issuance under the 2017 Director Plan (“Available Shares”), less one (1) share for every one (1) share granted under the 2009 Director Plan after December 31, 2016 and prior to the effective date of the 2017 Director Plan. Shares covered by an award shall only be counted as used to the extent they are actually issued. Any shares related to awards (or awards under the 2009 Director Plan) which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such shares, are settled in cash in lieu of shares, or are exchanged with the Board’s permission, prior to the issuance of shares, for awards not involving shares, shall be available again for grant under the 2017 Director Plan, and shall be counted on a one-for-one basis. However, the full number of stock appreciation rights granted that are to be settled by the issuance of shares shall be counted against the number of shares available for award under the 2017 Director Plan, regardless of the number of shares actually issued upon settlement of such stock appreciation rights. Furthermore, any shares tendered or withheld to satisfy any tax withholding obligations on an award issued under the 2017 Director Plan (or award granted under the 2009 Director Plan), shares tendered or withheld to pay the exercise price of an award under the 2017 Director Plan (or award under the 2009 Director Plan), and shares repurchased on the open market with the proceeds of a stock option exercise will not be available for grant under the 2017 Director Plan. Awards granted or shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future
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awards, in each case by a company acquired by the Company or any affiliate that is a subsidiary of the Company or with which the Company or any affiliate that is a subsidiary of the Company combines (“Substitute Awards”) shall not reduce the shares authorized for grant under the 2017 Director Plan (and shall not be added back as provided herein). Additionally, in the event that a company acquired by the Company or any affiliate that is a subsidiary of the Company or with which the Company or such subsidiary combines, has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for awards under the 2017 Director Plan and shall not reduce the shares authorized for grant under the 2017 Director Plan (and shall not be added back as provided herein); provided that awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Non-Employee Directors prior to such acquisition or combination. Any shares issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise.
Terms and Conditions of Awards
A stock option is the right to purchase a specified number of shares of common stock at an exercise price fixed by the Board. The exercise price paid to the Company generally may be no less than the fair market value of the underlying common stock on the date of grant. A stock appreciation right is a right to receive cash, common stock, or other property as determined by the Board, based on the increase in the fair market value of the common stock over the strike price specified in the stock appreciation right. The strike price is fixed by the Board but may not be less than the fair market value of the common stock on the date of grant. The Board may grant stock appreciation rights either alone or in conjunction with other awards. The term of an option or stock appreciation will be determined by the Board and set forth in an applicable award agreement; provided, however, that the term for an option or stock appreciation right will be no more than ten years from the date of grant of such award.
Other than pursuant to certain equitable adjustments or in connection with a change of control, the Board will not without the approval of the Company’s stockholders to the extent required by law or the rules and regulations of the principal securities exchange on which the shares are traded (i) lower the option price per share of an option after it is granted (or strike price of a stock appreciation right), (ii) cancel an option or stock appreciation right in exchange for cash or another award, and (iii) take any other action with respect to an option or stock appreciation right that would be treated as a repricing under the rules and regulations of the principal securities exchange on which the shares are traded.
Restricted stock is a grant of shares of the Company’s common stock that are subject to transfer and other (e.g., forfeiture) restrictions imposed by the Board. The restrictions generally lapse over time. RSUs represent the right to receive a payment that is valued by reference to the Company’s common stock, which payment may be paid by delivery of such property as the Board determines, including without limitation, cash, common stock, other property, or any combination thereof which right to payment may be subject to such vesting and deferral conditions as determined by the Board and as permitted by the 2017 Director Plan. A participant who has received RSUs does not have any of the rights of a stockholder until any shares of common stock in payment of the RSUs are delivered to the individual, whereas a participant who has received restricted stock does have the rights of a stockholder while holding the restricted shares (subject to terms of the 2017 Director Plan or an award agreement to the contrary). Except as otherwise provided in an award agreement, any shares or any other property (including cash) distributed as a dividend or otherwise with respect to any award of restricted stock as to which the restrictions have not yet lapsed will be subject to the same restrictions as the underlying award.
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Dividend equivalents represent awards or a right to receive payments equal to dividends (whether in cash, shares or other property) if and when paid or distributed on common stock of the Company. The Board may, but is not obligated, to grant dividend equivalents on awards. Dividend equivalents are not awarded in connection with stock option or stock appreciation rights.
Other Share-Based Awards represent awards other than stock options, stock appreciation rights, restricted stock, RSUs, and dividend equivalents that are valued in whole or in part by reference to, or are otherwise based on, common stock of the Company or other property. Other Share-Based Awards may be fully vested or subject to such terms and conditions, including forfeiture and vesting conditions, as the Board determines.
Change of Control
In the event of a Change of Control (as defined in the 2017 Director Plan), the Board may, in its sole discretion, provide for (a) the termination of an award upon the consummation of such Change of Control, (b) acceleration of all or any portion of an award, (c) the payment of any amount (in cash or, in the discretion of the Board, in the form of consideration paid to shareholders of the Company in connection with such Change of Control) in exchange for the cancellation of such award which, in the case of stock options and stock appreciation rights, may equal the excess, if any, of the fair market value of the shares of common stock subject to such stock options or stock appreciation rights over the aggregate exercise price or strike price of such stock options or stock appreciation rights; provided, that if the option price of such stock options and/or the strike price of such stock appreciation right equals or exceeds the fair market value of shares of common stock covered thereby immediately prior to the occurrence of such Change of Control, then such stock option and/or stock appreciation right may be cancelled without the payment of consideration, and/or (iv) issuance of substitute awards that will substantially preserve the otherwise applicable terms of any affected awards previously granted hereunder.
Forfeiture Events
The Board may specify in an award agreement that a non-employee director’s rights, payments, and benefits with respect to an award will 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 may include, but will not be limited to, separation from service or violation of material Company and/or affiliate policies. Awards made under the 2017 Director Plan will be subject to generally applicable clawback policies of the Company as in effect from time to time.
Annual Compensation
Each calendar year, a Non-Employee Director will receive an annual retainer and annual equity award, as provided for below. The 2017 Director Plan sets forth the current annual retainer and equity award program for Non-Employee Directors, which may be modified from time to time.
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Each Non-Employee Director will be entitled to receive an annual retainer equal to $60,000. The annual retainer for the chairs of the Audit Committee, Nominating Committee and Compensation Committee will be increased by $17,500, $15,000, and $15,000 each, respectively. The Annual Retainer (a) for each member of the Audit Committee (other than the chairperson) will be increased by $10,000 and (b) for each member of the Compensation Committee and Nominating Committee (other than the respective chairperson) will be increased by an additional $7,500. The annual retainer of the Lead Independent Director will be increased by $20,000. So long as a Non-Employee Director has not made a deferral election with respect to the annual retainer, one quarter of the Non-Employee Director’s annual retainer will be paid to the Non-Employee Director in cash in arrears as soon as administratively practicable following completion of the applicable quarter. A Non-Employee Director’s annual retainer shall be prorated for any partial year of service on the Board, unless otherwise determined by the Board.
At each annual meeting of the Company’s stockholders or promptly thereafter, each Non-Employee Director will receive an award of RSUs in such amount equal to the quotient determined by dividing $165,000 by the fair market value on the grant date (rounded down to the nearest whole number). Such amount may be modified by the Board from time to time. A Non-Employee Director’s annual award of RSUs will generally vest on earliest to occur of: (a) the last business day immediately preceding the annual meeting of the Company’s stockholders in the calendar year following the calendar year in which the grant date occurs, (b) a Change of Control, (c) the Non-Employee Director’s death, or (d) the date of the Non-Employee Director’s separation from service due to disability, so long as the Non-Employee Director remains a Non-Employee Director through such date. The Board may in its discretion award Non-Employee Directors stock options, stock appreciation rights, restricted stock, and other share-based awards in lieu of or in addition to RSUs, although none are contemplated at this time.
Stock Ownership Requirements
The Board believes that Non-Employee Directors should own and hold shares of Company common stock to further align their interests and actions with the interests of the Company’s shareholders. Therefore, the Board requires each Non-Employee Director to satisfy the share ownership guidelines set forth below, as may be amended by the Board from time to time. The current share ownership guidelines provide that Non-Employee Directors of the Company must:
· Hold at least 9,000 shares of Company common stock. For this purpose, shares will be deemed held if deferred shares or deferred RSUs, to the extent vested.
· The minimum stock ownership level must be achieved by each Non-Employee Director by the third (3rd) anniversary of such Non-Employee Director’s initial appointment to the Board.
· Once achieved, ownership of the guideline amount should be maintained for so long as the Non-Employee Director retains his or her seat on the Board.
· There may be rare instances where these guidelines would place a hardship on a Non-Employee Director. In these cases or in similar circumstances, the Board will make the final decision as to developing an alternative stock ownership guideline for a Non-Employee Director that reflects the intention of these guidelines and his or her personal circumstances.
Tax Consequences to Participants
The following is a brief summary of certain United States federal income tax consequences relating to awards under the 2017 Director Plan. This summary is not intended to be complete and does not describe state, local, foreign or other tax consequences. The tax information summarized is not tax advice and cannot be used for the purpose of avoiding penalties under the Code.
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Annual Retainer. In general, a Non-Employee Director will recognize ordinary income upon actual receipt of the Non-Employee Director’s annual retainer. No amounts are withheld generally for Non-Employee Directors.
Options. Options under the 2017 Director Plan are intended to be non-qualified stock options. In general, (a) no income should be recognized by a Non-Employee Director at the time an option is granted; (b) at the time of exercise of an option, ordinary income should be recognized by the Non-Employee Director in an amount equal to the excess, if any, of the fair market value of the shares subject to the option, on the date of exercise over the exercise price paid; and (c) at the time of sale of shares acquired pursuant to the exercise of an option, appreciation (or depreciation) in value of the shares after the date of exercise may be treated as either short-term or long-term capital gain (or loss) depending on how long the shares have been held.
Stock Appreciation Rights. No income should be recognized by a Non-Employee Director in connection with the grant of a stock appreciation right. When the stock appreciation right is exercised, the Non-Employee Director normally would be required to include as taxable ordinary income in the year of exercise an amount equal to the amount of cash received and/or the fair market value of any unrestricted shares and/or other property received on the exercise.
Restricted Stock. The recipient of restricted stock generally will not be subject to tax until the shares are no longer subject to forfeiture or restrictions on transfer for purposes of Internal Revenue Code Section 83. At such time, the recipient should be subject to tax at ordinary income rates on the fair market value of the restricted stock (reduced by any amount paid by the participant for such restricted stock). However, a recipient who makes an election under Code Section 83(b) within 30 days following the date of transfer of the restricted stock to him or her will have taxable ordinary income on the date of transfer of the shares equal to the excess of the fair market value of such shares (determined without regard to the restrictions) over the purchase price, if any, of such restricted shares. Any appreciation (or depreciation) realized upon a later disposition of such shares should be treated as long-term or short-term capital gain (or loss) depending upon how long the shares have been held. If a Code Section 83(b) election has not been made, any dividends received with respect to restricted shares that are subject to the restrictions generally will be treated as compensation that is taxable as ordinary income to the Non-Employee Director and not eligible for a reduced tax rate that may apply to dividends.
Restricted Stock Units. Generally, no income will be recognized upon the award of restricted stock units. The recipient of a restricted stock unit award generally should be subject to tax at ordinary income rates on any cash received and/or the fair market value of any unrestricted shares and/or other property on the date that such amounts are delivered to the participant under the award (reduced by any amount paid by the participant for such restricted stock units).
Tax Consequences to the Company
To the extent that a participant recognizes ordinary income in the circumstances described above, the Company or the subsidiary for which the participant performs services may be entitled to a corresponding income tax deduction provided that, among other things, the expense (a) meets the test of reasonableness, (b) is an ordinary and necessary business expense, and (c) is not an “excess parachute payment” within the meaning of Code Section 280G.
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New Plan Benefits
The following table sets forth benefits to be received by Non-Employee Directors on an annual basis starting in 2017:
New Plan Benefits
Group
| Dollar Value of Annual Equity
Awards ($)1
| Number of Shares Underlying
Annual Equity Awards
|
Named Executive Officers
(Not eligible under Plan)
| N/A
| N/A
|
Executive Group
(Not eligible under Plan)
| N/A
| N/A
|
Non-Executive Director Group
(Currently 7 persons)
| $1,155,000
| ·2
|
Non-Executive Officer Director Group
(Not eligible under Plan)
| N/A
| N/A
|
1The current dollar value of the annual equity award per Non-Employee Director ($165,000) may be modified by the Board from time to time.
2The number of shares is indeterminable at this time because it will fluctuate with the market price of Company common stock on each award grant date.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ADOPTION OF THE MONSTER BEVERAGE CORPORATION 2017 COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS.
PROPOSAL FOUR
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection
Pursuant to Section 14A of the Exchange Act, of 2010 (the “Dodd-Frank Act”) enablesthe Company asks our stockholders to approve, on a non-binding, advisory basis, the compensation of our NamedNamed Executive Officers as disclosed in this proxy statement in accordance with SEC rules.statement.
Our executive compensation program for our NamedNamed Executive Officers is designed to motivate our executive talent, to reward those individuals fairly over time for achieving performance goals, to retain those individuals who continue to perform at or above the levels that are deemed essential to ensure our long-term success and growth and to attract, as needed, individuals with the skills necessary for us to achieve our business plan. We believe our compensation policies are designed to reinforce a sense of ownership and overall entrepreneurial spirit and to link rewards to measurable corporate and qualitative individual performance. In addition, the Compensation Committee has made several key enhancements this year to our compensation program in response to feedback from stockholders. See “Compensation Discussion and Analysis” above.
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We urge stockholders to read the Compensation Discussion and Analysis, as well as the Summary Compensation Table and related tables and narrative that follow it. This proposal is not intended to address any specific item of compensation, but rather the overall compensation of our NamedNamed Executive Officers and the policies and practices described in this proxy statement.
The Board requests that stockholders approve the following advisory resolution at the Annual Meeting:
RESOLVED, that the stockholders of Monster Beverage Corporation (the “Company”) approve, on an advisory basis, the compensation of the Company’s Named Executive Officers described in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables and narrative in the Proxy Statement for the Company’s Annual Meeting of Stockholders.
While the vote on the resolution is advisory in nature and therefore will not bind us to take any particular action, our Board and the Compensation Committee intend to carefully consider the stockholder vote resulting from the proposal in making future decisions regarding our compensation program. The Board has adopted a policy of providing for annual advisory votes from stockholders on the compensation of our Named Executive Officers. The next such vote will occur at our 2021 annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
PROPOSAL FIVEFOUR
APPROVAL OF THE 2020 OMNIBUS INCENTIVE PLAN
ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATIONStock Award and Incentive Plan Historical Information
Section 14AThe2020 Omnibus Incentive Plan was approved by the Board on April 14, 2020, subject to stockholder approval at the Annual Meeting. The Boardauthorized, and the Company’s stockholders previously approved, the2011 Omnibus Incentive Plan. The 2011 Omnibus Incentive Plan has a ten (10) year term and no awards can be granted under the 2011 Omnibus Incentive Plan after February 25, 2021, or June 3, 2020 if the 2020 Omnibus Incentive Plan is approved by stockholders at the Annual Meeting. Accordingly, the Board has determined that it is in the Company’s best interests to adopt the 2020 Omnibus Incentive Plan in order to replace the 2011 Omnibus Incentive Plan, make certain changes that reflect best practices in compensation and position the Company to effectively retain and attract key talent in a competitive industry. The 2020 Omnibus Incentive Plan will be effective as of the Exchange Act enablesdate the 2020 Omnibus Incentive Plan is approved by the stockholders (the “Effective Date”). At the time the Board approved the 2020 Omnibus Incentive Plan, the Board determined that, if the 2020 Omnibus Incentive Plan was approved by the stockholders, then no new awards would be made under the 2011 Omnibus Incentive Plan as of the Effective Date.
The Company also maintains the 2017 Directors Plan, which will remain outstanding and available for grants to non-employee directors.
The 2011 Omnibus Incentive Plan will remain in effect, as applicable, for so long as awards granted under the 2011 Omnibus Incentive Plan remain outstanding. All awards granted pursuant to an award agreement under, and elections made pursuant to, the 2011 Omnibus Incentive Plan prior to the Effective Date will remain in full force and effect in accordance with its terms and administered in accordance with the terms and conditions of the 2011 Omnibus Incentive Plan.
Increase in Number of Shares Reserved for Issuance
As of December 31, 2019:
| · | 824,463 full-value awards covering 824,463 shares of our Common Stock were outstanding under the 2011 Omnibus Incentive Plan and 2017 Directors Plan, in the aggregate; |
| · | options covering 14,941,291 shares of our Common Stock, with a weighted average exercise price of $42.88 and a weighted average remaining term of 6.3 years, were outstanding under the 2011 Omnibus Incentive Plan (no options were outstanding under the 2017 Directors Plan); and |
| · | 14,169,367 shares were available for grant under the 2011 Omnibus Incentive Plan (subject to fungible share counting, as described below) and 1,181,226 shares were available for grant under the 2017 Directors Plan. |
Accordingly, based upon the recommendation of its Compensation Committee, our Board has unanimously approved, subject to stockholder approval at the Annual Meeting, that the 2020 Omnibus Incentive Plan will provide for the grant of up to 46,169,367 shares, comprised of 14,169,367 shares that were available for grant under the 2011 Omnibus Incentive Plan as of December 31, 2019 and 32,000,000 newly approved shares. If the 2020 Omnibus Incentive Plan is approved and awards are granted under the 2011 Omnibus Incentive Plan after December 31, 2019 and prior to the Effective Date, the maximum number of shares available for issuance under the 2020 Omnibus Incentive Plan will be reduced by any shares issued pursuant to such awards (subject to the fungible ratio, as discussed in further detail below).
Information about Dilution, Overhang and Burn Rate
Dilution. The Board anticipates that the 46,169,367 will be sufficient to provide projected equity incentives for the Company’s equity compensation plans for several years, assuming that its annual usage remains consistent with 2019. The actual amount of time will vary depending on several factors, including changes in employee headcount, long-term incentive award type mix, future forfeitures and cancellations, future acquisitions, and the Company’s stock price. If stockholders do not approve the 2020 Omnibus Incentive Plan, we will have no ability to issue stock-based awardsafter February 25, 2021, thus substantially adversely affecting our ability to retain and attract key talent to serve as employees or consultants of the Company.
The 32,000,000 new shares reserved under the 2020 Omnibus Incentive Plan would represent approximately 5.3% of the fully diluted shares of our Common Stock outstanding as of December 31, 2019, and the 46,169,367 share pool under the 2020 Omnibus Incentive Plan (comprised of the 14,169,367 shares that were available for grant under the 2011 Omnibus Incentive Plan as of December 31, 2019 and 32,000,000 newly approved shares) would represent approximately 7.7% of the fully diluted shares of our Common Stock outstanding as of December 31, 2019. The Board believes that this would represent a reasonable amount of potential dilution, given the strong incentive that the Board believes future equity award grants will provide to employees and consultants to increase the value of the Company for all stockholders.
Overhang. We calculate our fully-diluted “overhang” as the aggregate sum of: (a) stock options granted and outstanding plus (b) unvested and outstanding shares of restricted stock and restricted stock units (settled in Common Stock) plus (c) shares available for grant under plans; all divided by the number of fully-diluted shares of our Common Stock outstanding as of December 31, 2019.
Our overhang as of December 31, 2019 was approximately 5.5%. Including the shares to be reserved under the 2020 Omnibus Incentive Plan (if authorized), the potential overhang from all stock incentives and available to employees would be approximately 10.5%.
Burn Rate. We calculate our “total equity burn rate” as the (a) total number of equity-related awards in any given fiscal year divided by (b) the number of basic weighted average shares of our Common Stock outstanding at the end of that fiscal year.
Our historical total equity burn rate from shares issued under the 2020 Omnibus Incentive Plan, calculated in terms of the average burn rate over the three (3) year period from January 1, 2017 through December 31, 2019, has been 0.44%.
| | Shares Granted | Weighted Average | |
Fiscal
Year | Stock Options | Full-
Value | Total | Basic Common Stock
Outstanding | Burn Rate |
| 2019 | 1,672,000 | 568,000 | 2,240,000 | 542,191,000 | 0.41% |
| 2018 | 3,180,000 | 271,000 | 3,451,000 | 557,166,000 | 0.62% |
| 2017 | 1,434,000 | 277,000 | 1,711,000 | 566,782,000 | 0.30% |
| | | | Monster 3-Year Average Burn Rate | 0.44% |
Description of the 2020 Omnibus Incentive Plan
Set forth below is a summary of the material features of the 2020 Omnibus Incentive Plan. The 2020 Omnibus Incentive Plan is set forth in its entirety as Appendix A to thisproxy statement, and all descriptions of the 2020 Omnibus Incentive Plan contained in this proposal are qualified by express reference to AppendixA. Stockholders are urged to review the 2020 Omnibus Incentive Plan before determining how to vote on a non-binding, advisory basis, on how frequently they wishthis proposal.
Purpose
The purpose of the 2020 Omnibus Incentive Plan is to assist the Company and its subsidiaries in attracting and retaining selected individuals to include a Say-on-Pay Proposal in our proxy statement. Our stockholders have the choice to vote for oneserve as employees and consultants of the following alternatives, as indicated onCompany and its subsidiaries who are expected to contribute to the proxy card:Company’s success and to holdachieve long-term objectives which will inure to the advisory vote on executive compensation each year, every two years, every three years, or to abstain from voting.
While the vote is advisory in nature and therefore will not bind us to adopt any particular frequency, our Compensation Committee and Board intends to carefully consider the stockholder vote resulting from the proposal in determining how frequently we will present a Say-on-Pay Proposal.
At the 2011 Annual Meeting, thebenefit of all stockholders of the Company indicatedthrough the additional incentives.
Types of Awards
The 2020 Omnibus Incentive Plan provides for the granting of restricted stock and restricted stock units, performance awards, and other share-based awards. The 2020 Omnibus Incentive Plan also provides for the granting of stock options, including “incentive stock options”(“ISOs”)within the meaning of Section 422 of the Code and non-qualified stock options. Options granted under the 2020 Omnibus Incentive Plan may be accompanied by stock appreciation rights. Stock appreciation rights may also be granted independently of options. An award agreement setting forth terms and conditions evidences each equity award.
Eligibility to Participate in the 2020 Omnibus Incentive Plan
We may make discretionary grants of awards under the 2020 Omnibus Incentive Plan to (i) employees of the Company or any subsidiary and certain consultants who the Compensation Committee determines to be eligible for participation in the 2020 Omnibus Incentive Plan and (ii) certain prospective employees and consultants who have accepted offers of employment, consultancy or service from the Company or its subsidiaries. ISOs, however, may be granted only to employees of the Company and employees of certain itssubsidiaries as permitted by applicable tax requirements. As of December 31, 2019, we employed a preferencetotal of 3,529 employees who as of such date were eligible for selection by the Company to holdparticipate in the 2020 Omnibus Incentive Plan. We maintain relationships with a non-binding advisory votefew consultants who would be eligible to approveparticipate in the 2020 Omnibus Incentive Plan, however, no grants have been made to consultants in the past five years. The Company’s selection of eligible participants in the 2020 Omnibus Incentive Plan will generally be based upon the Company’s evaluation of, among other considerations, retention, reward and incentive needs to stimulate the active interest of such persons in the development and financial success of the Company and its subsidiaries.
Plan Administration
The Compensation Committee will administer the 2020 Omnibus Incentive Plan and will be comprised of certain directors who are eligible to serve on the Compensation Committee pursuant to the terms of the 2020 Omnibus Incentive Plan. If a Compensation Committee member fails to qualify as an eligible director, such failure will not invalidate any award granted by the Compensation Committee that is otherwise validly granted under the 2020 Omnibus Incentive Plan, unless invalidation is required by applicable law or securities exchange requirement. The acts of a majority of the members of the Compensation Committee present at any meeting at which a quorum is present or acts approved in writing by a majority of the Compensation Committee will be deemed the acts of the Compensation Committee.
Subject to the provisions of the 2020 Omnibus Incentive Plan (including delegation of authority) and applicable law, the Compensation Committee will have the authority, in addition to other express powers and authorizations conferred on the Compensation Committee by the 2020 Omnibus Incentive Plan, to: (i) select the employees to whom awards may be granted under the 2020 Omnibus Incentive Plan; (ii) determine the type or types of awards, not inconsistent with the provisions of the 2020 Omnibus Incentive Plan, to be granted to each participant; (iii) determine the number of shares or dollar value to be covered by each award; (iv) determine the terms and conditions, including vesting conditions, not inconsistent with the provisions of the 2020 Omnibus Incentive Plan, of any award; (v) determine whether, to what extent and under what circumstances awards may be settled in cash, shares or other property; (vi) determine the extent to which cash, shares, other property and other amounts payable with respect to an award made under the 2020 Omnibus Incentive Plan will be deferred either automatically or at the election of the participant; (vii) determine the extent to which any award will be canceled, forfeited, or suspended; (viii) accelerate, continue, or extend the exercisability or vesting of any award or any shares acquired pursuant to an award, including with respect to the period following a participant’s termination of employment or service; (ix) interpret and administer the 2020 Omnibus Incentive Plan and any instrument or agreement entered into under, or in connection with, the 2020 Omnibus Incentive Plan, including any award agreement; (x) correct any defect, supply any omission or reconcile any inconsistency in the 2020 Omnibus Incentive Plan or any award in the manner and to the extent that the Compensation Committee will deem desirable to carry it into effect; (xi) establish such rules and regulations and appoint such agents as it will deem appropriate for the proper administration of the 2020 Omnibus Incentive Plan; (xii) determine whether any award, other than an option or stock appreciation right, will have dividend equivalents and (xiii) make any other determination and take any other action that the Compensation Committee deems necessary or desirable for administration of the 2020 Omnibus Incentive Plan.
To the extent permitted by law or securities exchange rules, the Compensation Committee may delegate to (i) a committee of one (1) or more directors of the Company any of the authority of the Compensation Committee under the 2020 Omnibus Incentive Plan, including the right to grant, cancel or suspend awards and (ii) to the extent permitted by law, one (1) or more executive officer compensationofficers, or a committee of executive officers, the right to grant awards to employees who are not executive officers of the Company. The discussion below related to Compensation Committee also refers (where appropriate) to persons to whom such authority has been delegated by the Compensation Committee.
No Repricing without Stockholder Approval
Other than in connection with changes in capitalization, without the approval of the Company’s stockholders, the Compensation Committee will not (a) lower the exercise price of an option or stock appreciation right after it is granted when the exercise price per share exceeds the fair market value of one (1) share, (b) cancel an option or stock appreciation right in exchange for cash or another award (other than in connection with a Change in Control), or (c) take any other action with respect to an option or stock appreciation right that would be treated as a repricing under the rules and regulations of the principal securities exchange on which the Company’s shares are traded.
Available Shares and Recycling
Subject to the 2020 Omnibus Incentive Plan’s adjustment and share counting provisions, a total of 46,169,367 shares will be authorized for awards granted under the 2020 Omnibus Incentive Plan, less: (A) one (1) share for every one (1) share that was subject to an option or stock appreciation right granted after December 31, 2019 and prior to the Effective Date under the 2011 Omnibus Incentive Plan, and (B) two point six (2.6) shares for every one (1) share that was subject to an award other than an option or stock appreciation right (a full-value award) granted after December 31, 2019 and prior to the Effective Date under the 2011 Omnibus Incentive Plan. Any shares that are subject to options or stock appreciation rights granted on or after the Effective Date under the 2020 Omnibus Incentive Plan will be counted against this limit as one (1) share for every one (1) share granted, and any shares that are subject to full value awards will be counted against this limit as two point six (2.6) shares for every one (1) share granted.
Any shares related to awards (including, after December 31, 2019, awards granted under the 2011 Omnibus Incentive Plan) which terminate by expiration, forfeiture, cancellation, or which are settled in cash in lieu of shares, or are exchanged for awards not involving shares, will be added back to the shares available for awards under the 2020 Omnibus Incentive Plan. The full number of stock appreciation rights (including, after December 31, 2019, stock appreciation rights granted under the 2011 Omnibus Incentive Plan) that can be settled by the issuance of shares will be counted against the number of shares available for awards under the 2020 Omnibus Incentive Plan, regardless of the number of shares actually issued upon settlement. Any shares withheld to satisfy tax withholding obligations on an annual basisaward (including, after December 31, 2019, an award granted under the 2011 Omnibus Incentive Plan), shares tendered to pay the exercise price of an award (including, after December 31, 2019, an award granted under the 2011 Omnibus Incentive Plan), and shares repurchased on the open market with the proceeds of an option (including, after December 31, 2019, an option granted under the 2011 Omnibus Incentive Plan) exercise will not be added to the shares available for grant under the 2020 Omnibus Incentive Plan. Any shares that again become available for awards under the 2020 Omnibus Incentive Plan will be added as (i) one (1) share for every one (1) share subject to options or stock appreciation rights, and (ii) two point six (2.6) shares for every one (1) share subject to full value awards. The maximum number of shares that may be issued under the 2020 Omnibus Incentive Plan will not be affected by the payment of dividends or dividend equivalents in cash or in shares in connection with outstanding awards.
Substitute awards (granted in connection with certain corporate transactions) will not reduce the shares authorized for grant under the 2020 Omnibus Incentive Plan and will not be added to the shares available for awards under the 2020 Omnibus Incentive Plan. Additionally, in the event that a company acquired by the Company or any subsidiary or with which the Company or any subsidiary combines, has shares available under a preexisting plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such preexisting plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for awards under the 2020 Omnibus Incentive Plan and will not reduce the shares authorized for grant under the 2020 Omnibus Incentive Plan.
Options
All options granted under the 2020 Omnibus Incentive Plan will be nonqualified stock options unless the applicable award agreement expressly states that the option is intended to be an ISO. ISOs will be granted only to participants who are employees of the Company and its affiliates. The exercise price per share of Common Stock for each option will not be less than 100% of the fair market value of such share on the date of grant; provided, however, that, in the case of an ISO granted to an employee who, at the time of the grant of such option, owns shares representing more than 10% of the voting power of all classes of shares of the Company or any affiliate, the exercise price per share will not be less than 110% of the fair market value per share on the date of grant. The aggregate fair market value (determined as of the date an option is granted) of the shares for which ISOs granted to any employee under the 2020 Omnibus Incentive Plan may first become exercisable in any calendar year will not exceed $100,000. Solely for purposes of determining whether shares are available for the grant of ISOs under the 2020 Omnibus Incentive Plan, the maximum aggregate number of shares that may be issued pursuant to ISOs granted under the 2020 Omnibus Incentive Plan will be 46,169,367 shares, subject to adjustment for changes in capitalization.
The fair market value of shares of our Common Stock will be the per share closing price of the shares of our Common Stock on the Nasdaq on such date (or if there were no reported prices on such date, the closing price on the last preceding date on which the shares were traded) or, if the Company is not then listed on Nasdaq, on such other principal securities exchange on which the shares of our Common Stock are traded and if the Company is not listed on the Nasdaq or any other securities exchange, the fair market value of shares of our Common Stock will be determined by the Compensation Committee, in its sole discretion and in accordance with Section 409A of the Code.
The exercise price will be payable (i) in cash, check, cash equivalent and/or shares of Common Stock having a fair market value on the date of exercise equal to the exercise price; provided, that such shares of Common Stock are not subject to any pledge or other security interest and are held for the applicable period as determined by the Company’s auditors to avoid adverse accounting charges; and (ii) by such other method as the Compensation Committee may permit in accordance with applicable law, in its sole discretion, including: (A) if there is a public market for the shares of Common Stock at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered a copy of irrevocable instructions to a broker to sell the shares of Common Stock otherwise deliverable upon the exercise of the option and to deliver promptly to the Company an amount equal to the exercise price or (B) by a “net exercise” method whereby the Company withholds from the delivery of the shares of Common Stock for which the option was exercised that number of shares of Common Stock having a fair market value equal to the aggregate exercise price for the shares of Common Stock for which the option was exercised.
Options will vest and become exercisable in such manner and on such date and dates, and expire after such period not to exceed ten (10) years, in each case, as may be determined by the Compensation Committee and as set forth in the applicable award agreement. With respect to an ISO, the option period will not exceed five (5) years from the date of grant for a participant who on the grant date owns shares representing more than 10% of the voting power of all classes of shares of the Company or any affiliate. Unless otherwise provided by the Compensation Committee in an award agreement: (i) the unvested portion of an option will expire upon termination of employment or service of the participant granted the option without consideration in respect of such portion, and the Board implemented this standard.vested portion of such option will remain exercisable for (A) six (6) months following termination of employment or service by reason of such participant’s death or disability, but not later than the expiration of the option period, or (B) three (3) months following termination of employment or service for any reason other than such participant’s death or disability, and other than such participant’s termination of employment or service for cause, but not later than the expiration of the option period; and (ii) both the unvested and the vested portion of an option will automatically expire upon the termination of the participant’s employment or service by the Company for cause without consideration in respect of such portion. The specific terms and conditions will be set forth in an award agreement. Dividends and/or dividend equivalents will not be payable with respect to options.
SARs
After carefulStock appreciation rights (“SARs”) may be granted under the 2020 Omnibus Incentive Plan. SARs allow the participant to receive the appreciation in the fair market value of the Common Stock between the exercise date and the date of grant. Any stock option granted under the 2020 Omnibus Incentive Plan may include SARs granted in tandem with such options. The Compensation Committee may also award SARs independent of any stock option grant. Subject to the provisions of the 2020 Omnibus Incentive Plan, the Compensation Committee determines the terms of SARs, including when such rights vest and become exercisable and whether to settle such awards in cash or with shares of Common Stock, or a combination thereof. Unless otherwise provided by the Compensation Committee in an award agreement: (i) the unvested portion of a SAR will expire upon termination of employment or service without consideration in respect of such option, and the vested portion of such SAR will remain exercisable for (A) six (6) months following termination of employment or service by reason of such participant’s death or disability, but not later than the expiration of the SAR exercise period or (B) three (3) months following termination of employment or service for any reason other than such participant’s death or disability, and other than such participant’s termination of employment or service for cause, but not later than the expiration of the SAR exercise period; and (ii) both the unvested and the vested portion of a SAR will automatically expire upon the termination of the participant’s employment or service by the Company for cause without consideration in respect of such portion. The specific terms and conditions will be set forth in an award agreement. Dividends and/or dividend equivalents will not be payable with respect to SARs.
Restricted Stock and RSUs
Restricted stock and restricted stock units (“RSUs”) may be granted under the 2020 Omnibus Incentive Plan. Restricted stock is a grant of shares of our Common Stock that are subject to various restrictions, including restrictions on transferability and forfeiture provisions. Shares will vest and the restrictions on such shares will lapse, in accordance with terms and conditions established by the Compensation Committee. RSUs are unfunded and unsecured promises to deliver shares of Common Stock, cash, or other securities or other property, subject to certain conditions under the 2020 Omnibus Incentive Plan. Such terms may include, among other things, vesting upon the achievement of specific performance goals determined by the Compensation Committee and/or continued service. The Compensation Committee, in its sole discretion, may accelerate the time at which any restrictions, limitations and other conditions will lapse or be removed. Recipients of restricted stock generally will have voting rights with respect to such shares of restricted stock upon grant without regard to vesting, unless the Compensation Committee provides otherwise. Shares that do not vest for any reason will be forfeited by the participant and will revert to the Company. The specific terms will be set forth in an award agreement. Dividends and other distributions will be credited with respect to restricted shares of restricted stock and will be withheld by the Compensation Committee and distributed at such time the related shares of restricted stock vest. Dividends and other distributions credited with respect to any shares of restricted stock that do not vest will be forfeited. Recipients of RSUs will not possess any rights of a stockholder with regard to such award (but see “Dividend Equivalents” below with regard to RSUs).
Other Share-Based Awards
Other share-based awards may be granted under the 2020 Omnibus Incentive Plan. The Compensation Committee may issue unrestricted shares of Common Stock, or other awards denominated in shares of Common Stock, whether restricted or unrestricted and whether current or deferred, under the 2020 Omnibus Incentive Plan to eligible persons, either alone or in tandem with other awards, in such amounts as the Compensation Committee will from time to time in its sole discretion determine. Each other share-based award granted under the 2020 Omnibus Incentive Plan will be subject to such conditions not inconsistent with the 2020 Omnibus Incentive Plan as may be reflected in the applicable award agreement. The Compensation Committee may specify that other share-based awards will include the right to receive dividend equivalents; provided that, any dividend equivalents granted in connection with respect to other share-based awards will be subject to the same restrictions and risk of forfeiture as the shares covered by such other share-based awards and will be settled only if, when and to the extent, such other share-based award vests. Any dividend equivalents with respect to other share-based awards that do not vest will be forfeited.
Performance Compensation Awards
Performance awards may be granted under the 2020 Omnibus Incentive Plan in the form of cash-based awards or share-based awards or a combination thereof. The performance goals will be set by the Compensation Committee, which also has the authority to determine whether such goals have been met. The Compensation Committee may specify that other performance awards will include the right to receive dividend equivalents; provided that, any dividend equivalents granted in connection with respect to performance awards will be subject to the same restrictions and risk of forfeiture as the shares covered by such performance awards and will be settled only if, when and to the extent, such performance award vests. Any dividend equivalents with respect to performance awards that do not vest will be forfeited.
The performance criteria that will be used to establish the performance goal(s) will be based on the attainment of one (1) or more objective performance goals established by the Compensation Committee, which will be based on the attainment of specified levels of certain performance goals, including: net sales; booking value of contract awards; year-end backlog; days sales outstanding; revenue; revenue growth or product revenue growth; operating income (before or after taxes); pre- or after-tax income (before or after allocation of corporate overhead and bonus); earnings per share; net income (before or after taxes); return on equity; total stockholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the shares or any other publicly traded securities of the Company; market share; gross profits; earnings (including earnings before taxes, earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels; operating margins, gross margins or cash margin; year-end cash; debt reductions; stockholder equity; market share; regulatory achievements; and implementation, completion or attainment of measurable objectives with respect to research, development, products or projects, production volume levels, acquisitions and divestitures and recruiting and maintaining personnel; or any other goals provided by the Compensation Committee. Such performance goals also may be based solely by reference to the Company’s performance or the performance of a subsidiary, division, business segment or business unit of the Company, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies.
The Compensation Committee may also exclude charges related to an event or occurrence which the Compensation Committee determines should appropriately be excluded, including, but not limited to, (a) restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management or (c) the cumulative effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles.
Dividend Equivalents
A dividend equivalent is an amount equivalent to cash, stock or other property dividends on shares of our Common Stock. No dividend equivalents will be granted in connection with an option or a SAR. Unless otherwise provided in an award agreement, each RSU will include the right to receive dividend equivalents. Dividend equivalents will accumulate and be withheld by the Compensation Committee until the applicable RSUs upon which the dividend equivalents are awarded vest and any dividend equivalent payments that have accumulated and have been withheld by the Compensation Committee and attributable to any particular RSU will be distributed to the participant in cash or, at the sole discretion of the Compensation Committee, in shares of Common Stock having a fair market value equal to the amount of such dividend equivalent payments then due. Upon the vesting and settlement of RSUs that include dividend equivalents, the dividend equivalents attributable to such RSUs will expire automatically. The Compensation Committee may specify that other share-based and/or performance awards will include the right to receive dividend equivalents; provided that, any dividend equivalents granted in connection with respect to other share-based and/or performance awards will be subject to the same restrictions and risk of forfeiture as the shares covered by such other share-based and/or performance awards and will be settled only if, when and to the extent, such other share-based and/or performance award vests. Any dividend equivalents with respect to other share-based and/or performance awards that do not vest will be forfeited.
Changes in Capital Structure and Similar Events
In the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the shares or the value thereof, such adjustments and other substitutions will be made to the 2020 Omnibus Incentive Plan and to awards as the Compensation Committee deems equitable or appropriate to prevent dilution or enlargement of the rights of participants under the 2020 Omnibus Incentive Plan, taking into consideration the accounting and tax consequences.
Effect of Change in Control
Unless otherwise defined in an award agreement,for purposes of the 2020 Omnibus Incentive Plan, “Change in Control” means the occurrence of any of the following events: (a) sale of all or substantially all of the assets of the Company and its subsidiaries taken as a whole; (b) any person or group of persons is or will become the “beneficial owner” (as defined in Rule 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 50% of the voting stock of the Company then outstanding or (c) a merger or consolidation pursuant to which any person or group of persons becomes the beneficial owner of more than 50% of the voting stock of the Company or the surviving or resulting entity immediately following the consummation of such transaction. To the extent that an award is subject to Section 409A of the Code, then the term “Change in Control” will mean a transaction, event or circumstance described in the prior sentence as long as it also constitutes a “change in control event” within the meaning of Treasury Regulations Section 1.409A-3(i)(5).
Unless the Compensation Committee determines otherwise in an award agreement, the 2020 Omnibus Incentive Planprovides that if a Change in Control occurs and the successor assumes the award (or in which the Company is the ultimate parent corporation and continues the award) or the 2020 Omnibus Incentive Plan, during the two (2) year period immediately following the consummation of such Change in Control, a participant incurs an involuntary termination of service without cause, such participant will be entitled to the following treatment with respect to his or her awards (as applicable): (A) each option and SAR outstanding at such time under the 2020 Omnibus Incentive Plan will become fully vested and exercisable with respect to all shares covered thereby; (B) the restricted period will expire and restrictions, limitations and other conditions applicable to all outstanding restricted stock awards and RSUs will lapse and such awards will become fully vested and settled in accordance with their terms; (C) all performance awards will be considered to be earned and payable (pro rata based on the portion of the performance period completed as of the date of such termination), and any other restriction will lapse and such performance awards will be immediately settled or distributed; (D) for other share-based awards, any restrictions, limitations or conditions will immediately lapse and become settled.
Unless the Compensation Committee determines otherwise in an award agreement, to the extent the successor company in connection with a Change in Control does not assume or replace an award, the 2020 Omnibus Incentive Plan provides the following treatment: (i) options and SARs outstanding as of the date of the Change in Control that are not assumed or replaced will immediately vest and become fully exercisable, (ii) restrictions, limitations and other conditions applicable to restricted stock and RSUs that are not assumed or replaced will lapse and the restricted stock and RSUs will become free of all restrictions, limitations and conditions and become fully vested, (iii) all performance awards will be considered to be earned and payable (pro rata based on the portion of performance period completed as of the date of the Change in Control), and any other restriction will lapse and such performance awards will be immediately settled or distributed and (iv) the restrictions, limitations and other conditions applicable to any other share-based awards will lapse, and such other share-based awards will become free of all restrictions, limitations and conditions and become fully vested and transferable to the full extent of the original grant.
The Compensation Committee, in its discretion, may also determine that, upon the occurrence of a Change in Control, each option and SAR outstanding will terminate or be canceled and in consideration for such cancellation or termination, a participant holding an option and/or SAR will receive an amount equal to the excess, if any, of the fair market value as determined by the Compensation Committee of such share of our Common Stock subject to such option or SAR immediately before the occurrence of such Change in Control over the exercise price per share of such option or SAR; provided that if the exercise price per share of such option and/or SAR equals or exceeds the fair market value of such share immediately before the occurrence of such Change in Control, then it may be canceled without the payment of consideration.
Transferability of Awards
Except as otherwise determined by the Compensation Committee, no award and no shares subject to awards that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution, and such award may be exercised during the life of the participant only by the participant or the participant’s guardian or legal representative. To the extent and under such terms and conditions as determined by the Compensation Committee, a participant may assign or transfer an award (other than an ISO) without consideration (i) to the participant’s spouse, children or grandchildren (including any adopted and step children or grandchildren), parents, grandparents or siblings, (ii) to a trust in which a majority of the beneficiaries are the participant or the persons referred to in clause (i), (iii) to a partnership, limited liability company or corporation in which the participant or the persons referred to in clause (i) are a majority of the partners, members or stockholders or (iv) for charitable donations; provided that, such permitted assignee or transferee will be bound by and subject to all of the terms and conditions of the 2020 Omnibus Incentive Plan and the award agreement relating to the transferred award and will execute an agreement satisfactory to the Company evidencing such obligations; and provided further, that such participant will remain bound by the terms and conditions of the 2020 Omnibus Incentive Plan.
Forfeiture Events; Clawbacks
The Compensation Committee may specify in an award agreement that the participant’s rights, payments, and benefits with respect to an award will 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 may include, but will not be limited to, termination of employment or service, violation of material Company, and/or subsidiary policies, breach of noncompetition, non-solicitation, confidentiality or other restrictive covenants that may apply to the participant, or other conduct by the participant that is detrimental to the business or reputation of the Company, and/or its subsidiaries.
If the Company is required to file an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, if the participant knowingly or recklessly engaged in the misconduct, or knowingly or recklessly failed to prevent or report the misconduct, or if the participant is one (1) of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the participant will reimburse the Company the amount of any payment in settlement of an award earned or accrued for such period as determined by the Compensation Committee following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document reflecting such material noncompliance.
Plan Amendment, Termination
The Board believeshas the authority to alter, amend, suspend, or terminate the 2020 Omnibus Incentive Plan provided such action does not materially and adversely affect the existing rights of any participant and, provided further, that conductingcertain amendments will require stockholder approval. The 2020 Omnibus Incentive Plan will automatically terminate on the tenth (10th) anniversary of the Effective Date, or in the case of ISOs, the tenth (10th) anniversary of Board approval of the 2020 Omnibus Incentive Plan,unless we terminate it sooner.
U.S. Federal Tax Aspects
The following is a brief summary of the current federal income tax consequences that generally apply with respect to awards that may be granted under the 2020 Omnibus Incentive Plan and is based upon laws, regulations, rules and decisions now in effect, all of which are subject to change. The following summary is intended for general information only and does not purport to be a complete analysis of all of the potential tax effects of the 2020 Omnibus Incentive Plan. This summary does not describe any foreign, state or local tax consequences, tax withholding requirements or various other rules that could apply to a particular individual or to the Company and its subsidiaries under certain circumstances (and references to the Company in this section include the applicable subsidiary, if any). This summary is not tax advice and is not intended or written to be used (and cannot be used by any taxpayer) to avoid penalties that may be imposed on a taxpayer. Tax implications may vary due to individual circumstances. Participants should consult their personal tax advisors about the tax consequences related to awards under the 2020 Omnibus Incentive Plan. Tax consequences are not guaranteed.
Nonqualified Stock Options. The grant of nonqualified stock options generally should have no federal income tax consequences to the Company or the option holder. Upon the exercise of a nonqualified stock option, the option holder will recognize ordinary income equal to the excess of the fair market value of the acquired shares on the date of exercise over the exercise price paid for the shares. The Company generally will be allowed a federal income tax deduction equal to the same amount that the option holder recognizes as ordinary income. In the event of the disposition of the acquired shares of Common Stock, any additional gain or loss generally will be taxed to the option holder as either short-term or long-term capital gain or loss depending on how long the shares were held.
Incentive Stock Options. The grant and exercise of ISOs generally should have no federal income tax consequences to the Company. The grant and exercise of ISOs generally have no ordinary income tax consequences to the option holder. However, upon the exercise of an advisory voteISO, the option holder treats the excess of the fair market value on the date of exercise over the exercise price as an item of tax adjustment for alternative minimum tax purposes, which may result in alternative minimum tax liability.
If the option holder retains the shares of Common Stock acquired upon the exercise of an incentive stock option for at least two (2) years following the grant date of the option and one (1) year following exercise of the option, the subsequent disposition of such shares will ordinarily result in long-term capital gains or losses to the option holder equal to the difference between the amount realized on disposition of the shares and the exercise price. The Company will not be entitled to any deduction in such case. If the holding period requirements described above are not met, the option holder will recognize ordinary income upon disposition of the Common Stock equal to the excess of the fair market value of the shares on the date of exercise (or, if less, the sale price received on disposition of the shares) over the exercise price. The Company will be entitled to a corresponding tax deduction in the same amount. Any additional gain or loss realized by the option holder on the disposition of the Common Stock will be taxed as short-term or long-term capital gain or loss, as applicable.
Stock Appreciation Rights. The grant of SARs generally has no federal income tax consequences to the Company or the recipient. Upon the exercise of SARs, the recipient will recognize ordinary income equal to the amount of cash received and the fair market value of any shares of Common Stock received. The Company generally will be allowed a federal income tax deduction equal to the same amount that the recipient recognizes as ordinary income.
Restricted Stock. The recipient of restricted stock normally will recognize ordinary income when the restrictions on the restricted stock lapse (i.e., at the time the restricted shares are no longer subject to a substantial risk of forfeiture or become transferable, whichever occurs first). However, a recipient instead may elect to recognize ordinary income at the time the restricted stock is granted by making an election under Section 83(b) of the Code within thirty (30) days after the grant date. In either case, the recipient will recognize ordinary income equal to the fair market value of such shares of stock at the time the income is recognized (reduced by the amount, if any, the recipient paid for the stock) and the Company generally will be entitled to a corresponding tax deduction. If the recipient subsequently disposes of the shares of Common Stock, any additional gain or loss should be eligible for short-term or long-term capital gain or loss tax treatment depending on how long the shares were held after the ordinary income was recognized. If a recipient makes an election under Section 83(b) of the Code and then forfeits the shares of Common Stock, the recipient normally will not be entitled to any tax deduction or refund with respect to the tax already paid.
Restricted Stock Units. The grant of restricted stock units generally should have no federal income tax consequences to the Company or the recipient. When the restricted stock units are settled, the recipient will recognize ordinary income equal to the amount of cash received and/or the fair market value of any shares of Common Stock received. The Company generally will be allowed a federal income tax deduction equal to the same amount that the recipient recognizes as ordinary income.
Dividends and Dividend Equivalent Rights. No taxable income should be recognized upon receipt of a dividend equivalent right award. A participant will recognize ordinary income in the year in which a dividend or distribution, whether in cash, securities or other property, is paid on an annualunrestricted basis to the participant. The amount of that income will be equal to the fair market value of the cash, securities or other property received. The Company will generally be entitled to an income tax deduction equal to the amount of the ordinary income recognized by the participant of the dividend equivalent right award at the time the dividend or distribution is most consistentpaid to such participant. That deduction will generally be taken for the taxable year in which such ordinary income is recognized.
Other Stock Awards. The federal income tax consequences of other stock awards will depend on the form of such awards.
Disposition of Shares. Unless stated otherwise above, upon the subsequent disposition of shares of Common Stock acquired under any of the preceding awards, such individual will recognize capital gain or loss based upon the difference between the amount realized on the disposition and the basis in such shares, and such amount will be long-term capital gain or loss if such shares were held for more than 12 months.
Section 162(m) of the Code
Section 162(m) of the Code limits deductibility of compensation in excess of $1 million paid to certain executives, but exempts qualifying performance-based compensation payable under a written binding contract in effect on, and not materially modified after, November 2, 2017. The Compensation Committee intends to maximize the tax deductibility of compensation paid to executive officers where possible. However, the Compensation Committee may pay compensation to our executive officers that may not be deductible due to the limit imposed by Section 162(m) of the Code in order to continue to attract and retain superior talent.
Sections 280G and 4999 of the Code
Sections 280G and 4999 of the Code impose penalties on persons who pay and persons who receive so-called excess parachute payments. A parachute payment is the value of any amount that is paid to Company officers (or other disqualified individuals) on account of a change in control. If total parachute payments from all sources, including but not limited to stock-based compensation plans, equal or exceed three (3) times an officer’s (or other disqualified individual’s) base amount, meaning his or her five (5) year average taxable compensation, a portion of the parachute payments above one (1) times the base amount will constitute an excess parachute payment. Because ofSection4999 of the Code, the officer (or other disqualified individual) must pay an excise tax equal to 20% of the total excess parachute payments. This tax is in addition to other federal, state, and local income, wage, and employment taxes imposed on the individual’s change in control payments. Moreover, because of Section 280G of the Code, the company paying the compensation is unable to deduct the excess parachute payment.
Benefits to which participants are entitled under the 2020 Omnibus Incentive Plan and associated award agreements could constitute parachute payments underSections280G and 4999 of the Code if a change in control of the Company occurs. If this happens, the value of each participant’s parachute payment arising under the 2020 Omnibus Incentive Plan must be combined with other parachute payments the same participant may be entitled to receive under other agreements or plans with the objectivesCompany or a related entity, such as an employment agreement or a severance agreement.
Section 409A of the Code
Section 409A of the Code provides requirements for certain nonqualified deferred compensation arrangements. If applicable, Section 409A of the Code also imposes penalties (including an additional 20% tax) on the recipient of deferred compensation in the event such compensation fails to comply with Section 409A of the Code. Furthermore, if applicable, Section 409A of the Code imposes certain tax reporting on the Company if such deferred compensation does not comply with Section 409A requirements. Unless otherwise provided by the Compensation Committee, awards granted under the 2020 Omnibus Incentive Plan generally are intended to either comply with or meet the requirements for an exemption from Section 409A of the Code. The Company does not guarantee to any participant that the 2020 Omnibus Incentive Plan or any award granted under the 2020 Omnibus Incentive Plan complies with or is exempt from Section 409A of the Code, and the Company will not have any liability to, or obligation to indemnify or hold harmless, any individual with respect to any tax consequences that arise from any such failure to comply with or meet an exemption under Section 409A of the Code.
New Plan Benefits
Awards under the 2020 Omnibus Incentive Plan will be granted in amounts and to individuals as determined by the Company in its discretion and depend on a number of factors. Therefore, the benefits or amounts that will be received by employees, officers and consultants under the 2020 Omnibus Incentive Plan are not determinable at this time.
Registration with the SEC
We intend to file a registration statement on Form S-8 relating to the issuance of our compensation philosophy andcommon stock under the preference2020 Omnibus Incentive Plan with the SEC pursuant to the Securities Act of 1933, as amended, as soon as practicable after approval of the 2020 Omnibus Incentive Plan by our shareholders.stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “EACH YEAR” WITH RESPECT TO HOW FREQUENTLY A NON-BINDING STOCKHOLDER VOTE ON“FOR” THE COMPENSATION
ADOPTION OF OUR NAMED EXECUTIVE OFFICERS SHOULD OCCUR.THE 2020 OMNIBUS INCENTIVE PLAN.
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PROPOSAL SIX
STOCKHOLDER PROPOSAL REGARDING PROXY ACCESS
The Company received the following resolution and supporting statement submitted by the Comptroller of the City of New York (the “Comptroller of the City of New York”), as custodian and trustee of the New York City Employees’ Retirement System, the New York City Fire Department Pension Fund, the New York City Teachers’ Retirement System and the New York City Police Pension Fund and as custodian of the New York City Board of Education Retirement System (collectively, the “Systems”), and is including the proposal in this Proxy Statement in accordance with Rule 14a-8 under the Exchange Act. The address and stock ownership for the Comptroller of the City of New York and each of the Systems will be furnished promptly upon receipt of any oral or written request addressed to the Company Secretary at the Company’s executive offices.
The following stockholder proposal (the “Proxy Access Proposal”) and supporting statement are presented as submitted by the Comptroller of the City of New York and are quoted verbatim.
RESOLUTION CONCERNING PROXY ACCESS
RESOLVED: Shareholders of Monster Beverage Corporation (the “Company”) ask the board of directors (the “Board”) to take the steps necessary to adopt a “proxy access” bylaw. Such a bylaw shall require the Company to include in proxy materials prepared for a shareholder meeting at which directors are to be elected the name, Disclosure and Statement (as defined herein) of any person nominated for election to the board by a shareholder or group (the “Nominator”) that meets the criteria established below. The Company shall allow shareholders to vote on such nominee on the Company’s proxy card.
The number of shareholder-nominated candidates appearing in proxy materials shall not exceed the larger of two or one quarter of the directors then serving. This bylaw, which shall supplement existing rights under Company bylaws, should provide that a Nominator must:
a)have beneficially owned 3% or more of the Company’s outstanding common stock continuously for at least three years before submitting the nomination;
b)give the Company, within the time period identified in its bylaws, written notice of the information required by the bylaws and any Securities and Exchange Commission rules about (i) the nominee, including consent to being named in the proxy materials and to serving as director if elected; and (ii) the Nominator, including proof it owns the required shares (the “Disclosure”); and
c)certify that (i) it will assume liability stemming from any legal or regulatory violation arising out of the Nominator’s communications with the Company shareholders, including the Disclosure and Statement; (ii) it will comply with all applicable laws and regulations if it uses soliciting material other than the Company’s proxy materials; and (iii) to the best of its knowledge, the required shares were acquired in the ordinary course of business and not to change or influence control at the Company.
The Nominator may submit with the Disclosure a statement not exceeding 500 words in support of each nominee (the “Statement”). The Board shall adopt procedures for promptly resolving disputes over whether notice of a nomination was timely, whether the Disclosure and Statement satisfy the bylaw and applicable federal regulations, and the priority to be given to multiple nominations exceeding the one-quarter limit.
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SUPPORTING STATEMENT
We believe proxy access will make directors more accountable and enhance shareholder value. A 2014 study by the CFA Institute concluded that proxy access could raise overall US market capitalization by up to $140.3 billion if adopted market-wide, “with little cost or disruption.”
(http://www.cfapubs.org/doi/pdf/10.2469/ ccb.v2014.n9.1)
The proposed terms are similar to those in vacated SEC Rule 14a-11 (https://www.sec.gov/ rules/final/2010/33-9136.pdf). The SEC, following extensive analysis and input from market participants, determined that those terms struck the proper balance of providing shareholders with viable proxy access while containing appropriate safeguards.
The proposed terms enjoy strong investor support and company acceptance. Between January 2015 and December 2016, 95 similar shareholder proposals received majority votes and more than 300 companies of various sizes across industries enacted bylaws with similar terms.
We urge shareholders to vote FOR this proposal.
THE COMPANY’S STATEMENT IN OPPOSITION
The Board has carefully considered the Proxy Access Proposal and, for the reasons described below, believes that adopting proxy access in the form contemplated by the Proxy Access Proposal is unnecessary and not in the best interests of the Company or its stockholders. The Proxy Access Proposal contains features that are not in alignment with the majority of proxy access policies adopted in the United States thus far and does not reflect the Company’s specific attributes, track record and governance. It is important for the Company to have time to develop a measured and thoughtful approach to proxy access based on a review of continuing marketplace developments, consideration of potential consequences and feedback from our stockholders, the majority of whom voted against a similar proxy access proposal at our 2015 and 2016 annual meetings.
The specific terms of this proposal are problematic. The Board believes that the framework advocated in the Proxy Access Proposal fails to provide the appropriate balance and safeguards to prevent proxy contests that could distract management and the Board from conducting the Company’s business. The Board finds the following features of the Proxy Access Proposal to be especially problematic:
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| the Proxy Access Proposal is not in accordance with market trends in that it contemplates an unacceptably high percentage of the Board (25%) being available for proxy access candidates;
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| the Proxy Access Proposal is not in accordance with market trends in that it does not cap the number of stockholders that may constitute a group for purposes of the 3% threshold;
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| the Proxy Access Proposal could require the Company to include any qualifying stockholders’ nominees in the Company’s proxy statement regardless of whether the stockholders intend to file their own proxy statement and engage in a proxy contest;
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| the Proxy Access Proposal does not require stockholder nominees to be independent under applicable SEC and NASDAQ standards and fails to require that stockholder nominees have no affiliations with a competitor of the Company or others who oppose the Company’s best interests;
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| the Proxy Access Proposal does not require nominating stockholders to certify that they are not seeking to effect a change in control of the Company; and
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·
| the Proxy Access Proposal does not require nominating stockholders to retain ownership of their shares through the meeting date, which would misalign the interests of the nominating stockholder and other stockholders of the Company.
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The Board believes that the failure of the Proxy Access Proposal to provide these safeguards could result in proxy access nominations being used in a manner that would be harmful to the Company and its stockholders.
The Company’s current policies and procedures reflect the Company’s commitment to Board accountability. The Proxy Access Proposal does not articulate any specific concerns regarding our governance or performance and does not take into account the Company’s existing corporate governance policies that promote responsiveness to our stockholders. Our Board is committed to strong corporate governance practices and we believe that our current corporate governance policies create an appropriate balance between stockholder rights and the ability of our directors to effectively manage the business for the benefit of long-term stockholders. As discussed above under “Nominating Committee—Process For Selection and Nomination of Directors,” our governing policies permit stockholders to recommend director candidates to the Nominating Committee, which evaluates candidates recommended by stockholders on the same basis as the Board’s own director candidates.
The Company’s current organizational documents and corporate governance policies are also designed to empower stockholders. For example:
·
| all directors are elected annually;
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| the Company has adopted a director resignation policy requiring incumbent directors who fail to receive a majority of votes in an uncontested election to tender their resignation;
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| the Board has a Lead Independent Director with broad authority and responsibility;
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| stockholders may take action by written consent;
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| stockholders may increase or decrease the number of seats on the Board;
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| any or all directors may be removed, with or without cause, by stockholders;
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| board vacancies may be filled by stockholders;
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| the Company’s governing documents do not contain any supermajority stockholder voting requirement;
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| stockholders may propose director candidates to the Nominating Committee, as discussed above; and
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| stockholders may submit proposals and nominees for presentation at an annual meeting and for inclusion in the Company’s proxy statement for that annual meeting, subject to certain conditions set forth in our bylaws and the rules and regulations of the SEC, as applicable.
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In contrast to our existing corporate governance policies, the Proxy Access Proposal would grant special rights to a limited group of stockholders whose interests may differ significantly from the interests of the majority of our stockholders. We note that a stockholder or group of stockholders owning 3% of the Company’s outstanding shares owns, at current share prices, approximately $747 million worth of shares. We believe, therefore, that a stockholder or group of stockholders that meets the 3% ownership threshold and has a legitimate interest in nominating a board candidate has the resources necessary to bear the costs of soliciting proxies. The expenses associated with proxy solicitation limit such challenges to instances where there are significant enough governance issues to warrant the challenge; the Proxy Access Proposal would eliminate any such constraint.
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We believe that the members of our Nominating Committee are the people best positioned to assess the professional experiences, skills and character of potential director nominees and to determine whether they will be effective contributors to our Board and will represent the best interests of all of our stockholders. The Proxy Access Proposal would override this process by allowing the nomination of candidates who may fail to meet the Board’s standards. Additionally, members of the Nominating Committee owe fiduciary duties to all of the Company’s stockholders when they nominate director candidates. In contrast, a stockholder making nominations through the proposal’s proxy access process would have no fiduciary obligations to the Company or its stockholders and could be motivated entirely by its own interests, rather than by the interests of all Company stockholders and the Company’s long-term business goals.
Implementation of the Proxy Access Proposal could be harmful to the long-term success of the Company. Proxy access may result in frequent contested elections, which could require the Company to divert significant time, money and attention towards these contested elections and away from the operations of the Company. Furthermore, the prospect of routine contested elections and the high percentage of Board seats which are available for proxy access candidates are likely to deter highly-qualified individuals from serving on our Board and may cause our incumbent directors to become excessively risk-averse, which would have a negative impact on their ability to provide sound judgment and oversight with respect to the Company’s operations and interests.
Implementation of the Proxy Access Proposal could threaten the Company’s long-term approach to creating stockholder value. The Board effectively oversees our management and operations and has guided our Company to the long-term success and benefit of our stockholders: over the long-term the Company has consistently outperformed the NASDAQ composite, producing higher returns in the past three, five, and ten-year periods. The Board believes that continuity among directors has played a significant role in producing these returns.
The Board wishes to conduct a more thorough evaluation of possible proxy access policies. The Board believes that the desire for proxy access is driven by a genuine and legitimate interest in ensuring that the Board is comprised of people who will best represent stockholder interests. Once adopted, proxy access would play a significant role in the Company’s corporate governance framework, and it is important that we strike an appropriate balance between respecting stockholders’ concerns about Board accountability and minimizing the potential for abuse and disruption. We therefore believe that at this time, the most prudent course of action is to continue engaging with our stockholders to listen to their evolving views on proxy access and to continue monitoring developing market practice.
For the reasons stated above, the Board believes that instituting the change called for by the Proxy Access Proposal is unnecessary and not in the best interests of our stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “AGAINST” THE ADOPTION OF THE PROXY ACCESS PROPOSAL.
PROPOSAL SEVEN
STOCKHOLDER PROPOSAL REGARDING A SUSTAINABILITY REPORT
The Company received the following resolution and supporting statement submitted by the California State Teachers’ Retirement System (“CalSTRS”), and is including the proposal in this Proxy Statement in accordance with Rule 14a-8 under the Exchange Act. The address and stock ownership for CalSTRS will be furnished promptly upon receipt of any oral or written request addressed to the Company Secretary at the Company’s executive offices.
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The following stockholder proposal (the “Sustainability Report Proposal”) and supporting statement are presented as submitted by CalSTRS and are quoted verbatim.
SUSTAINABILITY REPORTING AND WATER 2017: MONSTER BEVERAGE
WHEREAS: We believe tracking and reporting environmental, social and governance practices strengthens a company’s ability to compete in today’s global business environment, which is characterized by finite natural resources, changing legislation, and heightened public expectations for corporate accountability. Reporting helps companies gain strategic value from sustainability efforts, identify gaps and opportunities, develop communications and recruit and retain employees.
Support for sustainability reporting continues to gain momentum:
·In 2013, KPMG found that of 4,100 global companies 71% had ESG reports.
·The United Nations Principles for Responsible Investment has approximately 1,400 signatories with $59 trillion in assets under management. These members routinely use ESG information when analyzing risks and opportunities associated with investments.
·CDP (formerly Carbon Disclosure Project), representing 822 institutional investors globally with approximately $95 trillion in assets, calls for company disclosure on water, GHG and climate change management programs. 70% of S&P 500 companies now report to CDP.
The food and beverage sector faces specific sustainability challenges, particularly related to water resources. The Food and Agriculture Organization (FAO) estimates that agriculture accounts for about 70 percent of global freshwater withdrawals. Agricultural water pollution is the leading cause of impaired American waterways according to the Environmental Protection Agency. The World Economic Forum predicts a 40 percent shortfall between global water demand and supply by 2030. Climate change is expected to exacerbate regional water scarcity, posing significant financial risks.
Leading beverage companies have been addressing these risks for over a decade. According to their sustainability reports, Coca-Cola, PepsiCo and SABMiller all report on their freshwater management. These companies are also working with their agricultural supply chains to ensure resilience against water scarcity, flooding, and climate change.
Currently, Monster Beverage Corporation does not publish a sustainability report, or information on how it manages water use and disposal. In contrast, competitors such as Coca-Cola, Dr. Pepper Snapple and PepsiCo offer shareholders important information through comprehensive sustainability reports quantifying water use. These competitors also showcase their sustainability efforts by disclosing environmental progress to CDP.
By not disclosing a water sustainability report, Monster Beverage is missing an opportunity to communicate with shareholders, customers, and employees regarding its material management strategies. Accordingly, the company is lagging on ESG-related risk management. By not providing a sustainability report that explicitly addresses water use, disposal, and risks, Monster Beverage fails to recognize and act on ESG opportunities that its peers are addressing.
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RESOLVED: Shareholders request that Monster Beverage Corporation issue a sustainability report describing the company’s policies, performance, and improvement targets related to key environmental, social and governance risks (ESG) and opportunities, including an analysis of material water-related risks. The report should be available by December 31, 2017, prepared at reasonable cost, and omitting proprietary information.
THE COMPANY’S STATEMENT IN OPPOSITION
The Board has carefully considered the Sustainability Report Proposal and, for the reasons described below, believes that adopting a sustainability report in the form contemplated by the Sustainability Report Proposal is unnecessary and not in the best interests of the Company or its stockholders. The Board recognizes the importance of environmental, social and governance (“ESG”) practices, and believes that the Company’s policies and programs reflect a commitment to sustainability, good corporate citizenship and social responsibility. The Board believes that a separate sustainability report is neither necessary nor an efficient use of corporate resources given that the information on our website and our corporate culture appropriately and thoroughly demonstrate our adoption of sustainable business practices.
The Company currently reports policies, initiatives and performance related to the same ESG risks that the Sustainability Report Proposal seeks to address. The Sustainability Report Proposal does not take into account our existing initiatives and conservation programs which encourage compliance with environmental, health and safety regulations, and ensure that the Company is socially responsible and acts as a good corporate citizen. In opposing the Sustainability Report Proposal, the Company is merely resisting the requirement to devote Company resources to comprehensively gathering data and publishing an ESG report. This should not be interpreted as a lack of concern by the Board or the Company about ESG topics or implementing ESG related practices, procedures or policies.
The Company’s approach to sustainability demonstrates the redundant nature of the Sustainability Report Proposal. As reflected on our website in more detail, since moving to our corporate headquarters in 2013, we have made tremendous strides in our ability to monitor water consumption, increase energy efficiency and reduce waste. In 2016 alone, we have reduced water consumption by approximately 200,000 gallons by adopting various water-efficiency technologies. We have also taken measures to ensure water conservation within the local community by participating in various programs in the City of Corona, CA. Along with our conservation efforts, we have adopted a variety of initiatives aimed at increasing energy efficiency, which has resulted in energy reduction of at least twenty-five percent (25%) over the 2016 calendar year. In coordination with our commitment to waste reduction, we have embraced the principles of reduce, reuse and recycle, and actively engage in recycling at our corporate headquarters. In acknowledgement of our efforts to reduce waste, we were named as a recipient of the 2016 Recycling All Stars Award for the City of Corona in 2016.
Beyond our focus on environmental sustainability, we also emphasize effective corporate governance. We have always looked to partner with top-tier co-packers and bottlers who have committed to the highest sustainability and corporate governance efforts in the industry, including such initiatives as water sustainability. For example, The Coca Cola Company has become our preferred global distribution partner with an overwhelming majority of case sales transitioned to The Coca Cola Company’s distribution network. As a reflection of this commitment, several of our bottlers have committed to reducing water use in their manufacturing through investments in new technologies, operating procedures and water footprinting studies. We also survey our suppliers, including to address any risks of slavery and human trafficking throughout our supply chain and to evaluate the risk profiles of individual suppliers. Not only do we monitor
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the actions of our suppliers and bottlers, but we also work hard to ensure that we, as a corporation, and all of our employees are in compliance with the law. Our Code of Business Conduct and Ethics (the “Code”), which can be found on our website, requires that our employees, officers and directors lawfully conduct our business with integrity. The Code outlines various standards of conduct that we adopt including equal employment opportunities, a safe and healthy work environment, equitable treatment of employees and compliance with laws, rules and regulations applicable to the Company.
Along with our focus on environmental sustainability and corporate governance, we also concentrate our efforts towards supporting local communities and promoting social responsibility within our actions. As a large company with global reach, we believe it is our responsibility to give back to the communities in which we operate. Our philanthropic platform includes supporting active and retired military, the charities of various sponsored athletes, the local community and first responders. We support such platforms through monetary donations, donations of products and the sponsorship of events. Further, we understand the significance of diversity and inclusion as it relates to innovation, communication, fostering relationships and long-term sustainability. To reflect our commitment to diversity and inclusion, we seek to employ a workforce representative of different genders, races and sexual orientations, and believe that the composition of our employees embodies this principle. To support our dedication to diversity and inclusion, we are committed to providing equal opportunities in all aspects of employment.
All of the preceding information can be found at www.monsterbevcorp.com/social-responsibility.php and reflects our commitment to not only implement initiatives related to ESG risks, but to also provide and track such information for the general public.
Preparing a sustainability report is expensive, time consuming and largely duplicative of ESG information already available. The Sustainability Report Proposal requests the Company issue a sustainability report describing the Company’s policies, performance and improvement targets related to key ESG risks, which should be prepared at a “reasonable cost.” However, because this information is already available on our website, it would be largely duplicative to include such information in a formal report. Further, preparing a formal report would require significant cost, both in dollars and employee time, which would outweigh any potential benefits of such a report. The Board does not believe that it is in the best interests of the Company to dedicate such significant costs to develop a report which lacks a tangible return for our shareholders, and that management should continue to focus on improving areas of the Company that can provide tangible results to our shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “AGAINST” THE ADOPTION OF THE SUSTAINABILITY REPORT PROPOSAL.
OTHER MATTERS
The Company knows of no other matters to be submitted to the Annual Meeting. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the proxy to vote the shares they represent as the Board of Directors may recommend.
It is important that your shares be represented at the Annual Meeting, regardless of the number of shares that you hold. You are, therefore, urged to vote by calling the toll free number or over the internet or, if you requested to receive printed proxy materials, by marking, signing, dating and returning your proxy card.
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COMMUNICATING WITH THE BOARD
Stockholders, employees and other individuals interested in communicating with the Chairman and CEO should write to the address below:
Rodney C. Sacks, Chairman and CEO
Monster Beverage Corporation
1 Monster Way
Corona, CA 92879
Those interested in communicating directly with the Board, any of the committees of the Board, the Lead Independent Director, and the non-employee directors as a group or individually should write to the address below:
Office of the Corporate Secretary
Monster Beverage Corporation
1 Monster Way
Corona, CA 92879
FORM 10-K AND OTHER DOCUMENTS AVAILABLE
A copy of our Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2016,2019, as filed with the SEC, is available over the internet at the SEC’s website,www.sec.gov, or on our website atwww.monsterbevcorp.com. The Annual Report on Form 10-K, as amended, is also available without charge to any stockholder upon request to:
Monster Beverage Corporation
1 Monster Way
Corona, CA 92879
(951) 739-6200 * (800) 426-7367
Additionally, charters for certain of the committees of the Board of Directors and the Lead Independent Director as well as the Company’s Code of Business Conduct and Ethics and Director Resignation Policy are available on our website.
Incorporation by Reference
In accordance with SEC rules, notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings under the Securities Act of 1933, as amended, or the Exchange Act that might incorporate this proxy statement or future filings made by the Company under those statutes, the information included under the captions “Compensation Committee Report,” and “Report of the Audit Committee” shall not be deemed filed with the SEC and shall not be deemed incorporated by reference into any of those prior filings or into any future filings made by the Company under those statutes, except to the extent that the Company specifically incorporates these items by reference.
BY ORDER OF THE BOARD OF DIRECTORS
Dated: April 28, 2017 21, 2020 | | /s/ Rodney C. Sacks |
| | RODNEY C. SACKS |
| | Chairman of the Board of Directors |
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Table of ContentsAPPENDIX A
APPENDIX AMONSTER BEVERAGE CORPORATION
MONSTER BEVERAGE CORPORATION
2017 COMPENSATION2020 OMNIBUS INCENTIVE PLAN
FOR NON-EMPLOYEE DIRECTORS
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MONSTER BEVERAGE CORPORATION
2017 COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
Article 1.Establishment, Objectives and Duration
1.1Establishment of the Plan. Monster Beverage Corporation, a Delaware corporation, hereby establishespreviously established the “MonsterMonster Beverage Corporation 2017 Compensation2011 Omnibus Incentive Plan, for Non-Employee Directors”, as set forth herein.
1.2amended (the “Prior Plan Objectives”). The objectives ofNotwithstanding the Prior Plan, are to attract and retain persons of ability as non-employee directors of the Company and to further align the economic interests of such directors with those of the Company’s shareholders.
1.3DurationBoard of Directors determined that it was in the Company’s best interest to adopt this Monster Beverage Corporation 2020 Omnibus Incentive Plan (“Plan”). The Plan shall becomebe effective on the Effective Date and shall remain in effect until the tenth (10th) anniversaryas of the Effective Date, unless earlier terminated pursuant to Section 12.1.
1.4Prior Plan. Effective asDate. As of the Effective Date, no awards willshall be made under the 2009 Monster Beverage Corporation Stock Incentive Plan for Non-Employee Directors, as amended (the “Prior Plan. The Prior Plan”); provided, that such plan shall remain in effect, with respect to, and govern, awards made thereunderas applicable, for so long as awards thereunder remain outstanding. All awards granted pursuant to an Award Agreement under, and elections made pursuant to, the Prior Plan prior to the Effective Date shall remain in full force and effect in accordance with their terms and shall be administered in accordance with the terms and conditions of the Prior Plan, as applicable.
Article 2.Definitions
The followingpurpose of the Plan is to continue to assist the Company and its Subsidiaries in attracting and retaining selected individuals to serve as employees and consultants of the Company and its Subsidiaries who are expected to contribute to the Company’s success and to achieve long-term objectives which will inure to the benefit of all stockholders of the Company through the additional incentives inherent in the Awards hereunder.
Capitalized terms in the Plan and Award Agreements (unless otherwise defined termsin such Award Agreement) shall have the meanings set forth below:following meanings:
2.12.1. “Affiliate” means with respect to the Company,(i) any entity directlydirect or indirectly controlling, controlled by, or under common control with,indirect Subsidiary of the Company or (ii) any other entity designatedthat, at the time of granting of an Award, is controlled by the BoardCompany and in which the Company directly or an Affiliate has an interest;indirectly owns at least 20% of the combined voting power of all classes of stock (or equivalent equity-type security) of such entity; provided that with respect to incentive stock options, the term shall only mean “subsidiary corporation” as defined in Section 424(f) of the Code; further, provided that, with respect to the award of aany “stock right” within the meaning of Code Section 409A of the Code, such affiliated entity would be required toaffiliate must qualify as a “service recipient” within the meaning of Section 409A of the Code, to the extent applicable, and in applying Sections 1563(a)(1), (2) and (3) of the Code for purposes of determining a controlled group of corporations under Section 409A.414(b) of the Code and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of Section 414(c) of the Code, the language “at least 50 percent” (or, where legitimate business criteria exists as determined by the Committee, “at least 20 percent”) is used instead of “at least 80 percent.”
2.22.2. “Annual RetainerAward” means the annual cash retainer fee payable by the Company pursuant to the Plan to a Non-Employee Director for services performed as a member of the Board of Directors during the applicable year.
2.3“Available Shares” has the meaning ascribed to it in Section 4.1.
2.4“Award” meansshall mean any Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit DeferredAward, Other Share-Based Award, Dividend Equivalent, or Other Share BasedPerformance Award granted pursuant to the provisions of the Plan.
2.3. “Award Agreement” means anshall mean any agreement, between a Non-Employee Director and the Companycontract or other instrument or document evidencing the terms of anany Award hereunder, whether in writing or through an electronic medium and duly executed by the Non-Employee Director and an authorized representative of the Company for this purpose.medium.
2.62.4. “Board” or “Board of Directors” meansshall mean the Board of Directors of the Company, as constituted from time to time.Company.
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Table2.5. “Cause” shall mean, unless the applicable Award Agreement states otherwise: (a) the Company or an Affiliate having “cause” to terminate a Participant’s employment or service, as defined in any employment or consulting agreement or similar services agreement between the Participant and the Company or an Affiliate in effect at the time of Contentssuch termination, or (b) in the absence of any such employment, consulting or similar services agreement (or the absence of any definition of “Cause” contained therein), “Cause” shall mean, as determined by the Committee, the Participant’s (i) act(s) of fraud or dishonesty, (ii) knowing and material failure to comply with applicable laws or regulations or satisfactorily perform Participant’s services, (iii) insubordination or (iv) drug or alcohol abuse.
2.72.6. “Change of Control means the occurrence of any of the following events: (i) sale of all or substantially all of the assets of the Company and its subsidiaries taken as a whole; (ii) any Person or group of Persons is orCode” shall become the “beneficial owner” (as defined in Rule 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 50% of the voting stock of the Company then outstanding; or (iii) a merger or consolidation pursuant to which any Person or group of Persons becomes the “beneficial owner” (as defined in clause (ii) above) of more than 50% of the voting stock of the Company or the surviving or resulting entity immediately following the consummation of such transaction. Notwithstanding the foregoing, no Awards that are subject to Code Section 409A shall accelerate or be paid as the result of a Change of Control unless such Change of Control constitutes a “change in control event” within the meaning of Treasury Regulations Section 1.409A-3(i)(5).
2.8“Code” meansmean the Internal Revenue Code of 1986, as amended and any successorfrom time to it.time.
2.92.7. “Code Section 409ACommittee” means section 409Ashall mean the Compensation Committee of the Code,Board or a subcommittee thereof formed by the Compensation Committee of the Board to act as the Committee hereunder or if no such committee or subcommittee shall be in existence at any relevant time, the term “Committee” for purposes of the Plan shall mean the Board; provided, however, that during any time that the Company’s common stock is publicly traded, the Committee shall consist of no fewer than two Directors, each of whom is (i) a “Non-Employee Director” within the meaning of Rule 16b-3 of the Exchange Act, and (ii) an “independent director” to the extent required by the rules and regulations of the Nasdaq (or such other principal securities exchange on which the Shares are traded), to the extent required by such rules ((i) and other guidance issued(ii) are referred to as “Eligible Directors”); provided, further, that, if the Committee includes individuals who are not Eligible Directors then, to the extent permitted under applicable law and with respect to determinations made or to be made by it which are not otherwise delegated pursuant to the Treasury Department orPlan, the Internal Revenue Service thereunder.Committee shall be deemed a subcommittee of only those individuals that constitute Eligible Directors and those individuals who are not Eligible Directors shall be deemed excluded from the Committee.
2.102.8. “Company” means Monster Beverage Corporation, a corporation organized under the laws of Delaware corporation, andor any successor thereto.corporation.
2.112.9. “Deferral ElectionData” has the meaning ascribed to itset forth in Section 10.12.23.
2.122.10. “Deferred AwardDate of Grant” means a right, granted asthe date on which the granting of an Award under Section 10, to receive paymentis authorized, or such other date as may be specified in such authorization; provided, for purposes of Sections 422 and 409A of the formCode, as applicable, “Date of cash or Shares (or measured byGrant” shall mean the valuedate of Shares) atgrant determined in accordance with the endrequirements of a specified deferral period.Sections 422 and 409A of the Code, as applicable.
2.132.11. “Director” means any individual who isshall mean a member of the Board who is not an Employee of Directors.the Company or any of its Subsidiaries.
2.142.12. “Disability” means (except as otherwise expressly provided in a mentalParticipant’s Award Agreement) or, physical illness that rendersin the case of an incentive stock option, in which case Disability shall have the definition in Section 22(e)(3) of the Code, a Non-Employee Director totallycomplete and permanently incapablepermanent inability of performinga Participant to perform all of such Participant’s duties under the Non-Employee Directors dutiesterms of Participant’s employment or service with the Company or its Subsidiaries, as determined by the Committee upon the basis of such evidence,
including independent medical reports and data, as the Committee deems appropriate or necessary. Notwithstanding anything herein to the contrary, in any circumstance in which the definition of “Disability” under this Plan would otherwise be operative and with respect to which the additional tax under Section 409A of the Code would apply or be imposed, but where such tax would not apply or be imposed if the meaning of the term “Disability” met the requirements of Section 409A(a)(2)(A)(ii) of the Code, then the term “Disability” herein shall mean, but only for the Company; provided, however, that Disability for purposescircumstances so affected and the item of Codeincome with respect to which the additional tax under Section 409A toof the extent applicable, shall occur only upon the occurrence ofCode would otherwise be imposed, a “disability” within the meaning of Treasury Regulations Section 1.409A-3(i)(4).
2.13. “Dividend Equivalents” shall have the meaning set forth in Section 7.7.
2.152.14. “Dividend EquivalentEffective Date” means any right to receive payments equal to dividends (whether in cash, Shares or other property) if and when paid or distributed on Shares. Dividend Equivalents can be satisfied in cash, Shares or other property asshall mean the Board determines.date of the approval of the Plan by the Company’s stockholders.
2.162.15. “Effective DateEmployee” meansshall mean any employee of the date on whichCompany or any Subsidiary and any prospective employee conditioned upon, and effective not earlier than, such Person becoming an employee of the Company or any Subsidiary. Solely for purposes of the Plan, an Employee shall also mean any consultant who is a natural person and who provides services to the Company or any Subsidiary, so long as such natural person (i) renders bona fide services that are not in connection with the offer and sale of the Company’s shareholders approvesecurities in a capital-raising transaction and (ii) does not directly or indirectly promote or maintain a market for the Plan.Company’s securities.
2.172.16. “Exchange Act” meansshall mean the Securities Exchange Act of 1934, as amended, and any successor to it.amended.
2.182.17. “Exercise Date” means the date a holder of an Award under the Plan (i) exercises an Award pursuant to the procedures established by the Board and (ii) pays any Option Price or other amounts required as a condition to such exercise.
2.19“Fair Market Value” means,shall mean, with respect to any property other than Shares, the market value of such property as determined by such methods or procedures as shall be established or determined
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from time to time by the Board.Committee. The Fair Market Value of Shares as of any date shall be the per Share closing price of the Shares as reported on NASDAQthe Nasdaq on thatsuch date (or if there were no reported prices on such date, the closing price on the last preceding date on which the pricesShares were reported)traded) or, if the Company is not then listed on NASDAQ,Nasdaq, on such other principal securities exchange on which the Shares are traded and if the Company is not listed on the NASDAQNasdaq or any other securities exchange, the Fair Market Value of Shares shall be determined by the BoardCommittee, in its sole discretion.
2.20“Grant Date” means the date on which an Award is granted, which date may be specified in advance by the Board; provided, that for Code Section 409A purposes, Grant Date shall mean the date of grant determineddiscretion and in accordance with Code Section 409A as applicable.
2.21“Non-Employee Director” means a Director who, at the time in question, is not an employee of the Company or any of its Affiliates.
2.22“Option” means any right granted to a Non-Employee Director under the Plan allowing such Non-Employee Director to purchase Shares at the Option Price and at such times as the Board shall determine.
2.23“Option Price” means the price at which a Share may be purchased by a Non-Employee Director pursuant to an Option. Except with respect to Substitute Awards or in connection with an adjustment provided in Section 4.2, the Option Price shall not be less than 100% of the Fair Market Value on the Grant Date of an Option. Options granted hereunder are nonqualified stock options and not stock options as described in Section 422 of the Code.
2.242.18. “Other Share Based AwardsFull Value Award” has the meaning ascribed itshall mean an Award, other than an Award for Options or Stock Appreciation Rights, that is settled in Section 7.4.Shares.
2.252.19. “Permitted AssigneeGood Reason” hasshall mean (a) a Participant having “good reason” to terminate such Participant’s employment or service, as defined in any employment or consulting or similar services agreement between a Participant and the meaning ascribedCompany or an Affiliate in effect at the time of such termination, or (b) in Section 12.13.the absence of any such employment, consulting or similar services agreement (or the absence of any definition of “good reason” contained therein), “Good Reason” shall mean (i) a material diminution in a Participant’s duties and responsibilities; (ii) a material decrease in a Participant’s base salary other than a decrease in base salary that affects similarly situated Employees; or (iii) a relocation of a Participant’s primary work location more than thirty (30) miles from such Participant’s primary work location, without such Participant’s prior written consent; provided that, within thirty (30) days following the occurrence of any of the events set forth herein, a Participant shall have delivered written notice to the Company of such Participant’s intention to terminate such
Participant’s employment or service for Good Reason, and the Company shall not have cured such circumstances within thirty (30) days following the Company’s receipt of such notice.
2.20. “Option” shall mean either a nonqualified stock option or an incentive stock option.
2.21. “Other Share-Based Award” shall have the meaning set forth in Section 8.1.
2.22. “Participant” shall mean an Employee who is selected by the Committee to receive an Award under the Plan.
2.23. “Payee” shall have the meaning set forth in Section 12.1.
2.24. “Performance Award” shall mean any Award of Performance Cash or Performance Shares granted pursuant to Article 9.
2.25. “Performance Cash” shall mean any cash incentives granted pursuant to Article 9, including Restricted Stock Units settled in cash, which will be paid to a Participant upon the achievement of such performance goals or at such time(s) as the Committee shall establish.
2.26. “Performance Period” shall mean the period established by the Committee during which any performance goals specified by the Committee with respect to such Award are to be measured.
2.27. “Performance Share” shall mean any grant pursuant to Article 9, including Restricted Stock Units, of a Share, or a unit valued by reference to a designated number of Shares, which Share or unit value will be paid to the Participant upon achievement of such performance goals or at such time(s) as the Committee shall establish.
2.28. “Permitted Assignee” shall have the meaning set forth in Section 11.3.
2.29. “Person” means any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.
2.272.30. “Plan” meansshall have the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors, as may be amended from time to time.meaning set forth in the preamble.
2.282.31. “Prior Plan” hasshall have the meaning ascribed to itset forth in Section 1.4.the preamble.
2.292.32. “Restricted StockPeriod” meansshall mean the period in which an Award of Sharesremains unvested.
2.33. “Restricted Stock” shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such other restrictions as the Board,Committee, in its sole discretion, may impose (including any restriction on the right to vote such Share and, subject to Section 7.3, the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the BoardCommittee may deem appropriate.
2.302.34. “Restricted Stock Award” shall have the meaning set forth in Section 7.1.
2.35. “Restricted Stock Unit” or “RSU” means an Award that is valued by reference to a Share, which value may be paid to the Non-Employee Directora Participant by delivery of Share(s)such property as the Committee shall determine, including, without limitation, cash or cash,Shares, or any combination thereof, as set forth in an Award Agreement, and whichthat has such restrictions as the Board,Committee, in its sole discretion, may impose, including, without limitation, any restriction on the right to retain such Awards, to sell, transfer, pledge or assign such Awards, and/or, subject to Section 7.7, to receive any cash Dividend Equivalents with respect to such Awards, which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the BoardCommittee may deem appropriate.
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Table of Contents2.36. “Restricted Stock Unit Award” shall have the meaning set forth in Section 7.1.
2.312.37. “Separation from Service” or “Separate from ServiceSecurities Act” means ceasingthe Securities Act of 1933, as amended, and any successor thereto. Reference in the Plan to be a Directorany section of the Company forSecurities Act shall be deemed to include any rules, regulations, or no reason. Notwithstanding anythingother interpretative guidance under such section, and any amendments or successor provisions to the contrary, for purposes of Code Section 409A, to the extent applicable, the determination of whether an individual has had a Separation from Service will be made in accordance with Code Section 409A.such section, rules, regulations, or guidance.
2.322.38. “Shares” meansshall mean the shares of the common stock of the Company.Company, par value $0.005 per share (and any stock or other securities into which such common stock may be converted or into which it may be exchanged).
2.332.39. “Stock Appreciation Right” or “SAR” means ashall mean the right granted to a Non-Employee Director under the PlanParticipant pursuant to receive payment, upon exercise, of an amount equal to the excess, if any, of the Fair Market Value of a Share on the Exercise Date over the Strike Price.Article 6.
2.342.40. “Stock Appreciation Right Period” shall have the meaning set forth in Section 6.2.
2.41. “Strike Price” means, except as otherwise provided by the per-Share price used as the baseline measure for the value of a SAR, as specified in the applicable Award Agreement. ExceptCommittee in the case of Substitute Awards, or(i) in connectionthe case of a Stock Appreciation Right granted in tandem with an adjustment providedOption, the exercise price of the related Option; or (ii) in Section 4.2, Strike Price shallthe case of a Stock Appreciation Right granted independent of an Option, an amount not be less than the Fair Market Value of one Share on the Grant Date of a SAR.Grant.
2.352.42. “Substitute AwardsSubsidiary” hasshall mean any corporation (other than the meaning ascribedCompany) in an unbroken chain of corporations beginning with the Company if, at the relevant time each of the corporations other than the last corporation in Section 4.1.the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one (1) of the other corporations in the chain.
Article 3.2.43. “Substitute Awards” shall mean Awards that may, in the sole discretion of the Committee, be granted or Shares issued by the Company under the Plan in assumption of, or in substitution or exchange for, outstanding awards previously granted by an entity acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.
2.44. “Ten Percent Shareholder” shall have the meaning set forth in Section 5.3.
2.45. “Total Payments” shall have the meaning set forth in Section 12.24.
| 3. | SHARES SUBJECT TO THE PLAN |
3.1. Number of Shares.
a. Subject to adjustment as provided in Section 11.2 and the provisions contained in this Section 3.1, a total of 46,169,367 Shares shall be authorized for Awards granted under the Plan, less
one (1) Share for every one (1) Share that was subject to an option or stock appreciation right granted after December 31, 2019 and prior to the Effective Date under the Prior Plan and two point six (2.6) Shares for every one (1) Share that was subject to an award other than an option or stock appreciation right granted after December 31, 2019 and prior to the Effective Date under the Prior Plan. On and after the Effective Date, any Shares that are subject to Options or Stock Appreciation Rights shall be counted against this limit as one (1) Share for every one (1) Share granted, and any Shares that are subject to Full Value Awards shall be counted against this limit as two point six (2.6) Shares for every one (1) Share granted. After the Effective Date, no awards may be granted under the Prior Plan.
b. If (i) any Shares related to Awards which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, are settled in cash in lieu of Shares, or are exchanged with the Committee’s permission, prior to the issuance of Shares, for Awards not involving Shares, or (ii) after December 31, 2019, any Shares related to awards granted under the Prior Plan which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, are settled in cash in lieu of Shares, or are exchanged with the Committee’s permission, prior to the issuance of Shares, for awards not involving Shares, shall be added to the Shares available for Awards under the Plan, in accordance with Section 3.1(d) below. However, the full number of Stock Appreciation Rights (or, after December 31, 2019, stock appreciation rights under the Prior Plan) granted that are to be settled by the issuance of Shares shall be counted against the number of Shares available for Awards under the Plan, regardless of the number of Shares actually issued upon settlement of such Stock Appreciation Rights (or, after December 31, 2019, stock appreciation rights under the Prior Plan). Furthermore, any Shares withheld to satisfy tax withholding obligations on an Award (or, after December 31, 2019, an award under the Prior Plan), Shares tendered to pay the exercise price of an Award (or, after December 31, 2019, an award under the Prior Plan) under the Plan, and Shares repurchased on the open market with the proceeds of an Option (or, after December 31, 2019, an option under the Prior Plan) exercise will not be added to the Shares available for grant under this Plan.
c. Substitute Awards shall not reduce the Shares authorized for grant under the Plan or authorized for grant to a Participant in any calendar year nor shall Shares subject to a Substitute Award be added to the Shares available for Awards under the Plan as provided in paragraph (b) above. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines, has shares available under a preexisting plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such preexisting plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan (and Shares subject to such Awards shall not be added to the Shares available for Awards under the Plan as provided in paragraph (b) above); provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of such preexisting plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees prior to such acquisition or combination.
d. Any Shares that again become available for Awards under the Plan pursuant to this Section 3.1 shall be added as (i) one (1) Share for every one (1) Share subject to Options or Stock Appreciation Rights granted under the Plan or options or stock appreciation rights granted under the Prior Plan, and (ii) as two point six (2.6) Shares for every one (1) Share subject to Full Value Awards granted under the Plan or awards other than options or stock appreciation rights granted under the Prior Plan.
e. The maximum number of Shares that may be issued under the Plan in this Section 3.1 shall not be affected by the payment of dividends or Dividend Equivalents in cash or in Shares in connection with outstanding Awards.
3.2. Character of Shares. Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued Shares, treasury Shares or Shares purchased in the open market or otherwise.
| 4. | ELIGIBILITY AND ADMINISTRATION |
4.1. Eligibility. Any Employee shall be eligible to be selected as a Participant by the Committee or by a Person designated by the Committee.
4.2. Administration..
a. The Plan shall be administered by the Board.Committee. If a Committee member shall fail to qualify as an Eligible Director, such failure shall not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan, unless invalidation is required by applicable law or securities exchange requirements. Unless otherwise expressly provided in the applicable charter or bylaws, the acts of a majority of the Committee members present at any meeting at which a quorum is present or acts approved in writing by a majority of the Committee shall be deemed the acts of the Committee.
b. The BoardCommittee shall have full power and authority, subject to the provisions of the Plan and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to: (i) select the Non-Employee DirectorsEmployees to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Awards, not inconsistent with the provisions of the Plan, to be granted to each Non-Employee DirectorParticipant hereunder; (iii) determine the number of Shares or dollar value to be covered by each Award granted hereunder; (iv) determine the terms and conditions, including vesting conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder; (v) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other property and other amounts payable with respect to an Award made under the Plan shall be deferred either automatically or at the election of the Non-Employee Director;Participant; (vii) determine whether, to what extent and under what circumstances any Award shall be canceled, forfeited, or suspended; (viii) accelerate, continue, or extend the exercisability or vesting of any Award or any Shares acquired pursuant thereto, including with respect to the period following a Participant’s termination of employment or service; (ix) interpret and administer the Plan and any instrument or agreement entered into under or in connection with the Plan, including any Award Agreement; (ix)(x) correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent that the BoardCommittee shall deem desirable to carry it into effect; (x)(xi) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (xi)(xii) determine whether any Award, other than an Option or Stock Appreciation Right, will have Dividend Equivalents; and (xii)(xiii) make any other determination and take any other action that the BoardCommittee deems necessary or desirable for administration of the Plan. Any decision
c. Decisions of the Board in the interpretation and administration of the Plan, as described herein, shall lie within its sole and absolute discretion andCommittee shall be final, conclusive and binding on all parties concerned. The Board shall havePersons or entities, including the full powerCompany, any Participant, and authority to waive any terms and conditions at any time (including, without limitation, accelerating or waiving any vesting conditions). The Board shall require payment of any amount it may determine to be necessary to withhold for federal, state, local or other taxes as a result of the exercise of an Award or other amounts required to be paid or withheld by law. The Board’s decisions and determinations under the Plan need not be uniform and may be made selectively among Non-Employee Directors, whether or not such Non-Employee Directors are similarly situated.Subsidiary.
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Article 4.Shares Subject to the Plan and Adjustments
4.1Number of Shares Available for Grants. Subject to adjustment as provided in Section 4.2, a total of 1,250,000 Shares shall be authorized for issuance under the Plan (“Available Shares”), less one (1) Share for every one (1) Share granted under the Prior Plan after December 31, 2016 and prior to the effective date of the Plan. Shares covered by an Award shall only be counted as used to the extent they are actually issued. Any Shares related to Awards (or awards under the Prior Plan) which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, are settled in cash in lieu of Shares, or are exchanged with the Board’s permission, prior to the issuance of Shares, for Awards not involving Shares, shall be available again for grant under this Plan, and shall be counted on a one-for-one basis. However, the full number of Stock Appreciation Rights granted that are to be settled by the issuance of Shares shall be counted against the number of Shares available for award under the Plan, regardless of the number of Shares actually issued upon settlement of such Stock Appreciation Rights. Furthermore, any Shares tendered or withheld to satisfy any tax withholding obligations on an Award issued under the Plan (or award granted under the Prior Plan), Shares tendered or withheld to pay the exercise price of an Award under the Plan (or award under the Prior Plan), and Shares repurchased on the open market with the proceeds of an Option exercise will not be available for grant under this Plan. Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company acquired by the Company or any Affiliate that is a subsidiary of the Company or with which the Company or any Affiliate that is a subsidiary of the Company combines (“Substitute Awards”) shall not reduce the Shares authorized for grant under the Plan (and shall not be added back as provided in Section 4.1 above). Additionally, in the event that a company acquired by the Company or any Affiliate that is a subsidiary of the Company or with which the Company or such subsidiary combines, has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan (and shall not be added back as provided in Section 4.1); provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Non-Employee Directors prior to such acquisition or combination. Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise.
4.2Adjustments in Authorized Shares and Awards. In the event of any merger, reorganization, consolidation, recapitalization, extraordinary dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off or similar transaction or other change of corporate structure affecting the Shares or the value thereof, such adjustments and other substitutions shall be made to the Plan and to Awards as the Board deems equitable or appropriate to prevent dilution or enlargement of the rights of Non-Employee Directors under the Plan, taking into consideration the accounting and tax consequences, including such adjustments in the aggregate number, class and kind of securities that may be delivered under the Plan and the number, class, kind and price of securities subject to outstanding Awards granted under the Plan (including, if the Board deems appropriate, the substitution of similar Awards to purchase the shares of, or other awards denominated in the shares of, another company) as the Board may determine to be appropriate.
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Article 5.Eligibility and General Conditions of Awards
Each Non-Employee Director shall be eligible to participate in the Plan for so long as such Person remains a Non-Employee Director and the Plan is then in effect.d. To the extent not set forth ininconsistent with applicable law or the rules and regulations of Nasdaq (or such other principal securities exchange on which the Shares are traded), the Committee may delegate to (i) a committee of one (1) or more directors of the Company any of the authority of the Committee under the Plan, including the termsright to grant, cancel or suspend Awards and conditions(ii) to the extent permitted by law, one (1) or more executive officers or a committee of each Award shall be set forth in an Award Agreement.executive officers the right to grant Awards to Employees who are not executive officers of the Company.
Article 6.Annual Retainer; Annual Award
6.1Amounts Payable in Cash. Each Non-Employee Director will be entitled to receive an Annual Retainer equal to $60,000. The Annual Retainer for the chairs5.1. Grant of the Audit Committee, Nominating Committee and Compensation Committee will be increased by $17,500, $15,000, and $15,000 each, respectively. The Annual Retainer (i) for each member of the Audit Committee (other than the chairperson) will be increased by $10,000 and (ii) for each member of the Compensation Committee and Nominating Committee (other than the respective chairperson) will be increased by an additional $7,500. The Annual Retainer of the Lead Independent Director will be increased by $20,000. So long as a Non-Employee Director has not made a Deferral Election with respect to the Annual Retainer, one quarter of the Non-Employee Director’s Annual Retainer will be paid to the Non-Employee Director in cash in arrears as soon as administratively practicable following completion of the applicable quarter. A Non-Employee Director’s Annual Retainer shall be prorated for any partial year of service on the Board, unless otherwise determined by the Board. The amounts provided for under this Section 6.1 may be modified by the Board or applicable committee thereof pursuant to any applicable charters and board procedures in effect from time to time without any amendment required under the Plan.
6.2Amounts Payable in Equity. At each annual meeting of the Company’s stockholders or promptly thereafter, each Non-Employee Director will receive an Award of Restricted Stock Units in such amount equal to the quotient determined by dividing $165,000 by the Fair Market Value on the Grant Date (rounded down to the nearest whole number). All Awards shall be evidenced by an Award Agreement in such form and upon such terms as the Board may approve. The Board may, but is not obligated, to award such Non-Employee Directors Dividend Equivalents. Except as provided otherwise in an Award Agreement with respect to RSUs, a Non-Employee Director’s annual award of RSUs will vest on earliest to occur of: (i) the last business day immediately preceding the annual meeting of the Company’s stockholders in the calendar year following the calendar year in which the Grant Date occurs, (ii) a Change of Control, (iii) the Non-Employee Director’s death, or (iv) the date of the Non-Employee Director’s Separation from Service due to Disability, so long as the Non-Employee Director remains a Non-Employee Director through such date. The amounts provided for under this Section 6.2 may be modified by the Board or applicable committee thereof pursuant to any applicable charters and board procedures in effect from time to time without any amendment required under the Plan.
Article 7.Awards
7.1Options. Options may be granted hereunder to Non-Employee DirectorsParticipants either alone or in addition to other Awards granted under the Plan. Any Option shall be subject to the terms and conditions of this Article 5 and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the BoardCommittee shall deem desirable.
5.2. Award Agreements. All Options granted pursuant to this Article 5 shall be evidenced by an Award Agreement in such form and containing such terms and conditions as the Committee shall determine in an Award Agreement.which are not inconsistent with the provisions of the Plan. The terms of Options need not be the same with respect to each Non-Employee Director.Participant. Granting an Option pursuant to the Plan shall impose no obligation on the recipient to exercise such Option, including upon the scheduled expiration thereof; provided thatOption. Any individual who is granted an Option willpursuant to this Article 5 may hold more than one (1) Option granted pursuant to the Plan at the same time. For the avoidance of doubt, dividends and/or Dividend Equivalents shall not be automatically exercised by the Company on the Non-Employee Director’spayable with respect to Options.
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Table5.3. Option Price. Other than in connection with Substitute Awards, the Option price per each Share purchasable under any Option granted pursuant to this Article 5 shall not be less than 100% of Contents
behalf as of immediately prior to its scheduled expiration so long as the Exercise Price of such Option does not equal or exceed the Fair Market Value of one (1) Share on the Shares covered thereby asDate of Grant of such exercise.Option; provided that the Option price of an incentive stock option granted to an Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (a “Ten Percent Shareholder”) shall be no less than 110% of the Fair Market Value of one (1) Share on the Date of Grant of such Option. Other than pursuant to Section 4.2 or in connection with a Change of Control,11.2, the BoardCommittee shall not without the approval of the Company’s stockholders to(a) when the extent required by law orOption price per Share exceeds the rules and regulationsFair Market Value of the principal securities exchange on which the Shares are traded (i)one (1) Share, lower the optionOption price per Share of an Option after it is granted, (ii)(b) cancel an Option in exchange for cash or another Award and (iii)(other than in connection with a Change in Control as defined in Section 10.1(d)), or (c) take any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the principal securities exchange on which the Shares are traded.
5.4. Option Term. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Option shall be exercisable after the expiration of ten (10) years from the date the Option is granted; provided, further, that no incentive stock option granted to a Ten Percent Shareholder shall be exercisable after five (5) years from the date the Option is granted. Unless otherwise provided by the Committee in an Award Agreement will requireor otherwise determined by it in accordance with the Plan: (a) the unvested portion of an Option shall expire upon termination of employment or service of the Participant granted the Option without consideration therefor, and the vested portion of such Option shall remain exercisable for (i) six (6) months following termination of employment or service by reason of such Participant’s death or Disability, but not later than the expiration of the Option period or (ii) three (3) months following termination of employment or service for any reason other than such Participant’s death or Disability, and other than such Participant’s termination of employment or service for Cause, but not later than the expiration of the
Option period and (b) both the unvested and the vested portion of an Option shall automatically expire upon the termination of the Participant’s employment or service by the Company for Cause without consideration therefor.
5.5. Exercise of Options.
a. Vested Options granted under the Plan shall be exercised by the Participant or by a Permitted Assignee thereof (or by the Participant’s executors, administrators, guardian or legal representative, as a conditionmay be provided in an Award Agreement) as to all or part of the Shares covered thereby, by giving notice of exercise to the Company or its designated agent, specifying the number of Shares to be purchased. The notice of exercise shall be in such form, made in such manner, and in compliance with such other requirements consistent with the provisions of the Plan as the Committee may prescribe from time to time.
b. Unless otherwise provided in an Award Agreement, full payment of such purchase price shall be made at the Option Pricetime of exercise and shall be made (i) in cash or cash equivalents (including certified check or bank check or wire transfer of immediately available funds), (ii) by tendering previously acquired Shares (provided that such Shares are not subject to any pledge or other security interest and are held for the applicable period as determined by the Company’s auditors to avoid adverse accounting charges); and (iii) by such other method as the Committee may permit in accordance with applicable law, in its sole discretion, including: (A) if there is a public market for the Board’s discretion, satisfactionShares at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered a copy of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the exercise of the Option Priceand to deliver promptly to the Company an amount equal to the exercise price or (B) by such other manner, including by tenderinga “net exercise” method whereby the Company withholds from the delivery of previously acquiredthe Shares (either actually or by attestation, valued at their then Fair Market Value), by delivering other considerationfor which the Option was exercised that number of Shares having a Fair Market Value on the Exercise Date equal to the totalaggregate exercise price for the Shares for which the Option Price,was exercised. Any fractional Shares shall be settled in cash.
c. The notice of exercise, accompanied by withholdingsuch payment, shall be delivered to the Company at its principal business office or such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share.
5.6. Incentive Stock Options.
a. The Committee may grant Options intended to qualify as “incentive stock options,” as defined in Section 422 of the Code, to any employee of the Company or any Subsidiary, subject to the requirements of Section 422 of the Code.
b. No Option shall be treated as an incentive stock option unless the Plan has been approved by the stockholders of the Company in a manner intended to comply with the stockholder approval requirements of Section 422(b)(1) of the Code; provided that any Option intended to be an incentive stock option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a nonqualified stock option unless and until such approval is obtained. If for any reason an Option intended to be an incentive stock option (or any portion thereof) shall not qualify as an incentive stock option, then, to the extent of such non-qualification, such Option
or portion thereof shall be regarded as a nonqualified stock option appropriately granted under the Plan.
c. The aggregate Fair Market Value (determined as of the date an Option is granted) of the Shares otherwise issuablefor which incentive stock options granted to any employee under this Plan may first become exercisable in connection withany calendar year shall not exceed $100,000.
d. Solely for purposes of determining whether Shares are available for the grant of incentive stock options under the Plan, the maximum aggregate number of Shares that may be issued pursuant to incentive stock options granted under the Plan shall be 46,169,367 Shares, subject to adjustment provided in Section 11.2.
e. Each Participant awarded an incentive stock option under the Plan shall notify the Company in writing promptly after the date the Participant makes a disqualifying disposition of any Shares acquired pursuant to the exercise of such incentive stock option. A disqualifying disposition is any disposition (including any sale) of such Shares before the Option,later of (i) two (2) years after the Date of Grant of the incentive stock option; or (ii) one (1) year after the date of exercise of the incentive stock option upon which such other method (or combination of methods) as specified in an Award Agreement or permittedShares were issued. The Company may, if determined by the Board. The Award AgreementCommittee and in accordance with procedures established by the Committee, retain possession of any Shares acquired pursuant to the exercise of an incentive stock option as agent for an Option shall set forth the extent to which it may be exercised following a Separation from Service. The termapplicable Participant until the end of each Option will be provided forthe period described in the Award Agreement; provided, however, that the term will be no more than ten (10) years from the Grant Date of the Option.preceding sentence.
| 6. | STOCK APPRECIATION RIGHTS |
7.26.1. Grant of Stock Appreciation Rights. The BoardCommittee may provide Stock Appreciation Rights (a) in conjunctiontandem with all or part of any Option granted under the Plan, or at any subsequent time during the term of such Option, (b) in conjunction with all or partindependent of any Award (other than an Option) granted under the Plan or at any subsequent time during the term of such Award, or (c) without regard to any Option, or other Award, in each case upon such terms and conditions as the BoardCommittee may establish in its sole discretion.
6.2. Vesting and Expiration. A Stock Appreciation Right granted in connection with an Option shall become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option. Any other Stock Appreciation Right shall (i) vest and become exercisable in such manner and on such date or dates; and (ii) expire after such period, not to exceed ten (10) years (the “Stock Appreciation Right Period”), in each case as may be determined by the Committee and as set forth in an Award Agreement. Unless otherwise provided by the Committee in an Award Agreement: (i) the unvested portion of a Stock Appreciation Right shall expire upon termination of employment or service of the Participant who is granted the Stock Appreciation Right, and the vested portion of such Stock Appreciation Right shall remain exercisable for (A) six (6) months following termination of employment or service by reason of such Participant’s death or Disability, but not later than the expiration of the Stock Appreciation Right Period; or (B) three (3) months following termination of employment or service for any reason other than such Participant’s death or Disability, and other than such Participant’s termination of employment or service for Cause, but not later than the expiration of the Stock Appreciation Right Period; and (ii) both the unvested and the vested portion of a Stock Appreciation Right shall expire without consideration therefor upon the termination of the Participant’s employment or service by the Company for Cause.
6.3. Terms and Conditions. Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Board. Granting a Stock Appreciation Right pursuant toCommittee, including the Plan shall impose no obligation on the recipient to exercise such Stock Appreciation Right; provided, that a Stock Appreciation Right will be automatically exercised by the Company on the Non-Employee Director’s behalf as of immediately prior to its scheduled expiration so long as the Strike Price of such Stock Appreciation Right does not equal or exceed the Fair Market Value of the Shares covered thereby as of such exercise.following:
a. The BoardCommittee shall determine in its sole discretion whether upon the exercise of a Stock Appreciation Right payment shall be made in cash, in whole Shares or other property, or any combination thereof. The termsprovisions of Stock Appreciation Rights need not be the same with respect to each Non-Employee Director.recipient. Stock Appreciation Rights shall be subject to such vesting conditions as may be imposed by the Board.Committee. The BoardCommittee may impose such other conditions or restrictions on the terms of exercise of any Stock Appreciation Right, as it shall deem appropriate. The Award Agreement for
b. Upon the exercise of a Stock Appreciation Right, the Company shall pay to the Participant an amount equal to the number of Shares subject to the Stock Appreciation Right that are being exercised multiplied by the excess, if any, of the Fair Market Value of a Share on the exercise date over the Strike Price, less an amount equal to any federal, state, local and non-U.S. income and employment taxes required to be withheld. The Company shall set forth the extent to which it may be exercised following a Separation from Service. Other than pursuant to Section 4.2 orpay such amount in connectioncash, in Shares with a Change of Control,Fair Market Value equal to such amount, or any combination thereof, as determined by the BoardCommittee in an Award Agreement or otherwise. Any fractional Share shall not withoutbe settled in cash.
c. Without the approval of the Company’s stockholders, other than pursuant to Section 11.2, the extent required by law or the rules and regulations of the principal securities exchange on which the Shares are tradedCommittee shall not (i) reduce the Strike Pricegrant price of any Stock Appreciation Right after the dateDate of grantGrant (ii) cancel any Stock Appreciation Right in exchange for cash or another Award (other than in connection with a Change in Control as defined in Section 10.1(d)), and (iii) take any other action with respect to a Stock Appreciation Right that would be treated as a repricing under the rules and regulations of the principal securities market on which the Shares are traded. The term of each Stock Appreciation Right will be provided for in the Award Agreement; provided, however, that the term will be no more than ten (10) years from the Grant Date of the Stock Appreciation Right.
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Tabled. For the avoidance of Contentsdoubt, dividends and/or Dividend Equivalents shall not be payable with respect to Stock Appreciation Rights.
| 7. | RESTRICTED STOCK AND RESTRICTED STOCK UNITS |
7.3RSUs and Restricted Stock7.1. Grants. Awards of Restricted Stock or RSUsand Restricted Stock Units may be issued hereunder to Non-Employee DirectorsParticipants either alone or in addition to other Awards granted under the Plan. An Award of Plan (a “Restricted Stock Award” or RSUs“Restricted Stock Unit Award” respectively), and such Restricted Stock Awards and Restricted Stock Unit Awards shall also be subject to vesting restrictions imposed by the Board coveringavailable as a periodform of time orpayment of Performance Awards and other conditions specified by the Board.incentive compensation.
7.2. Award Agreements. The terms of an Award ofany Restricted Stock Award or an RSURestricted Stock Unit Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the BoardCommittee and not inconsistent with the Plan. The terms of an Award of Restricted Stock or RSUsAwards and Restricted Stock Unit Awards need not be the same with respect to each Non-Employee Director. Unless otherwise providedParticipant. The Committee shall impose such terms, conditions and/or restrictions on any Restricted Stock or Restricted Stock Units granted pursuant to the Plan as it may deem advisable including, without limitation: a requirement that Participants pay a stipulated purchase price for each Restricted Stock or each Restricted Stock Unit; forfeiture conditions; transfer restrictions; restrictions based upon the achievement of specific performance goals (Company-wide, divisional, and/or individual); time-based restrictions on vesting; and/or restrictions under applicable federal or state securities laws.
7.3. Rights of Holders of Restricted Stock and Restricted Stock Units. Except as determined by the Committee and specified in thean Award Agreement, beginning on the Grant Date of an AwardGrant of the Restricted Stock Award and subject to execution of the Award Agreement, the Non-Employee Director to whom such Award was madeParticipant shall becomehave the rights and privileges of a stockholder of the Company with respect to all Shares subject to the Award Agreement, and shall have all of the rights of a stockholder, including the right to vote such Shares and the right to receive distributions madedividends (if any) with
respect to such Shares.Shares, subject to the terms of this Section 7.3. A Non-Employee DirectorParticipant receiving ana Restricted Stock Unit Award of RSUs shall not possess any rights of a stockholder with respect to such Award. Except as otherwise provided in an Award Agreement, anyAny Shares or any other property (including cash) distributed as a dividend or otherwise with respect to any Award of Restricted Stock Award as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such AwardRestricted Stock Award. To the extent shares of Restricted Stock.Stock are forfeited, any share certificates issued to the Participant evidencing such shares shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect thereto shall terminate without further obligation on the part of the Company.
7.4. Effect of Termination of Employment. The Award Agreement for an Award ofa Restricted Stock Award or Restricted Stock UnitsUnit Award shall set forth the extent to which the Non-Employee Director to whom such Award was madeParticipant shall have the right to retain such Restricted Stock or Restricted Stock Units following a Separation from Service.termination of the Participant’s employment with or provision of services to the Company and its Subsidiaries; provided, however, unless otherwise provided for in an Award Agreement, if the Participant’s employment or service is terminated for Cause, any Restricted Stock or Restricted Stock Unit shall be immediately forfeited.
7.5. Issuance of Shares; Restrictions. Any Restricted Stock granted under the Plan may be evidenced in such manner as the BoardCommittee may deem appropriate, including book-entry registration or issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Company. Restricted Stock may not be sold, assigned, transferred or otherwise disposed of, or mortgaged, pledged or otherwise encumbered. Such certificate or certificates shall be registered in the name of the applicable Non-Employee DirectorParticipant and shall bear an appropriate legend referring to the restrictions applicable to such Restricted Stock. The BoardIn order to enforce the limitations imposed upon the Restricted Stock, the Committee may but iscause “stop transfer” instructions to be issued, as it deems necessary or appropriate. Restricted Stock Units may not obligated, to grant Dividend Equivalentsbe sold, assigned, transferred or otherwise disposed of, or mortgaged, pledged, or otherwise encumbered at any time.
7.6. Delivery of Restricted Stock and Settlement of Restricted Stock Units.
a. Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant, or such Participant’s beneficiary, without charge, the share certificate evidencing the shares of Restricted Stock that have not then been forfeited and with respect to which the Restricted Period has expired (rounded down to the nearest full share). Dividends on Restricted Stock shall accumulate and be withheld until the restrictions on such Restricted Stock lapse. Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash or, at the sole discretion of the Committee, in Shares having a Fair Market Value equal to the amount of such dividends, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends (except as otherwise set forth by the Committee in the applicable Award Agreement).
b. Unless otherwise provided by the Committee in an Award Agreement or otherwise determined by the Committee in accordance with the Plan, upon the expiration of RSUs,the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall deliver to the Participant, or such Participant’s beneficiary, without charge, one Share for each such outstanding Restricted Stock Unit; provided, however, that the Committee may, in its sole discretion, elect to (i) pay cash or part cash and part common stock in lieu of delivering only Shares in respect of such Restricted Stock
Units; or (ii) defer the delivery of Shares (or cash or part cash and part common stock, as the case may be) beyond the expiration of the Restricted Period if such delivery would result in a violation of applicable law until such time as is no longer the case. If a cash payment is made in lieu of delivering Shares, the amount of such payment shall be equal to the Fair Market Value of the Shares as of the date on which the Restricted Period lapsed with respect to such Restricted Stock Units, less an amount equal to any federal, state, local and non-U.S. income and employment taxes required to be withheld.
7.7. Dividend Equivalents. Unless otherwise provided in an Award Agreement, foreach Restricted Stock Unit may include the right to receive, on a deferred basis, amounts equivalent to cash, stock or other property dividends on Shares (“Dividend Equivalents”) as provided herein. Dividend Equivalents will accumulate and be withheld until the applicable Restricted Stock Units upon which the Dividend Equivalents are awarded vest and any such Award of RSUs will set forthDividend Equivalent payments that have accumulated and have been withheld by the rights, if any,Committee and attributable to any particular Restricted Stock Unit shall be distributed to the Participant in cash or, at the sole discretion of the Committee, in Shares having a Fair Market Value equal to the amount of such Dividend Equivalents;Equivalent payments then due; provided that, a holderin the event that all or any portion of RSUs shall not have a right toany Restricted Stock Unit is forfeited, the Dividend Equivalents unlessattributable to such Award Agreement provides forforfeited Restricted Stock Unit shall also be forfeited. Upon the vesting and settlement of Restricted Stock Units that include Dividend Equivalents.Equivalents, the Dividend Equivalents attributable to such Restricted Stock Units shall expire automatically.
| 8. | OTHER SHARE-BASED AWARDS |
7.4Other Share Based Awards8.1. Grants. Other Awards of Shares and other Awards that are valued in whole or in part by reference to, or are otherwise based on, Shares or other property (“Other Share BasedShare-Based Awards”) may be granted hereunder to Non-Employee DirectorsParticipants either alone or in addition to other Awards granted under the Plan. Other Share BasedShare-Based Awards shall also be available as a form of payment of other Awards granted under the Plan and other earned cash-based compensation, including under any deferred compensation plan whether or not under the Plan or a sub-plan thereunder.compensation. Other Share BasedShare-Based Awards mayshall be fully vested or subject to vesting restrictions or conditions imposed by the BoardCommittee covering a period of time or other condition, as specified by the Board.Committee.
8.2. Award Agreements. The terms of Other Share BasedShare-Based Awards granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the BoardCommittee and not inconsistent with the Plan. The terms of Other Share Basedsuch Awards need not be the same with respect to each Non-Employee Director. A Non-Employee Director receiving Other Share Based Awards shall not possessParticipant. Notwithstanding the provisions of this Section 8.2, Dividend Equivalents and cash and any rights ofproperty distributed as a stockholderdividend or otherwise with respect to the number of Shares covered by an Other Share-Based Award shall be subject to restrictions and risk of forfeiture to the same extent as the Shares covered by an Other Share-Based Award with respect to which such Award unlesscash, Shares or other property has been distributed and shall be settled only if, when and to the Award Agreement forextent, such Other Share BasedShare-Based Award provides for such rights.vests; the value of amounts payable with respect to an Other Share-Based Award that does not vest shall be forfeited.
8.3. Effect of Termination of Employment. The Award Agreement for an Other Share Based AwardsShare-Based Award shall set forth the extent to which the Non-Employee DirectorAward will be retained following termination of the Participant’s employment with or provision of services to whom suchthe Company and its Subsidiaries; provided, however, unless otherwise provided for in an Award was made shall haveAgreement, if the right to retainParticipant’s employment or service is terminated for Cause, such Other Share Based Awards following a Separation from Service. Other Share Based Awards granted under the Plan may be evidenced in such manner as the Board may deem appropriate, including book-entry registration or issuance of a stock certificate or certificates, which certificate or certificatesShare-Based Award shall be held by the Company. Such certificate or certificates shall be registered in the name of the applicable Non-Employee Director and shall bear an appropriateimmediately forfeited.
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legend referring to the restrictions applicable to such Other Share Based Award. The Board may, but is not obligated, to grant Dividend Equivalents with respect to Other Share Based Awards and the Award Agreement for any such Award will set forth the rights, if any, to any such Dividend Equivalents; provided, that, no Dividend Equivalents shall be granted to the holder of such Other Share Based Award unless such Award Agreement provides for Dividend Equivalents.8.4. Except as may be provided in an Award Agreement, Other Share-Based Awards may be paid in cash, Shares, other property, or any combination thereof, in the sole discretion of the Board.
Committee. Other Share-Based Awards may be paid in a lump sum or in installments or, in accordance with procedures established by the Board,Committee, on a deferred basis subject to Codethe requirements of Section 409A.409A of the Code.
9.1. Grants. Performance Awards in the form of Performance Cash or Performance Shares, as determined by the Committee in its sole discretion, may be granted hereunder to Participants, for no consideration or for such minimum consideration as may be required by applicable law, either alone or in addition to other Awards granted under the Plan. The performance goals to be achieved for each Performance Period shall be conclusively determined by the Committee.
9.2. Performance Criteria. If the Committee determines that a Restricted Stock Award, a Restricted Stock Unit Award, a Performance Award or an Other Share-Based Award is intended to be subject to this Article 8.Special Treatment In9, the Eventlapsing of restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as applicable, shall be subject to the achievement of one or more objective performance goals established by the Committee, which shall be based on the attainment of specified levels of one or any combination of the following: net sales; booking value of contract awards; year-end backlog; days sales outstanding; revenue; revenue growth or product revenue growth; operating income (before or after taxes); pre- or after-tax income (before or after allocation of corporate overhead and bonus); earnings per Share; net income (before or after taxes); return on equity; total shareholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the Shares or any other publicly traded securities of the Company; market share; gross profits; earnings (including earnings before taxes, earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow or cash flow per Share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; improvement in or attainment of expense levels or working capital levels; operating margins, gross margins or cash margin; year-end cash; debt reductions; stockholder equity; market share; regulatory achievements; and implementation, completion or attainment of measurable objectives with respect to research, development, products or projects, production volume levels, acquisitions and divestitures and recruiting and maintaining personnel; or any other goals provided by the Committee. Such performance goals also may be based solely by reference to the Company’s performance or the performance of a ChangeSubsidiary, division, business segment or business unit of Controlthe Company, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies. The Committee may also exclude charges related to an event or occurrence which the Committee determines should appropriately be excluded, including, but not limited to, (a) restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, or (c) the cumulative effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles.
9.3. Award Agreements. InThe terms of any Performance Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan, including whether such Performance Awards shall have Dividend Equivalents. The terms of Performance Awards need not be the same with respect to each Participant. Notwithstanding the provisions of this Section 9.3, Dividend Equivalents and cash and any property distributed as a dividend or otherwise with respect to the number of Shares covered by a Performance
Award shall be subject to restrictions and risk of forfeiture to the same extent as the Shares covered by a Performance Award with respect to which such cash, Shares or other property has been distributed and shall be settled only if, when and to the extent, such Performance Award vests. The value of amounts payable with respect to a Performance Award that does not vest shall be forfeited.
9.4. Terms and Conditions. The performance criteria to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award. The amount of the Performance Award to be distributed shall be conclusively determined by the Committee.
9.5. Effect of Termination of Employment. The Award Agreement for Performance Awards shall set forth the extent to which the Participant shall have the right to retain Performance Awards following termination of the Participant’s employment with or provision of services to the Company and its Subsidiaries; provided that, unless otherwise provided for in an Award Agreement, if the Participant’s employment or service is terminated for Cause, any Performance Award shall be immediately terminated.
9.6. Payment. Except as provided in Article 11 or as may be provided in an Award Agreement, Performance Awards will be paid only after the end of the relevant Performance Period. Performance Awards may be paid in cash, Shares, other property, or any combination thereof, in the sole discretion of the Committee. Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period or, in accordance with procedures established by the Committee, on a deferred basis subject to the requirements of Section 409A of the Code. Performance Awards granted for a Performance Period shall be paid to Participants as soon as administratively practicable following completion of the certifications required by this Section 9.6 and in a manner intended to be exempt or comply with Section 409A of the Code and local law, as applicable. For Performance Awards covering Participants who are U.S. employees and for which no deferral election has been made, Performance Awards will be paid in the fiscal year that follows the fiscal year during which the Performance Period ends and no later than two and one-half (2.5) months following the end of the fiscal year during which the Performance Period is completed (or at such other time as would not result in a violation of Section 409A of the Code).
| 10. | CHANGE IN CONTROL PROVISIONS |
10.1. Treatment of Awards.
a. Unless otherwise provided in an Award Agreement, in the event of a Change ofin Control after the Effective Date, the Board may, in its sole discretion, provide for (i) the termination of an Award upon the consummation of the Change of Control, but only if such Award has vested and been paid out or the Non-Employee Director has been permitted to exercise the Award in full for a period of not less than ten (10) days prior to the Change of Control, (ii) acceleration of all or any portion of an Award, (iii) the payment of any amount (in cash or, in the discretion of the Board, in the form of consideration paid to shareholders of the Company in connectionwhich the successor company assumes or replaces an Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Performance Award or Other Share-Based Award, (or in which the Company is the ultimate parent corporation and continues the Award), if a Participant’s employment with such Change of Control) in exchange for the cancellation of such Award which,successor company (or a subsidiary thereof) terminates (except as provided in the case ofAward Agreement, other than a termination by the Company for Cause (as defined in an Award Agreement)) within twenty four (24) months following such Change in Control (or such other period set forth in the Award Agreement, including prior thereto if applicable): (i) Options and Stock Appreciation Rights outstanding as of the date of such termination of employment will immediately vest, become fully exercisable, and may thereafter be exercised, (ii) restrictions, limitations and other conditions on Restricted Stock and Restricted Stock Units shall lapse and the Restricted Stock and Restricted Stock Units shall become free of all restrictions, limitations and conditions and become fully vested, (iii) all Performance Awards shall be considered to be earned and
payable (pro rata based on the portion of the Performance Period completed as of the date of the termination), and any other restriction shall lapse and such Performance Awards shall be immediately settled or distributed, and (iv) the restrictions, limitations and other conditions applicable to any Other Share-Based Awards shall lapse, and such Other Share-Based Awards shall become free of all restrictions, limitations and conditions and become fully vested and transferable to the full extent of the original grant. For the purposes of this Section 10.1, an Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Performance Award or Other Share-Based Award shall be considered assumed or replaced if following the Change in Control the assumed or replacement award confers the right to purchase or receive, for each Share subject to the Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Performance Award or Other Share-Based Award immediately prior to the Change in Control, the consideration (whether stock, cash or other securities or property) received in the transaction constituting a Change in Control by holders of Shares for each Share held on the effective date of such transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares).
b. Unless otherwise provided in an Award Agreement, in the event of any Change in Control of the Company, to the extent the successor company does not assume or replace an Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Performance Award or Other Share-Based Award (or in which the Company is the ultimate parent corporation and does not continue the Award): (i) those Options and Stock Appreciation Rights outstanding as of the date of the Change in Control that are not assumed or replaced shall immediately vest and become fully exercisable, (ii) restrictions, limitations and other conditions applicable to Restricted Stock and Restricted Stock Units that are not assumed or replaced shall lapse and the Restricted Stock and Restricted Stock Units shall become free of all restrictions, limitations and conditions and become fully vested, (iii) all Performance Awards shall be considered to be earned and payable (pro rata based on the portion of Performance Period completed as of the date of the Change in Control), and any other restriction shall lapse and such Performance Awards shall be immediately settled or distributed, and (iv) the restrictions, limitations and other conditions applicable to any Other Share-Based Awards shall lapse, and such Other Share-Based Awards shall become free of all restrictions, limitations and conditions and become fully vested and transferable to the full extent of the original grant.
c. Notwithstanding the foregoing, the Committee, in its discretion, may determine that, upon the occurrence of a Change in Control of the Company, each Option and Stock Appreciation Right outstanding shall terminate within a specified number of days after notice to the Participant, and/or that each Option and Stock Appreciation Right shall be canceled and in consideration for such cancellation each Participant shall receive, with respect to each Share subject to such Option or Stock Appreciation Right, an amount equal to the excess, if any, of the Fair Market Value of such Share immediately prior to the Shares subject tooccurrence of such Options Change in Control over the exercise price per Share of such Option and/or Stock Appreciation Rights overRight; such amount to be payable in cash, in one or more kinds of stock or property (including the aggregate exercise pricestock or Option Price of such Optionsproperty, if any, payable in the transaction) or Stock Appreciation Rights;in a combination thereof, as the Committee, in its discretion, shall determine; provided that if the Option Priceexercise price per Share of such OptionsOption and/or the Strike Price of such Stock Appreciation Right equals or exceeds the Fair Market Value of Shares covered therebysuch Share immediately prior to the occurrence of such Change ofin Control, then such Option and/or Stock Appreciation Right may be cancelledcanceled without the payment of consideration, and/or (iv) issuanceconsideration.
d. Change in Control.Unless otherwise defined in an Award Agreement, for purposes of substitute Awards that will substantially preserve the otherwise applicable termsPlan, “Change in Control” means the occurrence of any affected Awards previously granted hereunder.of the following events: (a) sale of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole; (b) any Person or
A-Article 9.16Ownership Guidelines. The Board believes that Non-Employee Directors should own
group of Persons is or shall become the “beneficial owner” (as defined in Rule 13(d)-3 and hold Shares to further align their interests and actions with13(d)-5 under the interestsExchange Act), directly or indirectly, of more than 50% of the Company’s shareholders. Therefore,voting stock of the Board requires each Non-Employee DirectorCompany then outstanding or (c) a merger or consolidation pursuant to satisfywhich any Person or group of Persons becomes the share ownership guidelines set forth on Exhibit A, as may“beneficial owner” (as defined in clause (ii) above) of more than 50% of the voting stock of the Company or the surviving or resulting entity immediately following the consummation of such transaction. Notwithstanding anything herein to the contrary, in any circumstance in which the definition of “Change in Control” under this Plan would otherwise be amended byoperative and with respect to which the Board from timeadditional tax under Section 409A of the Code would apply or be imposed, but where such tax would not apply or be imposed if the meaning of the term “Change in Control” met the requirements of Section 409A(a)(2)(A)(v) of the Code, then the term “Change in Control” herein shall mean, but only for the transaction, event or circumstance so affected and the item of income with respect to time.which the additional tax under Section 409A of the Code would otherwise be imposed, a transaction, event or circumstance that is both (x) described in the preceding provisions of this definition, and (y) a “change in control event” within the meaning of Treasury Regulations Section 1.409A-3(i)(5).
Article 10.Deferrals If and to the extent permitted by the Board, an Non-Employee Director may elect (a “Deferral Election”), at such times and in accordance with rules and procedures (or sub-plan) adopted by the Board (which shall comply with Code Section 409A, as applicable), to receive all or any portion of such Non-Employee Director’s compensation, whether payable in cash or in equity, on a deferred basis.
| 11. | GENERALLY APPLICABLE PROVISIONS |
Article 11.Effective Date. The Plan shall be effective on11.1. Amendment and Termination of the Effective Date.
Article 12.Miscellaneous.
12.1Modification and TerminationPlan. The Board may, at anyfrom time to time, alter, amend, suspend or terminate the Plan and Awards thereunderas it shall deem advisable, subject to any requirement for stockholder approval imposed by applicable law, andincluding the rules and regulations of the principal securities exchangemarket on which the Shares are traded. No amendment shall,traded; provided that the Board may not amend the Plan in any manner that would result in noncompliance with Rule 16b-3 of the Exchange Act; and further provided that the Board may not, without properthe approval of the Company’s shareholders,stockholders, amend the Plan to (a) increase the number of Shares that may be the subject of Awards under the Plan (except for adjustments pursuant to Section 11.2), (b) expand the types of awards available under the Plan, (c) materially expand the class of Persons eligible to participate in the Plan, (d) amend any provision of Section 5.5 or Section 6.3 to eliminate the requirements relating to minimum exercise price, minimum grant price and stockholder approval, or (e) increase the maximum permissible term of any Option specified by Section 5.4 or the maximum permissible term of a Stock Appreciation Right specified by Section 6.2. The Board may not (except pursuant to Section 11.2 or in connection with a Change in Control), when the exercise price or grant price per Share exceeds the Fair Market Value of a Share, without the approval of the Company’s stockholders, cancel an Option or Stock Appreciation Right in exchange for cash or take any other action with respect to an Option or Stock Appreciation Right that would be treated as a repricing under the rules and regulations of the principal securities market on which the Shares are traded, including a reduction of the exercise price of an Option or the grant price of a Stock Appreciation Right or the exchange of an Option or Stock Appreciation Right for another Award. In addition, no amendments to, or suspension or termination of, the Plan shall impair the rights of a Participant in any material respect under any Award previously granted without such Participant’s consent.
11.2. Adjustments. In the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Shares or the value thereof, such adjustments and other substitutions shall be made to the Plan and to Awards as the Committee deems equitable or appropriate to prevent dilution or enlargement of the rights of Participants under the Plan, taking into consideration the accounting and tax consequences, including (a) such adjustments in the terms, the aggregate number, class and kind of securities that may be delivered under the Plan, the maximum number of Shares which are available forthat may be issued
as incentive stock options and, in the aggregate or to any one Participant, in the number, class, kind and Option or exercise price or Strike Price of securities subject to outstanding Awards granted under the Plan. No amendmentPlan (including, if the Committee deems appropriate, the substitution of similar options to purchase the shares of, or other awards denominated in the shares of, another company) as the Committee may determine to be appropriate; provided, however, that the number of Shares subject to any Award shall always be a whole number; (b) providing for a substitution or assumption of Awards, accelerating the exercisability of, lapse of restrictions on, or termination shall materiallyof, Awards or providing for a period of time for exercise prior to the occurrence of such event; and adversely affect(c) if not assumed or substituted, canceling any rightsone or more outstanding Awards or portion thereof and causing to be paid to the holders thereof, in cash, Shares, other securities or other property, or any combination thereof, the value of such Awards, if any, as determined by the Committee (which if applicable may be based upon the price per Share received or to be received by other stockholders of the Company in such event), including, in the case of an outstanding Option or Stock Appreciation Right, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the Shares subject to such Option or Stock Appreciation Right over the aggregate exercise price or Strike Price of such Option or Stock Appreciation Right (it being understood that, in such event, any Option or Stock Appreciation Right having a per Share exercise price or Strike Price equal to, or in excess of, the Fair Market Value of a Share subject thereto may be canceled and terminated without any payment or consideration therefor); provided, however, that in the case of any Person with respect“equity restructuring” (within the meaning of FASB Accounting Standards Codification Topic 718 or any successor rule), the Committee shall make an equitable or proportionate adjustment to an Award without the consent of such Person. Notwithstanding the foregoing, the Board may (i) amend the Plan in such manner as it deems necessary to causeoutstanding Awards to meetreflect such equity restructuring. Any adjustment in incentive stock options under this Section 11.2 (other than any cancellation of incentive stock options) shall be made only to the requirementsextent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code, or otherand any otherwise applicable laws or (ii) terminate any Deferred Awards and accelerate payment thereunderadjustments under this Section 11.2 shall be made in a manner consistent with Codethat does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act or the exemption under Section 409A in each case without the consent of the Non-Employee Director.Code, to the extent applicable. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.
11.3. Transferability of Awards. Except as provided below, no Award and no Shares subject to Awards described in Article 8 that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution, and such Award may be exercised during the life of the Participant only by the Participant or the Participant’s guardian or legal representative. To the extent and under such terms and conditions as determined by the Committee, a Participant may assign or transfer an Award (other than an incentive stock option) without consideration (each transferee thereof, a “Permitted Assignee”) to (i) the Participant’s spouse, children or grandchildren (including any adopted and step children or grandchildren), parents, grandparents or siblings, (ii) to a trust in which a majority of the beneficiaries are the Participant or the Persons referred to in clause (i), (iii) to a partnership, limited liability company or corporation in which the Participant or the Persons referred to in clause (i) are a majority of the partners, members or stockholders or (iv) for charitable donations; provided that such Permitted Assignee shall be bound by and subject to all of the terms and conditions of the Plan and the Award Agreement relating to the transferred Award and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Participant shall remain bound by the terms and conditions of the Plan. The Company shall cooperate with any Permitted Assignee and the Company’s transfer agent in effectuating any transfer permitted under this Section. The terms of any Award transferred in accordance with the immediately preceding sentence shall apply to the Permitted Assignee, and any
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12.2Successors. The Plan shall be binding on and inure toreference in the benefit of all successors and assigns of the Company and Non-Employee Directors participating therein, including without limitation, the estate of such and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Non-Employee Director’s creditors.
12.3Service. Nothing in this Plan, or in any applicable Award Agreement, to a Participant shall be deemed to refer to a Permitted Assignee, except that (A) Permitted Assignees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (B) the Committee or the Company shall not be construedrequired to limitprovide any notice to a Permitted Assignee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise; and (C) the consequences of the termination of the Participant’s employment or service with the Company or an Affiliate under the terms of the Plan and the applicable Award Agreement shall continue to be applied with respect to the Participant, including that an Option or Stock Appreciation Right shall be exercisable by a Permitted Assignee only to the extent, and for the periods, specified in the Plan and the applicable Award Agreement.
11.4. Deferral. The Committee shall be authorized to establish procedures pursuant to which the payment of any Award may be deferred.
12.1. Tax Withholding. The Company shall have the right to make all payments or distributions pursuant to the Plan to a Participant (or a Permitted Assignee thereof) (any such Person, a “Payee”) net of any applicable federal, state and local taxes (whether imposed in the United States or in any wayother jurisdiction) required to be paid or withheld as a result of (a) the grant of any Award, (b) the exercise of an Option or Stock Appreciation Right, (c) the delivery of Shares or cash, (d) the lapse of any restrictions in connection with any Award or (e) any other event occurring pursuant to the Plan. The Company or any Subsidiary shall have the right to withhold from wages or other amounts otherwise payable to a Payee such withholding taxes as may be required by law, or to otherwise require a Payee to pay such withholding taxes. If a Payee shall fail to make such tax payments as are required, the Company or its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Payee or to take such other action as may be necessary to satisfy such withholding obligations. The Committee shall be authorized to establish procedures for election by Participants to satisfy such obligation for the payment of such taxes by tendering previously acquired Shares (which are not subject to any pledge or other security interest and are held for the applicable period as determined by the Company’s rightauditors to removeavoid adverse accounting charges) having a Non-Employee Director fromFair Market Value equal to such withholding liability, or by directing the BoardCompany to retain Shares otherwise deliverable in connection with the Award pursuant to the exercise or settlement of Directorsthe Award a number of Shares with a Fair Market Value equal to such liability. Notwithstanding anything herein to the contrary, the amount withheld shall not exceed the maximum statutory tax rates in the Participant’s applicable jurisdictions. The maximum statutory tax rates are based on the applicable rates of the relevant tax authorities (for example, federal, state, and nothing hereinlocal), including the Participant’s share of payroll or similar taxes, as provided in tax law, regulations or the authority’s administrative practices, not to exceed the highest statutory rate in that jurisdiction (even if that rate exceeds the highest rate that may be applicable to the Participant) and that does not result in adverse accounting consequences.
12.2. Right of Discharge Reserved; Claims to Awards. Nothing in the Plan nor the grant of an Award hereunder shall confer upon any Non-Employee DirectorEmployee the right to remain a Directorcontinue in the employment or service of the Company. TheCompany or any Affiliate or affect any right that the Company or any Affiliate may have to terminate the employment or service of (or to demote or to exclude from future Awards under the Plan) any such Employee at any time for any reason. Except as specifically provided by the Committee, the Company shall not be liable for the loss of existing or potential profit from an Award granted in the event of a Separation from Service. Except as provided expressly in the Plan, no non-Employee Directortermination of an employment or other relationship. No Employee or
Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Non-Employee DirectorsEmployees or Participants under the Plan.
12.412.3. Substitute Awards. Notwithstanding any other provision of the Plan, the terms of Substitute Awards may vary from the terms set forth in the Plan to the extent the BoardCommittee deems appropriate to conform, in whole or in part, to the provisions of the awards in substitution for which they are granted.
12.512.4. Forfeiture Events..
a. The BoardCommittee may specify in an Award Agreement that a Non-Employee Director’sthe 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 may include, but shall not be limited to, Separation from Servicetermination of employment or service, violation of material Company, and/or Affiliate policies. Awards made underSubsidiary policies, breach of noncompetition, non-solicitation, confidentiality, or other restrictive covenants that may apply to the Plan shall be subjectParticipant, or other conduct by the Participant that is detrimental to generally applicable clawback policiesthe business or reputation of the Company, and/or its Subsidiaries.
b. If the Company is required to file an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, if the Participant knowingly or recklessly engaged in effect from timethe misconduct, or knowingly or recklessly failed to time.prevent or report the misconduct, or if the Participant is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the Participant shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued for such period as determined by the Committee following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document reflecting such material noncompliance.
12.612.5. Stop Transfer Orders. All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stop-transfer orders and other restrictions as the BoardCommittee may deem advisable under the rules, regulations and other requirements of the United States Securities and Exchange Commission, any stock exchange upon which the Shares are then traded,listed, and any applicable federal or state securities law, and the BoardCommittee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
12.712.6. Nature of Payments. All Awards made pursuant to the Plan are in consideration of service performed or to be performed for the Company or any Subsidiary, division or business unit of the Company. Any income or gain realized pursuant to Awards under the Plan constitutes a special incentive payment to the Participant and shall not be taken into account, to the extent permissible under applicable law, as compensation for purposes of any of the employee benefit plans of the Company or any Subsidiary except as may be determined by the Committee or by the Board or board of directors of the applicable Subsidiary or as otherwise provided in a respective employee benefit plan of the Company.
12.7. Other Plans. Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.
12.8. Severability. If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction or by reason of a change in law or regulation, such provision shall (i)(a) be deemed limited to the extent that such court of competent jurisdiction deems it lawful, valid and/or enforceable and as so limited shall remain in full force and effect, and (ii)(b) not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unenforceable by a court of competent jurisdiction, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan.
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Table12.9. Construction. As used in the Plan, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of Contentslimitation, but rather shall be deemed to be followed by the words “without limitation.”
12.8Requirements of Law. The granting of Awards and the delivery of Shares under the Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges or markets as may be required. Notwithstanding any provision of the Plan or any Award Agreement, Non-Employee Directors shall not be entitled to exercise, or receive benefits under, any Award, and the Company (or any Affiliate) shall not be obligated to deliver any Shares or deliver benefits to a Non-Employee Director, if such exercise or delivery would constitute a violation by the Non-Employee Director, the Company or any Affiliate of any applicable law or regulation.
12.9Withholding. Awards or amounts payable or deliverable in respect of Awards may be withheld by the Company only to the extent required under applicable law.
12.10Section 409A Compliance. To the extent applicable and notwithstanding any other provision of the Plan, the Plan, Awards, and Award Agreements hereunder shall be administered, operated and interpreted in accordance with Code Section 409A, including any regulations or other guidance that may be issued after the date on which the Board approves the Plan; provided, however, that, in the event that the Board determines that any amounts payable hereunder may be taxable to a Non-Employee Director under Code Section 409A prior to the payment and/or delivery to such Non-Employee Director of such amount, the Board may (i) adopt such amendments to the Plan and related Award, and appropriate policies and procedures, including amendments and policies with retroactive effect, that the Board determines necessary or appropriate to preserve the intended tax treatment of the benefits provided by the Plan and Awards hereunder, and/or (ii) take such other actions as the Board determines necessary or appropriate to comply with or exempt the Plan and/or Awards from the requirements of Code Section 409A. The Company and its Affiliates and the Board make no guarantees to any Person regarding the tax treatment of Awards or payments made or to be made under the Plan and shall have no liability with regard to any adverse tax consequences arising from any Awards or payments made or to be made under the Plan, including the failure of any Award to comply with or be exempt from Code Section 409A. Each Award and each payment under any Award shall be a separate payment for purposes of Code Section 409A.
12.1112.10. Unfunded Status of the Plan.Plan. The Plan is intended to constitute an “unfunded” plan.plan for incentive compensation. With respect to any payments or benefits not yet made to a Non-Employee DirectorParticipant by the Company, nothing contained herein willshall give any such Participant any rights to a Non-Employee Director that are greater than those of a general unsecured creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver the Shares or payments in lieu of or with respect to Awards hereunder; provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.
12.1212.11. Governing Law. The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware, without reference to principles of conflict of laws, and construed accordingly. The Plan and Awards thereunder are not governed by or subject to the Federal law known as ERISA (the Employee Retirement Income Security Act of 1974, as amended).
12.13Nontransferability12.12. Effective Date of Plan; Termination of Plan. ExceptAwards may be granted under the Plan at any time and from time to time on or prior to the tenth (10th) anniversary of the Effective Date of the Plan (or in the case of incentive stock options, the tenth (10th) anniversary of Board approval of the Plan), on which date the Plan will expire except as provided below, no Award and no Shares subject to Awards thatthen outstanding under the Plan. Such outstanding Awards shall remain in effect until they have not been issuedexercised or as to which any applicable restriction, performanceterminated, or deferral period has not lapsed,have expired.
12.13. Foreign Employees. Awards may be sold, assigned, transferred, pledgedgranted to Participants who are foreign nationals or otherwise encumbered, other than by willemployed outside the United States, or the laws of descent and distribution or as otherwise required by law, and such Award may be exercised during the life of the Non-Employee Director only by the Non-Employee Director or the Non-Employee Director’s guardian or legal representative. To the extent and underboth, on such terms and conditions different from those applicable to Awards to Employees employed in the United States as determined bymay, in the Board,judgment of the Committee, be necessary or desirable in order to recognize differences in local law or tax policy. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Company’s obligation with respect to tax equalization for Employees on assignments outside their home country. The Committee may amend the terms of the Plan or outstanding Awards (or adopt one or more sub-plans) in its sole discretion with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or other treatment for a Non-Employee Director may assignParticipant, the Company or transfer an Award without consideration (each transferee thereof, a “Permitted Assignee”) to (i) the Non-Employee Director’s spouse, children orits Affiliates.
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grandchildren (including any adopted and step children or grandchildren), parents, grandparents or siblings, (ii) to a trust in which a majority12.14. Compliance with Section 409A of the beneficiaries areCode. This Plan is intended to comply and shall be administered in a manner that is intended to comply with Section 409A of the Non-Employee DirectorCode and shall be construed and interpreted in accordance with such intent. To the extent that an Award or the persons referredpayment, settlement or deferral thereof is subject to in clause (i), (iii) to a partnership, limited liability company or corporation in which the Director or the Persons referred to in clause (i) are a majoritySection 409A of the partners, members or shareholders, or (iv) for charitable donations; provided that such Permitted AssigneeCode, the Award shall be bound by and subject to allgranted, paid, settled or deferred in a manner that will comply with Section 409A of the terms and conditions of the Plan and the Award Agreement relating to the transferred Award and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Non-Employee Director shall remain bound by the terms and conditions of the Plan. The Company shall cooperateCode, including regulations or other guidance issued with any Permitted Assignee and the Company’s transfer agent in effectuating any transfer permitted under this Section.
12.14No Fractional Shares. Exceptrespect thereto, except as otherwise determined by the Board, no fractional SharesCommittee. Any provision of this Plan that would cause the grant of an Award or the payment, settlement or deferral thereof to fail to satisfy Section 409A of the Code shall be amended to comply with Section 409A of the Code on a timely basis, which may be made on a retroactive basis, in accordance with regulations and other guidance issued under Section 409A of the Code.If a Participant is a “specified employee” (as defined under Section 409A of the Code) and should any portion of the Award that would otherwise be payable under such Award be determined to be a payment that is not exempt from Section 409A of the Code, such payment, to the extent otherwise payable within six (6) months after a “separation from service” (as defined under Section 409A of the Code), and to the extent necessary to avoid the imposition of taxes under Section 409A of the Code, will be settled on the earlier of the date that is six (6) months and one (1) day after the date of such of separation from service or deliveredthe date of Participant’s death. For purposes of Section 409A of the Code, each installment payment provided under this Agreement shall be treated as a separate payment.
12.15. No Registration Rights; No Right to Settle in Cash. The Company has no obligation to register with any governmental body or organization any of (a) the offer or issuance of any Award, (b) any Shares issuable upon the exercise of any Award, or (c) the sale of any Shares issued upon exercise of any Award, regardless of whether the Company in fact undertakes to register any of the foregoing. In particular, in the event that any of (x) any offer or issuance of any Award, (y) any Shares issuable upon exercise of any Award, or (z) the sale of any Shares issued upon exercise of any Award are not registered with any governmental body or organization, the Company will not under any circumstance be required to settle its obligations, if any, under this Plan in cash.
12.16. Captions. The captions in the Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein.
12.17. Incentive Stock Options Shareholder Approval. The Plan shall become effective on the Effective Date, provided, however, that no incentive stock option that may be granted under the Plan shall be valid as an incentive stock option unless and until the Plan has been approved by stockholders no later than the twelve (12) month anniversary of adoption by the Board in the manner provided under Section 424 of the Code and Treasury Regulations thereunder. Nothing in this clause shall affect the validity of Awards granted after the Effective Date if such stockholder approval has not been obtained.
12.18. Interpretation. Whenever the words “include,” “includes” or “including” are used in the Plan, they shall be deemed to be followed by the words “without limitation.”
12.19. Titles 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.
12.20. Other Agreements. The Committee may require, as a condition to the vesting of, grant of and/or the receipt of Shares under an Award, that Participants execute lock-up or other agreements, as it may determine in its sole and absolute discretion.
12.21. Payments.Participants shall be required to pay, to the extent required by applicable law, any amounts required to receive Shares under any Award made under the Plan.
12.22. Brokerage Accounts. Participants shall abide by the terms of any brokerage, custody or similar agreement established by the Company in connection with administration of the Plan, including the automatic reinvestment of dividends and payments on Shares awarded under the Plan, to the extent such Shares are held pursuant to such agreement. Such brokerage, custody or similar agreement may be modified by the PlanCompany (subject to the consent of such broker or applicable counterparty) at any time and from time to time.
12.23. Data Privacy.Except as prohibited by applicable law (including, as applicable, foreign laws), the receipt by a Participant of an Award and the Boardbenefits thereunder may pay cash in lieu of any fractional Shares or round downbe conditioned on such Participant acknowledging and consenting to the nearest whole Share.collection, use and transfer, in electronic or other form, of personal data as described in this subsection by and among, as applicable, the Company and its Affiliates for the exclusive purpose of implementing, administering and managing the Participant’s participation in this Plan. The Committee may, from time to time and at any time, require Participants to execute consents or similar agreements providing for such collection, use and transfer, in a manner consistent with applicable law (including, as applicable, foreign laws). Subject to applicable law (including, as applicable, foreign laws), the Company and its Affiliates may hold certain personal information about a Participant, including but not limited to, a Participant’s name, home address and telephone number, date of birth, social security or insurance number or other identification number, salary, nationality, job title(s), any shares held in the Company or any of its Subsidiaries and Affiliates, and details of all Awards, in each case, for the purpose of implementing, managing and administering this Plan and Awards (the “Data”). Subject to applicable law (including, as applicable, foreign laws), the Company and its Affiliates may transfer the Data amongst themselves as necessary for the purpose of implementation, administration and management of a Participant’s participation in this Plan, and the Company and its Affiliates may each further transfer the Data to any third parties assisting the Company and its Affiliates in the implementation, administration and management of this Plan. These recipients may be located in a Participant’s country, or elsewhere, and a Participant’s country may have different data privacy laws and protections than the recipients’ country. Through acceptance of an Award, subject to applicable law (including, as applicable, foreign laws), each Participant authorizes and shall authorize upon request such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing a Participant’s participation in this Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Company or its Affiliates, or a Participant, may elect to deposit any Shares. The Data related to a Participant will be held only as long as is necessary to implement, administer, and manage a Participant’s participation in this Plan. Subject to applicable law (including, as applicable, foreign laws), a Participant may, at any time, view the Data held by the Company or its Affiliates with respect to such Participant, request additional information about the storage and processing of the Data with respect to such Participant, recommend any necessary corrections to the Data with respect to such Participant or refuse or withdraw the consents set forth in the Award Agreement in writing, in any case without cost, by contacting such Participant’s local human resources representative.
12.1512.24. Mitigation of Excise Tax. Subject to the last sentence of this Section 12.24, if any payment or right accruing to a Participant under the Plan (without the application of this Section 12.24), either alone or together with other payments or rights accruing to the Participant from the Company, Affiliates and Subsidiaries (“Total Payments”), would constitute a “parachute payment” (as defined in Section 280G of the Code), such payments and rights shall be reduced to the largest amount or
greatest right that will result in no portion of the amount payable or right accruing under the Plan being subject to an excise tax under Section 4999 of the Code or being disallowed as a deduction under Section 280G of the Code. The determination of whether and how any reduction in the rights or payments under the Plan is to apply shall be made by the Committee in good faith after consultation with the Participant, and such determination shall be conclusive and binding on the Participant. The Participant shall cooperate in good faith with the Committee in making such determination and providing the necessary information for this purpose. Unless otherwise provided in an Award Agreement or in an employment agreement, the foregoing provisions of this Section 12.24 shall apply with respect to any Person only if, after reduction for any applicable federal excise tax imposed by Section 4999 of the Code and federal income tax imposed by the Code, the Total Payments accruing to such Person would be less than the amount of the Total Payments as reduced, if applicable, under the foregoing provisions of the Plan and after reduction for only federal income taxes. Notwithstanding the foregoing, in the event a Participant is a party to an employment agreement or other agreement with the Company or an Affiliate that provides for more favorable treatment for the Participant regarding Section 280G of the Code, such agreement shall be controlling.
12.25. Plan Document Controls. Controls.This Plan and each Award Agreement constitute the entire agreement with respect to the subject matter hereof and thereof; provided, however, that in the event of any inconsistency between the Plan and such Award Agreement, the terms and conditions of the Plan shall control.
12.16No Registration Rights; No Right12.26. Employment Agreement Supersedes Award Agreement. In the event a Participant is a party to Settle in Cash. The Company has no obligation to registeran employment agreement with any governmental body or organization any of (i) the offer or issuance of any Award, (ii) any Shares issuable upon the exercise of any Award, or (iii) the sale of any Shares issued upon exercise of any Award, regardless of whether the Company in fact undertakesand/or an Affiliate that expressly provides for vesting or extended exercisability of Awards on terms more favorable to register any of the foregoing. In particular, inParticipant than the event that any of (a) any offerParticipant’s Award Agreement or issuance of any Award, (b) any Shares issuable upon exercise of any Award, or (c) the sale of any Shares issued upon exercise of any Award are not registered with any governmental body or organization, the Company will not under any circumstance be required to settle its obligations, if any, under this Plan, in cash.
12.17Construction. As used insuch employment agreement shall be controlling; provided, however, that: (a) the Plan, the words “include” and “including,” and variations thereof,employment agreement shall not be deemedcontrolling to the extent the Participant and the Company and/or an Affiliate agree it shall not be terms of limitation, but rathercontrolling; and (b) an employment agreement or modification to an employment agreement shall be deemed to be followed bymodify the words “without limitation.”terms of any pre-existing Award only if the terms of the employment agreement expressly so provide.
A-12.18Gender and Number. Except where otherwise indicated by the context, any masculine term used herein will also include the feminine, the plural will include the singular, and the singular will include the plural.24
12.19Captions. The captions in the Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein.
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Table of Contents
EXHIBIT A
SHARE OWNERSHIP GUIDELINES
Non-Employee Directors of the Company must:
·Hold at least 9,000 Shares. For this purpose, Shares will be deemed held if deferred Shares or deferred RSUs, to the extent vested.
·The minimum stock ownership level must be achieved by each Non-Employee Director by the third (3rd) anniversary of such Director’s initial appointment to the Board.
·Once achieved, ownership of the guideline amount should be maintained for so long as the Non-Employee Director retains his or her seat on the Board.
·There may be rare instances where these guidelines would place a hardship on a Non-Employee Director. In these cases or in similar circumstances, the Board will make the final decision as to developing an alternative stock ownership guideline for a Non-Employee Director that reflects the intention of these guidelines and his or her personal circumstances.
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PROXY FOR
ANNUAL MEETING OF STOCKHOLDERS OF
MONSTER BEVERAGE CORPORATION
June 19, 2017
GO GREEN
| e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access.
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS:
The Proxy Materials are available at
https://materials.proxyvote.com/61174X
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
” Please detach along perforated line and mail in the envelope provided. ”
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VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. MONSTER BEVERAGE CORPORATION 1 MONSTER WAY CORONA, CA 92879 During The Meeting - Go to www.virtualshareholdermeeting.com/MNST2020 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D12980-P39830 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. MONSTER BEVERAGE CORPORATION THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS 1, 2, 3 AND 4, EVERY “1 YEAR” ON PROPOSAL 5, AND “AGAINST” PROPOSALS 6 AND 7.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
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| ABSTAIN
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4. For Withhold For All AllAllExcept To withhold authority to vote for any individual nominee(s), mark "For All Except" and write the number(s) of the nominee(s) on the line below. ! ! ! 1. Proposal to elect ten Directors: | Nominees: 01) Rodney C. Sacks 02) Hilton H. Schlosberg 03) Mark J. Hall 04) Kathleen E. Ciaramello 05) Gary P. Fayard 06) Jeanne P. Jackson 07) Steven G. Pizula 08) Benjamin M. Polk 09) Sydney Selati 10) Mark S. Vidergauz For Against Abstain ! ! ! ! ! ! ! ! ! 2. Proposal to ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2017. | o
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| FOR ALL NOMINEES
| NOMINEES:
 Rodney C. Sacks
Hilton H. Schlosberg
Mark J. Hall
Norman C. Epstein
Gary P. Fayard
Benjamin M. Polk
Sydney Selati
Harold C. Taber, Jr.
Kathy N. Waller
Mark S. Vidergauz
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o
| WITHHOLD AUTHORITY
FOR ALL NOMINEES
| | FOR
| AGAINST
| ABSTAIN
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3. Proposal to approve the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors.
| o
| o
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o
| FOR ALL EXCEPT
(See instructions below)
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| | FOR
| AGAINST
| ABSTAIN
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4.2020. Proposal to approve, on a non-binding, advisory basis, the compensation of the Company’s named executive officers.
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| 1 YEAR
| 2 YEARS
| 3 YEARS
| ABSTAIN
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5. 3. 4. Proposal to approve on a non-binding, advisory basis, the frequency with which stockholders will approveMonster Beverage Corporation 2020 Omnibus Incentive Plan. NOTE: Such other business as may properly come before the compensation of the Company’s named executive officers.
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6. Stockholder proposal requesting the Company's board of directors adopt a “proxy access” bylaw.
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INSTRUCTIONS:To withhold authority to vote formeeting or any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: ˜
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| FOR
| AGAINST
| ABSTAIN
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7. Stockholder proposal regarding a sustainability report related to key environmental, social and governance risks and opportunities including an analysis of material water-related risks.
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| o
| o
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adjournment thereof. The shares represented in this proxy card will be voted as directed above. IF NO DIRECTION IS GIVEN AND THE PROXY CARD IS VALIDLY EXECUTED, THE SHARES WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4, EVERY “1 YEAR” ON PROPOSAL 5, AND AGAINST PROPOSALS 6 AND 7.
PLEASE MARK, SIGN, DATE AND RETURN IMMEDIATELY.
Your Telephone 4. ! For address changes and/or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.
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To change the address on your account,comments, please check thethis box at right and indicate your new address in the address space above. Please note that changes to the registered name(s)write them on the account may not be submitted via this method.
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Signature of Stockholder
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| Note: back where indicated. Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign.name(s) appear(s) hereon. When signing as attorney, executor, administrator, attorney, trustee or guardian,other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If the signer is a corporation please sign full corporate name by duly authorized officer, giving full title as such. If signer is aor partnership, please sign in full corporate or partnership name by authorized person.officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date Convert pdf to html. Please insert high resolution. Please make sure the card is reduce so it will show the complete card in the edgar.
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PROXY FOR
MONSTER BEVERAGE CORPORATION
THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 19, 2017
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Proxy Statement and 10-K Wrap are available at www.proxyvote.com. D12981-P39830 PROXY FOR MONSTER BEVERAGE CORPORATION THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 3, 2020 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Monster Beverage Corporation (the "Company") hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated April 28, 2017, and hereby appoints Rodney C. Sacks and Hilton H. Schlosberg, or either of them, as proxies and attorneys-in-fact, each with the power to appoint his substitute, on behalf and in the name of the undersigned, to represent the undersigned at the Annual Meeting of Stockholders of the Company to be held on June 19, 2017 at 2:00 p.m. PDT, at the Company's executive offices, located at 1 Monster Way, Corona, California 92879 and at any postponement or adjournment thereof, and to vote all the stock of the Company that the undersigned would be entitled to vote as designated on the reverse hereof if then and there personally present, on the matters set forth in the Notice of Annual Meeting of Stockholders and proxy statement. In their discretion, such proxies are each authorized to vote upon such other business as may properly come before such Annual Meeting of Stockholders or any adjournment or postponement thereof.
(Continued and to be signed on the reverse side)
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PROXY FOR
ANNUAL MEETING OF STOCKHOLDERS OF
MONSTER BEVERAGE CORPORATION
June 19, 2017
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PROXY VOTING INSTRUCTIONS
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INTERNET- Access “www.voteproxy.com” and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page.
TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call.
Vote online/phone until 11:59 PM EST the day before the meeting.
MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible.
IN PERSON - You may vote your shares in person by attending the Annual Meeting.
GO GREEN - e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access.
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS: The Proxy Materials are available at
https://materials.proxyvote.com/61174X
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” Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet. ”
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS 1, 2, 3 AND 4, EVERY “1 YEAR” ON PROPOSAL 5, AND “AGAINST” PROPOSALS 6 AND 7.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
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1. ProposalThe undersigned stockholder of Monster Beverage Corporation (the “Company”) hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated April 21, 2020, and hereby appoints Rodney C. Sacks and Hilton H. Schlosberg, or either of them, as proxies and attorneys-in-fact, each with the power to elect ten Directors:
| 2. Proposalappoint his substitute, on behalf and in the name of the undersigned, to ratifyrepresent the appointmentundersigned at the Annual Meeting of Deloitte & Touche LLP as the independent registered public accounting firmStockholders of the Company forto be held on June 3, 2020 at 2:30 p.m. PDT, virtually at www.virtualshareholdermeeting.com/MNST2020, and at any postponement or adjournment thereof, and to vote all the fiscal year ending December 31, 2017.
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| stock of the Company that the undersigned would be entitled to vote as designated on the reverse hereof, on the matters set forth in the Notice of Annual Meeting of Stockholders and Proxy Statement. In their discretion, such proxies are each authorized to vote upon such other business as may properly come before such Annual Meeting of Stockholders or any adjournment or postponement thereof. (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) (Continued and to be signed on the reverse side) Address Changes/Comments: |
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| FOR ALL NOMINEES
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NOMINEES:
 Rodney C. Sacks
Hilton H. Schlosberg
Mark J. Hall
Norman C. Epstein
Gary P. Fayard
Benjamin M. Polk
Sydney Selati
Harold C. Taber, Jr.
Kathy N. Waller
Mark S. Vidergauz
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| WITHHOLD AUTHORITY
FOR ALL NOMINEES
| | FOR
| AGAINST
| ABSTAIN
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3. Proposal to approve the Monster Beverage Corporation 2017 Compensation Plan for Non-Employee Directors.
| o
| o
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o
| FOR ALL EXCEPT
(See instructions below)
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| AGAINST
| ABSTAIN
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4. Proposal to approve, on a non-binding, advisory basis, the compensation of the Company’s named executive officers.
| o
| o
| o
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| 1 YEAR
| 2 YEARS
| 3 YEARS
| ABSTAIN
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5. Proposal to approve, on a non-binding, advisory basis, the frequency with which stockholders will approve the compensation of the Company’s named executive officers.
| o
| o
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| FOR
| AGAINST
| ABSTAIN
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6. Stockholder proposal requesting the Company's board of directors adopt a “proxy access” bylaw.
| o
| o
| o
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INSTRUCTIONS:To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: ˜
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| FOR
| AGAINST
| ABSTAIN
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7. Stockholder proposal regarding a sustainability report related to key environmental, social and governance risks and opportunities including an analysis of material water-related risks.
| o
| o
| o
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The shares represented in this proxy card will be voted as directed above.
IF NO DIRECTION IS GIVEN AND THE PROXY CARD IS VALIDLY EXECUTED, THE SHARES WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4, EVERY “1 YEAR” ON PROPOSAL 5, AND AGAINST PROPOSALS 6 AND 7.
PLEASE MARK, SIGN, DATE AND RETURN IMMEDIATELY.
Your Telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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Signature of Stockholder
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| | Signature of Stockholder
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| Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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