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YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THEMEETING, WE ENCOURAGE YOU TO READ THIS PROXY STATEMENT ANDSUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE.
PLEASE REFER TO (I) THE INSTRUCTIONS OF THE NOTICE OF INTERNETAVAILABILITY OF PROXY MATERIALS YOU RECEIVED IN THE MAIL, (II) THESECTION ENTITLED GENERAL INFORMATION BEGINNING ON PAGE 1 OF THISPROXY STATEMENT, OR (III) IF YOU REQUESTED TO RECEIVE PRINTEDPROXY MATERIALS, YOUR ENCLOSED PROXY CARD.
IMPORTANT NOTICE REGARDING THE PROXY MATERIALS FOR THESTOCKHOLDER MEETING TO BE HELD ON NOVEMBER 15, 2017:The notice ofannual meeting, proxy statement and the annual report on Form 10-K for the fiscal year endedJuly 1, 2017,
IMPORTANT NOTICE REGARDING THE PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON NOVEMBER 11, 2020: The notice of annual meeting, proxy statement and the annual report on Form 10-K for the fiscal year ended June 27, 2020, are available free of charge at the following website: www.edocumentview.com/VIAV |
i
ii
2, 2020
WeStockholders:
This year’s Annual Meeting will consider the following proposals:
These items of business are more fully described in the Proxy Statement which is attached and made a part hereof.Time. Stockholders of record as of the close of business on September 19, 201723, 2020 are entitled to vote.
![]() | ![]() | ![]() | ||
Date Wednesday, November 11, 2020 | Time 9:00 a.m., Pacific Time | Live Webcast www.meetingcenter.io/210764753 access begins at 8:30 a.m., Pacific Time |
IMPORTANT NOTICE REGARDING THE PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON NOVEMBER 11, 2020: The notice of annual meeting, proxy statement and the annual report on Form 10-K for the fiscal year ended June 27, 2020, are available free of charge at the following website: www.edocumentview.com/VIAV |
Proxy Summary | ![]() |
Date & Time: | Wednesday, November 11, 2020 at 9:00 a.m. Pacific Time |
Location: | www.meetingcenter.io/210764753 |
Record Date: | September 23, 2020 |
Board Recommendation | ||
ITEM 1. Election of Directors The Board of Directors (the "Board') believes that each of the director nominees has the knowledge, experience, skills and background necessary to contribute to an effective and well-functioning Board. | ![]() | Vote FOR each director nominee |
ITEM 2.Ratification of the Appointment of PricewaterhouseCoopers LLP as VIAVI’s independent registered public accounting firm for fiscal year 2021 The Audit Committee and the Board believe that the continued retention of PricewaterhouseCoopers LLP to serve as VIAVI’s independent auditors is in the best interests of VIAVI and its stockholders. | ![]() | Vote FOR |
ITEM 3.Approval, in a Non-Binding Advisory Vote, of the Compensation for Named Executive Officers The Board believes that the compensation of our named executive officers as disclosed in this proxy statement for fiscal year 2020 is well aligned with VIAVI’s performance and the interests of our stockholders. | ![]() | Vote FOR |
0-5 Years: 56% | 5-10 Years: 78% | 10+ Years: 22% | Average tenure of all director nominees: 7 years |
1 | For the purpose of the charts, each year refers to the 12-month period ending on October 2. |
Committee Memberships (effective June 27, 2020) | |||||||
Nominee | Age at Record Date | Primary Occupation | Director Since | Audit Committee | Compensation Committee | Corporate Development Committee | Governance Committee |
Richard E. Belluzzo(C) | 66 | US Venture Partner of Innogest SGR SpA | February 2005 | ● | ● | ||
Keith Barnes | 69 | Former Chief Executive Officer and Chair of the Board of Verigy Ltd. | October 2011 | ●FE | ● | ● | |
Laura Black | 59 | Managing Director of Needham & Company, LLC | February 2018 | ● | ● | ||
Tor Braham | 62 | Former Managing Director and Global Head, Technology, M&A for Deutsche Bank Securities | October 2015 | ● | |||
Timothy Campos | 47 | Chief Executive Officer of Woven, Inc. | April 2014 | ● | ● | ||
Donald Colvin | 67 | Former Interim Chief Financial Officer of Isola Group Ltd. | October 2015 | ●FE | ● | ||
Glenda Dorchak | 66 | Independent technology business consultant. | November 2019 | ● | |||
Masood A. Jabbar | 70 | Former Chief Executive Officer of XDS Inc. | March 2006 | ●FE | ● | ||
Oleg Khaykin | 55 | Chief Executive Officer of Viavi Solutions Inc. | February 2016 |
● | Non-executive, independent Chairman | |
● | Annual election of directors | |
● | Majority voting for directors in uncontested elections | |
● | All committees are comprised of independent directors | |
● | All members of the Audit Committee are Audit Committee Financial Experts | |
● | Executive sessions of independent directors | |
● | Annual Board and Committee evaluations | |
● | Risk oversight by Board and Committees, including with respect to cybersecurity | |
● | Procedures for shareholders to communicate directly with the Board | |
● | Stock ownership requirements for directors and executives | |
● | Annual advisory vote on executive compensation | |
● | Annual review of Committee charters and Corporate Governance Guidelines | |
● | Governance Committee oversight of environmental, social and governance matters |
● | Quarterly earnings presentations; | In 2020, we spoke to stockholders, representing 53% of our shares outstanding. | |
● | SEC filings; | ||
● | The annual report and proxy statement; | ||
● | The annual stockholders meeting; and | ||
● | Investor meetings, conferences and web communications. |
What We Do | What We Don’t Do | ||||
![]() | Compensation Committee is comprised 100% of independent directors. | ![]() | No repricing or repurchasing of underwater stock options without stockholder approval. | ||
![]() | Independent compensation consultant retained by the Compensation Committee. | ![]() | No dividends or dividend equivalents on unearned awards. | ||
![]() | Balance short- and long-term incentives, cash and equity and fixed and variable pay elements. | ![]() | No pledging or hedging of VIAVI securities. | ||
![]() | Performance-based awards comprising approximately 50% of the overall equity allocation to executive officers. | ![]() | No “single trigger” change in control acceleration of vesting for equity awards. | ||
![]() | Require one-year minimum vesting for awards granted under the Amended and Restated 2003 Equity Incentive Plan, subject to certain exceptions. | ![]() | No excessive perquisites or severance benefits. | ||
![]() | Maintain a clawback policy that applies to both cash incentives and equity awards. | ![]() | No executive pension plans or supplemental retirement plans. | ||
![]() | Assess and mitigate compensation risk. | ![]() | No “golden parachute” tax gross-ups. | ||
![]() | Solicit an annual advisory vote on executive compensation. | ||||
![]() | Maintain stock ownership guidelines. | ||||
Fiscal Year 2020 VPP Payout | MSUs Earned in Fiscal Year 2020 | Fiscal Year 2020 Performance |
$514K for H1 of FY2020 | FY2016 MSUs: 150% of 4th tranche earned | 87.5percentile TSR ranking |
$0 for H2 of FY2020 (waived by CEO) | FY2017 MSUs: 150% of 3rd tranche earned | 86.3 percentile TSR ranking |
FY2018 MSUs: 142.5% of 2nd tranche earned | 72 percentile TSR ranking | |
FY2019 MSUs: 150% of 1st tranche earned | 90.9 percentile TSR ranking |
Net revenue | |
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$1,136.3 million, up $6.0 million or 0.5% year-over-year | |
GAAP operating margin | Non-GAAP operating margin* |
![]() | ![]() |
10.4%, up 440 bps year-over-year | 18.6%, up 110 bps year-over-year |
GAAP EPS | Non-GAAP EPS* |
![]() | ![]() |
$0.12, up $0.09 or 300.0% year-over-year | $0.73, up $0.05 or 7.4% year-over-year |
Materials instead of a full set of proxy materials?
The following proposals are scheduled to be voted on at the Annual Meeting:
The Board recommends that you vote “FOR” each of the proposals presented in this Proxy Statement.
Specifically, the Board recommends you vote:
The record date for the Annual Meeting is September 19, 2017 (the “Record Date”). The Record Date is established by the Board as required by Delaware law. Holders of shares of the Company’s Common Stock at the close of business on the record date are entitled to receive notice of the Annual Meeting and to vote at the Annual Meeting and any adjournments or postponements thereof.
Each holder of the Company’s common stock, par value $.001 per share (“Common Stock”), is entitled to one vote for each share of Common Stock owned as of the Record Date. At the Record Date, 228,354,440 shares of Common Stock were outstanding.
“Annual Report” “Annual Report”). These materials were first made available to you via the Internet on or about October 4, 2017.2, 2020. Our principal executive offices are located at 6001 America Center Drive, 6th6th Floor, San Jose, California 95002, and our telephone number is (408) 404-3600. We maintain a website atwww.viavisolutions.com. The information on our website is not a part of this Proxy Statement.
In accordance with the rulesavoid having duplicate copies of the SEC, we have electedProxy Statement sent to furnish ourmy household?
You are invited to attend the Annual Meeting if you are a registered stockholder or a street name stockholder as of September 19, 2017, the Record Date. In order to enter the Annual Meeting, you must present a form of photo identification acceptable to us, such as a valid driver’s license or passport. If you hold your shares beneficially in street name, you will need to provide proof of stock ownership as of the Record Date. Please note that since a street name stockholder is not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you follow your broker’s procedures for obtaining a legal proxy.
We do not know of any business to be considered at the Annual Meeting other than the proposals described in this Proxy Statement; however, the proxy holders (who are the management representatives named on the proxy card) may vote using their discretion with respect to any other matters properly presented for a vote at the meeting.
If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, you are considered a “record holder” of those shares. If you are a record holder, you will receive a Notice on how you may access and review the proxy materials on the Internet.
If your shares are held in a stock brokerage account, by a bank, or by another nominee, those shares are registered with American Stock Transfer & Trust Company in the “street name” of the brokerage account, bank, or other nominee, and you are considered the “beneficial owner” of those shares. If you are a beneficial owner, your broker or other nominee will send you a form of voting instructions along with instructions on how to access proxy materials.
As a beneficial owner, you have the right to direct your broker, bank, or other nominee on how to vote your shares by using the voting instruction form included in the mailing or by following the instructions on the voting instruction card for voting via the Internet or telephone.
1. | To elect the nine nominees named in the Proxy Statement as directors to serve until the 2021 Annual Meeting and until their respective successors are elected and qualified. |
2. | To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm (the “independent auditors”) for the fiscal year ending July 3, 2021. |
3. | To approve, on an advisory basis, the compensation of our named executive officers for the year ended June 27, 2020, as set forth in the Proxy Statement. |
4. | To consider such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof. |
Proposal 4. The choice of frequency that receives the highest number of affirmative “FOR” votes will be considered the advisory vote of our stockholders. You may vote “FOR” one year, “FOR” two years, or “FOR” three years or “ABSTAIN.” A properly executed proxy marked “ABSTAIN” with respect to the frequency of future stockholder votes on executive compensation will not be voted with respect to such proposal although it will be counted for purposes of determining whether there is a quorum. Abstentions and broker non-votes will not affect the outcome of this proposal.
Proposal 5. Approval of the amendment to the Company’s Amended and Restated Bylaws requires the affirmative vote of a majority of the shares of Common Stock present or represented by proxy and entitled to vote on this proposal at the Annual Meeting. Abstentions and broker non-votes will be counted towards a quorum. As a result, abstentions will have the same effect as votes against the proposal. Broker non-votes will have no effect on the outcome of this proposal.
Proposal 6. Approval of the amendment and restatement of the Company’s Amended and Restated 2003 Equity Incentive Plan requires the affirmative vote of a majority of the shares of Common Stock present or represented by proxy and entitled to vote on this proposal at the Annual Meeting. Abstentions and broker non-votes will be counted towards a quorum. As a result, abstentions will have the same effect as votes against the proposal. Broker non-votes will have no effect on the outcome of this proposal.
Proposal 7. Approval of the amendment and restatement of the Company’s Amended and Restated 1998 Employee Stock Purchase Plan requires the affirmative vote of a majority of the shares of Common Stock present or represented by proxy and entitled to vote on this proposal at the Annual Meeting. Abstentions and broker non-votes will be counted towards a quorum. As a result, abstentions will have the same effect as votes against this proposal. Broker non-votes will have no effect on the outcome of this proposal.
All shares of Common Stockour common stock represented by valid proxies will be voted in accordance with the instructions contained therein. In the absence of instructions, proxies from holders of Common Stockour common stock will be voted in accordance with the recommendations set forth in the Proxy Statement.
If you are astockholder of record as of the Record Date, there are four ways to vote:
Please note that the Internet and telephone voting facilities will close at 11:59 p.m. Eastern Daylight Time (8:59 p.m. Pacific Daylight Time) on November 14, 2017.
If, as of the Record Date, you area beneficial owner of shares held in street name, you should have received from your broker, bank, trustee or other nominee instructions on how to vote or instruct the broker to vote your shares, which are generally contained in a “vote instruction form” sent by the broker, bank, trustee or other nominee. Please follow their instructions carefully. Street name stockholders generally may vote by one of the following methods:
If you have any questions or require any assistance with voting your shares, please contact our proxy solicitor by any of the methods listed below:
48 Wall StreetNew York, NY 10005Banks and Brokers Call: (212) 269-5550All Others Call: (800) 848-3416Email: viavi@dfking.com
For shares you hold beneficially in street name, you generally may change your vote by submitting new voting instructions to your broker, bank, trustee, or nominee following the instructions they provided, or, if you have obtained a legal proxy from your broker, bank, trustee, or nominee giving you the right to vote your shares, by attending the Annual Meeting and voting in person.
Stockholders who have previously elected to receive the Proxy Statement and Annual Report over the Internet will be receiving an e-mail on or about October 4, 2017 with information on how to access stockholder information and instructions for voting over the Internet. Stockholders of record may vote via the Internet until 11:59 p.m. Eastern Time, November 14, 2017.
If your shares are registered in the name of a brokerage firm and you have not elected to receive your Proxy Statement and Annual Report over the Internet, you still may be eligible to vote your shares electronically over the Internet. A large number of brokerage firms are participating in the ADP online program, which provides eligible stockholders who receive a paper copy of this Proxy Statement the opportunity to vote via the Internet. If your brokerage firm is participating in ADP’s program, your proxy card will provide instructions for voting online.
Stockholders can elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies, which results in cost savings for the Company. If you are a stockholder of record and would like to receive future stockholder materials electronically, you can elect this option by following the instructions provided when you vote your proxy over the Internet atwww.voteproxy.com.
If you chose to view future proxy statements and annual reports over the Internet, you will receive an e-mail notification next year with instructions containing the Internet address of those materials. Your choice to view future proxy statements and annual reports over the Internet will remain in effect until you contact either your broker or the Company to rescind your instructions. You do not have to elect Internet access each year.
If you elected to receive this Proxy Statement electronically over the Internet and would now like to receive a paper copy of this Proxy Statement so that you may submit a paper proxy in lieu of an electronic proxy, you should contact your broker or the Company.
Some brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports, which results in cost savings for the Company. Householding means that only one copy of the Proxy Statement and Annual Report, or notice of internet availability of proxy materials will be sent to multiple stockholders who share an address. The Company will promptly deliver a separate copy of either document to any stockholder who contacts the Company’s Investor Relations Department at (408) 404-6305 or 6001 America Center Drive, 6th Floor, San Jose, California 95002, Attention: Investor Relations, requesting such copies. If a stockholder is receiving multiple copies of the Proxy Statement and Annual Report at the stockholder’s household and would like to receive a single copy of those documents for a stockholder’s household in the future, that stockholder should contact their broker, other nominee record holder, or the Company’s Investor Relations Department to request mailing of a single copy of the Proxy Statement and Annual Report.
(iv) any material interest of the stockholder or any proposing person in such business; (v) the number of shares owned beneficially and of record by the stockholder or proposing person, including derivative interests, contracts or other agreements related to ownership or rights to vote the Company’s shares and other economic interests in the Company’s securities; and (vi) any other information required pursuant to Section 14 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Our Bylaws specify in greater detail the requirements as to the form and content of a stockholder’s notice. We recommend that any stockholder wishing to bring any item before an annual meeting review a copy of our Bylaws, as amended and restated to date, which can be found atwww.viavisolutions.com. We will not entertain any proposals at the 20182021 Annual Meeting that do not meet the requirements set forth in ourthe Company's Bylaws. Subject to applicable laws and regulations, the Company has discretion over what stockholder proposals will be included in the agenda for the 20182021 Annual Meeting and/or in the related proxy materials. If the stockholder does not also comply with the requirements of Rule 14a-4(c)(2) under the Exchange Act, we may exercise discretionary voting authority under proxies that we solicit to vote in accordance with our best judgment on any such stockholder proposal.
Each candidate must have an employment and professional record which demonstrates, in the judgment of the Governance Committee, that the candidate has sufficient and relevant experience and background, taking into account positions held and industries, markets and geographical locations served, to serve on In November 2019, the Board in the proposed capacity. In particular, the Governance Committee seeks candidates with at least two years of experience serving as the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Director, or the equivalent of such positions, of a well-respected, publicly-traded company.
appointed Glenda Dorchak after an extensive search and upon recommendation from another board member.
Experience: |
Mr. Barnes served as Chief Executive Officer of Verigy Ltd, a semiconductor automatic test equipment company, from 2006 through 2010 and as Chair of the Board of Verigy from 2008 through 2011. Prior to that he was Chair and Chief Executive Officer of Electroglas, Inc. from 2003 through 2006 and Chair and Chief Executive Officer of Integrated Measurement Systems, Inc. from 1995 through 2001. Mr. Barnes is currently a member of the Board of Directors, Chair of Governance and Nominating Committee, and member of the Audit Committee of Knowles Corporation. Mr. Barnes is a member of the Board of Directors, Chair of the Compensation Committee and member of the Governance and Nominating committees of Rogers Corporation. Within the past five years, Mr. Barnes also served on the Boards of Directors of |
Timothy Campos | |
Mr. Khaykin’s hands on experience leading the Company provides him with day-to-day knowledge of the Company’s operations. Additionally, Mr. Khaykin’s extensive operational and strategic experience at other technology companies adds substantial value to the Board and the Company. |
Principles
The Company has adopted a Code of Ethics (known as the Code of Business Conduct) for its directors, officers and other employees. The Company will post on its website any amendments to, or waivers from, any provision of its Code of Business Conduct. A copy of the Code of Business Conduct is available on the Company’s website atwww.viavisolutions.comhttps://www.viavisolutions.com/en-us/literature/code-business-conduct-en.pdf.
ü | Non-executive, independent Chairman | |
ü | Annual election of directors | |
ü | Majority voting for directors in uncontested elections | |
ü | All committees are comprised of independent directors | |
ü | All members of the Audit Committee are Audit Committee Financial Experts | |
ü | Executive sessions of independent directors | |
ü | Annual Board and Committee evaluations | |
ü | Risk oversight by Board and Committees, including with respect to cybersecurity | |
ü | Procedures for shareholders to communicate directly with the Board | |
ü | Stock ownership requirements for directors and executives | |
ü | Annual advisory vote on executive compensation | |
ü | Annual review of Committee charters and Corporate Governance Guidelines | |
ü | Governance Committee oversight of environmental, social and governance matters |
The Company is not aware of any agreements or arrangements between any director and any person or entity other than the Company relating to compensation or other payment in connection with such director’s candidacy or service as a member of the Board.
Chairman of the Board | Chief Executive Officer |
Sets the agenda of Board meetings Presides over meetings of the full Board Contributes to Board governance and Board processes Communicates with all directors on key issues and concerns outside of Board meetings Presides over meetings of stockholders | Sets strategic direction for the Company Creates and implements the Company’s vision and mission Leads the affairs of the Company, subject to the overall direction and supervision of the Board and its committees and subject to such powers as reserved by the Board and its committees |
The Company takes
Audit Committee | |
The Audit Committee is responsible for assisting the full Board in fulfilling its oversight responsibilities relative to: | Members: |
•the Company’s financial statements; | Donald Colvin (Chair) |
• financial reporting practices; | Keith Barnes |
• systems of internal accounting and financial control; | Masood Jabbar |
• internal audit function; | Meetings: 8 |
• annual independent audits of the Company’s financial statements; | |
• Cybersecurity risk; and | |
• such legal and ethics programs as may be established from time to time by the Board. |
Compensation Committee | |
The Compensation Committee is responsible for: | Members: |
Keith Barnes (Chair) | |
•ensuring that the Company adopts and maintains responsible and responsive compensation programs for its employees, executive officers and directors consistent with the long-range interests of stockholders; and | Richard Belluzzo Timothy Campos Glenda Dorchak* |
•the administration of the Company’s | Meetings:5 |
Glenda Dorchak became a Board Member effective November 20, 2019 and joined the Compensation Committee |
Corporate Development Committee | |
The Corporate Development Committee is responsible for: | Members: |
•oversight of the Company’s strategic transaction and investment activities. | Masood Jabbar (Chair) Laura Black Tor Braham Timothy Campos Donald Colvin |
Meetings: 4 |
Governance Committee: | |
•serves as the Company’s nominating committee; | Members: |
•reviews current trends and practices in corporate governance; and | Richard Belluzzo (Chair) |
•recommends to the Board the adoption of governance programs. | Keith Barnes |
Laura Black* | |
Meetings: 4 |
* | Laura Black joined the Governance Committee |
patently offensive or otherwise inappropriate material. The Company’s Secretary may forward certain correspondence, such as product-related inquiries, elsewhere within the Company for review and possible response.
Director
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Compensation Element for Role | Board Compensation | |
General Board Service – Cash | ||
Retainer | $60,000, paid in quarterly installments | |
Meeting Fees | Not applicable (“NA”) | |
General Board Service – Equity | ||
Annual RSU | ||
Vesting Schedule | Vest on the first anniversary of the grant date | |
Number of shares determined using 30 calendar day average stock price prior to date of grant |
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Chair | Member | |||||||||||
Committee Service | Audit | $ | 30,000 | $ | 15,000 | |||||||
(No meeting fees) | Compensation | $ | 20,000 | $ | 10,000 | |||||||
Governance/Corporate Development | $ | 15,000 | $ | 7,500 | ||||||||
Non-Employee Board Chair | ||||||||||||
Additional Board Retainer | $75,000 | |||||||||||
Additional Equity | NA |
Chair | Member | ||||||||
Committee Service | Audit | $ | 30,000 | $ | 15,000 | ||||
(No meeting fees) | Compensation | $ | 20,000 | $ | 10,000 | ||||
Governance/Corporate Development | $ | 15,000 | $ | 7,500 | |||||
Non-Employee Board Chair | |||||||||
Additional Board Retainer | $ | 75,000 | |||||||
Additional Equity | NA |
The director compensation policies summarized above resulted in the following total compensation for our non-management directors in fiscal year 2017:
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DIRECTOR COMPENSATION | ||||||||||||
Name(1) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(2) | Total ($) | |||||||||
Keith Barnes | 102,500 | 214,903 | 317,403 | |||||||||
Richard E. Belluzzo | 160,000 | 214,903 | 374,903 | |||||||||
Tor Braham | 67,500 | 214,903 | 282,403 | |||||||||
Timothy Campos | 77,500 | 214,903 | 292,403 | |||||||||
Donald Colvin | 67,500 | 214,903 | 282,403 | |||||||||
Masood A. Jabbar | 95,000 | 214,903 | 309,903 | |||||||||
Pamela Strayer | 90,000 | 214,903 | 304,903 |
DIRECTOR COMPENSATION | |||||||
Name (1) | Fees Earned or Paid in Cash ($) | Stock Awards ($) (2) | Total ($) | ||||
Keith Barnes | 102,500 | 203,574 | 306,074 | ||||
Richard E. Belluzzo | 160,000 | 203,574 | 363,574 | ||||
Laura Black | 70,541 | (3) | 203,574 | 274,115 | |||
Tor Braham | 67,500 | 203,574 | 271,074 | ||||
Timothy Campos | 77,500 | 203,574 | 281,074 | ||||
Donald Colvin | 97,500 | 203,574 | 301,074 | ||||
Glenda Dorchak | 54,101 | (4) | 202,007 | 256,108 | |||
Masood A. Jabbar | 90,000 | 203,574 | 293,574 | ||||
(1) | Oleg Khaykin, President and Chief Executive Officer, is not included in this table as he was an employee of the Company and as such received no compensation for his services as a director. His compensation is disclosed in the Summary Compensation Table. |
(2) | The amounts shown in this column represent the grant date fair values of |
No stock options were awarded to non-employee directors in fiscal 2017. For information regarding the number of outstanding stock options held by each non-employee director as of the end of fiscal year 2017, see the column “Stock Options Outstanding” in the table below.
(3) | The amount shown includes fees earned in fiscal year 2020 and paid in fiscal year 2021. The fee includes Ms. Black's prorated Governance Committee member retainer fee ($3,041) |
(4) | The amount shown includes fees earned in fiscal year 2020 and paid in fiscal year 2021. The fee includes Ms. Dorchak’s prorated Compensation Committee member retainer fee ($7,287). |
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Non-Employee Director | Unvested Restricted Stock Units Outstanding | Stock Options Outstanding | ||||||
Mr. Barnes | 33,841 | 0 | ||||||
Mr. Belluzo | 33,841 | 0 | ||||||
Mr. Braham | 27,100 | 0 | ||||||
Mr. Campos | 33,841 | 0 | ||||||
Mr. Colvin | 27,100 | 0 | ||||||
Mr. Jabbar | 33,841 | 0 | ||||||
Ms. Strayer | 50,212 | 0 |
Non-Employee Director | Unvested Stock Units Outstanding at Fiscal Year End | |
Mr. Barnes | 13,058 | |
Mr. Belluzzo | 13,058 | |
Ms. Black | 13,058 | |
Mr. Braham | 13,058 | |
Mr. Campos | 13,058 | |
Mr. Colvin | 13,058 | |
Ms. Dorchak | 13,058 | |
Mr. Jabbar | 13,058 |
Executives
arrangements or relationships (including indebtedness). As required under SEC rules, any transactions that are determined to be directly or indirectly material to the Company or a related person are disclosed in the Company’s Proxy Statement. The Audit Committee reviews and approves or ratifies any related person transaction that is required to be disclosed. This review and approval process is evidenced in the minutes of the Audit Committee meetings.
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Executive Officer | Age | Position | ||
Oleg Khaykin | 55 | President and Chief Executive Officer (“CEO”) | ||
Amar Maletira | 51 | Executive Vice President and Chief Financial Officer (“CFO”) | ||
Paul McNab | 57 | Executive Vice President and Chief Marketing and Strategy Officer | ||
Ralph Rondinone | 58 | Senior Vice President, Global Operations and Services, Network and Service Enablement | ||
Luke Scrivanich | 58 | Senior Vice President and General Manager, Optical Security & Performance Products (OSP) | ||
Kevin Siebert | 51 | Senior Vice President, General Counsel and Secretary | ||
Gary Staley | 53 | Senior Vice President, Global Sales, Network and Service Enablement |
Directors,” on page 8 above. April 2008 as Vice President and General Manager of Flex Products. Prior to joining the Company in 2008, Mr. Scrivanich was with PPG Industries where he served in general management, marketing and strategic planning positions for various divisions, including fine chemicals, optical products and coatings. He previously held senior marketing positions at AGR International, Inc., a manufacturer of packaging inspection equipment. Mr. Scrivanich holds a B.S. in Chemical Engineering from Cornell University and an M.B.A. from the Harvard Graduate School of Business Administration. joined the Company in February 2016 as President and CEO. Priorjoining the Company, Mr. Khaykin was a Senior Advisor with Silver Lake Partners from February 2015 to February 2016. Before that, Mr. Khaykin was President and CEOProposal No. 1, “Election of International Rectifier from 2008 until its acquisition by Infineon AG in January of 2015. He has also served as Chief Operating Officer of Amkor Technology and Vice President of Strategy & Business Development at Conexant Systems. Earlier in his career he spent eight years with The Boston Consulting Group and prior to that, he was an engineer at Motorola. Mr. Khaykin is currently a member of the board of directors, Chairman of the executive compensation committee and a member of the nominating and governance committee of Marvell Technology Group. Mr. Khaykin holds an MBA from Kellogg School of Management at Northwestern University and a B.S. in Electrical and Computer Engineering with honors from Carnegie-Mellon University.CFO.Chief Financial Officer. Prior to joining the Company, Mr. Maletira spent 14 years at Hewlett Packard serving in a number of senior positions in Finance, most recently as Chief Financial Officer & Vice President, Enterprise Services Americas. From 1998 to 2000, Mr. Maletira was Chief Operating Officer and Vice President of a start-up IT consulting company, DPP Incorporated. Prior to that, Mr. Maletira led sales teams at Siemens and HCL in India. Mr. Maletira holds a B.S. in Electronics & Communication Engineering from Gogte Institute of Technology at Karnataka University in India and an M.B.A. from the Ross School of Business in Ann Arbor, Michigan.CEOChief Executive Officer of Puro Networks from 2013 to 2014. Before that, Mr. McNab was with Cisco Systems, Inc. for sixteen years where he held increasingly senior roles including Vice President and Chief Technology Officer, Data Center Switching and Vice President, Enterprise Marketing. Mr. McNab holds a B.S. in Engineering from Manchester Metropolitan University in the United Kingdom.Verizon included Worldwide Enterprise Sales and Regional Sales Service Provider.Firescope. Mr. Staley holds a Bachelor of Business Administration in Marketing from Ohio University.June 30, 2018,July 3, 2021, and the Board has directed that the selection of the independent auditors be submitted for ratification by the stockholders at the Annual Meeting.July 1, 2017June 27, 2020 and July 2, 2016,June 29, 2019 respectively, and fees billed for other services rendered by PricewaterhouseCoopers LLP and during those periods. Fiscal 2017 Fiscal 2016 Audit Fees(1) $ 2,502,545 $ 2,963,443 Audit-Related Fees 0 0 Tax Fees(2) 170,865 1,023,866 All Other Fees(3) 3,600 0 Total $ 2,677,010 $ 3,987,309 Fiscal 2020 Fiscal 2019 $ 3,646,606 $ 3,631,575 — — 139,180 169,776 4,500 4,500 Total $ 3,790,286 $ 3,805,851 (1) Audit Fees are related to professional services rendered in connection with the audit of the Company’s annual financial statements, the audit of internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, reviews of financial statements included in the Company’s Quarterly Reports on Form 10-Q, and audit services provided in connection with other statutory and regulatory filings. Audit Fees in Fiscal 2017fiscal 2020 include comfort letter fees related to a registered convertible debt offering. Fees include $692,000 for fiscal 2016 for services performed by PricewaterhouseCoopers LLP in connection with the separationaudit of the Oracle R12 implementation. Audit Fees in fiscal 2019 include fees for the acquisitions of RPC Photonics, Inc. (“RPC”) and spin-off of Lumentum Holdings,3Z Telecom, Inc. (“3Z”).(2) There were no Audit-Related Fees in fiscal year 2020 and fiscal year 2019. (3) Tax Fees for fiscal 2017year 2020 and 2016fiscal year 2019 include professional services rendered in connection with transfer pricing consulting, tax audits, tax planning services and other tax consulting. The fees include $860,000 for fiscal 2016, for services performed by PricewaterhouseCoopers LLP in connection with the separationcompliance and spin-off of Lumentum Holdings Inc.consulting.(3)(4) All Other Fees in fiscal 2017 isare related to certain software subscription fees.fee for fiscal years 2020 and 2019.
The following resolution will be submitted for stockholder vote at the Annual Meeting: “RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in the Company’s Proxy Statement for the 20172020 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and related narrative discussion.” Although the advisory vote is non-binding, the Compensation Committee and the Board will review the results of the vote and the Compensation Committee will consider the results of the vote when making future compensation decisions. Unless the Board of Directors modifies its determination on the frequency of future advisory votes, the next advisory vote on the compensation of the Company’s NEOs will be held at the 20182020 Annual Meeting.
As required by the Dodd-Frank Act, we are again asking our stockholders to provide their input with regard to the frequency of future stockholder advisory votes on our executive compensation programs, such as Proposal 3 of this Proxy Statement. In particular, we are asking whether the advisory vote on executive compensation should occur once every year, every two years or every three years.
After considering this agenda item, the Board has determined that an annual advisory vote on executive compensation is the most appropriate alternative for Viavi. The Board’s determination was influenced by the fact that the compensation of our named executive officers is evaluated, adjusted, and approved on an annual basis. As part of the annual review process, the Board believes that stockholder sentiment should be a factor that is taken into consideration by the Board and the Compensation Committee in making decisions with respect to executive compensation. By providing an advisory vote on executive compensation on an annual basis, our stockholders will be able to provide us with direct input on our compensation philosophy, policies and practices as disclosed in the proxy statement every year. We understand that our stockholders may have different views as to what is the best approach for Viavi, and we look forward to hearing from our stockholders on this agenda item every year. Accordingly, our Board recommends that the advisory vote on executive compensation be held every year.
You may cast your vote by choosing the option of one year, two years, three years, or abstain from voting in response to the resolution set forth below:
“RESOLVED, that the option of once every year, two years, or three years that receives the highest number of votes cast for this resolution will be determined to be the preferred frequency with which Viavi Solutions, Inc. is to hold an advisory vote by stockholders to approve the compensation of Viavi Solutions, Inc. named executive officers as set forth in the proxy statement relating to Viavi’s 2017 Annual Meeting of Stockholders under the caption “Executive Compensation,” including the section captioned “Compensation Discussion and Analysis,” the tabular disclosure regarding executive compensation, and the accompanying narrative disclosure.”
The choice of frequency that receives the highest number of affirmative “FOR” votes will be considered the advisory vote of our stockholders. You may vote “FOR” one year, “FOR” two years, or “FOR” three years or “ABSTAIN.” A properly executed proxy marked “ABSTAIN” with respect to the frequency of the stockholder vote on executive compensation will not be voted with respect to such proposal although it will be counted for purposes of determining whether there is a quorum. Abstentions and broker non-votes will not affect the outcome of this proposal.
Even though your vote is advisory and, therefore, will not be binding on Viavi, the Board and the Compensation Committee value the opinions of our stockholders and will consider our stockholders’ vote. Nonetheless, the Board may decide that it is in the best interests of our stockholders and Viavi to hold an advisory vote on executive compensation more or less frequently than the option voted by our stockholders.
We are asking stockholders to approve an amendment (the “Amendment”) to the Company’s AmendedBeneficial Owners and Restated Bylaws (the “Bylaws”) that, if adopted, would result in the courts located within the State of Delaware serving as the exclusive forum for the adjudication of certain legal actions involving the Company. Specifically, if this proposal is approved by stockholders, the Bylaws will be amended to insert a new provision as Article X to the Bylaws and to make appropriate conforming changes. The text of the new Article X is as follows:
Unless the corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the corporation to the corporation or the corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or the Certificate of Incorporation or these Bylaws (in each case, as they may be amended from time to time), or (iv) any action asserting a claim governed by the internal affairs doctrine shall be the Court of Chancery in the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the corporation shall be deemed to have notice of and consented to the provisions of these Bylaws.
The Board believes that adopting the Amendment is in the best interests of the Company and its stockholders for the following reasons:
The Board is seeking stockholder approval for this exclusive forum bylaw based on the following:
As a general matter, the Board is increasingly concerned about recent trends in lawyer-driven stockholder litigation relating to mergers and acquisitions or in connection with other matters submitted for stockholder approval. Such cases are typically filed in the state court where the defendant company is headquartered or where one or more of the plaintiff stockholders are domiciled, rather than the state where the company is incorporated, thus requiring a court less familiar with the laws of the state of incorporation to interpret and apply those laws.
The Board is committed to strong corporate governance practices, as evidenced by this proposal. A description of our key corporate governance practices appears under “Corporate Governance-Corporate Governance and Ethics” above.
After considering the foregoing, the Board believes the Amendment is in the best interests of the Company and its stockholders and recommends that our stockholders approve the Amendment. If approved by stockholders, the Amendment will be immediately effective. If the Amendment is not approved, the Board will reconsider whether the Amendment is in the best interests of the Company.
Stockholder approval is not required for the Board to amend our Bylaws; however, we believe this proposal is in keeping with our commitment to seek stockholder input on important governance issues and to serve the best interests of our stockholders. Approval of the Amendment requires the affirmative “for” vote of a majority of shares present in person or represented by proxy and entitled to vote on the proposal. Abstentions are treated as shares represented in person or by proxy and entitled to vote on the proposal and, therefore, will have the same effect as a vote “against” the proposal. Broker non-votes will have no effect on the outcome of the vote.
The Company’s stockholders are being asked to approve the Company’s Amended and Restated 2003 Equity Incentive Plan (the “2003 Plan”), as amended and restated by our Board on September 18, 2017, subject to stockholder approval, (the 2003 Plan, as amended and restated, the “Amended 2003 Plan”) to:
In the event that our stockholders do not approve this Proposal 6, the Amended 2003 Plan will not become effective, and the 2003 Plan and the Acquisition Plan will continue in their current forms.
As of August 31, 2017, there were 213,400 shares of our Common Stock subject to outstanding options, with a weighted average exercise price per share equal to $8.80 and a weighted average term remaining of 1.3 years, 7,290,944 RSUs, 1,245,844 MSUs and 135,000 PSUs that were issued and outstanding, but not yet vested, that were in each case, granted under the 2003 Plan. As of that date, there were 8,921,571 shares of our Common Stock remaining available for future grants under the 2003 Plan.
In addition, as of August 31, 2017, there were no shares of our Common Stock subject to outstanding options and 33,756 RSUs that were issued and outstanding, but not yet vested, that were in each case, granted under the 2005 Acquisition Equity Incentive Plan, which we utilize for grants made in connection with acquisitions and certain new hire awards to the extent permitted by NASDAQ rules. As of that date, there were 1,508,565 shares of our Common Stock remaining available for future grants under the 2005 Acquisition Equity Incentive Plan.
Additionally, as of August 31, 2017, there were 1,180,257 shares of our Common Stock subject to outstanding options, with a weighted average exercise price per share equal to $5.95 and a weighted average term remaining of 6.5 years, and 259,979 RSUs and 86,659 MSUs that were issued and outstanding, but not yet vested that were in each case, granted as inducement awards.
For more information regarding the 2003 Plan and the 2005 Acquisition Equity Incentive Plan as well the ESPP, please see the “Equity Compensation Plan Information” section.
The 2003 Plan was initially established as the JDS Uniphase Corporation 2003 Equity Incentive Plan effective as of November 6, 2003 and was subsequently amended a number of times. On August 1, 2015, in connection with the spin-off of Lumentum Holdings, Inc. (“Lumentum”) from the Company into a separate company (the “Spin-off”) and the related distribution of Lumentum common stock to holders of the Company’s Common Stock and renaming of JDS Uniphase Corporation (“JDSU”) as Viavi Solutions Inc., the
2003 Plan was amended and restated to (i) change the name of the plan to the “Viavi Solutions Inc. 2003 Equity Incentive Plan,” and (ii) adjust the remaining share reserve from 7,426,152 shares to 13,294,297 shares and the number of shares subject to outstanding awards from 15,092,155 shares to 27,017,296 shares (the “2003 Plan Adjustment”). Unlike the Company’s stockholders, the participants in the 2003 Plan did not receive any Lumentum common stock or the right to acquire such common stock in connection with the Spin-off. Because the Company’s Common Stock decreased in value as a result of the Spin-off, the 2003 Plan Adjustment was implemented to preserve the intrinsic value of the participating outstanding awards.
As of August 31, 2017, 8,885,188 shares of our Common Stock under the 2003 Plan are subject to outstanding awards. The awards outstanding consists of (i) 213,400 shares subject to option awards, with a weighted average exercise price of $8.80 per option share and a weighted average remaining term of 1.3 years and (ii) 8,671,788 shares subject to outstanding “full value stock awards” (either service-vesting RSUs or performance-vesting RSUs (PSUs and MSUs). In addition, 8,921,571 shares of our Common Stock remain available for future grants under the 2003 Plan. We believe that these shares remaining in the 2003 Plan may be insufficient to continue operating the 2003 Plan beyond the 2019 fiscal year, after taking into account the fungible share reserve feature of our 2003 Plan, which provides that 1.5 shares count against the 2003 Plan’s available share reserve for each share made subject to a “full value stock award.”
Approval of the Amended 2003 Plan will allow us to continue to grant equity awards at levels our Compensation Committee determines to be appropriate in order to attract the most qualified employees as well as to retain our existing personnel and provide incentives for such persons to exert maximum efforts for our success and ultimately increase shareholder value. The Amended 2003 Plan allows us to continue to utilize a broad array of equity incentives with flexibility in designing such incentives.
We also believe that increasing the number of shares reserved under the 2003 Plan through the Share Reserve Amendments will allow us to remain consistent with our intent to limit annual potential incremental dilution attributable to equity incentive awards by, among other things, utilizing the existing share reserve of our Acquisition Plan. The table below reflects our unadjusted three-year average gross burn rate based on the total number of options granted plus the total number of full-value stock awards, divided by the weighted-average number of shares of Common Stock outstanding for that fiscal year. Additionally, we have included an adjusted three-year average burn rate calculated by multiplying the full value stock award by 2.5, which is the multiplier used by Institutional Shareholder Services (ISS).
(Options and Shares in Millions)
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Year | Options | Full-Value Stock Awards(1) | Total Awards Granted(2) | Weighted- Average Shares Outstanding (Basic)(3) | Unadjusted Burn Rate(4) | ISS Adjusted Burn Rate(5) | ||||||||||||||||||
2017 | 0 | 4.3 | 4.3 | 229.9 | 1.87 | % | 4.68 | % | ||||||||||||||||
2016 | 1.2 | 6.8 | 8.0 | 234.0 | 3.42 | % | 7.78 | % | ||||||||||||||||
2015 | 0 | 6.0 | 6.0 | 232.7 | 2.58 | % | 6.45 | % |
If the amendment is approved, we anticipate the number of shares available for grant under the Amended 2003 Plan will last through the Company’s 2021 fiscal year. This calculation is based on the average rate at
which time-based awards were granted and performance-based awards were earned, in each case, over the past three fiscal years, without taking into account the fungible share reserve and assumes that future awards under the Amended 2003 Plan would be granted or earned (as applicable) at a similar rate. The number of shares required for future grants is not currently known and is dependent upon several factors that cannot be predicted, including but not limited to the price of the Company’s Common Stock on future grant dates and the extent to which grants, including our MSUs, vest.
The Amended 2003 Plan is also being submitted to our stockholders for approval to place a limit on the total value of cash and equity compensation that may be paid or granted to our non-employee directors each fiscal year. The Amended 2003 Plan provides that the maximum value of awards granted during a single fiscal year under the Amended 2003 Plan, taken together with any cash fees paid during such fiscal year for services on the Board, will not exceed $1,000,000 in total value for any non-employee director. In setting such a limit, our Board considered the recommendation of Compensation Committee. In addition, the Board considered the effectiveness and reasonableness of the equity and cash compensation that we offer to our non-employee directors, the current and future responsibilities of our non-employee directors, and whether such a limit provides sufficient flexibility to adjust non-employee director compensation in the future if such changes are necessary to remain competitive with our peers. We believe that such a limit allows us to stay within reasonable bounds of what the market requires in a competitive environment for qualified directors, while also imposing meaningful limits on the amount of compensation that may be awarded to our non-employee directors.
We are also seeking stockholder approval of the Amended 2003 Plan to allow the Company to grant stock options, stock appreciation rights (“SARs”) and performance awards to certain executive officers under the Amended 2003 Plan that are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code. Section 162(m) of the Code generally denies a corporate tax deduction for annual compensation exceeding $1 million paid to a “covered employee” of a publicly held company. Generally, covered employees are the chief executive officer and the three highest compensated officers other than the chief executive and chief financial officers. However, certain types of compensation, including “performance-based compensation,” are generally excluded from this limitation on deductibility. In order for awards granted under the Amended 2003 Plan to qualify as “performance-based compensation,” among other things, stockholders must approve the following terms, which appear in the Amended 2003 Plan, at least every five years: (i) the eligible participants; (ii) the per-person limit on the number of shares subject to stock options, SARs and performance stock awards that may be granted to any employee during a specified period; and (iii) the objective performance goals upon which performance awards may be become vested or exercisable. Accordingly, our stockholders are being requested to approve the Amended Stock Plan. These terms remain unchanged from the last time they were approved by stockholders at the 2013 Annual Meeting, except that the Amended 2003 Plan clarifies that the 2003 Plan Administrator may provide at the time of grant for the adjustment of the performance goals applicable to performance awards.
The 2003 Plan was also amended and restated by the Board to reflect our current practice of not paying out dividends and dividend equivalents on unvested awards. We believe that expressly tying the vesting of dividends, dividend equivalents and other distributions payable on shares or units to the vesting of the related shares or units is consistent with our philosophy of aligning compensation to performance. In our view, from an incentive and retention perspective, dividends, dividend equivalents and other distributions on unvested awards should be paid only after the underlying awards have been earned and not during the performance/service vesting period, and therefore, the Amended 2003 Plan now explicitly sets forth this limitation.
Finally, the 2003 Plan was amended and restated by the Board to include a minimum vesting requirement pursuant to which 95% of the shares authorized for grant under Amended 2003 Plan must be granted pursuant to equity awards with a one-year minimum vesting period from the date of grant. Such amendment was made to reflect our current practice of generally requiring employees to have been employed for one year from their start date before they vest into their equity awards.
The Amended 2003 Plan includes provisions that are designed to protect our stockholders’ interests and to reflect corporate governance best practices including:
No Evergreen Provision. The Amended 2003 Plan does not contain an “evergreen” feature pursuant to which the shares authorized for issuance under the Amended 2003 Plan can be automatically replenished.
No Liberal Share Recycling. Shares used to pay the exercise price or withholding taxes related to an outstanding award, unissued shares resulting from the net settlement of outstanding SARs or options, and shares purchased by the Company in the open market do not become available for issuance as future awards under the Amended 2003 Plan.
No Single Trigger Change of Control. Awards do not accelerate upon a change of control unless the acquiring company does not assume or replace the award.
No Repricing Without Stockholder Approval. Other than in connection with a corporate transaction, as described below, at any time when the purchase price of a stock option or SAR is above the market value of a share, the Company will not, without stockholder approval, reduce the purchase price of such stock option or SAR and will not exchange such stock option or SAR for a new award with no or a lower purchase price or for cash.
Minimum Vesting Requirement. Future awards granted under the Amended 2003 Plan will have a minimum one-year vesting period from the date of grant, subject to certain limited exceptions.
Prohibition on Payment of Dividends and Dividend Equivalents on Unvested Awards. Prohibits the payment or settlement of dividends or dividend equivalents with respect to any award until the underlying shares or units vest.
Limit on non-employee director awards. The aggregate value of all compensation paid or granted, as applicable, to any individual for service as a non-employee director of our Board with respect to any fiscal year, including awards granted under the Amended 2003 Plan and cash fees paid by us to such non-employee director, will not exceed $1,000,000 in total value.
No Automatic Grants. The Amended 2003 Plan does not provide for automatic grants to any participant.
No Tax Gross-ups. The Amended 2003 Plan does not provide for any tax gross-ups.
Maximum Term of Options/SARs. The maximum term for options and SARs issued under the Amended 2003 Plan is 8 years.
No Transferability. Awards generally may not be transferred, except by will or the laws of descent and distribution, unless approved by the 2003 Plan Administrator.
No Discounted Options or SARs. Stock options and SARs may not be granted with exercise prices lower than the market value of the underlying shares on the grant date.
No Reload Grants. Reload grants, or the granting of stock options conditioned upon delivery of shares to satisfy the exercise price and/or tax withholding obligation under another employee stock option are not permitted.
Performance Measures. The Amended 2003 Plan includes a list of business and financial performance measures from which the Compensation Committee may construct predetermined goals that must be met for certain awards to vest with the intent that such awards constitute “performance-based” compensation for purposes of 162(m) of the Code.
The following description of the Amended 2003 Plan is only a summary of certain provisions thereof and is qualified in its entirety by reference to its full text, a copy of which, as proposed in its amended and restated form, is attached hereto asAppendix A.
The purpose of the Amended 2003 Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company by offering them an opportunity to participate in the Company’s future performance.
All employees, directors and consultants are eligible to receive awards under the Amended 2003 Plan. As of August 31, 2017, there were approximately 2,746 employees, approximately 297 consultants, seven (7) executive officers and seven (7) independent directors who were eligible to participate in the Amended 2003 Plan.
As of August 31, 2017, an aggregate of 8,921,571 shares of Common Stock remain available for issuance under the 2003 Plan and 8,885,188 shares remain subject to outstanding awards, in each case subject to capitalization adjustments. If the Amended 2003 Plan is approved by stockholders, subject to capitalization adjustments, the maximum aggregate number of shares available for issuance under the Amended 2003 Plan following the Restatement Date will be equal to the sum of (i) the number of shares that were available for the future grant of awards as of the approval date, (ii) 4,000,000 new shares, (iii) the number of shares subject to awards outstanding under the 2003 Plan as of the Restatement Date, (iv) the number of unallocated shares remaining available for the grant of new awards under the Acquisition Plan as of the Restatement Date, and (v) the number of shares subject to outstanding stock awards granted under the Acquisition Plan that on or after Restatement Date would have otherwise been available for reissuance under the Acquisition Plan. The shares to be issued pursuant to awards under the Amended 2003 Plan will, solely in the Board’s discretion, be made available from either authorized but unissued Common Stock or from reacquired Common Stock. Any shares covered by an award that is forfeited, canceled or expires is deemed not to have been issued for purposes of determining the maximum aggregate number of shares that may be issued under the Amended 2003 Plan. The number of shares available under the Amended 2003 Plan will be reduced upon the exercise of a SAR by the gross number of shares for which the award is exercised, rather than by the net number of shares actually issued. If shares are withheld to pay any withholding taxes applicable to an award, then the gross number of shares subject to such award will not be returned to the Amended 2003 Plan’s share reserve to again become available for future grant. Except as described above, shares that have been issued under the Amended 2003 Plan cannot be returned to the Amended 2003 Plan’s share reserve to again become available for future grant.
Following the Restatement Date, the Amended 2003 Plan’s share reserve will be reduced by one share for each share made subject to an award, and one share will be returned to the share reserve for each unvested share subject to an award that is forfeited, canceled, expired or repurchased by the Company (at the lower of its original purchase price or its fair market value at the time of repurchase), in each case, regardless of whether such share is subject to a full value award or not. To the extent that a share that was subject to an
award that counted as 1.5 Shares against the 2003 Plan reserve prior to the Restatement Date is recycled back into the Amended 2003 Plan, the Amended 2003 Plan reserve will be credited with 1.5 shares.
The Amended 2003 Plan is administered by the Board or a committee of the Board (collectively, the “2003 Plan Administrator”). The Board has delegated to its Compensation Committee the authority generally to administer the Amended 2003 Plan. In the case of awards granted to officers and members of the Board or which are intended to qualify as “performance-based” for purposes of Section 162(m) of the Code, the Amended 2003 Plan requires that the 2003 Plan Administrator be constituted in a manner that complies with applicable law. Subject to applicable law and the terms of the Amended 2003 Plan, the 2003 Plan Administrator has the authority, in its discretion, to:
The maximum number of shares for which awards may be granted to any participant during a fiscal year is 1,790,200 shares, provided that a participant may be granted awards for up to an additional 1,790,200 shares in connection with the participant’s initial commencement of service or first promotion in any fiscal year. These award limits will be adjusted proportionately in the event of a stock split or other change in the Common Stock or capital structure of the Company.
The maximum value of awards granted during a single fiscal year under the Amended 2003 Plan, if any, taken together with any cash fees paid during such fiscal year for services on the Board, will not exceed $1,000,000 in total value for any non-employee director, calculating the value of any such awards based on the grant date fair value of such awards under applicable financial accounting standards. Such limit includes the value of any awards that are received in lieu of payment of all or a portion of the non-employee director’s regular annual retainer or other similar cash based payments. For the avoidance of doubt, neither awards granted or compensation paid to a non-employee director for services rendered as an employee or consultant nor any amounts paid to a non-employee director as a reimbursement of an expense will count against the foregoing.
The Amended 2003 Plan expressly provides that, without the approval of the Company’s stockholders, the Company may not reduce the exercise price of any option or SAR granted under the Amended 2003 Plan or cancel an outstanding option or SAR having an exercise price that exceeds the fair market value of the underlying shares in exchange for cash, another option, SAR, restricted stock, RSUs or other award, unless the exchange occurs in connection with a corporate transaction, as described below.
The Amended 2003 Plan provides for the grant of awards in the form of stock options, SARs, restricted stock, RSUs, performance shares, performance units, and dividend equivalent rights. Stock options granted
under the Amended 2003 Plan may be either incentive stock options complying with Section 422 of the Code or nonqualified stock options. Incentive stock options may be granted only to employees.
Each award must be evidenced by an award agreement designating the type of award granted. Stock options must be designated as either incentive stock options or nonqualified stock options. However, to the extent that the aggregate fair market value of shares of Common Stock subject to options designated as incentive stock options which become exercisable by an employee for the first time during any calendar year exceeds $100,000, such excess options are treated as nonqualified stock options. The term of any award granted under the Amended 2003 Plan may not exceed eight years, provided that the term of an incentive stock option granted to an employee who owns stock representing more than 10% of the combined voting power of the Company or any parent or subsidiary of the Company may not exceed five years.
Awards may be granted with such vesting conditions, including satisfaction of performance criteria, as are determined by the 2003 Plan Administrator. Compensation realized by a covered employee pursuant to a stock-based award other than a stock option or SAR will qualify as performance-based for purposes of Section 162(m) of the Code only if it is payable only upon the achievement of one or more performance goals established by the 2003 Plan Administrator not later than 90 days (or other period required by Section 162(m) of the Code) after the commencement of the services to which the goal relates and while the outcome is substantially uncertain. The Amended 2003 Plan establishes the following business criteria upon which the 2003 Plan Administrator may base such performance goals for purposes of qualifying the Award as performance-based for purposes of Section 162(m) of the Code: (i) increase in share price, (ii) earnings per share, (iii) total stockholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xvi) economic value added, (xvii) market share, (xviii) personal management objectives, and (xix) other measures of performance selected by the 2003 Plan Administrator. The Amended 2003 Plan also provides that the 2003 Plan Administrator may provide at the time of grant for the adjustment of the performance goals to include or exclude any objectively determinable components of any performance measure.
Stock options and SARs must have an exercise price per share that is not less than 100% of the fair market value of a share of Common Stock on the date the option is granted, except that in the case of incentive stock options granted to an employee who owns stock representing more than 10% of the combined voting power of the Company or any parent or subsidiary of the Company such exercise price may not be less than 110% of the fair market value of a share of Common Stock on the date the option is granted. The exercise price is generally payable in cash, by check, through the surrender of shares of Common Stock or, in the case of options, by means of a broker-assisted sale and remittance procedure.
Under the Amended 2003 Plan, the 2003 Plan Administrator may establish one or more programs to permit selected participants the opportunity to elect to defer receipt of consideration payable under an award. The 2003 Plan Administrator also may establish separate programs for the grant of particular forms of awards to one or more classes of participants.
All awards granted under the Amended 2003 Plan after the plan becomes effective. will have a minimum vesting period of one-year measured from the date of grant; provided, however, that up to 5% of the shares available for future distribution under the Amended 2003 Plan on the date the plan becomes effective may be granted without such minimum vesting requirement. Further, this minimum vesting requirement will not limit (i) the Company’s ability to grant awards that contain rights to accelerated vesting on a termination of employment or service (or to otherwise accelerate vesting), or (ii) any rights to accelerated vesting in connection with a change of control.
The 2003 Plan Administrator may credit any holder of an award granted under the Amended 2003 Plan with dividends or dividend equivalents in an amount equal to the value of all dividends paid on one share of
Common Stock for each share represented by the award. However, any such dividends or dividend equivalents may not be paid until the underlying share or unit vests. The value of dividends or dividend equivalents payable with respect to awards that do not vest must be forfeited.
A participant in the Amended 2003 Plan whose service with the Company terminates may exercise an award only to the extent and only within the time period provided in the award agreement. Any award designated as an incentive stock option not exercised within the time permitted by Section 422 of the Code following the participant’s termination of employment will be treated as a nonqualified stock option.
Incentive stock options may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent and distribution and may be exercised during the lifetime of the participant only by the participant. Other awards may be transferred only by will or by the laws of descent and distribution, or by gift or domestic relations order to the participant’s immediate family in a manner determined by the 2003 Plan Administrator. The Amended 2003 Plan permits the designation of beneficiaries by holders of awards.
Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by outstanding awards, the number of shares of Common Stock that have been authorized for issuance under the Amended 2003 Plan, the exercise or purchase price of each outstanding award, the maximum number of shares of Common Stock that may be granted subject to awards to any participant in a fiscal year, and the like, will be proportionally adjusted in the event of (i) any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification or similar event affecting the Common Stock, or (ii) any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company. In addition, the 2003 Plan Administrator is authorized to provide for such adjustments in connection with any other transaction with respect to Common Stock, including a merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction.
Outstanding awards will terminate upon the consummation of a corporate transaction (as described below) except to the extent that they are continued by the Company or assumed by the successor entity or its parent. Except as otherwise provided by the award agreement, the vesting of an outstanding award will be accelerated in full if it is not continued by the Company or assumed or replaced by the successor entity or its parent in connection with a corporate transaction. The Amended 2003 Plan provides that a corporate transaction includes (i) the sale of all or substantially all of the Company’s assets, (ii) the complete dissolution or liquidation of the Company, (iii) a merger or consolidation in which the Company is not the surviving entity, (iv) any reverse merger in which the Company is the surviving entity but in which securities possessing more than 40% of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger, or (v) the acquisition in a single or series of related transactions by any person or related group of persons of beneficial ownership of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities.
The Board may at any time amend, suspend or terminate the Amended 2003 Plan. The Amended 2003 Plan will terminate automatically November 14, 2022. To the extent necessary to comply with applicable law and listing requirements, the Company will obtain stockholder approval of any amendment to the Amended 2003 Plan. The Board may unilaterally amend the Amended 2003 Plan or any award agreement, retroactively or otherwise, in order to conform the Amended 2003 Plan or award agreement to any present or future law, regulation or rule applicable to the Amended 2003 Plan, including Section 409A of the Code. Section 409A establishes certain requirements applicable to nonqualified deferred compensation and imposes tax penalties on
such deferred compensation that does not satisfy these requirements. Certain awards granted under the Amended 2003 Plan may be deemed to constitute deferred compensation and will be required to comply with the requirements of Section 409A.
The following summary is intended only as a general guide to the U.S. federal income tax consequences of participation in the Amended 2003 Plan and is based upon the federal income tax laws in effect on the date of this proxy statement and does not attempt to describe all possible federal or other tax consequences of such participation or tax consequences based on particular circumstances.
The grant of a nonqualified stock option under the Amended 2003 Plan will not result in any federal income tax consequences to the participant or to the Company. Upon exercise of a nonqualified stock option, the participant is subject to income tax at the rate applicable to ordinary compensation income on the excess of the fair market value on the date of exercise of the shares acquired over the exercise price paid. If the participant is an employee, this income will be subject to withholding of federal income and employment taxes. The Company generally will be entitled to an income tax deduction in the amount of the income recognized by the participant, except to the extent such deduction is limited by applicable provisions of the Code (including, without limitation, Section 162(m)). Any gain or loss realized by the participant upon a subsequent disposition of the shares will be a long- or short-term capital gain or loss, depending on whether the shares are held for more than one year following exercise of the option. The Company does not receive a tax deduction for any such gain.
The grant of an incentive stock option under the Amended 2003 Plan will not result in any federal income tax consequences to the participant or to the Company. A participant recognizes no taxable income for regular tax purposes upon exercising an incentive stock option (subject to the alternative minimum tax rules discussed below), and the Company receives no deduction at the time of exercise. In the event of a disposition of stock acquired upon exercise of an incentive stock option, the tax consequences depend upon how long the participant has held the shares. If the participant does not dispose of the shares within two years after the incentive stock option was granted or within one year after the incentive stock option was exercised, the participant will recognize a long-term capital gain (or loss) equal to the difference between the sale price of the shares and the exercise price paid. The Company is not entitled to any deduction under these circumstances.
If the participant fails to satisfy either of the foregoing holding periods, he or she must recognize ordinary income in the year of the disposition (referred to as a “disqualifying disposition”). The amount of such ordinary income generally is the lesser of (i) the difference between the amount realized on the disposition and the exercise price paid, or (ii) the difference between the fair market value of the stock on the exercise date and the exercise price paid. Any gain in excess of the amount taxed as ordinary income will be treated as a long- or short-term capital gain, depending on whether the shares were held for more than one year. The Company, in the year of the disqualifying disposition, is entitled to a deduction equal to the amount of ordinary income recognized by the participant, except to the extent such deduction is limited by applicable provisions of the Code (including, without limitation, Section 162(m)).
In general, the difference between the exercise price paid and the fair market value of the shares on the date when an incentive stock option is exercised is treated as an adjustment in computing income that may be subject to the alternative minimum tax, which is paid if such tax exceeds the regular tax for the year. Special rules may apply with respect to certain subsequent sales of the shares in a disqualifying disposition, certain basis adjustments for purposes of computing the alternative minimum taxable income on a subsequent sale of the shares and certain tax credits which may arise with respect to participants subject to the alternative minimum tax.
A participant recognizes no taxable income upon the receipt of a SAR. Upon the exercise of a SAR, the participant generally will recognize ordinary income in an amount equal to the excess of the fair market value of the underlying shares of Common Stock on the exercise date over the award’s base price. If the participant
is an employee, such ordinary income generally is subject to withholding of income and employment taxes. The Company generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant in connection with the exercise of the SAR, except to the extent such deduction is limited by applicable provisions of the Code (including, without limitation, Section 162(m)). Any gain or loss on participant’s subsequent disposition of the shares will be a long- or short-term capital gain or loss, depending on whether the shares have been held for more than one year following exercise of the SAR. The Company does not receive a tax deduction for any such gain.
A participant who acquires shares under a restricted stock award will generally recognize ordinary income on the difference between the amount paid for the shares, if anything, and their fair market value on the date that the restrictions lapse. If the participant is an employee, this income will be subject to withholding of federal income and employment taxes. The Company is entitled to an income tax deduction in the amount of the ordinary income recognized by the participant, except to the extent such deduction is limited by applicable provisions of the Code (including, without limitation, Section 162(m)). Any gain or loss on the recipient’s subsequent disposition of the shares will be a long- or short-term capital gain or loss, depending on whether the shares have been held for more than one year since the restrictions lapsed. The Company does not receive a tax deduction for any such gain.
Recipients of restricted stock awards may make an election under Section 83(b) of the Code to recognize as ordinary income in the year that such shares are granted at the amount equal to the excess of the fair market value on the date of their issuance over the price paid for such shares, if any. If this election is made, the participant will recognize no additional compensation income when the restrictions on the shares lapse. Any gain or loss on the subsequent disposition of the shares will be a long- or short-term capital gain or loss, depending on whether the shares have been held for more than one year since they were acquired by the participant. An election under Section 83(b) of the Code must be made, if at all, within thirty days following the date on which the shares of restricted stock were issued to the participant.
A participant generally will recognize no income upon the receipt of a RSU, performance share or performance unit award. Upon the settlement of such awards, participants normally will recognize ordinary income in the year of settlement in an amount equal to the cash received and the fair market value of any unrestricted shares of stock received. If the participant is an employee, such ordinary income generally is subject to withholding of federal income and employment taxes. If the participant receives performance shares, the participant generally will be taxed in the same manner as described above under “Restricted Stock.” Upon the sale of any shares received, any gain or loss, based on the difference between the sale price and the fair market value of unrestricted shares on the date they were issued, will be taxed as a long- or short-term capital gain or loss, depending on whether the shares have been held for more than one year since they were acquired by the participant. The Company generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant, except to the extent such deduction is limited by applicable provisions of the Code (including, without limitation, Section 162(m)).
Because RSUs and performance unit awards are not actual, issued shares of our Common Stock, recipients do not have the rights of a stockholder, but these awards may provide for the payment of dividend equivalents. Recipients of stock-based awards that earn dividends or dividend equivalents will recognize taxable ordinary income on any dividend payments received with respect to such awards. If the participant is an employee, such income is subject to withholding of federal income and employment taxes. The Company is entitled to an income tax deduction in the amount of the income recognized by a participant, except to the extent such deduction is limited by applicable provisions of the Code (including, without limitation, Section 162(m)).
As discussed above, while Section 162(m) of the Code limits the deductibility of compensation paid to certain executive officers, the Amended 2003 Plan permits the grant of stock awards that are intended to satisfy the requirements of Section 162(m). However, because of the fact-based nature of the performance-based
compensation exception under Section 162(m) and the limited availability of binding guidance thereunder, we cannot guarantee that the awards under the Amended 2003 Plan or any other arrangement the Company maintains will qualify for exemption under Section 162(m).
The Amended 2003 Plan does not provide for set benefits or amounts of awards and we have not approved any awards that are conditioned on stockholder approval of the Amended 2003 Plan. However, as discussed in further detail in the section entitled “Director Compensation”, each of our current non-employee directors is entitled to receive a grant of RSUs every year on the date of our Annual Meeting of stockholders for the number of shares determined by dividing $200,000 by the 30 calendar day average stock price prior to the date of grant, which vest on the first anniversary of the grant date. As of the date of the Annual Meeting, such awards will be granted under the Amended 2003 Plan. The following table summarizes the aggregate value of the shares that our current non-employee directors as a group will receive if they remain a director following the Annual Meeting and highlights the fact that none of our executive officers (including our named executive officers) or employees will receive any set benefits or awards that are conditioned upon stockholder approval of the Amended 2003 Plan. All other future awards to directors, executive officers, employees and consultants of the Company under the Amended 2003 plan are discretionary and cannot be determined at this time.
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Name of Individual or Group(1) | Dollar Value | Number of Shares | ||||||
Oleg Khaykin President and Chief Executive Officer | — | — | ||||||
Amar Maletira Executive Vice President and Chief Financial Officer | — | — | ||||||
Luke Scrivanich Senior Vice President & General Manager, Optical Security and Performance Products | — | — | ||||||
Paul McNab Executive Vice President and Chief Marketing & Strategy Officer | — | — | ||||||
Ralph Rondinone Senior Vice President, Global Operations, Network Service Enablement | — | — | ||||||
Susan Spradley Former Executive Vice President and General Manager, Product Line Management & Design, Network Enablement and Service Enablement | — | — | ||||||
Dion Joannou Former Senior Vice President, Global Sales, Network Enablement and Service Enablement | — | — | ||||||
All current executive officers as a group | — | — | ||||||
All current directors who are not executive officers as a group(1) | $ | 1,400,000 | — | |||||
All employees, including all current officers who are not executive officers, as a group | — | — |
The following table shows, as to each of our named executive officers and the other individuals and groups indicated, the number of shares of Common Stock subject to stock awards that have been granted (even if not currently outstanding) since its inception through August 31, 2017. On August 31, 2017, the closing price per share of our Common Stock was $10.04.
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The Company’s stockholders are being asked to approve the Company’s 1998 Employee Stock Purchase Plan (the “ESPP”), as amended and restated by our Board on September 18, 2017, subject to stockholder approval, to extend the termination date to November 15, 2027 (the ESPP, as amended and restated, the “Amended ESPP”).No new shares are being requested. In the event that our stockholders do not approve this Proposal 7, the Amended ESPP will not become effective and the ESPP will continue in its current form and terminate pursuant to its terms.
If the ESPP termination date is not extended, the ESPP will terminate under its terms on the earlier of (i) August 1, 2018 or (ii) the date on which all shares available for issuance under the ESPP are sold in accordance with the ESPP. The Board believes that amending the ESPP to extend the termination date to November 15, 2027 is critical in enabling the Company to continue offering benefits to employees under the ESPP and to motivate high levels of performance through employee stock ownership in the Company.
The following description of the Amended ESPP is only a summary of certain provisions thereof and is qualified in its entirety by reference to its full text, a copy of which, as proposed in its amended and restated form, is attached hereto asAppendix B.
The Amended ESPP is intended to provide eligible employees of the Company and one or more of its affiliates with the opportunity to purchase shares of Common Stock. It is also intended to qualify as an “employee stock purchase plan” under Section 423 of the Code for employees in the United States.
Each participant in the Amended ESPP is granted at the beginning of each purchase period under the Amended ESPP the right to purchase shares of Common Stock at a discount through accumulated payroll deductions (each such right, a “purchase right”). The purchase right is automatically exercised on the last date of the purchase period provided the purchase right remains outstanding on such date (such date, a “purchase date”).
Any employee of the Company or any affiliate designated by the ESPP Administrator for inclusion in the Amended ESPP is eligible to participate in a particular purchase period under the Amended ESPP so long as the employee is customarily employed for more than 20 hours per week and more than five months per calendar year. However, under no circumstances will purchase rights be granted under the Amended ESPP to any employee if such employee would, immediately after the grant, own (within the meaning of Section 424(d) of the Code), or hold outstanding options or other rights to purchase, stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or any of its affiliates.
To enroll in a purchase period, an eligible employee must complete and submit an enrollment form to the Company before the start of the purchase period. As of August 31, 2017, approximately 2,746 employees, including seven (7) executive officers, were eligible to participate in the Amended ESPP. Non-employee directors and consultants are not eligible to participate in the Amended ESPP.
On August 1, 2015, in connection with the Spin-off and the related distribution of Lumentum common stock to holders of the Company’s Common Stock and renaming of JDS Uniphase Corporation as Viavi Solutions Inc., the ESPP was amended and restated to (i) change the name of the plan to the “1998 Employee Stock Purchase Plan,” and (ii) adjust the remaining share reserve from 3,199,171 shares to 5,727,155 shares (the “ESPP Adjustment”). Unlike the Company’s stockholders, the participants in the ESPP did not receive any Lumentum common stock or the right to acquire such common stock in connection with the Spin-off.
Because the Company’s Common Stock decreased in value as a result of the Spin-off, the ESPP Adjustment was implemented to preserve the intrinsic value of the Common Stock that participants could purchase.
Currently, an aggregate of 4,573,845 shares of Common Stock remain available for issuance under the ESPP, subject to capitalization adjustments. The shares purchasable by participants under the Amended ESPP will, solely in the Board’s discretion, be made available from either authorized but unissued Common Stock or from reacquired Common Stock, including shares of Common Stock purchased on the open market.
The Amended ESPP is administered by either the Board or a committee of the Board (collectively, the “ESPP Administrator”). The Board has delegated to its Compensation Committee the authority generally to administer the Amended ESPP. The ESPP Administrator has full authority to construe, interpret, and apply the terms of the Amended ESPP, to determine eligibility and to adjudicate all disputed claims filed under the Amended ESPP. All determinations of the ESPP Administrator are final and binding on all persons having an interest in the Amended ESPP or any purchase right.
The Amended ESPP is implemented through purchase periods of approximately six months in duration, beginning on or about February 1 and August 1 of each year; provided, however, that the ESPP Administrator may establish prior to the commencement of any purchase period, a different duration for one or more purchase periods or different commencing or ending dates for such purchase periods; provided that no purchase period may have a duration exceeding six (6) months. If the first day of a purchase period is not a trading day, then the next subsequent trading day will be deemed the first day of the purchase period unless the Company provides otherwise prior to the commencement of such purchase period. If the last day of a purchase period is not a trading day, the immediately preceding trading day will be deemed the last day of the purchase period unless the Company provides otherwise prior to the commencement of such purchase period.
Participation in a purchase period under the Amended ESPP is limited to eligible employees who authorize payroll deductions prior to the first day of a purchase period. Payroll deductions may be any multiple of 1% of compensation paid to the employee during the relevant purchase period, up to a maximum of 10%. An employee who becomes a participant in the Amended ESPP will automatically participate in each subsequent purchase period beginning immediately after the last day of the purchase period in which he or she is a participant until the employee withdraws from the Amended ESPP, becomes ineligible to participate, or terminates employment.
Subject to any notice requirements imposed by the Company, a participant may decrease his or her rate of payroll deductions one time in each purchase period. The reduced rate shall stay in effect unless the participant designates a different rate (up to the 10% maximum) before the beginning of the next purchase period. If the rate is increased, the new rate will be effective for the first purchase period after the appropriate forms are filed with the Company. The participant may withdraw from the Amended ESPP before any purchase date by filing the prescribed notice with the Company. Upon withdrawal, the Company will refund without interest the participant’s accumulated payroll deductions not previously applied to the purchase of shares. Once a participant withdraws from a purchase period, that participant may not again participate in the same purchase period and must re-enroll in the Amended ESPP if the participant wishes to resume participation in a subsequent purchase period.
On the purchase date, the Company will issue to each participant in the purchase period the number of whole shares of Common Stock determined by dividing the amount of payroll deductions accumulated for the participant during the purchase period, together with any amount carried over from the prior purchase period, by the purchase price. However, the maximum number of shares purchasable by the participant pursuant to any one outstanding purchase right shall not exceed 4,000 shares. The price at which shares are sold under the Amended ESPP will be the lesser of 95% of the fair market value of the share on the date the purchase right is granted or on the date it is exercised. The fair market value of the Common Stock on any relevant date generally will be the closing price per share as reported on the NASDAQ Stock Market.
As a further limitation, no participant may accrue a right to purchase shares of Common Stock under the Amended ESPP or any other employee stock purchase plan of the Company having a fair market value exceeding $25,000 (measured by the fair market value of such stock on the date or dates the purchase rights are granted to the participant) for each calendar year in which the purchase right is outstanding at any time.
Any payroll deductions under the Amended ESPP not applied to the purchase of shares will be returned to the participant without interest, unless the amount remaining is less than the amount necessary to purchase a whole share of Common Stock, in which case the remaining amount may be applied to the next purchase period if the participant participates in the next purchase period.
Purchase rights are nontransferable unless by will or by the laws of descent and distribution, and can only be exercised by the participant during the lifetime of the participant.
Appropriate adjustments will be made to the number of shares authorized under the Amended ESPP and to outstanding purchase rights in the event of any recapitalization, stock dividend, stock split, combination of shares, or other change affecting our outstanding Common Stock.
If there is a disposal of all or substantially all of the assets or outstanding capital stock of the Company by means of a sale, merger, reorganization where the Company is not the surviving corporation, or in the event of a liquidation, then all outstanding purchase rights under the Amended ESPP shall automatically be exercised immediately prior to such sale, merger, reorganization or liquidation (or such other time, as determined by the Plan Administrator). Subject to other limitations under the Amended ESPP, all purchase rights will be automatically exercised by applying previously collected payroll deductions to the purchase of whole shares of Common Stock.
The Amended ESPP will continue until the earlier of: (i) the date it is terminated by the Company under the sole discretion of the Board, (ii) November 15, 2027, or (iii) until all of the shares reserved for issuance under the Amended ESPP have been issued. The Board may at any time alter, amend, suspend or terminate the Amended ESPP, except that no such action will become effective until after any outstanding purchase rights are exercised in a purchase period during which said action was authorized.
The following summary is intended only as a general guide to the U.S. federal income tax consequences of participation in the Amended ESPP and is based upon the federal income tax laws in effect on the date of this proxy statement and does not attempt to describe all possible federal or other tax consequences of such participation or tax consequences based on particular circumstances.
Purchase rights granted under the Amended ESPP are intended to qualify for the favorable federal income tax treatment associated with purchase rights granted under an employee stock purchase plan which qualifies under provisions of Section 423 of the Code.
A participant will be taxed on amounts withheld for the purchase of shares of Common Stock as if such amounts were actually received. Otherwise, no income will be taxable to a participant as a result of the granting or exercise of a purchase right, until disposition of the acquired shares. The taxation upon disposition will depend upon the holding period of the acquired shares.
If the stock is disposed of more than two years after the beginning of the offering period and more than one year after the stock is transferred to the participant, then the lesser of: (1) the excess of the fair market value of the stock at the time of such disposition over the purchase price, or (2) the excess of the fair market value of the stock as of the beginning of the offering period over the purchase price (determined as of the beginning of the offering period) will be treated as ordinary income.
Any further gain or any loss will be taxed as a long-term capital gain or loss. At present, such capital gains generally are subject to lower tax rates than ordinary income.
If the stock is sold or disposed of before the expiration of either of the holding periods described above, then the excess of the fair market value of the stock on the purchase date over the purchase price will be treated as ordinary income at the time of such disposition. The balance of any gain will be treated as capital gain. Even if the stock is later disposed of for less than its fair market value on the purchase date, the same amount of ordinary income is attributed to the participant, and a capital loss is recognized equal to the difference between the sales price and the fair market value of the stock on such purchase date. Any capital gain or loss will be short-term or long-term, depending on how long the stock has been held.
There are no federal income tax consequences to the Company by reason of the grant or exercise of rights under the Amended ESPP. We are entitled to a deduction to the extent amounts are taxed as ordinary income to a participant (subject to the requirement of reasonableness and the satisfaction of tax reporting obligations).
The Amended ESPP does not provide for set benefits or amounts of awards and we have not approved any awards that are conditioned on stockholder approval of the Amended ESPP. Because benefits under the Amended ESPP will depend on employees’ elections to participate and the fair market value of the Common Stock at various future dates, it is not possible to determine the benefits that will be received by executive officers and other employees if the share increase is approved by the shareholders.
The following table shows, as to each of our named executive officers and the other individuals and groups indicated, the number of shares of Common Stock purchased under the ESPP from the inception of the ESPP through the most recent purchase date. On August 31, 2017, the closing price per share of our Common Stock was $10.04.
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The following table sets forth certain information known to the Company with respect to the beneficial ownership as of August 31, 2017,2020, by (i) all persons who are beneficial owners of five percent (5%) or more of the Company’s Common Stock,common stock, (ii) each director and nominee, (iii) the Company’s named executive officers, and (iv) all current directors and executive officers as a group.
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Number of Shares | ||||||||
Beneficially Owned | ||||||||
Name | Number | Percentage | ||||||
5% or more Stockholders(1) | ||||||||
Capital Research Global Investor 333 South Hope Street Los Angeles, CA 90071(2) | 14,664,274 | 6.4 | % | |||||
The Bank of New York Mellon Corporation One Wall Street, 31st Floor New York, NY 10022(3) | 22,609,152 | 9.9 | % | |||||
BlackRock, Inc. 40 East 52nd Street New York, NY 10022(4) | 27,211,361 | 11.9 | % | |||||
The Vanguard Group 100 Vanguard Boulevard Malvern, PA 19355-2331(5) | 20,020,817 | 8.8 | % | |||||
Goldman Sachs Asset Management 200 West Street c/o Goldman Sachs & Co. New York, NY 10282(6) | 14,697,168 | 6.4 | % | |||||
Directors and Executive Officers | ||||||||
Oleg Khaykin(7) | 154,264 | * | ||||||
Amar Maletira(8) | 195,857 | * | ||||||
Luke Scrivanich(9) | 65,036 | * | ||||||
Paul McNab(10) | 114,510 | * | ||||||
Ralph Rondinone(11) | 45,009 | * | ||||||
Richard E. Belluzzo | 206,762 | * | ||||||
Keith Barnes | 94,156 | * | ||||||
Tor Braham | 64,019 | * | ||||||
Timothy Campos | 95,233 | * | ||||||
Donald Colvin | 64,019 | * | ||||||
Masood A. Jabbar | 169,087 | * | ||||||
Pamela Strayer | 82,945 | * | ||||||
All directors and executive officers as a group (14 persons)(12) | 1,368,198 | * |
Number of Shares Beneficially Owned | ||||
Name | Number | Percentage | ||
5% or more Stockholders (1) | ||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 (2) | 43,632,626 | 19.1 | % | |
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 (3) | 24,678,871 | 10.8 | % | |
Directors and Executive Officers | ||||
Oleg Khaykin (4) | 941,212 | * | ||
Amar Maletira (5) | 314,031 | * | ||
Paul McNab (6) | 82,765 | * | ||
Luke Scrivanich (7) | 85,356 | * | ||
Gary Staley(8) | 97,386 | * | ||
Richard E. Belluzzo | 208,397 | * | ||
Keith Barnes | 116,214 | * | ||
Laura Black | 34,354 | * | ||
Tor Braham | 103,910 | * | ||
Timothy Campos | 107,365 | * | ||
Donald Colvin | 103,910 | * | ||
Glenda Dorchak | — | * | ||
Masood A. Jabbar | 215,719 | * | ||
All directors and executive officers as a group (15 persons) (9) | 2,542,638 | 1.1 | % |
* | Less than 1%. |
(1) | Based on information set forth in various Schedule 13 filings with the SEC current as of August 31, |
(2) | Based on information reported, as of |
(3) | Based on information reported, as of |
Includes |
(5) | Includes (i) |
(6) | Includes 30,666 MSUs which vest within 60 days of August 31, |
(7) | Includes |
(8) | Includes |
(9) | Includes (i) |
In this section, we discuss
Ms. Spradley2020 Financial Performance
Executive Summary
Our compensation philosophy isCOVID-19 pandemic. Despite the pandemic disruption, VIAVI demonstrated solid execution and still grew revenue and profitability in fiscal 2020 compared to provide our NEOs competitive compensation opportunities based upon the financial and operational performance of the Company and their individual performance.
| ||
Net revenue | ||
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$1,136.3 million, | ||
| ||
GAAP operating margin | Non-GAAP operating margin* | |
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10.4%, up
| 18.6%, up
| |
GAAP EPS | Non-GAAP EPS* | |
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$0.12, up
| $0.73, up
| |
Returning Value to Stockholders | Fiscal 2017 Financial Highlights* | ||
Fiscal 2017 Compensation Tied to Performance | |||
Market-Based Restricted Stock Units (MSUs) | |||
TSR Ranking | % of Target Earned for Tranche Vesting in Fiscal 2017 | ||
Fiscal 2013, 2014, 2015 and 2016 MSUs | 82.4 | 150% | |
Fiscal 2016 CEO MSU Plan | 69.1 | 135.25% | |
Performance-Based Bonus Variable Pay Plan (VPP) Our CEO and NEOs participating in the NSE VPP did not earn a bonus because of below target performance. Only NEOs participating in the OSP VPP and the Sales Incentive Plan received a bonus. |
* |
• No base salary increases for any NEO. • Approximately 50% of • Each NEO voluntarily forfeited 2nd half FY 2020 VPP bonus. |
We believe that a significant portion of each executive’s target total direct compensation should be “at risk” and tied to the Company’s attainment of semi-annual, annual and long-term business objectives and the creation of stockholder value. Our fiscal year 2017 performance-based pay for our NEOs is summarized below:
Named Executive Officer | Fiscal Year 2020 VPP H1 Payout | Fiscal Year 2020 VPP H2 Payout |
Oleg Khaykin | $513,600 | $0 |
Amar Maletira | $267,500 | $0 |
Paul McNab | $236,640 | $0 |
Luke Scrivanich | $135,966 | $0 |
Gary Staley | $189,656 | $0 |
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Prioritizing Our Workforce as a Whole. Our NEOs waived their fiscal year 2020 second half bonuses so that such bonuses could be allocated to the general pool for non-executive employees, in keeping with our commitment to support our employees as a whole and in recognition of their continued hard work and dedication. | ||||||||
MSUs Earned in Fiscal Year 2020 | Fiscal Year |
FY2016 CEO MSUs: 150% of 4th tranche earned | 87.5percentile TSR ranking(1) |
FY2016 CFO MSUs: 150% of 4th tranche earned | 93.1 percentile TSR ranking(1) |
FY2017 MSUs: 150% of 3rd tranche earned | 86.3 percentile TSR ranking |
FY2018 MSUs: 142.5% of 2nd tranche earned | 72 percentile TSR ranking |
FY2019 MSUs: 150% of 1st tranche earned | 90.9 percentile TSR ranking |
(1) | Our CEO and CFO were granted their MSUs on different dates due to when they joined the Company. |
What We Do | What We Don’t Do | |||||||
![]() | Compensation Committee is comprised 100% of independent directors. | ![]() | No repricing or repurchasing of underwater stock options without stockholder approval. | |||||
![]() | Independent compensation consultant retained by the Compensation Committee. | ![]() | No dividends or dividend equivalents on unearned awards. | |||||
![]() | Balance short- and long-term incentives, cash and equity and fixed and variable pay elements. | ![]() | No pledging or hedging of VIAVI securities. | |||||
![]() | Performance-based awards comprising approximately 50% of the overall equity allocation to executive officers. | ![]() | No “single trigger” change in control acceleration of vesting for equity awards. | |||||
![]() | Require one-year minimum vesting for awards granted under the Amended and Restated 2003 Equity Incentive Plan, subject to certain exceptions. | ![]() | No excessive perquisites or severance benefits. | |||||
![]() | Maintain a clawback policy that applies to both cash incentives and equity awards. | ![]() | No executive severance plans or supplemental retirement plans. | |||||
![]() | Assess and mitigate compensation risk. | ![]() | No "golden parachute" tax gross-ups. | |||||
![]() | Solicit an annual advisory vote on executive compensation. | |||||||
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Maintain stock ownership guidelines | ||||||||
(1) | The charts reflect target total direct compensation as approved by the Committee at the beginning of fiscal year 2020. |
At the 2016 Annual Meeting of Stockholders, the Company conducted an advisory vote on the compensation of our NEOs. Approximately 96% of the votes cast were voted in favor of our NEOs’ compensation as disclosed in the 2016 Proxy Statement.
The Committee along with the Board has determined that holding an annual stockholder advisory vote on named executive officer compensation will allow our stockholders to provide timely, direct input on the Company’s executive compensation philosophy, policies and practices as disclosed in the proxy statement and recommends that stockholders vote to hold an advisory vote to approve named executive officer compensation every year at the 2017 annual meeting of the stockholders.
The Board and the Committee value the opinions of our stockholders and, to the extent that there is any significant vote against the compensation of our NEOs, seek to identify the specific concerns driving negative votes and evaluate whether any actions are necessary to address those concerns. The Board and the Committee will continue to consider stockholder concerns and feedback in the future.
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• | Attract and retain talented and experienced executives who will achieve our financial and operational objectives | • | Motivate and reward executives whose knowledge, skills and performance are critical to our success and performance | ||
• | Ensure fairness among our executives by recognizing the contributions each executive makes to our success | • | Incentivize our executives to manage our business to meet our long-term objectives and the long-term objectives of our stockholders by aligning executive compensation with long-term performance |
to incentivize our executives to manage our business to meet our long-term objectives and the long-term objectives of our stockholders by aligning executive compensation with long-term Company performance.
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Element | |||
Base salary | |||
Annual cash incentive bonuses | |||
Time-based restricted stock units (“RSUs”) | talent. | ||
Market-based restricted stock units (“MSUs”) | Align our executives’ interests with those of our stockholders, drive long-term stockholder value, and reinforce longer-term retention of highly qualified executive talent. | ||
The individual elements of each NEO’s compensation package for fiscal year 2017 are summarized below.
on the Committee’s (and in the case of our CEO, the fiscal year. . As such, the targets reflect our analyses, expectations and objectives for our financial, operating and overall business performance, taking into consideration then current forecasted economic conditions, the outlook for the industry and our businesses, technology and new product development, and strategic objectives intended to drive growth in long-term stockholder value, among other factors. Due to the confidential and commercially sensitive nature of these analyses, expectations and objectives, their specific disclosure could result in competitive harm to us. It is for this reason that they are not disclosed. The use of financial metrics and individual operating objectives for the establishment of incentive bonus performance criteria is intended to set challenging goals and is designed to ensure that all participants, including our NEOs, are focused on operating the Company in a disciplined manner in accordance with the Committee’s and Board’s compensation objectives as discussed above.. the following factors: scope of responsibilities, experience, skills, performance, and expected future contribution, base salarycompensation levels in effect for comparable positions at the companies in the Peer Group (as described on page 64below under “Use of Peer Group Compensation Data”) and the other competitive market factors.factors described below in “Considerations in Determining Fiscal Year 2020 NEO Compensation.” Generally, the Committee reviews the base salary levels of our NEOs annuallyat the beginning of each fiscal year as part of the Company’s performance review process as well as upon a promotion or other change of position or level of responsibility. Merit-based increases to the base salaries of our NEOs (other than theour CEO) are recommended by our CEO to the Committee, and all increases are basedindependent directors of the Board)Board’s) review and assessment of the factors described above.20172020 and did not increase the salaries of our CEO and CFO or any of our other NEOs because the Committee determined that the existing base salaries were appropriate for each NEO.of these NEOs. Named Executive Officer Fiscal Year 2016
Base Salary Fiscal Year 2017
Base Salary Percentage
IncreaseOleg Khaykin $ 750,000 $ 750,000 — Amar Maletira $ 425,000 $ 425,000 — Luke Scrivanich $ 372,000 $ 372,000 — Paul McNab $ 435,000 $ 435,000 — Ralph Rondinone $ 352,000 $ 352,000 — Susan Spradley(1) $ 470,000 $ 470,000 — Dion Joannou(1) $ 408,000 $ 408,000 — (1)Effective January 31, 2017, each of Ms. Spradley and Mr. Joannou’s employment with the Company terminated.Oleg Khaykin 800,000 800,000 — Amar Maletira 500,000 500,000 — Paul McNab 435,000 435,000 — Luke Scrivanich 372,000 372,000 — Gary Staley 375,000 375,000 — . The Company utilizes a singleprogramprograms, one for the majority of itsour employees globally, and one for our executive staff, including all theof our NEOs, except for Mr. Joannou, referred to as the Company’sExecutive Staff Variable Pay Plan (“Executive VPP”). Under the Executive VPP, incentive bonuses are determined based on aour actual performance as measured against one or more semi-annual performance metric,metrics and are paid semi-annually. These awards are designed to incentivize and reward short-term performance and achievement of our objectives for the Company’s operating income targets.2017,2020, for purposes of the CompanyExecutive VPP, we maintained separate performance targetsmetrics and payout metricsrelated target levels for employees ofexecutive staff, including the Company’sNEOs who are employed by our (i) Optical Security and Performance ProductsOSP business segment (the “OSP(“OSP VPP”), (ii) Network and Service EnablementNSE business segments (the “NSE(“NSE VPP”), (iii) NSE sales department (“NSE Sales VPP), and (iii) Shared Services employees (the “Shared Services(iv) Corporate department (“Corporate VPP”)salary, based upon the individual’s grade level within the Company.salary. Each NEO’s TIO is annually reviewed by the Committee at the beginning of each fiscal year as part of the Company’s performance review process as well as upon a promotion or other change of position or level of responsibility, using the same criteria and compared against the Peer Group data. process that is used to assess base salary.20162019 and fiscal year 20172020 the assigned TIOs for each of theour NEOs were as follows: Named Executive Officer VPP NEO
Participates In Fiscal Year 2016
Target Incentive
Opportunity Fiscal Year 2017
Target Incentive
Opportunity Percentage Increase Oleg Khaykin N/A 100 % 100 % — Amar Maletira Shared Services
VPP 85 % 85 % — Luke Scrivanich OSP VPP 85 % 85 % — Paul McNab NSE VPP 85 % 85 % — Ralph Rondinone NSE VPP 70 % 70 % — Susan Spradley(1) NSE VPP 85 % 85 % — Dion Joannou(1) N/A(2) N/A(2) N/A(2) — Oleg Khaykin Corporate VPP 120 120 — Amar Maletira Corporate VPP 85 100 15% Paul McNab NSE VPP 85 85 — Luke Scrivanich OSP VPP 85 85 — Gary Staley NSE Sales VPP 75 85 10% (1) Effective January 31, 2017, eachTIO was increased based upon management recommendation, competitive assessment and review of Ms. Spradley and Mr. Joannou’s employment with the Company terminated.market percentile data provided by independent compensation consultant.(2)During fiscal year 2017, Mr. Joannou did not participate in the VPP. Mr. Joannou’s annual cash incentive bonus was to be determined based on an individual Sales Incentive Plan.Mrs. Spradley, and Mr. Rodinone participated in the NSE VPP. No payment was made underThe incentive bonuses for the participants in the NSE VPP unlesswere based upon an NSE exceeded thenon-GAAP operating income target under the annual operating plan (“AOP”) for theprofit goal weighted at 40%, an NSE business.revenue goal weighted at 40% and individual goals weighted at 20%. Based on the size of the pool, established under our Annual Operating Plan (the “AOP”), and depending on the extent to which the non-GAAP operating profit goal and revenue goal are achieved, participating employees receivedcould receive a percentage of their TIO that increased from 0% to 150% of TIO.TIO, and from 0% up to 100% of TIO with respect to individual goals. Income% of TIO 0 – 100%0% - 79%0% - 96% 0% > 100% – 185%79% - 143% >96% - 109% 0% to 150% >0% up to 100%>185%>100 up to 150%
2020.
NSE Operating Profit as a % of Target | NSE Revenue as a % of Target | % of TIO | NSE Bookings as a % of Target | % of TIO |
0% - 79% | 0% - 96% | 0% | 0% - 97% | 0% - 100% |
>79% - 143% | >96% - 109% | 0% to 150% | >97% - 145% | 100% to 250% |
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OSP Operating Profit as a % of Target | OSP Revenue as a %of Target | % of TIO | ||
0% - 95% | 0% | |||
> | >95% - 111% | 0% to 150% | ||
could be increased or decreased based upon the discretion of our CEO. Our CEO did not exercise this discretion with respect to Mr. Scrivanich’s incentive bonus payment for fiscal year 2020. TIO with respect to the non-GAAP operating profit goal and revenue goal and from 0% up to 100% of TIO with respect to individual goals. The actual semi-annual Executive VPP payment to each participant ongoing pandemic. The Committee also Further, the Committee considers the number of shares of Shared ServicesShared ServicesCorporate VPP. No payment would be made underThe incentive bonuses for participants in the Shared ServicesCorporate VPP unless actualwere calculated based upon our company-wide performance and individual goals and included a weighted revenue goal weighted at 40%, a weighted non-GAAP operating income for Viavi exceeded the operating income target under the AOP for Viavi,profit goal weighted at 40% and individual goals weighted at such point Shared services VPP pool would be funded proportionately from the NSE and/or OSP actual operating income in excess of their respective AOP operating income targets.20%. Based on the size of the Shared Services VPP pool, participating employees would thenand depending on the extent to which the operating profit and revenue goals are achieved, Mr. Khaykin and Mr. Maletira could receive a percentage of their TIO that could increase from 0% up to 150% of TIO.Shared ServicesCorporate VPP (other than for our CEO) could be increased or decreased by up to 25% at the discretion of our CEO. Our CEO did not exercise histhis discretion to adjust the actual bonus payments under the Shared servicesCorporate VPP for fiscal year 2017.2Cash Incentive Award for CEOThe terms under which Oleg Khaykin, the Company’s CEO, participates in the 20172020.are governed by the Employment Agreement dated January 28, 2016, between the Company and Mr. Khaykin (the “Khaykin
Payout2The methods for determination of the actual VPP are recommended by management and reviewed and approved by the Committee (and the independent members of the Board relative to the CEO’s participation in the VPP). The operating income, bookings and revenue targets utilized for purposes of determining payments under the VPP and SIP, reflect the actual financial and business performance objectives, projections and estimates approved by the Board and used by management and the Board for purposes of annual financial and business planning and analysis. As such, the targets reflect the Company’s confidential and commercially sensitive analysis, expectations and objectives for its financial, operating and overall business performance, taking into consideration then current forecasted economic conditions, the outlook for the industry and the Company’s businesses, technology and new product development, and strategic objectives intended to drive growth in long-term stockholder value, among other factors. Due to the confidential and commercially sensitive nature of these analyses, expectations and objectives and elements, their specific disclosure would result in competitive harm to the Company. It is for this reason that they are not disclosed. The use of financial metrics and defined operating objectives for the establishment of the Company’s incentive bonus performance criteria is intended to set challenging goals and is designed to ensure that all participants, including our NEOs, are focused on operating the Company in a disciplined manner in accordance with the Committee’s and Board’s compensation objectives discussed above.Agreement”). Under the Khaykin Agreement, Mr. Khaykin’s target bonus was to be based on the Company’s achievement of pre-established revenue and operating income objectives. Depending on the Company’s actual performance, his actual cash incentive payment would range from 100% to 150% of his TIO. At the beginning of fiscal year 2017, the independent members of the Board established the threshold performance level for our CEO’s actual cash incentive payment at 50% of target such that his actual cash incentive bonus for fiscal year 2017 could range from 50% to 150% of target performance for the two-pre-established metrics in the Employment Agreement, as reflected in the tables below.Company Non-GAAP Operating Profit as % of Target% of TIO0% – <90%0%90% – 100%50% up to 100%100% – 107%>100% up to 125%107% – 110%>125% up to 150%Company Revenue as % of Target% of TIO0% – <90%0%90% – 100%50% up to 100%100% – 103%>100% up to 125%103% – 107%>125% up to 150%2017 VPP Payout thus was calculated based upon the following formula (excluding the exercise of CEO and Board discretion):Companyperformance targets for each half of fiscal year 20172020 was as follows: H1 FY17 VPP Achievement H2 FY17 VPP Achievement NSE OSP Shared Services NSE OSP Shared Services 0 % 34 % 0 % 0 % 120 % 0 % Actual incentive payments awardedH1 FY20 VPP Achievement H2 FY20 VPP Achievement NSE NSE Sales OSP Corporate NSE NSE Sales OSP Corporate 128% 119% 86% 107% 20% 25% 42% 31% our NEOs25% of target, each NEO, in light of overall economic conditions and ongoing operational challenges due to the COVID-19 pandemic,2017 under2020 VPP bonus. The funds that would have been used to pay the declined NEO VPP are set forth in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.Sales Incentive Plan for Mr. JoannouDuring fiscal year 2017, Mr. Joannou’s cash incentive bonus was based on an individual Sales Incentive Plan (the “SIP”) rather than participation in the VPP. Pursuantbonuses were instead allocated to the SIP, Mr. Joannou’s target incentive compensation was set at $300,000 which was tiedgeneral pool for non-executive employees, in keeping with our commitment to the achievement of an NSE bookings target as wellsupport our employees as a NSE revenue target.The NSE bookings target bonus amount for Mr. Joannou was determined onwhole and in recognition of their continued hard work and dedication despite a sliding scale, with a cap at 200%:NSE Bookings as a % of Target% of Bookings Bonus Received0 – 70%up to 40%70 – 100%up to 100%100 – 120%up to 200%The NSE revenue target bonus amount for Mr. Joannou was determined on a sliding scale, with a cap at 150%:NSE Revenue as a % of Target% of Revenue Bonus Received0% – 92.5%0%>92.5% – 100%up to 100%>100%up to 150%Mr. Joannou threshold NSE bookings performance level for the first half of fiscal year 2017 were met and, consequently, he did receive a cash incentive bonus related to bookings achievement for the first half of fiscal year 2017. Mr. Joannou did not meet the threshold revenue performance level and subsequently did not receive a payment related to NSE revenue achievement for the first half of fiscal year 2017. Mr. Joannou’s employmentchallenging environment with the Company terminated effective January 31, 2017 and, therefore, he was not eligible for a cash incentive bonus for the second half of fiscal year 2017.Compensation.Compensationthe Companyus with an important long-term retention tool in a highly competitive market for executive talent.the Common Stockour common stock subject to each equity award is set by the Committee at a level intended to create a meaningful opportunity for stock ownership and resulting compensation opportunity based on each executive officer’s current position with the Company, the average size and potential returns of comparable awards made to executive officers in similar positions within the industry and at the companies in the Peer Group, his or her potential for increased responsibility and promotion over the award term and his or her individual performance in recent periods.takes into accountconsiders the value of outstanding vested and unvested equity awards held by the executive officer in order to maintain an appropriate level of equity incentives for that executive officer.The Committee generally grants equity awards to executive officers upon commencement of their employment with the Company or their promotion, with the size of the award based on factors similar to those considered in connection with awards to existing executive officers.the Common Stockour common stock which would be subject to the proposed equity awards to our individual NEOs for consistency with the Company’sour objective to limit actual net dilution attributable to equity awards to all Companyour employees to at or below a long-term average of less than 3% per year.
In addition, the Committee considers the other factors described below in “Considerations in Determining Fiscal Year 2020 NEO Compensation.”➣To ensure equity awards are aligned with the Company’s commitment to pay-for-performance, it is the Committee’s practice that:objectives; andcriteria applicable to such performance-basedobjectives. All of the equity awards are disclosedgranted to our NEOs in the proxy statement for each applicable fiscal year.
year 2020 complied with this standard.➣With the exception of our CEO’sInitial Subsequent Equity Awards as described below, all of the equity awards granted to our NEOs in fiscal year2017 complied with this practice.
Fiscal Year 20172020 Equity Awards
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Named Executive Officer | RSU Awards (# of shares) | MSU Awards (target # of shares) | Aggregate Value of Equity Award(2) | |||||||||
Oleg Khaykin | 57,408 | 57,408 | $ | 880,000 | ||||||||
Amar Maletira | 50,000 | 50,000 | $ | 766,000 | ||||||||
Luke Scrivanich | 30,000 | 30,000 | $ | 460,000 | ||||||||
Paul McNab | 32,500 | 32,500 | $ | 498,000 | ||||||||
Ralph Rondinone | 32,500 | 32,500 | $ | 498,000 | ||||||||
Susan Spradley(1) | 32,500 | 32,500 | $ | 498,000 | ||||||||
Dion Joannou(1) | 32,500 | 32,500 | $ | 498,000 |
Named Executive Officer | Time-Based RSU Awards (Target # of shares) | MSU Awards (Target # of shares) | Target Value of Equity Award (1) |
Oleg Khaykin | 194,350 | 194,350 | 5,301,868 |
Amar Maletira | 95,000 | 95,000 | 2,591,600 |
Paul McNab | 35,000 | 35,000 | 954,800 |
Luke Scrivanich | 30,000 | 30,000 | 818,400 |
Gary Staley | 37,500 | 37,500 | 1,023,000 |
Based upon the closing price per share of our |
material termsMSUs that were granted in fiscal year 2020 will be earned and vest based on our total stockholder return (“TSR”) relative to the performance of the fiscalcomponent companies in the Nasdaq Telecommunications Index (the “Nasdaq Telecom Index”), with three overlapping performance periods and 1/3rd of the shares earned based on relative TSR measured over one-year, two-year and three-year measurement periods ending on September 15, 2020, September 15, 2021 and September 15, 2022, respectively.2017will be compared against our weighted average stock price during the period of August 1, 2019 to September 15, 2019. The MSU awards wereaward will be divided into three equal tranches, with one tranche assigned to each measurement period.MSU Program FeatureDescriptionPerformance metricThreshold/TargetTotal stockholder return (“TSR”) relative to the NASDAQ Telecom Index
Shares EarnedAward formula0-25th PercentileShares0% of Common Stock are earned based on the Company’s TSR ranking relative to the Index as follows:
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25th-55th Percentile | ||||||||
55th-75th and Above Percentile | 100%-150% of Target Shares | |||||||
MSUs Earned in Fiscal Year 2020 | Fiscal Year 2020 Performance |
FY2016 CEO MSUs: 150% of 4th tranche earned | 87.5percentile TSR ranking(1) |
FY2016 CFO MSUs: 150% of 4th tranche earned | 93.1 percentile TSR ranking(1) |
FY2017 MSUs: 150% of 3rd tranche earned | 86.3 percentile TSR ranking |
FY2018 MSUs: 142.5% of 2nd tranche earned | 72 percentile TSR ranking |
FY2019 MSUs: 150% of 1st tranche earned | 90.9 percentile TSR ranking |
(1) | Our CEO and CFO were granted their MSUs on different dates due to when they joined the Company. |
Named Executive Officer | FY 2016 MSUs # of Shares Earned | FY 2017 MSUs # of Shares Earned | FY 2018 MSUs # of Shares Earned | FY 2019 MSUs # of Shares Earned |
Oleg Khaykin | 43,329 | 28,704 | 71,250 | 103,211 |
Amar Maletira | 71,592 | 25,001 | 29,449 | 35,000 |
Paul McNab | ___ | 16,251 | 12,825 | 15,000 |
Luke Scrivanich | ___ | 15,000 | 12,825 | 15,000 |
Gary Staley | ___ | ___ | 23,386(1) | 15,000 |
(1) | ||||||||||
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| 12,825 respectively. |
the RSUsinitial new-hire RSU grants vest in four equal annual installments, commencing on the first anniversary of the date of grant and forgrant. In the case of focal grants made as part of the Company’s annual review process, the RSUs vestprior to May 2020, such RSU grants vested over three years, with 1/3rd3rd of the RSUs vesting on the first anniversary of the date of grant and the remaining 2/3rds3rds vesting quarterly thereafter, with all RSU vesting subject to the NEO’s continued employment through each vesting date.MSUs Earned — Fiscal Year 2015 through Fiscal Year 2017The following table shows In May 2020, to help further retain and incentivize employees, the MSUs earned by ourCompensation Committee determined to change the vesting schedule for future focal grants, such that focal RSUs vest annually over three years, with 1/3 vesting on each one-year anniversary of the date of grant. For all eligible employees, including the NEOs, inthis change came into effect with the fiscal year 2015 through fiscal year 2017. Earned in
Fiscal Year TSR Ranking Payout % Total MSUs
Earned(1)Various MSUs FY15(2) 33.6th 67.20 % 16,015 Various MSUs FY16(3) 40.6th 81.00 % 220,630 33.3th 66.60 % 61.3th 122.40 % Various MSUs FY17 82.4th 150.00 % 478,454 CEO FY16 MSUs FY17 69.1th 135.25 % 39,069
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Category | Ownership Requirement | Deadline for Compliance | ||||||||
Non-Employee Directors | 5th anniversary of election to the Board | |||||||||
Chief Executive Officer | 3x annual base salary | 5th anniversary of hire or promotion date | ||||||||
Executive Officers (excluding CEO) | 1x annual base salary | 5th anniversary of hire or promotion date | ||||||||
On May 25, 2016, the Committee amended the
valuation.
BothInsider Trading
In fiscal year 2012, the Committee transitioned from a policy of granting both RSUs and stock options to generally granting only RSUs. Since then the Committee has added MSUs to our equity award mix. The Company’s policy is that any stock option awards granted to our NEOs, as well as to all other Company employees, have an exercise price equal to the fair market value of our Common Stock on the date of grant. Fair market value is defined under our equity compensation plans as the closing market price of one share of our Common Stock on the NASDAQ Stock Market on the date of grant.
The Company doeseach quarter.
The
In October 2015,
The Retention Plan provides for severance and retention benefits to certain executives at the level of senior vice president and above, who were designated by the Compensation Committee to participate in the Retention Plan (which includes NEOsMaletira Agreement, if Mr. Maletira’s employment is terminated other than the CEO and CFO). In the event of a participant’s Involuntary Terminationfor Cause (as defined in the Retention Plan)Maletira Agreement), provided that he signs a separation agreement and dependent upon a participant’s position and when the Involuntary Termination occurs, provided the participant executes a general release in favor of the Company, the participant will generally be entitled to the following severance benefits:
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In connection with their termination of employment, Ms. Spradley and Mr. Joannou received the payments and benefits described above for an “Involuntary Termination Occurs During a Retention Period” based on their respective positions with the Company.Additionally, as the retention period has expired, no other executive officerclaims, he will receive the “Involuntary Termination Occurs During Retention Period” benefits described above. Additionally, no new executive officers will be alloweda severance payment equal to participate18-months base salary.
In June 2017, the Committee amended and restated the Change of Control Plan to: (i) extend the term of the plan to the third anniversary of the date of the amendment and restatement, (ii) provide the Committee with additional flexibility in setting entitlements, (iii) provide certain market standard updates to ensure legal compliance, and (iv) eliminate a clawback based on a failed say-on-golden parachute advisory vote.
For a complete summary of the termination and change of control provisions of the Change of Control Plan, please see the section titled “Potential Payments Made Upon Termination or Change of Control” below.
Ultimately, the Committee is responsible for the final determination of all compensation for our NEOs other than our CEO, whose compensation is determined by the independent members of the Board. |
(Other than CEO)
Silicon Laboratories.
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3D Systems Corporation | ![]() | National Instruments | Ubiquiti Networks | |
ADTRAN | II-VI | |||
Cirrus Logic | Infinera | |||
Coherent | Integrated Device Technology | |||
Commvault Systems | Knowles | |||
The Committee endeavors to maximize deductibility of compensation under
The Company’s 2003 Equity Incentive Plan (the “2003 Plan”) is structured suchin order to structure a program that compensation deemed paid to an executive officer when he or she exercises an outstanding stock option granted under the 2003 Plan, with an exercise price equal to the fair market value of the option shares on the grant date, should qualify as “performance-based compensation” which will not be subject to the $1 million limitation. In addition, other stock based awards granted under the 2003 Plan may be exempt from the $1 million limitation if such awards are subject to performance criteria and administered in accordance with Section 162(m) of the Code.
The Committee has the discretion to grant stock-based awards which are intendedwe consider to be exempt from the $1 million limitation as well as other stock-based awards that are not intended to be exempt from the $1 million limitation.
COMPENSATION COMMITTEE REPORT
Compensation Committee
Keith Barnes, ChairTimothy CamposRichard Belluzzo
Compensation Committee |
Keith Barnes (Chair) |
Richard Belluzzo |
Timothy Campos |
Glenda Dorchak |
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Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | ||||||||||||||||||||||||
Oleg Khaykin President and Chief Executive Officer | 2017 | 750,000 | 0 | 941,873 | — | 0 | 123,000 | 1,814,873 | ||||||||||||||||||||||||
2016 | 282,692 | 0 | 3,576,115 | 2,750,707 | 297,115 | 200,000 | 7,106,629 | |||||||||||||||||||||||||
Amar Maletira Executive Vice President and Chief Financial Officer | 2017 | 425,000 | 0 | 820,334 | — | 0 | 4,000 | 1,249,334 | ||||||||||||||||||||||||
2016 | 331,827 | 370,000 | 2,894,420 | 0 | 175,423 | 0 | 3,771,670 | |||||||||||||||||||||||||
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Luke Scrivanich Senior Vice President & General Manager, Optical Security and Performance Products | 2017 | 372,000 | 0 | 492,200 | — | 243,474 | 4,000 | 1,111,674 | ||||||||||||||||||||||||
2016 | 353,769 | 0 | 853,032 | 112,355 | 635,539 | 4,000 | 1,958,695 | |||||||||||||||||||||||||
2015 | 331,077 | 0 | 597,500 | 0 | 141,513 | 4,000 | 1,074,090 | |||||||||||||||||||||||||
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Paul McNab Executive Vice President and Chief Marketing & Strategy Officer | 2017 | 435,000 | 0 | 533,217 | — | 0 | 0 | 968,217 | ||||||||||||||||||||||||
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Ralph Rondinone Senior Vice President, Global Operations, Network & Service Enablement | 2017 | 352,000 | 0 | 533,217 | — | 0 | 4,000 | 889,217 | ||||||||||||||||||||||||
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Susan Spradley(5) Executive Vice President and General Manager Product Line Management & Design, Network Enablement and Service Enablement | 2017 | 274,769 | 0 | 1,193,152 | — | 0 | 713,620 | 2,181,541 | ||||||||||||||||||||||||
2016 | 458,961 | 0 | 941,595 | 0 | 147,110 | 0 | 1,547,666 | |||||||||||||||||||||||||
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Dion Joannou(6) Former Senior Vice President, Global Sales, Network Enablement and Service Enablement | 2017 | 238,523 | 0 | 1,257,782 | — | 0 | 621,205 | 2,117,510 | ||||||||||||||||||||||||
2016 | 397,692 | 0 | 936,139 | 0 | 239,201 | 0 | 1,573,032 | |||||||||||||||||||||||||
2015 | 184,615 | 0 | 1,173,263 | 0 | 65,077 | 0 | 1,422,955 | |||||||||||||||||||||||||
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Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) (1) | Option Awards ($) (2) | Non-Equity Incentive Plan Compensation ($) (3) | All Other Compensation ($) (4) | Total ($) | |
Oleg Khaykin President and Chief Executive Officer | 2020 | 800,000 | — | 5,669,190 | — | 662,400 | 4,000 | 7,135,590 | |
2019 | 800,000 | — | 5,081,397 | — | 1,056,681 | 4,000 | 6,942,078 | ||
2018 | 750,000 | — | 4,064,900 | — | 135,000 | 4,000 | 4,953,900 | ||
Amar Maletira Executive Vice President and Chief Financial Officer | 2020 | 500,000 | — | 2,771,150 | — | 345,000 | 4,000 | 3,620,150 | |
2019 | 500,000 | — | 2,067,567 | — | 452,093 | 4,000 | 3,023,660 | ||
2018 | 425,000 | 180,000 | 1,759,017 | — | 65,024 | 4,000 | 2,433,041 | ||
Paul McNab Executive Vice President and Chief Marketing & Strategy Officer | 2020 | 435,000 | — | 1,020,950 | — | 273,615 | — | 1,729,565 | |
2019 | 435,000 | — | 738,500 | — | 303,254 | — | 1,476,754 | ||
2018 | 435,000 | — | 567,900 | — | 97,984 | — | 1,100,884 | ||
Luke Scrivanich Senior Vice President and General Manager, Optical Security & Performance Products (OSP) | 2020 | 372,000 | — | 875,100 | — | 202,368 | 4,000 | 1,453,468 | |
2019 | 372,000 | — | 738,500 | — | 442,680 | 4,000 | 1,557,180 | ||
2018 | 372,000 | — | 567,900 | — | — | 4,000 | 943,900 | ||
Gary Staley Senior Vice President, Global Sales, Network Enablement and Service Enablement | 2020 | 375,000 | — | 1,093,875 | — | 229,500 | 4,000 | 1,702,375 | |
2019 | 375,000 | — | 968,100 | — | 150,614 | 4,000 | 1,497,714 | ||
2018 | 360,000 | — | 901,988 | — | 71,550 | 5,638 | 1,339,176 | ||
(1) | Amounts shown do not reflect compensation actually received by the NEO. Instead, the amounts shown in this column represent the grant date fair values of |
2003 |
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Name | Fiscal Year | Maximum Possible Value of MSUs Using Grant Date Fair Value | ||||||
Oleg Khaykin | 2017 | 659,618 | ||||||
2016 | 1,031,248 | |||||||
Amar Maletira | 2017 | 574,500 | ||||||
2016 | 1,606,500 | |||||||
Luke Scrivanich | 2017 | 344,700 | ||||||
2016 | 365,850 | |||||||
2015 | 417,000 | |||||||
Paul McNab | 2017 | 373,425 | ||||||
Ralph Rondinone | 2017 | 373,425 | ||||||
Susan Spradley | 2017 | 373,425 | ||||||
2016 | 345,525 | |||||||
Dion Joannou | 2017 | 373,425 | ||||||
2016 | 422,760 | |||||||
2015 | 873,450 |
Name | Fiscal Year | Maximum Possible Value of MSUs Using Grant Date Fair Value | Maximum Possible Value of PSUs Using Grant Date Fair Value |
Oleg Khaykin | 2020 | 4,527,383 | — |
2019 | 4,067,526 | — | |
2018 | 2,457,750 | 909,900 | |
Amar Maletira | 2020 | 2,213,025 | — |
2019 | 1,379,350 | — | |
2018 | 1,015,870 | 454,950 | |
Paul McNab | 2020 | 815,325 | — |
2019 | 591,150 | — | |
2018 | 442,395 | — | |
Luke Scrivanich | 2020 | 698,850 | — |
2019 | 591,150 | — | |
2018 | 442,395 | — | |
Gary Staley | 2020 | 873,563 | — |
2019 | 591,150 | — | |
2018 | 943,527 | — |
The amount disclosed for Ms. Spradley for fiscal year 2017 includes the incremental fair value of outstanding RSU and MSU awards that were modified in connection with Ms. Spradley’s separation from the Company and does not reflect a new equity grant. In connection with Ms. Spadley’s separation, the Committee accelerated 18 months of her unvested RSUs and modified her MSUs to permit their continued vesting through the performance period ending on September 15, 2017, resulting in additional stock-based compensation expense of $659,935. For more information relating to these modifications, see the table entitled “Grants of Plan-Based Awards Table.”
The amount disclosed for Mr. Joannou for fiscal year 2017 includes the incremental fair value of outstanding RSU and MSU awards that were modified in connection with Mr. Joannou’s separation from the Company and does not reflect a new equity grant. In connection with Mr. Joannou’s separation, the Committee accelerated 18 months of his unvested RSUs and modified his MSUs to permit their continued vesting through the performance period ending on September 15, 2017, resulting in additional stock-based compensation expense of $724,565. For more information relating to these modifications, see the table entitled “Grants of Plan-Based Awards Table.”
(2) | Amounts shown do not reflect compensation actually received by the NEO. Instead, the amounts shown in this column represent the grant date fair values of stock options issued pursuant to the |
(3) | All non-equity incentive plan compensation was paid pursuant to the |
Name | H1FY20 VPP (Actual) | H2FY20 VPP (Forfeited) | ||||
Oleg Khaykin | $513,600 | $148,800 | ||||
Amar Maletira | $267,500 | $77,500 | ||||
Paul McNab | $236,640 | $36,975 | ||||
Luke Scrivanich | $135,966 | $66,402 | ||||
Gary Staley | $189,656 | $39,844 |
(4) | The amounts in the “All Other Compensation” column for fiscal |
The amounts in the salary, bonus, and non-equity incentive plan compensation columns of the Summary Compensation Table reflect actual amounts paidearned for the relevant years, while the amounts in the stock awards column reflect accounting values. The tables entitled “Outstanding Equity Awards at Fiscal Year-End Table” and “Option Exercises and Stock Vested Table” provide further information on the named executive officers’ potential realizable value and actual value realized with respect to their equity awards. The Summary Compensation Table should be read in conjunction with the Compensation Discussion and Analysis and the subsequent tables and narrative descriptions.
On January 28, 2016, the Company entered into an Employment Agreement with Mr. Khaykin (the “Khaykin Agreement”) pursuant to which Mr. Khaykin’s starting base salary was set at $750,000. Mr. Khaykin was also eligible to participate in the Company’s Variable Pay Plan.
For a complete summary of the termination and change of control provisions of the Khaykin Agreement please see the section titled “Potential Payments Made Upon Termination or Change of Control” below.
On August 6, 2015, the Company extended an offer letter to Mr. Maletira (the “Maletira Agreement”) pursuant to which Mr. Maletira’s starting base salary was set at $425,000 and was eligible to participate in the Company’s Variable Pay Plan with a target incentive opportunity of 85% of his base salary.
The Retention Plan provides for severance and retention benefits to certain executives at the level of senior vice president and above as disclosed in the CD&A above.
A summary of the Change of Control Plan, which explains the termination benefits available to all of the NEOs except Mr. Khaykin can be found under the section titled “Potential Payments Made Upon Termination or Change of Control” below.
GRANTS OF PLAN-BASED AWARDS TABLE
The following table provides information about equity and non-equity awards granted to the NEOs in fiscal year 2017:
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GRANTS OF PLAN-BASED AWARDS | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(2) | |||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Approval Date | Award Type | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||
Oleg Khaykin | 8/17/16 | 8/17/16 | MSUs | 28,704 | (3) | 57,408 | (3) | 86,112 | (3) | 502,129 | ||||||||||||||||||||||||||||||||||||||||||
8/17/16 | 8/16/16 | RSUs | 57,408 | (4) | 439,745 | |||||||||||||||||||||||||||||||||||||||||||||||
N/A | N/A | Cash | 0 | 750,000 | 1,125,000 | N/A | ||||||||||||||||||||||||||||||||||||||||||||||
Incentive | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Amar Maletira | 8/17/16 | 8/16/16 | MSUs | 25,000 | (3) | 50,000 | (3) | 75,000 | (3) | 437,334 | ||||||||||||||||||||||||||||||||||||||||||
8/17/16 | 8/16/16 | RSUs | 50,000 | (4) | 383,000 | |||||||||||||||||||||||||||||||||||||||||||||||
N/A | N/A | Cash | 0 | 361,250 | 541,875 | N/A | ||||||||||||||||||||||||||||||||||||||||||||||
Incentive | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Luke Scrivanich | 8/17/16 | 8/16/16 | MSUs | 15,000 | (3) | 30,000 | (3) | 45,000 | (3) | 262,400 | ||||||||||||||||||||||||||||||||||||||||||
8/17/16 | 8/16/16 | RSUs | 30,000 | (4) | 229,800 | |||||||||||||||||||||||||||||||||||||||||||||||
N/A | N/A | Cash | 0 | 316,200 | 474,300 | N/A | ||||||||||||||||||||||||||||||||||||||||||||||
Incentive | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Paul McNab | 8/17/16 | 8/16/16 | MSUs | 16,250 | (3) | 32,500 | (3) | 48,750 | (3) | 284,267 | ||||||||||||||||||||||||||||||||||||||||||
8/17/16 | 8/16/16 | RSUs | 32,500 | (4) | 248,950 | |||||||||||||||||||||||||||||||||||||||||||||||
N/A | N/A | Cash | 0 | 369,750 | 554,625 | N/A | ||||||||||||||||||||||||||||||||||||||||||||||
Incentive | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Ralph Rondinone | 8/17/16 | 8/16/16 | MSUs | 16,250 | (3) | 32,500 | (3) | 48,750 | (3) | 284,267 | ||||||||||||||||||||||||||||||||||||||||||
8/17/16 | 8/16/16 | RSUs | 32,500 | (4) | 248,950 | |||||||||||||||||||||||||||||||||||||||||||||||
N/A | N/A | Cash | 0 | 246,400 | 369,600 | N/A | ||||||||||||||||||||||||||||||||||||||||||||||
Incentive | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Susan Spradley | 8/17/16 | 8/16/16 | MSUs | 16,250 | (3) | 32,500 | (3) | 48,750 | (3) | 284,267 | ||||||||||||||||||||||||||||||||||||||||||
8/17/16 | 8/16/16 | RSUs | 32,500 | (4) | 248,950 | |||||||||||||||||||||||||||||||||||||||||||||||
1/31/17 | — | Modified | 43,797 | (5) | 247,150 | |||||||||||||||||||||||||||||||||||||||||||||||
MSUs | ||||||||||||||||||||||||||||||||||||||||||||||||||||
1/31/17 | — | Modified | 54,414 | (6) | 412,785 | |||||||||||||||||||||||||||||||||||||||||||||||
RSUs | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Dion Joannou | 8/17/16 | 8/16/16 | MSUs | 16,250 | (3) | 32,500 | (3) | 48,750 | (3) | 284,267 | ||||||||||||||||||||||||||||||||||||||||||
8/17/16 | 8/16/16 | RSUs | 32,500 | (4) | 248,950 | |||||||||||||||||||||||||||||||||||||||||||||||
1/31/17 | — | Modified | 48,305 | (7) | 226,572 | |||||||||||||||||||||||||||||||||||||||||||||||
MSUs | ||||||||||||||||||||||||||||||||||||||||||||||||||||
1/31/17 | — | Modified | 65,159 | (8) | 497,993 | |||||||||||||||||||||||||||||||||||||||||||||||
RSUs |
GRANTS OF PLAN BASED AWARDS | |||||||||||||||
Estimated Future Payouts Under Non- Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock (#) (3) | Grant Date Fair Value of Stock Awards ($) (4) | ||||||||||||
Name | Grant Date | Approval Date | Award Type | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||
Oleg Khaykin | 8/28/19 | 8/20/19 | MSUs | 97,175 | 194,350 | 291,525 | 3,018,256 | ||||||||
8/28/19 | 8/20/19 | RSUs | 194,350 | 2,650,934 | |||||||||||
N/A | N/A | Cash | 0 | 960,000 | 1,344,000 | N/A | |||||||||
Incentive | |||||||||||||||
Amar Maletira | 8/28/19 | 8/20/19 | MSUs | 47,500 | 95,000 | 142,500 | 1,475,350 | ||||||||
8/28/19 | 8/20/19 | RSUs | 95,000 | 1,295,800 | |||||||||||
N/A | N/A | Cash | 0 | 500,000 | 700,000 | N/A | |||||||||
Incentive | |||||||||||||||
Paul McNab | 8/28/19 | 8/20/19 | MSUs | 17,500 | 35,000 | 52,500 | 543,550 | ||||||||
8/28/19 | 8/20/19 | RSUs | 35,000 | 477,400 | |||||||||||
N/A | N/A | Cash | 0 | 369,750 | 517,650 | N/A | |||||||||
Incentive | |||||||||||||||
Luke Scrinavich | 8/28/19 | 8/20/19 | MSUs | 15,000 | 30,000 | 45,000 | 465,900 | ||||||||
8/28/19 | 8/20/19 | RSUs | 30,000 | 409,200 | |||||||||||
N/A | N/A | Cash | 0 | 316,200 | 442,680 | N/A | |||||||||
Incentive | |||||||||||||||
Gary Staley | 8/28/19 | 8/20/19 | MSUs | 18,750 | 37,500 | 56,250 | 582,375 | ||||||||
8/28/19 | 8/20/19 | RSUs | 37,500 | 511,500 | |||||||||||
N/A | N/A | Cash | 0 | 318,750 | 573,750 | N/A | |||||||||
Incentive |
(1) | These columns show the potential cash value range of the payout for each NEO under the |
These |
(3) | These grants are time-based RSUs that vest 1/3 of the shares on the first anniversary of the grant date and the remainder of the shares in equal quarterly installments for two years |
(4) | Except as otherwise noted, the |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | ||||||||||||
OPTION AWARDS | STOCK AWARDS | |||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | 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 (#)(1) | |||
Oleg Khaykin | 2/15/16 | 1,180,257 | (2) | 5.95 | 02/15/24 | |||||||
8/28/17 | 12,563 | (4) | 157,038 | |||||||||
8/28/18 | 86,439 | (4) | 1,080,488 | |||||||||
8/28/19 | 194,350 | (4) | 2,429,375 | |||||||||
8/28/17 | 50,000 | (6) | 625,000 | |||||||||
8/28/17 | 22,500 | (7) | 281,250 | |||||||||
8/28/18 | 137,614 | (6) | 1,720,175 | |||||||||
8/28/19 | 194,350 | (6) | 2,429,375 | |||||||||
Amar Maletira | 8/28/17 | 5,193 | (4) | 64,913 | ||||||||
8/28/18 | 29,313 | (4) | 366,413 | |||||||||
8/28/18 | 15,000 | (8) | 187,500 | |||||||||
8/28/19 | 95,000 | (4) | 1,187,500 | |||||||||
8/28/17 | 20,668 | (6) | 258,350 | |||||||||
8/28/17 | 11,250 | (7) | 140,625 | |||||||||
8/28/18 | 46,667 | (6) | 583,338 | |||||||||
8/28/19 | 95,000 | (6) | 1,187,500 | |||||||||
Paul McNab | 8/28/17 | 2,262 | (4) | 28,275 | ||||||||
8/28/18 | 12,563 | (4) | 157,038 | |||||||||
8/28/19 | 35,000 | (4) | 437,500 | |||||||||
8/28/17 | 9,000 | (6) | 112,500 | |||||||||
8/28/18 | 20,000 | (6) | 250,000 | |||||||||
8/28/19 | 35,000 | (6) | 437,500 | |||||||||
Luke Scrivanich | 8/28/17 | 2,262 | (4) | 28,275 | ||||||||
8/28/18 | 12,563 | (4) | 157,038 | |||||||||
8/28/19 | 30,000 | (4) | 375,000 | |||||||||
8/28/17 | 9,000 | (6) | 112,500 | |||||||||
8/28/18 | 20,000 | (6) | 250,000 | |||||||||
8/28/19 | 30,000 | (6) | 375,000 | |||||||||
Gary Staley | 2/15/17 | 7,062 | (3) | 88,275 | ||||||||
8/28/17 | 2,262 | (4) | 28,275 | |||||||||
8/28/18 | 12,563 | (4) | 157,038 | |||||||||
8/28/18 | 10,000 | (8) | 125,000 | |||||||||
8/28/18 | 37,500 | (4) | 468,750 | |||||||||
8/28/17 | 9,000 | (6) | 112,500 | |||||||||
8/28/17 | 14,822 | (5) | 185,275 | |||||||||
8/28/18 | 20,000 | (6) | 250,000 | |||||||||
8/28/19 | 37,500 | (6) | 468,750 | |||||||||
The following table provides information regarding outstanding equity awards and applicable market values at the end of fiscal year 2017.
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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | ||||||||||||||||||||||||||||||||||||
OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | 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 (#)(1) | |||||||||||||||||||||||||||
Oleg Khaykin | 2/15/16 | 295,065 | (2) | 885,192 | (2) | 5.95 | 2/15/2024 | |||||||||||||||||||||||||||||
2/15/16 | 259,979 | (3) | 2,737,579 | |||||||||||||||||||||||||||||||||
2/15/16 | 16,700 | (4) | 175,851 | |||||||||||||||||||||||||||||||||
8/17/16 | 57,408 | (5) | 604,506 | |||||||||||||||||||||||||||||||||
2/15/16 | 86,659 | (6) | 912,519 | |||||||||||||||||||||||||||||||||
8/17/16 | 57,408 | (7) | 604,506 | |||||||||||||||||||||||||||||||||
Amar Maletira | 8/17/16 | 50,000 | (5) | 526,500 | ||||||||||||||||||||||||||||||||
9/15/15 | 143,182 | (3) | 1,507,706 | |||||||||||||||||||||||||||||||||
8/17/16 | 50,000 | (7) | 526,500 | |||||||||||||||||||||||||||||||||
9/15/15 | 143,182 | (6) | 1,507,706 | |||||||||||||||||||||||||||||||||
Luke Scrivanich | 8/15/10 | 48,967 | (8) | 0 | 5.74 | 8/15/2018 | ||||||||||||||||||||||||||||||
8/1/15 | 3,748 | (3) | 39,466 | |||||||||||||||||||||||||||||||||
8/17/16 | 30,000 | (5) | 315,900 | |||||||||||||||||||||||||||||||||
8/20/15 | 18,844 | (5) | 198,427 | |||||||||||||||||||||||||||||||||
8/1/15 | 14,919 | (7) | 157,097 | |||||||||||||||||||||||||||||||||
8/17/16 | 30,000 | (7) | 315,900 | |||||||||||||||||||||||||||||||||
8/20/15 | 30,000 | (7) | 315,900 | |||||||||||||||||||||||||||||||||
Paul McNab | 8/1/15 | 89,510 | (3) | 942,540 | ||||||||||||||||||||||||||||||||
8/17/16 | 32,500 | (5) | 342,225 | |||||||||||||||||||||||||||||||||
8/20/15 | 17,797 | (5) | 187,402 | |||||||||||||||||||||||||||||||||
8/1/15 | 89,510 | (6) | 942,540 | |||||||||||||||||||||||||||||||||
8/17/16 | 32,500 | (7) | 342,225 | |||||||||||||||||||||||||||||||||
8/20/15 | 28,334 | (7) | 298,357 | |||||||||||||||||||||||||||||||||
Ralph Rondinone | 8/1/15 | 4,172 | (3) | 43,931 | ||||||||||||||||||||||||||||||||
8/1/15 | 5,968 | (3) | 62,843 | |||||||||||||||||||||||||||||||||
8/17/16 | 32,500 | (5) | 342,225 | |||||||||||||||||||||||||||||||||
8/20/15 | 12,982 | (5) | 136,700 | |||||||||||||||||||||||||||||||||
8/1/15 | 16,604 | (7) | 174,840 | |||||||||||||||||||||||||||||||||
8/1/15 | 5,968 | (7) | 62,843 | |||||||||||||||||||||||||||||||||
8/17/16 | 32,500 | (7) | 342,225 | |||||||||||||||||||||||||||||||||
8/20/15 | 20,667 | (7) | 217,624 | |||||||||||||||||||||||||||||||||
Susan Spradley | 8/20/15 | 14,167 | (7) | 149,179 | ||||||||||||||||||||||||||||||||
8/17/16 | 10,833 | (7) | 114,071 | |||||||||||||||||||||||||||||||||
8/1/15 | 18,797 | (7) | 197,932 |
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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | ||||||||||||||||||||||||||||||||||||
�� OPTION AWARDS | STOCK AWARDS | |||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | 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 (#)(1) | |||||||||||||||||||||||||||
Dion Joannou | 8/20/15 | 17,333 | (7) | 182,516 | ||||||||||||||||||||||||||||||||
8/17/16 | 10,833 | (7) | 114,071 | |||||||||||||||||||||||||||||||||
8/1/15 | 20,139 | (6) | 212,064 |
(1) | Amounts reflecting market value of |
(2) | Time-based stock option |
(3) | Time-based RSUs with ¼ of the units vesting on each of the first four anniversaries of the hire date, |
(4) | Time-based |
(5) | MSUs that vest in three annual tranches based upon the Company’s TSR relative to the performance of the companies in the Nasdaq Telecommunications Index over a three-year period, contingent on the NEO’s continuous service through each applicable vesting date, subject to certain exceptions as set forth below in Potential Payments Made Upon Termination or Change in Control. The number of MSUs disclosed in the table above reflects vesting at 100% of the target amount. The actual number of shares that will vest ranges from 0% to 150% of the target amount for each vesting tranche, subject to completion of the applicable measurement period and certification by the Compensation Committee. |
(6) | MSUs that vest in four annual tranches based upon the Company’s total stockholder return (“TSR”) relative to the performance of the component companies of the |
(7) | PSUs that were earned on May 16, 2019 upon the Compensation Committee certifying achievement of an NSE operating income margin rate target. Previously, 50% of each NEO’s PSUs vested on the certification date and 25% of each executive officer’s PSUs vested on October 1, 2019. The remaining 25% of each executive officer’s PSUs vested on October 1, 2020, contingent on the NEO’s continuous service through each applicable vesting date, subject to certain exceptions as set forth below in Potential Payments Made Upon Termination or Change in Control. |
(8) |
The following Option Exercises and Stock Vested Table provides additional information about the value realized by the NEOs due to the exercise of option awards and vesting of restricted stock unitsRSUs during fiscal year 2017.
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OPTION EXERCISES AND STOCK VESTED | ||||||||||||||||
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) | ||||||||||||
Oleg Khaykin | 0 | 0 | 209,028 | 1,948,700 | ||||||||||||
Amar Maletira | 0 | 0 | 119,317 | 876,264 | ||||||||||||
Luke Scrivanich | 66,118 | 419,872 | 117,372 | 922,681 | ||||||||||||
Paul McNab | 0 | 0 | 157,839 | 1,190,298 | ||||||||||||
Ralph Rondinone | 0 | 0 | 139,643 | 1,132,001 | ||||||||||||
Susan Spradley | 0 | 0 | 218,179 | 1,767,828 | ||||||||||||
Dion Joannou | 0 | 0 | 163,020 | 1,372,318 |
OPTION EXERCISES AND STOCK VESTED | ||||
OPTION AWARDS | STOCK AWARDS | |||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (1) |
Oleg Khaykin | — | — | 261,700 | 3,607,089 |
Amar Maletira | — | — | 128,373 | 1,796,816 |
Paul McNab | — | — | 29,204 | 393,923 |
Luke Scrivanich | — | — | 28,995 | 391,045 |
Gary Staley | — | — | 43,544 | 594,746 |
Represents the amounts realized based on the product of (a) the number of |
benefits:
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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL | ||||||||||||
Name | Benefit | Within 12 Months After a Change in Control | Termination Not in Connection with a Change in Control | |||||||||
Oleg Khaykin(1) | Salary | 3,750,000 | 2,250,000 | |||||||||
Securities | 10,440,539 | 4,496,331 | ||||||||||
COBRA | 31,235 | 31,235 | ||||||||||
Amar Maletira | Salary | 850,000 | 637,500 | |||||||||
Securities | 4,068,413 | 0 | ||||||||||
COBRA | 21,120 | 0 | ||||||||||
Luke Scrivanich | Salary | 744,000 | 558,000 | |||||||||
Securities | 2,373,936 | 0 | ||||||||||
COBRA | 13,720 | 0 | ||||||||||
Paul McNab | Salary | 870,000 | 652,500 | |||||||||
Securities | 3,055,290 | 0 | ||||||||||
COBRA | 22,092 | 0 | ||||||||||
Ralph Rondinone | Salary | 704,000 | 528,000 | |||||||||
Securities | 1,383,231 | 0 | ||||||||||
COBRA | 22,092 | 0 | ||||||||||
Susan Spradley(2) | Salary | n/a | 705,000 | |||||||||
Securities | n/a | 461,182 | ||||||||||
COBRA | n/a | 24,005 | ||||||||||
Dion Joannou(2) | Salary | n/a | 612,000 | |||||||||
Securities | n/a | 508,652 | ||||||||||
COBRA | n/a | 33,139 |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL | |||||||
Name | Benefit | Death or Disability ($) (2) | Within 12 Months After a Change in Control ($) (3) | Termination Not in Connection with a Change in Control ($) | |||
Oleg Khaykin (1) | Salary | 0 | 3,360,000 | 2,640,000 | |||
Securities | 8,722,700 | 8,722,700 | 7,302,513 | ||||
COBRA | 0 | 34,944 | 34,944 | ||||
Amar Maletira | Salary | 0 | 1,000,000 | 750,000 | |||
Securities | 3,976,138 | 3,976,138 | 0 | ||||
COBRA | 0 | 23,580 | 0 | ||||
Paul McNab | Salary | 0 | 870,000 | 652,500 | |||
Securities | 1,422,813 | 1,422,813 | 0 | ||||
COBRA | 0 | 24,889 | 0 | ||||
Luke Scrivanich | Salary | 0 | 744,000 | 558,000 | |||
Securities | 1,297,813 | 1,297,813 | 0 | ||||
COBRA | 0 | 15,456 | 0 | ||||
Gary Staley | Salary | 0 | 562,500 | 375,000 | |||
Securities | 1,883,863 | 1,883,863 | 0 | ||||
COBRA | 0 | 24,889 | 0 |
(1) | Benefits for Mr. Khaykin are also payable if he is terminated within three months prior to a Change |
(2) | Amounts |
(3) | These amounts do not reflect the impact of any “better after-tax” provision. |
Under rules adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are required to calculate and disclose the total compensation paid to our median employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to Oleg Khaykin, our CEO. The following paragraphs describe our methodology and the resulting CEO Pay Ratio.
in our fiscal year 2019 proxy statement, incorporated herein by reference. With respect to the annual total compensation of the “median employee,” we identified and calculated the elements of such employee’s annual total compensation for fiscal year 2020 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $75,527. The median employee’s total compensation for fiscal year 2020 includes the median employee’s actual salary for the twelve-month period ended June 27, 2020 and the fiscal year 2020 bonus. With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column for 2020 in our Summary Compensation Table included in this Proxy Statement.
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Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column) | |||||||||
Equity compensation plans | 7,202,966 | (1) | $ | 6.89 | 13,845,670 | (2) | ||||||
Approved by security holders | ||||||||||||
Equity compensation plans | 1,577,351 | (3) | $ | 5.95 | 1,508,565 | |||||||
Not approved by security holders | ||||||||||||
Total/Weighted Ave./Total | 8,780,317 | (4) | $ | 6.16 | 15,354,235 |
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted- average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column) | ||||||
Equity compensation plans approved by security holders | 6,065,164 | (1) | n/a | 20,573,369 | (2) | ||||
Equity compensation plans not approved by security holders | 1,180,257 | (3) | $ | 5.95 | — | ||||
Total/Weighted Ave./Total | 7,245,421 | $ | 5.95 | 20,573,369 | |||||
(1) | Represents shares of the Company’s Common Stock issuable upon the exercise of options and |
(2) | Represents shares of the Company’s Common Stock authorized for future issuance under the following equity compensation plans: Amended and Restated 2003 Equity Incentive Plan (under which |
(3) | Represents shares of the Company’s Common Stock issuable upon the exercise of options |
The Board of Directors adopted the 2005 Acquisition Equity Incentive Plan (the “2005 Plan”) in August 2005 and amended the 2005 Plan in February 2016. The 2005 Plan is administered by the Compensation Committee. Pursuant to the 2005 Plan, the Compensation Committee may grant stock options, SARs, Dividend Equivalent Rights, Restricted Stock, Restricted Stock Units and Performance Units to employees (including directors and officers) of the Company or any parent or subsidiary corporation of the Company, or any other such entity in which the Company holds a substantial ownership interest. Pursuant to NASDAQ listing rules regarding equity compensation plans not approved by security holders, the Company can and will only issue awards under the 2005 Plan to individuals joining the Company in connection with acquisitions or related strategic transactions or certain new hires to the extent permitted by NASDAQ rules, and not for new grants to continuing employees of the Company, nor to regular new hires. The 2005 Plan will continue in effect until terminated by the Board of Directors.
As of July 1, 2017, there were 1,508,565 shares remaining available for future grants under the 2005 Plan. Shares underlying awards that are forfeited, canceled or expired are not counted as having been issued under the 2005 Plan. Stock options and any awards intended to qualify as performance-based compensation issued under the 2005 Plan must have an exercise price of not less than 100% of the fair market value of the
Company’s Common Stock on the date of grant of the award. Awards are generally non-transferable. The term of all awards granted under the Plan shall not exceed eight years from the date of grant.
SEC.
June 27, 2020.
Section 16(a) of the Exchange requires the Company’s directors, executive officers and any persons who directly or indirectly hold more than 10 percent of the Company’s Common Stockcommon stock (“Reporting Persons”) to file reports of ownership and changes in ownership with the SEC. Reporting Persons are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
By Order
Oleg KhaykinChief Executive Officer and President
San Jose, CaliforniaOctober 4, 2017
The Viavi Solutions Inc. 1998 Employee Stock Purchase Plan is intended to provide eligible employees of the Company and one or more of its Corporate Affiliates with the opportunity to acquire a proprietary interest in the Company through participation in a plan designed to qualify as an employee stock purchase plan under1995, Section 423 of the Internal Revenue Code (the “Code”) for Participants in the United States. The Plan was initially established as the JDS Uniphase Corporation 1998 Employee Stock Purchase Plan effective as of August 1, 1998 and was subsequently amended a number of times. In connection with the spin-off of Lumentum Holdings, Inc. from the Company on August 1, 2015 (the “Spin-off”), and the related renaming of JDS Uniphase Corporation as Viavi Solutions Inc., the Plan was amended and restated in its entirety as the Viavi Solutions Inc. 1998 Employee Stock Purchase Plan and certain adjustments were made to the number of shares of Stock reserved for issuance under the Plan. On November 15, 2017 (the “Restatement Effective Date”), the Plan was amended and restated to, among other things, extend the term of the Plan until November 15, 2027 and shall be effective for offerings made under the Plan commencing on or after February 1, 2018.
For purposes of administration of the Plan, the following terms shall have the meanings indicated:
Compensation means the (i) regular base salary or base wages paid to a Participant by one or more Participating Companies during such individual’s period of participation in the Plan, plus (ii) any amounts contributed by the Corporation or any Corporate Affiliate pursuant to a salary reduction agreement which are not includible in the gross income of the Participant by reason of Code Sections 402(e)(3) or 125, plus (iii) all of the following amounts to the extent paid in cash: overtime payments, bonuses, commissions, profit-sharing distributions and other incentive-type payments. However, Compensation shall not include any contributions (other than those excludible from the Participant’s gross income under Code Sections 402(e)(3) or 125) made on the Participant’s behalf by the Company or any Corporate Affiliate to any deferred compensation plan or welfare benefit program now or hereafter established.
Board means the Board of Directors of the Company.
Company means Viavi Solutions Inc., a Delaware corporation, formerly known as JDS Uniphase Corporation, and any corporate successor to all or substantially all of the assets or voting stock of Viavi Solutions Inc., which shall by appropriate action adopt the Plan.
Corporate Affiliate means any company which is, or in the future becomes, either the parent corporation or a subsidiary corporation of the Company (as determined in accordance with Section 424 of the Code).
Employee means any person who is regularly engaged, for a period of more than 20 hours per week and more than 5 months per calendar year, in the rendition of personal services to the Company or any other Participating Company for earnings considered wages under Section 3121(a) of the Code. For purposes of the Plan, a person’s employment with the Company or a Participating Company terminates and the person ceases to be an Employee on the date on which such person ceases to provide continuous active service to the Company or Participating Company. In jurisdictions requiring notice in advance of an effective termination of an employee’s employment, an employee’s continuous active service shall be deemed terminated upon the actual cessation of the active performance of duties or responsibilities in providing services to the Company or a Participating Company, notwithstanding any required notice period that must be fulfilled or pay in lieu of notice or severance pay that must be provided before a termination as an employee can otherwise become effective under applicable laws, regardless of whether such notice has been fulfilled or pay in lieu of notice or severance pay has been provided. Further, and notwithstanding anything else in the Plan, a person’s employment with the Company or a Participating Company terminates and the person ceases to be an Employee on the date that he or she is notified that his or her employment is terminated for cause or for just cause. The terms “termination of employment” or “cessation of Employee status” or similar terms have meaning corresponding to this definition of “Employee.”
Participant means any Employee of a Participating Company who is actively participating in the Plan.
Participating Company means the Company and such Corporate Affiliates as may be designated from time to time by the Board.
Plan means this 1998 Employee Stock Purchase Plan.
Plan Administrator means either the Board or a committee of the Board that is responsible for administration of the Plan.
Purchase Period means each six-month period commencing on (1) any February 1 and ending on the subsequent July 31, or (2) commencing on August 1 and ending on the subsequent January 31; provided, however, that the Plan Administrator may establish prior to the commencement of any Purchase Period, a different duration for one or more Purchase Periods or different commencing or ending dates for such Purchase Periods; provided that no Purchase Period may have a duration exceeding six (6) months. If the first day of a Purchase Period is not a Trading Day, then the next subsequent Trading Day will be deemed the first day of the Purchase Period unless the Company provides otherwise prior to the commencement of such Purchase Period. If the last day of a Purchase Period is not a Trading Day, the immediately preceding Trading Day will be deemed the last day of the Purchase Period unless the Company provides otherwise prior to the commencement of such Purchase Period.
Stock means shares of the common stock of the Company.
Trading Day means a day on which the principal stock exchange or quotation system on which the Stock is then listed is open for trading.
The Plan shall be administered by the Plan Administrator which shall have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan. Every finding, decision and determination made by the Plan Administrator shall, to the full extent permitted by applicable law, be final and binding upon all persons.
(a) Stock shall be offered for purchase under the Plan through a series of Purchase Periods established by the Plan Administrator until such time as (i) the maximum number of shares of Stock available for issuance under the Plan shall have been purchased or (ii) the Plan shall have been sooner terminated, discontinued, or suspended in accordance with Article X or Article XI.
(b) The Participant shall be granted a separate purchase right for each Purchase Period in which he/she participates. The purchase right shall be granted on the first day of the Purchase Period and shall be automatically exercised on the last day of such Purchase Period provided such purchase right remains outstanding on such date.
(c) The acquisition of Stock through participation in the Plan for any Purchase Period shall neither limit nor require the acquisition of Stock by the Participant in any subsequent Purchase Period, subject to the limitations of Sections V, VII, and VIII hereof.
(d) Under no circumstances shall any purchase rights granted under the Plan be exercised, nor shall any shares of Stock be issued hereunder, until such time as (i) the Plan shall have been approved by the Company’s stockholders and (ii) the Company shall have complied with all applicable requirements27A of the Securities Act of 1933, (as amended), all applicable listing requirements of any securities exchange on which the Stock is listed and all other applicable requirements established by law or regulation.
(a) Every Employee of a Participating Company shall be eligible to participate in the Plan on the first day of the first Purchase Period following the Employee’s commencement of service with the Company or any Corporate Affiliate.
(b) In order to participate in the Plan for a particular Purchase Period, the Employee must complete the enrollment forms prescribed by the Plan Administrator (including a purchase agreement and a payroll deduction authorization) and file such forms with the Plan Administrator (or its designate) prior to the commencement date of the Purchase Period.
(c) The payroll deduction authorized by a Participant for purposes of acquiring Stock under the Plan may be any multiple of 1% of Compensation paid to the Participant during the relevant Purchase Period, up to a maximum of 10%. The deduction rate so authorized shall continue in effect for the entire Purchase Period unless the Participant shall, prior to the end of the Purchase Period for which the purchase right is in effect, reduce the rate by filing the appropriate form with the Plan Administrator (or its designate). The reduced rate shall become effective as soon as practicable following the filing of such form. Each Participant shall be permitted such a rate reduction only one (1) time in each Purchase Period. The reduced rate shall continue in effect for the entire Purchase Period and for each subsequent Purchase Period, unless the Participant shall, prior to the commencement of any subsequent Purchase Period, designate a different rate (up to the 10% maximum) by filing the appropriate form with the Plan Administrator (or its designate). The new rate shall become effective for the first Purchase Period commencing after the filing of such form. Payroll deductions, however, will automatically cease upon the termination of the Participant’s purchase right in accordance with Section VII(d) or (e) below.
(d) With respect to Participants who are not United States residents, the amount deducted for each such Participant shall be deducted from the Participant’s salary in the currency in which such Participant is compensated and shall be converted to United States dollars by using the United States buying rate as reported by Bloomberg for the purchase of United States dollars with such currency on the day Stock is purchased for the Participant’s account.
(a) The Stock purchasable by Participants under the Plan shall, solely in the Board’s discretion, be made available from either authorized but unissued Stock or from reacquired Stock, including shares of Stock purchased on the open market. On August 1, 2015, in connection with the Spin-off, the Plan was amended and restated to adjust the number of shares of Stock that were available for issuance under the Plan as of that date from 3,199,171 shares to 5,727,155, subject to adjustment under Section VI(b). As of the Restatement Effective Date, 4,573,845 shares of Stock were available for issuance under the Plan, subject to adjustment under Section VI(b). With respect to any amendment to increase the total number of shares of Stock under the Plan, the Plan Administrator shall have discretion to disallow the purchase of any increased shares of Stock for the Purchase Period in existence at the time of such increase. If the Plan Administrator determines that on a given purchase date the number of shares with respect to which purchase rights are to be exercised may exceed the number of shares then available for sale under the Plan, the Plan Administrator may make a pro-rata allocation of the shares remaining available for purchase on such purchase date in as uniform a manner as shall be practicable and as it shall determine to be equitable and continue such Purchase Period. Any amount remaining in a Participant’s payroll account following such pro-rata allocation shall be promptly refunded to the Participant without interest and shall not be carried over to any future Purchase Period.
(b) In the event any change is made to the Stock purchasable under the Plan by reason of any recapitalization, stock dividend, stock split, combination of shares or other change affecting the outstanding common stock of the Company as a class without receipt of consideration, then appropriate adjustments shall be made by the Plan Administrator to the class and maximum number of shares purchasable under the Plan, the class and maximum number of shares purchasable per Participant under any purchase right outstanding at the time or purchasable per Participant over the term of the Plan, and the class and number of shares and the price per share of the Stock subject to outstanding purchase rights held by Participants under the Plan.
An Employee who participates in the Plan for a particular Purchase Period shall have the right to purchase Stock on the purchase date for such Purchase Period upon the terms and conditions set forth below and shall execute a purchase agreement embodying such terms and conditions and such other provisions (not inconsistent with the Plan) as the Plan Administrator may deem advisable.
(a)Purchase Price. The purchase price per share shall be thelesser of (i) 95% of the fair market value of a share of Stock on the date on which the purchase right is granted or (ii) 95% of the fair market value of a share of Stock on the date the purchase right is exercised. For purposes of determining such fair market value (and for all other valuation purposes under the Plan), the fair market value per share of Stock on any date shall be the closing selling price per share (or the closing bid, if no sales are reported on such date), as officially quoted on any established stock exchange or a national market system, including without limitation The Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, on the date of determination (or, if no closing selling price or closing bid was reported on that date, as applicable, on the last Trading Day such closing selling price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Plan Administrator deems reliable;
(b)Number of Purchasable Shares. The number of shares purchasable by a Participant on a purchase date for a Purchase Period shall be the number of whole shares obtained by dividing the amount collected from the Participant through payroll deductions during the Purchase Period, together with any amount carried over from the prior Purchase Period pursuant to the provisions of Section VII(f), by the purchase price in effect for such purchase date. However, the maximum number of shares purchasable by the Participant pursuant to any one outstanding purchase right shall not exceed 4,000 shares (subject to adjustment under Section VI(b)).
Under no circumstances shall purchase rights be granted under the Plan to any Employee if such Employee would, immediately after the grant, own (within the meaning of Section 424(d) of the Code), or hold outstanding options or other rights to purchase, stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or any of its Corporate Affiliates.
(c)Payment. Payment for Stock purchased under the Plan shall be effected by means of the Participant’s authorized payroll deductions. Such deductions shall begin on the first pay day coincident with or immediately following the commencement date of the relevant Purchase Period and shall terminate with the pay day ending with or immediately prior to the last day of the Purchase Period. The amounts so collected shall be credited to the Participant’s individual account under the Plan, but no interest shall be paid on the balance from time to time outstanding in the account. The amounts collected from a Participant may be commingled with the general assets of the Company and may be used for general corporate purposes.
(d)Termination of Purchase Rights.
(i) A Participant may, prior to any purchase date, terminate his/her outstanding purchase right under the Plan by filing the prescribed notification form with the Plan Administrator (or its designate). The Company will then refund the payroll deductions which the Participant made with respect to the terminated purchase right without interest, and no further amounts will be collected from the Participant with respect to such terminated right.
(ii) The termination shall be irrevocable with respect to the particular Purchase Period to which it pertains and shall also require the Participant to re-enroll in the Plan (by making a timely filing of a new purchase agreement and payroll deduction authorization) if the Participant wishes to resume participation in a subsequent Purchase Period.
(e)Termination of Employment. If a Participant ceases Employee status during any Purchase Period, then the Participant’s outstanding purchase right under the Plan shall immediately terminate and all sums previously collected from the Participant and not previously applied to the purchase of stock during such Purchase Period shall be promptly refunded without interest. However, should the Participant die or become permanently disabled while in Employee status, then the Participant or the person or persons to whom the rights of the deceased Participant under the Plan are transferred by will or by the laws of descent and distribution (the “successor”) will have the election, exercisable at any time prior to the purchase date for the Purchase Period in which the Participant dies or becomes permanently disabled that is scheduled to occur within three (3) months of the date that the Participant ceases to be an Employee due to death or permanent disability, to (i) withdraw all of the funds in the Participant’s payroll account at the time of his/her cessation of Employee status or (ii) have such funds held for purchase of shares of Stock on the purchase date. If the Plan Administrator (or its designate) does not receive such an election prior to the purchase date for such Purchase Period, or the Purchase Period will end more than three (3) months after the Participant ceases to be
an Employee due to death or permanent disability, the successor will be deemed to have elected to withdraw all of the funds in the Participant’s payroll account at the time of his/her cessation of Employee status and such funds shall be distributed to the successor as soon as administratively practicable. In no event, however, shall any further payroll deductions be added to the Participant’s account following his/her cessation of Employee status.
For purposes of the Plan, a Participant shall be deemed to be permanently disabled if he/she is unable, by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of at least twelve (12) months, to engage in any substantial gainful employment.
(f)Stock Purchase. Outstanding purchase rights shall be automatically exercised as provided in Section IV(b). The exercise shall be effected by applying the amount credited to the Participant’s account on the last date of the Purchase Period to the purchase of whole shares of Stock (subject to the limitations on the maximum number of purchasable shares set forth in Section VII(b)) at the purchase price in effect for such purchase date. Any amount remaining in the Participant’s account after such exercise representing a fractional share of Stock shall be held for the purchase of Stock on the next purchase date;provided, however, that any other amount not applied to the purchase of Stock at the end of a Purchase Period shall be refunded without interest promptly after the close of the Purchase Period, including any amount not applied to the purchase of stock by reason by the Section VII(b) or the Section VIII limitations on the maximum number of purchasable shares.
(g)Rights as Stockholder. A Participant shall have no rights as a stockholder with respect to shares covered by the purchase rights granted to the Participant under the Plan until the shares are actually purchased on the Participant’s behalf in accordance with Section VII(f). No adjustments shall be made for dividends, distributions or other rights for which the record date is prior to the date of such purchase.
(h)Assignability. No purchase rights granted under the Plan shall be assignable or transferable by a Participant except by will or by the laws of descent and distribution, and the purchase rights shall, during the lifetime of the Participant, be exercisable only by such Participant.
(i)Merger or Liquidation of Company. In the event the Company or its stockholders enter into an agreement to dispose of all or substantially all of the assets or outstanding capital stock of the Company by means of a sale, merger or reorganization in which the Company will not be the surviving corporation (other than a reorganization effected primarily to change the State in which the Company is incorporated) or in the event the Company is liquidated, then all outstanding purchase rights under the Plan shall automatically be exercised immediately prior to such sale, merger, reorganization or liquidation (or such other time, as determined by the Plan Administrator) determined by applying all sums previously collected from Participants pursuant to their payroll deductions in effect for such rights to the purchase of whole shares of Stock, subject, however, to the applicable limitations of Section VII(b) and Section VIII.
(a) No Participant shall be entitled to accrue rights to acquire Stock pursuant to any purchase right under this Plan if and to the extent such accrual, when aggregated with (I) Stock rights accrued under other purchase rights outstanding under this Plan and (II) similar rights accrued under other employee stock purchase plans (within the meaning21E of Section 423 of the Code) of the Company or its Corporate Affiliates, would otherwise permit such Participant to purchase more than $25,000 worth of stock of the Company or any Corporate Affiliate (determined on the basis of the fair market value of such stock on the date or dates such rights are granted to the Participant) for each calendar year such rights are at any time outstanding.
(b) For purposes of applying the accrual limitations of Section VIII(a), the right to acquire Stock pursuant to each purchase right outstanding under the Plan shall accrue as follows:
(i) The right to acquire Stock under each such purchase right shall accrue as and when the purchase right first becomes exercisable during the calendar year as provided in Section IV(b).
(ii) No right to acquire Stock under any outstanding purchase right shall accrue to the extent the Participant has already accrued in the same calendar year the right to acquire $25,000 worth of Stock (determined on the basis of the fair market value on the date or dates of grant) pursuant to that purchase right or one or more other purchase rights which may have been held by the Participant during such calendar year.
(iii) If by reason of the Section VIII(a) limitations, the Participant’s outstanding purchase right does not accrue for any Purchase Period, then the payroll deductions which the Participant made during that Purchase Period with respect to such purchase right shall be promptly refunded without interest.
(c) In the event there is any conflict between the provisions of this Article VIII and one or more provisions of the Plan or any instrument issued thereunder, the provisions of this Article VIII shall be controlling.
(a) The Plan is designed to qualify as an employee stock purchase plan under Section 423 of the Code for Participants in the United States. However, the Plan Administrator may, at its discretion, cease to administer the Plan as a qualified employee stock purchase plan under Code Section 423. Accordingly, share purchases effected under the Plan at any time after the Plan ceases to be administered as a qualified employee stock purchase plan under Code Section 423 (whether pursuant to purchase rights granted before or after the Plan ceases to be qualified) shall result in taxable income to each Participant equal to the excess of (i) the fair market value of the purchased shares on the purchase date over (ii) the purchase price paid for such shares.
(b) To the extent required by law, the Company’s obligation to deliver shares to the Participant upon the exercise of any outstanding purchase right shall be subject to the Participant’s satisfaction of all applicable federal, state and local income and employment and similar non-United States tax withholding requirements.
(a) The Board may from time to time alter, amend, suspend or discontinue the Plan;provided, however, that no such action shall become effective prior to the exercise of outstanding purchase rights at the end of the Purchase Period in which such action is authorized. To the extent necessary to comply with Code Section 423, the Company shall obtain stockholder approval in such a manner and to such a degree as required.
(b) The Company shall have the right, exercisable in the sole discretion of the Plan Administrator, to terminate the Plan immediately following the end of a Purchase Period. Should the Company elect to exercise its right to terminate the Plan, then the Plan shall terminate in its entirety, and no further purchase rights shall thereafter be granted, and no further payroll deductions shall thereafter be collected, under the Plan.
(a) The Plan shall terminate upon the earlier of (i) November 15, 2027 or (ii) the date on which all shares available for issuance under the Plan shall have been sold pursuant to purchase rights exercised under the Plan.
(b) All costs and expenses incurred in the administration of the Plan shall be paid by the Company.
(c) Neither the action of the Company in establishing the Plan, nor any action taken under the Plan by the Plan Administrator, nor any provision of the Plan itself shall be construed so as to grant any person the right to remain in the employ of the Company or any of its Corporate Affiliates for any period of specific duration, and such person’s employment may be terminated at any time, with or without cause. Termination of the Plan, or of a person’s status as an Employee or a Participant under the Plan, shall not constitute a constructive dismissal of the Participant’s employment with the Company or a Participating Company. Further, no person shall have any rights or entitlement under the Plan after such person has ceased to be an Employee for purposes of the Plan or a Participant in the Plan.
(d)Governing Law. The Plan is to be construed in accordance with and governed by the internal laws of the State of California (as permitted by Section 1646.5 of the California Civil Code, or any similar successor provision) without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of California to the rights and duties of the parties, except to the extent the internal laws of the State of California are superseded by the laws of the United States. Should any provision of the Plan be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.
1.Establishment and Purpose of the Plan. The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company by offering them an opportunity to participate in the Company’s future performance. The Plan was initially established as the JDS Uniphase Corporation 2003 Equity Incentive Plan effective as of November 6, 2003 and has subsequently been amended a number of times. In connection with the spin-off of Lumentum Holdings, Inc. from the Company on August 1, 2015, and the related renaming of JDS Uniphase Corporation as Viavi Solutions Inc., the Plan was amended and restated in its entirety as the Viavi Solutions Inc. 2003 Equity Incentive Plan and certain adjustments were made to the number of Shares reserved for issuance under the Plan and subject to outstanding Awards granted under the Plan. On November 15, 2017 (the “Restatement Effective Date”), the Plan was amended and restated, to among other things: (i) increase the number of Shares reserved under the Plan; (ii) set a limit on the total value of equity and cash compensation that may be paid to each Non-Employee Director during each fiscal year; (iii) provide that Awards granted under the Plan after the Restatement Effective Date will have a minimum one-year vesting period from the date of grant, subject to certain limited exceptions; and (iv) provide that any dividends or Dividend Equivalent Rights credited with respect to an Award will be paid or distributed only if, when and to the extent the Shares underlying the Award vest.
2.Definitions. As used herein, the following definitions shall apply:
(a) “Administrator” means the Board or any of the Committees appointed to administer the Plan.
(b) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.
(c) “Applicable Laws” means the legal requirements relating to the Plan and the Awards under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to Awards granted to residents therein.
(d) “Assumed” means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which preserves the compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Award.
(e) “Award” means the grant of an Option, SAR, Dividend Equivalent Right, Restricted Stock, Restricted Stock Unit, Performance Unit, Performance Share, or other right or benefit under the Plan.
(f) “Award Agreement” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.
(g) “Board” means the Board of Directors of the Company.
(h) “Cause” means, with respect to the termination by the Company or a Related Entity of the Grantee’s Continuous Active Service, that such termination is for “Cause” as such term is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator, the Grantee’s: (i) performance of any act or failure to perform any act in bad faith and to the detriment of the Company or a Related Entity; (ii) dishonesty, intentional misconduct, material violation of any applicable Company or Related Entity policy, or material breach of
any agreement with the Company or a Related Entity; or (iii) commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person.
(i) “Change in Control” means a change in ownership or control of the Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s stockholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offeror do not recommend such stockholders accept, or
(ii) a change in the composition of the Board over a period of thirty-six (36) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors.
(j) “Code” means the Internal Revenue Code of 1986, as amended.
(k) “Committee” means any committee composed of members of the Board appointed by the Board to administer the Plan.
(l) “Common Stock” means the common stock of the Company.
(m) “Company” means Viavi Solutions Inc., a Delaware corporation, formerly known as JDS Uniphase Corporation.
(n) “Consultant” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.
(o) “Continuing Directors” means members of the Board who either (i) have been Board members continuously for a period of at least thirty-six (36) months or (ii) have been Board members for less than thirty-six (36) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board.
(p) “Continuous Active Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated. In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Active Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws. Continuous Active Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave. For purposes of each Incentive Stock Option granted under the Plan, if such leave exceeds ninety (90) days, and reemployment upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following the expiration of such ninety (90) day period.
(q) “Corporate Transaction” means any of the following transactions:
(i) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;
(ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company;
(iii) the complete liquidation or dissolution of the Company;
(iv) any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but in which securities possessing more than forty percent (40%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction; or
(v) acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction.
(r) “Covered Employee” means an Employee who is a “covered employee” under Section 162(m)(3) of the Code.
(s) “Director” means a member of the Board or the board of directors of any Related Entity.
(t) “Disability” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.
(u) “Dividend Equivalent Right” means a right entitling the Grantee to compensation measured by dividends paid with respect to Common Stock.
(v) “Employee” means any person, including an Officer or Director, who is in the employ of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance. The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.
(w) “Exchange Act” means the Securities Exchange Act of 1934,1934. Forward-looking statements may appear throughout this Proxy Statement. These forward-looking statements generally are identified by the words “committed to, “strive” “believe,” “expect,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially. We describe risks and uncertainties that could cause actual results and events to differ materially in “Risk Factors,” “Quantitative and Qualitative Disclosures about Market Risk,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our Forms 10-K and 10-Q. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.
(x) “Fair Market Value” means,supplemental information regarding the Company’s operational performance. The Company uses these measures to evaluate the Company’s historical and prospective financial performance, as well as its performance relative to its competitors. Specifically, management uses these items to further its own understanding of any date, the Company’s core operating performance, which the Company believes represent its performance in the ordinary, ongoing and customary course of its operations. Accordingly, management excludes from core operating performance items such as those relating to certain purchase price accounting adjustments, amortization of acquisition-related intangibles and inventory step-up, stock-based compensation, restructuring, separation costs, changes in fair value of Common Stock determined as follows:
contingent consideration liabilities and certain investing expenses and non-cash activities that management believes are not reflective of such ordinary, ongoing and customary course activities. Additionally, the Company excludes the results of discontinued operations in calculating non-GAAP net income (loss), non-GAAP net income (loss) per share for all periods reported. The Company believes excluding these items enables investors to evaluate more clearly and consistently the Company’s core operational performance.
(ii) If the Common Stock is regularly quoted on an automated quotation system (including the OTC Bulletin Board) or byAmortization of intangibles: The Company includes amortization expense related to intangibles in its GAAP presentation of cost of revenues and operating expense. The Company excludes these significant non-cash items in calculating non-GAAP operating margin, non-GAAP net income (loss), and non-GAAP net income (loss) per share, because it believes doing so provides investors a recognized securities dealer, but selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bidclearer and low asked prices for the Common Stock on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stockmore consistent view of the type describedCompany’s core operating performance in (i)terms of cost of revenues and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith.
(y) “Full Value Award” means the grant of Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares under the Plan with a per share or unit purchase price lower than 100% of Fair Market Value on the date of grant.
(z) “Grantee” means an Employee, Director or Consultant who receives an Award under the Plan.
(aa) “Immediate Family” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Grantee’s household (other than a tenant or employee), a trust in which these persons (or the Grantee) have more than fifty percent (50%) of the beneficial interest, a foundation in which these persons (or the Grantee) control the management of assets, and any other entity in which these persons (or the Grantee) own more than fifty percent (50%) of the voting interests.
(bb) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.
(cc) “Non-Employee Director” means a Director who is not an Employee.
(dd) “Non-Qualified Stock Option” means an Option not intended to qualify as an Incentive Stock Option.
(ee) “Officer” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(ff) “Option” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan.
(gg) “Parent” means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code.
(hh) “Performance-Based Compensation” means compensation qualifying as “performance-based compensation” under Section 162(m) of the Code.
(ii) “Performance Shares” means Shares or an Award denominated in Shares which may be earned in whole or in part upon attainment of performance criteria established by the Administrator.
(jj) “Performance Units” means an Award which may be earned in whole or in part based upon attainment of performance criteria established by the Administrator and which may be settled for cash, Shares or other securities or a combination of cash, Shares or other securities as established by the Administrator.
(kk) “Plan” means this 2003 Equity Incentive Plan.
(ll)Related Entity” means any Parent or Subsidiary of the Company and any business, corporation, partnership, limited liability company or other entity in which the Company or a Parent or a Subsidiary of the Company holds a substantial ownership interest, directly or indirectly.
(mm) “Replaced” means that pursuant to a Corporate Transaction the Award is replaced with a comparable stock award or a cash incentive program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such Award existing at the time
Non-cash interest expense and other expense: The Company incurred non-cash interest expense accretion of the Corporate Transactiondebt discount on its convertible debt instruments. The Company eliminates this in calculating non-GAAP net income (loss), and providesnon-GAAP net income (loss) per share because it believes that in so doing, it can provide investors a clearer and more consistent view of the Company’s core operating performance.
(nn) “Restricted Stock” means Shares issued under the Plan to the Granteeor an alternative for, such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.
(oo) “Restricted Stock Unit” means a grant of a right to receive in cash or stock, as established by the Administrator, the market value of one Share.
(pp) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.
(qq) “SAR” means a stock appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciationgenerally accepted accounting principles in the valueUnited States. The GAAP measure most directly comparable to non-GAAP net income (loss) is net income (loss). The GAAP measure most directly comparable to non-GAAP net income (loss) per share is net income (loss) per share. The Company believes these GAAP measures alone are not fully indicative of Common Stock.
(rr) “Share” means a share of the Common Stock.
(ss) “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as definedits core operating expenses and performance and that providing non-GAAP financial measures in Section 424(f) of the Code.
3.Stock Subject to the Plan.
(a) Effective as of the Restatement Effective Date, subject to the provisions of Section 10 below, the maximum aggregate number of Shares which may be issued pursuant to all Awards (including Incentive Stock Options) shall be equal to the sum of (i) the number of Shares that were available for the future grant of Awards as of the Restatement Effective, (ii) 4,000,000 new Shares, (iii) the number of Shares subject to Awards outstanding under the Plan as of the Restatement Effective Date, (iv) the number of unallocated Shares remaining available for the grant of new awards underconjunction with GAAP measures provides valuable supplemental information regarding the Company’s 2005 Acquisition Equity Incentive Plan (“Acquisition Plan”) as of the Restatement Date, and (v) the number of Shares subject to outstanding stock awards granted under the Acquisition Plan that on or after Restatement Date would have otherwise been available for reissuance under the Acquisition Plan. The Shares to be issued pursuant to Awards may be authorized, but unissued, or reacquired Common Stock.
(b) Any Shares subject to Awards will be counted against the numerical limits of this Section 3 as one Share for every one Share subject thereto. To the extent that a Share that was subject to an Award that counted as 1.5 Shares against the Plan reserve prior to the Restatement Date is recycled back into the Plan under the next paragraph of this Section 3, the Plan will be credited with 1.5 Shares.
(c) Any Shares covered by an Award (or portion of an Award) which is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at the lower of their original purchase price or their Fair Market Value at the time of repurchase, such Shares shall become available for future grant under the Plan. With respect to Options and SARs, the gross number of Shares subject to the Award will cease to be available under the Plan (whether or not the Award is net settled for a lesser number of Shares, or if Shares are utilized to exercise such an Award). In addition, if Shares are withheld to pay any withholding taxes applicable to an Award, then the gross number of Shares subject to such Award will cease to be available under the Plan.
4.Administration of the Plan.
(a)Plan Administrator.
(i)Administration with Respect to Directors and Officers. With respect to grants of Awards to Directors or Employees who are also Officers or Directors of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in
accordance with Rule 16b-3. Once appointed, such Committee shall continueThe following tables reconcile GAAP measures to serve in its designated capacity until otherwise directed by the Board.
(ii)Administration With Respect to Consultants and Other Employees. With respect to grants of Awards to Employees or Consultants who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. The Board may authorize one or more Officers to grant such Awards and may limit such authority as the Board determines from time to time.
(iii)Administration With Respect to Covered Employees. Notwithstanding the foregoing, grants of Awards to any Covered Employee intended to qualify as Performance-Based Compensation shall be made only by a Committee (or subcommittee of a Committee) which is comprised solely of two or more Directors eligible to serve on a committee making Awards qualifying as Performance-Based Compensation. In the case of such Awards granted to Covered Employees, references to the “Administrator” or to a “Committee” shall be deemed to be references to such Committee or subcommittee.
(iv)Administration Errors. In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a), such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.
(b)Powers of the Administrator. Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:
(i) to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;
(ii) to determine whether and to what extent Awards are granted hereunder;
(iii) to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder;
(vi) to amend the terms of any outstanding Award granted under the Plan, provided that (A) any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent, (B) the reduction of the exercise price of any Option or SAR awarded under the Plan shall be subject to stockholder approval and (C) canceling or “buying-out” an Option or SAR at a time when its exercise price exceeds the Fair Market Value of the underlying Shares, in exchange for cash, another Option, SAR, Restricted Stock, Restricted Stock Unit, or other Award shall be subject to stockholder approval, unless the cancellation and exchange occurs in connection with a Corporate Transaction;
(vii) to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of Award or Award Agreement, granted pursuant to the Plan;
(viii) to establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable non-U.S. jurisdictions and to afford Grantees favorable treatment under such rules or laws; provided, however, that no Award shall be granted under any such additional terms, conditions, rules or procedures with terms or conditions which are inconsistent with the provisions of the Plan; and
(ix) to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.
(c)Minimum Vesting Requirements. Notwithstanding any provision
Years Ended | |||||||||||||
June 27, 2020 | June 29, 2019 | ||||||||||||
Operating Income | Operating Margin | Operating Income | Operating Margin | ||||||||||
Net Revenue | $ | 1,136.3 | $ | 1,130.3 | |||||||||
GAAP measures from continuing operations | $ | 118.1 | 10.4 | % | $ | 67.4 | 6.0 | % | |||||
Stock-based compensation | 44.6 | 3.9 | % | 38.2 | 3.4 | % | |||||||
Change in fair value of contingent liability | (31.5 | ) | (2.8 | )% | (5.9 | ) | (0.5 | )% | |||||
Other charges unrelated to core operating performance (1) | 8.4 | 0.8 | % | 10 | 0.9 | % | |||||||
Amortization of intangibles | 67.8 | 6.0 | % | 72.5 | 6.4 | % | |||||||
Restructuring and related charges | 3.5 | 0.3 | % | 15.4 | 1.3 | % | |||||||
Total related to Cost of Revenue and Operating Expenses | 92.8 | 8.2 | % | 130.2 | 11.5 | % | |||||||
Non-GAAP measures from continuing operations | $ | 210.9 | 18.6 | % | $ | 197.6 | 17.5 | % |
Years Ended | |||||||||||||||
June 27, 2020 | June 29, 2019 | ||||||||||||||
Net (Loss) Income | Diluted EPS | Net (Loss) Income | Diluted EPS | ||||||||||||
GAAP measures from continuing operations | $ | 28.7 | $ | 0.12 | $ | 7.8 | $ | 0.03 | |||||||
Items reconciling GAAP net income and EPS to non-GAAP net income and EPS: | |||||||||||||||
Stock-based compensation | 44.6 | 0.19 | 38.2 | 0.17 | |||||||||||
Change in fair value of contingent liability | (31.5 | ) | (0.13 | ) | (5.9 | ) | (0.03 | ) | |||||||
Other charges unrelated to core operating performance (1) | 8.4 | 0.04 | 10.5 | 0.05 | |||||||||||
Amortization of intangibles | 67.8 | 0.29 | 72.5 | 0.31 | |||||||||||
Restructuring and related charges (benefits) | 3.5 | 0.01 | 15.4 | 0.07 | |||||||||||
Non-cash interest expense and other expense | 20.7 | 0.09 | 21 | 0.09 | |||||||||||
Withholding income taxes | 31.6 | 0.14 | — | — | |||||||||||
Benefits/charges from income taxes | (2.5 | ) | (0.01 | ) | (3.3 | ) | (0.01 | ) | |||||||
Total related to net income and EPS | 142.6 | 0.61 | 148.4 | 0.64 | |||||||||||
Non-GAAP measures from continuing operations | $ | 171.3 | $ | 0.73 | $ | 156.2 | $ | 0.68 | |||||||
Shares used in per share calculation for Non-GAAP EPS | 233.7 | 231.2 | |||||||||||||
Note: Certain totals may not add due to rounding |
(d)Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees of the Company or a Related Entity, members of the Board and any Officers or Employees of the Company or a Related Entity to whom authority to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within thirty (30) days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to handle and defend the same.
5.Eligibility. Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees of the Company or a Parent or a Subsidiary of the Company. An Employee, Director or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards. Awards may be granted to such Employees, Directors or Consultants who are residing in non-U.S. jurisdictions as the Administrator may determine from time to time.
6.Terms and Conditions of Awards.
(a)Type of Awards. The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash or (iii) an Option, a SAR, or similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions. Such Awards include, without limitation, Options, SARs, Restricted Stock, Restricted Stock Units, Dividend Equivalent Rights, Performance Units or Performance Shares, and an Award may consist of one such security or benefit, or two (2) or more of them in any combination or alternative.
(b)Designation of Award. Each Award shall be designated in the Award Agreement. In the case of an Option, the Option shall be designated as either an Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company) exceeds $100,000, such excess Options, to the extent of the Shares covered thereby in excess of the foregoing limitation, shall be treated as Non-Qualified Stock Options. For this purpose, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the grant date of the relevant Option.
(c)Conditions of Award. Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance
criteria. The performance criteria established by the Administrator may be based on any one of, or combination of, the following: (i) increase in share price, (ii) earnings per share, (iii) total stockholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xvi) economic value added, (xvii) market share, (xviii) personal management objectives, and (xix) other measures of performance selected by the Administrator. Partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement. The Administrator may provide at the time of grant for the adjustment of the performance criteria applicable to Performance-Based Compensation to include or exclude any objectively determinable components of such performance criteria.
(d)Dividends and Dividend Equivalent Rights. The Administrator in its sole discretion may credit to each holder of an Award, in the form of Dividend Equivalent Rights or otherwise, an amount equal to the value of all dividends and other distributions (whether in cash, Shares or other property) paid or distributed by the Company on the equivalent number of Shares;provided,however, that such holder will not be paid any dividends or other distributions (or any related earnings or interest on such dividends or distributions, if the Administrator in its sole discretion provides for such payments) unless and until the underlying Award vests. The value of dividends or other distributions (or any related earnings or interest, if applicable) payable with respect to Awards that do not vest shall be forfeited.
(e)Acquisitions and Other Transactions. The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form of transaction.
(f)Deferral of Award Payment. The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award. The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.
(g)Separate Programs. The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.
(h)Individual Limitations on Awards. The maximum number of Shares with respect to which Awards may be granted to any Grantee in any fiscal year of the Company shall be 1,790,200 Shares. In connection with a Grantee’s (i) commencement of Continuous Active Service or (ii) first promotion in any fiscal year of the Company prior to the Restatement Effective Date, a Grantee may be granted Awards for up to an additional 1,790,200 Shares which shall not count against the limit set forth in the preceding sentence. The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10, below. To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitations with respect to a Grantee, if any Awards are canceled, the canceled Awards shall continue to count against the maximum number of Shares with respect to which Awards may be granted to the Grantee. For this purpose, the repricing of an Option (or in the case of a SAR, the base amount on which the stock appreciation is calculated is reduced to reflect a reduction in the Fair Market Value of the Common Stock) shall be treated as the cancellation of the existing Option or SAR and the grant of a new Option or SAR. If the vesting or receipt of Shares under the Award is deferred to a later date, any amount (whether denominated in Shares or cash) paid in addition to the original number of Shares subject to the Award will not be treated as an increase in the number of Shares subject to the Award if the additional amount is based either on a reasonable rate of
interest or on one or more predetermined actual investments such that the amount payable by the Company at the later date will be based on the actual rate of return of a specific investment (including any decrease as well as any increase in the value of an investment).
(i)Limitations on Awards to Non-Employee Directors. Notwithstanding any other provision of the Plan to the contrary, the maximum value of Awards granted under the Plan during a fiscal year of the Company to a Non-Employee Director for services on the Board, taken together with any cash fees paid by the Company to such Non-Employee Director during such fiscal year for services on the Board, shall not exceed $1,000,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards under applicable financial accounting standards), including for this purpose the value of any Awards that are received in lieu of payment of all or a portion of his or her regular annual retainer or other similar cash based payments. For the avoidance of doubt, neither Awards granted or compensation paid to a Non-Employee Director for services as an Employee or Consultant nor any amounts paid to a Non-Employee Director as a reimbursement of an expense shall count against the foregoing limitation.
(j)Early Exercise. Subject to Section 4(c), the Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award. Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.
(k)Term of Award. The term of each Award shall be the term stated in the Award Agreement, provided, however, that the term of an Award shall be no more than eight (8) years from the date of grant thereof. However, in the case of an Incentive Stock Option granted to a Grantee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the term of the Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement.
(l)Transferability of Awards. Incentive Stock Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the Grantee. Other Awards shall be transferable by will and by the laws of descent and distribution, and during the lifetime of the Grantee, by gift or pursuant to a domestic relations order to members of the Grantee’s Immediate Family to the extent and in the manner determined by the Administrator. Notwithstanding the foregoing, the Grantee may designate a beneficiary of the Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator.
(m)Time of Granting Awards. The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such later date as is determined by the Administrator.
7.Award Exercise or Purchase Price, Consideration and Taxes.
(a)Exercise or Purchase Price. The exercise or purchase price, if any, for an Award shall be as follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of such Incentive Stock Option owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the per Share exercise price shall be not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or
(B) granted to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
(ii) In the caseTable of a Non-Qualified Stock Option, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
(iii) In the case of a SAR, the base amount on which the stock appreciation is calculated shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
(iv) In the case of Awards intended to qualify as Performance-Based Compensation, the exercise or purchase price, if any, shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
(v) In the case of other Awards, such price as is determined by the Administrator.
(vi) Notwithstanding the foregoing provisions of this Section 7(a), in the case of an Award issued pursuant to Section 6(d) above, the exercise or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award.
(b)Consideration. Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following, provided that the portion of the consideration equal to the par value of the Shares must be paid in cash or other legal consideration permitted by the Delaware General Corporation Law:
(i) cash;
(ii) check;
(iii) surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require (including withholding of Shares otherwise deliverable upon exercise of the Award) which have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised, provided, however, that Shares acquired under the Plan or any other equity compensation plan or agreement of the Company must have been held by the Grantee for a period of more than six (6) months;
(iv) with respect to Options, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction; or
(v) any combination of the foregoing methods of payment.
(c)Taxes. No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any non-U.S., federal, state, or local income and employment tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares or the disqualifying disposition of Shares received on exercise of an Incentive Stock Option. Upon exercise of an Award the Company shall withhold or collect from Grantee an amount sufficient to satisfy such tax obligations.
8.Exercise of Award.
(a)Procedure for Exercise; Rights as a Stockholder.
(i) Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement.
(ii) An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise
the Award and full payment for the Shares with respect to which the Award is exercised, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b)(iv).
(b)Exercise of Award Following Termination of Continuous Active Service.
(i) An Award may not be exercised after the termination date of such Award set forth in the Award Agreement and may be exercised following the termination of a Grantee’s Continuous Active Service only to the extent provided in the Award Agreement.
(ii) Where the Award Agreement permits a Grantee to exercise an Award following the termination of the Grantee’s Continuous Active Service for a specified period, the Award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the Award, whichever occurs first.
(iii) Any Award designated as an Incentive Stock Option to the extent not exercised within the time permitted by law for the exercise of Incentive Stock Options following the termination of a Grantee’s Continuous Active Service shall convert automatically to a Non-Qualified Stock Option and thereafter shall be exercisable as such to the extent exercisable by its terms for the period specified in the Award Agreement.
9.Conditions Upon Issuance of Shares.
(a) Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all Applicable Laws, and shall be further subject to the approval of counsel for the Company with respect to such compliance.
(b) As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.
10.Adjustments Upon Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, the maximum number of Shares with respect to which Awards may be granted to any Grantee in any fiscal year of the Company, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii) as the Administrator may determine in its discretion, any other transaction with respect to Common Stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Administrator and the Administrator’s determination shall be final, binding and conclusive. Except as the Administrator determines, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award.
11.Corporate Transactions.
(a)Termination of Award to Extent Not Assumed in Corporate Transaction. Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate. However, all such Awards shall not terminate to the extent they are Assumed in connection with the Corporate Transaction.
(b)Acceleration of Award Upon Corporate Transaction. Except as provided otherwise in an individual Award Agreement, in the event of a Corporate Transaction, for the portion of each Award that is neither Assumed nor Replaced, such portion of the Award shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at fair market value) for all of the Shares at the time represented by such portion of the Award, immediately prior to the specified effective date of such Corporate Transaction.
(c)Effect of Acceleration on Incentive Stock Options. Any Incentive Stock Option accelerated under this Section 11 in connection with a Corporate Transaction shall remain exercisable as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded. To the extent such dollar limitation is exceeded, the excess Options shall be treated as Non-Qualified Stock Options.
12.Effective Date and Term of Plan. The Plan originally became effective upon its approval by the stockholders of the Company. The Plan, as amended and restated, shall become effective upon its approval by the stockholders of the Company. It shall continue in effect for a term of ten (10) years from the date of such approval unless sooner terminated. Subject to Applicable Laws, Awards may be granted under the Plan upon its becoming effective.
13.Amendment, Suspension or Termination of the Plan.
(a) The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s stockholders to the extent such approval is required by Applicable Laws, or if such amendment would change any of the provisions of Section 4(b)(vi) or this Section 13(a). Notwithstanding any other provision of the Plan to the contrary, the Board may, in its sole and absolute discretion and without the consent of any participant, amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as it deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement to any present or future law, regulation or rule applicable to the Plan, including, but not limited to, Section 409A of the Code.
(b) No Award may be granted during any suspension of the Plan or after termination of the Plan.
(c) No suspension or termination of the Plan (including termination of the Plan under Section 12, above) shall adversely affect any rights under Awards already granted to a Grantee.
14. Reservation of Shares.
(a) The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.
(b) The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
15.No Effect on Terms of Employment/Consulting Relationship. The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Active Service, nor shall it interfere in any way with his or her right or the right of the Company or any Related Entity to terminate the Grantee’s Continuous Active Service at any time, with or without Cause, and with or without notice. The ability of the Company or any Related Entity to terminate the employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Active Service has been terminated for Cause for the purposes of this Plan.
16.No Effect on Retirement and Other Benefit Plans. Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.
17.Unfunded Obligation. Grantees shall have the status of general unsecured creditors of the Company. Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974, as amended. Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.
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