Washington, D.C. 20549
The information in this proxy statement relates to the proposals to be voted on at the Annual Meeting, the voting process, the compensation of our directors and certain of our executive officers, corporate governance, and certain other required information.
We have adopted a procedure called “householding,” which the SEC has approved. Under this procedure, we deliver a single copy of the Notice and, if applicable, the proxy materials to multiple stockholders who share the same address unless we received contrary instructions from one or more of the stockholders. This procedure reduces our printing costs, mailing costs, and fees. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. Upon written request, we will deliver promptly a separate copy of the Notice and, if applicable, the proxy materials to any stockholder at a shared address to which we delivered a single copy of any of these documents. To receive a separate copy of the Notice and, if applicable, the proxy materials, stockholders may contact us as follows:
Stockholders who hold shares in street name (as described below) may contact their brokerage firm, bank, broker-dealer, or other similar organization to request information about householding.
Our proxy materials are also available on our Investor Relations website at http://investor.google.com/proxy.html.
Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you, and will reduce the impact of printing and mailing these materials on the environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminaterevoke it.
We will also consider any other business that properly comes before the Annual Meeting. See Question 21 below.
If you are a stockholder of record, you may vote by proxy. You can vote by proxy over the internetInternet by following the instructions provided in the Notice, or, if you requested to receive printed proxy materials, you can also vote by mail or telephone pursuant to instructions provided on the proxy card.
If you hold shares beneficially in street name, you may also vote by proxy over the internetInternet by following the instructions provided in the Notice, or, if you requested to receive printed proxy materials, you can also vote by telephone or mail by following the voting instruction cardform provided to you by your broker, bank, trustee, or nominee.
For the other items of business, you may vote “FOR,” “AGAINST,” or “ABSTAIN.” If you elect to “ABSTAIN,” the abstention has the same effect as a vote “AGAINST.”
If you provide specific instructions with regard to certain items, your shares will be voted as you instruct on such items. If no instructions are indicated on a properly executed proxy card or over the telephone or Internet, the shares will be voted as recommended by theour board of directors.
If you hold shares beneficially in street name and do not provide your broker with voting instructions, your shares may constitute “broker non-votes.” Broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. These matters are referred to as “non-routine” matters. All of the matters scheduled to be voted on at the Annual Meeting are “non-routine,” except for the proposal to ratify the appointment of Ernst & Young LLP as Google’s independent registered public accounting firm for the fiscal year ending December 31, 2012.2015. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered voting power present with respect to that proposal. Thus, broker non-votes will not affect the outcome of any matter being voted on at the meeting,Annual Meeting, assuming that a quorum is obtained, other than Proposal Number 3 (comprising Proposal Numbers 3A, 3B, and 3C) regarding the approval of the adoption of Google’s Fourth Amended and Restated Certificate of Incorporation, for which broker non-votes will count as a vote “AGAINST” such proposal.obtained.
Google will pay the entire cost of preparing, assembling, printing, mailing, and distributing these proxy materials and soliciting votes. If you choose to access the proxy materials and/or vote over the internet,Internet, you are responsible for internet access charges you may incur. If you choose to vote by telephone, you are responsible for telephone charges you may incur. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone, or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation for such solicitation activities. We have also retained Georgeson Inc. to act as aassist us in the distribution of proxy solicitor in conjunction with the Annual Meeting.materials. We will pay Georgeson Inc. a fee of $8,500approximately $1,000 plus reasonable out-of-pocket expenses for these services. Georgeson Inc. may be contacted at (800) 261-1052.
Other than the eight items of business described in this proxy statement, we are not aware of any other business to be acted upon at the Annual Meeting. If you grant a proxy, the persons named as proxy holders, Larry Page, Eric E. Schmidt, Patrick Pichette, and David C. Drummond, and Kent Walker, or any of them, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting.Annual Meeting. If, for any reason, any of the nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the board of directors.
If you do not provide photo identification or comply with the other procedures outlined above, you will not be admitted to the Annual Meeting. For security reasons, you and your bags will be subject to search prior to your admittance to the meeting.Annual Meeting.
The inspector of elections will be a representative from Computershare Trust Company, N.A.
Our bylaws also establish an advance notice procedure for stockholders who wish to present a proposal before an annual meeting of stockholders but do not intend for the proposal to be included in our proxy statement. Our bylaws provide that the only business that may be conducted at an annual meeting is business that is (1) specified in the notice of a meeting given by or at the direction of our board of directors, (2) otherwise properly brought before the meeting by or at the direction of our board of directors, or (3) properly brought before the meeting by a stockholder entitled to vote at the annual meeting who has delivered timely written notice to our Corporate Secretary, which notice must contain the information specified in our bylaws. To be timely for our 20132016 Annual Meeting of Stockholders, our Corporate Secretary must receive the written notice at our principal executive offices:
If a stockholder who has notified us of his or her intention to present a proposal at an annual meeting does not appear to present his or her proposal at such meeting, we are not required to present the proposal for a vote at such meeting.
In addition, our bylaws permit stockholders to nominate directors for election at an annual meeting of stockholders. To nominate a director, the stockholder must provide the information required by our bylaws. In addition, the stockholder must give timely notice to our Corporate Secretary in accordance with our bylaws, which, in general, require that the notice be received by our Corporate Secretary receive the notice within the time period described above under “Stockholder Proposals” for stockholder proposals that are not intended to be included in our proxy statement.
The names of our directors and executive officers and their ages, positions, and biographies as of March 31, 2012April 6, 2015 are set forth below. Our executive officers are appointed by, and serve at the discretion of, our board of directors. There are no family relationships among any of our directors or executive officers.
Executive Vice President and General Manager, Intel Architecture Group, and Executive Vice President and General Manager, Sales and Marketing Group. Paul holds a Master of Business Administration degree from the University of California, Berkeley, and a Bachelor of Arts degree in economics from the University of San Francisco.
early member of the executive team at Netscape Communications Corporation. Ram is also on the board of trustees of Stanford University. Ram holds a Bachelor of Science degree in mathematics from the University of Madras, India.
We have adopted a code of business conduct and ethics for directors, officers (including our principal executive officer and principal financial and accounting officer), and employees, known as the Google Code of Conduct. We have also adopted Corporate Governance Guidelines, which, in conjunction with our certificate of incorporation, bylaws, and charters of the standing committees of our board of directors, form the framework for our corporate governance. The Google Code of Conduct and our Corporate Governance Guidelines are available on the Investor Relations section of our website at http://investor.google.com. We will post amendments to the Google Code of Conduct or waivers of the Google Code of Conduct for directors and executive officers on the same website.
Stockholders may request printed copies of the Google Code of Conduct, the Corporate Governance Guidelines, and committee charters at no charge by filling out our contact form at http://investor.google.com or sending inquiries to:
In April 2011, Larry Page became our Chief Executive Officer and Eric E. Schmidt became Executive Chairman of our board of directors.
The board of directors believes that this leadership structure, which separates the Chairman and Chief Executive Officer roles, is appropriate at this time in light of the evolution of Google’s business and operating environment. In particular, the board of directors believes that this structure clarifies the individual roles and responsibilities of Larry, Sergey, and Eric, streamlines decision-making, and enhances accountability. As Executive Chairman, Eric remains involved in key matters, such as major transactions, broader business and customer relationships, and government relations, which are increasingly important given our global reach, and continues to advise Larry and Sergey. In this role and given his in-depth knowledge of the issues, challenges, and opportunities facing us, the board of directors believes that Eric continues to be best positioned to develop agendas that ensure that the board’s time and attention are focused on the most critical matters. His role enables decisive leadership, ensures clear accountability, and enhances the ability to communicate our message and strategy clearly and consistently to our stockholders, employees, customers, and users.
Our certificate of incorporation and bylaws provide that the chairman of our board of directors may not be an employee or officer of our company and may not have been an employee or officer for the last three years, unless the appointment is approved by two-thirds of the members of our board of directors. The board of directors unanimously approved Eric’s appointment as Executive Chairman.
Each of the directors other than Larry, Sergey, and Eric is independent (see “Director Independence” below)on page 17 of this proxy statement), and the board of directors believes that the independent directors provide effective oversight of management. In addition, in April 2007, our board of directors appointed John L. Hennessy as our Lead Independent Director. As Lead Independent Director, John’s responsibilities include:
The board of directors believes that these responsibilities appropriately and effectively complement our Executive Chairman and Chief Executive Officer structure.
(5) an Executive Committee.
From time to time, the board of directors may also establish ad hoc committees to address particular matters, such as the Special Committee described in Proposal Number 3, beginning on page 56 of this proxy statement.matters.
Each of the standing committees operates under a written charter adopted by the board of directors. All of the standing committee charters are available on the Investor Relations section of our website at http://investor.google.com/corporate/board-committees.html. Printed copies of the charters are available at no charge to any stockholder who requests them by following the instructions on page 12 of this proxy statement.
The main function of our Audit Committee is to oversee our accounting and financial reporting processes. The Audit Committee’s responsibilities include:
The board of directors has determined that, based on her professional qualifications and experience described above, Ann Mather is an audit committee financial expert as defined under the rules of the SEC.SEC, and that each member of the Audit Committee is able to read and understand fundamental financial statements as required by the Listing Rules of NASDAQ.
Our Nominating and Corporate Governance Committee’s purpose is to assist our board of directors in identifying individuals qualified to become members of our board of directors consistent with criteria set by our board of directors, to oversee the evaluation of the board of directors and management, and to develop and update our corporate governance principles. The Nominating and Corporate Governance Committee’s responsibilities include:
The Nominating and Corporate Governance Committee considers properly submitted recommendations for candidates to the board of directors from stockholders. In evaluating such recommendations, the Nominating and Corporate Governance Committee seeks to achieve a balance of experience, knowledge, integrity, and capability on the board of directors and to address the membership criteria set forth under “Director Selection Process and Qualifications” below.on page 18 of this proxy statement. Any stockholder recommendations for consideration by the Nominating and Corporate Governance Committee should include the candidate’s name, biographical information, information regarding any relationships between the candidate and Google within the last three years, at least three personal references, a statement of recommendation of the candidate from the stockholder, a description of our shares beneficially owned by the stockholder, a description of all arrangements between the candidate and the recommending stockholder and any other person pursuant to which the candidate is being recommended, a written indication of the candidate’s willingness to serve on the board of directors, any other information required to be provided under securities laws and regulations, and a written indication to provide such other information as the Nominating and Corporate Governance Committee may reasonably request. There are no differences in the manner in which the Nominating and Corporate Governance Committee evaluates nominees for director based on whether the nominee is recommended by a stockholder or otherwise. Stockholder recommendations to the board of directors should be sent to:
In addition, our bylaws permit stockholders to nominate directors for consideration at an annual meeting. For a description of the process for nominating directors in accordance with our bylaws, see “Questions and Answers about the Proxy Materials and the Annual Meeting—Question 27. What is the deadline to propose actions for consideration at next year’s Annual Meeting of Stockholders or to nominate individuals to serve as directors?” on page 78 of this proxy statement.
Our Nominating and Corporate Governance Committee will evaluate and recommend candidates for membership on the board of directors consistent with criteria established by our board of directors in our policy with regard to the selection of director nominees. Pursuant to this policy, the Nominating and Corporate Governance Committee screens candidates and evaluates the qualifications of the persons nominated by or recommended by our stockholders. The Nominating and Corporate Governance Committee recommends director nominees who are ultimately approved by the full board of directors.
Our Nominating and Corporate Governance Committee uses a variety of methods for identifying and evaluating nominees for directors. Our Nominating and Corporate Governance Committee regularly assesses the appropriate size and composition of the board of directors, the needs of the board of directors and the respective committees of the board of directors, and the qualifications of candidates in light of these needs. Candidates may come to the attention of the Nominating and Corporate Governance Committee through stockholders, management, current members of the board of directors, or search firms. The evaluation of these candidates may be based solely upon information provided to the committee or may also include discussions with persons familiar with the candidate, an interview of the candidate, or other actions the committee deems appropriate, including the use of third parties to review candidates. The Nominating and Corporate Governance committee may, at the Google’s expense, retain search firms, consultants, and other advisors to identify, screen, and/or evaluate candidates.
When considering a potential non-incumbent candidate, the Nominating and Corporate Governance Committee will factor into its determination the following qualities, among others: integrity, professional reputation and strength of character, educational background, knowledge of our business, diversity of professional experience, including whether the person is a current or former chief executive officer or chief financial officer of a public company or the head of a division of a large international organization, and ability to represent the best interests of our stockholders and to provide practical insights and diverse perspectives. Additionally, due to the global and complex nature of our business, our board of directors believes it is important to consider diversity of race, ethnicity, gender, age, education, cultural background, and professional experiences in evaluating board candidates, although our policy does not prescribe specific standards for diversity. Candidates also are evaluated in light of our other policies, such as those relating to independence and service on other boards, as well as considerations relating to the size, structure, and needs of our board of directors. As part of its consideration of director succession, our board of directors and the Nominating and Corporate Governance Committee monitor whether the directors as a group meet the criteria for the composition of the board of directors, including overall diversity of perspective and experience.
Our board of directors is composed of a diverse group of leaders in their respective fields. Many of the current directors have senior leadership experience at major domestic and international companies. In these positions, they have also gained experience in core management skills, such as strategic and financial planning, public company financial reporting, compliance, risk management, leadership development, and international business experience. Most of our directors also have experience serving on boards of directors and board committees of other public companies, and have an understanding of corporate governance practices and trends, different business processes, challenges, and strategies. Other directors have experience as presidents or trustees of significant academic, research, and philanthropic institutions, which brings unique perspectives to the board of directors. Further, our directors also have other experience that makes them valuable members, such as entrepreneurial experience and experience developing technology or managing technology companies, which provides insight into strategic and operational issues faced by us.
The Nominating and Corporate Governance Committee and the board of directors believe that the above-mentioned attributes, along with the leadership skills and other experiences of our board members described below, provide us with a diverse range of perspectives and judgment necessary to guide our strategies and monitor their execution.
Executive sessions of independent directors are held in connection with each regularly scheduled board of directors meeting and at other times as necessary, and are chaired by the Lead Independent Director. The board of directors’ policy is to hold executive sessions without the presence of management, including the Chief Executive Officer and other non-independent directors. The committees of the board of directors also generally meet in executive session at the end of each committee meeting, except for meetings of the Acquisition Committee and the Executive Committee as these committees have only one or no independent directors.
Stockholders may contact the board of directors about bona fide issues or questions about Google by sending an email to directors@google.com or by writing to the Corporate Secretary at the following address:as follows:
Any matter intended for the board of directors, or for any individual member or members of the board of directors, should be directed to the email address or street address noted above, with a request to forward the communication to the intended recipient or recipients. In general, any stockholder communication about bona fide issues concerning Google delivered to the Corporate Secretary for forwarding to the board of directors or specified member or members will be forwarded in accordance with the stockholder’s instructions.
Unless otherwise noted below, the address of each beneficial owner listed in the table is c/o Google Inc., 1600 Amphitheatre Parkway, Mountain View, California 94043.
We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.
The information provided in the table is based on our records, information filed with the SEC, and information provided to us, except where otherwise noted. Non-voting Class C capital stock is not included in the table.
Section 16(a) of the Exchange Act requires our directors, executive officers, and holders of more than 10%ten percent of our Class A and Class B common stock and our Class C capital stock to file with the SEC reports regarding their ownership and changes in ownership of our securities. We believe that, during 2011,2014, our directors, executive officers, and 10%ten percent stockholders complied with all Section 16(a) filing requirements, with the exceptions noted below.
In making these statements, we have relied upon examination of the copies of Forms 3, 4, and 5, and amendments to these forms provided to us, and the written representations of our directors, executive officers, and 10%ten percent stockholders.
Our Related Party Transactions Policy provides that we will only enter into or ratify a transaction with a related party when our board of directors, acting through the Audit Committee, determines that the transaction is in the best interests of Google and our stockholders.
We review all known relationships and transactions in which Google and our directors, executive officers, and significant stockholders or their immediate family members are participants to determine whether such persons have a direct or indirect interest. Our legal staff, in consultation with our finance team, is primarily responsible for developing and implementing processes and controls to obtain information regarding our directors, executive officers, and significant stockholders with respect to related party transactions and then determining, based on the facts and circumstances, whether Google or a related party has a direct or indirect interest in these transactions. On a periodic basis, the legal and finance teams review all transactions involving payments between Google and any company that has a Google executive officer or director as an officer or director. In addition, our directors and executive officers are required to notify us of any potential related party transactions and provide us with the information regarding such transactions.
If our legal department determines that a transaction is a related party transaction, the Audit Committee must review the transaction and either approve or disapprove it. If advance approval of a transaction is not feasible, the chair of the Audit Committee may approve the transaction, and the transactionAudit Committee may be ratified byratify the Audit Committeetransaction in accordance with the Related Party Transactions Policy. In determining whether to approve or ratify a transaction with a related party, the Audit Committee will take into account all of the relevant facts and circumstances available to it, including, among any other factors it deems appropriate:
Any member of the Audit Committee who is a related party with respect to a transaction under review may not participate in the deliberations or vote on the approval of the transaction.
We have entered into an indemnification agreement with each of our directors and executive officers. The indemnification agreements, and our certificate of incorporation, and bylaws require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law.
John L. Hennessy, President of Stanford University, is a member of our board of directors. Ruth M. Porat, our incoming Senior Vice President and Chief Financial Officer, is Vice Chair of the Stanford University board of trustees. In addition, K. Ram Shriram, anothera member of our board of directors, serves on the Stanford University board of trustees. NeitherOmid Kordestani, our Senior Vice President and Chief Business Officer, serves as a member of Stanford Graduate School of Business Advisory Board, and Diane B. Greene, another member of our board of directors, serves as an advisor to Stanford College of Engineering. John, norRuth, Ram, Omid, and Diane do not have a directmaterial interest in any of the transactions described above.
We reimburse our directors for reasonable out-of-pocket expenses in connection with attendance at board of directors and committee meetings.
Our Compensation Discussion and Analysis (CD&A) includes a detailed discussion of compensation for our six named executive officers—Larry, Sergey, Eric, our Chief Financial Officer, and the two other highest paid executive officers during the fiscal year ended December 31, 2011 (since we only have six executive officers as of April 2011):2014:
We pay Googlers competitively compared to other opportunities they might have in the market. We also offer competitive benefits that help Googlers and their families be healthy and happy, provide unique perks that make life and work more convenient, design compelling job opportunities aligned with our mission, and create a fun and energizing work environment.
We use base salary to provide Googlers, including our named executive officers, with a steady income in line with their skill setskills and experiences and on par with other job opportunities available to them.
Upon reviewing the pay practices of our talent competitors and the compensation preferences of our employees, we continue to believe that highly-competitivehighly competitive salaries are important for attracting and retaining great talent. In January 2011, we increased base salaries for all
We set base salaries for our named executive officers based on their responsibilities and the trends we observe in the market (see Section 3 Determiningof this CD&A, “Determining Competitive Levels of PayPay” for further details). We review base salaries at least once a year and adjust them as needed to reflect changes in these areas.needed.
Larry and Sergey did not hold any stock options, GSUs or other contingent stock rights at the end of 2011. They requested not to be considered for additional equity awards in 2011.2014. The LDCLeadership Development and Compensation Committee will continue to review their compensation on an ongoing basis and may recommend future equity awards.
at the expense of long-term results. In general, we cap cash bonus opportunities for our employees are capped, and we haveretain discretion to reduce bonus paymentspay smaller bonuses (or pay no bonus)bonuses) based on any factor that we determine to be appropriate in the circumstances. As with the compensation of our named executive officers, a substantial portion of the compensation for employees generally is delivered in the form of equity awards that help further align the interests of employees with those of stockholders.
To align our named executive officers’ and directors’ interests with those of our stockholders, the board of directors has instituted minimum stock ownership requirements under our Corporate Governance Guidelines.
Like all Googlers, our named executive officers are eligible to participate in various employee benefit plans, includingsuch as medical, dental, and vision care plans, flexible spending accounts for health and dependent care, life, accidental death and dismemberment, disability, and disabilitytravel insurance, survivor income benefit, employee assistance programs (e.g., confidential counseling), and paid time off. As with our other employees, we also paid life insurance premiums for the benefit of our named executive officers other(other than Larry and Sergey.Sergey).
In addition, we maintain a tax qualified 401(k) retirement savings plan that contains both a pre-tax and an after-tax Roth savings feature for the benefit of eligible employees, including our named executive officers. In 2011,2014, we provided a company match equal to the greater of 100% of contributions up to $3,000, or 50% of the maximum contribution under the Code in 20112014 ($16,500)17,500) for a maximum match of $8,250,$8,750, per employee, which our named executive officers other(other than Larry and SergeySergey) also received. Our company match is fully vested at the time of contribution. Participants are not taxed on their pre-tax contributions or earnings
on those contributions until distribution, but pre-tax contributions and all company matching contributions are deductible by us when made. Participants are taxed on their after-tax Roth contributions, and after-tax Rothall company matching contributions and all company matchingafter-tax Roth contributions are deductible by us when made.
We maintain a non-qualified deferred compensation plan for most of our U.S.-based employees. Patrick, our CFO, is not eligible to participate in the deferred compensation plan. The deferred compensation plan allows
participants to defer a specified percentage (up to 100%) of their bonus for a period of three, four, or five years, subject to certain exceptions. The deferred compensation plan is unfunded and unsecured, and participation is voluntary. We do not contributeprovide any matching contributions to the deferred compensation plan.
Since we do not generally differentiate the benefits we offer our named executive officers from the benefits we offer our other employees, we do not maintain any benefit plans that cover only one or more of ourselect named executive officers. We also do not maintain any executive retirement programs such as executive pension plans or supplemental executive retirement plans.
Paul S. Otellini,Chair
The following table sets forth information regarding the compensation paid to, or earned by, our named executive officers for the fiscal year ended December 31, 2011.2014.
(7)Back to Contents | The vesting schedule of the shares subject to this replacement option is as follows: (i) 1/4th of shares vested on August 1, 2010, and, (ii) 1/48th of shares shall vest each month thereafter until the option is fully vested, subject to continued employment with Google through the applicable vesting dates.
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(8) | These GSUs began vesting on August 1, 2008 (vesting commencement date) as follows: 1/4th of GSUs shall vest annually beginning 12 months after the vesting commencement date and thereafter until all shares are fully vested, subject to continued employment with Google through the applicable vesting dates.
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(9) | The vesting schedule of the shares subject to this replacement option is as follows: (i) 2,500 shares vested on October 5, 2009, and (ii) 1/48th of the total shares subject to the replacement option shall vest each month thereafter until the option is fully vested, subject to continued employment with Google through the applicable vesting dates.
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(10) | The vesting schedule of the shares subject to this replacement option is as follows: (i) 1,750 shares vested on October 5, 2009, and (ii) 1/48th of the total shares subject to the replacement option shall vest each month thereafter until the option is fully vested, subject to continued employment with Google through the applicable vesting dates.
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(11) | The shares subject to this replacement option have fully vested as of December 31, 2011.
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(12) | The vesting schedule of the shares subject to this replacement option is as follows: (i) 11,250 shares vested on September 9, 2009, and (ii) 1/48th of the total shares subject to the replacement option shall vest on October 1, 2009 and each month thereafter until the option is fully vested, subject to continued employment with Google through the applicable vesting dates.
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Option Exercises and Stock Vested in Fiscal 20112014
The following table provides information for the named executive officers on stock option exercises and sales of vested stock options under our TSO Programawards during the year ended December 31, 2011,2014, including the number of shares acquired upon exercise and on vesting and the value realized before payment of any applicable withholding taxupon exercise and broker commissions, and GSUs that vested during the same period.on vesting.
| | | | | | | | | | | | | | | | |
| | | 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) ($) | |
Larry Page | | | — | | | | — | | | | — | | | | — | |
Sergey Brin | | | — | | | | — | | | | — | | | | — | |
Eric E. Schmidt | | | — | | | | — | | | | — | | | | — | |
Patrick Pichette | | | 21,500 | | | | 5,464,515 | | | | 14,921 | | | | 8,694,044 | |
Nikesh Arora | | | 7,142 | | | | 1,899,951 | (3) | | | 27,287 | | | | 15,740,295 | |
David C. Drummond | | | 4,219 | | | | 2,537,943 | | | | 6,454 | | | | 3,753,842 | |
| | | Option Awards | | | Stock Awards |
| | | Number of Shares | | | Value Realized | | | Number of Shares | | | Value Realized |
| | | Acquired on Exercise | | | on Exercise(1) | | | Acquired on Vesting | | | on Vesting(2) |
| Name | | (#) | | | ($) | | | (#) | | | ($) |
| Larry Page | | | — | | | | — | | | | — | | | | — |
| Sergey Brin | | | — | | | | — | | | | — | | | | — |
| Eric E. Schmidt | | | — | | | | — | | | | 45,483 | | | | 29,360,445 |
| Patrick Pichette | | | 31,753 | | | | 10,644,750 | | | | 17,971 | | | | 11,374,669 |
| David C. Drummond | | | — | | | | — | | | | 10,738 | | | | 6,712,679 |
| Omid Kordestani | | | — | | | | — | | | | 9,023 | | | | 4,771,092 |
(1) | |
| (1) | The value realized on exercise is calculated as the difference betweenproduct of (a) the actual salesnumber of shares of Class A common stock or Class C capital stock, as applicable, for which the stock options were exercised and (b) the excess of the closing price of our Class A common stock or Class C capital stock, as applicable, on the shares underlyingNASDAQ Global Select Market on the options exercised anddate of the exercise over the applicable exercise price per share of thosethe stock options. |
(2) | |
| (2) | The value realized on vesting is calculated based onas the product of (a) the number of shares of Class A common stock or Class C capital stock, as applicable, underlying the GSUs that vested and (b) the closing sales price of our Class A common stock or Class C capital stock, as applicable, on the NASDAQ Global Select Market on the day before vesting. |
(3) | The value realized upon exercise includes a TSO premium of $5,911. The TSO premium is calculated as the difference between (a) the sale price of the TSO, and (b) the intrinsic value of the TSO, which we define as the excess, if any, of the price of our Class A common stock at the time of the sale over the exercise price of the TSO.
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Non-Qualified Deferred Compensation
The following table provides information about contributions, earnings, and balances under our non-qualified deferred compensation plan in fiscal year 2011.2014. We do not contributeprovide matching contributions to the deferred compensation plan, and in fiscal year 20112014 there were no withdrawals by or distributions to our named executive officers.
| | | Executive Contributions | | | Aggregate Earnings | | | Aggregate Balance at |
| | | in 2014(1) | | | in 2014(2) | | | December 31, 2014(3) |
| Name | | ($) | | | ($) | | | ($) |
| Larry Page | | | — | | | | — | | | | — |
| Sergey Brin | | | — | | | | — | | | | — |
| Eric E. Schmidt | | | 5,704,571 | (4) | | | 457,395 | | | | 20,714,563 |
| Patrick Pichette | | | — | | | | — | | | | — |
| David C. Drummond | | | — | | | | — | | | | — |
| Omid Kordestani | | | — | | | | — | | | | — |
| | | | | | | | | | | | |
Name
| | Executive
Contributions in
2011(1) ($) | | | Aggregate
Earnings in 2011
($) | | | Aggregate Balance
at December 31,
2011 ($) | |
Larry Page
(1) | | | — | | | | — | | | | — | |
Sergey Brin
| | | — | | | | — | | | | — | |
Eric E. Schmidt
| | | 3,000,000 | | | | — | | | | 3,000,000 | (2) |
Patrick Pichette
| | | — | | | | — | | | | — | |
Nikesh Arora
| | | — | | | | — | | | | — | |
David C. Drummond
| | | — | | | | — | | | | — | |
(1) | The amountsamount reported under Executive Contributions arein 2014 is the amount that the named executive officers elected to defer under our non-qualified deferred compensation plan. This amount represents compensation earned by Eric in 2014 and is therefore also reported as compensation to such named executive officersEric in the Summary Compensation Table above. on page 38 of this proxy statement. |
(2) | |
| (2) | The amount reported under Aggregate Earnings in 2014 shows the net amount credited to Eric’s account as a result of the performance of the investment vehicle in which his account was deemed invested. This amount does not represent “above-market” earnings, and thus is not reported in the Summary Compensation Table on page 38 of this proxy statement. |
| |
| (3) | Column Aggregate Balance at December 31, 2014 shows the amount of the non-qualified deferred compensation account balance at the end of 2014 for Eric, of which $14,552,597 represent the amount previously reported as Aggregate Balance at December 31, 2013 in the 2014 proxy statement. |
| |
| (4) | Eric elected to contribute 50%100% of his 20112014 bonus, net of applicable withholdings, the amount of which was determined and paid in March 2012. Accordingly, there were no earnings in 2011.February 2015. |
Our deferred compensation plan is unfunded and unsecured.unsecured, and participation is voluntary. Most U.S.-based employees are eligible to participate in the deferred compensation plan. Patrick, our CFO, is not eligible to participate in the deferred compensation plan. The plan allows participants to defer a specified percentage (up to 100%) of their bonus for a period of three, four or five years, subject to certain exceptions. During the deferral period, the deferred amounts are hypothetically or “notionally” invested in one or more investments funds selected by the committee administering the deferred compensation plan. Each participant’s account is adjusted for gains or losses at least
annually based on the rate of gain or loss on the assets in each notional investment fund. We do not guarantee any returns on participant contributions. If a participant’s employment terminates, distribution is made in the form of a lump sum following termination.
In 2011,2014, Eric was the only named executive officer to defer a portion of his bonus under this plan.
GOOGLE INC. | 2015 Proxy Statement 42
Potential Payments Upon Termination or Change in Control
We have no agreements with any of our named executive officers that provide for additional or accelerated compensation on the termination of the executive’s employment or a change in control of Google, except as set forth under “Post-Employment and Change in Control Payments” above.on page 36 of this proxy statement.
* * * * *
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes our equity compensation plan information as of December 31, 2011.2014. Information is included for equity compensation plans approved by our stockholders and equity compensation plans not approved by our stockholders. We will not grant equity awards in the future under any of the equity compensation plans not approved by our stockholders included in the table below. This table does not include the shares of Class C capital stock that may be issuable pursuant to (1) the Google Inc. 2012 Stock Plan, the approval of which is the subject of Proposal Number 4 of this proxy statement and (2) the Google Inc. 2012 Incentive Compensation Plan for Employees and Consultants of Motorola Mobility, the approval of which is the subject of Proposal Number 5 of this proxy statement.
| | | | | | | | | | | | | | |
Plan Category | | Class of
Common
Stock | | (a)
Common Shares to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights | | | (b)
Weighted-average
Exercise Price of
Outstanding Options,
Warrants and
Rights(1) ($) | | | (c)
Common Shares Available
for Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a)) | |
Equity compensation plans approved by our stockholders | | Class A | | | 18,424,119 | (2) | | | 364.93 | | | | 11,987,240 | (3) |
Equity compensation plans approved by our stockholders | | Class B | | | 143,522 | (4) | | | 5.11 | | | | — | |
Equity compensation plans not approved by our stockholders | | Class A | | | 54,545 | (5) | | | 59.08 | | | | — | |
Total | | Class A | | | 18,478,664 | | | | 363.17 | | | | 11,987,240 | |
Total | | Class B | | | 143,522 | | | | 5.11 | | | | — | |
Total | | Class A
and Class B | | | 18,622,186 | | | | 357.92 | | | | 11,987,240 | |
| | | | | (a) | | | (b) | | | (c) | |
| | | | | Common Shares to | | | Weighted-average | | | Common Shares | |
| | | | | be Issued | | | Exercise Price | | | Available for Future | |
| | | Class of | | Upon Exercise of | | | of Outstanding | | | Issuance Under Equity | |
| | | Common | | Outstanding | | | Options and | | | Compensation Plans | |
| | | Stock/Capital | | Options and | | | Rights(1) | | | (Excluding Securities | |
| Plan Category | | Stock | | Rights(#) | | | ($/Share) | | | Reflected in Column (a))(#) | |
| Equity compensation plans approved by our stockholders | | Class A | | | 9,895,297 | (2) | | | 215.50 | | | | — | (3) |
| Equity compensation plans approved by our stockholders | | Class B | | | — | | | | — | | | | — | |
| Equity compensation plans approved by our stockholders | | Class C | | | 21,722,747 | (4) | | | 215.61 | | | | 17,525,225 | (5) |
| Equity compensation plans not approved by our stockholders | | Class A | | | 99,473 | (6) | | | 216.72 | | | | — | |
| Equity compensation plans not approved by our stockholders | | Class C | | | 99,809 | (7) | | | 215.25 | | | | — | |
| Total | | Class A | | | 9,994,770 | | | | 215.54 | | | | — | |
| Total | | Class B | | | — | | | | — | | | | — | |
| Total | | Class C | | | 21,822,556 | | | | 215.60 | | | | 17,525,225 | (5) |
| Total | | Class A and | | | 9,994,770 | | | | 215.54 | | | | — | |
| | | Class B | | | | | | | | | | | | |
| Total | | Class A, Class B, and Class C | | | 31,817,326 | | | | 215.57 | | | | 17,525,225 | (5) |
| | | | | | | | | | | | | | | |
(1) |
|
| (1) | The weighted average exercise price is calculated based solely on the outstanding stock options. It does not take into account the shares issuable upon vesting of outstanding GSUs, which have no exercise price. |
(2) |
|
| (2) | Consists of stock options to purchase a total of 9,609,1853,564,901 shares, and GSUs representing the right to acquire 8,814,9346,330,396 shares of our Class A common stock outstanding under our 2003 Stock Plan, 2003 Stock Plan (No. 3), and 2004 Stock Plan. |
(3) | Represents shares of common stock available for issuance under our 2004 Stock Plan. Shares available for issuance under our
|
| (3) | Our 2004 Stock Plan canexpired in April 2014. No further grants may be granted pursuant to stock options, stock appreciation rights, dividend equivalent rights, restricted stock, performance units, performance shares, and any other stock-based award selected bymade under the plan administrator.2004 Stock Plan. |
(4) | Includes options to purchase shares outstanding under our 1998 Stock Plan, 2000 Stock Plan, and 2003 Stock Plan (No. 2).
|
(5)(4) | Consists of common(i) 9,809,637 shares of Class C capital stock to be issued upon exercise of outstanding stock options and vesting of outstanding GSUs that were distributed as a dividend to the issued and outstanding Class A stock options and GSUs in April 2014 in connection with the Stock Split; and (ii) 11,913,110 shares of Class C capital stock to be issued upon conversion of GSUs that were granted under our 2012 Stock Plan during 2014. |
| |
| (5) | Consists of shares of Class C capital stock authorized to be issued pursuant to the Google Inc. 2012 Stock Plan, which was approved by our stockholders at the 2012 Annual Meeting of Stockholders. |
| |
| (6) | Consists of shares of Class A common stock to be issued upon exercise of outstanding stock options and vesting of outstanding restricted stock units under the following plans which have been assumed by us in connection with certain of our acquisition transactions: the 19992005 Stock Option/Stock Issuance Plan assumed by us in connection with our acquisition of Applied Semantics, Inc. in April 2003, the 2000 Equity Incentive Plan assumed by us in connection with our acquisition of Keyhole,DoubleClick Inc. in October 2004,March 2008; the 2006 Stock Plan assumed by us in connection with our acquisition of AdMob, Inc. in May 2010; and the Motorola Mobility Holdings, Inc. 2011 Incentive Compensation Plan assumed by us in connection with our acquisition of Motorola Mobility Holdings, Inc. in May 2012. No further grants may be made under any of these plans. |
| |
| (7) | Consists of shares of Class C capital stock to be issued upon exercise of outstanding stock options and vesting of outstanding GSUs that were distributed as a dividend to the issued and outstanding Class A stock options and GSUs in April 2014 in connection with the Stock Split under the following plans which have been assumed by us in connection with certain of our acquisition transactions: the 2005 Stock Incentive Plan assumed by us in connection with our acquisition of DoubleClick Inc. in March 2008, and2008; the 2006 Stock Plan assumed by us in connection with our acquisition of AdMob, Inc. in May 2010.2010; and the Motorola Mobility Holdings, Inc. 2011 Incentive Compensation Plan assumed by us in connection with our acquisition of Motorola Mobility Holdings, Inc. in May 2012. No further grants may be made under any of these plans. |
* * * * *
GOOGLE INC. | 2015 Proxy Statement 43
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Principal Accounting Fees and Services
The following table sets forth all fees paid or accrued by us for the audit and other services provided by Ernst & Young LLP during the years ended December 31, 20102013 and 20112014 (in thousands):
| | | | | | | | |
| | | 2010 | | | 2011 | |
Audit Fees(1) | | $ | 11,880 | | | $ | 12,302 | |
Tax Fees(2) | | | 1,130 | | | | 1,902 | |
Other Fees(3) | | | — | | | | 88 | |
| | | | | | | | |
Total Fees | | $ | 13,010 | | | $ | 14,292 | |
| | | | | | | | |
| | | 2013 | | | 2014 |
| Audit Fees(1) | | $ | 13,666 | | | $ | 13,865 |
| Audit-Related Fees(2) | | | 2,291 | | | | 1,742 |
| Tax Fees(3) | | | 3,416 | | | | 5,180 |
| Other Fees(4) | | | 688 | | | | 72 |
| Total Fees | | $ | 20,061 | | | $ | 20,859 |
| | | | | | | | |
(1) | |
| (1) | Audit Fees:This category represents fees for professional services provided in connection with the audit of our financial statements, audit of our internal control over financial reporting, review of our quarterly financial statements, and audit services provided in connection with other regulatory or statutory filings for which we have engaged Ernst & Young LLP. |
(2) | |
| (2) | Audit-Related Fees: This category consists primarily of attest services related to information systems. |
| |
| (3) | Tax Fees:This category consists of tax compliance, tax planning, and tax advice, including foreign tax return preparation and requests for rulings or technical advice from tax authorities. |
(3) | |
| (4) | Other Fees:This category consists of fees for services other than the services reported in audit fees, audit-related fees, and tax fees. |
The Audit Committee considered whether the provision of services other than audit services is compatible with maintaining Ernst & Young LLP’s independence.
Pre-Approval Policies and Procedures
All audit and non-audit services provided by Ernst & Young LLP to us must be pre-approved in advance by our Audit Committee unless the following conditions are met:
| • | The service is one of a set of permitted services that the independent auditor is allowed to provide; |
| | |
| • | The total amount of such permitted service is less than or equal to $100,000; and |
| | |
| • | The services are reported to the Audit Committee and approved prior to the completion of the annual audit. |
In March 2015, the Audit Committee amended the second condition above by increasing the total amount of permitted services that the independent auditor is allowed to provide;
The total amount of such services isfrom less than or equal to $100,000 during the fiscal year in which the services are provided; andto less than or equal to $500,000.
The services must be brought to the attention of the Audit Committee and approved prior to the completion of the annual audit.
All other permitted services must be pre-approved by either the Audit Committee or aan authorized delegate of the Audit Committee.Committee prior to commencing such services. If pre-approval is obtained from a delegate of the Audit Committee, the service may be performed,commence, provided that the service is presented to the Audit Committee for approval at the next scheduled meeting.
All services provided to us by Ernst & Young LLP in 20102013 and 20112014 were pre-approved by the Audit Committee.
* * * * *
GOOGLE INC. | 2015 Proxy Statement 44
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee (Committee) of the board of directors of Google is comprised entirely of independent directors who meet the independence requirements of the Listing Rules of Thethe NASDAQ Stock Market and the Securities and Exchange Commission.SEC. The Audit Committee operates pursuant to a charter that is available on the Investor Relations section of our website at http://investor.google.com/corporate/board-committees-audit.html. To view the charter, select “Board Committees” under “Corporate Governance” and then “Audit Committee Charter.”
The Audit Committee oversees Google’s financial reporting process and internal control structure on behalf of the board of directors. Management is responsible for the preparation, presentation, and integrity of the financial statements and the effectiveness of Google’s internal control over financial reporting. Google’s independent auditors are responsible for expressing an opinion as to the conformity of Google’s consolidated financial statements with generally accepted accounting principles and as to the effectiveness of Google’s internal control over financial reporting.
In performing its responsibilities, the Audit Committee has reviewed and discussed with management and the independent auditors the audited consolidated financial statements in Google’s Annual Report on Form 10-K for the year ended December 31, 2011.2014. The Audit Committee has also discussed with the independent auditors matters required to be discussed by the Statement on Auditing StandardsStandard No. 61, as amended (Codification of Statements on Auditing Standards, AU 380), as adopted16, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board (PCAOB) in Rule 3200T..
The Audit Committee received written disclosures and the letter from the independent auditors pursuant to the applicable requirements of the PCAOB regarding the independent auditors’ communications with the Audit Committee concerning independence, and the Audit Committee discussed with the auditors their independence.
Based on the reviews and discussions referred to above, the Audit Committee unanimously recommended to the board of directors that the audited consolidated financial statements be included in Google’s Annual Report on Form 10-K for the year ended December 31, 2011.2014.
AUDIT COMMITTEE
Ann Mather,Chair
Diane B. Greene
Alan R. Mulally
K. Ram Shriram
* * * * *GOOGLE INC. | 2015 Proxy Statement 45
MANAGEMENT PROPOSALS TO BE VOTED ON
PROPOSAL NUMBER
| Proposal Number 1 | Election of Directors |
ELECTION OF DIRECTORSNominees
Nominees
The Nominating and Corporate Governance Committee recommended, and the board of directors nominated:
| • | Larry Page, | • | Ann Mather, |
| • | Sergey Brin, | • | Alan R. Mulally, |
| • | Eric E. Schmidt, | • | Paul S. Otellini, |
| • | L. John Doerr, | • | K. Ram Shriram, and |
| • | Diane B. Greene, | • | Shirley M. Tilghman |
| • | John L. Hennessy, | | |
as nominees for election as members of our board of directors at the Annual Meeting. At the Annual Meeting, 10eleven directors will be elected to the board of directors.
Except as set forth below, unless otherwise instructed, the persons appointed in the accompanying form of proxy will vote the proxies received by them for these nominees, who are all presently directors of Google. In the event that any nominee becomes unavailable or unwilling to serve as a member of our board of directors, the proxy holders will vote in their discretion for a substitute nominee. The term of office of each person elected as a director will continue until the next annual meeting or until a successor has been elected and qualified, or until the director’s earlier death, resignation, or removal.
The sections titled “Directors and Executive Officers” and “Director Selection Process and Qualifications” on pages 9-1110-12 and 18-2018-19 of this proxy statement contain more information about the leadership skills and other experiences that caused the Nominating and Corporate Governance Committee and the board of directors to determine that these nominees should serve as directors of Google.
Required Vote
The 10eleven nominees receiving the highest number of affirmative “FOR” votes shall be elected as directors. Unless marked to the contrary, proxies received will be voted “FOR” these nominees.
Google Recommendation
Our board of directors recommends a vote FOR the election to the board of directors of each of the abovementioned nominees.
* * * * *
GOOGLE INC. | 2015 Proxy Statement 46
| Proposal Number 2 | Ratification of Appointment of Independent Registered Public Accounting Firm |
PROPOSAL NUMBER 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the board of directors has appointed Ernst & Young LLP as the independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending December 31, 2012.2015. During the fiscal year ended December 31, 2011,2014, Ernst & Young LLP served as our independent registered public accounting firm and also provided certain audit-related, tax, relatedand other services. See “Independent Registered Public Accounting Firm” on page 5244 of this proxy statement. Notwithstanding its selection, the Audit Committee, in its discretion, may appoint another independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best interests of Google and our stockholders. If our stockholders do not ratify the appointment, is not ratified by our stockholders, the Audit Committee may reconsider whether it should appoint another independent registered public accounting firm. Representatives of Ernst & Young LLP are expected to attend the Annual Meeting, where they will be available to respond to appropriate questions and, if they desire, to make a statement.
Required Vote
Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 20122015 requires the affirmative “FOR” vote of the holders of a majority of the voting power of Google’s shares of Class A common stock and Class B common stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon, voting together as a single class. Unless marked to the contrary, proxies received will be voted “FOR” ratification of the appointment of Ernst & Young LLP.
Google Recommendation
Our board of directors recommends a vote FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2012.2015.
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GOOGLE INC. | 2015 Proxy Statement 47
| Proposal Number 3 | Approval of an Amendment to Google’s 2012 Stock Plan |
PROPOSAL NUMBER 3
APPROVAL OF THE ADOPTION OF
GOOGLE’S FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Summary
Our boardAt the Annual Meeting, stockholders will be asked to approve an amendment to the Google Inc. 2012 Stock Plan (Plan) to increase the maximum number of directors, after receiving the unanimous recommendation of the Special Committee, has unanimously determined that it is advisable and in our best interests, and in the best interestsshares of our stockholders (other than the stockholders who will enter into transfer restriction agreements, as to whom no determination is made), to adjust our capital structure by establishing a new class of capital stock and potentially declaring and paying a dividend of one share of this new class of capital stock for each outstanding share of Class A common stock and Class B common stock. This new capital stock, which will be known as Class C capital stock willthat may be available for use for, among other things, stock-based acquisitions and equity-based employee compensation. As further described below, our board of directors believes that addingissued under the Class C capital stock to our capital structure will, among other things, increase our flexibility in preserving our operational and strategic focus on the long term by providing us with an additional form of stock-based currency for use in connection with future acquisitions and employee incentives. This will allowPlan.
Our stockholders previously authorized us to better manage voting dilution as the result of these future equity issuances.
In orderissue up to establish the Class C capital stock, it is necessary to amend and restate our certificate of incorporation. Our board of directors has unanimously adopted resolutions approving and declaring advisable, and recommending that our stockholders approve, the adoption of the New Charter. The principal differences between the New Charter and the Existing Charter relate to the creation of the Class C capital stock, of which there will be 3 billion authorized shares. Holders of30,000,000 shares of Class C capital stock will have no voting rights, unless otherwise required by law. In addition,under the New Charter increases the numberPlan, subject to adjustment upon certain changes in our capital structure. As of authorizedDecember 31, 2014, 17,525,225 shares of our Class A commonC capital stock remained available for future grant of stock awards under the Plan, a number that the Leadership Development and Compensation Committee and the full board of directors believes to 9 billion (from 6 billion)be insufficient to accommodatemeet our anticipated needs. The Leadership Development and Compensation Committee and the potential conversionfull board of alldirectors believe that in order to successfully attract and retain the best possible candidates, we must continue to offer competitive equity incentive programs.
Therefore, in March 2015, the Leadership Development and Compensation Committee recommended, and in April 2015, the full board of directors adopted, subject to stockholder approval, an amendment to the Plan to increase the share reserve by 17,000,000 shares of Class C capital stock into Class A common stock in connection with a liquidation of Google. Assuming that our board of directors declares and pays the Dividend (as defined below), we will be required to reserve a sufficient number of shares of Class A common stock for the mandatory conversion of the shares of Class C capital stock into Class A common stock in connection with any liquidation of Google. Google may issue any authorized shares of Class A common stock that are not so reserved (or reserved for other purposes, such as the conversion of shares of Class B common stock into shares of Class A common stock), whether authorized pursuant to the transactions contemplated by this proxy statement or otherwise, for any purpose without the need for stockholder approval, except as required by applicable law or listing standards.
stock. The New Charter will also specify that the shares of Class A common stock will be treated at least as favorably as the shares of Class B common stock, and that the shares of Class C capital stock will be treated equally with the shares of Class A common stock, in connection with fundamental transactions involving Google. More specifically, the New Charter provides that in the event of any merger, consolidation, or other business combination requiring approval by Google’s stockholders, or any tender or exchange offer by a third party pursuant to an agreement to which Google is a party or by Google on its own behalf, the holders of shares of Class A common stock will be entitled to receive, or to elect to receive, the same form of consideration and at least the same amount of consideration on a per share basis as the holders of shares of Class B common stock. In connection with such transactions, holders of shares of Class C capital stock will be entitled to receive, or to elect to receive, the same form of consideration and amount of consideration on a per share basis as the holders of shares of Class A common stock.
Stockholders will vote separately on each of the following proposals, which collectively comprise this Proposal Number 3.
Proposal Number 3A—The approval of the adoption of amendments to the Existing Charter to establish the Class C capital stock and to make certain clarifying changes. This proposal is to approve the adoption of amendments to the Existing Charter to authorize 3 billion shares of Class C capital stock, to establish the powers,
| preferences and rights and qualifications, limitations and restrictions of the shares of Class C capital stock, and to set forth certain other clarifying changes including the requirement of certain approvals of our board of directors and our stockholders to amend or repeal the powers, preferences and rights and qualifications, limitations and restrictions of the shares of Class C capital stock.
|
Proposal Number 3B—The approval of the adoption of amendments to the Existing Charter toamendment would increase the number of authorized shares of Class A common stock from 6 billion to 9 billion. This proposal is to approve the adoption of amendments to the Existing Charter to increase the number of authorized shares of Class A common stock from 6 billion to 9 billion.
Proposal Number 3C—The approval of the adoption of amendments to the Existing Charter to provide for the treatment of shares of Class A common stock in a manner that is at least as favorable as shares of Class B common stock. This proposal is to approve the adoption of amendments to the Existing Charter to provide that in the event of any merger, consolidation, or other business combination requiring approval by Google’s stockholders, or any tender or exchange offer by a third party pursuant to an agreement to which Google is a party or by Google on its own behalf, the holders of shares of Class A common stock will be entitled to receive, or to elect to receive, the same form of consideration and at least the same amount of consideration on a per share basis as the holders of shares of Class B common stock.
The approval of each of these proposals is required to approve the adoption of the New Charter, and each is an integral element of the Recapitalization (as defined below). Accordingly, each of the proposals comprising this Proposal Number 3 is cross-conditioned upon the approval by our stockholders of all of the proposals comprising this Proposal Number 3. None of the actions contemplated by this Proposal Number 3 will proceed if any of Proposal Numbers 3A, 3B, or 3C is not approved by our stockholders. In this proxy statement, when we refer to the approval of the adoption of the New Charter, we are referring to our stockholders approving the adoption of the amendment and restatement of our certificate of incorporation by approving each of the proposals comprising this Proposal Number 3, which will collectively constitute approval of this Proposal Number 3. The approval of each of the proposals comprising Proposal Number 3 shall constitute the requisite approval of the adoption of the New Charter as required by Delaware law.
The description of the New Charter in this proxy statement is qualified in its entirety by reference to, and should be read in conjunction with, the full text of the New Charter, which is attached to this proxy statement as Appendix A-1. For convenience of reference, a copy of the New Charter showing the changes from the Existing Charter, with deleted text shown in strikethrough and added text shown as double-underlined, is attached to this proxy statement as Appendix A-2.
If the New Charter is adopted by the required vote of our stockholders, our board of directors intends to file the New Charter with the Secretary of State of the State of Delaware (Secretary of State). The New Charter will be effective immediately upon acceptance of filing by the Secretary of State or such later time as may be specified in the New Charter (Effective Date). Our board of directors reserves the right to abandon or delay the filing of the New Charter even if it is approved by our stockholders. In this proxy statement, we refer to the transactions contemplated by the adoption of the New Charter as the Recapitalization.
Our board of directors has expressed its intention, subject to stockholder approval of the adoption of the New Charter and filing and effectiveness of the New Charter, to declare and pay a dividend (Dividend) of one share of Class C capital stock for each share of Class A common stock and Class B common stock outstanding as of a record date to be determined by our board of directors. At this time, our board of directors is not aware of any factors other than the approval of the adoption of the New Charter by our stockholders that may impact its decision as to whether to declare and pay the Dividend. Stockholder approval of the Dividend is not required and is not being solicited by this proxy statement. There can be no assurance that our board of directors will elect to proceed with the Dividend.
As part of the approval of the adoption of the New Charter, Larry, Sergey, Eric, and certain of their respective affiliates have agreed to enter into transfer restriction agreements with Google (Transfer Restriction Agreements). Pursuant to the Transfer Restriction Agreements, these stockholders will agree, among other things, not to sell or transfer any shares of Class C capital stock that they receive at any time if, as a result of such sale or transfer, they would own more shares of Class B common stock than Class C capital stock. These restrictions are intended to limit the ability of these stockholders to sell their Google stock in a manner that does not reduce their voting power. See “Transfer Restriction Agreements” below.
As more fully explained below, the Recapitalization and the Dividend, if it is declared and paid, will not initially affect the relative voting power or economic interest of any stockholder.
The shares of Class A common stock will continue to trade on NASDAQ. We have been advised that the shares of Class C capital stock will be eligible to be listed on NASDAQ, and we intend to qualify the shares of Class C capital stock for listing on NASDAQ upon their issuance as a result of the Dividend, if it is declared and paid.
The Special Committee and our board of directors believe that the Recapitalization and the Dividend, if it is declared and paid, will have a number of benefits for Google. See “Reasons for the Recapitalization” below. The Recapitalization and the Dividend, if it is declared and paid, also involve a number of potential negative consequences. See “Potential Negative Consequences of the Recapitalization” below.
As a result of their beneficial ownership of more than a majority of each of our total outstanding voting power and the outstanding voting power of the Class B common stock as of the Record Date, Larry and Sergey will have the power to approve the adoption of the New Charter without the affirmative vote of any other stockholder.
The Special Committee
The Special Committee was established in 2011 as a committee of our board of directors for the purpose of investigating, evaluating, analyzing, negotiating and making a recommendation for or against, and to the extent delegable by the board of directors, approving, or not approving, and making a recommendation to Google’s stockholders for or against, a recapitalization or any other modification of Google’s capital structure, including any proposals made by Google, Larry and Sergey, our board of directors, or the Special Committee. The Special Committee’s authority with respect to the Recapitalization, the potential Dividend, and the related matters described in this Proposal ended once our board of directors approved its recommendation about those matters. The Special Committee consisted of Ann Mather (Chair), Paul S. Otellini, and K. Ram Shriram. As required by the Special Committee’s charter, its members (i) are not members of Google’s management; (ii) are independent of Larry and Sergey; (iii) do not own shares of Class B common stock; and (iv) are disinterested with respect to the Recapitalization and the potential Dividend (other than by virtue of their ownership of shares of Class A common stock). The members of the Special Committee have not been compensated for their service, although our board of directors may elect to provide them with compensation for their service.
Background
Google has always focused on and prioritized long-term goals, and it has always viewed its governance structure as an important element of its ability to do so. From time to time, our board of directors has discussed ways in which, consistent with what we stated during our initial public offering, we could remain an unconventional company that was willing to invest in the long term. Our board of directors has always considered the significant influence that Larry and Sergey have in our daily operations—both in their capacities as senior executives and as substantial stockholders—to be an important component of our ongoing growth and success. See “Reasons for the Recapitalization—Enhance Google’s Ability to Focus on the Long Term” below for additional discussion regarding the importance that our board of directors ascribes to Larry and Sergey’s influence over Google.
On June 28, 2010, Munger, Tolles & Olson LLP (Munger), counsel to Larry and Sergey, provided members of Google’s legal department with a proposal to create a new class of capital stock with no voting rights. The proposal noted that Google had issued almost 47 million shares of Class A common stock since its initial public offering and that issuances of shares of Class A common stock for stock-based acquisitions and equity-based employee compensation were likely to increase over time. The proposal stated that Larry and Sergey believed that it was important to manage voting dilution in order to preserve Google’s existing governance culture for the long term. The proposal identified that a practical challenge would be creating a sufficiently liquid market in the new non-voting stock, and suggested four ways to do this: (i) start paying equity-based compensation in non-voting stock; (ii) revise the terms of the Class B common stock so that it would be convertible into non-voting stock; (iii) undertake a primary offering of the non-voting stock; and (iv) start using the non-voting stock as consideration in stock-based acquisitions.
During the summer and into the fall of 2010, members of Google’s legal department studied the proposed recapitalization, including with respect to necessary approvals and ways in which it could be implemented.
On October 7, 2010, Larry, Sergey, and representatives of Munger met with members of Google’s legal department to discuss the proposed recapitalization. At this meeting, in response to concerns expressed by members of Google’s legal department that it would be difficult to create a sufficiently liquid market in the non-voting stock using the alternatives originally presented, representatives from Munger proposed as a new alternative a stock dividend pursuant to which one share of non-voting stock would be paid on each existing share of Class A common stock and Class B common stock.
In November 2010, we began to formally consult with Morgan Stanley & Co. Incorporated (Morgan Stanley) and Wilson Sonsini Goodrich & Rosati, Professional Corporation (Wilson Sonsini) about the proposed recapitalization, particularly with respect to the process that our board of directors should use in considering the proposal. Morgan Stanley and Wilson Sonsini also helped us conduct additional analysis of the proposed recapitalization.
On January 11, 2011, our board of directors held a special meeting. In attendance at the meeting were all of our directors, David Drummond, our Senior Vice President, Corporate Development, Chief Legal Officer and Secretary, and other members of Google’s legal department. At the request of one of our independent directors, a representative of Fenwick & West LLP (Fenwick) also attended this meeting. At this meeting, Eric, our then-Chief Executive Officer, provided a summary of the proposed recapitalization. David then discussed the technical aspects of a potential implementation of a new class of non-voting stock (which ultimately became the Class C capital stock). He also reviewed with our board of directors an analysis prepared by Morgan Stanley with respect to potential relative trading prices of the new non-voting stock, as compared to the Class A common stock, based upon Morgan Stanley’s review of other companies with two publicly traded classes of common stock. Larry and Sergey then summarized for the board of directors their views as to the strategic rationale for the proposed recapitalization and, in particular, how the recapitalization would help preserve Google’s current corporate governance structure, which structure had been important in allowing Google to focus on the long term. Following the presentations, the members of our board of directors asked Eric, Larry, Sergey, and David questions, after which Larry, Sergey, Eric, David, and the other representatives of Google management left the meeting. Our independent directors at that time, L. John Doerr, John L. Hennessy, Ann Mather, Paul S. Otellini, K. Ram Shriram, and Shirley M. Tilghman, and the representative of Fenwick then met separately to discuss the proposed recapitalization. During this discussion, the independent directors appointed Fenwick as their legal counsel to advise them with respect to the proposed recapitalization, and Fenwick reviewed with them a variety of legal matters related to the proposed recapitalization. The directors asked questions and following a discussion, it was the consensus of our independent directors that the Special Committee should be constituted to, among other things, investigate, evaluate, analyze, negotiate, and make a recommendation for or against, and to the extent delegable by the board, approve, or not approve, and make a recommendation to Google’s stockholders for or against, the proposed recapitalization or any other modification to Google’s capital structure. Our board of directors also determined not to recommend any recapitalization for approval by our stockholders, approve any
definitive documents, including amendments to our certificate of incorporation or bylaws, with respect to a recapitalization, or take any action to implement a recapitalization without a prior favorable recommendation of the Special Committee. Our board of directors appointed Ann, Paul, and Shirley to the Special Committee.
On January 26, 2011, the Special Committee held its first meeting. In attendance at the meeting were Paul, Ann, and a representative of Fenwick. The Special Committee discussed certain organizational matters relating to the formation of the Special Committee and its consideration of the proposed recapitalization, including the need for the Special Committee to retain financial and legal advisors. The Special Committee requested that the representative of Fenwick investigate the independence of certain potential financial advisors. Also at this meeting, it was the consensus of the Special Committee that because Eric was a substantial holder of shares of our Class B common stock and had made donations to Princeton University, his alma matter, where Shirley serves as President, she should not serve on the Special Committee. Shirley ceased her participation on the Special Committee following this meeting. In discussing a potential replacement for Shirley, the Special Committee requested the representative of Fenwick to investigate whether Ram held shares of Class B common stock.
On February 22, 2011, the Special Committee met to discuss the proposed recapitalization. In attendance at the meeting were Ann, Paul, Ram, and a representative of Fenwick. It was reported that because it was determined that Ram held no shares of Class B common stock, he would join the Special Committee. The members of the committee then discussed the time necessary to review, evaluate, and reach a recommendation with respect to the proposed recapitalization and concluded that it would be unable to do so in time for a recapitalization, should the Special Committee determine to recommend one, to be considered at the upcoming 2011 annual meeting of Google’s stockholders and requested that Fenwick inform Google of that conclusion. Also during this meeting, the Special Committee considered the retention of financial, legal, and other advisors.
On April 12, 2011, the Special Committee met to discuss the proposed recapitalization. In attendance at the start of the meeting were all of the committee members and representatives of Fenwick and Latham & Watkins LLP (Latham). The Special Committee discussed the need for a Chair and, following the discussion, elected Ann as Chair of the Special Committee. The representative of Latham then left the meeting, and the Special Committee and Fenwick discussed the retention of Latham as counsel to the Special Committee and, following the discussion, the Special Committee determined to retain Latham as its counsel. The representative of Latham then rejoined the meeting. The Special Committee then discussed the recapitalization proposal including its rationale and, in particular, the need for Google to manage voting dilution in order to preserve Google’s existing governance culture for the long term. As part of this discussion, the committee members considered potential modifications to the proposal and the manner and timing of the implementation of such a proposal. Representatives of Fenwick and Latham then reviewed with the committee members their fiduciary duties in connection with their evaluation of such a recapitalization and discussed other legal matters. At the request of the Special Committee, representatives of Perella Weinberg Partners LP (Perella) then joined the meeting and reviewed with the committee members factors relevant to an evaluation of such a recapitalization, including (i) an overview of companies with multiple classes of common stock; (ii) factors that the Special Committee might consider in evaluating such a recapitalization; (iii) stock performance and trading following certain other recapitalizations; (iv) relative trading prices between dual classes of common stock; (v) merger and acquisition efficacy with respect to non-voting stock; and (vi) factors that affect the relative prices of separate classes of stock issued by one company. Representatives of Perella also discussed with the committee members potential modifications to the proposed recapitalization and potential market and stockholder reactions to the announcement of the recapitalization. The representatives of Perella left the meeting after their presentation. The representative of Latham then reviewed with the committee members the proposed charter for the Special Committee, which included revisions previously made by Fenwick and Latham to the draft prepared by Google’s legal department. The representative of Latham also reviewed with the committee members the resolutions that were adopted by our board of directors in creating the Special Committee. The committee members provided comments on the draft charter and asked that they be reflected in a revised draft of the charter, which would be reviewed at the next meeting of the Special Committee. The representative of Fenwick then left the meeting and the representative of Latham reviewed with the committee members certain legal matters.
On April 13, 2011, during a portion of a regularly-scheduled meeting of our board of directors, members of the Special Committee provided an update to the independent members of our board of directors regarding the status of the Special Committee’s consideration of the proposed recapitalization.
On May 19, 2011, the Special Committee met to discuss the recapitalization proposal. In attendance at the start of the meeting were all the committee members and representatives of Fenwick and Latham. Representatives of Latham reviewed with the committee members a revised draft of the Special Committee’s charter that reflected changes suggested by the committee members at their prior meeting. Among other matters, the charter authorized the Special Committee to investigate, evaluate, analyze, negotiate and make a recommendation for or against, and to the extent delegable by our board of directors, approve, or not approve, and make a recommendation to Google’s stockholders for or against, a recapitalization or modification to Google’s capital structure, including the proposed recapitalization, or one initiated by the Special Committee, or any alternatives to such a recapitalization. After this review, the committee members unanimously approved the Special Committee’s charter and recommended that our board of directors approve the charter. Representatives of Latham then reviewed with the committee an engagement letter to retain Perella as financial advisor to the Special Committee. After this review, the committee members unanimously approved the engagement of Perella as the Special Committee’s financial advisor and authorized the execution and delivery of the engagement letter by Ann and by Google. Representatives of Perella then joined the meeting. Representatives of Latham reviewed with the committee members Google’s current capitalization, voting structure, the terms of the Class A common stock and Class B common stock and related provisions of Google’s certificate of incorporation and bylaws. The Special Committee and its advisors discussed Google’s capital structure and capital structures of a number of other technology companies. Representatives of Perella then reviewed with the committee members a share ownership and voting power analysis, based upon the assumptions used in the Morgan Stanley analysis originally provided to our board of directors at its January 11, 2011 meeting, with sensitivity analyses prepared by Perella based on different levels of stock repurchases, merger and acquisition activity financed by stock issuances, sales of Class B common stock by Larry and Sergey and conversion of Class B common stock into Class A common stock by holders other than Larry and Sergey. The Special Committee and its advisors discussed factors that could be considered in determining whether or not to recommend the proposed recapitalization, alternatives to the recapitalization proposal, and the timing and manner of implementing the proposed recapitalization if the Special Committee determined to recommend it. Following the discussion, the Special Committee determined to meet with Larry and Sergey to seek additional information with respect to the recapitalization proposal before further considering the process for evaluating the proposed recapitalization.
On July 13, 2011, during a portion of a regularly-scheduled meeting of our board of directors, Larry, Sergey, and representatives of Munger described the key elements of the proposed recapitalization and the principal purposes and reasons for the recapitalization proposal. David discussed the technical aspects of implementing the proposed recapitalization. Following these presentations, our board of directors discussed the proposed recapitalization and its intended purposes, including, among others, providing our board of directors with additional flexibility to manage ongoing voting dilution to preserve Google’s existing governance culture for the long term. Also at this meeting, our board of directors adopted the Special Committee’s charter in the form previously approved by the Special Committee. At the invitation of the Special Committee, representatives of Fenwick and Latham attended this portion of the meeting.
Following these presentations and discussions, all participants in the meeting, other than the independent directors, left the meeting. The independent directors, including the members of the Special Committee, then engaged in a discussion of the proposed recapitalization.
Later on July 13, 2011, the Special Committee met to discuss the recapitalization proposal. In attendance at the start of the meeting were all of the committee members and representatives of Fenwick, Latham, and Perella. The meeting commenced with a review of the presentations made by Larry and representatives of Munger and the implementation process described by David at the board meeting earlier that day. The Special Committee and its advisors then discussed their review of the recapitalization proposal to date, including discussions held with other
independent directors and the analysis and presentations made by Perella in prior meetings with respect to ownership and voting power of Larry and Sergey. Those present also discussed the potential benefits and disadvantages of the recapitalization proposal to Google and its stockholders, as well as potential modifications to the terms of the proposal. At the conclusion of that discussion, Larry, David, and representatives of Munger joined the meeting and answered questions asked by the committee members and representatives of Fenwick, Latham, and Perella concerning the reasons for the recapitalization, the terms of the proposed recapitalization, possible modifications to the proposal, and benefits of the proposal to Google and its stockholders. Larry, David, and the representatives of Munger then left the meeting. The Special Committee then requested that its advisors review the recapitalization proposal with a view to developing a range of possible alternatives and modifications to the proposal that the Special Committee could consider at its next meeting.
On September 14, 2011, the Special Committee met to further consider the proposed recapitalization. In attendance at the start of the meeting were all of the committee members and representatives of Fenwick and Latham. The meeting began with Latham leading a presentation of the fiduciary duties of the committee members and other legal matters relevant to such a recapitalization. Following that presentation, representatives of Perella joined the meeting and reviewed with the Special Committee (i) a share ownership and voting power analysis reflecting the potential effects of the proposed recapitalization; (ii) recent and pending initial public offerings that had dual class structures and large technology companies with single class structures; (iii) Google’s stock price performance and related market news; and (iv) stockholder perceptions of Google. Representatives of Perella then reviewed various alternatives to the proposed recapitalization designed to achieve the objectives of the recapitalization proposal, including stock buybacks, incentivizing conversions of Class B common stock into Class A common stock, adopting stockholder rights plans and implementing a staggered board, each of which was determined not to fully satisfy the objectives of the recapitalization because they did not allow Google to more effectively manage ongoing voting dilution. Representatives of Perella also reviewed with the Special Committee certain alternative responses to the proposed recapitalization, including deferring action on the proposal, denying the proposal or making modifications to the proposal. Representatives of Perella discussed with the Special Committee a range of modifications that could be made to the proposed recapitalization, including (i) reducing themaximum number of shares of Class C capital stock issued per share of Class A common stock or Class B common stock in connection with a dividend of the Class C capital stock; (ii) providing that each class of common stock vote on the proposal separately; and (iii) adding a “sunset provision” to the Class B common stock that would automatically convert all shares of Class B common stock to shares of Class A common stock upon certain events. Representatives of Perella also discussed with the Special Committee (i) potential limitations on the ability of Larry and Sergey to obtain liquidity from selling shares of Class C capital stock; (ii) amending Google’s certificate of incorporation to add a provision specifying that shares of Class A common stock be treated equally with shares of Class B common stock in change in control transactions; and (iii) making certain changes to Google’s certificate of incorporation to enhance independent director representation on our board of directors. The Special Committee then discussed with its advisors potential modifications to the terms of the proposed recapitalization that it believed would (i) better align the recapitalization with our board of directors’ primary objective of managing ongoing voting dilution due to future issuances of shares of Class A common stock in order to preserve Google’s existing governance culture for the long term; (ii) provide other benefits to the holders of shares of Class A common stock; and (iii) restrict the ability of Larry and Sergey to gain additional liquidity through sales of shares of Class C capital stock while preserving their existing voting power. Following that discussion, the Special Committee concluded that it would propose changes to the original proposal, which changes would require that any sale of the Class C capital stock by Larry or Sergey be made in tandem with the sale or conversion of an equal number of shares of Class B common stock and that a provision be added to Google’s certificate of incorporation specifying that shares of Class A common stock be treated equally with shares of Class B common stock in change in control transactions. The Special Committee requested that Ram propose these modifications to Larry and that representatives of Fenwick and Latham propose the modifications to representatives of Munger. The Special Committee requested that representatives of Perella update its share ownership and voting power analysis to reflect these changes to the proposed recapitalization. Representatives of Latham then reviewed certain legal matters with the Special Committee related to the proposed recapitalization, including the use of shares of Class C capital stock in tax-free mergers and acquisitions, tax consequences of the recapitalization, the stockholder vote
required to approve the recapitalization, and limitations on the convertibility of Class A common stock into Class C capital stock imposed by NASDAQ’s Listing Rules, which, in order to prevent stockholder disenfranchisement, generally prohibit the listing of a class of securities that is convertible into a lower- or non-voting class of securities.
During the week of September 19, 2011, Ram called Larry to discuss the status of the Special Committee’s review of the proposed recapitalization. During this conversation, Ram communicated the Special Committee’s proposed modifications to the proposed recapitalization.
During the week of September 26, 2011, representatives of Fenwick and Latham called representatives of Munger to communicate the Special Committee’s proposed modifications to Larry and Sergey’s recapitalization proposal.
On October 3, 2011, the Special Committee met to further discuss the status of the recapitalization proposal. In attendance at the meeting were all of the committee members and representatives of Fenwick, Latham, and Perella. Ram reviewed his conversation with Larry, and representatives of Fenwick and Latham reviewed their conversations with representatives of Munger. Representatives of Perella then reviewed with the Special Committee its updated share ownership and voting power analysis under a variety of scenarios, including assuming (i) no change in Google’s capital structure; (ii) that the recapitalization was implemented as originally proposed; and (iii) that the recapitalization was implemented as modified by the Special Committee. Representatives of Latham then reviewed with the committee members draft language to implement the Special Committee’s modifications to the recapitalization proposal, including an outline of a transfer restriction agreement to be entered into by certain holders of Class B common stock. The outline contemplated that the transfer restriction agreement would contain provisions requiring that (i) a party to the agreement must hold at least as many shares of the Class C capital stock as shares of Class B common stock, and if a disposition of shares of Class C capital stock resulted in that party no longer holding at least as many shares of Class C capital stock as Class B common stock, then a number of shares of Class B common stock would automatically be converted into shares of Class A common stock such that the number of shares of Class B common stock would again equal the number of shares of Class C capital stock; (ii) if a party to the agreement were to transfer shares of Class B common stock to a person entitled,issuable under the Google certificate of incorporation, to hold them as Class B common stock, then an equal number ofPlan from 30,000,000 shares of Class C capital stock would be required to be transferred to the same person; and (iii) all members of our board of directors would be required to approve any amendment or waiver of the transfer restriction agreement. We refer to these provisions in the transfer restriction agreement as the Stapling Provisions. The Special Committee also reviewed draft language to be added to our certificate of incorporation that would specify that holders of shares of Class A common stock would receive the same form of consideration and at least the same amount of consideration as that received by the holders of shares of Class B common stock in a sale of Google as well as certain other transactions, and would afford comparable treatment to the holders of shares of Class C capital stock in relation to the shares of Class A common stock. We refer to this provision as the Equal Treatment Provision. After this review, the Special Committee and its advisors discussed the proposed Stapling Provisions and the Equal Treatment Provision and concluded that in addition to Larry and Sergey becoming parties to the transfer restriction agreement, it was appropriate for Eric and John Doerr, as holders of shares of Class B common stock, to be subject to the proposed transfer restriction agreement. Following that discussion, the Special Committee approved the distribution of the proposed transfer restriction agreement and the Equal Treatment Provision to Larry and Sergey and their advisors.
On October 4, 2011, representatives of Latham provided representatives of Munger with an outline of the transfer restriction agreement and a draft of the Equal Treatment Provision.
On October 12, 2011, during a portion of a regularly-scheduled meeting of our board of directors, members of the Special Committee provided an update to the independent members of our board of directors regarding the status of the Special Committee’s consideration of the proposed recapitalization.
During the first two weeks of November 2011, representatives of Wilson Sonsini held a number of discussions with members of Google’s legal department and representatives of Potter Anderson & Corroon LLP, our special Delaware counsel (Potter Anderson), to discuss the proposed recapitalization, including (i) the transfer restriction agreement and the Equal Treatment Provision; and (ii) the potential implementation and effects of such agreements and of the proposed recapitalization overall. As part of these discussions, the parties reviewed and analyzed our board of directors’ primary objective for the proposed recapitalization, which was to better manage ongoing voting dilution in order to preserve Google’s existing governance culture for the long term, and the potential effect of the recapitalization on all of our stockholders. In addition, the parties reviewed and discussed the ongoing process used by the Special Committee and our board of directors in considering the proposed recapitalization.
On November 14, 2011, the Special Committee met to further discuss the recapitalization proposal. In attendance at the meeting were all of the committee members and representatives of Fenwick, Latham, and Perella. Representatives of Fenwick and Latham provided the Special Committee with updates on conversations with (i) representatives of Munger concerning the status of Larry and Sergey’s review of the Special Committee’s proposed modifications to the recapitalization proposal; and (ii) representatives of Wilson Sonsini with respect to timing and process for review of the recapitalization proposal by our board of directors. The Special Committee discussed its proposed modifications to the recapitalization proposal and the process for negotiating those modifications. The Special Committee also discussed the possibility of making a recommendation at the upcoming meeting of our board of directors in January 2012. At the conclusion of these discussions, the Special Committee requested that representatives of Latham contact representatives of Munger and communicate that the Special Committee’s modifications were critical to the Special Committee, that they were not proposed as the first step in an extended negotiation, that there was limited room to negotiate, and that if the Special Committee were to be in a position to make a recommendation at the upcoming meeting of our board of directors, then a prompt response from Larry and Sergey would be necessary. The Special Committee and its advisors then engaged in a review and discussion of the potential reasons for approving the recapitalization proposal, including its potential to (i) enhance Google’s ability to focus on the long term; (ii) allow Google to better manage ongoing voting dilution; and (iii) enhance the equal treatment of all stockholders in connection with certain fundamental transactions involving Google. Representatives of Perella also led a discussion of potential stockholder reaction to an announcement of the recapitalization proposal.
Later on November 14, 2011, representatives of Latham called representatives of Munger to communicate the Special Committee’s views expressed in its meeting earlier that day.
On November 23, 2011, following input from Larry and Sergey, a representative of Munger spoke with a representative of Latham regarding the transfer restriction agreement and the Equal Treatment Provision proposed by the Special Committee. During this discussion, the representative of Munger stated that Larry and Sergey believed that the Equal Treatment Provision was an appropriate element of the proposed recapitalization and would agree to that modification. With respect to the proposed transfer restriction agreement, the representative of Munger stated that, although Larry and Sergey did not concede that they were controlling stockholders of Google or that they were a group, for purposes of their counterproposal they were prepared to assume that they were both, and that based on that assumption it was Larry and Sergey’s position that (i) Eric and John should not be subject to the transfer restriction agreement because neither was a controlling stockholder or member of a group with Larry and Sergey; (ii) the transfer restriction agreement should terminate with respect to either Larry or Sergey when either would no longer be deemed to be a controlling stockholder, which would occur when: (a) Larry or Sergey owns securities representing less than 40% of our total outstanding voting power, provided that for purposes of determining if the 40% threshold had been met, Larry and Sergey’s voting power would be combined until such time as one of them was no longer serving as an officer or director of Google if at that time there was no agreement in place obligating them to act as a group, or until such time as a majority of our board of directors, excluding Larry and Sergey, determined that Larry and Sergey were not acting as a group; or (b) when a majority of our board of directors, excluding Larry and Sergey, determined that Larry or Sergey is not a controlling stockholder; (iii) the transfer restriction agreement should not prevent Larry and Sergey from
transferring shares of Class B common stock between themselves pursuant to the provision already included in Google’s certificate of incorporation that exempted these transfers from the automatic conversion of shares of Class B common stock into Class A common stock upon transfer (we refer to this as a Founder-to-Founder Transfer) or to their affiliated entities (we refer to this as a Founder-to-Affiliated Entity Transfer) without having to transfer an equal number of shares of Class C capital stock; and (iv) an amendment or waiver of the transfer restriction agreement should be permitted with the approval of a majority of our board of directors, excluding Larry and Sergey.
Later on November 23, 2011, a representative of Munger delivered to a representative of Latham an outline of Larry and Sergey’s response to the Special Committee’s proposed modifications.
On November 28, 2011, a representative of Latham delivered the outline of Larry and Sergey’s response to the members of the Special Committee.
On November 30, 2011, a representative of Latham called a representative of Munger to further discuss and clarify the positions set forth in the outline.
On December 9, 2011, representatives of Latham delivered to representatives of Wilson Sonsini a draft of the New Charter. From that time until the approval of the New Charter by our board of directors, representatives of Wilson Sonsini, Potter Anderson, Latham, and Richards, Layton & Finger, P.A., the Special Committee’s special Delaware counsel (Richards Layton), reviewed and revised the New Charter.
On December 16, 2011, the Special Committee met to discuss Larry and Sergey’s responses to the Special Committee’s modifications to the recapitalization proposal. In attendance at the meeting were all of the committee members and representatives of Perella and Latham. The Special Committee and its advisors reviewed and discussed the responses received from Larry and Sergey and a variety of other matters with respect to the recapitalization proposal. As part of that discussion, representatives of Latham reported that in order to better ensure the operation of the Equal Treatment Provision, the transfer restriction agreement would need to be revised to include a provision prohibiting sales by a party to that agreement of shares of Class B common stock, Class A common stock or Class C capital stock in a transaction related to a sale of Google for consideration different than that to be received by Google’s other stockholders. At the conclusion of the discussion, the Special Committee requested that its advisors engage in discussions with representatives of Munger to better understand certain elements of the response from Larry and Sergey. Representatives of Latham then reviewed with the Special Committee issues related to the New Charter, including the absence of a provision making shares of Class A common stock convertible at the option of the holder into shares of Class C capital stock, as well as NASDAQ’s policy against such a convertibility feature, the rationale for that policy and the likelihood of receiving an exemption from NASDAQ’s policy. The Special Committee and its advisors also discussed the relative trading prices that are observed when a company has two classes of publicly traded stock and various factors that affect those relative prices.
On January 13, 2012, representatives of Latham and Richards Layton met by telephonic conference with representatives of Munger to discuss Larry and Sergey’s responses to the Special Committee’s modifications to the recapitalization proposal, including the Special Committee’s concerns with certain elements of those responses, and in particular (i) the proposed Founder-to-Founder Transfer exception to the Stapling Provisions; (ii) the provisions relating to the termination of the transfer restriction agreement; and (iii) the proposed parties to the transfer restriction agreement. David and other members of Google’s legal department and representatives of Wilson Sonsini were present for this discussion. At the conclusion of this discussion, it was agreed that the parties should consider the views expressed on behalf of the Special Committee, on the one hand, and Larry and Sergey, on the other hand, in an effort to see if a resolution of the differences could be reached.
On January 16, 2012, representatives of Latham discussed with Ann the substance of the conversation on January 13, 2012 and potential next steps.
On January 17, 2012, Ann met with Larry to discuss the Special Committee’s evaluation of the proposed recapitalization.
On January 18, 2012, during a portion of a regularly-scheduled meeting of our board of directors, members of the Special Committee provided an update to the independent members of our board of directors regarding the status of the Special Committee’s consideration of the proposed recapitalization.
On February 24, 2012, representatives of Latham delivered to representatives of Munger a draft of the New Charter and a draft of the portion of the Equal Treatment Provision to be included in the transfer restriction agreement.
On February 28, 2012, representatives of Perella, Latham, and Richards Layton met in person at Google’s offices with representatives of Munger and Paul, Weiss, Rifkind, Wharton & Garrison LLP (Paul, Weiss), special Delaware counsel to Larry and Sergey, to discuss the responses of Larry and Sergey to the transfer restriction agreement and the Equal Treatment Provision proposed by the Special Committee. David and other members of Google’s legal department and representatives of Wilson Sonsini were present for this discussion. The parties discussed, among other matters, the proposed Founder-to-Founder Transfer exception to the Stapling Provisions, the provisions relating to the termination of the transfer restriction agreement, and the proposed parties to the transfer restriction agreement. During this discussion, it was generally agreed, subject to approval by the Special Committee, on the one hand, and Larry and Sergey, on the other hand, that (i) John Doerr would not be asked to enter into a transfer restriction agreement given his relatively small ownership of shares of Class B common stock and lack of management role at Google, but that Eric would be consulted about becoming a party to the transfer restriction agreement given his more significant ownership of shares of Class B common stock and management role at Google; (ii) the Founder-to-Affiliated Entity transfer exemption to the Stapling Provisions would be acceptable so long as a founder and his affiliated entities, in the aggregate, at no time held a number of shares of Class B common stock greater than the number of shares of Class C capital stock; and (iii) shares of Class A common stock would not be convertible into shares of Class C capital stock.
On February 29, 2012, representatives of Perella and Latham met with Ann to discuss a variety of matters, including the prior day’s conversation with the advisors to Larry and Sergey.
On March 5, 2012, representatives of Munger discussed with representatives of Latham and Perella, and on March 6, 2012, a representative of Munger again discussed with a representative of Latham, the basis upon which Larry and Sergey would be prepared to support the recapitalization proposal, which included (i) dropping their request for a Founder-to-Founder Transfer exemption to the Stapling Provisions; (ii) reducing from 40% to 35% the threshold of our total outstanding voting power possessed by either Larry or Sergey (and their respective affiliated entities) below which the Stapling Provisions would terminate, provided that for purposes of determining if the 35% threshold had been met, Larry and Sergey’s voting power would be combined only until such time as one of them was no longer serving as an officer or director of Google, provided that at such time there was no agreement in place obligating them to act as a group; and (iii) providing that the transfer restriction agreement could be amended or waived with the approval of a majority of our board of directors, excluding Larry and Sergey. Representatives of Munger indicated that Larry and Sergey would not be supportive of a proposal that did not include all of the elements described above.
On March 7, 2012, the Special Committee met to discuss the status of negotiations with Larry and Sergey’s advisors. In attendance at the meeting were all of the committee members and representatives of Perella, Latham, and Richards Layton. The meeting commenced with representatives of Latham reviewing certain legal matters with the Special Committee. Representatives of Latham then reviewed with the Special Committee the series of meetings with Larry and Sergey’s advisors that had taken place since the Special Committee’s last meeting, and the status of the negotiations, including various open points. The Special Committee and its advisors discussed the principal unresolved issues and potential alternatives and responses to those issues. At the conclusion of the discussion, the Special Committee instructed its advisors to inform Larry and Sergey’s advisors that the Special
Committee would be prepared to support a termination of the Stapling Provisions when the aggregate voting power of Larry, Sergey and their affiliated entities was less than 30% of our total outstanding voting power, which we refer to as the Ownership Threshold, but that for purpose of calculating the Ownership Threshold, the voting power of Larry, Sergey, and their affiliated entities would be aggregated without regard to whether Larry and Sergey both continued to be officers or directors of Google, which we refer to as the Aggregation Principle. Representatives of Perella then reviewed with the Special Committee potential market reactions to the announcement of the recapitalization. Representatives of Latham then reviewed with the Special Committee the New Charter, specifically identifying that shares of Class A common stock would not be convertible into shares of Class C capital stock.
On March 8, 2012, a representative of Latham called a representative of Munger to relay the Special Committee’s determination. Later that day, a representative of Latham sent to a representative of Munger a revised outline of the transfer restriction agreement setting forth the Special Committee’s position on all of the issues that had been raised by Larry and Sergey.
On March 14, 2012, representatives of Munger contacted representatives of Latham and Perella to indicate that Larry and Sergey were disappointed with the Special Committee’s response and that it was not clear to the representatives of Munger if there was a way forward given the parties’ positions. Representatives of Munger indicated that of the two issues, the Aggregation Principle was the more important issue to Larry and Sergey. During the course of this discussion, the representatives of Munger requested that the Special Committee reconsider their position, and indicated that Larry and Sergey would do likewise.
On March 15, 2012, representatives of Latham and Perella discussed with Ann the conversation with representatives of Munger, as well as potential responses.
On March 22, 2012, the Special Committee met to discuss the status of negotiations with Larry and Sergey’s advisors. In attendance at the meeting were all of the committee members and representatives of Perella, Latham, and Richards Layton. Latham reviewed with the Special Committee the discussions that had taken place since the Special Committee’s last meeting, that Larry and Sergey had not changed their position with respect to either the Ownership Threshold or the Aggregation Principle, and that Larry and Sergey’s advisors had requested that the Special Committee reconsider its position on those issues. Representatives of Latham and Perella reviewed with the Special Committee the differences between the Special Committee’s position and those of Larry and Sergey. The Special Committee and its advisors discussed these matters, and at the conclusion of that discussion the Special Committee determined not to change its position on the Ownership Threshold or the Aggregation Principle. The committee members requested that Paul meet with Larry to communicate the Special Committee’s determination.
On March 30, 2012, Paul and Larry met to discuss the remaining issues with respect to the proposed recapitalization. After a discussion, no resolution was reached, but Paul and Larry agreed that the advisors to the Special Committee should make a presentation to Larry explaining the Special Committee’s position, and that the advisors to Larry and Sergey should make a presentation to the Special Committee explaining Larry and Sergey’s position.
On April 3, 2012, representatives of Perella, Latham, and Richards Layton presented the Special Committee’s position on the remaining issues to Larry. Also in attendance were David, representatives of Munger and William V. Campbell, an advisor to our board of directors and its committees.
On April 4, 2012, representatives of Munger and Paul, Weiss presented Larry and Sergey’s position on the remaining issues to the Special Committee. Also in attendance were representatives of Richards Layton.
On April 8, 2012, Larry contacted Ram and Paul to indicate that he was prepared to concede the Aggregation Principle if the Special Committee would be prepared to accept an Ownership Threshold of 35% instead of the
Special Committee’s proposal of 30%. On April 9, 2012, Larry contacted Ann to make the same proposal. Ann indicated that she would be prepared to support that resolution, but with an Ownership Threshold below 35%. Larry and Ann agreed to support an Ownership Threshold of 34%.
On April 8, 2012, representatives of Latham delivered to representatives of Wilson Sonsini a draft transfer restriction agreement that was based on the outline previously delivered to Munger on March 8, 2012, revised to reflect the resolutions of the issues since that time. Representatives of Latham delivered the draft to representatives of Munger on April 9, 2012. From April 8, 2012 through the morning of April 11, 2012, representatives of Latham, Munger, Wilson Sonsini, and Potter Anderson negotiated and finalized the form of transfer restriction agreement.
On April 9, 2012, our board of directors held a special meeting to consider the proposed recapitalization. In attendance at the meeting were all of the directors (other than Paul), David and other members of Google’s legal department, and representatives of Latham, Perella, Wilson Sonsini and Potter Anderson. Representatives of Munger and Paul, Weiss were also in attendance, although they did not substantively participate in the discussion. During this meeting, members of the Special Committee provided an update to our board of directors regarding the status of the Special Committee’s consideration of the proposed recapitalization. Representatives of Wilson Sonsini provided our board of directors with an overview of Google’s current capital structure and of the capital structure that would be effected by the proposed recapitalization, including the Stapling Provisions and the Equal Treatment Provision. Our board of directors discussed the purposes of the recapitalization and Google’s focus on the long term in its operational, management and strategic initiatives with a view toward enhancing stockholder returns over the long term. Representatives of Wilson Sonsini also reviewed with our board of directors a number of legal matters related to the proposed recapitalization, including (i) potential use of Class C capital stock in mergers and acquisitions; (ii) the stockholder vote required to approve a recapitalization; (iii) the implications of effecting the proposed recapitalization by means of a stock dividend; and (iv) the planned listing of the Class C capital stock on NASDAQ. The fiduciary duties of the members of our board of directors applicable in this context, and the role of the Special Committee in evaluating the proposed recapitalization, were also reviewed with our board of directors by representatives of Wilson Sonsini. Representatives of Perella then further detailed the Special Committee’s process and considerations in assessing the proposed recapitalization, including the extension of the potential time horizon of founder control of a majority of our total outstanding voting power through implementation of the proposed recapitalization and the use of the shares of Class C capital stock for stock-based acquisitions and equity-based employee compensation. Members of our board of directors inquired as to a number of aspects of the proposed recapitalization that had been significant areas of negotiation between the Special Committee, on the one hand, and Larry and Sergey, on the other hand, including the Stapling Provisions and the Equal Treatment Provision, as well as with respect to alternatives to the proposed recapitalization. Our board of directors and representatives of Perella, Latham, and Wilson Sonsini discussed the effect of the Stapling Provisions in preserving voting power in Larry, Sergey, and Eric while restricting their ability to gain additional liquidity through sales of the Class C capital stock. Representatives of Perella also provided an overview of other companies with multiple classes of publicly traded stock, stock performance, and trading following certain other recapitalizations, and relative trading prices between dual classes of common stock of other companies that had similar capital structures to that contemplated by the proposed recapitalization. Representatives of Perella also reviewed the potential market reaction to such a recapitalization. Representatives of Wilson Sonsini then further reviewed with our board of directors a number of legal matters related to a potential recapitalization and the board’s evaluation of such a recapitalization in the event that there was a subsequent recommendation of the recapitalization by the Special Committee to our board of directors. The requirements for a unanimous board approval and subsequent timing of a stockholder approval of the proposed recapitalization in the event that the Special Committee were to recommend its adoption were also discussed. Following this discussion, representatives of Latham indicated that the Special Committee planned to hold an additional meeting in connection with the regular meeting of our board of directors scheduled for April 11, 2012 with a view toward the Special Committee making a recommendation to our board of directors regarding the proposed recapitalization at that time.
On April 11, 2012, the Special Committee met to consider whether or not to recommend the proposed recapitalization. In attendance were all of the committee members and representatives of Perella and Latham. Latham reviewed with the Special Committee the status of the discussions with Larry, Sergey, and Eric, and reviewed with the Special Committee the final form of transfer restriction agreement and the final form of the New Charter. Perella reviewed with the Special Committee potential market reaction to the announcement of the proposed recapitalization. Following a discussion, the Special Committee unanimously adopted resolutions in which it (i) determined that the Recapitalization and the potential Dividend were advisable and in the best interests of Google and its stockholders, other than Larry, Sergey, Eric, and their respective affiliated entities as to which the Special Committee made no determination; (ii) recommended that our board of directors adopt resolutions approving the New Charter and the other elements of the Recapitalization and the potential Dividend, including the Transfer Restriction Agreements; and (iii) subject to necessary stockholder approval and the execution of the Transfer Restriction Agreements by Larry, Sergey, Eric, and their respective affiliated entities, recommended that our board of directors proceed with the Recapitalization and the potential Dividend.
Later on April 11, 2012, during a regularly-scheduled meeting of our board of directors, our board of directors considered the Recapitalization. In attendance at the meeting were all of the directors, David and other members of Google’s legal department, and representatives of Latham, Perella, and Wilson Sonsini. The Special Committee reported to our board of directors that earlier that day it had unanimously (i) determined that the Recapitalization and the potential Dividend were advisable and in the best interests of Google and its stockholders, other than Larry, Sergey, Eric, and their respective affiliated entities as to which the Special Committee made no determination; (ii) recommended that our board of directors adopt resolutions approving the New Charter and the other elements of the Recapitalization and the potential Dividend, including the Transfer Restriction Agreements; and (iii) subject to necessary stockholder approval and the execution of the Transfer Restriction Agreements, recommended that our board of directors proceed with the Recapitalization and the potential Dividend. Representatives of Perella then addressed for our board of directors potential market reaction to the announcement of the Recapitalization and the potential Dividend. Google management discussed plans for communicating the Recapitalization and the potential Dividend to various constituencies, and our board of directors asked questions about the Recapitalization, the potential Dividend, and the communication plans. At the end of the discussion, the board of directors, among other things, unanimously declared that the Recapitalization and the potential Dividend are advisable and in the best interests of Google and its stockholders (other than the stockholders who will enter into the Transfer Restriction Agreements, as to whom no determination was made), approved and declared advisable the New Charter, expressed an intention to convene promptly following the Effective Date (subject to execution of the Transfer Restriction Agreements) to consider the declaration of the Dividend, approved the form of Transfer Restriction Agreement, authorized and directed Google’s officers to solicit and obtain the approval of the adoption of the New Charter by Google’s stockholders, and recommended that Google’s stockholders approve the adoption of the New Charter.
On April 12, 2012, we announced the Recapitalization and the potential Dividend in connection with the announcement of our earnings for the first quarter of 2012.
Reasons for the Recapitalization
The Special Committee and our board of directors believe that the Recapitalization and the potential declaration and payment of the Dividend are advisable and in our best interests, and in the best interests of our stockholders (other than the stockholders who will enter into Transfer Restriction Agreements, as to whom no determination is made). Our board of directors unanimously recommends a vote “FOR” the approval of the adoption of the New Charter. The Special Committee and our board of directors believe that the potential advantages of the Recapitalization and the Dividend, if it is declared and paid, include, but are not limited to, the following.
The following discussion of factors considered by the Special Committee and our board of directors is not intended to be exhaustive, but includes the material factors considered by the Special Committee and our board of directors in deciding to proceed with the Recapitalization and the Dividend, if it is declared and paid. In light of the
variety of factors considered, neither the Special Committee nor our board of directors found it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching their respective determinations and recommendations.
Enhance Google’s Ability to Focus on the Long Term
Since our inception, Google’s management team has focused on and prioritized long-term goals. This focus was highlighted by Larry and Sergey in the 2004 Founders’ IPO Letter at the time of our initial public offering. In that letter, Larry and Sergey explained that Google did not want its transition from a private company to a public company to change its focus from the long term. We wanted to remain an unconventional company not focused on short-term results and always willing to invest for the long term on promising new opportunities. As Larry explained in the 2004 Founders’ IPO Letter, our dual-class structure was designed to facilitate this:
We are creating a corporate structure that is designed for stability over long time horizons. By investing in Google, you are placing an unusual long-term bet on the team, especially Sergey and me, and on our innovative approach.
This corporate governance structure, which is premised on continued voting control by holders of shares of Class B common stock, particularly Larry and Sergey, has enabled us to continue to innovate and invest for the long term while maintaining our focus on the long-term best interests of all of our stockholders. The Special Committee and our board of directors believe that this ability to focus on the long term has generated, and will continue to generate, substantial benefits for all of our stockholders and has been an important competitive advantage. A focus on the long term is critical in an industry like ours, where enduring success depends in large part on identifying and executing against long-term trends in technology, innovation, and consumer preferences and behavior. Our corporate governance structure has also helped to insulate us from short-term pressure and outside influences that could distract our management team from its long-term vision and objectives.
For example, in 2005 we purchased Android and started investing in developing its mobile operating system. To spur widespread adoption we made the Android mobile operating system open-source, a decision that was not conventional but was one that embodied our goal of foregoing short-term gains in favor of long-term results. We could have licensed the Android mobile operating system and earned ongoing fees, but we thought that it would be much more valuable as a widely-adopted mobile operating system. This decision is paying off. It has been only four years since Android’s first public launch, and we believe that it is now the most widely-adopted mobile operating system in the world, with more than 300 million Android devices activated worldwide—and more than 850,000 devices now on average activated every day—through a network of approximately 58 manufacturers and 329 carriers in 169 countries.
The Special Committee and our board of directors strongly believe that our founders’ original vision with respect to Google’s governance structure has been validated by our financial results and track record of innovation and growing new businesses. The Recapitalization and the Dividend, if it is declared and paid, will enhance our ability to maintain that structure, but will not change our longstanding commitment to good corporate governance. We are, for example, committed to a board of directors that is comprised of a majority of independent directors who bring significant industry experience and judgment to the exercise of their fiduciary duties. The Recapitalization will have no impact on our board’s ability or obligation to continue to act in the best interests of all of our stockholders.
The Recapitalization and the Dividend, if it is declared and paid, provide us with the ability to prolong the period of time during which our existing stockholders, particularly Larry and Sergey, maintain voting control over Google. The Recapitalization and the Dividend, if it is declared and paid, by themselves will not prolong Larry and Sergey’s control over Google. It is the ability to issue shares of Class C capital stock in the future—instead of shares of Class A common stock—and thereby minimize voting dilution from such issuances that could have the effect of prolonging Larry and Sergey’s control over Google. As of the Record Date, Larry and Sergey beneficially owned 51,941,440 shares of Class A common stock and Class B common stock, representing 56.4% of our total
outstanding voting power. Over time, this percentage may increase as other holders of shares of Class B common stock convert their holdings into shares of Class A common stock in order to achieve liquidity; indeed, this has occurred since Google has been a public company. In addition, as of the Record Date, Eric beneficially owned 8,861,413 shares of Class A common stock and Class B common stock, representing 9.5% of our total outstanding voting power. Without the ability to issue shares of Class C capital stock, additional issuances of shares of Class A common stock would result in Larry and Sergey holding less than a majority of our outstanding voting power at some point in the future. The Special Committee and our board of directors believe that the Recapitalization and the Dividend, if it is declared and paid, are appropriate ways to make it more likely that Larry and Sergey will remain in a position to influence our direction for many years, which influence the Special Committee and our board of directors believe has been beneficial to our growth, strategy, and autonomy. The ability to issue shares of Class C capital stock will not result in the permanent extension of Larry and Sergey’s voting control of Google—both will still lose voting power when they sell or transfer shares of Class B common stock, which they do from time to time, or when Google issues additional shares of Class A common stock, which it may choose to do from time to time—but the Recapitalization helps to make it more likely that Larry and Sergey remain in a position to influence Google’s direction for many years.
Better Manage Future Potential Voting Dilution
At Google, our Class A common stock has been an important tool for stock-based acquisitions and equity-based employee compensation. But issuances of shares of Class A common stock come at a cost: they dilute the economic and voting interests of all of our stockholders. The economic dilution can be managed by endeavoring to receive value commensurate with the stock that we issue, but the voting dilution cannot be managed. Voting dilution is particularly acute at Google because it will eventually result in Larry and Sergey holding less than a majority of our outstanding voting power. In the view of the Special Committee and our board of directors, Larry and Sergey’s influence—in part through voting control—has been an important element of our success. We currently have several ways to manage voting dilution to the extent that our board of directors deems it appropriate, including using cash to finance acquisitions, repurchasing shares of Class A common stock in the market and granting cash-settled equity incentives. Each of these ways of managing voting dilution, however, requires us to expend cash, which we presently believe is better used by reinvesting in the growth of our business, including through acquisitions. The Special Committee and our board of directors believe that the ability to issue shares of Class C capital stock following the Recapitalization will provide our board of directors with a significant new tool to manage voting dilution without requiring us to use cash.
Google has been, and expects to continue to be, an active acquirer of complementary companies, technologies, and other assets as a means to fuel growth and innovation in our businesses. Historically, we have generally used cash to fund our acquisitions, including in connection with our acquisition of Motorola Mobility, but we have used shares of Class A common stock from time to time. The Special Committee and our board of directors believe that the Class C capital stock will provide us with an attractive additional currency for acquisitions that is free of the voting dilution associated with issuances of additional shares of Class A common stock. Although it is true that the use of stock (even Class C capital stock) as currency may cause economic dilution to existing stockholders, the Special Committee and our board of directors believe that the ability to offer stock consideration that better manages voting dilution provides us with important additional flexibility, particularly in today’s valuation environment for technology companies. Of course, we can continue to issue shares of Class A common stock in connection with acquisitions if it makes sense to do so.
Although we are not currently contemplating any acquisitions for which we would expect to use shares of Class C capital stock as consideration, the Special Committee and our board of directors believe that it is desirable to implement the Recapitalization now so as to position Google to take advantage of the additional flexibility it provides when opportunities arise. By implementing the Recapitalization at this time, and assuming that the Dividend is declared and paid and that the shares of Class C capital stock are listed on NASDAQ, we expect that a sufficiently liquid market for the shares of Class C capital stock will develop, which we believe will make the Class C capital stock an attractive acquisition currency.
The Recapitalization and the Dividend, if it is declared and paid, also provide us with the flexibility to manage more effectively the voting dilution that arises from our compensation programs, which rely substantially on equity incentives. At Google, we have always believed in rewarding our employees for their contributions, and we want them to benefit from the value that they are helping to create. Equity incentives have been, and will continue to be, an important part of our compensation practices. But, as with acquisitions, the issuance of shares of Class A common stock for equity incentives results in voting dilution, and that dilution ultimately diminishes Larry and Sergey’s influence over Google. The use of shares of Class C capital stock for future equity incentives provides Google with a way to mitigate the voting dilution impact of our compensation programs while continuing to have an attractive equity tool to recruit and retain talent.
Provide for the Treatment of Shares of Class A Common Stock in a Manner That Is at Least as Favorable as Shares of Class B Common Stock, and Provide for the Equal Treatment of Shares of Class C Capital Stock in Relation to Shares of Class A Common Stock
The Recapitalization will specify the treatment of shares of Class A common stock in a manner that is at least as favorable as shares of Class B common stock in connection with fundamental transactions involving Google. For example, pursuant to the Existing Charter, a third party could initiate a tender or exchange offer pursuant to which it would agree to pay more for shares of Class B common stock than for shares of Class A common stock (even though the shares of Class B common stock that such third party acquired would be converted into shares of Class A common stock upon their transfer). Following the approval of the adoption of the New Charter, this would not be permitted in any transaction to which Google is a party, and in connection with such a tender or exchange offer provision must be made for the right of holders of shares of Class A common stock to receive, or elect to receive, the same form of consideration and at least the same amount of consideration on a per share basis as the holders of shares of Class B common stock. Comparable equal treatment will be specified in connection with a merger, consolidation, or other business combination requiring the approval of our shareholders or a tender or exchange offer initiated by Google on its own behalf. There is no prohibition on the holders of shares of Class A common stock (and therefore the holders of shares of Class C capital stock as described below) receiving more consideration than the holders of shares of Class B common stock in such transactions.
The Recapitalization will provide for equal treatment of the shares of Class C capital stock in relation to shares of Class A common stock. For example, in a tender or exchange offer by a third party and to which Google is a party, provision must be made for the right of holders of shares of Class C capital stock to receive, or elect to receive, the same form of consideration and amount of consideration on a per share basis as the holders of shares of Class A common stock (and if the holders of shares of Class A common stock are entitled to make an election as to the amount or form of consideration that such holders shall receive in such tender or exchange offer, then the holders of shares of Class C capital stock shall be entitled to make the same election as to their shares of Class C capital stock). Comparable equal treatment will be provided in connection with a merger, consolidation, or other business combination requiring the approval of our shareholders or a tender or exchange offer initiated by Google on its own behalf.
Separately, as part of the Transfer Restriction Agreements, Larry, Sergey, and Eric have agreed to refrain from participating in certain transactions that would result in some stockholders being treated differently from others. For example, in connection with any tender offer by a third party to acquire a majority of the shares of Class A common stock, Class B common stock, or Class C capital stock, Larry, Sergey, and Eric have agreed that (i) with respect to their shares of Class A common stock or Class B common stock, they will not sell such shares for an amount per share greater than the holders of shares of Class A common stock would receive in such transaction; and (ii) with respect to their shares of Class C capital stock, they will not sell such shares for an amount per share greater than the holders of shares of Class C capital stock would receive in such transaction. See “Transfer Restriction Agreements” below.
The Special Committee and our board of directors believe that these provisions related to the treatment of shares of Class A common stock and Class C capital stock provide important protection to all of our stockholders and help to ensure that all stockholders will be on an equal footing in connection with fundamental transactions involving Google.
Facilitate Management of Google with the Advantages of a Startup Company
We operate in a highly competitive industry that has experienced rapid change as a result of, among other things, disruption from new competitors, technologies, and products. To maintain our competitive position, Google must continue to have the agility of a fast growing startup company. Because it will enhance Google’s ability to preserve its existing governance structure over time, the Recapitalization will facilitate our ability to act quickly and decisively to seize opportunities for growth and innovation, even if those opportunities may not yield immediate financial results or may have near-term adverse effects on our stock price.
Potential Negative Consequences of the Recapitalization
Although the Special Committee and our board of directors each unanimously determined that the Recapitalization and the potential declaration and payment of the Dividend are advisable and in our best interests, and in the best interests of our stockholders (other than the stockholders who will enter into Transfer Restriction Agreements, as to whom no determination is made), the Special Committee and the board of directors recognize that proceeding with the Recapitalization and the Dividend, if it is declared and paid, involve certain other considerations that, in isolation, may be viewed as negative. These considerations include, but are not limited to, the following:
The Recapitalization and the Dividend, If it is Declared and Paid, Could Prolong the Period of Time During Which Larry and Sergey Can Exercise a Controlling Influence on Most Corporate Matters
Larry and Sergey currently have the ability to elect all of our directors and to determine the outcome of most matters submitted for a vote of our stockholders. This will not change following the Recapitalization or the potential Dividend. This concentration of voting control in Larry and Sergey limits the ability of all of our stockholders (whether they hold shares of Class A common stock or Class B common stock) other than Larry and Sergey to influence corporate matters.
One of the principal purposes of the Recapitalization and the Dividend, if it is declared and paid, is to create the Class C capital stock, which can then be used to raise equity capital, finance stock-based acquisitions or fund employee equity incentive programs. In the past, we issued shares of Class A common stock for such purposes, and over time the issuance of additional shares of Class A common stock will result in voting dilution to all of our stockholders. This dilution will eventually result in Larry and Sergey owning less than a majority of our total outstanding voting power, although their ownership interest in Google would continue to be substantial. Once Larry and Sergey own less than a majority of our total outstanding voting power, they would no longer have the unilateral ability to elect all of our directors and to determine the outcome of any matter submitted for a vote of our stockholders. Because the shares of Class C capital stock have no voting rights (except as required by law), the issuance of such shares will not result in further voting dilution. As a result, the issuance of shares of Class C capital stock could prolong the duration of Larry and Sergey’s current relative ownership of our voting power and their ability to elect all of our directors and to determine the outcome of most matters submitted to a vote of our stockholders.
The Recapitalization and the Dividend, If It Is Declared and Paid, May Have an Anti-Takeover Effect
Because the Recapitalization and the Dividend, if it is declared and paid, may prolong the duration of Larry and Sergey’s ability to determine the outcome of most matters submitted to a vote of our stockholders, they may have the effect of limiting the likelihood of an unsolicited merger proposal, unsolicited tender offer or proxy contest for the removal of directors. As a result, the Recapitalization and the Dividend, if it is declared and paid, may have the effect of depriving our stockholders of an opportunity to sell their shares at a premium over prevailing market prices and make it more difficult to replace our directors and management.
As discussed above, Larry and Sergey currently have, and following the Recapitalization and the Dividend, if it is declared and paid, will continue to have, the voting power required to decide the outcome of most matters submitted for a vote of our stockholders. The New Charter will preserve the requirement in the Existing Charter
that, in connection with certain change in control transactions involving Google (including an acquisition of Google by another company), approval of the transaction also requires the favorable vote of at least 60% of the voting power of the shares of Google’s capital stock present in person or represented by proxy at the stockholder meeting called to consider the transaction. If Larry and Sergey’s ownership is aggregated with that of Eric, who as of the Record Date beneficially owned 8,861,413 shares of Class A common stock and Class B common stock, representing 9.5% of our total outstanding voting power, Larry, Sergey, and Eric would be able to control the result of that vote.
In addition, the Existing Charter contains certain provisions that may have an “anti-takeover” effect. The Existing Charter contains authority for our board of directors to issue up to 100,000,000 shares of preferred stock without stockholder approval. Although our board of directors has no present intention to issue any such shares, the board could issue such shares in a manner that deters or seeks to prevent an unsolicited bid for Google. The Existing Charter also does not provide for cumulative voting and, accordingly, a significant minority stockholder could not necessarily elect any designee to our board of directors. The New Charter will contain those same terms.
Our board of directors is not aware of any bona fide offer by any person or group, including Larry or Sergey, to (i) acquire any significant amount of shares of Class A common stock or Class B common stock; (ii) acquire control of Google by means of a merger, tender offer, solicitation in opposition to management or otherwise; or (iii) change our current board of directors or management.
Class C Capital Stock May Not be Attractive as Acquisition Currency or for Equity Incentives
We may use shares of Class C capital stock from time to time as consideration in connection with the acquisition of other companies. It is possible that companies that we are interested in acquiring will not agree to accept shares of Class C capital stock because such shares of stock carry no voting rights. In that instance, if we still wanted to pay for the acquisition with stock consideration, we would have to issue shares of Class A common stock, which would result in both economic and voting dilution to all stockholders. Companies that we are interested in acquiring may also refuse to accept shares of Class C capital stock if such stock trades at a significant discount to the shares of Class A common stock or if the trading market for the shares of Class C capital stock is not well-developed or suffers from limited liquidity.
Employees may not wish to receive shares of Class C capital stock in connection with equity incentives. This is particularly true if the shares of Class C capital stock trade at a significant discount to the shares of Class A common stock or if the trading market for the shares of Class C capital stock is not well-developed or suffers from limited liquidity. If employees are not adequately incentivized by receiving shares of Class C capital stock, then we might have to issue shares of Class A common stock in order to provide sufficient equity incentives, which would result in both economic and voting dilution to all stockholders. Alternatively, we might have to find other ways to incentivize our employees.
If the Class C capital stock trades at a discount to the Class A common stock, companies that we are interested in acquiring may demand more shares of Class C capital stock in exchange for accepting such stock as consideration. The same is true for employees in connection with equity incentives. If this occurs, then issuances of Class C capital stock may ultimately be more economically dilutive to all of our stockholders than issuances of Class A common stock.
A Liquid Trading Market for the Class C Capital Stock May Not Develop
We believe that a robust and sufficiently liquid market for the Class C capital stock will develop following the Dividend, if it is declared and paid. However, it is possible that such a market will not develop. Even if such a market does develop, there can be no assurance that the Class C capital stock will not trade at a discount to the Class A common stock. If a liquid market does not develop or the Class C capital stock trades at a discount to the Class A common stock, it is possible that we will not be able to achieve all of the benefits that we anticipate from the issuance of the Class C capital stock.
The Recapitalization and the Dividend, If It Is Declared and Paid, May Negatively Affect the Decision of Institutional Investors to Invest in Google, and Could Have Implications for the Inclusion of Shares of Class A Common Stock or Class C Capital Stock in Certain Stock Indices
The Recapitalization and the Dividend, if it is declared and paid, may negatively affect the decision by certain institutional investors to purchase or hold shares of Class A common stock or Class C capital stock. The holding of low- or non-voting stock, such as the Class A common stock or Class C capital stock, may not be permitted by the investment policies of certain institutional investors or may be less attractive to the portfolio managers of certain institutional investors. In addition, significant sales of shares of Class C capital stock by investors who receive such shares as part of the Dividend, if it is declared and paid, may occur if such investors are unwilling, unable or choose not to hold such shares. These sales could depress trading prices for the Class C capital stock, particularly in the period immediately following the Dividend, if it is declared and paid.
The Class A common stock is currently included in certain stock indices, and we expect that the managers of investment funds whose trading is tied to those stock indices may rebalance their holdings to reflect the change in the value of the Class A common stock following the Dividend, if it is declared and paid. Whether the Class C capital stock is included in stock indices in the future may also affect trading prices for that stock. For example, it is possible that certain stock indices may only include the Class A common stock, which may tend to reduce the liquidity of the Class C capital stock.
The Use of Shares of Class C Capital Stock as Acquisition Currency May Not Allow For Deferred Tax Treatment
Throughout its history, Google has been an active acquirer of other companies. Occasionally, it has used stock as consideration to fund these acquisitions. The use of stock as acquisition currency generally has the benefit of deferring taxes owed by the sellers in connection with the acquisition until such time as the sellers dispose of the stock received in the acquisition. However, in order for certain types of acquisition structures to qualify for this type of deferred tax treatment, the stock used as consideration must be “voting stock” within the meaning of Section 368(a) of the Code. Because the shares of Class C capital stock do not have voting rights (except as required by law), they will not qualify as “voting stock” and their use in connection with certain acquisition structures will not result in deferred tax treatment for the sellers in the acquisition. Sellers may have a preference for a transaction in which they can defer taxes owed, in which case Google may have to structure the acquisition in a different manner or may be precluded from using shares of Class C capital stock to fund the acquisition. Either of these outcomes could reduce the overall utility of the Class C capital stock as a means of managing voting dilution in connection with stock-based acquisitions.
Potential U.S. Federal Income Tax Consequences
We believe that the Class C capital stock will not constitute “Section 306 stock” within the meaning of Section 306(c) of the Code. However, if the Class C capital stock were determined to constitute Section 306 stock, a stockholder generally would be treated as realizing ordinary income as opposed to capital gain upon certain dispositions (including redemptions) of such Section 306 stock. The rules of Section 306 of the Code are complex, and each stockholder should consult with that stockholder’s own tax advisor regarding the tax consequences of the proposed transactions described in this proxy statement.
Required Vote
Approval of the adoption of the New Charter (comprising Proposal Numbers 3A, 3B, and 3C) requires the affirmative “FOR” vote of the holders of a majority of the voting power of the shares of (i) Class A common stock and Class B common stock outstanding as of the Record Date and entitled to vote thereon, voting together as a single class; and (ii) Class B common stock outstanding as of the Record Date and entitled to vote thereon, voting as a separate class. This vote will be taken in the manner set forth below. The approval of each of the proposals set forth below shall constitute the requisite approval of the adoption of the New Charter as required by Delaware law.
Proposal Number 3A—The Approval of the Adoption of Amendments to the Existing Charter to Establish the Class C Capital Stock and to Make Certain Clarifying Changes
The amendments to the Existing Charter contemplated by the New Charter would establish the Class C capital stock, with 3 billion shares authorized for issuance. The powers, preferences and rights and qualifications, limitations and restrictions of the shares of Class C capital stock are described elsewhere in this proxy statement. See “Description of Capital Stock” below. The amendments to the Existing Charter contemplated by the New Charter also contain certain other clarifying changes, including the requirement of certain approvals of our board of directors and our stockholders to amend or repeal the powers, preferences and rights and qualifications, limitations and restrictions of the shares of Class C capital stock.
Approval of Proposal Number 3A requires the affirmative “FOR” vote of the holders of a majority of the voting power of the shares of Class A common stock and Class B common stock outstanding as of the Record Date and entitled to vote thereon, voting together as a single class. Approval of Proposal Number 3A is cross-conditioned upon the approval by our stockholders of both Proposal Numbers 3B and 3C. If either or both of Proposal Numbers 3B or 3C is not approved, then Proposal Number 3A will fail regardless of whether it received enough affirmative votes to pass independently.
Proposal Number 3B—The Approval of the Adoption of Amendments to the Existing Charter to Increase the Number of Authorized Shares of Class A Common Stock From 6 Billion to 9 Billion
The amendments to the Existing Charter contemplated by the New Charter will increase the number of authorized shares of Class A common stock from 6 billion to 9 billion to accommodate the potential conversion of the shares of Class C capital stock into shares of Class A common stock in connection with a liquidation of Google. See “Description of Capital Stock—Liquidation Rights” below. Assuming that our board of directors declares and pays the Dividend, we will be required to reserve a sufficient number of shares of Class A common stock for the mandatory conversion of the shares of Class C capital stock into Class A common stock in connection with any liquidation of Google. Google may issue any authorized shares of Class A common stock that are not so reserved (or reserved for other purposes, such as the conversion of shares of Class B common stock into shares of Class A common stock), whether authorized pursuant to the transactions contemplated by this proxy statement or otherwise, for any purpose without the need for stockholder approval, except as required by applicable law or listing standards.
Approval of Proposal Number 3B requires the affirmative “FOR” vote of the holders of a majority of the voting power of the shares of Class A common stock and Class B common stock outstanding as of the Record Date and entitled to vote thereon, voting together as a single class. Approval of Proposal Number 3B is cross-conditioned upon the approval by our stockholders of both Proposal Numbers 3A and 3C. If either or both of Proposal Numbers 3A or 3C is not approved, then Proposal Number 3B will fail regardless of whether it received enough affirmative votes to pass independently.
Proposal Number 3C—The Approval of the Adoption of Amendments to the Existing Charter to Provide for the Treatment of Shares of Class A Common Stock in a Manner That Is at Least as Favorable as Shares of Class B Common Stock
The amendments to the Existing Charter contemplated by the New Charter will provide that in the event of any merger, consolidation, or other business combination requiring approval by Google’s stockholders, or any tender or exchange offer by a third party pursuant to an agreement to which Google is a party or by Google on its own behalf, the holders of shares of Class A common stock will be entitled to receive, or to elect to receive, the same form of consideration and at least the same amount of consideration on a per share basis as the holders of shares of Class B common stock. See “Description of Capital Stock—Equal Status” below.
Approval of Proposal Number 3C requires the affirmative “FOR” vote of the holders of a majority of the voting power of the shares of Class A common stock and Class B common stock outstanding as of the Record Date and
entitled to vote thereon, voting together as a single class. Approval of Proposal Number 3C is cross-conditioned upon the approval by our stockholders of both Proposal Numbers 3A and 3B. If either or both of Proposal Numbers 3A or 3B is not approved, then Proposal Number 3C will fail regardless of whether it received enough affirmative votes to pass independently.
Separate Vote of Class B Common Stock
Section 242 of the General Corporation Law of the State of Delaware entitles the holders of shares of Class B common stock to vote as a separate class on the approval of the adoption of the New Charter because the comparable treatment provisions for the shares of Class A common stock and Class B common stock in the New Charter, which will provide the holders of shares of Class A common stock with treatment that is at least as favorable as the shares of Class B common stock in connection with certain fundamental transactions involving Google, may have an adverse effect on the rights of the shares of Class B common stock as currently in effect in the Existing Charter. Accordingly, approval of the adoption of the New Charter (comprising Proposal Numbers 3A, 3B, and 3C) also requires the affirmative “FOR” vote of the holders of a majority of the voting power of the shares of Class B common stock outstanding as of the Record Date and entitled to vote thereon, voting as a separate class, on each of Proposal Numbers 3A, 3B, and 3C. The approval of each of the proposals comprising Proposal Number 3 by the holders of the shares of Class B common stock, voting as a separate class, shall constitute the requisite approval of the adoption of the New Charter by the holders of the shares of Class B common stock, voting as a separate class, as required by Delaware law.
Other Information
Unless your proxy card is marked to the contrary, your shares of Class A common stock or Class B common stock will be voted “FOR” the approval of the adoption of the New Charter, which means that they will be voted “FOR” each of Proposal Numbers 3A, 3B, and 3C.
As of the Record Date, Larry and Sergey beneficially owned 51,941,440 shares of Class A common stock and Class B common stock, representing 56.4% of our total outstanding voting power and 78.6% of the outstanding voting power of the shares of Class B common stock.As a result, Larry and Sergey will have the power to approve the adoption of the New Charter without the affirmative vote of any other stockholder. Both Larry and Sergey have indicated that they intend to vote all of the shares of Class A common stock and Class B common stock that they beneficially own “FOR” the approval of the adoption of the New Charter.
Stockholders will have no appraisal rights with respect to the adoption of the New Charter.
Google Recommendation
Our board of directors, after receiving the unanimous recommendation of the Special Committee, has unanimously determined that the Recapitalization (including the adoption of the New Charter) and the potential Dividend are advisable and in our best interests, and in the best interests of our stockholders (other than the stockholders who will enter into Transfer Restriction Agreements, as to whom no determination is made), and unanimously recommends a vote “FOR” the approval of the adoption of the New Charter.
Our board of directors recommends a vote “FOR” the approval of the adoption of the New Charter.
Transfer Restriction Agreements
In connection with the Recapitalization and the potential Dividend, the Special Committee has negotiated for Larry, Sergey, Eric, and certain of their respective affiliates to enter into the Transfer Restriction Agreements that are intended to limit the ability of Larry, Sergey, and Eric to sell their Google stock in a manner that does not reduce
their voting power. Pursuant to these agreements, none of Larry, Sergey, Eric, or certain of their respective affiliates that are party to the agreements (generally, trusts and other estate planning vehicles through which Larry, Sergey, and Eric hold all or a portion of their shares of Class A common stock and Class B common stock) may sell, assign, transfer, convey or hypothecate any shares of Class C capital stock if, as a result of such sale, transfer, conveyance or hypothecation, they, together with certain of their respective affiliates, would own more shares of Class B common stock than shares of Class C capital stock. If at any time either Larry, Sergey, or Eric, in each case together with certain of his respective affiliates, owns more shares of Class B common stock than shares of Class C capital stock, then Larry, Sergey, or Eric, as the case may be, and his respective affiliates, will be deemed to have automatically converted that number of shares of Class B common stock into shares of Class A common stock such that after such conversion he and his affiliates own an equal number of shares of Class B common stock as he and his affiliates own of shares of Class C capital stock.
Larry, Sergey, Eric, and certain of their respective affiliates that are party to the Transfer Restriction Agreements may transfer shares of Class B common stock to their affiliates as permitted by the terms of the New Charter (which terms are identical to those contained in the Existing Charter) only if, immediately following such transfer, Larry, Sergey, or Eric, as the case may be, and his respective affiliates, would own an aggregate number of shares of Class B common stock equal to or less than the number of shares of Class C capital stock that he and his affiliates own. Additionally, Larry, Sergey, Eric, and certain of their respective affiliates that are party to the Transfer Restriction Agreements may transfer shares of Class C capital stock to their affiliates only if, immediately following such transfer, Larry, Sergey, or Eric, as the case may be, and his respective affiliates, would own an aggregate number of shares of Class B common stock equal to or less than the number of shares of Class C capital stock that he and his affiliates own. However, each of Larry and Sergey and his respective affiliates that are party to the Transfer Restriction Agreements may not transfer shares of Class B common stock to another person in a transfer that does not result in the automatic conversion of such shares of Class B common stock into Class A common stock pursuant to the terms of the New Charter (which terms are identical to those contained in the Existing Charter) unless Larry or Sergey, as the case may be, and his respective affiliates, transfer, in the same manner and to the same extent, an equal number of shares of Class C capital stock to the transferee.
In the event of (i) any merger, consolidation, or other business combination requiring the approval of the holders of our capital stock (whether or not Google is the surviving entity), or the acquisition of all or substantially all of our assets; (ii) any tender or exchange offer by any third party to acquire a majority of the shares of Class A common stock, Class B common stock or Class C capital stock; or (iii) any tender or exchange offer by us to acquire any shares of Class A common stock, Class B common stock or Class C capital stock, none of Larry, Sergey, Eric, and certain of their respective affiliates that are party to the Transfer Restriction Agreements may sell, transfer or exchange, directly or indirectly, any shares of Class A common stock, Class B common stock or Class C capital stock in connection with such transaction or in a related transaction for (a) with respect to their shares of Class A common stock or Class B common stock, an amount per share greater than the holders of shares of Class A common stock receive in such transaction or a form of consideration different from the form that the holders of shares of Class A common stock would receive, or may elect to receive, in such transaction; or (b) with respect to their shares of Class C capital stock, an amount per share greater than the holders of shares of Class C capital stock receive in such transaction or a form of consideration different from the form that the holders of shares of Class C capital stock would receive, or may elect to receive, in such transaction. We refer to this provision of the Transfer Restriction Agreements as the Founder Equal Treatment Provision.
With respect to Larry, Sergey, and certain of their respective affiliates, the applicable Transfer Restriction Agreements generally terminate when they collectively hold less than 34% of our total outstanding voting power. However, the Founder Equal Treatment Provision never terminates.
With respect to Eric and certain of his affiliates, the applicable Transfer Restriction Agreement generally terminates when they collectively hold less than 2% of our total outstanding voting power. However, the Founder Equal Treatment Provision never terminates.
The Transfer Restriction Agreements may only be amended or waived with the approval of a majority of our board of directors, excluding Larry and Sergey.
Description of Capital Stock
The New Charter increases the number of authorized shares of Class A common stock to 9 billion and provides for the authorization of up to 3 billion shares of Class C capital stock. The powers, preferences and rights and qualifications, limitations and restrictions of the shares of Class A common stock, Class B common stock and Class C capital stock are set forth in full in the New Charter, which is attached to this proxy statement as Appendix A-1. The following summary of the powers, preferences and rights and qualifications, limitations and restrictions of the shares of Class A common stock, Class B common stock and Class C capital stock should be read in conjunction with, and is qualified in its entirety by reference to, Appendix A-1. For convenience of reference, a copy of the New Charter showing the changes from the Existing Charter, with deleted text shown in strikethrough and added text shown as double-underlined, is attached to this proxy statement as Appendix A-2.
Voting Rights
Holders of shares of Class A common stock and Class B common stock have identical rights, except that holders of shares of Class A common stock are entitled to one vote per share and holders of shares of Class B common stock are entitled to 10 votes per share. Holders of shares of Class A common stock and Class B common stock vote together as a single class on all matters (including the election of directors) submitted to a vote of stockholders, unless otherwise required by law.
Holders of shares of Class C capital stock have no voting rights, unless otherwise required by law.
Delaware law could require the holders of any of the shares of Class A common stock, Class B common stock or Class C capital stock to vote separately as a single class in the following circumstances:
If we amended our certificate of incorporation to increase or decrease the par value of the shares of a class of stock, then the holders of the shares of that class would be required to vote separately to approve the proposed amendment.
If we amended our certificate of incorporation in a manner that altered or changed the powers, preferences or special rights of the shares of a class of stock so as to affect them adversely, then the holders of the shares of that class would be required to vote separately to approve the proposed amendment.
As permitted by Delaware law and as set forth in both the Existing Charter and the New Charter, the holders of shares of Class A common stock, Class B common stock, and Class C capital stock do not have the right to vote separately as a single class if the number of authorized shares of such class is increased or decreased. Rather, the number of authorized shares of Class A common stock, Class B common stock, and Class C capital stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of at least a majority of the voting power of the issued and outstanding shares of Class A common stock and Class B common stock, voting together as a single class.
We have not previously provided for cumulative voting for the election of directors, and cumulative voting is not provided for in the New Charter.
Dividends
Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of shares of Class A common stock, Class B common stock, and Class C capital stock will be entitled to share equally, on a per share basis, in any dividends that our board of directors may determine to issue from time to time. In the event that a dividend is paid in the form of shares of common stock or rights to acquire shares of common stock (i) the holders of shares of Class A common stock shall receive Class A common stock, or rights to acquire shares of Class A common stock, as the case may be; (ii) the holders of shares of Class B common stock shall receive
shares of Class B common stock, or rights to acquire shares of Class B common stock, as the case may be; and (iii) the holders of shares of Class C capital stock shall receive shares of Class C capital stock, or rights to acquire shares of Class C capital stock, as the case may be.
Liquidation Rights
Upon our liquidation, dissolution or winding-up, the holders of shares of Class A common stock and Class B common stock shall be entitled to share equally in all assets remaining after the payment of any liabilities and the liquidation preferences on any outstanding preferred stock. Immediately prior to the earlier of (i) any distribution of our assets in connection with a liquidation, dissolution or winding-up; or (ii) any record date established to determine the holders of our capital stock entitled to receive such distribution, each share of Class C capital stock shall automatically be converted into one share of Class A common stock.
Conversion
Shares of Class A common stock are not convertible into any other shares of our capital stock.
Other than in connection with a liquidation as described above, shares of Class C capital stock are not convertible into any other shares of our capital stock.
Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock upon written notice to the transfer agent. In addition, each share of Class B common stock shall convert automatically into one share of Class A common stock upon any transfer, whether or not for value, except for certain transfers described in our certificate of incorporation, including the following:
Transfers between Larry and Sergey, subject to the requirements of the Transfer Restriction Agreements. See “Transfer Restriction Agreements” above.
Transfers for tax and estate planning purposes, including to trusts, corporations and partnerships established or controlled by a holder of Class B common stock.
In addition, partnerships or limited liability companies that held more than 5% of the total outstanding shares of Class B common stock as of the closing of our initial public offering in 2004 may distribute their shares of Class B common stock to their respective partners or members (who may further distribute the shares of Class B common stock to their respective partners or members) without triggering a conversion to shares of Class A common stock. Such distributions must be conducted in accordance with the ownership interests of such partners or members and the terms of any agreements binding the partnership or limited liability company.
The death of any holder of shares of Class B common stock who is a natural person will result in the conversion of his or her shares of Class B common stock, and any shares held by his or her permitted entities, into shares of Class A common stock. However, subject to the terms of the Transfer Restriction Agreements, either of Larry or Sergey may transfer voting control of his shares of Class B common stock and those held by his permitted entities to the other contingent or effective upon his death without triggering a conversion into shares of Class A common stock, but the shares of Class B common stock so transferred will convert to Class A common stock nine months after the death of the transferring founder.
Once transferred and converted into shares of Class A common stock, shares of Class B common stock shall not be reissued.
No class of our capital stock may be subdivided or combined unless the other classes of capital stock are concurrently subdivided or combined in the same proportion and in the same manner.
Equal Status
Except as expressly provided in the New Charter, shares of Class A common stock and Class B common stock have the same rights and privileges and rank equally, share ratably and are identical in all respects as to all matters. In the event of any merger, consolidation, or other business combination requiring the approval of our stockholders entitled to vote thereon (whether or not Google is the surviving entity), the holders of shares of Class A common stock shall have the right to receive, or the right to elect to receive, the same form of consideration as the holders of shares of Class B common stock and the holders of shares of Class A common stock shall have the right to receive, or the right to elect to receive, at least the same amount of consideration on a per share basis as the holders of shares of Class B common stock. In the event of any (i) tender or exchange offer to acquire any shares of Class A common stock or Class B common stock by any third party pursuant to an agreement to which we are a party; or (ii) any tender or exchange offer by us to acquire any shares of Class A common stock or Class B common stock, the holders of shares of Class A common stock shall have the right to receive, or the right to elect to receive, the same form of consideration as the holders of shares of Class B common stock and the holders of shares of Class A common stock shall have the right to receive, or the right to elect to receive, at least the same amount of consideration on a per share basis as the holders of shares of Class B common stock.
Except as expressly provided in the New Charter, shares of Class C capital stock have the same rights and privileges and rank equally, share ratably and are identical in all respects to the shares of Class A common stock and Class B common stock as to all matters. In the event of any merger, consolidation, or other business combination requiring the approval of our stockholders entitled to vote thereon (whether or not Google is the surviving entity), the holders of shares of Class C capital stock shall receive the same amount and form of consideration on a per share basis as the consideration, if any, received by holders of shares of Class A common stock in connection with such merger, consolidation or combination (and if holders of shares of Class A common stock are entitled to make an election as to the amount or form of consideration that such holders shall receive in any such merger, consolidation or combination with respect to their shares of Class A common stock, then the holders of shares of Class C capital stock shall be entitled to make the same election as to their shares of Class C capital stock). In the event of any (i) tender or exchange offer to acquire any shares of Class A common stock or Class B common stock by any third party pursuant to an agreement to which we are a party; or (ii) any tender or exchange offer by us to acquire any shares of Class A common stock or Class B common stock, the holders of shares of Class C capital stock shall receive the same amount and form of consideration on a per share basis as the consideration received by holders of shares of Class A common stock (and if holders of shares of Class A common stock are entitled to make an election as to the amount or form of consideration that such holders shall receive in any such tender or exchange offer with respect to their shares of Class A common stock, then the holders of shares of Class C capital stock shall be entitled to make the same election as to their shares of Class C capital stock).
Preferred Stock
Our board of directors will continue to have the authority, without approval by the stockholders, to issue up to a total of 100,000,00047,000,000 shares, of preferred stock in one or more series. Our board of directors may establish the number of shares to be included in each such series and may fix the designations, preferences, powers and other rights, and any qualifications, limitations or restrictions, of the shares of a series of preferred stock. Our board of directors could authorize the issuance of shares of preferred stock with voting or conversion rights that could dilute the voting power or rights of the holders of shares of our other capital stock. The issuance of preferred stock, although providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of Google and might harm the market price of our shares of Class A common stock and Class C capital stock. We have no current plans to issue any shares of preferred stock.
Transferability and Listing
Like shares of Class A common stock, shares of Class C capital stock will be freely transferable. See “Certain Other Effects of the Recapitalization—Securities Act of 1933” below. The shares of Class A common stock are currently listed on NASDAQ. Prior to the Effective Date, we will file appropriate applications and notices with NASDAQ to list the shares of Class C capital stock and, if necessary, to continue the listing of the shares of Class A common stock on NASDAQ from and after the date that the Recapitalization becomes effective. See “Certain Other Effects of the Recapitalization—Potential Changes in Law or Regulations” below. The listing of the shares of Class C capital stock on NASDAQ is subject to NASDAQ’s approval of such listing applications and notices, which will be conditionedadjustment upon Google’s satisfaction of certain listing requirements. We believe that we will be able to satisfy these listing requirements.
Certain Other Effects of the Recapitalization
Effect on Relative Voting Power and Equity Interest
If the Dividend is declared and paid, there will be no effect on the relative voting power or equity interest of each holder of shares of Class A common stock or Class B common stock. Following the Dividend, if it is declared and paid, holders of shares of Class A common stock or Class B common stock who sell their shares of Class C capital stock will not lose any voting power, but their relative equity interestchanges in Google will decrease as a result of such sale. Conversely, stockholders who purchase shares of Class C capital stock after the Dividend, if it is declared and paid, will increase their relative equity interest in Google but will not gain any additional voting power (or any voting power, if they do not otherwise own shares of Class A common stock).
Effect on Market Price
As of the close of business on May 4, 2012, the closing price of a share of Class A common stock was $596.97 as reported on NASDAQ.
If the Dividend is declared and paid, we believe that the market price for the shares of Class A common stock will generally reflect the effect of a two-for-one stock split once the Dividend is paid and, accordingly, the market price of the Class A common stock will decrease by approximately 50%. Assuming that the Dividend is declared and paid, we expect the market price of shares of Class C capital stock to be approximately equal to the market price of shares of Class A common stock (as such price is adjusted as a result of the Dividend).
The trading prices for shares of Class A common stock and Class C capital stock may be affected by the relative voting rights between these two classes of stock. Because the Class A common stock carries voting rights, it is possible that it could trade at a premium compared to the Class C capital stock. This is particularly true if investors were to place a premium on owning shares of Google that have voting rights, as opposed to shares without voting rights.
Furthermore, the trading price of shares of Class A common stock and Class C capital stock will continue to depend on many factors, including the future performance of Google, general market conditions and conditions relating to companies in businesses and industries similar to that of Google. Accordingly, we cannot predict the prices at which shares of Class A common stock and Class C capital stock will trade following the Recapitalization (and, in respect of shares of Class C capital stock, following the Dividend, if it is declared and paid), just as we could not predict the price at which shares of Class A common stock would trade absent the Recapitalization and the potential Dividend.
Following the Recapitalization, there will continue to be no trading market for the Class B common stock.
Effect on Trading Market and Potential Reduced Relative Liquidity of Shares of Class A Common Stock
To minimize dilution of voting power to existing stockholders, we are more likely to issue shares of Class C capital stock than shares of Class A common stock in the future to raise equity capital, finance acquisitions or fund employee equity incentive programs. It is possible that following the Dividend, if it is declared and paid, some portion of our stockholders will sell their shares of Class C capital stock but retain their shares of Class A common stock or Class B common stock (subject to the terms of the Transfer Restriction Agreements in the case of Larry, Sergey, and Eric) in order to monetize a portion of their investment in Google while retaining their relative voting power. Any such issuance of additional shares of Class C capital stock by Google or dispositions of shares of Class C capital stock by significant or other stockholders may serve to further increase market activity in the shares of Class C capital stock relative to the shares of Class A common stock.
Effect on Percentage Interest
The percentage interest of each stockholder in the total equity of Google will not be changed by the Recapitalization or the Dividend, if it is declared and paid.
Effect on Equity Incentive Plans and Outstanding Equity Awards
We currently have one active equity incentive plan under which new equity incentive awards can be granted, the 2004 Stock Plan (2004 Plan). The 2004 Plan provides for the issuance of shares of our Class A common stock pursuant to stock options, stock appreciation rights, dividend equivalent rights, restricted stock, performance units, performance shares, and any other stock-based award (Awards). Shares of Class A common stock issued pursuant to Awards are identical to all other shares of Class A common stock. After the Recapitalization, Google intends to maintain the ability to grant, in the discretion of the LDC Committee, future Awards relating to shares of Class A common stock pursuant to the 2004 Plan. Furthermore, in connection with the Recapitalization, the maximum number of shares of Class A common stock authorized to be issued pursuant to the 2004 Plan will not be increased. However, if the Dividend is declared and paid, a new number of shares of Class C capital stock will become authorized for issuance pursuant to the 2004 Plan. Specifically, for each share of Class A common stock authorized to be issued pursuant to the 2004 Plan prior to the Dividend, one additional share of Class C capital stock will be authorized to be issued pursuant to the 2004 Plan after the Dividend. In addition, if the 2012 Stock Plan and the 2012 Incentive Plan are approved by our stockholders at the Annual Meeting (see Proposal Number 4 and Proposal Number 5, respectively), then 30,000,000 shares of Class C capital stock will be authorized to be issued pursuant to the 2012 Stock Plan and 2,000,000 shares of Class C capital stock will be authorized to be issued pursuant to the 2012 Incentive Plan.
As of the Record Date, Google had outstanding stock options to purchase 9,787,914 shares of Class A common stock and 8,481,121 outstanding GSUs pursuant to the 2004 Plan, outstanding stock options to purchase 85,625 shares of Class A common stock and 130,028 shares of Class B common stock pursuant to our other equity incentive plans (Other Plans), and outstanding stock options to purchase 46,100 shares of Class A common stock pursuant to equity incentive plans assumed by Google in connection with certain acquisition transactions (Assumed Plans).
Following the Dividend, if it is declared and paid, all outstanding stock options and GSUs issued pursuant to the 2004 Plan and the Other Plans and all outstanding stock options issued pursuant to the Assumed Plans will be adjusted after the Effective Date to conform their terms to our capital structure following implementation of the Recapitalization as follows: (i) each stock option to purchase a share of Class A common stock shall be adjusted so that such stock option represents the right to purchase one share of Class A common stock and one share of Class C capital stock, with the original exercise price of the stock option allocated proportionately between the share of Class A common stock and the share of Class C capital stock according to their relative fair market
structure.values, determined pursuant to a reasonable valuation method; (ii) each stock option to purchase a share of Class B common stock shall be adjusted so that such stock option represents the right to purchase one share of Class B common stock and one share of Class C capital stock, with the original exercise price of the stock option allocated between the share of Class B common stock and the share of Class C capital stock according to their relative fair market values, determined pursuant to a reasonable valuation method; and (iii) each GSU representing the right to receive a share of Class A common stock shall be adjusted so that it represents the right to receive one share of Class A common stock and one share of Class C capital stock upon settlement. The outstanding stock options and GSUs, adjusted as described in the preceding sentence, will in all other respects continue to be subject to the terms and conditions applicable to them prior to the adjustment.
An example of the effect of the Recapitalization and the Dividend, if it is declared and paid, on an outstanding option to purchase 100 shares of Class A common stock at an exercise price of $500.00 per share is as follows: such option will, following the Recapitalization and the Dividend, if it is declared and paid, represent an option to purchase 100 shares of Class A common stock and 100 shares of Class C capital stock, in each case at an exercise price of approximately $250.00 per share. The original exercise price will be appropriately allocated between the shares of Class A common stock and Class C capital stock according to their relative fair market values, determined pursuant to a reasonable valuation method under applicable tax code provisions. As a result, more than 50% of the original exercise price may be allocated to either class of shares.
Accounting Matters
The par value per share of our shares of Class A common stock and Class B common stock will remain unchanged at $0.001 per share after the Recapitalization and the Dividend, if it is declared and paid. On the effective date of the Dividend, if it is declared and paid, there will be an increase in stockholders’ equity equal to the aggregate amount of Class C capital stock, par value $0.001 per share, that is issued. We will give retroactive effect to prior period share and per share amounts in our consolidated financial statements for the effect of the Recapitalization and the Dividend, if it is declared and paid, such that prior periods are comparable to current period presentation. We do not anticipate any other material accounting consequences as a result of the Recapitalization and the Dividend, if it is declared and paid.
Effect on Preferred Stock
Neither the New Charter nor the Dividend, if it is declared and paid, will have any effect on the number of authorized shares of our preferred stock or the rights, preferences and privileges of, and restrictions on, the preferred stock. Currently, no shares of preferred stock are issued or outstanding.
Material U.S. Federal Income Tax Consequences
We believe that, in general, for U.S. federal income tax purposes (i) neither the Recapitalization nor the Dividend, if it is declared and paid, will be taxable to a stockholder of Google; (ii) the Class C capital stock will not constitute “Section 306 stock” within the meaning of Section 306(c) of the Code; (iii) the tax basis of each share of Class A common stock and Class B common stock, as applicable, with respect to which Class C capital stock is distributed in the potential Dividend will be apportioned between such share of Class A common stock or Class B common stock, on the one hand, and the Class C capital stock received in the potential Dividend, on the other hand, in proportion to the fair market value of such shares on the date of the potential Dividend; (iv) if the shares of Class A common stock and Class B common stock were held as capital assets immediately before the Effective Date, the holding period for each new share of Class C capital stock will include such stockholder’s holding period for the share of common stock with respect to which the Class C capital stock is distributed; and (v) no gain or loss will be recognized on any subsequent conversion of Class C capital stock into shares of Class A common stock. Gain or loss would be recognized, however, on the subsequent disposition of shares of Class C capital stock in a taxable transaction. Further, if the Class C capital stock were determined to constitute Section 306 stock, a stockholder generally would be treated as realizing ordinary income as opposed to capital gain upon certain
dispositions (including redemptions) of such Section 306 stock. Stockholders are urged to seek the advice of their tax counsel on these matters and on tax matters other than U.S. federal income tax matters.
Securities Act of 1933
The distribution of shares of Class C capital stock as a stock dividend will not involve a “sale” of a security under the Securities Act or Rule 145 thereunder. Consequently, we are not required to register, and will not register, the Class C capital stock pursuant to the Securities Act.
Because the Recapitalization and the Dividend, if it is declared and paid, do not constitute a “sale” of Class C capital stock pursuant to the Securities Act, stockholders will not be deemed to have purchased such shares separately from the Class A common stock or Class B common stock to which such shares of Class C capital stock relate pursuant to the Securities Act and Rule 144 thereunder. Shares of Class A common stock held at the time of the effectiveness of the New Charter and shares of Class C capital stock (whether in respect of shares of Class A common stock or Class B common stock) received in the Dividend, if it is declared and paid, other than any such shares held by “affiliates” of Google within the meaning of the Securities Act, may be offered for sale and sold in the same manner as the Class A common stock prior to the Recapitalization without registration pursuant to the Securities Act (or in the case of equity awards, pursuant to registration statements that we will file under the Securities Act). Affiliates of Google will continue to be subject to the restrictions specified in Rule 144 of the Securities Act.
NASDAQ Criteria
The shares of Class A common stock are currently traded on NASDAQ and will remain traded on NASDAQ following the Recapitalization and the Dividend, if it is declared and paid.
Application will be made to trade the shares of Class C capital stock on NASDAQ. The listing of the shares of Class C capital stock on NASDAQ is subject to NASDAQ’s approval of such listing applications and notices, which will be conditioned upon Google’s satisfaction of certain listing requirements. We believe that we will be able to satisfy these listing requirements.
Potential Changes in Law or Regulations
In prior years, bills have been introduced in Congress that, if enacted, would have prohibited the registration of common stock on a national securities exchange if such common stock was part of a class of securities that has no voting rights or carried disproportionate voting rights. Although these bills have not been acted upon by Congress, there can be no assurance that such a bill (or a modified version thereof) will not be introduced in Congress in the future. Legislation or other regulatory developments could make the shares of Class A common stock and Class C capital stock ineligible for trading on NASDAQ or other national securities exchanges. We are unable to predict whether any such legislation or regulatory proposals will be adopted or whether they will have such effect.
Interests of Certain Persons
As of the Record Date, Larry and Sergey beneficially owned 51,941,440 shares of Class A common stock and Class B common stock, representing 56.4% of our total outstanding voting power. As a result, Larry and Sergey currently have the ability to elect all of our directors and to determine the outcome of most matters submitted for a vote of our stockholders.
After the Recapitalization and the Dividend, if it is declared and paid, Larry and Sergey will have the same beneficial ownership of shares of Class A common stock and Class B common stock. If the Dividend is declared and paid, they will also own a number of shares of Class C capital stock equal to their ownership of shares of
Class A common stock and Class B common stock on the record date for the Dividend. If the record date for the Dividend were to have been the same as the Record Date, Larry and Sergey would own 51,941,440 shares of Class C capital stock, representing approximately 15.9% of the shares of Class C capital stock to be issued in the Dividend.
As of the Record Date, Eric beneficially owned 8,861,413 shares of Class A common stock and Class B common stock, representing 9.5% of our total outstanding voting power.
After the Recapitalization and the Dividend, if it is declared and paid, Eric will have the same beneficial ownership of shares of Class A common stock and Class B common stock. If the Dividend is declared and paid, he will also own a number of shares of Class C capital stock equal to his ownership of shares of Class A common stock and Class B common stock on the record date for the Dividend. If the record date for the Dividend were to have been the same as the Record Date, Eric would own 8,861,413 shares of Class C capital stock, representing approximately 2.7% of the shares of Class C capital stock to be issued in the Dividend.
After the Recapitalization and the Dividend, if it is declared and paid, Larry and Sergey will continue to have the ability to elect all of our directors and to determine the outcome of most matters submitted for a vote of our stockholders. This will be true so long as they own a majority of our total outstanding voting power. Furthermore, even if Larry and Sergey substantially reduce their existing investment in Google by converting some or all of their shares of Class B common stock into shares of Class A common stock and disposing of either shares of Class A common stock or Class C capital stock (or both), they will continue to have the ability to elect all of our directors and to determine the outcome of most matters submitted for a vote of our stockholders so long as they continue to own a majority of our total outstanding voting power. With respect to certain change in control transactions involving Google (including an acquisition of Google by another company), Larry and Sergey’s ability to determine the affirmative outcome of the stockholder vote on that transaction is contingent upon their ability to cast in favor of the transaction at least 60% of the voting power of the shares of Google’s capital stock present in person or represented by proxy at the stockholder meeting called to consider the transaction. If Larry and Sergey’s ownership is aggregated with that of Eric, then Larry, Sergey, and Eric would be able to control the result of that vote.
Larry, Sergey, and Eric’s ability to sell their shares of Class C capital stock received in the Dividend, if it is declared and paid, is subject to the terms of the Transfer Restriction Agreements. See “Transfer Restriction Agreements” above.
Certain members of our board of directors and management other than Larry, Sergey, and Eric hold shares of Class B common stock representing in the aggregate 1.6% of our total outstanding voting power as of the Record Date. If the Dividend is declared and paid, these individuals will receive shares of Class C capital stock. There is no requirement that these individuals maintain an equal number of shares of Class B common stock and Class C capital stock, and they will be free to sell any or all of the shares of Class C capital stock that they receive in the Dividend, if it is declared and paid, without any obligation to sell an equal number of shares of Class B common stock. Accordingly, these individuals would be able to achieve liquidity for a portion of their investment in Google without suffering any loss of voting power. None of these individuals were members of the Special Committee.
Larry, Sergey, and Eric are members of our board of directors. In their capacity as directors, they voted in favor of the New Charter as well as our board of directors’ intention to declare the Dividend. Furthermore, in their capacity as stockholders of Google, Larry, Sergey, and Eric have indicated that they intend to vote all of the shares of Class A common stock and Class B common stock beneficially owned by them “FOR” the approval of the adoption of the New Charter.As a result of their beneficial ownership of more than a majority of each of our total outstanding voting power and the outstanding voting power of the Class B common stock as of the Record Date, Larry and Sergey will have the power to approve the adoption of the New Charter without the affirmative vote of any other stockholder.
Stockholder Information
Following both the Recapitalization and the Dividend, if it is declared and paid, we will deliver to the holders of shares of Class A common stock, Class B common stock, and Class C capital stock the same proxy statements, annual reports, and other information and reports as we currently deliver to the holders of shares of Class A common stock and Class B common stock.
Expenses
The costs of evaluating the Recapitalization and the Dividend, if it is declared and paid, and various alternatives thereto and of structuring and implementing the Recapitalization and the potential Dividend (including financial advisor fees, legal fees, accountants’ fees, transfer agent’s fees, NASDAQ fees, and printing and mailing costs) are expected to total approximately $7.5 million, the majority of which has already been incurred. These costs are charged against Google’s pre-tax earnings in the fiscal quarter in which they are incurred.
Litigation Relating to the Recapitalization
Following the announcement of the Recapitalization, two purported class action lawsuits were brought against Google and our board of directors on behalf of the stockholders of Google. These two lawsuits were filed in the Delaware Court of Chancery and are titledBrockton Retirement Board v. Page et. al., C.A. No. 7469 (April 27, 2012), andSkidmore v. Page et. al., C.A. No. 7473 (April 30, 2012). These lawsuits generally allege that the individual defendants breached their fiduciary duties in connection with the Recapitalization. Among other remedies, these lawsuits seek to enjoin the Recapitalization as well as unspecified money damages, costs, and attorneys’ fees. Google believes that each of these lawsuits is without merit and intends to vigorously defend against all claims asserted.
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PROPOSAL NUMBER 4
APPROVAL OF GOOGLE’S 2012 STOCK PLAN
In April 2012, our board of directors approved the Google Inc. 2012 Stock Plan (2012 Stock Plan or plan), subject to the approval of our stockholders at the 2012 Annual Meeting. We are submitting the 2012 Stock Plan to our stockholders for approval in order to satisfy (1) applicable Listing Rules of NASDAQ and (2) the stockholder approval requirement under Section 162(m).
Summary of the 2012 Stock Plan
The material features of the 2012 Stock Plan are summarized below. This summary is qualified in its entirety by reference to the full text of the 2012 Stock Plan, which is set forth in Appendix BA to this proxy statement.
Purpose
ThePurpose
Our board of directors originally adopted the Plan in April 2012, Stockand it was subsequently approved by our stockholders in June 2012. The Plan is intended to promote the interests of Google and its subsidiaries (collectively, the Company) and its stockholders by providing the employees and consultants of the Company and members of the board of directors with incentives and rewards to encourage them to continue in the service of the Company and with a proprietary interest in pursuing the long-term growth, profitability and financial success of the Company.
Administration
The LDCLeadership Development and Compensation Committee shall administeradministers the 2012 Stock Plan in accordance with its terms. The LDCLeadership Development and Compensation Committee has full discretionary authority to administer the plan,Plan, including without limitation, the authority to (1) designate the employees and consultants of the Company and members of the board of directors who shall be granted incentive awards under the planPlan and the amount, type and other terms and conditions of such incentive awards and (2) interpret and construe any and all provisions of the planPlan and the terms of any incentive award (and any agreement evidencing the grant of an incentive award). The LDCLeadership Development and Compensation Committee may exercise all discretion granted to it under the 2012 Stock Plan in a non-uniform manner among participants. The LDCLeadership Development and Compensation Committee may delegate to a subcommittee of one or more members of the board of directors or employees of the Company the authority to grant incentive awards, subject to such limitations as the LDCLeadership Development and Compensation Committee shall specify and to the requirements of applicable law.
Eligibility
Any employee or consultant of, or person who renders services directly or indirectly to, the Company and any member of the board of directors is eligible for selection by the LDCLeadership Development and Compensation Committee to receive an incentive award under the 2012 Stock Plan (such a person who is selected to receive an incentive award is referred to herein as a participant). As of March 31, 2012,April 6, 2015, the Company had approximately 33,07755,527 employees approximately 4,456 consultants, and 10eleven members of the board of directors (including three employee directors).
Shares Subject to the Plan
The
Currently, the maximum number of shares of Class C capital stock that may be covered by incentive awards granted under the 2012 Stock Plan shall not exceed 30,000,000 shares in the aggregate. TheCurrently, the maximum number of shares of Class C capital stock that may be covered by incentive awards granted under the 2012 Stock Plan that are intended to be incentive stock options (ISOs) shall not exceed 30,000,000 shares in the aggregate. As of December 31, 2014, 17,525,225 shares of our Class C capital stock remained
GOOGLE INC. | 2015 Proxy Statement 48
available for future grant of equity awards under the Plan. Assuming Stockholders approve this proposal, a total of 47,000,000 shares of Class C capital stock will have been reserved for issuance pursuant to the Plan. Assuming stockholders approve this proposal, the maximum number of shares of Class C capital stock that may be covered by incentive awards granted under the Plan shall not exceed 47,000,000.
For purposes of these maximum share limitations, shares of Class C capital stock shall only be counted as used to the extent that they are actually issued and delivered to a participant (or such participant’s permitted transferees as described in the plan)Plan) pursuant to the plan.Plan. Accordingly, if an incentive award is settled for cash or if shares of Class C capital stock are withheld to pay the exercise price of a stock option or to satisfy any tax withholding requirement in connection with an incentive award, only the shares issued (if any), net of the shares withheld, will be deemed delivered for purposes of
determining the number of shares of Class C capital stock that are available for delivery under the plan.Plan. In addition, shares of Class C capital stock related to incentive awards that expire, are forfeited or cancelled or terminate for any reason without the issuance of shares shall not be treated as issued pursuant to the plan.Plan. In addition, if shares of Class C capital stock owned by a participant (or such participant’s permitted transferees as described in the plan)Plan) are tendered (either actually or through attestation) to Google in payment of any obligation in connection with an incentive award, the number of shares tendered shall be added to the number of shares of Class C capital stock that are available for delivery under the plan.Plan. Notwithstanding anything to the contrary herein, shares of Class C capital stock attributable to incentive awards transferred under any incentive award transfer program (as described below) shall not again be available for delivery under the plan.Plan. As of the date of this proxy statement,April 6, 2015, the market pricevalue of a share of Class C capital stock is not determinable because there are no such shares outstanding.was $536.77.
Award Types
The 2012 Stock Plan permits grants of the following types of incentive awards subject to such terms and conditions as the LDCLeadership Development and Compensation Committee shall determine, consistent with the terms of the plan:Plan: (1) stock options, including stock options intended to qualify as ISOs, (2) other stock-based awards, including in the form of stock appreciation rights, phantom stock, restricted stock, restricted stock units, performance shares, deferred share units or share-denominated performance units, and (3) cash awards. Subject to the terms and conditions set forth in the 2012 Stock Plan, incentive awards may be settled in cash or shares of Class C capital stock and may be subject to performance-based and/or service-based conditions. Cash awards shall, and all other incentive awards may, be designed to qualify as “performance-based compensation” within the meaning of Section 162(m) (Performance-Based Compensation).
Stock Options
The 2012 Stock Plan permits the LDCLeadership Development and Compensation Committee to grant stock options, including ISOs, which are stock options that are designated by the LDCLeadership Development and Compensation Committee as incentive stock options and which meet the applicable requirements of incentive stock options pursuant to Section 422 of the Code, subject to certain terms and conditions.
Exercise Price.The exercise price per share of Class C capital stock covered by a stock option shall not be less than 100% of the fair market value of a share of Class C capital stock on the date on which such stock option is granted. For this purpose, fair market value (Fair Market Value) is determined as being equal to the closing sales price on the date of grant or, if not so reported for such day, the immediately preceding business day, of a share of Class C capital stock as reported on the principal securities exchange on which shares of Class C capital stock are listed and admitted to trading.
Terms Applicable to Stock Options.A stock option granted to a participant under the 2012 Stock Plan allows a participant to purchase up to a specified total number of shares of Class C capital stock at a specified exercise price per share during specified time periods, each as determined by the LDCLeadership Development and Compensation Committee in its discretion, provided that no stock option may have a term of longer than ten (10) years.
Additional Terms for ISOs.Stock options granted under the 2012 Stock Plan that are intended to qualify as ISOs are subject to certain additional terms and conditions as set forth in the plan,Plan, including: (1) each stock option that is intended to qualify as an ISO must be designated as an ISO in the agreement evidencing its grant, (2) ISOs may only be granted to individuals who are employees of the Company, (3) the aggregate Fair Market Value (determined as of the date of grant of the ISOs) of the number of shares of Class C capital stock with respect to which ISOs are exercisable for the first time by any participant during any calendar year under all plans of the Company cannot not exceed $100,000, or such other maximum amount as is then applicable under Section 422 of the Code, and (4) no ISO may be granted to a person who, at the time of the proposed grant, owns (or is deemed to own under the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of common stock of the Company unless (a) the exercise price of such ISO is at least one hundred ten
percent (110%) of the Fair Market Value of a share of Class C capital stock at the time such ISO is granted and (b) such ISO is not exercisable after the expiration of five years from the date it is granted. Any stock option granted under the 2012 Stock Plan that is designated as an ISO but for any reason fails to meet the requirements of an ISO shall be treated under the planPlan as a nonstatutory stock option.
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Repricing PermittedPermitted.. The 2012 Stock Plan permits Google to reprice any stock option granted under the planPlan without the approval of the stockholders of Google. For this purpose, “reprice” means (1) any of the following or any other action that has the same effect: (a) lowering the exercise price of a stock option after it is granted, (b) any other action that is treated as a repricing under GAAP, or (c) cancelling a stock option at a time when its exercise price exceeds the fair market value of the underlying Class C capital stock, in exchange for another stock option, restricted stock, or other equity, unless the cancellation and exchange occurs in connection with a merger, acquisition, spin-off or other similar corporate transaction; and (2) any other action that is considered to be a repricing under formal or informal guidance issued by NASDAQ.
Performance-Based Awards
The LDCLeadership Development and Compensation Committee may grant incentive awards that are intended to qualify as Performance-Based Compensation pursuant to the 2012 Stock Plan. Unless otherwise specified in the agreement evidencing the grant of an incentive award that is intended to qualify as Performance-Based Compensation, the LDCLeadership Development and Compensation Committee may, in its discretion, reduce or eliminate the amount payable to any participant with respect to the incentive award, based on such factors as the LDCLeadership Development and Compensation Committee may deem relevant, but the LDCLeadership Development and Compensation Committee may not increase any such amount above the amount established in accordance with the relevant objective performance formula applicable to the incentive award. For purposes of clarity, the LDCLeadership Development and Compensation Committee may exercise the discretion provided by the foregoing sentence in a non-uniform manner among participants.
The performance goals upon which the payment or vesting of any incentive award (other than stock options and stock appreciation rights) that is intended to qualify as Performance-Based Compensation depends shall relate to one or more of the following performance measures: market price of Class C capital stock, earnings per share of Class C capital stock, income, net income or profit (before or after taxes), economic profit, operating income, operating margin, profit margin, gross margins, return on equity or stockholder equity, total shareholder return, market capitalization, enterprise value, cash flow (including but not limited to operating cash flow and free cash flow), cash position, return on assets or net assets, return on capital, return on invested capital, return on sales, stockholder returns, economic value added, cash value added, earnings or net earnings (before or after interest, taxes, depreciation and amortization), earnings from continuing operations, operating earnings, controllable profits, sales or revenues, sales growth, new orders, capital or investment, ratio of debt to debt plus equity, ratio of operating earnings to capital spending, new product innovation, product release schedules or ship targets, market share, cost reduction goals, inventory or supply chain management initiatives, budget comparisons, implementation or completion of specified projects or processes, customer satisfaction MBOs (management by objectives), productivity, expense, margins, operating efficiency, working capital, the formation of joint ventures, research or development collaborations, or the completion of other transactions, any other measure of financial performance that can be determined pursuant to GAAP, or any combination of any of the foregoing.
A performance goal (1) may relate to the performance of the participant, Google, a subsidiary of Google, the Company, any business group, business unit or other subdivision of the Company, or any combination of the foregoing, as the LDCLeadership Development and Compensation Committee deems appropriate and (2) may be expressed as an amount, as an increase or decrease over a specified period, as a relative comparison to the performance of a group of comparator companies or a published or special index, or any other external measure of the selected performance criteria, as the LDCLeadership Development and Compensation Committee deems appropriate. The measurement of any performance goal may exclude the impact of unusual, non-recurring or extraordinary items or expenses; items relating to financing activities; charges for restructurings or productivity initiatives; other non-operating items; discontinued operations; items related to the disposal of a business or segment of a business; the cumulative effect of changes in accounting treatment; items related to a change in accounting principle; items related to changes in applicable laws or business conditions; any impact of
impairment of tangible or intangible assets; any impact of the issuance or repurchase of equity securities and or other changes in the number of outstanding shares of any class of Google equity securities; any gain, loss, income or expense attributable to acquisitions or dispositions of stock or assets; items attributable to the business operations of any entity acquired by Google during a performance period; stock-based compensation expense; in-process research and development expense; future contributions to the Google Foundation; gain or loss from all or certain claims and/or litigation and insurance recoveries; items that are outside the scope of Google’s core, on-going business activities; and any other items, each determined in accordance with GAAP and as identified in Google’s audited financial statements, including the notes thereto.
Within ninety (90) days after the beginning of a performance period for an incentive award intended to qualify as Performance-Based Compensation, and in any case before twenty-five percent (25%) of the performance period has elapsed, the LDCLeadership Development and Compensation Committee shall establish written, objective performance goals for the incentive awards to be earned over the performance period. Performance periods may be overlapping.
The maximum number of shares of Class C capital stock that may be covered by incentive awards intended to qualify as Performance-Based Compensation that are granted to any one participant who is an executive officer of Google in any calendar year shall not exceed 1,000,000 shares. The amount payable to any executive officer of Google with respect to any calendar year for all cash incentive awards shall not exceed $100 million. For this purpose, “amount payable with respect to any calendar year” means the amount of cash, or value of other property, required to be paid based on the achievement of applicable performance goals during
GOOGLE INC. | 2015 Proxy Statement 50
a performance period that ends in a calendar year, disregarding any deferral pursuant to the terms of a deferred compensation plan unless the terms of the deferral are intended to comply with the requirements for Performance-Based Compensation.
For purposes of clarity, the foregoing provisions described in this section apply only to incentive awards granted under the 2012 Stock Plan that are intended to qualify as Performance-Based Compensation and do not limit the LDCLeadership Development and Compensation Committee’s discretion to determine the terms and conditions of performance-based incentive awards granted under the 2012 Stock Plan that are not intended to qualify as Performance-Based Compensation. In addition, the LDCLeadership Development and Compensation Committee may, subject to the terms of the 2012 Stock Plan, amend previously granted incentive awards in a way that disqualifies them as Performance-Based Compensation.
Incentive Award Transfer Program
Each of the board of the directors and the LDCLeadership Development and Compensation Committee has the authority under the 2012 Stock Plan to implement a program whichthat would permit participants the opportunity to transfer any outstanding incentive awards to a financial institution or other person selected by the board of directors or the LDCLeadership Development and Compensation Committee.
Amendment and Termination
The board of directors may at any time suspend or discontinue the 2012 Stock Plan or revise or amend the planPlan in any respect whatsoever, provided that to the extent that any applicable law, tax requirement, or rule of a stock exchange requires stockholder approval in order for any such revision or amendment to be effective, such revision or amendment shall not be effective without such approval. Except as expressly provided in the plan,Plan, no action under the planPlan may, without the consent of a participant, reduce the participant’s rights under any previously granted and outstanding incentive award.
Adjustments Upon Certain Changes
The 2012 Stock Plan includes provisions that require or permit the LDCLeadership Development and Compensation Committee to make certain adjustments upon the occurrence of specified events, including provisions that provide as follows: (1) upon the occurrence of certain events effecting the capitalization of Google such as a recapitalization or stock split, the LDCLeadership Development and Compensation Committee shall make appropriate adjustments in the type and maximum number of shares available for issuance under the planPlan and the limits described above for ISOs and for incentive awards intended to be Performance-Based Compensation that are granted to executive officers of Google, (2) in the event of an increase or decrease in
the number or type of issued shares of common stock of Google without receipt or payment of consideration by the Company, the LDCLeadership Development and Compensation Committee shall appropriately adjust the type or number of shares subject to each outstanding incentive award and the exercise price per share, if any, of shares subject to each such incentive award, (3) in the event of a merger or similar transaction as a result of which the holders of shares of Class C capital stock receive consideration consisting exclusively of securities of the surviving corporation in such transaction, the LDCLeadership Development and Compensation Committee shall appropriately adjust each outstanding incentive award so that it pertains and applies to the securities which a holder of the number of shares of Class C capital stock subject to such incentive award would have received in such transaction, and (4) upon the occurrence of certain specified extraordinary corporate transactions, such as a dissolution or liquidation of Google, sale of all or substantially all of the Company’s assets, and certain mergers involving Google, and upon any other corporate change, including but not limited to the sale of a subsidiary or business unit, the LDCLeadership Development and Compensation Committee has discretion to make certain adjustments to outstanding incentive awards, cancel outstanding incentive awards and provide for cash payments to participants in consideration of such cancellation, or provide for the exchange of outstanding incentive awards.
Summary of Federal Income Tax Consequences of Awards
ISOs. AnA participant who is granted an ISO does not recognize taxable income at the time the ISO is granted or upon its exercise, but the excess of the aggregate fair market value of the shares acquired on the exercise date (ISO shares) over the aggregate exercise price paid by the participant is included in the participant’s income for alternative minimum tax purposes. Upon a disposition of the ISO shares more than two years after grant of the ISOs and one year after exercise of the ISOs, any gain or loss is treated as long-term capital gain or loss. In such case, Google would not be entitled to a deduction. If the participant sells the ISO shares prior to the expiration of these holding periods, the participant recognizes ordinary income at the time of disposition equal to the excess if any, of the lesser of (1) the aggregate fair market value of the ISO shares at the date of exercise and (2) the amount received for the ISO shares, over the aggregate exercise price previously paid by the participant. Any gain or loss recognized on such a premature disposition of the ISO shares in excess of the amount treated as ordinary income is treated as long-term or short-term capital gain or loss, depending on how long the shares were held by the participant prior to the sale. The amount of
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ordinary income recognized by the participant is subject to payroll taxes. Google is entitled to a deduction at the same time and in the same amount as the participant recognizes ordinary income.
Nonstatutory Stock Options.A participant who is granted a stock option that is not an ISO (a nonstatutory stock option) does not recognize any taxable income at the time of grant. Upon exercise, the participant recognizes taxable income in an amount equal to the aggregate fair market value of the shares subject to the nonstatutory stock options over the aggregate exercise price of such shares. Any taxable income recognized in connection with the exercise of nonstatutory stock options by an employee is subject to payroll taxes. Google is entitled to a deduction at the same time and in the same amount as the participant recognizes ordinary income. The participant’s basis in the option shares will be increased by the amount of ordinary income recognized. Upon the sale of the shares issued upon exercise of the nonstatutory stock options, any further gain or loss recognized will be treated as long-term or short-term capital gain or loss, depending on how long the shares were held by the participant prior to the sale.
Restricted Stock and Restricted Stock Units. A participant will not recognize income at the time a restricted stock award is granted. When the restrictions lapse with regard to any installment of restricted stock, the participant will recognize ordinary income in an amount equal to the fair market value of the shares with respect to which the restrictions lapse, unless the participant elected to realize ordinary income in the year the award is granted in an amount equal to the fair market value of the restricted stock awarded, determined without regard to the restrictions. A participant will not recognize income at the time an award of restricted stock units (GSUs) is granted. The participant will recognize ordinary income at the time the GSUs vest, in an amount equal to the cash paid or to be paid or the fair market value of the shares delivered or to be delivered. The amount of ordinary income recognized by the participant is subject to payroll taxes. Google is entitled to a deduction at the same time and in the same amount as the participant recognizes ordinary income.
Performance-Based Awards.A participant will not recognize income at the time of grant of a performance-based award. The participant will recognize ordinary income at the time the performance-based award vests in an amount equal to the dollar amount, or the fair market value of the shares of Class C capital stock, subject to the award. The amount of ordinary income recognized by the participant is subject to payroll taxes. Google is entitled to a deduction at the same time and in the same amount as the participant recognizes ordinary income.
Section 162(m) Compensation Deduction LimitationLimitation.. In general, Section 162(m) limits Google’s compensation deduction to $1,000,000 paid in any tax year to any “covered employee” as defined under Section 162(m). This deduction limitation does not apply to certain types of compensation, including Performance-Based Compensation. The terms of the 2012 Stock Plan permit, but do not require, Google to grant performance-based awards under the planPlan that meet the requirements of Performance-Based Compensation so that such awards will be deductible by Google for federal income tax purposes.
New
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF U.S. FEDERAL INCOME TAXATION WITH RESPECT TO THE GRANT AND EXERCISE OF AWARDS UNDER THE PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF AN INDIVIDUAL’S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE, OR FOREIGN COUNTRY IN WHICH ANY ELIGIBLE INDIVIDUAL MAY RESIDE.
Plan Benefits
As
The amount and timing of awards granted under the Plan are determined in the sole discretion of the date of this proxy statement, noadministrator and therefore cannot be determined in advance. The future awards have been madethat would be received under the 2012 Stock Plan. The benefits or amounts that will be receivedPlan by or allocated to each named executive officer, all currentdirectors, consultants, executive officers as a group, all directors whoand other employees are discretionary and are therefore not executive officers as a group, and all employees who are not executive officers as a group under the 2012 Stock Plan, as well as the benefits or amounts that would have been so received or allocated had the 2012 Stock Plan been in effect in 2011, are not presently determinable.determinable at this time.
Required Vote
Approval of the 2012 Stockproposed amendment to the Plan requires the affirmative “FOR” vote of the holders of a majority of the voting power of Google’s shares of Class A common stock and Class B common stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon, voting together as a single class. Unless marked to the contrary, proxies received will be voted “FOR” approval of an amendment to increase the 2012 Stock Plan.maximum number of shares of our Class C capital stock that may be issued under the Plan by 17,000,000 shares.
Google Recommendation
We believe strongly that the approval of the 2012 Stockamendment to the Plan is essential to our continued success. Our employees are among our most valuable assets. Stock options and otherEquity awards such as those provided under the 2012 Stock Plan are vital to our ability to attract and retain outstanding and highly skilled individuals. Such awards also are crucial to our ability to motivate employees to achieve our goals. For the reasons stated above the stockholders are being asked to approve the 2012 Stockamendment to the Plan.
Our board of directors recommends a vote FOR the approval of the 2012 Stock Plan.
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PROPOSAL NUMBER 5
APPROVAL OF GOOGLE’S 2012 INCENTIVE COMPENSATION PLAN FOR
EMPLOYEES AND CONSULTANTS OF MOTOROLA MOBILITY
In April 2012, our board of directors approved the Google Inc. 2012 Incentive Compensation Plan for Employees and Consultants of Motorola Mobility (2012 Incentive Plan or plan), subjectan amendment to the approval of our stockholders at the 2012 Annual Meeting. We are submitting the 2012 Incentive Plan to our stockholders for approval in order to satisfy (1) applicable Listing Rules of NASDAQ and (2)increase the stockholder approval requirement under Section 162(m).
The 2012 Incentive Plan shall become effective upon the later of (a) the date that stockholders approve the plan and (b) the closing of Google’s acquisition of Motorola Mobility Holdings, Inc. (together with its subsidiaries, Motorola Mobility) pursuant to the terms of the Agreement and Plan of Merger by and among Google, RB98 Inc. and Motorola Mobility dated as of August 15, 2011 (the Motorola Mobility Closing). If the Motorola Mobility Closing does not occur, the plan shall automatically terminate, Google shall have no further obligations with respect to the plan and the provisions of the plan shall be of no further force or effect.
Summary of the 2012 Incentive Plan
The material features of the 2012 Incentive Plan are summarized below. This summary is qualified in its entirety by reference to the full text of the 2012 Incentive Plan, which is set forth in Appendix C to this proxy statement.
Purpose
The 2012 Incentive Plan is intended to promote the interests of the Company and its stockholders by providing the employees and consultants of Motorola Mobility with incentives and rewards to encourage them to continue in the service of the Company and with a proprietary interest in pursuing the long-term growth, profitability and financial success of the Company.
Administration
The LDC Committee shall administer the 2012 Incentive Plan in accordance with its terms. The LDC Committee has full discretionary authority to administer the plan, including without limitation the authority to (1) designate the employees and consultants of Motorola Mobility who shall be granted incentive awards under the plan and the amount, type and other terms and conditions of such incentive awards and (2) interpret and construe any and all provisions of the plan and the terms of any incentive award (and any agreement evidencing the grant of an incentive award). The LDC Committee may exercise all discretion granted to it under the 2012 Incentive Plan in a non-uniform manner among participants. The LDC Committee may delegate to a subcommittee of one or more members of the board of directors or employees of the Company the authority to grant incentive awards, subject to such limitations as the LDC Committee shall specify and to the requirements of applicable law.
Eligibility
Any employee or consultant of, or person who renders services directly or indirectly to, Motorola Mobility is eligible for selection by the LDC Committee to receive an incentive award under the 2012 Incentive Plan (such a person who is selected to receive an incentive award is referred to herein as a participant). As of March 31, 2012, Motorola Mobility had approximately 20,000 employees and approximately 12,000 consultants.
Shares Subject to the Plan
The maximum number of shares of Class C capital stock that may be covered by incentive awards grantedissuable under the 2012 Incentive Plan shall not exceed 2,000,000 shares in the aggregate. The maximum number of
by 17,000,000 shares.shares of Class C capital stock that may be covered by incentive awards granted under the 2012 Incentive Plan that are intended be ISOs shall not exceed 2,000,000 shares in the aggregate. For purposes of these limitations, shares of Class C capital stock shall only be counted as used to the extent that they are actually issued and delivered to a participant (or such participant’s permitted transferees as described in the plan) pursuant to the plan. Accordingly, if an incentive award is settled for cash or if shares of Class C capital stock are withheld to pay the exercise price of a stock option or to satisfy any tax withholding requirement in connection with an incentive award, only the shares issued (if any), net of the shares withheld, will be deemed delivered for purposes of determining the number of shares of Class C capital stock that are available for delivery under the plan. In addition, shares of Class C capital stock related to incentive awards that expire, are forfeited or cancelled or terminate for any reason without the issuance of shares shall not be treated as issued pursuant to the plan. In addition, if shares of Class C capital stock owned by a participant (or such participant’s permitted transferees as described in the plan) are tendered (either actually or through attestation) to Google in payment of any obligation in connection with an incentive award, the number of shares tendered shall be added to the number of shares of Class C capital stock that are available for delivery under the plan. As of the date of this proxy statement, the market price of a share of Class C capital stock is not determinable because there are no such shares outstanding.
Award TypesGOOGLE INC. | 2015 Proxy Statement 52
The 2012 Incentive Plan permits grants of the following types of incentive awards subject to such terms and conditions as the LDC Committee shall determine, consistent with the terms of the plan: (1) stock options, including stock options intended to qualify as ISOs, (2) other stock-based awards, including in the form of stock appreciation rights, phantom stock, restricted stock, restricted stock units, performance shares, deferred share units or share-denominated performance units, and (3) cash awards. Subject to the terms and conditions set forth in the 2012 Incentive Plan, incentive awards may be settled in cash or shares of Class C capital stock and may be subject to performance-based and/or service-based conditions. Cash awards shall, and all other incentive awards may, be designed to qualify as Performance-Based Compensation.
Stock Options
The 2012 Incentive Plan permits the LDC Committee to grant stock options, including ISOs, which are stock options that are designated by the LDC Committee as incentive stock options and which meet the applicable requirements of incentive stock options pursuant to Section 422 of the Code, subject to certain terms and conditions.
Exercise Price. The exercise price per share of Class C capital stock covered by a stock option shall not be less than 100% of the fair market value of a share of Class C capital stock on the date on which such stock option is granted. For this purpose, fair market value (Fair Market Value) is determined as being equal to the closing sales price on the date of grant or, if not so reported for such day, the immediately preceding business day, of a share of Class C capital stock as reported on the principal securities exchange on which shares of Class C capital stock are listed and admitted to trading.
Terms Applicable to Stock Options.A stock option granted to a participant under the 2012 Incentive Plan allows a participant to purchase up to a specified total number of shares of Class C capital stock at a specified exercise price per share during specified time periods, each as determined by the LDC Committee in its discretion, provided that no stock option may have a term of longer than ten (10) years.
Additional Terms for ISOs.Stock options granted under the 2012 Incentive Plan that are intended to qualify as ISOs are subject to certain additional terms and conditions as set forth in the plan, including: (1) each stock option that is intended to qualify as an ISO must be designated as an ISO in the agreement evidencing its grant, (2) ISOs may only be granted to individuals who are employees of the Company, (3) the aggregate Fair Market Value (determined as of the date of grant of the ISOs) of the number of shares of Class C capital stock with respect to which ISOs are exercisable for the first time by any participant during any calendar year under all plans of the
Company cannot not exceed $100,000, or such other maximum amount as is then applicable under Section 422 of the Code, and (4) no ISO may be granted to a person who, at the time of the proposed grant, owns (or is deemed to own under the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of common stock of the Company unless (a) the exercise price of such ISO is at least one hundred ten percent (110%) of the Fair Market Value of a share of Class C capital stock at the time such ISO is granted and (b) such ISO is not exercisable after the expiration of five years from the date it is granted. Any stock option granted under the 2012 Incentive Plan that is designated as an ISO but for any reason fails to meet the requirements of an ISO shall be treated under the plan as a nonstatutory stock option.
Repricing Permitted. The 2012 Incentive Plan permits Google to reprice any stock option granted under the plan without the approval of the stockholders of Google. For this purpose, “reprice” means (1) any of the following or any other action that has the same effect: (a) lowering the exercise price of a stock option after it is granted, (b) any other action that is treated as a repricing under GAAP, or (c) cancelling a stock option at a time when its exercise price exceeds the fair market value of the underlying Class C capital stock, in exchange for another stock option, restricted stock, or other equity, unless the cancellation and exchange occurs in connection with a merger, acquisition, spin-off or other similar corporate transaction; and (2) any other action that is considered to be a repricing under formal or informal guidance issued by NASDAQ.
Performance-Based Awards
The LDC Committee may grant incentive awards that are intended to qualify as Performance-Based Compensation pursuant to the 2012 Incentive Plan. Unless otherwise specified in the agreement evidencing the grant of an incentive award that is intended to qualify as Performance-Based Compensation, the LDC Committee may, in its discretion, reduce or eliminate the amount payable to any participant with respect to the incentive award, based on such factors as the LDC Committee may deem relevant, but the LDC Committee may not increase any such amount above the amount established in accordance with the relevant objective performance formula applicable to the incentive award. For purposes of clarity, the LDC Committee may exercise the discretion provided by the foregoing sentence in a non-uniform manner among participants.
The performance goals upon which the payment or vesting of any incentive award (other than stock options and stock appreciation rights) that is intended to qualify as Performance-Based Compensation depends shall relate to one or more of the following performance measures: market price of Class C capital stock, earnings per share of Class C capital stock, income, net income or profit (before or after taxes), economic profit, operating income, operating margin, profit margin, gross margins, return on equity or stockholder equity, total shareholder return, market capitalization, enterprise value, cash flow (including but not limited to operating cash flow and free cash flow), cash position, return on assets or net assets, return on capital, return on invested capital, return on sales, stockholder returns, economic value added, cash value added, earnings or net earnings (before or after interest, taxes, depreciation and amortization), earnings from continuing operations, operating earnings, controllable profits, sales or revenues, sales growth, new orders, capital or investment, ratio of debt to debt plus equity, ratio of operating earnings to capital spending, new product innovation, product release schedules or ship targets, market share, cost reduction goals, inventory or supply chain management initiatives, budget comparisons, implementation or completion of specified projects or processes, customer satisfaction MBOs (management by objectives), productivity, expense, margins, operating efficiency, working capital, the formation of joint ventures, research or development collaborations, or the completion of other transactions, any other measure of financial performance that can be determined pursuant to GAAP, or any combination of any of the foregoing.
A performance goal (1) may relate to the performance of the participant, Motorola Mobility, Google, a subsidiary of Google, the Company, any business group, business unit or other subdivision of the Company, or any combination of the foregoing, as the LDC Committee deems appropriate and (2) may be expressed as an amount, as an increase or decrease over a specified period, as a relative comparison to the performance of a group of comparator companies or a published or special index, or any other external measure of the selected performance criteria, as the LDC Committee deems appropriate. The measurement of any performance goal may exclude the
impact of unusual, non-recurring or extraordinary items or expenses; items relating to financing activities; charges for restructurings or productivity initiatives; other non-operating items; discontinued operations; items related to the disposal of a business or segment of a business; the cumulative effect of changes in accounting treatment; items related to a change in accounting principle; items related to changes in applicable laws or business conditions; any impact of impairment of tangible or intangible assets; any impact of the issuance or repurchase of equity securities and or other changes in the number of outstanding shares of any class of Google equity securities; any gain, loss, income or expense attributable to acquisitions or dispositions of stock or assets; items attributable to the business operations of any entity acquired by Google during a performance period; stock-based compensation expense; in-process research and development expense; future contributions to the Google Foundation; gain or loss from all or certain claims and/or litigation and insurance recoveries; items that are outside the scope of Google’s or Motorola Mobility’s core, on-going business activities; and any other items, each determined in accordance with GAAP and as identified in Google’s audited financial statements, including the notes thereto.
Within ninety (90) days after the beginning of a performance period for an incentive award intended to qualify as Performance-Based Compensation, and in any case before twenty-five percent (25%) of the performance period has elapsed, the LDC Committee shall establish written, objective performance goals for the incentive awards to be earned over the performance period. Performance periods may be overlapping.
The maximum number of shares of Class C capital stock that may be covered by incentive awards intended to qualify as Performance-Based Compensation that are granted to any one participant who is an executive officer of Google in any calendar year shall not exceed 1,000,000 shares. The amount payable to any executive officer of Google with respect to any calendar year for all cash incentive awards shall not exceed $100 million. For this purpose, “amount payable with respect to any calendar year” means the amount of cash, or value of other property, required to be paid based on the achievement of applicable performance goals during a performance period that ends in a calendar year, disregarding any deferral pursuant to the terms of a deferred compensation plan unless the terms of the deferral are intended to comply with the requirements for Performance-Based Compensation.
For purposes of clarity, the foregoing provisions described in this section apply only to incentive awards granted under the 2012 Incentive Plan that are intended to qualify as Performance-Based Compensation and do not limit the LDC Committee’s discretion to determine the terms and conditions of performance-based incentive awards granted under the 2012 Incentive Plan that are not intended to qualify as Performance-Based Compensation. In addition, the LDC Committee may, subject to the terms of the 2012 Incentive Plan, amend previously granted incentive awards in a way that disqualifies them as Performance-Based Compensation.
Amendment and Termination
The board of directors may at any time suspend or discontinue the 2012 Incentive Plan or revise or amend the plan in any respect whatsoever, provided that to the extent that any applicable law, tax requirement, or rule of a stock exchange requires stockholder approval in order for any such revision or amendment to be effective, such revision or amendment shall not be effective without such approval. Except as expressly provided in the plan, no action under the plan may, without the consent of a participant, reduce the participant’s rights under any previously granted and outstanding incentive award.
Adjustments Upon Certain Changes
The 2012 Incentive Plan includes provisions that require or permit the LDC Committee to make certain adjustments upon the occurrence of specified events, including provisions that provide as follows: (1) upon the occurrence of certain events effecting the capitalization of Google such as a recapitalization or stock split, the LDC Committee shall make appropriate adjustments in the type and maximum number of shares available for issuance under the plan and the limits described above for ISOs and for incentive awards intended to be Performance-Based Compensation that are granted to executive officers of Google, (2) in the event of an increase or decrease in
the number or type of issued shares of common stock of Google without receipt or payment of consideration by the Company, the LDC Committee shall appropriately adjust the type or number of shares subject to each outstanding incentive award and the exercise price per share, if any, of shares subject to each such incentive award, (3) in the event of a merger or similar transaction as a result of which the holders of shares of Class C capital stock receive consideration consisting exclusively of securities of the surviving corporation in such transaction, the LDC Committee shall appropriately adjust each outstanding incentive award so that it pertains and applies to the securities which a holder of the number of shares of Class C capital stock subject to such incentive award would have received in such transaction, and (4) upon the occurrence of certain specified extraordinary corporate transactions, such as a dissolution or liquidation of Google, sale of all or substantially all of the Company’s assets, and certain mergers involving Google, and upon any other corporate change, including but not limited to the sale of a subsidiary or business unit, the LDC Committee has discretion to make certain adjustments to outstanding incentive awards, cancel outstanding incentive awards and provide for cash payments to participants in consideration of such cancellation, or provide for the exchange of outstanding incentive awards.
Summary of Federal Income Tax Consequences of Awards
ISOs. An participant who is granted an ISO does not recognize taxable income at the time the ISO is granted or upon its exercise, but the excess of the aggregate fair market value of the shares acquired on the exercise date (ISO shares) over the aggregate exercise price paid by the participant is included in the participant’s income for alternative minimum tax purposes. Upon a disposition of the ISO shares more than two years after grant of the ISOs and one year after exercise of the ISOs, any gain or loss is treated as long-term capital gain or loss. In such case, Google would not be entitled to a deduction. If the participant sells the ISO shares prior to the expiration of these holding periods, the participant recognizes ordinary income at the time of disposition equal to the excess if any, of the lesser of (1) the aggregate fair market value of the ISO shares at the date of exercise and (2) the amount received for the ISO shares, over the aggregate exercise price previously paid by the participant. Any gain or loss recognized on such a premature disposition of the ISO shares in excess of the amount treated as ordinary income is treated as long-term or short-term capital gain or loss, depending on how long the shares were held by the participant prior to the sale. The amount of ordinary income recognized by the participant is subject to payroll taxes. Google is entitled to a deduction at the same time and in the same amount as the participant recognizes ordinary income.
Nonstatutory Stock Options. A participant who is granted a stock option that is not an ISO (a nonstatutory stock option) does not recognize any taxable income at the time of grant. Upon exercise, the participant recognizes taxable income in an amount equal to the aggregate fair market value of the shares subject to the nonstatutory stock options over the aggregate exercise price of such shares. Any taxable income recognized in connection with the exercise of nonstatutory stock options by an employee is subject to payroll taxes. Google is entitled to a deduction at the same time and in the same amount as the participant recognizes ordinary income. The participant’s basis in the option shares will be increased by the amount of ordinary income recognized. Upon the sale of the shares issued upon exercise of the nonstatutory stock options, any further gain or loss recognized will be treated as long-term or short-term capital gain or loss, depending on how long the shares were held by the participant prior to the sale.
Restricted Stock and Restricted Stock Units. A participant will not recognize income at the time a restricted stock award is granted. When the restrictions lapse with regard to any installment of restricted stock, the participant will recognize ordinary income in an amount equal to the fair market value of the shares with respect to which the restrictions lapse, unless the participant elected to realize ordinary income in the year the award is granted in an amount equal to the fair market value of the restricted stock awarded, determined without regard to the restrictions. A participant will not recognize income at the time an award of restricted stock units (GSUs) is granted. The participant will recognize ordinary income at the time the GSUs vest, in an amount equal to the cash paid or to be paid or the fair market value of the shares delivered or to be delivered. The amount of ordinary income recognized by the participant is subject to payroll taxes. Google is entitled to a deduction at the same time and in the same amount as the participant recognizes ordinary income.
Performance-Based Awards. A participant will not recognize income at the time of grant of a performance-based award. The participant will recognize ordinary income at the time the performance-based award vests in an amount equal to the dollar amount, or the fair market value of the shares of Class C capital stock, subject to the award. The amount of ordinary income recognized by the participant is subject to payroll taxes. Google is entitled to a deduction at the same time and in the same amount as the participant recognizes ordinary income.
Section 162(m) Compensation Deduction Limitation.In general, Section 162(m) limits Google’s compensation deduction to $1,000,000 paid in any tax year to any “covered employee” as defined under Section 162(m). This deduction limitation does not apply to certain types of compensation, including Performance-Based Compensation. The terms of the 2012 Incentive Plan permit, but do not require, Google to grant performance-based awards under the plan that meet the requirements of Performance-Based Compensation so that such awards will be deductible by Google for federal income tax purposes.
New Plan Benefits
As of the date of this proxy statement, no awards have been made under the 2012 Incentive Plan. The benefits or amounts that will be received by or allocated to each named executive officer, all current executive officers as a group, and all employees who are not executive officers as a group under the 2012 Incentive Plan, as well as the benefits or amounts that would have been so received or allocated had the 2012 Incentive Plan been in effect in 2011, are not presently determinable. Directors who are not executive officers are not eligible to participate in the 2012 Incentive Plan.
Required Vote
Approval of Google’s 2012 Incentive Compensation Plan for Employees and Consultants of Motorola Mobility requires the affirmative “FOR” vote of the holders of a majority of the voting power of Google’s shares of Class A common stock and Class B common stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon, voting together as a single class. Unless marked to the contrary, proxies received will be voted “FOR” the approval of Google’s 2012 Incentive Compensation Plan for Employees and Consultants of Motorola Mobility.
Google Recommendation
We believe strongly that the approval of Google’s 2012 Incentive Compensation Plan for Employees and Consultants of Motorola Mobility is essential to our continued success. Our employees are among our most valuable assets. Stock options and other awards such as those provided under the 2012 Incentive Compensation Plan for Employees and Consultants of Motorola Mobility are vital to our ability to attract and retain outstanding and highly skilled individuals. Such awards also are crucial to our ability to motivate employees to achieve our goals. For the reasons stated above the stockholders are being asked to approve Google’s 2012 Incentive Compensation Plan for Employees and Consultants of Motorola Mobility.
Our board of directors recommends a vote “FOR” the approval of Google’s 2012 Incentive Compensation Plan for Employees and Consultants of Motorola Mobility.
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STOCKHOLDER PROPOSALS
Proposal Numbers 6-84-8 are proposals we received from our stockholders. If the proponents of these proposals, or representatives who are qualified under state law, are present at our Annual Meeting and submit the proposals for a vote, then the proposals will be voted upon. The stockholder proposals, including any supporting statements, are included exactly as submitted to us by the proponents of these proposals. The board of directors’ recommendation on each proposal is presented immediately following our opposing statement to the proposal. We will promptly provide you with the address, and, to our knowledge, the number of voting securities held by the proponents of the stockholder proposals, upon receiving a written request directed to:
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| Google Inc. | Email: corporatesecretary@google.com |
| Attn: Corporate Secretary | |
| 1600 Amphitheatre Parkway | |
| Mountain View, California 94043 | |
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GOOGLE INC. | 2015 Proxy Statement 53
| Proposal Number 4 | Stockholder Proposal Regarding Equal Shareholder Voting |
Attn: Corporate Secretary
1600 Amphitheatre Parkway
Mountain View, CA 94043
Email: corporatesecretary@google.com
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PROPOSAL NUMBER 6
STOCKHOLDER PROPOSAL
REGARDING AN ADVISORY VOTE ON POLITICAL CONTRIBUTIONS
John Chevedden, James McRitchie and the NorthStar Asset Management Inc. Funded Pension Plan, hasas co-lead filers, and Sonen Capital, as a co-filer, have advised us that it intendsthey intend to submit the proposal set forth below for consideration at our Annual Meeting.
Say on Political Contributions
Whereas,Give Each Share an Equal Vote – Proposal 4
RESOLVED: Shareholders request that our Board take all practicable steps in its control toward initiating and adopting a recapitalization plan for all outstanding stock to haveone vote per share. This would include efforts at the Supreme Court rulingearliest practicable time toward encouragement and negotiation with Class B shareholders to request that they relinquish, for the common good of all shareholders, any preexisting rights. This is not intended to unnecessarily limit our Board’s judgment inCitizens United v. Federal Election Commission interpreted crafting the First Amendment rightrequested change in accordance with applicable laws and existing contracts.
SUPPORTING STATEMENT:
In our company’s dual-class voting structure, each share of freedomClass A common stock has one vote and each share of speechClass B common stock has 10 votes. As a result, Mr. Page and Mr. Brin currently control nearly 55% of our company’s total voting power. This raised concerns that the interests of public shareholders may be subordinated to includethose of our co-founders.
By allowing certain corporate political expenditures involving “electioneering communications,” striking down elementsstock to have more voting power than other stock our company takes our public shareholder money but does not let us have an equal voice in our company’s management. Without a voice, shareholders cannot hold management accountable. For example, despite the fact that more than 85% of outsiders (average shareholders) voted AGAINST the creation of a third class of stock (class C), the weight of the previously well-established McCain-Feingold law,insiders’ 10 votes per share allowed the passage of this proposal.
As of November 1, 2014, Institutional Shareholder Services (ISS), which rates companies on risk, gave our company a 10, its highest risk category, for shareholder rights and resultingcompensation.
News Corp. is another company like ours. “If you are buying shares in greater public[News Corp.], it’s buyer beware,” says Sydney Finkelstein, a professor at Dartmouth’s Tuck School of Business. “There is no management or leadership reason to have two classes of stock except to retain control.” The Council of Institutional Investors asked NASDAQ and shareholder concern about corporate political spending;NYSE to stop listing new companies with dual share classes.
Whereas, proponents believe Google Inc. should establish policies that minimize risk to the firm’s reputation and brand through possible future missteps in corporate political contributions;
Whereas, in July 2010 Target Corporation donated $150,000 to the political group Minnesota Forward, which was followed by a national controversy with demonstrations, petitions, threatened boycotts and considerable negative publicity;
Whereas, Google’s website states that “at Google, we’ve worked hard to minimize the environmental impactThe 2013 version of our services... If you add in our renewable energy and offsets, our footprint is zero.” Yet since 2009, Google Inc. NETPAC (NETPAC) designated 28% of its contributions to politicians voting against the American Clean Energy and Security Act of 2009 (H.R. 2454) and voting to deregulate greenhouse gases (H.R. 910).
Whereas, Google Inc. has a firm nondiscrimination policy which states that “we strictly prohibit unlawful discrimination or harassment of any kind...on the basis of…sex, gender identity or expression, age, marital status…or any other characteristics protected by law.” Furthermore, “the Google Code of Conduct is...built around the recognition that everything we do in connection with our work at Google will be, and should be, measured againstthis proposal won the highest possible standards of ethical business conduct.” Yet since 2009, NETPAC designated more than 40% of its contributions to politicians voting against hate crimes legislation and the repeal of Don’t Ask Don’t Tell, and/or sponsoring the Federal Marriage Amendment Act, which would eliminate same sex marriage across the nation.
Resolved: Shareholders recommend that the Board of Directors adoptvotes for a policy under which the proxy statement for each annual meeting will contain ashareholder proposal on electioneering and political contributions and communications describing:at our company – 180 million yes-votes.
the Company’s and NETPAC’s policies on electioneering and political contributions and communications,Please vote to protect shareholder value:
any electioneering and political contributions and communications expenditures known to be anticipated during the forthcoming fiscal year,Give Each Share an Equal Vote – Proposal 4
the total amount of such anticipated expenditures,
a list of specific electioneering and political contributions and communications expenditures made in the prior fiscal year,
management’s analysis of the congruency with company values and policies of those political and electioneering policies, and of resultant expenditures for the prior year and the forthcoming year,
and providing an advisory shareholder vote on those policies and future plans.
Supporting Statement
Proponents recommend that the annual proposal contain management’s analysis of risks to our company’s brand, reputation, or shareholder value. “Expenditures for electioneering communications” means spending directly, or through a third party, at any time during the year, on printed, internet or broadcast communications, which are reasonably susceptible to interpretation as in support of or opposition to a specific candidate.
Google Opposing Statement
As a global technology leader focusing on improving the ways people connect with information, we are committed to transparency in all areas of our business, including our public policy activities and political contributions.
Our public policy team works in compliance with the Google Code of Conduct, which applies to all of our employees. In accordance with U.S. campaign finance law, we do not use our corporate funds for political contributions to federal candidates or committees, nor do we contribute corporate funds to trade associations supporting such candidates or committees.
The Google Inc. NetPAC, a political action committee (PAC), is a transparent and lawfully regulated mechanism for our employees to pool their resources to support federal candidates. We created the Google NetPAC in late 2006 to support officeholders and candidates who share our goal of promoting the internet as a free and open platform for communication and innovation, to the benefit of our users. Eligible Google employees may voluntarily contribute to the Google NetPAC. A board of directors, made up of senior Google employees, makes all final decisions on the donations made by the Google NetPAC. An advisory group, comprising interested and eligible Google employees from across the company, has helped promote the PAC and provides input into the giving strategy and overall approach.
Additionally, we are also a member of several national and state political organizations and a number of trade associations and other organizations representing a broad range of companies committed to issues that we care about.
In making any political contribution or participating in political and trade associations, we comply with applicable campaign finance and lobbying laws, including laws and policies requiring public disclosure. Our political contribution policy and our political contributions are disclosed on our investor relations website at http://www.google.com/publicpolicy/transparency.html. Our board of directors and/or one of its committees also review Google’s political contributions.
Our board of directors believes that participatingthe capital structure set out in our Fourth Amended and Restated Certificate of Incorporation is in the political processbest interests of the company and our stockholders.
Since its inception, Google has been managed with a focus on the long term. This focus was emphasized by our founders, Larry Page and Sergey Brin, in their letter to our stockholders at the time of Google’s initial public offering in 2004: “We are creating a transparent mannercorporate structure that is designed for stability over long time horizons. By investing in Google, you are placing an important wayunusual long term bet on the team, especially Sergey and me, and on our innovative approach.”
The dual class capital structure with two classes of common stock (Class A common stock with one vote per share and Class B common stock with ten votes per share) has been in existence since we became a public company in 2004, and the tri-class structure, with a new class of non-voting capital stock (Class C capital stock with no voting rights), was approved by votes representing a majority of our outstanding common stock at the 2012 Annual Meeting of Stockholders. Every investor purchasing a share of our Class A common stock and our Class C capital stock is aware of this capital structure, and many are attracted to enhanceour stock by the long-term stability that our founders and largest Class B stockholders, Larry and Sergey, provide to Google.
We believe that our success is owed in large part to the leadership and vision provided by Larry, Sergey, and Eric E. Schmidt, the Executive Chairman of our board of directors. Through their leadership and focus on innovation and long-term growth, we have established a track record of building a strong company and creating stockholder value and promote good corporate citizenship. value. We believe that the stability provided by the tri-class voting structure gives us greater ability to focus on long-term interests than might otherwise be the case.
GOOGLE INC. | 2015 Proxy Statement 54
Our board of directors doesbelieves that elimination of the tri-class structure will not believe, however, that implementing an annual stockholder advisory vote onimprove either the corporate governance or the long-term financial performance of the company. Accordingly, our political contributions would provide stockholders with any more meaningful information than is already available. Our board of directors therefore recommends that stockholders vote “AGAINST” this proposal.
Required Vote
Approval of the stockholder proposal requires the affirmative “FOR” vote of the holders of a majority of the voting power of Google’s shares of Class A common stock and Class B common stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon, voting together as a single class. Unless marked to the contrary, proxies received will be voted “AGAINST” the stockholder proposal.
Google Recommendation
Our board of directors recommends a vote “AGAINST” the stockholder proposal.
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GOOGLE INC. | 2015 Proxy Statement 55
| Proposal Number 5 | Stockholder Proposal Regarding a Lobbying Report |
PROPOSAL NUMBER 7
STOCKHOLDER PROPOSAL
REGARDING MANDATORY ARBITRATION OF CERTAIN SHAREHOLDER CLAIMS
Mark Shaevsky hasWalden Asset Management, as a lead filer, joined by other organizations, whose names, addresses and stockholdings will be provided by us upon request, have advised us that he intendsthey intend to submit the proposal set forth below for consideration at our Annual Meeting.
Shareholder Arbitration Proposal
Resolved,Lobbying Disclosure
Whereas,we believe it is important that Google’s lobbying positions, and processes to influence public policy, are transparent. Public opinion is skeptical of corporate influence on Congress and public policy and controversial lobbying activity may pose risks to our company’s reputation.
Google spent approximately $45.3 million between 2010 and 2014 on federal lobbying, according to Senate reports. But this figure may not include grassroots lobbying to influence legislation by mobilizing public support or opposition and does not include lobbying expenditures to influence legislation in states.
Resolved,the bylaws are amendedshareholders of Google request the Board authorize the preparation of a report, updated annually, and disclosing:
| 1. | Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications. |
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| 2. | Payments by Google used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient. |
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| 3. | Google’s membership in and payments to any tax-exempt organization that writes and endorses model legislation. |
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| 4. | Description of the decision making process and oversight by management and the Board for making payments described in sections 2 and 3 above. |
For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to add the following article:
general public that (a) Any controversyrefers to specific legislation or claim brought directlyregulation, (b) reflects a view on the legislation or derivatively by any present or former shareholderregulation and (c) encourages the recipient of the Corporation ascommunication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a presenttrade association or former stockholder, whether againstother organization of which Google is a member.
Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the Corporation,local, state and federal levels.
The report shall be presented to the Audit Committee or other relevant Board oversight committees and posted on Google’s website.
Supporting Statement
We encourage transparency about the ways corporate funds influence legislation and regulation, directly and indirectly. We commend Google for updating disclosure on its website on political spending and lobbying but Google still does not disclose details about indirect lobbying, maintaining secrecy about its payments used for lobbying by trade associations.
For example, the Chamber of Commerce spent over $1 billion in lobbying since 1998, yet Google’s level of funding of the Chamber is secret. The Chamber has also sued the EPA for advocacy combating climate regulation.
In contrast, Google’s website publicly affirms its commitment to “protecting the environment.”
In September 2014 Chair Eric Schmidt stated on a radio show that Google was ending its membership in ALEC, an organization that assists legislators and companies to promote model legislation. One high priority ALEC campaign is to repeal renewable energy legislation at the State level. Chair Schmidt argued ALEC was “literally lying” about climate. We commend Google for this act of leadership.
It is a logical next step in the nameinterests of transparency for Google to review its public policy advocacy and oversight and expand its public disclosure about third party lobbying.
GOOGLE INC. | 2015 Proxy Statement 56
Google Opposing Statement
As a global technology leader focusing on improving the Corporation or otherwise, arising outways people connect with information, we are committed to transparency in all areas of or relating to any acts or omissionsour business, including our public policy activities and lobbying expenditures.
Google has long been a champion of the Corporation or any of its officers, directors, agents, affiliates, associates, employees or controlling persons, shalldisclosure and transparency. Consistent with those values, Google adopted a transparency policy for our public policy activities, including our lobbying efforts, which can be settled by arbitration under the Federal Arbitration Act in accordance with the commercial arbitration rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction. In the arbitration proceedings, the parties shall be entitled to all remedies that would be available in the absence of this Article and the arbitrators, in rendering their decision, shall follow the substantive laws that would otherwise be applicable and shall state the basis of their decision. This Article shall apply, without limitation, to an action arising under any federal or state securities law.found at http://www.google.com/publicpolicy/ transparency.html.
(b) Arbitration under this Article shall be held in San Francisco, California, except that arbitration of disputes involving an amount in controversy of less than $25,000 shall be held in the jurisdiction in which the claimant stockholder resides.
(c) This Article shall not apply to appraisal proceedings or to a claim for damages in excess of $3,000,000. Any claim brought derivatively will be subject to requirements applicable to derivative proceedings in Delaware.
(d) Any party, upon submitting a matter to arbitration as required by this Article, may seek a temporary restraining order or preliminary injunction on an individual basis from a court of competent jurisdiction pending the outcome of the arbitration.
(e) No controversy or claim subject to arbitration under this Article may be brought in a representative capacity on behalf of a class of stockholders or former stockholders.
(f) The parties to any proceeding may agree not to arbitrate all or part of any controversy or claim, on the selection of arbitrators, and the location and procedures applicable to any proceeding.
(g) This Article shall be effective 30 days after it is adopted (the “Effective Date”). This Article shall not apply to controversies or claims relating to (i) shares acquired by the claimant prior to the Effective Date or (ii) claims arising out of actions or omissions occurring prior to the Effective Date.
(h) TheOur board of directors may adopt reasonable alternative arbitration proceduresbelieves our U.S. Public Policy Transparency site already contains much of the information requested in this proposal. Links are provided for Google’s federal lobbying disclosure reports, as are a representative listing of politically-engaged trade associations and other tax-exempt organizations that receive the most substantial contributions from Google’s U.S. Federal Public Policy team. Additionally, in compliance with respect to future controversies or claims.
Supporting Statement
Lawyer driven class actions impose large burdens on corporations without meaningful benefits to shareholders. Suits commonlyapplicable laws, Google discloses a significant amount of information in hundreds of publicly available filings at the state and local level in the U.S. To the extent grassroots lobbying is covered by a particular state’s disclosure laws, those amounts are filed soon after merger announcements or stock price changes to generate legal feesincluded in settlements. Shareholders bear the ultimatethose reports. Google does not otherwise track grassroots lobbying costs of defending court class actions, funding settlements,in a manner that this proposal suggests, and indemnifying officers and directors. Requiring arbitration on an individual basis should reduce such abuses. The proposed bylaw would affect only future purchasers of shares.
Google Opposing Statement
While we recognize that litigation can impose significant burdens on corporations without meaningful benefits to stockholders, we believe that the proposed bylaw amendment should not be approved by our stockholders. The proposed bylaw amendment, if approved,believes doing so would be binding on us,impractical and we would have no discretion to choose whether or not to implement it. As discussed below, we believe the proposed bylaw may violate the law of the State of Delaware, where Google is incorporated. In addition, based on recent statements of the staff of the SEC (SEC staff), we believe that the proposed bylaw could violate federal securities laws, to which Google is subject as a U.S. public company.burdensome.
As a Delaware company, our bylaws may not contain any provision that is inconsistent with Delaware law. Under Delaware law, a party cannot be required to arbitrate the merits of a dispute without a clear expression of the intent to do so in a valid agreement. A party is also entitled to have claims for breaches of fiduciary duty adjudicated by the Delaware Court of Chancery, unless there is a clear expression of an intent to arbitrate those claims. It is not certain that a Delaware court would view the mere acquisition of shares as meeting this standard. Accordingly, we believe the proposed bylaw, if implemented, could be challenged as being inconsistent with Delaware law. Litigation to invalidate the bylaw or challenging our power to implement it would be costly and divert management time and focus away from our business, without necessarily providing meaningful benefits to us even if we were ultimately successful in the litigation.
Moreover, as a U.S. public company, we are subject to the federal securities laws, which are administered by the SEC. The SEC staff has also recently expressed its views about an identical bylaw amendment that was proposed for inclusion in the 2012 proxy statements of Pfizer, Inc. and Gannett Co., Inc. Pfizer and Gannett asked the SEC staff to agree that the proposal could be omitted from their proxy statements because, if implemented, it would cause them to violate the federal securities laws. Specifically, they argued that the bylaw could be challenged as an improper waiver of stockholder rights under those laws. The SEC staff agreed with Pfizer and Gannett, stating that there was a basis for concluding that the proposed bylaw, if implemented, would cause the companies to violate the federal securities laws. A member of the SEC staff also recently stated that the SEC staff would have prohibited another company from making its initial public offering if the company’s governance arrangements included provisions mandating arbitration of claims. As a result, we believe the proposed bylaw would also be subject to costly and time-consuming challenge under the federal securities laws and potentially attract scrutiny and action by the SEC staff, including action that could affect our ability to access the capital markets.
For the foregoing reasons, ourOur board of directors believes that it would not be prudent orparticipating in the interestspolitical process in a transparent manner is an important way to enhance stockholder value and promote good corporate citizenship. Given our existing method of frequently updating stockholders to implementand the proposed bylaw andpublic about Google’s public policy activities, our board of directors does not believe that implementing this proposal would benefit our stockholders. Accordingly, our board of directors recommends that stockholders vote “AGAINST” this stockholder proposal.
Required Vote
Approval of the stockholder proposal requires the affirmative “FOR” vote of the holders of a majority of the voting power of Google’s shares of Class A common stock and Class B common stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon, voting together as a single class. Unless marked to the contrary, proxies received will be voted “AGAINST” the stockholder proposal.
Effect of the Proposal
If this stockholder proposal is approved by our stockholders, our bylaws would be amended effective as of the date of the Annual Meeting.
Google Recommendation
Our board of directors recommends a vote “AGAINST” the stockholder proposal.
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GOOGLE INC. | 2015 Proxy Statement 57
| Proposal Number 6 | Stockholder Proposal Regarding The Adoption of a Majority Vote Standard For The Election of Directors |
PROPOSAL NUMBER 8
STOCKHOLDER PROPOSAL
REGARDING EQUAL SHAREHOLDER VOTING
John CheveddenThe Firefighters’ Pension System of the City of Kansas City, Missouri, Trust has advised us that heit intends to submit the proposal set forth below for consideration at our Annual Meeting.
8—Equal Shareholder Voting
RESOLVED: ShareholdersResolved:That the shareholders of Google Inc. (or the “Company”) hereby request that ourthe Board take stepsof Directors initiate the appropriate process to adoptamend the Company’s governance documents (certificate of incorporation or bylaws) to provide that director nominees shall be elected by the affirmative vote of the majority of votes cast at an annual meeting of shareholders, with a planplurality vote standard retained for allcontested director elections, that is, when the number of our company’s outstanding stockdirector nominees exceeds the number of board seats.
Supporting Statement:
In order to have one-vote per share. This would be all practicable steps including encouragement and negotiation withprovide shareholders who have 10-votes per share, to request that they relinquish,a meaningful role in director elections, Google should use a majority vote standard for the common goodelection of all shareholders, any preexisting rights, if necessary.
This proposal is not intended to unnecessarily limit our Board’s judgment in crafting the requested change in accordance with applicable laws and existing contracts. This proposal is important because certain shares not owned by the general public have super-sized voting power with 10-votes per share compared to one-vote per share.
This proposal topic is expected to obtain overwhelmingdirectors. A majority support from our independent, general public shareholders.
The danger of giving disproportionate power to insiders is illustrated by Adelphia Communications. Adelphia’s dual-class voting stock gave the Rigas family control and contributed to Adelphia’s participation in “onevote standard would require that a nominee receive a majority of the most extensive financial frauds ever to take place at a public company.” See Securities and Exchange Commission Litigation Release No. 17627 (July 24, 2002).
The SEC alleged that Adelphia fraudulently excluded more than $2 billion in bank debt from its financial statements and concealed “rampant self-dealing by the Rigas Family.” Meanwhile, the price of Adelphia stock collapsed from $20 to 79¢ in two-years.
With stock having 10-times more voting power our company takes our public shareholder money but does not let us have an equal voice in our company’s management. Without a voice, shareholders cannot hold management accountable.
The merit of this proposal should also be considered in the context of the opportunity for additional improvement in our company’s 2011 reported corporate governancevotes cast in order to make our company more competitive:be elected. This standard is particularly well-suited for the vast majority of director elections in which only board nominated candidates are on the ballot. We believe that a majority vote standard in board elections would establish a challenging vote standard for board nominees and improve the performance of individual directors and entire boards.
The Corporate Library, an independent investment research firm rated our company “High Concern” in Takeover Defenses and “Moderate Concern” in Executive Pay – $22 million each
Under the Company’s current standard, a nominee for Patrick Pichette and Nikesh Arora. And one percent of CEO pay was incentive based.
The Corporate Library said our executive pay committee gave Executive Chairman Eric Schmidt equity pay of $100 million in return for Mr. Schmidt actingthe board can be elected with as an advisor to new CEO Larry Page and Co-Founder and President of Technology Sergey Brin, and assisting with the transitionlittle as a single affirmative vote, even if a substantial majority of the CEOvotes cast are “withheld” from the nominee.
An increasing number of companies, including Amazon.com, Microsoft, and Yahoo! have adopted a majority vote standard for director elections. These companies also have policies that require resignation if nominees fail to win a majority of votes in favor. With a majority vote standard in place, the board can then consider action on developing post-election procedures to address the status of directors that fail to win election. A majority vote standard combined with a post-election director resignation policy would establish a meaningful right for shareholders to elect directors, and reserve for the board an important post-election role in determining the continued status of an unelected director.
We urge shareholders to Mr. Page. The equity pay will simply vest over a four-year period with no performance requirements.voteFORthis proposal.
Four named executive officers (excluding Mr. Schmidt, Page, and Brin) received an average of $15 million in time-vesting equity pay, and annual incentive pay was essentially discretionary. Mr. Brin owned no stock.
Our 9-member board had 3 insiders and one insider-related director – independence concern. One vote from our 318 million shares was all it took to reelect each of our directors.
Please encourage our board to respond positively to this proposal for Equal Shareholder Voting—Yes on 8.
Google Opposing Statement
Please see Proposal Number 3, beginning on page 56 of this proxy statement for a discussion of the reasons why our
Our board of directors has considered this proposal and believes that the capital structure to be includedvoting procedures set forth in our Fourth Amended & Restated Certificate of Incorporation isbylaws, last amended and restated in July 2012, are in the best interests of the companyGoogle and our stockholders.
Additionally,
Under our bylaws, directors are elected using a plurality voting standard. Google’s Nominating and Corporate Governance Committee is tasked with evaluating and recommending nominees for election to our board of directors. As part of the practice, Google’s Nominating and Corporate Governance Committee reviews and considers individual director performance, board and committee performance, governance practices, and stockholder approval before making recommendations to the board of directors. Stockholders can currently express dissatisfaction with an incumbent director’s performance by withholding their vote. Stockholders who are truly dissatisfied with incumbent directors are empowered by our bylaws to nominate or recommend candidates for elections to our board.
A plurality voting standard for the election of directors is standard under Delaware law. It assures that we avoid “failed elections” (scenarios where directors fail to achieve the votes necessary to be elected, resulting in vacancies on our board). The possibility of failed elections introduces unnecessary legal uncertainty and risk to our director election process as discussed under the heading “Certain Relationships and Related Transactions”vacancies on pages 26-29 of this proxy statement, our board of directors acting throughcould result in our inability to comply with certain NASDAQ listing requirements or other securities regulations. This includes regulations related to director independence, committee composition, and the Audit Committee, reviews all known relationships and transactions in which Google and our directors, executive officers, and significant stockholders or their immediate family members are participants, and only approves transactions with such related parties if it determines that the transaction is in the best interestsmaintenance of the company and our stockholders. All of the members of our Audit Committee are independent directors.an audit committee financial expert.
Our board of directors believes that elimination of the dual class structure will not improve either the corporate governance or the long-term financial performance of the company. Accordingly,current nominating and voting procedures for election to our board of directors, as opposed to a mandated majority voting standard, provide the board the flexibility to appropriately respond to stockholder interests without the risk of potential corporate governance complications arising from failed elections. Accordingly, the board of directors has concluded that this stockholder proposal is not in the best interests of Google and our stockholders, and recommends that stockholders vote “AGAINST” this proposal.
GOOGLE INC. | 2015 Proxy Statement 58
Required Vote
Approval of the stockholder proposal requires the affirmative “FOR” vote of the holders of a majority of the voting power of Google’s shares of Class A common stock and Class B common stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon, voting together as a single class. Unless marked to the contrary, proxies received will be voted “AGAINST” the stockholder proposal.
Google Recommendation
Our board of directors recommends a vote “AGAINST” the stockholder proposal.
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APPENDIX A-1
FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
GOOGLE INC.| 2015 Proxy Statement 59
| Proposal Number 7 | Stockholder Proposal Regarding Renewable Energy Cost |
GOOGLE INC., a corporation organized and existing underShelton Ehrlich has advised us that he intends to submit the lawsproposal set forth below for consideration at our Annual Meeting.
Shareholder Proposal – Renewable Energy Costs
Resolution
Whereas,our company has chosen to obtain some or most of the Stateelectricity that powers its operations via renewable sources it would be useful for shareholders to know more about the costs of Delaware (the “Corporation”), hereby certifies as follows:this choice.
A. The name
Resolved,that the shareholders request the Company prepare a report at reasonable expense and omitting proprietary information estimating the total investment in these renewable sources of electricity in $/kW and the average cost per kilowatt-hour through 2013 and the projected costs over the life of the Corporation is Google Inc.existing renewable sources. If the company chooses, the report may be limited to facilities in the United States. The Corporation’s original Certificatereport should also estimate the subsidies obtained from governments at all levels in reduced investment dollars and/or as a percent reduction in the cost of Incorporation was filedelectricity. If available the report should also compare the cost of power from the renewable electricity sources with the Secretarycost of Stateelectricity from the power companies serving the communities in which our facilities are located. If it chooses the Company may also include statements on the non-financial benefits of using renewable electricity such as an improved reputation. The report should be published by December 2015.
Supporting Statement
Our company, it may be assumed, compared the costs of various means for powering its facilities. It may have located power-intensive operations where power prices were lowest, etc. Therefore, the report requested here should be relatively easy to prepare.
In September 2013 Google issued an interesting reporthttp://static.googleusercontent.com/external_content/untrusted_dlcp/ www.google.com/en/us/green/pdfs/renewable-energy.pdf on its renewable energy policy. The report was thorough although it did not provide the cost data that would be of interest to shareholders.
Solar and wind for electricity production provide substantial benefits despite the defect that they are intermittent. Unfortunately, no low-cost method of electricity storage is available meeting Google’s criteria* for storage. Also, if these intermittent sources of power become very widespread there is the risk that they will disrupt the power grid to which Google facilities must connect.
There are also technical risks with solar and wind as innovators try to push down costs. For example our company’s investment in very large solar-thermal technology may be a financial failure and even a technical failure.http://online.wsj.com/articles/ivanpah-solar-project-owners-delay-repaying-loans-documents-say-1411488730?KEYWORDS=ivanpah
http://www.forbes.com/sites/jamesconca/2014/11/11/thermal-solar-energy-some-technologies-really-are-dumb/ The requested report would not address all of the Stateissues connected with Google’s decision to “Go Green” but it would give the shareholders a way to judge if our company has made prudent use of Delawaresome of our investment.
| * | Compressed Air Energy Storage (CAES) is available technology but would use some fossil fuel in returning power to the grid. |
Google Opposing Statement
Google is constantly looking for ways to minimize our overall environmental impact. We seek a diversified, cost-effective, reliable, and sustainable energy supply to power our data centers and operate our company, and renewable energy is undeniably an important component of that mix.
We carefully evaluate many factors in making power decisions, including rates, fuel risks, supply shortages, environmental impacts, and changes in governmental policies. Renewable energy provides a variety of benefits, including a hedge against rising fuel prices, a sustainable power supply source in fossil heavy regions, and mitigation against future environmental regulations.
GOOGLE INC. | 2015 Proxy Statement 60
We have been an industry leader in releasing valuable information about the energy efficiency and power usage of our data centers and company operations, which can be found on October 22, 2002.our website at http://www.google.com/green/. Furthermore, we provide substantial disclosure regarding our purchase of renewable energy at http://www.google.com/green/energy/use/#purchasing, including links to white papers detailing our power procurement strategy, estimated total investments in renewable energy projects, and approximate megawatts of energy we have procured via our power purchase agreements and partnership efforts with utility providers.
B. This Fourth Amended
The report requested by the proposal would contain specific prices of electricity, which is highly confidential and Restated Certificateextensively negotiated. Disclosure of Incorporation was duly adoptedthis information would impact our ability to negotiate favorable power supply contracts, which would harm our business. The requested report would not, in accordance with Sections 242 and 245substance, provide any more meaningful information than our existing disclosures, nor would it justify the competitive harm we may suffer as a result of the General Corporation Lawdisclosed information.
Our board of directors believes that participating in clean energy efforts in a prudent and rational manner is an important way to enhance stockholder value and promote sustainable energy initiatives across the industry. Given the information already publicly available on Google’s website and the potential damage to our competitive position, our board of directors does not believe that producing the requested report would be in the best interests of Google and its stockholders. Accordingly, our board of directors recommends that stockholders vote “AGAINST” this proposal.
Required Vote
Approval of the State of Delaware, and restates, integrates and further amendsstockholder proposal requires the provisions of the Corporation’s Certificate of Incorporation.
C. The text of the Certificate of Incorporation of this Corporation is hereby amended and restated in its entirety as set forth inExhibit A attached hereto.
IN WITNESS WHEREOF, Google Inc. has caused this Fourth Amended and Restated Certificate of Incorporation to be executed by the undersigned officer, thereunto duly authorized, this th day of , .
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GOOGLE INC.
a Delaware corporation
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| |
By: | | |
| | Name:
Title:
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EXHIBIT A
ARTICLE I
The name of this corporation is Google Inc. (hereinafter, the “Corporation”).
ARTICLE II
The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
ARTICLE IV
Section 1.Authorized Shares. This Corporation is authorized to issue nine billion (9,000,000,000) shares of Class A Common Stock, par value $0.001 per share (the “Class A Common Stock”), three billion (3,000,000,000) shares of Class B Common Stock, par value $0.001 per share (the “Class B Common Stock”, and together with the Class A Common Stock, the “Common Stock”), three billion (3,000,000,000) shares of Class C Capital Stock, par value $0.001 per share (the “Class C Capital Stock”), and one hundred million (100,000,000) shares of Preferred Stock, par value $0.001 per share. The number of authorized shares of any class or classes of stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative “FOR” vote of the holders of at least a majority of the voting power of the issued and outstanding shares of Common Stock of the Corporation, voting together as a single class.
Section 2.Common Stock. A statement of the designations of each class of Common Stock and the powers, preferences and rights and qualifications, limitations or restrictions thereof is as follows:
(a)Voting Rights.
(i) Except as otherwise provided herein or by applicable law, the holders ofGoogle’s shares of Class A Common Stockcommon stock and Class B Common Stock shall at all times vote together as one class on all matters (including the election of directors) submitted to a vote or for the consent of the stockholders of the Corporation.
(ii) Each holder of shares of Class A Common Stock shall be entitled to one (1) vote for each share of Class A Common Stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the stockholders of the Corporation.
(iii) Each holder of shares of Class B Common Stock shall be entitled to ten (10) votes for each share of Class B Common Stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the stockholders of the Corporation.
(b)Dividends. Subject to the preferences applicable to any series of Preferred Stock, if any, outstanding at any time, the holders of Class A Common Stock and the holders of Class B Common Stock shall be entitled to share equally, on a per share basis, in such dividends and other distributions of cash, property or shares of stock of the Corporation as may be declared by the Board of Directors from time to time with respect to the Common Stock
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out of assets or funds of the Corporation legally available therefor; provided, however, that in the event that such dividend is paid in the form of shares of Common Stock or rights to acquire Common Stock, the holders of Class A Common Stock shall receive Class A Common Stock or rights to acquire Class A Common Stock, as the case may be, and the holders of Class B Common Stock shall receive Class B Common Stock or rights to acquire Class B Common Stock, as the case may be.
(c)Liquidation. Subject to the preferences applicable to any series of Preferred Stock, if any outstanding at any time, in the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Corporation, the holders of Class A Common Stock and the holders of Class B Common Stock shall be entitled to share equally, on a per share basis, all assets of the Corporation of whatever kind available for distribution to the holders of Common Stock.
(d)Subdivision or Combinations. If the Corporation in any manner subdivides or combines the outstanding shares of one class of Common Stock, the outstanding shares of the other class of Common Stock will be subdivided or combined in the same manner.
(e)Equal Status. Except as expressly provided in this Article IV, Class A Common Stock and Class B Common Stock shall have the same rights and privileges and rank equally, share ratably and be identical in all respects as to all matters. Without limiting the generality of the foregoing, (i) in the event of a merger, consolidation or other business combination requiring the approval of the holders of the Corporation’s capital stock entitled to vote thereon (whether or not the Corporation is the surviving entity), the holders of the Class A Common Stock shall have the right to receive, or the right to elect to receive, the same form of consideration, if any, as the holders of the Class B Common Stock and the holders of the Class A Common Stock shall have the right to receive, or the right to elect to receive, at least the same amount of consideration, if any, on a per share basis as the holders of the Class B Common Stock, and (ii) in the event of (x) any tender or exchange offer to acquire any shares of Common Stock by any third party pursuant to an agreement to which the Corporation is a party or (y) any tender or exchange offer by the Corporation to acquire any shares of Common Stock, pursuant to the terms of the applicable tender or exchange offer, the holders of the Class A Common Stock shall have the right to receive, or the right to elect to receive, the same form of consideration as the holders of the Class B Common Stock and the holders of the Class A Common Stock shall have the right to receive, or the right to elect to receive, at least the same amount of consideration on a per share basis as the holders of the Class B Common Stock.
(f)Conversion.
(i) As used in this Section 2(f), the following terms shall have the following meanings:
(1) “Founder” shall mean either Larry Page or Sergey Brin, each as a natural living person, and “Founders” shall mean both of them.
(2) “Class B Stockholder” shall mean (a) the Founders, (b) the registered holder of a share of Class B Common Stock on July 6, 2004 (the “Effective Time”), (c) each natural person who Transferred shares of Class B Common Stock (or securities convertible into or exchangeable for shares of Class B Common Stock) prior to the Effective Time to a Permitted Entity that, as of the Effective Time, complies with the applicable exception for such Permitted Entity specified in Section 2(f)(iii)(2), and (d) the initial registered holder of any shares of Class B Common Stock that were originally issued by the Corporation after the Effective Time.
(3) “Permitted Entity” shall mean, with respect to any individual Class B Stockholder, any trust, account, plan, corporation, partnership, or limited liability company specified in Section 2(f)(iii)(2) established by or for such individual Class B Stockholder, so long as such entity meets the requirements of the exception set forth in Section 2(f)(iii)(2) applicable to such entity.
(4) “Transfer” of a share of Class B Common Stock shall mean any sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of such share or any legal or beneficial interest in such
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share, whether or not for value and whether voluntary or involuntary or by operation of law. A “Transfer” shall also include, without limitation, a transfer of a share of Class B Common Stock to a broker or other nominee (regardless of whether or not there is a corresponding change in beneficial ownership), or the transfer of, or entering into a binding agreement with respect to, Voting Control over a share of Class B Common Stock by proxy or otherwise;provided,however, that the following shall not be considered a “Transfer” within the meaning of this Section 2(f)(i)(4):
a) the granting of a proxy to officers or directors of the Corporation at the request of the Board of Directors of the Corporation in connection with actions to be taken at an annual or special meeting of stockholders;
b) entering into a voting trust, agreement or arrangement (with or without granting a proxy) solely with stockholders who are Class B Stockholders, that (A) is disclosed either in a Schedule 13D filed with the Securities and Exchange Commission or in writing to the Secretary of the Corporation, (B) either has a term not exceeding one (1) year or is terminable by the Class B Stockholder at any time and (C) does not involve any payment of cash, securities, property or other consideration to the Class B Stockholder other than the mutual promise to vote shares in a designated manner; or
c) the pledge of shares of Class B Common Stock by a Class B Stockholder that creates a mere security interest in such shares pursuant to a bona fide loan or indebtedness transaction so long as the Class B Stockholder continues to exercise Voting Control over such pledged shares;provided,however, that a foreclosure on such shares of Class B Common Stock or other similar action by the pledgee shall constitute a “Transfer.”
(5) “Voting Control” with respect to a share of Class B Common Stock shall mean the power (whether exclusive or shared) to vote or direct the voting of such share of Class B Common Stock by proxy, voting agreement or otherwise.
(ii) Each share of Class B Common Stock shall be convertible into one (1) fully paid and nonassessable share of Class A Common Stock at the option of the holder thereof at any time upon written notice to the transfer agent of the Corporation.
(iii) Each share of Class B Common Stock shall automatically, without any further action, convert into one (1) fully paid and nonassessable share of Class A Common Stock upon a Transfer of such share, other than a Transfer:
(1) from a Founder, or such Founder’s Permitted Entities, to the other Founder, or such Founder’s Permitted Entities.
(2) by a Class B Stockholder who is a natural person to any of the following Permitted Entities, and from any of the following Permitted Entities back to such Class B Stockholder and/or any other Permitted Entity established by or for such Class B Stockholder:
a) a trust for the benefit of such Class B Stockholder and for the benefit of no other person,provided such Transfer does not involve any payment of cash, securities, property or other consideration (other than an interest in such trust) to the Class B Stockholder and,provided,further, that in the event such Class B Stockholder is no longer the exclusive beneficiary of such trust, each share of Class B Common Stock then held by such trust shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock;
b) a trust for the benefit of persons other than the Class B Stockholder so long as the Class B Stockholder has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such trust,provided such Transfer does not involve any payment of cash, securities, property or other consideration (other than an interest in such trust) to the Class B Stockholder, and,provided,
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further, that in the event the Class B Stockholder no longer has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such trust, each share of Class B Common Stock then held by such trust shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock;
c) a trust under the terms of which such Class B Stockholder has retained a “qualified interest” within the meaning of §2702(b)(1) of the Code and/or a reversionary interest so long as the Class B Stockholder has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such trust;provided,however, that in the event the Class B Stockholder no longer has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such trust, each share of Class B Common Stock then held by such trust shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock;
d) an Individual Retirement Account, as defined in Section 408(a) of the Internal Revenue Code, or a pension, profit sharing, stock bonus or other type of plan or trust of which such Class B Stockholder is a participant or beneficiary and which satisfies the requirements for qualification under Section 401 of the Internal Revenue Code;provided that in each case such Class B Stockholder has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held in such account, plan or trust, andprovided,further, that in the event the Class B Stockholder no longer has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such account, plan or trust, each share of Class B Common Stock then held by such trust shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock;
e) a corporation in which such Class B Stockholder directly, or indirectly through one or more Permitted Entities, owns shares with sufficient Voting Control in the corporation, or otherwise has legally enforceable rights, such that the Class B Stockholder retains sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such corporation;provided that in the event the Class B Stockholder no longer owns sufficient shares or has sufficient legally enforceable rights to enable the Class B Stockholder to retain sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such corporation, each share of Class B Common Stock then held by such corporation shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock;
f) a partnership in which such Class B Stockholder directly, or indirectly through one or more Permitted Entities, owns partnership interests with sufficient Voting Control in the partnership, or otherwise has legally enforceable rights, such that the Class B Stockholder retains sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such partnership;provided that in the event the Class B Stockholder no longer owns sufficient partnership interests or has sufficient legally enforceable rights to enable the Class B Stockholder to retain sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such partnership, each share of Class B Common Stock then held by such partnership shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock; or
g) a limited liability company in which such Class B Stockholder directly, or indirectly through one or more Permitted Entities, owns membership interests with sufficient Voting Control in the limited liability company, or otherwise has legally enforceable rights, such that the Class B Stockholder retains sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such limited liability company;provided that in the event the Class B Stockholder no longer owns sufficient membership interests or has sufficient legally enforceable rights to enable the Class B Stockholder to retain sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such limited liability company, each share of Class B Common Stock then held by such limited liability company shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock.
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Notwithstanding the foregoing, if the shares of Class B Common Stock held by the Permitted Entity of a Class B Stockholder would constitute stock of a “controlled corporation” (as defined in Section 2036(b)(2) of the Code) upon the death of such Class B Stockholder, and the Transfer of shares Class B Common Stock by such Class B Stockholder to the Permitted Entity did not involve a bona fide sale for an adequate and full consideration in money or money’s worth (as contemplated by Section 2036(a) of the Code), then such shares will not automatically convert to Class A Common Stock if the Class B Stockholder does not directly or indirectly retain Voting Control over such shares until such time as the shares of Class B Common Stock would no longer constitute stock of a “controlled corporation” pursuant to the Code upon the death of such Class B Stockholder (such time is referred to as the “Voting Shift”). If the Class B Stockholder does not, within five (5) business days following the mailing of the Corporation’s proxy statement for the first annual or special meeting of stockholders following the Voting Shift, directly or indirectly through one or more Permitted Entities assume sole dispositive power and exclusive Voting Control with respect to such shares of Class B Common Stock, each such share of Class B Common Stock shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock.
(3) by a Class B Stockholder that is a partnership, or a nominee for a partnership, which partnership beneficially held more than five percent (5%) of the total outstanding shares of Class B Common Stock as of the Effective Time, to any person or entity that, at the Effective Time, was a partner of such partnership pro rata in accordance with their ownership interests in the partnership and the terms of any applicable partnership or similar agreement binding the partnership at the Effective Time, and any further Transfer(s) by any such partner that is a partnership or limited liability company to any person or entity that was at such time a partner or member of such partnership or limited liability company pro rata in accordance with their ownership interests in the partnership or limited liability company and the terms of any applicable partnership or similar agreement binding the partnership or limited liability company at the Effective Time. All shares of Class B Common Stock held by affiliated entities shall be aggregated together for the purposes of determining the satisfaction of such five percent (5%) threshold.
(4) by a Class B Stockholder that is a limited liability company, or a nominee for a limited liability company, which limited liability company beneficially held more than five percent (5%) of the total outstanding shares of Class B Common Stock as of the Effective Time, to any person or entity that, at the Effective Time, was a member of such limited liability company pro rata in accordance with their ownership interests in the company and the terms of any applicable agreement binding the company and its members at the Effective Time, and any further Transfer(s) by any such member that is a partnership or limited liability company to any person or entity that was at such time a partner or member of such partnership or limited liability company pro rata in accordance with their ownership interests in the partnership or limited liability company and the terms of any applicable partnership or similar agreement binding the partnership or limited liability company. All shares of Class B Common Stock held by affiliated entities shall be aggregated together for the purposes of determining the satisfaction of such five percent (5%) threshold.
(iv) Each share of Class B Common Stock held of record by a Class B Stockholder who is a natural person, or by such Class B Stockholder’s Permitted Entities, shall automatically, without any further action, convert into one (1) fully paid and nonassessable share of Class A Common Stock upon the death of such Class B Stockholder;provided,however, that:
(1) If a Founder, or such Founder’s Permitted Entity (in either case, the “Transferring Founder”) Transfers exclusive Voting Control (but not ownership) of shares of Class B Common Stock to the other Founder (the “Transferee Founder”) which Transfer of Voting Control is contingent or effective upon the death of the Transferring Founder, then each share of Class B Common Stock that is the subject of such Transfer shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock upon that date which is the earlier of: (a) nine (9) months after the date upon which the Transferring Founder died, or (b) the date upon which the Transferee Founder ceases to hold exclusive Voting Control over such shares of Class B Common Stock;provided,further, that if the Transferee Founder shall die within nine (9) months following the death of the Transferring Founder, then a trustee designated by the Transferee Founder and approved by the Board of
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Directors may exercise Voting Control over: (x) the Transferring Founders’ shares of Class B Common Stock and, in such instance, each such share of Class B Common Stock shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock upon that date which is the earlier of: (A) nine (9) months after the date upon which the Transferring Founder died, or (B) the date upon which such trustee ceases to hold exclusive Voting Control over such shares of Class B Common Stock; and (y) the Transferee Founders’ shares of Class B Common Stock (or shares held by an entity of the type referred to in paragraph (2) below established by or for the Transferee Founder) and, in such instance, each such share of Class B Common Stock shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock upon that date which is the earlier of: (A) nine (9) months after the date upon which the Transferee Founder died, or (B) the date upon which such trustee ceases to hold exclusive Voting Control over such shares of Class B Common Stock; and
(2) If both Founders die simultaneously, a trustee designated by the Founders and approved by the Board of Directors may exercise Voting Control over the Founders’ shares of Class B Common Stock and, in such instance, each such share of Class B Common Stock shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock upon that date which is the earlier of: (a) nine (9) months after the date upon which both Founders died, or (b) the date upon which such trustee ceases to hold exclusive Voting Control over such shares of Class B Common Stock.
(v) The Corporation may, from time to time, establish such policies and procedures relating to the conversion of the Class B Common Stock to Class A Common Stock and the general administration of this dual class common stock structure, including the issuance of stock certificates with respect thereto, as it may deem necessary or advisable, and may request that holders of shares of Class B Common Stock furnish affidavits or other proof to the Corporation as it deems necessary to verify the ownership of Class B Common Stock and to confirm that a conversion to Class A Common Stock has not occurred. A determination by the Secretary of the Corporation that a Transfer results in a conversion to Class A Common Stock shall be conclusive.
(vi) In the event of a conversion of shares of Class B Common Stock to shares of Class A Common Stock pursuant to this Section 2, such conversion shall be deemed to have been made at the time that the Transfer of such shares occurred. Upon any conversion of Class B Common Stock to Class A Common Stock, all rights of the holder of shares of Class B Common Stock shall cease and the person or persons in whose names or names the certificate or certificates representing the shares of Class A Common Stock are to be issued shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock. Shares of Class B Common Stock that are converted into shares of Class A Common Stock as provided in this Section 2 shall be retired and may not be reissued.
(g)Reservation of Stock. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of effecting the conversion of the shares of Class B Common Stock, such number of its shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Class B Common Stock into shares of Class A Common Stock.
Section 3.Change in Control Transaction. The Corporation shall not consummate a Change in Control Transaction without first obtaining the affirmative vote, at a duly called annual or special meeting of the stockholders of the Corporation, of the holders of the greater of: (A) a majority of the voting power of the issued and outstanding shares of capital stock of the Corporation then entitled to vote thereon, voting together as a single class, and (B) sixty percent (60%) of the voting power of the shares of capital stock present in person or represented by proxy at the stockholder meeting called to consider the Change in Control TransactionAnnual Meeting and entitled to vote thereon, voting together as a single class. ForUnless marked to the purposes of this section, a “Change in Control Transaction” meanscontrary, proxies received will be voted “AGAINST” the occurrence of any of the following events:
(a) the sale, encumbrance or disposition (other than non-exclusive licenses in the ordinary course of business and the grant of security interests in the ordinary course of business) by the Corporation of all or substantially all of the Corporation’s assets;
stockholder proposal.
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(b)Our board of directors recommends a vote “AGAINST” the merger stockholder proposal.
GOOGLE INC. | 2015 Proxy Statement 61
| Proposal Number 8 | Stockholder Proposal Regarding A Report on Business Risk Related to Climate Change Regulations |
The National Center for Public Policy Research has advised us that it intends to submit the proposal set forth below for consideration at our Annual Meeting.
Risk Report
Whereas,The Securities and Exchange Commission has recognized that climate change regulations, policy and legislation pose a business risk to companies.
One risk is that federal, state and/or consolidation of the Corporationlocal government policies, adopted in whole or in part due to climate change concerns, that subsidize renewable energy and upon which company business plans rely may be repealed, augmented or altered.
These changes in policy may be significant, and may come with or into any other corporation or entity, other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) more than fifty percent (50%) of the total voting power represented by the voting securities of the Corporation or such surviving entity or its parent outstanding immediately after such merger or consolidation; or
(c) the issuance by the Corporation, in a transaction or series of related transactions, of voting securities representing more than two percent (2%) of the total voting power of the Corporation before such issuance, to any person or persons acting as a group as contemplated in Rule 13d-5(b) under the Securities Exchange Act of 1934 (or any successor provision) such that, following such transaction or related transactions, such person or group of persons would hold more than fifty percent (50%) of the total voting power of the Corporation, after giving effect to such issuance.
Section 4.Preferred Stock. The Board of Directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of shares of Preferred Stock in series, and to establish from time to time the number of shares to be included in each such series, and to fix the designation, power, preferences, and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. Except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock) that relates solelylittle advance notice to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon by law or pursuant to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock).
Section 5.Class C Capital Stock. A statement of the designation of the Class C Capital Stock and the powers, preferences and rights and qualifications, limitations or restrictions thereof is as follows:
(a)Voting. Except as otherwise required by applicable law, shares of Class C Capital Stock shall have no voting power and the holders thereof, as such, shall not be entitled to vote on any matter that is submitted to a vote or for the consent of the stockholders of the Corporation.
(b)Dividends. Subject to the preferences applicable to any series of Preferred Stock, if any, outstanding at any time, the holders of Class C Capital Stock shall be entitled to receive, on a per share basis, the same form and amount of dividends and other distributions of cash, property or shares of stock of the Corporation as may be declared by the Board of Directors from time to time with respect to shares of the Common Stock out of assets or funds of the Corporation legally available therefor; provided, however, that in the event that such dividend is paid in the form of shares of Common Stock or rights to acquire Common Stock, the holders of Class C Capital Stock shall receive Class C Capital Stock or rights to acquire Class C Capital Stock, as the case may be.
(c)Conversion upon Liquidation. Immediately prior to the earlier of (i) any distribution of assets of the Corporation to the holders of the Common Stock in connection with a voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Corporation pursuant to Section 2(c) or (ii) any record date established to determine the holders of capital stock of the Corporation entitled to receive such distribution of assets, each outstanding share of the Class C Capital Stock shall automatically, without any further action, convert into and become one (1) fully paid and nonassessable share of Class A Common Stock. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of effecting the conversion of the shares of Class C Capital Stock pursuant to this Section 5(c), such number of its shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Class C Capital Stock into shares of Class A Common Stock.
(d)Subdivision or Combinations. If the Corporation in any manner subdivides or combines the outstanding shares of any class of Common Stock, the outstanding shares of the Class C Capital Stock will be
company.
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subdivided or combined in the same manner. The Corporation shall not subdivide or combine the outstanding shares of the Class C Capital Stock unless a subdivision or combination is made in the same manner with respect to each class of Common Stock.
(e)Equal Status. Except as expressly provided in this Article IV, Class C Capital Stock shall have the same rights and privileges and rank equally, share ratably and be identical in all respects to the Common Stock as to all matters. Without limiting the generality of the foregoing, (i) in the event of a merger, consolidation or other business combination of the Corporation requiring the approval of the holders of the Corporation’s capital stock entitled to vote thereon (whether or not the Corporation is the surviving entity), the holders of the Class C Capital Stock shall receive the same amount and form of consideration, if any, on a per share basis as the consideration, if any, received by holders of the Class A Common Stock in connection with such merger, consolidation or combination (provided that if holders of Class A Common Stock are entitled to make an election as to the amount or form of consideration such holders shall receive in any such merger, consolidation or combination with respect to their shares of Class A Common Stock, the holders of Class C Capital Stock shall be entitled to make the same election as to their shares of Class C Capital Stock), and (ii) in the event of (x) any tender or exchange offer to acquire any shares of Common Stock by any third party pursuant to an agreement to which the Corporation is a party or (y) any tender or exchange offer by the Corporation to acquire any shares of Common Stock, pursuant to the terms of the applicable tender or exchange offer, the holders of the Class C Capital Stock shall receive the same amount and form of consideration on a per share basis as the holders of the Class A Common Stock (provided that if holders of Class A Common Stock are entitled to make an election as to the amount or form of consideration such holders shall receive in any such tender or exchange offer with respect to their shares of Class A Common Stock, the holders of Class C Capital Stock shall be entitled to make the same election as to their shares of Class C Capital Stock).
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
Section 1. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by statute or by this Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.
Section 2. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, alter, amend or repeal the Bylaws of the Corporation. The affirmative vote of at least a majority of the Board of Directors then in office shall be required in order for the Board of Directors to adopt, amend, alter or repeal the Corporation’s Bylaws. The Corporation’s Bylaws may also be adopted, amended, altered or repealed by the stockholders of the Corporation. Notwithstanding the above or any other provision of this Certificate of Incorporation, the Bylaws of the Corporation may not be amended, altered or repealed except in accordance with Article X of the Bylaws. No Bylaw hereafter legally adopted, amended, altered or repealed shall invalidate any prior act of the directors or officers of the Corporation that would have been valid if such Bylaw had not been adopted, amended, altered or repealed.
Section 3.
(a) If, at any time during which shares of capital stock of the Corporation are listed for trading on either The Nasdaq National Market (“Nasdaq”) or the New York Stock Exchange (“NYSE”), holders of the requisite voting power under the then-applicable Nasdaq or NYSE listing standards notify the Corporation in writing of their election to cause the Corporation to rely upon the applicable “controlled company” exemptions (the “Controlled Company Exemption”) to the corporate governance rules and requirements of the Nasdaq or the NYSE (the
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“Exchange Governance Rules”), the Corporation shall call a special meeting of the stockholders to consider whether to approve the election to be held within ninety (90) days of written notice of such election (or, if the next succeeding annual meeting of stockholders will be held within ninety (90) days of written notice of such election, the Corporation shall include a proposal to the same effect to be considered at such annual meeting). The Corporation shall not elect to rely upon the Controlled Company Exemption until such time as the Corporation shall have received the approval from holders of at least sixty-six and two thirds percent (66 2/3%) of the voting power of the issued and outstanding shares of capital stock of the Corporation at such annual or special meeting.
(b) In the event such approval is obtained, for so long as shares of the capital stock of the Corporation are listed on either the Nasdaq or the NYSE and the Corporation remains eligible for the Controlled Company Exemption under the requirements of the applicable Exchange Governance Rules, then the Board of Directors shall be constituted such that (i) a majority of the directors on the Board of Directors shall be Outside Directors (as defined below), and (ii) the Corporation’s compensation committee and the governance and nominating committee (or such committees serving similar functions as the Board of Directors of the Corporation shall constitute from time to time) shall consist of at least two (2) members of the Board of Directors and shall be composed entirely of Outside Directors. In the event the number of Outside Directors serving on the Board of Directors constitutes less than a majority of the directors on the Board of Directors as a result of the death, resignation or removal of an Outside Director, then the Board of Directors may continue to properly exercise its powers and no action of the Board of Directors shall be so invalidated, provided,Resolved:Shareholders request that the Board of Directors shall promptly takeauthorize the preparation of a report, to be issued by December 2015, at a reasonable cost and excluding proprietary information, disclosing the business risk related to developments in federal, state or local government policies in the United States relating to climate change and/or renewable energy.
Supporting Statement
Google relies on government actions to obtain certain financial advantages from climate change-related investments. Google might be materially affected by legislative and regulatory developments concerning climate change.
For example, it has been reported that Google and other investors in the Ivanpah Solar Electric Generating System are seeking more than $500 million in taxpayer funds to help pay off a federal loan for the solar project. That project has already received $1.6 billion in government loans. Future political leaders may act differently concerning loans and grants for alternative energy projects.
Subsidies and policies favorable to renewable energy are being challenged at the state and federal levels, where renewal of the approximately $12 billion wind production tax credit (PTC) has repeatedly been impossible to predict.
Shareholders need reasonable transparency to evaluate the business risk associated with developments in political, legislative and regulatory landscape regarding climate change.
Google Opposing Statement
In 2007, Google committed to become a carbon neutral company. Since then, our efficiency improvements, renewable energy purchases, low carbon on-site generation, and carbon offset purchases have helped drive our carbon footprint to zero.
We believe that the information technology sector is on a pathway for driving massive energy and carbon savings. As such, action aswe spend time and resources researching, implementing projects and policies to address climate change, and managing our exposure to risks associated with physical and regulatory changes with respect to climate change and renewable energy. In all of these endeavors, whether it’s our investments in renewable energy projects, our procurement of renewable power, or our efforts to run very efficient data centers, we focus on approaches that make business sense for our company. This is necessaryall explained on our website at http://www.google.com/green/bigpicture/#/ and the white papers linked thereto. In the spirit of transparency, we also provide detailed responses to appoint new Outside Director(s)an industry-recognized disclosure tool, the CDP questionnaire. Given the extensive information already publicly available and the narrow focus of the report requested by the proposal, our board of directors believes that the requested report would provide no meaningful value and may even be misleading to our stockholders.
Our responses to the Board2014 CDP questionnaire describe the process for identifying risks due to developments in climate change regulations and modeling future energy cost scenarios to account for such developments. This model allows us to better anticipate our exposure to potential risks triggered by regulation changes, such as higher energy prices and supply shortages. We believe this description is more valuable to our stockholders than a report that analyzes the speculative changes in the political, legislative and regulatory landscape regarding climate change.
GOOGLE INC. | 2015 Proxy Statement 62
Furthermore, we go beyond what is requested in the proposal by outlining steps we take to mitigate the impact of Directors.climate change regulations. For example, we’ve reported that the potential volatility in energy prices due to climate change regulation has increased our incentive to source long-term, price-stable contracts for renewable energy. We have also implemented business strategies and conducted energy efficiency projects that protect us from future increases in energy prices due to regulation that puts a price on carbon.
(c) An “Outside Director” shall mean
Our board of directors believes that the comprehensive disclosure already publicly available on our website and our responses to the CDP questionnaire provide a director who, currentlymore complete and formeaningful look at the risks and opportunities associated with climate change. Our board of directors believes that producing the report requested by the proposal would not provide any useful additional information to stockholders and would not be an effective use of Google’s time and resources. Accordingly, the board of directors recommends that stockholders vote “AGAINST” this proposal.
Required Vote
Approval of the past three years, is and was not an officer of the Corporation (other than service as the chairman of the Board of Directors) or a parent or subsidiary of the Corporation and is not and was not otherwise employed by the corporation or a parent or subsidiary of the Corporation.
Section 4. The chairman of the Board of Directors shall be an Outside Director (as defined above) and shall not hold any other office of the Corporation unless the appointment of the chairman is approved by two-thirds of the members of the Board of Directors then in office,provided,however, that if there is no chief executive officer or president of the Corporation as a result of the death, resignation or removal of such officer, then the chairman of the Board of Directors may also serve in an interim capacity as the chief executive officer of the Corporation until the Board shall appoint a new chief executive officer.
Section 5. The Board of Directors of the Corporation shall establish an audit committee whose principal purpose will be to oversee the Corporation’s and its subsidiaries’ accounting and financial reporting processes, internal systems of control, independent auditor relationships and audits of consolidated financial statements of the Corporation and its subsidiaries. The audit committee will also determine the appointment of the independent auditors of the Corporation and any change in such appointment and ensure the independence of the Corporation’s auditors. In addition, the audit committee will assume such other duties and responsibilities delegated to it by the Board of Directors and specified for it under applicable law and Exchange Governance Rules.
Section 6. The Board of Directors of the Corporation shall establish a corporate governance and nominating committee whose principal duties will be to assist the Board of Directors by identifying individuals qualified to become members of the Board of Directors consistent with criteria approved by the Board of Directors, to recommend to the Board of Directors for its approval the slate of nominees to be proposed by the Board of Directors to the stockholders for election to the Board of Directors, to develop and recommend to the Board of Directors the governance principles applicable to the Corporation, as well as such other duties and responsibilities delegated to it by the Board of Directors and specified for it under applicable law and Exchange Governance Rules. In the event the corporate governance and nominating committee will not be recommending a then incumbent director for inclusion in the slate of nominees to be proposed by the Board of Directors to the stockholders for election to the Board of Directors, and provided such incumbent director has not notified the committee that he or she will be resigning or that he or she does not intend to stand for re-election to the Board of Directors, then, in the
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case of an election to be held at an annual meeting of stockholders, the corporate governance and nominating committee will recommend the slate of nominees to the Board of Directors at least thirty (30) days prior to the latest date required by the provisions of Sections 2.14 (advance notice of stockholder business) and 2.15 (advance notice of director nominations) of the Bylaws of the Corporation (as such provisions may be amended from time to time) for stockholders to submit nominations for directors at such annual meeting, or in the case of an election to be held at a special meeting of stockholders, at least ten (10) days prior to the latest date required by the provisions of Sections 2.14 and 2.15 of the Bylaws for stockholders to submit nominations for directors at such special meeting.
Section 7. The Board of Directors of the Corporation shall establish a compensation committee whose principal duties will be to review employee compensation policies and programs as well as the compensation of the chief executive officer and other executive officers of the Corporation, to recommend to the Board of Directors a compensation program for outside members of the Board of Directors, as well as such other duties and responsibilities delegated to it by the Board of Directors and specified for it under applicable law and Exchange Governance Rules.
Section 8. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
Section 9. No stockholder will be permitted to cumulate votes at any election of directors.
Section 10. The number of directors that constitute the whole Board of Directors shall be fixed exclusively in the manner designated in the Bylaws of the Corporation.
ARTICLE VII
Section 1. To the fullest extent permitted by the General Corporation Law of Delaware as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law of Delaware is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated to the fullest extent permitted by the General Corporation Law of Delaware, as so amended.
Section 2. The Corporation may indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, she, his or her testator or intestate is or was a director, officer, employee or agent at the request of the Corporation or any predecessor to the Corporation or serves or served at any other enterprise as a director, officer, employee or agent at the request of the Corporation or any predecessor to the Corporation.
Section 3. Neither any amendment or repeal of any Section of this Article VII, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article VII, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.
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ARTICLE IX
Section 1. Except as otherwise provided for or fixed by or pursuant to the provisions of Article IV hereof in relation to the rights of the holders of Preferred Stock to elect directors under specified circumstances, newly created directorships resulting from any increase in the number of directors, created in accordance with the Bylaws of the Corporation, and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled only byproposal requires the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director. Any director elected in accordance with the preceding sentence shall hold office until the next annual meeting of stockholders and until such director’s successor shall have been elected and qualified, or until such director’s earlier death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
Section 2. Any director or the entire Board of Directors may be removed from office at any time, with or without cause, by the affirmative“FOR” vote of the holders of at least a majority of the voting power of the issued and outstandingGoogle’s shares of capitalClass A common stock of the Corporation then entitled to vote in the election of directors.
ARTICLE X
Advance notice of new business and stockholder nominations for the election of directors shall be given in the manner and to the extent provided in the Bylaws of the Corporation.
ARTICLE XI
Section 1. Unless otherwise required by law, special meetings of the stockholders of the Corporation, for any purpose or purposes, may be called only by (i) the Board of Directors of the Corporation, (ii) the Chairman of the Board of Directors of the Corporation, (iii) the Chief Executive Officer (or, in the absence of a Chief Executive Officer, the President) of the Corporation, or (iv) a holder, or group of holders, of Common Stock holding more than twenty percent (20%) of the total voting power of the outstanding shares of capital stock of the Corporation then entitled to vote.
Section 2. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.
ARTICLE XII
The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation;provided,however, that notwithstanding any other provision of this Certificate of Incorporation, or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of the Corporation, and, as applicable, such other approvals of the Board of Directors of the Corporation, as are required by law or by this Certificate of Incorporation: (i) the unanimous consent of Board of Directors then in office, and the affirmative vote of the holders at least a majority of the voting power of the issued and outstanding shares of capital stock of the Corporation then entitled to vote, shall be required to amend or repeal Article IV, Section 2, Article IV, Section 5 or this clause (i) of Article XII; (ii) the affirmative vote of the holders of the greater of: (A) a majority of the voting power of the issued and outstanding shares of capital stock of the Corporation then entitled to vote thereon, or (B) sixty percent (60%) of the voting power of the shares of capitalClass B common stock present in person or represented by proxy at the stockholder meeting and entitled to vote thereon, shall be required to amend or repeal Article IV, Section 3 or this clause (ii) of Article XII; (iii) the consent of a majority of the members of the Board then in office, and the affirmative vote of the holders at least sixty-six and two-thirds percent (66 2/3%) of the voting power of the issued and
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outstanding shares of capital stock of the Corporation then entitled to vote shall be required to amend or repeal Article IV, Section 4 and Article XI or this clause (iii) of Article XII; (iv) the unanimous consent of the Board of Directors then in office and the consent of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of the issued and outstanding shares of capital stock of the Corporation shall be required to amend or repeal Article VI, Section 3, 5, 6 or 7 or this clause (iv) of Article XII; and (v) the consent of at least two-thirds of the members of the Board of Directors then in office and the affirmative vote of the holders of at least a majority of the voting power of the issued and outstanding shares of capital stock of the Corporation then entitled to vote shall be required to amend or repeal Article VI, Section 4 or this clause (v) of Article XII.
* * * * *
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APPENDIX A-2
MARKED COPY OF FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF GOOGLE INC.
THIRDFOURTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF GOOGLE INC.
a Delaware Corporation
GOOGLE INC., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), hereby certifies as follows:
A. The name of the Corporation is Google Inc. The Corporation’s original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on October 22, 2002.
B. ThisThirdFourth Amended and Restated Certificate of Incorporation was duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, and restates, integrates and further amends the provisions of the Corporation’s Certificate of Incorporation.
C. The text of the Certificate of Incorporation of this Corporation is hereby amended and restated in its entirety as set forth inExhibit A attached hereto.
IN WITNESS WHEREOF, Google Inc. has caused thisThirdFourth Amended and Restated Certificate of Incorporation to be executed by the undersigned officer, thereunto duly authorized, this24th day ofAugust,2004.
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GOOGLE INC. a Delaware corporation
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By:
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| | Eric Schmidt
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| | Chief Executive Officer
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| | Name:
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| | Title:
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EXHIBIT A
ARTICLE I
The name of this corporation is Google Inc. (hereinafter, the “Corporation”).
ARTICLE II
The address of the Corporation’s registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
ARTICLE IV
Section 1.Authorized Shares. This Corporation is authorized to issue6,000,000,000nine billion (9,000,000,000) shares of Class A Common Stock, par value $0.001 per share (the “Class A Common Stock”),three billion (3,000,000,000) shares of Class B Common Stock, par value $0.001 per share (the “Class B Common Stock”, and together with the Class A Common Stock, the “Common Stock”)and,three billion (3,000,000,000) shares of Class C Capital Stock, par value $0.001 per share (the “Class C Capital Stock”), and one hundred million(100,000,000) shares of Preferred Stock, par value $0.001 per share. The number of authorized shares of any class or classes of stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of at least a majority of the voting power of the issued and outstanding shares of Common Stock of the Corporation, voting together as a single class.
Section 2.Common Stock. A statement of the designations of each class of Common Stock and the powers, preferences and rights and qualifications, limitations or restrictions thereof is as follows:
(a)Voting Rights.
(i) Except as otherwise provided herein or by applicable law, the holders of shares of Class A Common Stock and Class B Common Stock shall at all times vote together as one class on all matters (including the election of directors) submitted to a vote or for the consent of the stockholders of the Corporation.
(ii) Each holder of shares of Class A Common Stock shall be entitled to one (1) vote for each share of Class A Common Stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the stockholders of the Corporation.
(iii) Each holder of shares of Class B Common Stock shall be entitled to ten (10) votes for each share of Class B Common Stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the stockholders of the Corporation.
(b)Dividends. Subject to the preferences applicable to any series of Preferred Stock, if any, outstanding at any time, the holders of Class A Common Stock and the holders of Class B Common Stock shall be entitled to share equally, on a per share basis, in such dividends and other distributions of cash, property or shares of stock of the Corporation as may be declared by the Board of Directors from time to time with respect to the Common Stock out of assets or funds of the Corporation legally available therefor; provided, however, that in the event that such dividend is paid in the form of shares of Common Stock or rights to acquire Common Stock, the holders of Class A
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Common Stock shall receive Class A Common Stock or rights to acquire Class A Common Stock, as the case may be, and the holders of Class B Common Stock shall receive Class B Common Stock or rights to acquire Class B Common Stock, as the case may be.
(c)Liquidation. Subject to the preferences applicable to any series of Preferred Stock, if any outstanding at any time, in the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Corporation, the holders of Class A Common Stock and the holders of Class B Common Stock shall be entitled to share equally, on a per share basis, all assets of the Corporation of whatever kind available for distribution to the holders of Common Stock.
(d)Subdivision or Combinations. If the Corporation in any manner subdivides or combines the outstanding shares of one class of Common Stock, the outstanding shares of the other class of Common Stock will be subdivided or combined in the same manner.
(e)Equal Status. Except as expressly provided in this Article IV, Class A Common Stock and Class B Common Stock shall have the same rights and privileges and rank equally, share ratably and be identical in all respects as to all matters. Without limiting the generality of the foregoing, (i) in the event of a merger, consolidation or other business combination requiring the approval of the holders of the Corporation’s capital stock entitled to vote thereon (whether or not the Corporation is the surviving entity), the holders of the Class A Common Stock shall have the right to receive, or the right to elect to receive, the same form of consideration, if any, as the holders of the Class B Common Stock and the holders of the Class A Common Stock shall have the right to receive, or the right to elect to receive, at least the same amount of consideration, if any, on a per share basis as the holders of the Class B Common Stock, and (ii) in the event of (x) any tender or exchange offer to acquire any shares of Common Stock by any third party pursuant to an agreement to which the Corporation is a party or (y) any tender or exchange offer by the Corporation to acquire any shares of Common Stock, pursuant to the terms of the applicable tender or exchange offer, the holders of the Class A Common Stock shall have the right to receive, or the right to elect to receive, the same form of consideration as the holders of the Class B Common Stock and the holders of the Class A Common Stock shall have the right to receive, or the right to elect to receive, at least the same amount of consideration on a per share basis as the holders of the Class B Common Stock.
(f)Conversion.
(i) As used in this Section 2(f), the following terms shall have the following meanings:
(1) “Founder” shall mean either Larry Page or Sergey Brin, each as a natural living person, and “Founders” shall mean both of them.
(2) “Class B Stockholder” shall mean (a) the Founders, (b) the registered holder of a share of Class B Common StockatonJuly 6, 2004(the“Effective Time”), (c) each natural person who Transferred shares of Class B Common Stock (or securities convertible into or exchangeable for shares of Class B Common Stock) prior to the Effective Time to a Permitted Entity that, as of the Effective Time, complies with the applicable exception for such Permitted Entity specified in Section 2(f)(iii)(2), and (d) the initial registered holder of any shares of Class B Common Stock that were originally issued by the Corporation after the Effective Time.
(3) “Permitted Entity” shall mean, with respect to any individual Class B Stockholder, any trust, account, plan, corporation, partnership, or limited liability company specified in Section 2(f)(iii)(2) established by or for such individual Class B Stockholder, so long as such entity meets the requirements of the exception set forth in Section 2(f)(iii)(2) applicable to such entity.
(4) “Transfer” of a share of Class B Common Stock shall mean any sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of such share or any legal or beneficial interest in such share, whether or not for value and whether voluntary or involuntary or by operation of law. A “Transfer” shall also
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include, without limitation, a transfer of a share of Class B Common Stock to a broker or other nominee (regardless of whether or not there is a corresponding change in beneficial ownership), or the transfer of, or entering into a binding agreement with respect to, Voting Control over a share of Class B Common Stock by proxy or otherwise;provided,however, that the following shall not be considered a “Transfer” within the meaning of this Section 2(f)(i)(4):
a) the granting of a proxy to officers or directors of the Corporation at the request of the Board of Directors of the Corporation in connection with actions to be taken at an annual or special meeting of stockholders;
b) entering into a voting trust, agreement or arrangement (with or without granting a proxy) solely with stockholders who are Class B Stockholders, that (A) is disclosed either in a Schedule 13D filed with the Securities and Exchange Commission or in writing to the Secretary of the Corporation, (B) either has a term not exceeding one (1) year or is terminable by the Class B Stockholder at any time and (C) does not involve any payment of cash, securities, property or other consideration to the Class B Stockholder other than the mutual promise to vote shares in a designated manner; or
c) the pledge of shares of Class B Common Stock by a Class B Stockholder that creates a mere security interest in such shares pursuant to a bona fide loan or indebtedness transaction so long as the Class B Stockholder continues to exercise Voting Control over such pledged shares;provided,however, that a foreclosure on such shares of Class B Common Stock or other similar action by the pledgee shall constitute a “Transfer.”
(5) “Voting Control” with respect to a share of Class B Common Stock shall mean the power (whether exclusive or shared) to vote or direct the voting of such share of Class B Common Stock by proxy, voting agreement or otherwise.
(ii) Each share of Class B Common Stock shall be convertible into one (1) fully paid and nonassessable share of Class A Common Stock at the option of the holder thereof at any time upon written notice to the transfer agent of the Corporation.
(iii) Each share of Class B Common Stock shall automatically, without any further action, convert into one (1) fully paid and nonassessable share of Class A Common Stock upon a Transfer of such share, other than a Transfer:
(1) from a Founder, or such Founder’s Permitted Entities, to the other Founder, or such Founder’s Permitted Entities.
(2) by a Class B Stockholder who is a natural person to any of the following Permitted Entities, and from any of the following Permitted Entities back to such Class B Stockholder and/or any other Permitted Entity established by or for such Class B Stockholder:
a) a trust for the benefit of such Class B Stockholder and for the benefit of no other person,provided such Transfer does not involve any payment of cash, securities, property or other consideration (other than an interest in such trust) to the Class B Stockholder and,provided,further, that in the event such Class B Stockholder is no longer the exclusive beneficiary of such trust, each share of Class B Common Stock then held by such trust shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock;
b) a trust for the benefit of persons other than the Class B Stockholder so long as the Class B Stockholder has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such trust,provided such Transfer does not involve any payment of cash, securities, property or other consideration (other than an interest in such trust) to the Class B Stockholder, and,provided,further, that in the event the Class B Stockholder no longer has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such trust, each share of Class B Common Stock then held by such trust shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock;
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c) a trust under the terms of which such Class B Stockholder has retained a “qualified interest” within the meaning of §2702(b)(1) of the Code and/or a reversionary interest so long as the Class B Stockholder has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such trust;provided,however, that in the event the Class B Stockholder no longer has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such trust, each share of Class B Common Stock then held by such trust shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock;
d) an Individual Retirement Account, as defined in Section 408(a) of the Internal Revenue Code, or a pension, profit sharing, stock bonus or other type of plan or trust of which such Class B Stockholder is a participant or beneficiary and which satisfies the requirements for qualification under Section 401 of the Internal Revenue Code;provided that in each case such Class B Stockholder has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held in such account, plan or trust, andprovided,further, that in the event the Class B Stockholder no longer has sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such account, plan or trust, each share of Class B Common Stock then held by such trust shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock;
e) a corporation in which such Class B Stockholder directly, or indirectly through one or more Permitted Entities, owns shares with sufficient Voting Control in the corporation, or otherwise has legally enforceable rights, such that the Class B Stockholder retains sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such corporation;provided that in the event the Class B Stockholder no longer owns sufficient shares or has sufficient legally enforceable rights to enable the Class B Stockholder to retain sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such corporation, each share of Class B Common Stock then held by such corporation shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock;
f) a partnership in which such Class B Stockholder directly, or indirectly through one or more Permitted Entities, owns partnership interests with sufficient Voting Control in the partnership, or otherwise has legally enforceable rights, such that the Class B Stockholder retains sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such partnership;provided that in the event the Class B Stockholder no longer owns sufficient partnership interests or has sufficient legally enforceable rights to enable the Class B Stockholder to retain sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such partnership, each share of Class B Common Stock then held by such partnership shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock; or
g) a limited liability company in which such Class B Stockholder directly, or indirectly through one or more Permitted Entities, owns membership interests with sufficient Voting Control in the limited liability company, or otherwise has legally enforceable rights, such that the Class B Stockholder retains sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such limited liability company;provided that in the event the Class B Stockholder no longer owns sufficient membership interests or has sufficient legally enforceable rights to enable the Class B Stockholder to retain sole dispositive power and exclusive Voting Control with respect to the shares of Class B Common Stock held by such limited liability company, each share of Class B Common Stock then held by such limited liability company shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock.
Notwithstanding the foregoing, if the shares of Class B Common Stock held by the Permitted Entity of a Class B Stockholder would constitute stock of a “controlled corporation” (as defined in Section 2036(b)(2) of the Code) upon the death of such Class B Stockholder, and the Transfer of shares Class B Common Stock by such Class B Stockholder to the Permitted Entity did not involve a bona fide sale for an adequate and full consideration in money or money’s worth (as contemplated by Section 2036(a) of the Code), then such shares will not automatically
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convert to Class A Common Stock if the Class B Stockholder does not directly or indirectly retain Voting Control over such shares until such time as the shares of Class B Common Stock would no longer constitute stock of a “controlled corporation” pursuant to the Code upon the death of such Class B Stockholder (such time is referred to as the “Voting Shift”). If the Class B Stockholder does not, within five (5) business days following the mailing of the Corporation’s proxy statement for the first annual or special meeting of stockholders following the Voting Shift, directly or indirectly through one or more Permitted Entities assume sole dispositive power and exclusive Voting Control with respect to such shares of Class B Common Stock, each such share of Class B Common Stock shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock.
(3) by a Class B Stockholder that is a partnership, or a nominee for a partnership, which partnership beneficially held more than five percent (5%) of the total outstanding shares of Class B Common Stock as of the Effective Time, to any person or entity that, at the Effective Time, was a partner of such partnership pro rata in accordance with their ownership interests in the partnership and the terms of any applicable partnership or similar agreement binding the partnership at the Effective Time, and any further Transfer(s) by any such partner that is a partnership or limited liability company to any person or entity that was at such time a partner or member of such partnership or limited liability company pro rata in accordance with their ownership interests in the partnership or limited liability company and the terms of any applicable partnership or similar agreement binding the partnership or limited liability company at the Effective Time. All shares of Class B Common Stock held by affiliated entities shall be aggregated together for the purposes of determining the satisfaction of such five percent (5%) threshold.
(4) by a Class B Stockholder that is a limited liability company, or a nominee for a limited liability company, which limited liability company beneficially held more than five percent (5%) of the total outstanding shares of Class B Common Stock as of the Effective Time, to any person or entity that, at the Effective Time, was a member of such limited liability company pro rata in accordance with their ownership interests in the company and the terms of any applicable agreement binding the company and its members at the Effective Time, and any further Transfer(s) by any such member that is a partnership or limited liability company to any person or entity that was at such time a partner or member of such partnership or limited liability company pro rata in accordance with their ownership interests in the partnership or limited liability company and the terms of any applicable partnership or similar agreement binding the partnership or limited liability company. All shares of Class B Common Stock held by affiliated entities shall be aggregated together for the purposes of determining the satisfaction of such five percent (5%) threshold.
(iv) Each share of Class B Common Stock held of record by a Class B Stockholder who is a natural person, or by such Class B Stockholder’s Permitted Entities, shall automatically, without any further action, convert into one (1) fully paid and nonassessable share of Class A Common Stock upon the death of such Class B Stockholder;provided,however, that:
(1) If a Founder, or such Founder’s Permitted Entity (in either case, the “Transferring Founder”) Transfers exclusive Voting Control (but not ownership) of shares of Class B Common Stock to the other Founder (the “Transferee Founder”) which Transfer of Voting Control is contingent or effective upon the death of the Transferring Founder, then each share of Class B Common Stock that is the subject of such Transfer shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock upon that date which is the earlier of: (a) nine (9) months after the date upon which the Transferring Founder died, or (b) the date upon which the Transferee Founder ceases to hold exclusive Voting Control over such shares of Class B Common Stock;provided,further, that if the Transferee Founder shall die within nine (9) months following the death of the Transferring Founder, then a trustee designated by the Transferee Founder and approved by the Board of Directors may exercise Voting Control over: (x) the Transferring Founders’ shares of Class B Common Stock and, in such instance, each such share of Class B Common Stock shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock upon that date which is the earlier of: (A) nine (9) months after the date upon which the Transferring Founder died, or (B) the date upon which such trustee ceases to hold exclusive Voting Control over such shares of Class B Common Stock; and (y) the Transferee Founders’ shares of Class B Common Stock (or shares held by an entity of the type referred to in paragraph (2) below established by or for the
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Transferee Founder) and, in such instance, each such share of Class B Common Stock shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock upon that date which is the earlier of: (A) nine (9) months after the date upon which the Transferee Founder died, or (B) the date upon which such trustee ceases to hold exclusive Voting Control over such shares of Class B Common Stock; and
(2) If both Founders die simultaneously, a trustee designated by the Founders and approved by the Board of Directors may exercise Voting Control over the Founders’ shares of Class B Common Stock and, in such instance, each such share of Class B Common Stock shall automatically convert into one (1) fully paid and nonassessable share of Class A Common Stock upon that date which is the earlier of: (a) nine (9) months after the date upon which both Founders died, or (b) the date upon which such trustee ceases to hold exclusive Voting Control over such shares of Class B Common Stock.
(v) The Corporation may, from time to time, establish such policies and procedures relating to the conversion of the Class B Common Stock to Class A Common Stock and the general administration of this dual class common stock structure, including the issuance of stock certificates with respect thereto, as it may deem necessary or advisable, and may request that holders of shares of Class B Common Stock furnish affidavits or other proof to the Corporation as it deems necessary to verify the ownership of Class B Common Stock and to confirm that a conversion to Class A Common Stock has not occurred. A determination by the Secretary of the Corporation that a Transfer results in a conversion to Class A Common Stock shall be conclusive.
(vi) In the event of a conversion of shares of Class B Common Stock to shares of Class A Common Stock pursuant to this Section 2, such conversion shall be deemed to have been made at the time that the Transfer of such shares occurred. Upon any conversion of Class B Common Stock to Class A Common Stock, all rights of the holder of shares of Class B Common Stock shall cease and the person or persons in whose names or names the certificate or certificates representing the shares of Class A Common Stock are to be issued shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock. Shares of Class B Common Stock that are converted into shares of Class A Common Stock as provided in this Section 2 shall be retired and may not be reissued.
(g)Reservation of Stock. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of effecting the conversion of the shares of Class B Common Stock, such number of its shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Class B Common Stock into shares of Class A Common Stock.
Section 3.Change in Control Transaction. The Corporation shall not consummate a Change in Control Transaction without first obtaining the affirmative vote, at a duly called annual or special meeting of the stockholders of the Corporation, of the holders of the greater of: (A) a majority of the voting power of the issued and outstanding shares of capital stock of the Corporation then entitled to vote thereon, voting together as a single class, and (B) sixty percent (60%) of the voting power of the shares of capital stock present in person or represented by proxy at the stockholder meeting called to consider the Change in Control TransactionAnnual Meeting and entitled to vote thereon, voting together as a single class. ForUnless marked to the purposes of this section, a “Change in Control Transaction” meanscontrary, proxies received will be voted “AGAINST” the occurrence of any of the following events:
(a) the sale, encumbrance or disposition (other than non-exclusive licenses in the ordinary course of business and the grant of security interests in the ordinary course of business) by the Corporation of all or substantially all of the Corporation’s assets;
(b) the merger or consolidation of the Corporation with or into any other corporation or entity, other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) more than fifty percent (50%) of the total voting power represented by the voting securities of the Corporation or such surviving entity or its parent outstanding immediately after such merger or consolidation; or
stockholder proposal.
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(c) the issuance by the Corporation, in a transaction or seriesOur board of related transactions, of voting securities representing more than two percent (2%) of the total voting power of the Corporation before such issuance, to any person or persons acting as a group as contemplated in Rule 13d-5(b) under the Securities Exchange Act of 1934 (or any successor provision) such that, following such transaction or related transactions, such person or group of persons would hold more than fifty percent (50%) of the total voting power of the Corporation, after giving effect to such issuance.
Section 4.Preferred Stock. The Board of Directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of shares of Preferred Stock in series, and to establish from time to time the number of shares to be included in each such series, and to fix the designation, power, preferences, and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. Except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon by law or pursuant to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock).
Section 5. Class C Capital Stock. A statement of the designation of the Class C Capital Stock and the powers, preferences and rights and qualifications, limitations or restrictions thereof is as follows:
(a) Voting. Except as otherwise required by applicable law, shares of Class C Capital Stock shall have no voting power and the holders thereof, as such, shall not be entitled to vote on any matter that is submitted todirectors recommends a vote or for“AGAINST” the consent of the stockholders of the Corporation.
(b) Dividends. Subject to the preferences applicable to any series of Preferred Stock, if any, outstanding at any time, the holders of Class C Capital Stock shall be entitled to receive, on a per share basis, the same form and amount of dividends and other distributions of cash, property or shares of stock of the Corporation as may be declared by the Board of Directors from time to time with respect to shares of the Common Stock out of assets or funds of the Corporation legally available therefor; provided, however, that in the event that such dividend is paid in the form of shares of Common Stock or rights to acquire Common Stock, the holders of Class C Capital Stock shall receive Class C Capital Stock or rights to acquire Class C Capital Stock, as the case may be.
(c) Conversion upon Liquidation. Immediately prior to the earlier of (i) any distribution of assets of the Corporation to the holders of the Common Stock in connection with a voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Corporation pursuant to Section 2(c) or (ii) any record date established to determine the holders of capital stock of the Corporation entitled to receive such distribution of assets, each outstanding share of the Class C Capital Stock shall automatically, without any further action, convert into and become one (1) fully paid and nonassessable share of Class A Common Stock. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of effecting the conversion of the shares of Class C Capital Stock pursuant to this Section 5(c), such number of its shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Class C Capital Stock into shares of Class A Common Stock.
(d) Subdivision or Combinations. If the Corporation in any manner subdivides or combines the outstanding shares of any class of Common Stock, the outstanding shares of the Class C Capital Stock will besubdivided or combined in the same manner. The Corporation shall not subdivide or combine the outstanding shares of the Class C Capital Stock unless a subdivision or combination is made in the same manner with respect to each class of Common Stock.
(e) Equal Status. Except as expressly provided in this Article IV, Class C Capital Stock shall have the same rights and privileges and rank equally, share ratably and be identical in all respects to the Common Stock as
stockholder proposal.
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to all matters. Without limiting the generality of the foregoing, (i) in the event of a merger, consolidation or other business combination of the Corporation requiring the approval of the holders of the Corporation’s capital stock entitled to vote thereon (whether or not the Corporation is the surviving entity), the holders of the Class C Capital Stock shall receive the same amount and form of consideration, if any, on a per share basis as the consideration, if any, received by holders of the Class A Common Stock in connection with such merger, consolidation or combination (provided that if holders of Class A Common Stock are entitled to make an election as to the amount or form of consideration such holders shall receive in any such merger, consolidation or combination with respect to their shares of Class A Common Stock, the holders of Class C Capital Stock shall be entitled to make the same election as to their shares of Class C Capital Stock), and (ii) in the event of (x) any tender or exchange offer to acquire any shares of Common Stock by any third party pursuant to an agreement to which the Corporation is a party or (y) any tender or exchange offer by the Corporation to acquire any shares of Common Stock, pursuant to the terms of the applicable tender or exchange offer, the holders of the Class C Capital Stock shall receive the same amount and form of consideration on a per share basis as the holders of the Class A Common Stock (provided that if holders of Class A Common Stock are entitled to make an election as to the amount or form of consideration such holders shall receive in any such tender or exchange offer with respect to their shares of Class A Common Stock, the holders of Class C Capital Stock shall be entitled to make the same election as to their shares of Class C Capital Stock).
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
Section 1. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by statute or by this Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.
Section 2. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, alter, amend or repeal the Bylaws of the Corporation. The affirmative vote of at least a majority of the Board of Directors then in office shall be required in order for the Board of Directors to adopt, amend, alter or repeal the Corporation’s Bylaws. The Corporation’s Bylaws may also be adopted, amended, altered or repealed by the stockholders of the Corporation. Notwithstanding the above or any other provision of this Certificate of Incorporation, the Bylaws of the Corporation may not be amended, altered or repealed except in accordance with Article X of the Bylaws. No Bylaw hereafter legally adopted, amended, altered or repealed shall invalidate any prior act of the directors or officers of the Corporation that would have been valid if such Bylaw had not been adopted, amended, altered or repealed.
Section 3.
(a) If, at any time during which shares of capital stock of the Corporation are listed for trading on either The Nasdaq National Market (“Nasdaq”) or the New York Stock Exchange (“NYSE”), holders of the requisite voting power under the then-applicable Nasdaq or NYSE listing standards notify the Corporation in writing of their election to cause the Corporation to rely upon the applicable “controlled company” exemptions (the “Controlled Company Exemption”) to the corporate governance rules and requirements of the Nasdaq or the NYSE (the “Exchange Governance Rules”), the Corporation shall call a special meeting of the stockholders to consider whether to approve the election to be held within ninety (90) days of written notice of such election (or, if the next succeeding annual meeting of stockholders will be held within ninety (90) days of written notice of such election, the Corporation shall include a proposal to the same effect to be considered at such annual meeting). The Corporation shall not elect to rely upon the Controlled Company Exemption until such time as the Corporation shall have received the approval from holders of at least sixty-six and two thirds percent (66 2/3%) of the voting power of the issued and outstanding shares of capital stock of the Corporation at such annual or special meeting.
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(b) In the event such approval is obtained, for so long as shares of the capital stock of the Corporation are listed on either the Nasdaq or the NYSE and the Corporation remains eligible for the Controlled Company Exemption under the requirements of the applicable Exchange Governance Rules, then the Board of Directors shall be constituted such that (i) a majority of the directors on the Board of Directors shall be Outside Directors (as defined below), and (ii) the Corporation’s compensation committee and the governance and nominating committee (or such committees serving similar functions as the Board of Directors of the Corporation shall constitute from time to time) shall consist of at least two (2) members of the Board of Directors and shall be composed entirely of Outside Directors. In the event the number of Outside Directors serving on the Board of Directors constitutes less than a majority of the directors on the Board of Directors as a result of the death, resignation or removal of an Outside Director, then the Board of Directors may continue to properly exercise its powers and no action of the Board of Directors shall be so invalidated, provided, that the Board of Directors shall promptly take such action as is necessary to appoint new Outside Director(s) to the Board of Directors.
(c) An “Outside Director” shall mean a director who, currently and for any of the past three years, is and was not an officer of the Corporation (other than service as the chairman of the Board of Directors) or a parent or subsidiary of the Corporation and is not and was not otherwise employed by the corporation or a parent or subsidiary of the Corporation.
Section 4. The chairman of the Board of Directors shall be an Outside Director (as defined above) and shall not hold any other office of the Corporation unless the appointment of the chairman is approved by two-thirds of the members of the Board of Directors then in office,provided,however, that if there is no chief executive officer or president of the Corporation as a result of the death, resignation or removal of such officer, then the chairman of the Board of Directors may also serve in an interim capacity as the chief executive officer of the Corporation until the Board shall appoint a new chief executive officer.
Section 5. The Board of Directors of the Corporation shall establish an audit committee whose principal purpose will be to oversee the Corporation’s and its subsidiaries’ accounting and financial reporting processes, internal systems of control, independent auditor relationships and audits of consolidated financial statements of the Corporation and its subsidiaries. The audit committee will also determine the appointment of the independent auditors of the Corporation and any change in such appointment and ensure the independence of the Corporation’s auditors. In addition, the audit committee will assume such other duties and responsibilities delegated to it by the Board of Directors and specified for it under applicable law and Exchange Governance Rules.
Section 6. The Board of Directors of the Corporation shall establish a corporate governance and nominating committee whose principal duties will be to assist the Board of Directors by identifying individuals qualified to become members of the Board of Directors consistent with criteria approved by the Board of Directors, to recommend to the Board of Directors for its approval the slate of nominees to be proposed by the Board of Directors to the stockholders for election to the Board of Directors, to develop and recommend to the Board of Directors the governance principles applicable to the Corporation, as well as such other duties and responsibilities delegated to it by the Board of Directors and specified for it under applicable law and Exchange Governance Rules. In the event the corporate governance and nominating committee will not be recommending a then incumbent director for inclusion in the slate of nominees to be proposed by the Board of Directors to the stockholders for election to the Board of Directors, and provided such incumbent director has not notified the committee that he or she will be resigning or that he or she does not intend to stand for re-election to the Board of Directors, then, in the case of an election to be held at an annual meeting of stockholders, the corporate governance and nominating committee will recommend the slate of nominees to the Board of Directors at least thirty (30) days prior to the latest date required by the provisions of Sections 2.14 (advance notice of stockholder business) and 2.15 (advance notice of director nominations) of the Bylaws of the Corporation (as such provisions may be amended from time to time) for stockholders to submit nominations for directors at such annual meeting, or in the case of an election to be held at a special meeting of stockholders, at least ten (10) days prior to the latest date required by the provisions of Sections 2.14 and 2.15 of the Bylaws for stockholders to submit nominations for directors at such special meeting.
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Section 7. The Board of Directors of the Corporation shall establish a compensation committee whose principal duties will be to review employee compensation policies and programs as well as the compensation of the chief executive officer and other executive officers of the Corporation, to recommend to the Board of Directors a compensation program for outside members of the Board of Directors, as well as such other duties and responsibilities delegated to it by the Board of Directors and specified for it under applicable law and Exchange Governance Rules.
Section 8. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
Section 9. No stockholder will be permitted to cumulate votes at any election of directors.
Section 10. The number of directors that constitute the whole Board of Directors shall be fixed exclusively in the manner designated in the Bylaws of the Corporation.
ARTICLE VII
Section 1. To the fullest extent permitted by the General Corporation Law of Delaware as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law of Delaware is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated to the fullest extent permitted by the General Corporation Law of Delaware, as so amended.
Section 2. The Corporation may indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, she, his or her testator or intestate is or was a director, officer, employee or agent at the request of the Corporation or any predecessor to the Corporation or serves or served at any other enterprise as a director, officer, employee or agent at the request of the Corporation or any predecessor to the Corporation.
Section 3. Neither any amendment or repeal of any Section of this Article VII, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article VII, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.
ARTICLE IX
Section 1. Except as otherwise provided for or fixed by or pursuant to the provisions of Article IV hereof in relation to the rights of the holders of Preferred Stock to elect directors under specified circumstances, newly created directorships resulting from any increase in the number of directors, created in accordance with the Bylaws of the Corporation, and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled only by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director. Any director elected in accordance with the preceding sentence shall hold office until the next annual meeting of stockholders and until such director’s successor shall have been elected and qualified, or until such director’s earlier death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
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Section 2. Any director or the entire Board of Directors may be removed from office at any time, with or without cause, by the affirmative vote of the holders of at least a majority of the voting power of the issued and outstanding shares of capital stock of the Corporation then entitled to vote in the election of directors.
ARTICLE X
Advance notice of new business and stockholder nominations for the election of directors shall be given in the manner and to the extent provided in the Bylaws of the Corporation.
ARTICLE XI
Section 1. Unless otherwise required by law, special meetings of the stockholders of the Corporation, for any purpose or purposes, may be called only by (i) the Board of Directors of the Corporation, (ii) the Chairman of the Board of Directors of the Corporation, (iii) the Chief Executive Officer (or, in the absence of a Chief Executive Officer, the President) of the Corporation, or (iv) a holder, or group of holders, of Common Stock holding more than twenty percent (20%) of the total voting power of the outstanding shares of capital stock of the Corporation then entitled to vote.
Section 2. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.
ARTICLE XII
The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation;provided,however, that notwithstanding any other provision of this Certificate of Incorporation, or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of the Corporation, and, as applicable, such other approvals of the Board of Directors of the Corporation, as are required by law or by this Certificate of Incorporation: (i) the unanimous consent of Board of Directors then in office, and the affirmative vote of the holders at least a majority of the voting power of the issued and outstanding shares of capital stock of the Corporation then entitled to vote, shall be required to amend or repeal Article IV, Section 2, Article IV, Section 5 or this clause (i) of Article XII; (ii) the affirmative vote of the holders of the greater of: (A) a majority of the voting power of the issued and outstanding shares of capital stock of the Corporation then entitled to vote thereon, or (B) sixty percent (60%) of the voting power of the shares of capital stock present in person or represented by proxy at the stockholder meeting and entitled to vote thereon, shall be required to amend or repeal Article IV, Section 3 or this clause (ii) of Article XII; (iii) the consent of a majority of the members of the Board then in office, and the affirmative vote of the holders at least sixty-six and two-thirds percent (66 2/3%) of the voting power of the issued and outstanding shares of capital stock of the Corporation then entitled to vote shall be required to amend or repeal Article IV, Section 4 and Article XI or this clause (iii) of Article XII; (iv) the unanimous consent of the Board of Directors then in office and the consent of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of the issued and outstanding shares of capital stock of the Corporation shall be required to amend or repeal Article VI, Section 3, 5, 6 or 7 or this clause (iv) of Article XII; and (v) the consent of at least two-thirds of the members of the Board of Directors then in office and the affirmative vote of the holders of at least a majority of the voting power of the issued and outstanding shares of capital stock of the Corporation then entitled to vote shall be required to amend or repeal Article VI, Section 4 or this clause (v) of Article XII.
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APPENDIX B
A
GOOGLE INC.
2012 STOCK PLAN
1.Purpose of the Plan
This Plan is intended to promote the interests of the Company and its stockholders by providing the employees and consultants of the Company and members of the Board of Directors with incentives and rewards to encourage them to continue in the service of the Company and with a proprietary interest in pursuing the long-term growth, profitability and financial success of the Company.
2.Definitions
As used in the Plan or in any instrument governing the terms of any Incentive Award, the following definitions apply to the terms indicated below:
| (a) | “Board of Directors” means the Board of Directors of Google. |
| (b) | “Capital Stock” means Google’s Class C Capital Stock, $0.001 par value per share, or any other security into which such capital stock shall be changed as contemplated by the adjustment provisions of Section 10 of the Plan. |
| (c) | “Cash Incentive Award” means an award granted pursuant to Section 8 of the Plan. |
| (d) | “Code” means the Internal Revenue Code of 1986, as amended from time to time, and all regulations, interpretations and administrative guidance issued thereunder. |
| (e) | “Committee” means the Leadership Development and Compensation Committee of the Board of Directors or such other committee as the Board of Directors shall appoint from time to time to administer the Plan and to otherwise exercise and perform the authority and functions assigned to the Committee under the terms of the Plan. |
| (f) | “Company” means Google and all of its Subsidiaries, collectively. |
| (g) | “Covered Employee” means each Participant who is an executive officer (within the meaning of Rule 3b-7 under the Exchange Act) of Google. |
| (h) | “Deferred Compensation Plan” means any plan, agreement or arrangement maintained by the Company from time to time that provides opportunities for deferral of compensation. |
| (i) | “Exchange Act” means the Securities Exchange Act of 1934, as amended. |
| (j) | “Fair Market Value” means, with respect to a share of Capital Stock, as of the applicable date of determination (i) the closing sales price on the date of determination or, if not so reported for such day, the immediately preceding business day of a share of Capital Stock as reported on the principal securities exchange on which shares of Capital Stock are then listed or admitted to trading or (ii) if not so reported, the closing bid price on the date of determination or, if not so reported for such day, on the immediately preceding business day as reported on The NASDAQ Stock Market or (iii) if not so reported, as furnished by any member of the Financial Industry Regulatory Authority, Inc. selected by the Committee. In the event that the price of a share of Capital Stock shall not be so reported, the Fair Market Value of a share of Capital Stock shall be determined by the Committee in its sole discretion. Notwithstanding the preceding, for federal, state and local income tax reporting purposes and for such other purposes as the Committee deems appropriate, the Fair Market Value shall be determined by the Committee in accordance with uniform and nondiscriminatory standards adopted by it from time to time. |
| (k) | “Google” means Google Inc., a Delaware corporation. |
| (l) | “Incentive Award” means one or more Stock Incentive Awards and Cash Incentive Awards, collectively. |
| (m) | “Incentive Award Transfer Program” means any program instituted by the Board of Directors or the Committee which would permit Participants the opportunity to transfer any outstanding Incentive Awards to a financial institution or other Person selected by the Board of Directors or the Committee. |
| (n) | “ISO” shall mean any Option, or portion thereof, awarded to a Participant pursuant to the Plan which is designated by the Committee as an incentive stock option and also meets the applicable requirements of an incentive stock option pursuant to Section 422 of the Code. |
| (o) | “Option” means a stock option to purchase shares of Capital Stock granted to a Participant pursuant to Section 6 of the Plan. |
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| (p) | “Other Stock-Based Award” means an award granted to a Participant pursuant to Section 7 of the Plan. |
| (q) | “Participant” means an employee or consultant of the Company or a member of the Board of Directors who is eligible to participate in the Plan pursuant to the terms and conditions hereof and to whom one or more Incentive Awards have been granted pursuant to the Plan and have not been fully settled or cancelled and, following the death of any such Person, his successors, heirs, executors and administrators, as the case may be. |
| (r) | “Performance-Based Compensation” means compensation that satisfies the requirements of Section 162(m) of the Code for deductibility of “qualified performance-based compensation.” |
| (s) | “Performance Measures” means such measures as are described in Section 9 of the Plan on which performance goals are based in order to qualify certain awards granted hereunder as Performance-Based Compensation. |
| (t) | “Performance Percentage” means the factor determined pursuant to a Performance Schedule that is to be applied to a Target Award and that reflects actual performance compared to the Performance Target. |
| (u) | “Performance Period” means the period of time during which Performance Targets must be met in order to determine the degree of payout and/or vesting with respect to an Incentive Award that is intended to qualify as Performance-Based Compensation. Performance Periods may be overlapping. |
| (v) | “Performance Schedule” means a schedule or other objective method for determining the applicable Performance Percentage to be applied to each Target Award. |
| (w) | “Performance Target” means performance goals and objectives with respect to a Performance Period. |
| (x) | “Person” means a “person” as such term is used in Section 13(d) and 14(d) of the Exchange Act, including any “group” within the meaning of Section 13(d)(3) under the Exchange Act. |
| (y) | “Plan” means this 2012 Stock Plan, as it may be amended from time to time. |
| (z) | “Securities Act” means the Securities Act of 1933, as amended. |
| (aa) | “Stock Incentive Award” means an Option or Other Stock-Based Award granted pursuant to the terms of the Plan. |
| (bb) | “Subsidiary” means any “subsidiary” within the meaning of Rule 405 under the Securities Act. |
| (cc) | “Target Award” means target payout amount for an Incentive Award. |
3.Stock Subject to the Plan and Limitations on Cash Incentive Awards
| 3. | Stock Subject to the Plan and Limitations on Cash Incentive Awards |
(a)Stock Subject to the Plan
| (a) | Stock Subject to the Plan |
The maximum number of shares of Capital Stock that may be covered by Incentive Awards granted under the Plan shall not exceed 30,000,00047,000,000 shares of Capital Stock in the aggregate. The maximum number of shares of Capital Stock that may be covered by Incentive Awards granted under the Plan that are intended to be ISOs shall not exceed 30,000,00047,000,000 shares of Capital Stock in the aggregate. The shares referred to in the preceding sentences of this paragraph shall be subject to adjustment as provided in Section 10 and the following provisions of this Section 3. Shares of Capital Stock issued under the Plan may be either authorized and unissued shares or treasury shares, or both, at the sole discretion of the Committee.
For purposes of the preceding paragraph, shares of Capital Stock covered by Incentive Awards shall only be counted as used to the extent they are actually issued and delivered to a Participant (or such Participant’s permitted transferees as described in the Plan) pursuant to the Plan. For purposes of clarification, in accordance with the preceding sentence if an Incentive Award is settled for cash or if shares of Capital Stock are withheld to pay the exercise price of an Option or to satisfy any tax withholding requirement in connection with an Incentive Award, only the shares issued (if any), net of the shares withheld, will be deemed delivered for purposes of determining the number of shares of Capital Stock that are available for delivery under the Plan. In addition, shares of Capital Stock related to Incentive Awards that expire, are forfeited or cancelled or terminate for any reason without the issuance of shares shall not be treated as issued pursuant to the Plan. In addition, if shares of Capital Stock owned by a Participant (or such Participant’s permitted transferees as described in the Plan) are tendered (either actually or through attestation) to the Company in payment of any obligation in connection with an Incentive Award, the number of shares tendered shall be added to the number of shares of Capital Stock that are available for delivery under the Plan. Shares of Capital Stock covered by Incentive Awards granted pursuant to the Plan in connection with the conversion, replacement, or adjustment of outstanding equity-based awards to reflect a merger or acquisition (within the meaning of NASDAQ Listing Rule 5635(c) and Interpretive Material 5635-1) shall not count as used under the Plan for purposes of this Section 3. Notwithstanding anything to the contrary herein, shares of Capital Stock attributable to Incentive Awards transferred under any Incentive Award Transfer Program shall not again be available for delivery under the Plan.
(b)Individual Award Limits
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| (b) | Individual Award Limits |
Subject to adjustment as provided in Section 10, the maximum number of shares of Capital Stock that may be covered by Incentive Awards intended to qualify as Performance-Based Compensation that are granted to any Covered Employee in any calendar year shall not exceed 1,000,000 shares. The amount payable to any Covered Employee with respect to any calendar year for all Cash Incentive Awards shall not exceed $100 million. For purposes of the preceding sentence, the phrase “amount payable with respect to any calendar year” means the amount of cash, or value of other property, required to be paid based on the achievement of applicable Performance Measures during a Performance Period that ends in a calendar year, disregarding any deferral pursuant to the terms of a Deferred Compensation Plan unless the terms of the deferral are intended to comply with the requirements for performance-based compensation under Section 162(m) of the Code.
4.Administration of the Plan
| 4. | Administration of the Plan |
The Plan shall be administered by a Committee of the Board of Directors consisting of two or more persons, each of whom qualifies as a “non-employee director” (within the meaning of Rule 16b-3 promulgated under Section 16 of the Exchange Act), an “outside director” within the meaning of Treasury Regulation Section 1.162-27(e)(3) and as “independent” within the meaning of any applicable stock exchange listing rules or similar regulatory authority. The Committee shall, consistent with the terms of the Plan, from time to time designate those employees and consultants of the Company and members of the Board of Directors who shall be granted Incentive Awards under the Plan and the amount, type and other terms and conditions of such Incentive Awards. All of the powers and responsibilities of the Committee under the Plan may be delegated by the Committee to any subcommittee thereof. In addition, the Committee may from time to time authorize a subcommittee consisting of one or more members of the Board of Directors (including members who are employees of the Company) or employees of the Company to grant Incentive Awards, subject to such restrictions and limitation as the Committee may specify and to the requirements of Delaware General Corporation Law Section 157.
The Committee shall have full discretionary authority to administer the Plan, including discretionary authority to interpret and construe any and all provisions of the Plan and the terms of any Incentive Award (and any agreement evidencing the grant of any Incentive Award) granted thereunder and to adopt and amend from time to time such rules and regulations for the administration of the Plan as the Committee may deem necessary or appropriate. The Committee shall have the authority, in its discretion, to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations related to sub-plans established for the purpose of
satisfying applicable foreign laws and/or qualifying for preferred tax treatment under applicable foreign tax laws. For purposes of clarity, the Committee may exercise all discretion granted to it under the Plan in a non-uniform manner among Participants.
Without limiting the generality of the foregoing paragraph, the Committee shall determine whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment, provided that a Participant who is an employee will not be deemed to cease employment in the case of any leave of absence approved by the Company. Unless the Committee provides otherwise in the agreement evidencing the grant of an Incentive Award, vesting of Incentive Awards granted hereunder will be suspended during any unpaid leave of absence and will resume on the date the Participant returns to work on a regular schedule as determined by the Company, it being understood that no vesting credit will be awarded for the time vesting has been suspended during such leave of absence. For purposes of ISOs, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three months following the 91stday of such leave any ISO held by the Participant will cease to be treated as an ISO and will be treated for tax purposes as a non-qualified Option. The provisions of this paragraph shall be administered and interpreted in a manner that does not give rise to any tax under Section 409A of the Code.
The employment of a Participant with the Company shall be deemed to have terminated for all purposes of the Plan if such Participant is employed by or provides services to a Person that is a Subsidiary of the Company and such Person ceases to be a Subsidiary of the Company, unless the Committee determines otherwise. The Committee may, without limitation and in its discretion, in connection with any such determination, provide for the accelerated vesting of any Incentive Award upon or after such cessation, subject to such terms and conditions as the Committee shall specify. The employment of a Participant with the Company shall not be deemed to have terminated for any purpose of the Plan if such Participant is employed by a Person that is part of the Company, and such Participant’s employment is subsequently transferred to any other Person that is part of the Company, unless and to the extent the Committee specifies otherwise in writing in the instrument evidencing the grant of an Incentive Award or otherwise. A Participant who ceases to be an employee of the Company but continues, or simultaneously commences, services as a consultant or director of the Company shall not be deemed to have had a termination of employment for purposes of the Plan, unless the Committee determines otherwise. Decisions of the Committee shall be final, binding and conclusive on all parties. All discretion granted to the Committee pursuant to this paragraph must be exercised in a manner that would not cause any tax to become due under Section 409A of the Code.
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On or after the date of grant of an Incentive Award under the Plan, the Committee may (i) accelerate the date on which any such Incentive Award becomes vested, exercisable or transferable, as the case may be, (ii) extend the term of any such Incentive Award, including, without limitation, extending the period following a termination of a Participant’s employment during which any such Incentive Award may remain outstanding, (iii) waive any conditions to the vesting, exercisability or transferability, as the case may be, of any such Incentive Award, or (iv) provide for the payment of dividends or dividend equivalents with respect to any such Incentive Award;provided, that the Committee shall not have any such authority to the extent that the grant of such authority would cause any tax to become due under Section 409A of the Code.
The Board of Directors or the Committee may, at any time, in its sole and complete discretion, implement an Incentive Award Transfer Program.
The Company shall pay any amount payable with respect to an Incentive Award in accordance with the terms of such Incentive Award, provided that the Committee may, in its discretion, defer the payment of amounts payable with respect to an Incentive Award subject to and in accordance with the terms of a Deferred Compensation Plan.
5.Eligibility
The Persons who shall be eligible to be selected by the Committee from time to time to receive Incentive Awards pursuant to the Plan shall be those Persons (a) who are employees and consultants of, or who render services directly or indirectly to, the Company or (b) who are members of the Board of Directors. Each Incentive Award granted under the Plan shall be evidenced by an instrument in writing in form and substance approved by the Committee.
6.Options
The Committee may from time to time grant Options, subject to the following terms and conditions:
(a)Exercise Price
The exercise price per share of Capital Stock covered by any Option shall be not less than 100% of the Fair Market Value of a share of Capital Stock on the date on which such Option is granted.
(b)Term and Exercise of Options
| (b) | Term and Exercise of Options |
(i) Each Option shall become vested and exercisable on such date or dates, during such period and for such number of shares of Capital Stock as shall be determined by the Committee on or after the date such Option is granted and set forth in the agreement evidencing the grant of such Option;provided,however that no Option shall be exercisable after the expiration of ten (10) years from the date such Option is granted; and,provided,further, that each Option shall be subject to earlier termination, expiration or cancellation as provided in the Plan or in the agreement evidencing the grant of such Option.
| (i) | Each Option shall become vested and exercisable on such date or dates, during such period and for such number of shares of Capital Stock as shall be determined by the Committee on or after the date such Option is granted and set forth in the agreement evidencing the grant of such Option;provided,however that no Option shall be exercisable after the expiration of ten (10) years from the date such Option is granted; and,provided,further, that each Option shall be subject to earlier termination, expiration or cancellation as provided in the Plan or in the agreement evidencing the grant of such Option. |
(ii) Each Option may be exercised in whole or in part;provided,however that no partial exercise of an Option shall be for an aggregate exercise price of less than $1,000. The partial exercise of an Option shall not cause the expiration, termination or cancellation of the remaining portion thereof.
| (ii) | Each Option may be exercised in whole or in part; provided, however that no partial exercise of an Option shall be for an aggregate exercise price of less than $1,000. The partial exercise of an Option shall not cause the expiration, termination or cancellation of the remaining portion thereof. |
(iii) An Option shall be exercised by such methods and procedures as the Committee determines from time to time, including without limitation through net physical settlement or other method of cashless exercise.
| (iii) | An Option shall be exercised by such methods and procedures as the Committee determines from time to time, including without limitation through net physical settlement or other method of cashless exercise. |
(iv) 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 a Participant, only by the Participant;provided,however that the Committee may permit in its discretion Options to be sold, pledged, assigned, hypothecated, transferred, or disposed of, on a general or specific basis, subject to such conditions and limitations as the Committee may determine, including through the implementation of an Incentive Award Transfer Program.
| (iv) | 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 a Participant, only by the Participant;provided,however that the Committee may permit in its discretion Options to be sold, pledged, assigned, hypothecated, transferred, or disposed of, on a general or specific basis, subject to such conditions and limitations as the Committee may determine, including through the implementation of an Incentive Award Transfer Program. |
(c)Effect of Termination of Employment or Other Relationship
| (c) | Effect of Termination of Employment or Other Relationship |
The agreement evidencing the grant of each Option shall specify the consequences with respect to such Option of the termination of the employment or other service between the Company and the Participant holding the Option.
(d)Additional Terms for ISOs
| (d) | Additional Terms for ISOs |
Each Option that is intended to qualify as an ISO shall be designated as such in the agreement evidencing its grant, and each agreement evidencing the grant of an Option that does not include any such designation shall be deemed to be a non-qualified Option. ISOs may only be granted to Persons who are employees of the Company. The aggregate Fair Market Value (determined as of the date of grant of the ISOs) of the number of shares of Capital Stock with respect to which ISOs are exercisable for the
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first time by any Participant during any calendar year under all plans of the Company shall not exceed $100,000, or such other maximum amount as is then applicable under Section 422 of the Code. Any Option or a portion thereof that is designated as an ISO that for any
reason fails to meet the requirements of an ISO shall be treated hereunder as a non-qualified Option. No ISO may be granted to a Person who, at the time of the proposed grant, owns (or is deemed to own under the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of common stock of the Company unless (i) the exercise price of such ISO is at least one hundred ten percent (110%) of the Fair Market Value of a share of Capital Stock at the time such ISO is granted and (ii) such ISO is not exercisable after the expiration of five years from the date it is granted.
(e)Repricing.
Notwithstanding anything to the contrary herein, Google may reprice any Option without the approval of the stockholders of Google. For this purpose, “reprice” means (i) any of the following or any other action that has the same effect: (A) lowering the exercise price of an Option after it is granted, (B) any other action that is treated as a repricing under U.S. generally accepted accounting principles (“GAAP”), or (C) cancelling an Option at a time when its exercise price exceeds the Fair Market Value of the underlying Capital Stock, in exchange for another Option, restricted stock or other equity, unless the cancellation and exchange occurs in connection with a merger, acquisition, spin-off or other similar corporate transaction; and (ii) any other action that is considered to be a repricing under formal or informal guidance issued by The NASDAQ Stock Market.
7.Other Stock-Based Awards
| 7. | Other Stock-Based Awards |
The Committee may grant equity-based or equity-related awards not otherwise described herein in such amounts and subject to such terms and conditions as the Committee shall determine. Without limiting the generality of the preceding sentence, each such Other Stock-Based Award may (a) involve the transfer of actual shares of Capital Stock to Participants, either at the time of grant or thereafter, or payment in cash or otherwise of amounts based on the value of shares of Capital Stock, (b) be subject to performance-based and/or service-based conditions, (c) be in the form of stock appreciation rights, phantom stock, restricted stock, restricted stock units, performance shares, deferred share units or share-denominated performance units, (d) be designed to comply with applicable laws of jurisdictions other than the United States and (e) be designed to qualify as Performance-Based Compensation;provided, that each Other Stock-Based Award shall be denominated in, or shall have a value determined by reference to, a number of shares of Capital Stock that is specified at the time of the grant of such award.
8.Cash Incentive Awards
The Committee may grant Cash Incentive Awards with respect to any Performance Period, subject to terms and conditions determined by the Committee in its sole discretion, provided that such terms and conditions are consistent with the terms and conditions of the Plan. Cash Incentive Awards may be settled in cash or in other property, including shares of Capital Stock, provided that the term “Cash Incentive Award” shall exclude any Stock Incentive Award. Cash Incentive Awards shall be designed to qualify as Performance-Based Compensation.
9.Performance-Based Compensation
| 9. | Performance-Based Compensation |
(a)Calculation
The amount payable with respect to an Incentive Award that is intended to qualify as Performance-Based Compensation shall be determined in any manner permitted by Section 162(m) of the Code.
(b)Discretionary Reduction
| (b) | Discretionary Reduction |
Unless otherwise specified in the agreement evidencing the grant of an Incentive Award that is intended to qualify as Performance-Based Compensation, the Committee may, in its discretion, reduce or eliminate the amount payable to any Participant with respect to the Incentive Award, based on such factors as the Committee may deem relevant, but the Committee may not increase any such amount above the amount established in accordance with the relevant Performance Schedule. For purposes of clarity, the Committee may exercise the discretion provided by the foregoing sentence in a non-uniform manner among Participants.
(c)Performance Measures
The performance goals upon which the payment or vesting of any Incentive Award (other than Options and stock appreciation rights) that is intended to qualify as Performance-Based Compensation depends shall relate to one or more of the following Performance Measures: market price of Capital Stock, earnings per share of Capital Stock, income, net income or profit (before or after taxes), economic profit, operating income, operating margin, profit margin, gross margins, return on equity or stockholder equity, total shareholder return, market capitalization, enterprise value, cash flow (including but not limited to operating cash flow and free cash flow), cash position, return on assets or net assets, return on capital, return on invested
GOOGLE INC. | 2015 Proxy Statement A-5
capital, return on sales, stockholder returns, economic value added, cash value added, earnings or net earnings (before or after interest, taxes, depreciation and amortization), earnings from continuing operations, operating earnings, controllable profits, sales or revenues, sales growth, new orders, capital or investment, ratio of debt to debt plus equity, ratio of operating earnings to capital spending, new product innovation, product release schedules or ship targets, market share, cost reduction goals, inventory or supply chain management initiatives, budget comparisons, implementation or completion of specified projects or processes, customer satisfaction MBOs (management by objectives), productivity, expense, margins, operating efficiency, working capital, the formation of joint ventures, research or development collaborations, or the completion of other transactions, any other measure of financial performance that can be determined pursuant to GAAP, or any combination of any of the foregoing.
A Performance Measure (i) may relate to the performance of the Participant, Google, a Subsidiary of Google, the Company, any business group, business unit or other subdivision of the Company, or any combination of the foregoing, as the Committee deems appropriate and (ii) may be expressed as an amount, as an increase or decrease over a specified period, as a relative comparison to the performance of a group of comparator companies or a published or special index, or any other external measure of the selected performance criteria, as the Committee deems appropriate. The measurement of any Performance Measure may exclude the impact of unusual, non-recurring or extraordinary items or expenses; items relating to financing activities; charges for restructurings or productivity initiatives; other non-operating items; discontinued operations; items related to the disposal of a business or segment of a business; the cumulative effect of changes in accounting treatment; items related to a change in accounting principle; items related to changes in applicable laws or business conditions; any impact of impairment of tangible or intangible assets; any impact of the issuance or repurchase of equity securities and or other changes in the number of outstanding shares of any class of Google equity securities; any gain, loss, income or expense attributable to acquisitions or dispositions of stock or assets; items attributable to the business operations of any entity acquired by Google during a Performance Period; stock-based compensation expense; in-process research and development expense; future contributions to the Google Foundation; gain or loss from all or certain claims and/or litigation and insurance recoveries; items that are outside the scope of Google’s core, on-going business activities; and any other items, each determined in accordance with GAAP and as identified in Google’s audited financial statements, including the notes thereto.
(d)Performance Schedules
Within ninety (90) days after the beginning of a Performance Period, and in any case before twenty-five percent (25%) of the Performance Period has elapsed, the Committee shall establish (a) Performance Targets for such Performance Period, (b) Target Awards for each Participant, and (c) Performance Schedules for such Performance Period.
(e)Termination of Employment
| (e) | Termination of Employment |
With respect to an Incentive Award that is intended to qualify as Performance-Based Compensation, the consequences of the termination of employment of the Participant holding such Incentive Award shall be determined by the Committee in its sole discretion and set forth in the applicable agreement evidencing the grant of the Incentive Award, it being intended that no agreement providing for a payment to a Participant upon termination of employment shall be given effect to the extent that it would cause an Incentive Award that was intended to qualify as Performance-Based Compensation to fail to so qualify.
(f)Committee Discretion
Nothing in this Section 9 is intended to limit the Committee’s discretion to adopt conditions with respect to any Incentive Award that is not intended to qualify as Performance-Based Compensation. In addition, the Committee may, subject to the terms of the Plan, amend previously granted Incentive Awards in a way that disqualifies them as Performance-Based Compensation.
10.Adjustment Upon Certain Changes
| 10. | Adjustment Upon Certain Changes |
Subject to any action by the stockholders of Google required by law, applicable tax rules or the rules of any exchange on which shares of common stock of Google (for the avoidance of doubt, references to common stock of Google in this Plan shall include Capital Stock) are listed for trading:
(a)Shares Available for Grants
| (a) | Shares Available for Grants |
In the event of any change in the number or type of shares of common stock of Google outstanding by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or similar corporate change, or any change in the type and number of shares of common stock of Google outstanding by reason of any other event or transaction, the Committee shall make appropriate adjustments in the type and maximum aggregate number of shares with respect to which the Committee may grant Incentive Awards, the type and maximum aggregate number of shares with respect to which the Committee may grant Incentive Awards that are intended to be ISOs, and the type and maximum aggregate number of shares with respect to which the Committee may grant Incentive Awards that are intended to qualify as Performance-Based Compensation to any Covered Employee in any calendar year.
GOOGLE INC. | 2015 Proxy Statement A-6
| (b) | (b)Increase or Decrease in Issued Shares Without Consideration |
In the event of any increase or decrease in the number or type of issued shares of common stock of Google resulting from a subdivision or consolidation of shares of common stock of Google or the payment of a stock dividend (but only on the shares of common stock of Google), or any other increase or decrease in the number of such shares effected without receipt or payment of consideration by the Company, the Committee shall appropriately adjust the type or number of shares subject to each outstanding Incentive Award and the exercise price per share, if any, of shares subject to each such Incentive Award.
In the event of any merger, consolidation or similar transaction as a result of which the holders of shares of Capital Stock receive consideration consisting exclusively of securities of the surviving corporation in such transaction, the Committee shall appropriately adjust each Incentive Award outstanding on the date of such merger or consolidation so that it pertains and applies to the securities which a holder of the number of shares of Capital Stock subject to such Incentive Award would have received in such merger or consolidation.
| (d) | (d)Certain Other Transactions |
In the event of (i) a dissolution or liquidation of Google, (ii) a sale of all or substantially all of the Company’s assets (on a consolidated basis) or (iii) a merger, consolidation or similar transaction involving Google in which the holders of shares of Capital Stock receive securities and/or other property, including cash, other than shares of the surviving corporation in such transaction, the Committee shall, in its sole discretion, have the power to:
(A) cancel, effective immediately prior to the occurrence of such event, each Incentive Award (whether or not then exercisable or vested), and, in full consideration of such cancellation, pay to the Participant to whom such Incentive Award was granted an amount in cash, for each share of Capital Stock subject to such Incentive Award, equal to the value, as determined by the Committee, of such share of Capital Stock, provided that with respect to the shares of Capital Stock subject to any outstanding Option such value shall be equal to the excess of (1) the value, as determined by the Committee, of the property (including cash) received by the holder of a share of Capital Stock as a result of such event over (2) the exercise price of a share of Capital Stock subject to such Option; or
| (A) | cancel, effective immediately prior to the occurrence of such event, each Incentive Award (whether or not then exercisable or vested), and, in full consideration of such cancellation, pay to the Participant to whom such Incentive Award was granted an amount in cash, for each share of Capital Stock subject to such Incentive Award, equal to the value, as determined by the Committee, of such share of Capital Stock, provided that with respect to the shares of Capital Stock subject to any outstanding Option such value shall be equal to the excess of (1) the value, as determined by the Committee, of the property (including cash) received by the holder of a share of Capital Stock as a result of such event over (2) the exercise price of a share of Capital Stock subject to such Option; or |
| (B) | provide for the exchange of each Incentive Award (whether or not then exercisable or vested) for an Incentive Award with respect to (1) some or all of the property which a holder of the number of shares of Capital Stock subject to such Incentive Award would have received in such transaction or (2) securities of the acquirer or surviving corporation, and, incident thereto, make an equitable adjustment as determined by the Committee in the exercise price per share, if any, of stock subject to the Incentive Award, or the number of shares or amount of property subject to the Incentive Award or provide for a payment (in cash or other property) to the Participant to whom such Incentive Award was granted in partial consideration for the exchange of the Incentive Award. |
(B) provide for the exchange of each Incentive Award (whether or not then exercisable or vested) for an Incentive Award with respect to (1) some or all of the property which a holder of the number of shares of Capital Stock subject to such Incentive Award would have received in such transaction or (2) securities of the acquirer or surviving corporation, and, incident thereto, make an equitable adjustment as determined by the Committee in the exercise price per share, if any, of stock subject to the Incentive Award, or the number of shares or amount of property subject to the Incentive Award or provide for a payment (in cash or other property) to the Participant to whom such Incentive Award was granted in partial consideration for the exchange of the Incentive Award.
In the event of any change in the capitalization of Google or corporate change other than those specifically referred to in paragraphs 10(b), (c) or (d), including without limitation, any extraordinary cash dividend, spin-off , split-off , sale of a Subsidiary or business unit, or similar transaction, the Committee may make such adjustments in the issuer, number and class of shares subject to Stock Incentive Awards outstanding on the date on which such change occurs, such as, for example, a rollover of Stock Incentive Awards, and in such other terms of such Incentive Award, including without limitation in any Performance Schedule, Performance Target or Target Award, as the Committee may consider appropriate, provided that if any such Incentive Award is intended to be Performance-Based Compensation such adjustment is consistent with the requirements of Section 162(m) of the Code.
| (f) | (f)Cash Incentive Awards |
In the event of any transaction or event described in this Section 10, including without limitation any corporate change referred to in paragraph (e) hereof, the Committee may, in its sole discretion, make such adjustments in any Performance Schedule, Performance Target or Target Award, and in such other terms of any Cash Incentive Award, as the Committee may consider appropriate in respect of such transaction or event, provided that such adjustments must be consistent with the requirements of Section 162(m) of the Code.
Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger or consolidation of Google or any other corporation. Except as expressly provided in the Plan, no issuance by Google of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares or amount of other property subject to, or the terms related to, any Incentive Award.
GOOGLE INC. | 2015 Proxy StatementA-7
No provision of this Section 10 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code.
| 11. | 11.Rights Under the Plan |
No Person shall have any rights as a stockholder with respect to any shares of Capital Stock covered by or relating to any Incentive Award until the date of the issuance of such shares on the books and records of Google. Except as otherwise expressly provided in Section 10 hereof, no adjustment of any Incentive Award shall be made for dividends or other rights for which the record date occurs prior to the date of such issuance. Nothing in this Section 11 is intended, or should be construed, to limit the authority of the Committee to cause the Company to make payments based on the dividends that would be payable with respect to any share of Capital Stock if it were issued or outstanding, or from granting rights related to such dividends.
The Company shall not have any obligation to establish any separate fund or trust or other segregation of assets to provide for payments under the Plan. To the extent any person acquires any rights to receive payments hereunder from the Company, such rights shall be no greater than those of an unsecured creditor.
| 12. | 12.No Special Employment Rights; No Right to Incentive Award(a) Nothing contained in the Plan or any agreement evidence the grant of any Incentive Award shall confer upon any Participant any right with respect to the continuation of his employment by or service to the Company or interfere in any way with the right of the Company at any time to terminate such employment or service or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of an Incentive Award.
(b) No person shall have any claim or right to receive an Incentive Award hereunder. The Committee’s granting of an Incentive Award to a Participant at any time shall neither require the Committee to grant an Incentive Award to such Participant or any other Participant or other person at any time nor preclude the Committee from making subsequent grants to such Participant or any other Participant or other person.
13.Securities Matters
(a) Google shall be under no obligation to effect the registration pursuant to the Securities Act of any shares of Capital Stock to be issued hereunder or to effect similar compliance under any state or local laws. Notwithstanding anything herein to the contrary, Google shall not be obligated to cause to be issued any shares of Capital Stock pursuant to the Plan unless and until Google is advised by its counsel that the issuance of such shares is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Capital Stock are traded. The Committee may require, as a condition to the issuance of shares of Capital Stock pursuant to the terms hereof, that the recipient of such shares make such covenants, agreements and representations, and that any certificates representing such shares bear such legends, as the Committee deems necessary or desirable.
(b) The exercise of any Option granted hereunder shall only be effective at such time as counsel to Google shall have determined that the issuance of shares of Capital Stock pursuant to such exercise is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Capital Stock are traded. Google may, in its sole discretion, defer the effectiveness of an exercise of an Option hereunder or the issuance of shares of Capital Stock pursuant to any Incentive Award pending or to ensure compliance under federal, state or local securities laws. Google shall inform the Participant in writing of its decision to defer the effectiveness of the exercise of an Option or the issuance of shares of Capital Stock pursuant to any Incentive Award. During the period that the effectiveness of the exercise of an Option has been deferred, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto.
14.Withholding Taxes
(a)Cash Remittance
|
| (a) | Nothing contained in the Plan or any agreement evidence the grant of any Incentive Award shall confer upon any Participant any right with respect to the continuation of his employment by or service to the Company or interfere in any way with the right of the Company at any time to terminate such employment or service or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of an Incentive Award. |
| (b) | No person shall have any claim or right to receive an Incentive Award hereunder. The Committee’s granting of an Incentive Award to a Participant at any time shall neither require the Committee to grant an Incentive Award to such Participant or any other Participant or other person at any time nor preclude the Committee from making subsequent grants to such Participant or any other Participant or other person. |
| | |
| (a) | Google shall be under no obligation to effect the registration pursuant to the Securities Act of any shares of Capital Stock to be issued hereunder or to effect similar compliance under any state or local laws. Notwithstanding anything herein to the contrary, Google shall not be obligated to cause to be issued any shares of Capital Stock pursuant to the Plan unless and until Google is advised by its counsel that the issuance of such shares is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Capital Stock are traded. The Committee may require, as a condition to the issuance of shares of Capital Stock pursuant to the terms hereof, that the recipient of such shares make such covenants, agreements and representations, and that any certificates representing such shares bear such legends, as the Committee deems necessary or desirable. |
| | |
| (b) | The exercise of any Option granted hereunder shall only be effective at such time as counsel to Google shall have determined that the issuance of shares of Capital Stock pursuant to such exercise is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Capital Stock are traded. Google may, in its sole discretion, defer the effectiveness of an exercise of an Option hereunder or the issuance of shares of Capital Stock pursuant to any Incentive Award pending or to ensure compliance under federal, state or local securities laws. Google shall inform the Participant in writing of its decision to defer the effectiveness of the exercise of an Option or the issuance of shares of Capital Stock pursuant to any Incentive Award. During the period that the effectiveness of the exercise of an Option has been deferred, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto. |
| | |
Whenever shares of Capital Stock are to be issued upon the exercise of an Option or the grant or vesting of an Incentive Award, and whenever any amount shall become payable in respect of any Incentive Award, Google shall have the right to require the Participant to remit to Google in cash an amount sufficient to satisfy federal, state and local withholding tax requirements, if any, attributable to such exercise, grant, vesting or payment prior to issuance of such shares or the effectiveness of the lapse of
GOOGLE INC. | 2015 Proxy Statement A-8
such restrictions or making of such payment. In addition, upon the exercise or settlement of any Incentive Award in cash, or the making of any other payment with respect to any Incentive Award (other than in shares of Capital Stock), Google shall have the right to withhold from any payment required to be made pursuant thereto an amount sufficient to satisfy the federal, state and local withholding tax requirements, if any, attributable to such exercise, settlement or payment.
At the election of the Participant, subject to the approval of the Committee, when shares of Capital Stock are to be issued upon the exercise, grant or vesting of an Incentive Award, the Participant may tender to Google a number of shares of Capital Stock that have been owned by the Participant for at least six months (or such other period as the Committee may determine) having a Fair Market Value at the tender date determined by the Committee to be sufficient to satisfy the minimum federal, state and local withholding tax requirements, if any, attributable to such exercise, grant or vesting but not greater than the minimum withholding obligations, as determined by Google in its sole discretion. Such election shall satisfy the Participant’s obligations under Section 14(a) hereof, if any.
When shares of Capital Stock are to be issued upon the exercise, grant or vesting of an Incentive Award, Google shall have the authority to withhold a number of such shares having a Fair Market Value at the date of the applicable taxable event determined by the Committee to be sufficient to satisfy the minimum federal, state and local withholding tax requirements, if any, attributable to such exercise, grant or vesting but not greater than the minimum withholding obligations, as determined by Google in its sole discretion.
| 15. | 15.Amendment or Termination of the Plan |
The Board of Directors may at any time suspend or discontinue the Plan or revise or amend it in any respect whatsoever;provided,however, that to the extent that any applicable law, tax requirement, or rule of a stock exchange requires stockholder approval in order for any such revision or amendment to be effective, such revision or amendment shall not be effective without such approval. The preceding sentence shall not restrict the Committee’s ability to exercise its discretionary authority hereunder pursuant to Section 4 hereof, which discretion may be exercised without amendment to the Plan. No provision of this Section 15 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code. Except as expressly provided in the Plan, no action hereunder may, without the consent of a Participant, reduce the Participant’s rights under any previously granted and outstanding Incentive Award. Nothing in the Plan shall limit the right of the Company to pay compensation of any kind outside the terms of the Plan.
| 16. | 16.No Obligation to Exercise |
The grant to a Participant of an Incentive Award shall impose no obligation upon such Participant to exercise such Incentive Award.
| 17. | 17.Transfers Upon Death |
Upon the death of a Participant, outstanding Incentive Awards granted to such Participant may be exercised by the Participant’s designated beneficiary, provided that such beneficiary has been designated prior to the Participant’s death. Each such designation shall revoke all prior designations by the Participant and shall be effective only if given in a form and manner acceptable to the Committee. In the absence of any such effective designation, such Incentive Awards may be exercised only by the executors or administrators of the Participant’s estate or by any person or persons who shall have acquired such right to exercise by will or by the laws of descent and distribution. No transfer by will or the laws of descent and distribution of any Incentive Award, or the right to exercise any Incentive Award, shall be effective to bind Google unless the Committee shall have been furnished with (a) written notice thereof and with a copy of the will and/or such evidence as the Committee may deem necessary to establish the validity of the transfer and (b) an agreement by the transferee to comply with all the terms and conditions of the Incentive Award that are or would have been applicable to the Participant and to be bound by the acknowledgements made by the Participant in connection with the grant of the Incentive Award.
| 18. | 18.Expenses and Receipts |
The expenses of the Plan shall be paid by the Company. Any proceeds received by Google in connection with any Incentive Award will be used for general corporate purposes.
GOOGLE INC. | 2015 Proxy Statement A-9
The Plan and the rights of all persons under the Plan shall be construed and administered in accordance with the laws of the State of New York without regard to its conflict of law principles.
| 20. | 20.Effective Date and Term of Plan |
The Plan was approved by the Board of Directors on April 11, 2012 subject to the approval of the Planand was approved by the stockholders of Google.on June 21, 2012. No grants of Incentive Awards may be made under the Plan after April 11, 2022.
* * * * *
APPENDIX CGOOGLE INC. | 2015 Proxy Statement A-10
GOOGLE INC.
2012 INCENTIVE COMPENSATION PLAN FOR EMPLOYEES AND CONSULTANTS OF MOTOROLA MOBILITY
1.Purpose of the Plan
This Plan is intended to promote the interests of the Company and its stockholders by providing the employees and consultants of MMI with incentives and rewards to encourage them to continue in the service of the Company and with a proprietary interest in pursuing the long-term growth, profitability and financial success of the Company.
2.Definitions
As used in the Plan or in any instrument governing the terms of any Incentive Award, the following definitions apply to the terms indicated below:
| (b) | “Capital Stock” means Google’s Class C Capital Stock, $0.001 par value per share, or any other security into which such capital stock shall be changed as contemplated by the adjustment provisions of Section 10 of the Plan. |
| (c) | “Cash Incentive Award” means an award granted pursuant to Section 8 of the Plan. |
| (d) | “Code” means the Internal Revenue Code of 1986, as amended from time to time, and all regulations, interpretations and administrative guidance issued thereunder. |
| (e) | “Committee” means the Leadership Development and Compensation Committee of the Board of Directors or such other committee as the Board of Directors shall appoint from time to time to administer the Plan and to otherwise exercise and perform the authority and functions assigned to the Committee under the terms of the Plan. |
| (f) | “Company” means Google and all of its Subsidiaries, collectively. |
| (g) | “Covered Employee” means each Participant who is an executive officer (within the meaning of Rule 3b-7 under the Exchange Act) of Google. |
| (h) | “Deferred Compensation Plan” means any plan, agreement or arrangement maintained by the Company from time to time that provides opportunities for deferral of compensation. |
| (i) | “Exchange Act” means the Securities Exchange Act of 1934, as amended. |
| (j) | “Fair Market Value” means, with respect to a share of Capital Stock, as of the applicable date of determination (i) the closing sales price on the date of determination or, if not so reported for such day, the immediately preceding business day of a share of Capital Stock as reported on the principal securities exchange on which shares of Capital Stock are then listed or admitted to trading or (ii) if not so reported, the closing bid price on the date of determination or, if not so reported for such day, on the immediately preceding business day as reported on The NASDAQ Stock Market or (iii) if not so reported, as furnished by any member of the Financial Industry Regulatory Authority, Inc. selected by the Committee. In the event that the price of a share of Capital Stock shall not be so reported, the Fair Market Value of a share of Capital Stock shall be determined by the Committee in its sole discretion. Notwithstanding the preceding, for federal, state and local income tax reporting purposes and for such other purposes as the Committee deems appropriate, the Fair Market Value shall be determined by the Committee in accordance with uniform and nondiscriminatory standards adopted by it from time to time. |
| (k) | “Google” means Google Inc., a Delaware corporation. |
| (l) | “Incentive Award” means one or more Stock Incentive Awards and Cash Incentive Awards, collectively. |
| (m) | “ISO” shall mean any Option, or portion thereof, awarded to a Participant pursuant to the Plan which is designated by the Committee as an incentive stock option and also meets the applicable requirements of an incentive stock option pursuant to Section 422 of the Code. |
| (n) | “MMI” means Motorola Mobility Holdings, Inc., and its successors and all of its Subsidiaries, collectively. |
| (o) | “Option” means a stock option to purchase shares of Capital Stock granted to a Participant pursuant to Section 6 of the Plan. |
| (p) | “Other Stock-Based Award” means an award granted to a Participant pursuant to Section 7 of the Plan. |
| (q) | “Participant” means an employee or consultant of MMI who is eligible to participate in the Plan pursuant to the terms and conditions hereof and to whom one or more Incentive Awards have been granted pursuant to the Plan and have not been fully settled or cancelled and, following the death of any such Person, his successors, heirs, executors and administrators, as the case may be. |
| (r) | “Performance-Based Compensation” means compensation that satisfies the requirements of Section 162(m) of the Code for deductibility of “qualified performance-based compensation.” |
| (s) | “Performance Measures” means such measures as are described in Section 9 of the Plan on which performance goals are based in order to qualify certain awards granted hereunder as Performance-Based Compensation. |
| (t) | “Performance Percentage” means the factor determined pursuant to a Performance Schedule that is to be applied to a Target Award and that reflects actual performance compared to the Performance Target. |
| (u) | “Performance Period” means the period of time during which Performance Targets must be met in order to determine the degree of payout and/or vesting with respect to an Incentive Award that is intended to qualify as Performance-Based Compensation. Performance Periods may be overlapping. |
| (v) | “Performance Schedule” means a schedule or other objective method for determining the applicable Performance Percentage to be applied to each Target Award. |
| (w) | “Performance Target” means performance goals and objectives with respect to a Performance Period. |
| (x) | “Person” means a “person” as such term is used in Section 13(d) and 14(d) of the Exchange Act, including any “group” within the meaning of Section 13(d)(3) under the Exchange Act. |
| (y) | “Plan” means this 2012 Incentive Compensation Plan for Employees and Consultants of Motorola Mobility, as it may be amended from time to time. |
| (z) | “Securities Act” means the Securities Act of 1933, as amended. |
| (aa) | “Stock Incentive Award” means an Option or Other Stock-Based Award granted pursuant to the terms of the Plan. |
| (bb) | “Subsidiary” means any “subsidiary” within the meaning of Rule 405 under the Securities Act. |
| (cc) | “Target Award” means target payout amount for an Incentive Award. |
3.Stock Subject to the Plan and Limitations on Cash Incentive Awards
(a)Stock Subject to the Plan
The maximum number of shares of Capital Stock that may be covered by Incentive Awards granted under the Plan shall not exceed 2,000,000 shares of Capital Stock in the aggregate. The maximum number of shares of Capital Stock that may be covered by Incentive Awards granted under the Plan that are intended to be ISOs shall not exceed 2,000,000 shares of Capital Stock in the aggregate. The shares referred to in the preceding sentences of this paragraph shall be subject to adjustment as provided in Section 10 and the following provisions of this Section 3. Shares of Capital Stock issued under the Plan may be either authorized and unissued shares or treasury shares, or both, at the sole discretion of the Committee.
For purposes of the preceding paragraph, shares of Capital Stock covered by Incentive Awards shall only be counted as used to the extent they are actually issued and delivered to a Participant (or such Participant’s
permitted transferees as described in the Plan) pursuant to the Plan. For purposes of clarification, in accordance with the preceding sentence if an Incentive Award is settled for cash or if shares of Capital Stock are withheld to pay the exercise price of an Option or to satisfy any tax withholding requirement in connection with an Incentive Award, only the shares issued (if any), net of the shares withheld, will be deemed delivered for purposes of determining the number of shares of Capital Stock that are available for delivery under the Plan. In addition, shares of Capital Stock related to Incentive Awards that expire, are forfeited or cancelled or terminate for any reason without the issuance of shares shall not be treated as issued pursuant to the Plan. In addition, if shares of Capital Stock owned by a Participant (or such Participant’s permitted transferees as described in the Plan) are tendered (either actually or through attestation) to the Company in payment of any obligation in connection with an Incentive Award, the number of shares tendered shall be added to the number of shares of Capital Stock that are available for delivery under the Plan. Shares of Capital Stock covered by Incentive Awards granted pursuant to the Plan in connection with the conversion, replacement, or adjustment of outstanding equity-based awards to reflect a merger or acquisition (within the meaning of NASDAQ Listing Rule 5635(c) and Interpretive Material 5635-1) shall not count as used under the Plan for purposes of this Section 3.
(b)Individual Award Limits
Subject to adjustment as provided in Section 10, the maximum number of shares of Capital Stock that may be covered by Incentive Awards intended to qualify as Performance-Based Compensation that are granted to any Covered Employee in any calendar year shall not exceed 1,000,000 shares. The amount payable to any Covered Employee with respect to any calendar year for all Cash Incentive Awards shall not exceed $100 million. For purposes of the preceding sentence, the phrase “amount payable with respect to any calendar year” means the amount of cash, or value of other property, required to be paid based on the achievement of applicable Performance Measures during a Performance Period that ends in a calendar year, disregarding any deferral pursuant to the terms of a Deferred Compensation Plan unless the terms of the deferral are intended to comply with the requirements for performance-based compensation under Section 162(m) of the Code.
4.Administration of the Plan
The Plan shall be administered by a Committee of the Board of Directors consisting of two or more persons, each of whom qualifies as a “non-employee director” (within the meaning of Rule 16b-3 promulgated under Section 16 of the Exchange Act), an “outside director” within the meaning of Treasury Regulation Section 1.162-27(e)(3) and as “independent” within the meaning of any applicable stock exchange listing rules or similar regulatory authority. The Committee shall, consistent with the terms of the Plan, from time to time designate those employees and consultants of MMI who shall be granted Incentive Awards under the Plan and the amount, type and other terms and conditions of such Incentive Awards. All of the powers and responsibilities of the Committee under the Plan may be delegated by the Committee to any subcommittee thereof. In addition, the Committee may from time to time authorize a subcommittee consisting of one or more members of the Board of Directors (including members who are employees of the Company) or employees of the Company to grant Incentive Awards, subject to such restrictions and limitation as the Committee may specify and to the requirements of Delaware General Corporation Law Section 157.
The Committee shall have full discretionary authority to administer the Plan, including discretionary authority to interpret and construe any and all provisions of the Plan and the terms of any Incentive Award (and any agreement evidencing the grant of any Incentive Award) granted thereunder and to adopt and amend from time to time such rules and regulations for the administration of the Plan as the Committee may deem necessary or appropriate. The Committee shall have the authority, in its discretion, to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations related to sub-plans established for the purpose of satisfying applicable foreign laws and/or qualifying for preferred tax treatment under applicable foreign tax laws. For purposes of clarity, the Committee may exercise all discretion granted to it under the Plan in a non-uniform manner among Participants.
Without limiting the generality of the foregoing paragraph, the Committee shall determine whether an authorized leave of absence, or absence in military or government service, shall constitute termination of
employment, provided that a Participant who is an employee will not be deemed to cease employment in the case of any leave of absence approved by the Company. Unless the Committee provides otherwise in the agreement evidencing the grant of an Incentive Award, vesting of Incentive Awards granted hereunder will be suspended during any unpaid leave of absence and will resume on the date the Participant returns to work on a regular schedule as determined by the Company, it being understood that no vesting credit will be awarded for the time vesting has been suspended during such leave of absence. For purposes of ISOs, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three months following the 91stday of such leave any ISO held by the Participant will cease to be treated as an ISO and will be treated for tax purposes as a non-qualified Option. The provisions of this paragraph shall be administered and interpreted in a manner that does not give rise to any tax under Section 409A of the Code.
The employment of a Participant with the Company shall be deemed to have terminated for all purposes of the Plan if such Participant is employed by or provides services to a Person that is a Subsidiary of the Company and such Person ceases to be a Subsidiary of the Company, unless the Committee determines otherwise. The Committee may, without limitation and in its discretion, in connection with any such determination, provide for the accelerated vesting of any Incentive Award upon or after such cessation, subject to such terms and conditions as the Committee shall specify. The employment of a Participant with the Company shall not be deemed to have terminated for any purpose of the Plan if such Participant is employed by MMI or any other Person that is part of the Company, and such Participant’s employment is subsequently transferred to any other Person that is part of the Company, unless and to the extent the Committee specifies otherwise in writing in the instrument evidencing the grant of an Incentive Award or otherwise. A Participant who ceases to be an employee of the Company but continues, or simultaneously commences, services as a consultant or director of the Company shall not be deemed to have had a termination of employment for purposes of the Plan, unless the Committee determines otherwise. Decisions of the Committee shall be final, binding and conclusive on all parties. All discretion granted to the Committee pursuant to this paragraph must be exercised in a manner that would not cause any tax to become due under Section 409A of the Code.
On or after the date of grant of an Incentive Award under the Plan, the Committee may (i) accelerate the date on which any such Incentive Award becomes vested, exercisable or transferable, as the case may be, (ii) extend the term of any such Incentive Award, including, without limitation, extending the period following a termination of a Participant’s employment during which any such Incentive Award may remain outstanding, (iii) waive any conditions to the vesting, exercisability or transferability, as the case may be, of any such Incentive Award, or (iv) provide for the payment of dividends or dividend equivalents with respect to any such Incentive Award;provided, that the Committee shall not have any such authority to the extent that the grant of such authority would cause any tax to become due under Section 409A of the Code.
The Company shall pay any amount payable with respect to an Incentive Award in accordance with the terms of such Incentive Award, provided that the Committee may, in its discretion, defer the payment of amounts payable with respect to an Incentive Award subject to and in accordance with the terms of a Deferred Compensation Plan.
5.Eligibility
The Persons who shall be eligible to be selected by the Committee from time to time to receive Incentive Awards pursuant to the Plan shall be those Persons who are employees and consultants of, or who render services directly or indirectly to, MMI. Each Incentive Award granted under the Plan shall be evidenced by an instrument in writing in form and substance approved by the Committee.
6.Options
The Committee may from time to time grant Options, subject to the following terms and conditions:
(a)Exercise Price
The exercise price per share of Capital Stock covered by any Option shall be not less than 100% of the Fair Market Value of a share of Capital Stock on the date on which such Option is granted.
(b)Term and Exercise of Options
(i) Each Option shall become vested and exercisable on such date or dates, during such period and for such number of shares of Capital Stock as shall be determined by the Committee on or after the date such Option is granted and set forth in the agreement evidencing the grant of such Option;provided,however that no Option shall be exercisable after the expiration of ten (10) years from the date such Option is granted; and,provided,further, that each Option shall be subject to earlier termination, expiration or cancellation as provided in the Plan or in the agreement evidencing the grant of such Option.
(ii) Each Option may be exercised in whole or in part;provided,however that no partial exercise of an Option shall be for an aggregate exercise price of less than $1,000. The partial exercise of an Option shall not cause the expiration, termination or cancellation of the remaining portion thereof.
(iii) An Option shall be exercised by such methods and procedures as the Committee determines from time to time, including without limitation through net physical settlement or other method of cashless exercise.
(iv) 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 a Participant, only by the Participant;provided,however that the Committee may permit in its discretion Options to be sold, pledged, assigned, hypothecated, transferred, or disposed of, on a general or specific basis, subject to such conditions and limitations as the Committee may determine.
(c)Effect of Termination of Employment or Other Relationship
The agreement evidencing the grant of each Option shall specify the consequences with respect to such Option of the termination of the employment or other service between the Company and the Participant holding the Option.
(d)Additional Terms for ISOs
Each Option that is intended to qualify as an ISO shall be designated as such in the agreement evidencing its grant, and each agreement evidencing the grant of an Option that does not include any such designation shall be deemed to be a non-qualified Option. ISOs may only be granted to Persons who are employees of the Company. The aggregate Fair Market Value (determined as of the date of grant of the ISOs) of the number of shares of Capital Stock with respect to which ISOs are exercisable for the first time by any Participant during any calendar year under all plans of the Company shall not exceed $100,000, or such other maximum amount as is then applicable under Section 422 of the Code. Any Option or a portion thereof that is designated as an ISO that for any reason fails to meet the requirements of an ISO shall be treated hereunder as a non-qualified Option. No ISO may be granted to a Person who, at the time of the proposed grant, owns (or is deemed to own under the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of common stock of the Company unless (i) the exercise price of such ISO is at least one hundred ten percent (110%) of the Fair Market Value of a share of Capital Stock at the time such ISO is granted and (ii) such ISO is not exercisable after the expiration of five years from the date it is granted.
(e)Repricing.
Notwithstanding anything to the contrary herein, Google may reprice any Option without the approval of the stockholders of Google. For this purpose, “reprice” means (i) any of the following or any other action that has the same effect: (A) lowering the exercise price of an Option after it is granted, (B) any other action that is treated as a repricing under U.S. generally accepted accounting principles (“GAAP”), or (C) cancelling an Option at a time when its exercise price exceeds the Fair Market Value of the underlying Capital Stock, in exchange for another Option, restricted stock or other equity, unless the cancellation and exchange occurs in connection with a merger, acquisition, spin-off or other similar corporate transaction; and (ii) any other action that is considered to be a repricing under formal or informal guidance issued by The NASDAQ Stock Market.
7.Other Stock-Based Awards
The Committee may grant equity-based or equity-related awards not otherwise described herein in such amounts and subject to such terms and conditions as the Committee shall determine. Without limiting the generality of the preceding sentence, each such Other Stock-Based Award may (a) involve the transfer of actual shares of Capital Stock to Participants, either at the time of grant or thereafter, or payment in cash or otherwise of amounts based on the value of shares of Capital Stock, (b) be subject to performance-based and/or service-based conditions, (c) be in the form of stock appreciation rights, phantom stock, restricted stock, restricted stock units, performance shares, deferred share units or share-denominated performance units, (d) be designed to comply with applicable laws of jurisdictions other than the United States and (e) be designed to qualify as Performance-Based Compensation;provided, that each Other Stock-Based Award shall be denominated in, or shall have a value determined by reference to, a number of shares of Capital Stock that is specified at the time of the grant of such award.
8.Cash Incentive Awards
The Committee may grant Cash Incentive Awards with respect to any Performance Period, subject to terms and conditions determined by the Committee in its sole discretion, provided that such terms and conditions are consistent with the terms and conditions of the Plan. Cash Incentive Awards may be settled in cash or in other property, including shares of Capital Stock, provided that the term “Cash Incentive Award” shall exclude any Stock Incentive Award. Cash Incentive Awards shall be designed to qualify as Performance-Based Compensation.
9.Performance-Based Compensation
(a)Calculation
The amount payable with respect to an Incentive Award that is intended to qualify as Performance-Based Compensation shall be determined in any manner permitted by Section 162(m) of the Code.
(b)Discretionary Reduction
Unless otherwise specified in the agreement evidencing the grant of an Incentive Award that is intended to qualify as Performance-Based Compensation, the Committee may, in its discretion, reduce or eliminate the amount payable to any Participant with respect to the Incentive Award, based on such factors as the Committee may deem relevant, but the Committee may not increase any such amount above the amount established in accordance with the relevant Performance Schedule. For purposes of clarity, the Committee may exercise the discretion provided by the foregoing sentence in a non-uniform manner among Participants.
(c)Performance Measures
The performance goals upon which the payment or vesting of any Incentive Award (other than Options and stock appreciation rights) that is intended to qualify as Performance-Based Compensation depends shall relate to one or more of the following Performance Measures: market price of Capital Stock, earnings per share of Capital Stock, income, net income or profit (before or after taxes), economic profit, operating income, operating margin,
profit margin, gross margins, return on equity or stockholder equity, total shareholder return, market capitalization, enterprise value, cash flow (including but not limited to operating cash flow and free cash flow), cash position, return on assets or net assets, return on capital, return on invested capital, return on sales, stockholder returns, economic value added, cash value added, earnings or net earnings (before or after interest, taxes, depreciation and amortization), earnings from continuing operations, operating earnings, controllable profits, sales or revenues, sales growth, new orders, capital or investment, ratio of debt to debt plus equity, ratio of operating earnings to capital spending, new product innovation, product release schedules or ship targets, market share, cost reduction goals, inventory or supply chain management initiatives, budget comparisons, implementation or completion of specified projects or processes, customer satisfaction MBOs (management by objectives), productivity, expense, margins, operating efficiency, working capital, the formation of joint ventures, research or development collaborations, or the completion of other transactions, any other measure of financial performance that can be determined pursuant to GAAP, or any combination of any of the foregoing.
A Performance Measure (i) may relate to the performance of the Participant, MMI, Google, a Subsidiary of Google, the Company, any business group, business unit or other subdivision of the Company, or any combination of the foregoing, as the Committee deems appropriate and (ii) may be expressed as an amount, as an increase or decrease over a specified period, as a relative comparison to the performance of a group of comparator companies or a published or special index, or any other external measure of the selected performance criteria, as the Committee deems appropriate. The measurement of any Performance Measure may exclude the impact of unusual, non-recurring or extraordinary items or expenses; items relating to financing activities; charges for restructurings or productivity initiatives; other non-operating items; discontinued operations; items related to the disposal of a business or segment of a business; the cumulative effect of changes in accounting treatment; items related to a change in accounting principle; items related to changes in applicable laws or business conditions; any impact of impairment of tangible or intangible assets; any impact of the issuance or repurchase of equity securities and or other changes in the number of outstanding shares of any class of Google equity securities; any gain, loss, income or expense attributable to acquisitions or dispositions of stock or assets; items attributable to the business operations of any entity acquired by Google during a Performance Period; stock-based compensation expense; in-process research and development expense; future contributions to the Google Foundation; gain or loss from all or certain claims and/or litigation and insurance recoveries; items that are outside the scope of Google’s or MMI’s core, on-going business activities; and any other items, each determined in accordance with GAAP and as identified in Google’s audited financial statements, including the notes thereto.
(d)Performance Schedules
Within ninety (90) days after the beginning of a Performance Period, and in any case before twenty-five percent (25%) of the Performance Period has elapsed, the Committee shall establish (a) Performance Targets for such Performance Period, (b) Target Awards for each Participant, and (c) Performance Schedules for such Performance Period.
(e)Termination of Employment
With respect to an Incentive Award that is intended to qualify as Performance-Based Compensation, the consequences of the termination of employment of the Participant holding such Incentive Award shall be determined by the Committee in its sole discretion and set forth in the applicable agreement evidencing the grant of the Incentive Award, it being intended that no agreement providing for a payment to a Participant upon termination of employment shall be given effect to the extent that it would cause an Incentive Award that was intended to qualify as Performance-Based Compensation to fail to so qualify.
(f)Committee Discretion
Nothing in this Section 9 is intended to limit the Committee’s discretion to adopt conditions with respect to any Incentive Award that is not intended to qualify as Performance-Based Compensation. In addition, the Committee may, subject to the terms of the Plan, amend previously granted Incentive Awards in a way that disqualifies them as Performance-Based Compensation.
10.Adjustment Upon Certain Changes
Subject to any action by the stockholders of Google required by law, applicable tax rules or the rules of any exchange on which shares of common stock of Google (for the avoidance of doubt, references herein to common stock of Google shall include Capital Stock) are listed for trading:
(a)Shares Available for Grants
In the event of any change in the number or type of shares of common stock of Google outstanding by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or similar corporate change, or any change in the type and number of shares of common stock of Google outstanding by reason of any other event or transaction, the Committee shall make appropriate adjustments in the type and maximum aggregate number of shares with respect to which the Committee may grant Incentive Awards, the type and maximum aggregate number of shares with respect to which the Committee may grant Incentive Awards that are intended to be ISOs, and the type and maximum aggregate number of shares with respect to which the Committee may grant Incentive Awards that are intended to qualify as Performance-Based Compensation to any Covered Employee in any calendar year.
(b)Increase or Decrease in Issued Shares Without Consideration
In the event of any increase or decrease in the number or type of issued shares of common stock of Google resulting from a subdivision or consolidation of shares of common stock of Google or the payment of a stock dividend (but only on the shares of common stock of Google), or any other increase or decrease in the number of such shares effected without receipt or payment of consideration by the Company, the Committee shall appropriately adjust the type or number of shares subject to each outstanding Incentive Award and the exercise price per share, if any, of shares subject to each such Incentive Award.
(c)Certain Mergers
In the event of any merger, consolidation or similar transaction as a result of which the holders of shares of Capital Stock receive consideration consisting exclusively of securities of the surviving corporation in such transaction, the Committee shall appropriately adjust each Incentive Award outstanding on the date of such merger or consolidation so that it pertains and applies to the securities which a holder of the number of shares of Capital Stock subject to such Incentive Award would have received in such merger or consolidation.
(d)Certain Other Transactions
In the event of (i) a dissolution or liquidation of Google, (ii) a sale of all or substantially all of the Company’s assets (on a consolidated basis) or (iii) a merger, consolidation or similar transaction involving Google in which the holders of shares of Capital Stock receive securities and/or other property, including cash, other than shares of the surviving corporation in such transaction, the Committee shall, in its sole discretion, have the power to:
(A) cancel, effective immediately prior to the occurrence of such event, each Incentive Award (whether or not then exercisable or vested), and, in full consideration of such cancellation, pay to the Participant to whom such Incentive Award was granted an amount in cash, for each share of Capital Stock subject to such Incentive Award, equal to the value, as determined by the Committee, of such share of Capital Stock, provided that with respect to the shares of Capital Stock subject to any outstanding Option such value shall be equal to the excess of (1) the value, as determined by the Committee, of the property (including cash) received by the holder of a share of Capital Stock as a result of such event over (2) the exercise price of a share of Capital Stock subject to such Option; or
(B) provide for the exchange of each Incentive Award (whether or not then exercisable or vested) for an Incentive Award with respect to (1) some or all of the property which a holder of the number of shares of Capital Stock subject to such Incentive Award would have received in such transaction or (2) securities of the acquirer or surviving corporation, and, incident thereto, make an equitable adjustment as determined by the Committee in the exercise price per share, if any, of stock subject to the Incentive Award, or the number of
shares or amount of property subject to the Incentive Award or provide for a payment (in cash or other property) to the Participant to whom such Incentive Award was granted in partial consideration for the exchange of the Incentive Award.
(e)Other Changes
In the event of any change in the capitalization of Google or corporate change other than those specifically referred to in paragraphs 10(b), (c) or (d), including without limitation, any extraordinary cash dividend, spin-off, split-off, sale of a Subsidiary or business unit, or similar transaction, the Committee may make such adjustments in the issuer, number and class of shares subject to Stock Incentive Awards outstanding on the date on which such change occurs, such as, for example, a rollover of Stock Incentive Awards, and in such other terms of such Incentive Award, including without limitation in any Performance Schedule, Performance Target or Target Award, as the Committee may consider appropriate, provided that if any such Incentive Award is intended to be Performance-Based Compensation such adjustment is consistent with the requirements of Section 162(m) of the Code.
(f)Cash Incentive Awards
In the event of any transaction or event described in this Section 10, including without limitation any corporate change referred to in paragraph (e) hereof, the Committee may, in its sole discretion, make such adjustments in any Performance Schedule, Performance Target or Target Award, and in such other terms of any Cash Incentive Award, as the Committee may consider appropriate in respect of such transaction or event, provided that such adjustments must be consistent with the requirements of Section 162(m) of the Code.
(g)No Other Rights
Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger or consolidation of Google, MMI or any other corporation. Except as expressly provided in the Plan, no issuance by Google of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares or amount of other property subject to, or the terms related to, any Incentive Award.
(h)Savings Clause
No provision of this Section 10 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code.
11.Rights Under the Plan
No Person shall have any rights as a stockholder with respect to any shares of Capital Stock covered by or relating to any Incentive Award until the date of the issuance of such shares on the books and records of Google. Except as otherwise expressly provided in Section 10 hereof, no adjustment of any Incentive Award shall be made for dividends or other rights for which the record date occurs prior to the date of such issuance. Nothing in this Section 11 is intended, or should be construed, to limit the authority of the Committee to cause the Company to make payments based on the dividends that would be payable with respect to any share of Capital Stock if it were issued or outstanding, or from granting rights related to such dividends.
The Company shall not have any obligation to establish any separate fund or trust or other segregation of assets to provide for payments under the Plan. To the extent any person acquires any rights to receive payments hereunder from the Company, such rights shall be no greater than those of an unsecured creditor.
12.No Special Employment Rights; No Right to Incentive Award
(a) Nothing contained in the Plan or any agreement evidence the grant of any Incentive Award shall confer upon any Participant any right with respect to the continuation of his employment by or service to the Company or interfere in any way with the right of the Company at any time to terminate such employment or service or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of an Incentive Award.
(b) No person shall have any claim or right to receive an Incentive Award hereunder. The Committee’s granting of an Incentive Award to a Participant at any time shall neither require the Committee to grant an Incentive Award to such Participant or any other Participant or other person at any time nor preclude the Committee from making subsequent grants to such Participant or any other Participant or other person.
13.Securities Matters
(a) Google shall be under no obligation to effect the registration pursuant to the Securities Act of any shares of Capital Stock to be issued hereunder or to effect similar compliance under any state or local laws. Notwithstanding anything herein to the contrary, Google shall not be obligated to cause to be issued any shares of Capital Stock pursuant to the Plan unless and until Google is advised by its counsel that the issuance of such shares is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Capital Stock are traded. The Committee may require, as a condition to the issuance of shares of Capital Stock pursuant to the terms hereof, that the recipient of such shares make such covenants, agreements and representations, and that any certificates representing such shares bear such legends, as the Committee deems necessary or desirable.
(b) The exercise of any Option granted hereunder shall only be effective at such time as counsel to Google shall have determined that the issuance of shares of Capital Stock pursuant to such exercise is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Capital Stock are traded. Google may, in its sole discretion, defer the effectiveness of an exercise of an Option hereunder or the issuance of shares of Capital Stock pursuant to any Incentive Award pending or to ensure compliance under federal, state or local securities laws. Google shall inform the Participant in writing of its decision to defer the effectiveness of the exercise of an Option or the issuance of shares of Capital Stock pursuant to any Incentive Award. During the period that the effectiveness of the exercise of an Option has been deferred, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto.
14.Withholding Taxes
(a)Cash Remittance
Whenever shares of Capital Stock are to be issued upon the exercise of an Option or the grant or vesting of an Incentive Award, and whenever any amount shall become payable in respect of any Incentive Award, Google shall have the right to require the Participant to remit to Google in cash an amount sufficient to satisfy federal, state and local withholding tax requirements, if any, attributable to such exercise, grant, vesting or payment prior to issuance of such shares or the effectiveness of the lapse of such restrictions or making of such payment. In addition, upon the exercise or settlement of any Incentive Award in cash, or the making of any other payment with respect to any Incentive Award (other than in shares of Capital Stock), Google shall have the right to withhold from any payment required to be made pursuant thereto an amount sufficient to satisfy the federal, state and local withholding tax requirements, if any, attributable to such exercise, settlement or payment.
(b)Stock Remittance
At the election of the Participant, subject to the approval of the Committee, when shares of Capital Stock are to be issued upon the exercise, grant or vesting of an Incentive Award, the Participant may tender to Google a
number of shares of Capital Stock that have been owned by the Participant for at least six months (or such other period as the Committee may determine) having a Fair Market Value at the tender date determined by the Committee to be sufficient to satisfy the minimum federal, state and local withholding tax requirements, if any, attributable to such exercise, grant or vesting but not greater than the minimum withholding obligations, as determined by Google in its sole discretion. Such election shall satisfy the Participant’s obligations under Section 14(a) hereof, if any.
(c)Stock Withholding
When shares of Capital Stock are to be issued upon the exercise, grant or vesting of an Incentive Award, Google shall have the authority to withhold a number of such shares having a Fair Market Value at the date of the applicable taxable event determined by the Committee to be sufficient to satisfy the minimum federal, state and local withholding tax requirements, if any, attributable to such exercise, grant or vesting but not greater than the minimum withholding obligations, as determined by Google in its sole discretion.
15.Amendment or Termination of the Plan
The Board of Directors may at any time suspend or discontinue the Plan or revise or amend it in any respect whatsoever;provided,however, that to the extent that any applicable law, tax requirement, or rule of a stock exchange requires stockholder approval in order for any such revision or amendment to be effective, such revision or amendment shall not be effective without such approval. The preceding sentence shall not restrict the Committee’s ability to exercise its discretionary authority hereunder pursuant to Section 4 hereof, which discretion may be exercised without amendment to the Plan. No provision of this Section 15 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code. Except as expressly provided in the Plan, no action hereunder may, without the consent of a Participant, reduce the Participant’s rights under any previously granted and outstanding Incentive Award. Nothing in the Plan shall limit the right of the Company to pay compensation of any kind outside the terms of the Plan.
16.No Obligation to Exercise
The grant to a Participant of an Incentive Award shall impose no obligation upon such Participant to exercise such Incentive Award.
17.Transfers Upon Death
Upon the death of a Participant, outstanding Incentive Awards granted to such Participant may be exercised by the Participant’s designated beneficiary, provided that such beneficiary has been designated prior to the Participant’s death. Each such designation shall revoke all prior designations by the Participant and shall be effective only if given in a form and manner acceptable to the Committee. In the absence of any such effective designation, such Incentive Awards may be exercised only by the executors or administrators of the Participant’s estate or by any person or persons who shall have acquired such right to exercise by will or by the laws of descent and distribution. No transfer by will or the laws of descent and distribution of any Incentive Award, or the right to exercise any Incentive Award, shall be effective to bind Google unless the Committee shall have been furnished with (a) written notice thereof and with a copy of the will and/or such evidence as the Committee may deem necessary to establish the validity of the transfer and (b) an agreement by the transferee to comply with all the terms and conditions of the Incentive Award that are or would have been applicable to the Participant and to be bound by the acknowledgements made by the Participant in connection with the grant of the Incentive Award.
18.Expenses and Receipts
The expenses of the Plan shall be paid by the Company. Any proceeds received by Google in connection with any Incentive Award will be used for general corporate purposes.
19.Governing Law
The Plan and the rights of all persons under the Plan shall be construed and administered in accordance with the laws of the State of New York without regard to its conflict of law principles.
20.Effective Date and Term of Plan
The Plan was approved by the Board of Directors on April 11, 2012, subject to the approval of the Plan by the stockholders of Google. The Plan shall become effective upon the later to occur of (a) the date that the stockholders of Google approve the Plan and (b) the closing of Google’s acquisition of MMI pursuant to the terms of the Agreement and Plan of Merger by and among Google, RB98 Inc. and MMI dated as of August 15, 2011 (the “MMI Closing”). If the MMI Closing does not occur, the Plan shall automatically terminate, the Company shall have no further obligations with respect to the Plan and the provisions of the Plan shall be of no further force or effect. No grants of Incentive Awards may be made under the Plan after April 11, 2022.
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INFORMATION CONCERNING GOOGLE’S ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
We are pleased to invite you to attend Google’s 2015 Annual Meeting of Stockholders to be held on Wednesday, June 21, 20123, 2015 at 2:9:00 p.m.a.m., local time, at Google’s headquarters located at:
1600 Amphitheatre Parkway
Mountain View, California 94043
Check-in begins at the Shoreline Amphitheatre at 12:7:30 p.m.a.m., local time. The Shoreline Amphitheatre is located at:
1 Amphitheatre Parkway
Mountain View, California 94043
Meeting begins at 2:9:00 p.m.a.m.
If You Plan to Attend the Annual Meeting:
It is important that you let us know in advance by marking the appropriate box on the enclosed proxy card if you requested to receive printed proxy materials, or, if you vote by telephone or internet, indicating your plans when prompted.
| | • | It is important that you let us know in advance by marking the appropriate box on the enclosed proxy card if you requested to receive printed proxy materials, or, if you vote by telephone or Internet, indicating your plans when prompted. |
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| • | If you are a beneficial owner, like a vast majority of our stockholders, you may not vote your shares in person at the Annual Meeting unless you obtain a “legal proxy” from the broker, bank, trustee, or nominee that holds your shares giving you the right to vote the shares at the meeting.Annual Meeting.Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy or voting instructions as described in the proxy statement so that your vote will be counted if you later decide not to attend the meeting.Annual Meeting. |
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| • | Please note that space limitations make it necessary for us to limit attendance to our stockholders.Only Google stockholders of Class A and/or Class B common stock as of the close of business on April 6, 2015 are entitled to vote at our Annual Meeting. |
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| • | You must be registered to be admitted to the Annual Meeting.Registration will take place at the Shoreline Amphitheatre (see directions below). Parking will only be available at the Shoreline Amphitheatre. |
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| • | Admission will be on a first-come, first-served basis. Check-in and registration will begin promptly at 7:30 a.m., local time. Google will be serving breakfast to attendees. |
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| • | Each stockholder should be prepared to present: |
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Please note that space limitations make it necessary for us to limit attendance to our stockholders.Only Google stockholders as of the close of business on April 23, 2012 are entitled to attend our Annual Meeting.
You must be registered to be admitted to the meeting. Registration will take place at the Shoreline Amphitheatre (see directions below). Parking will only be available at the Shoreline Amphitheatre.
Admission will be on a first-come, first-served basis. Check-in and registration will begin promptly at 12:30 p.m. Google will be serving lunch to attendees.
Each stockholder should be prepared to present:
| | | (1) | Valid photo identification, such as a driver’s license or passport; and |
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| | | (2) | Stockholders holding their shares through a broker, bank, trustee, or nominee will need to bring proof of beneficial ownership as of the Record Date, such as their most recent account statement reflecting their stock ownershipprior to April 23, 2012,6, 2015,a copy of the voting instruction cardform provided by their broker, bank, trustee, or nominee, or similar evidence of ownership. |
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| • | Cameras, recording devices, and other electronic devices, such as smartphones, will not be permitted at the Annual Meeting. Photography is prohibited at the Annual Meeting. Please also do not bring large bags or packages to the Annual Meeting. |
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| • | Please allow ample time for check-in. For security reasons, you and your bags will be subject to search prior to your admittance to the Annual Meeting. |
Cameras, recording devices, and other electronic devices, such as smart phones, will not be permitted at the meeting. Photography is prohibited at the meeting. Please also do not bring large bags or packages to the meeting.
Please allow ample time for check-in. For security reasons, you and your bags will be subject to search prior to your admittance to the meeting.
Directions to Shoreline Amphitheatre from either San Jose or San Francisco:
| | (1) | Follow Route 101 to the Rengstorff Avenue/Amphitheatre Parkway exit. |
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| | (2) | Follow the signs to the Amphitheatre (cross back over 101 if you are coming from the north/just stay right if you are coming from the south). |
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| | (3) | Go through the signal at Charleston Road and continue on Amphitheatre Parkway. You will pass Google on your right. |
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| | (4) | Turn left at Bill Graham Parkway and follow the signs to Lot C. |
Parking will only be available at the Shoreline Amphitheatre. AWe will provide a shuttle bus will be available to take you to our headquarters for the Annual Meeting.
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MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 IMPORTANT ANNUAL MEETING INFORMATION ENDORSEMENT_LINE SACKPACK Admission Ticket C123456789 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead methods of outlined mailing below your proxy, to vote you your may proxy. choose one of the voting VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies 1:00 a.m. submitted , Central Time, by the on internet June 21, or 2012. telephone must be received by Vote by Internet Go to www.envisionreports.com/goog Or scan the QR code with your smartphone Follow the steps outlined on the secure website Vote by telephone Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. Annual Meeting Proxy Card 1234 5678 9012 345 IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. A Election of Directors — The Board of Directors recommends a vote FOR the listed nominees. Nominees: - Larry Page - L. John Doerr - Ann Mather - Shirley M. Tilghman 02 - Sergey Brin 05 - Diane B. Greene 08 - Paul S. Otellini 03 - Eric E. Schmidt 06 - John L. Hennessy 09 - K. Ram Shriram For Withhold Proposals — The Board of Directors recommends a vote FOR Proposals 2, 3 (comprising Proposals 3A, 3B, and 3C), 4, and 5, and AGAINST Proposals 6, 7, and 8. For Against Abstain The ratification of the appointment of Ernst & Young LLP as Google’s independent registered public accounting firm for the fiscal year ending December 31, 2012. 3. The approval of the adoption of Google’s Fourth Amended and Restated Certificate of Incorporation*: 3A. The approval of the adoption of amendments to Google’s Third Amended and Restated Certificate of Incorporation to establish the Class C capital stock and to make certain clarifying changes. 3B. The approval of the adoption of amendments to Google’s Third Amended and Restated Certificate of Incorporation to increase the number of authorized shares of Class A common stock from 6 billion to 9 billion. 3C. The approval of the adoption of amendments to Google’s Third Amended and Restated Certificate of Incorporation to provide for the treatment of shares of Class A common stock in a manner that is at least as favorable as the shares of Class B common stock. The approval of Google’s 2012 Stock Plan. The approval of Google’s 2012 Incentive Compensation Plan for Employees and Consultants of Motorola Mobility. A stockholder proposal regarding an advisory vote on political contributions, if properly presented at the meeting. A stockholder proposal regarding mandatory arbitration of certain shareholder claims, if properly presented at the meeting. A stockholder proposal regarding equal shareholder voting, if properly presented at the meeting. Each of the proposals comprising Proposal 3 is cross-conditioned upon the approval by our stockholders of all of the proposals comprising Proposal 3. None of Proposals 3A, 3B, or 3C will be deemed approved unless all of them are approved. The approval of each of the proposals comprising Proposal 3 shall constitute the requisite approval of the adoption of Google’s Fourth Amended and Restated Certificate of Incorporation as required by Delaware law. C 1234567890 J N T 1 U P X 1 3 6 5 7 8 1 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND 01FTMK
2012 Annual Meeting Admission Ticket 2012 Annual Meeting of Google’s Stockholders June 21, 2012, 2:00 p.m. local time Google’s Headquarters 1600 Amphitheatre Parkway, Mountain View, California 94043 Upon arrival, please present this admission ticket and photo identification at the registration desk located at the Shoreline Amphitheatre. If You It Plan is important to Attend that the you Annual let us Meeting: know in advance by marking the appropriate box on this proxy or internet, card if indicating you requested your plans to receive when printed prompted. proxy materials, or, if you vote by telephone If your you shares are a beneficial in person owner, at the Annual like a vast Meeting majority unless of our you stockholders, obtain a “legal you proxy” may from not vote the broker, bank, trustee, or nominee that holds your shares giving you the right to vote the shares at the meeting. Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy or voting instructions as described in the proxy statement so Please that your note vote that will space be counted limitations if you make later decide it necessary not to attend for us the to limit meeting. attendance to our stockholders. are entitled to Only attend Google our Annual stockholders Meeting. as of the close of business on April 23, 2012 the You Shoreline must be Amphitheatre registered to (see be admitted directions to below) the meeting. . Registration will take place at Admission promptly at will 12:30 be on p.m. a Google first-come, will first-served be serving lunch basis. to Check-in attendees. and registration will begin Each (1) stockholder Valid photo should identification, be prepared such as to a present: driver’s license or passport; and (2) need Stockholders to bring holding proof of their beneficial shares ownership through a as broker, of the bank, Record trustee, Date, or such nominee as their will most April 23, recent 2012, account a copy statement of the voting reflecting instruction their card stock provided ownership by their prior broker, to Cameras, bank, recording trustee, devices, or nominee and other or similar electronic evidence devices, of ownership. such as smart phones, will not bring be permitted large bags at the or meeting. packages Photography to the meeting. is prohibited at the meeting. Please also do not Please subject allow to search ample prior time to your for check-in. admittance For to security the meeting. reasons, you and your bags will be Directions (1) Follow Route to Shoreline 101 to Amphitheatre the Rengstorff from Avenue/Amphitheatre either San Jose or Parkway San Francisco: exit. (2) north/just Follow the stay signs right to the if you Amphitheatre are coming (cross from the back south) over . 101 if you are coming from the (3) pass Go through Google the on signal your right. at Charleston Road and continue on Amphitheatre Parkway. You will (4) Parking Turn will left only at Bill be Graham available Parkway at the Shoreline and follow Amphitheatre. the signs to Lot A shuttle C. bus will be available to take you to our headquarters for the Annual Meeting. IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Proxy — Google Inc. This proxy is solicited by the Board of Directors for use at the Annual Meeting on June 21, 2012. of You your hereby shares authorize of Class Larry A common Page, Eric stock E. and/or Schmidt, Class Patrick B common Pichette stock and David of Google C. Drummond, Inc. held of or record any of as them, of the each close with of full business power on of substitution, April 23, 2012, to represent with all the you powers and vote which all You the undersigned hereby revoke would all proxies possess previously if personally given. present, at the Annual Meeting of Stockholders of Google Inc., on June 21, 2012 or at any postponement or adjournment thereof. The shares of stock you hold in your account will be voted as you specify on the reverse side. In come their before discretion, the meeting. Larry Page, Eric E. Schmidt, Patrick Pichette and David C. Drummond, or any of them, are authorized to vote upon such other business as may properly THIS “FOR” PROXY PROPOSALS WHEN PROPERLY 2, 3 (COMPRISING EXECUTED PROPOSALS WILL BE VOTED 3A, 3B, AS DIRECTED AND 3C), 4, OR, and IF NO 5, “AGAINST” DIRECTION PROPOSALS IS GIVEN, WILL 6, BE 7, and VOTED 8 AND “FOR” IN ALL THE DIRECTOR DISCRETION NOMINEES, OF THE PROXYHOLDERS ON ANY OTHER MATTER THAT PROPERLY COMES BEFORE THE MEETING. THE 4, AND BOARD 5, AND OF A DIRECTORS VOTE “AGAINST” RECOMMENDS PROPOSALS A VOTE 6, 7, AND “FOR” 8. ALL DIRECTOR NOMINEES, “FOR” PROPOSALS 2, 3 (COMPRISING PROPOSALS 3A, 3B, AND 3C), C Non-Voting Items Change of Address — Please print new address below. Meeting Attendance Mark box to the right if you plan to attend the Annual Meeting. D Authorized Signatures — This section must be completed for your vote to be counted — Date and Sign Below Please sign exactly as your name(s) appear on the proxy. If held in joint tenancy, all persons must sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy. provide Please sign full name exactly of as corporation your name(s) and title appear of authorized on the proxy. officer If held signing in joint the tenancy, proxy. all persons must sign. Trustees, administrators, etc., should include title and authority. Corporations should
Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - D ON BOTH SIDES OF THIS CARD.
