PROXY STATEMENT PURSUANT TO SECTION
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To the Stockholders ofMOLEX INCORPORATED
Notice is hereby given thatWe will hold the annual meeting of the stockholders of Molex Incorporated a Delaware corporation, will be held in the Symposium Theater at the Wyndham Hotel located at 3000 Warrenville Road, Lisle, Illinois,stockholders on Friday, October 28, 200531, 2008 at 10:00 a.m. Central Daylight Time, local time, at our corporate headquarters at 2222 Wellington Court, Lisle, Illinois 60532.
1. | To elect four Class III members of the board of directors for a term of three years and one Class I member of the board of directors for a term of one year. | |
2. | To adopt the Amended and Restated 1998 Molex Stock Option and Restricted Stock Plan. | 3. | To adopt the 2005 Molex Employee Stock Award Plan. | 4. | To adopt the 2005 Molex Employee Stock Purchase Plan. | 5. | To adopt the 2005 Molex Incentive Stock Option Plan. | 6. | To adopt the Amended and Restated 2000 Molex Long-Term Stock Plan. | 7. | To ratify the appointment of Ernst & Young LLP as the independent auditors of the Company for the fiscal year ending June 30, 2006. | 8. | To transact such other business as may properly come before the meeting, or any adjournments or postponements thereof. |
A proxy card, proxy statement and the Annual Report of Molex Incorporated are enclosed with this notice. (See Important Note below.) The Annual Report is not part of the proxy soliciting materials.
Regardless of whetherimportant. Whether or not you plan to attend the annual meeting in person, it is important that your shares arebe represented and voted. Accordingly, you are requested to completevoted at the annual meeting. You can vote your shares by completing and sign the enclosedreturning your proxy card and return it inor the enclosed envelope.
September 23, 2005
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PROXY STATEMENT
September 23, 2005
INFORMATION ABOUT THE MEETING
SOLICITATIONCONCERNING VOTING AND REVOCATION OF PROXIES
SOLICITATION
We are providing these
Multiple Stockholders Having the Same Address
We have adopted the procedure, approved by the Securities and Exchange Commission (“SEC”) called “house holding.” Under this procedure, stockholders of record who have the same address and last name will receive only one copy of our annual report and proxy statement, unless one or more of these stockholders notifies us that they wish to receive individual copies. If you or other residents at your mailing address own shares of any class of Molex stock, you should have received a notice advising you that your household will be sent only one annual report and proxy statement. If you did not return the “opt-out” card attached to the notice, you were deemed to have consented to such process, which means that you will receive only one copy of the annual report and proxy statement to your address. You may revoke your consent at any time upon written request by sending your name,held in the name of a bank, broker, or other holder of record, you may change your brokerage firm (ifvote by submitting new voting instructions to your bank, broker or other holder of record. Please note that if your shares are held by a bank, broker or other holder of record, and you are holding stock in “street name”),decide to attend and yo ur account number to Automatic Data Processing, Inc.-Investor Communication Services, 51 Mercedes Way, Edgewood, NY 11717. The revocation will be effective 30 days following its receipt.
Any stockholder may have a copy ofvote at the annual report and/or proxy statement sent by mailing their written request to Shareholder Servicesmeeting, your vote in person at the address printed on the top of this page or calling (630) 527-4447. If you are receiving multiple copies of the annual report and proxy statement at your address and would like to receive only one copy, please contact us at the foregoing address or phone number.
Proxy Solicitation Expenses
All expenses in connection with the solicitation, including postage, printing, handling and the actual expenses incurred by brokerage houses, custodians, nominees and fiduciaries in forwarding these proxy materials to beneficial owners, will be paid by Molex.
VOTING RIGHTS AND PROCEDURES
Determination of a Quorum
The presence at the meeting in person or by proxy, of a majority of the outstanding shares of each of the Common Stock and Class B Common Stock classes entitled to vote will constitute a quorum at the meeting. Abstentions, broker “non-votes” and withheld votes are counted as present for purposes of determining the presence or absence of a quorum for the transaction of business. A broker “non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a proposal because the nominee does not have discretionary voting power and has not received instructions from the beneficial owner.
Election of Directors
Directors are elected by a plurality of the vote of the shares of the Common Stock and the Class B Common Stock voting together as a class. The nominees who receive the most votes will be elected. Abstentions, withheld votes and broker “non-votes” will not be taken into account and will have no effecteffective unless you present a legal proxy, issued in determining the outcomeyour name from your bank, broker or other holder of the election.record.
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When electing directors, the holders of the shares of Common Stock and the holders of the shares of Class B Common Stock have non-cumulative voting rights. This means that the holders of a majority of shares of the Common Stock and Class B Common Stock taken together, represented and entitled to vote at a meeting where a quorum is present can elect all of the directors if they choose to do so. In such an event, the holders of the remaining shares will not be able to elect any person or persons to the board of directors.
Proposals Other Than the Election of Directors
Subject to certain conditions, all matters, other than the election of directors, submitted to a vote of all the stockholders at the Annual Meeting must be approved separately by both the holders of a majority of the shares of the Common Stock entitled to vote on the subject matter and present in person or by proxy, voting as a class, and by the holders of a majority of the shares of the Class B Common Stock entitled to vote on the subject matter and present in person or by proxy, voting as a class. Abstentions will have the same effect as votes against all proposals (other than the election of directors) presented to the stockholders. A broker “non-vote” will not be considered entitled to vote as to such matters at the Annual Meeting, will not be counted as a vote for or against any matter and, accordingly, will have no effect on the outcome of any proposal presented to the stockholders.
INFORMATION ABOUT THE DIFFERENT CLASSES OF MOLEX STOCK
DESCRIPTION OF THE THREE DIFFERENT CLASSES OF STOCK
Voting Stock: Common Stock and Class B Common Stock
– | Voting Stock: Common Stock and Class B Common Stock |
Non-Voting Stock: Class A Common Stock
– | Non-Voting Stock: Class A Common Stock |
SHARES OUTSTANDING ON THE RECORD DATE
Only voting stockholders
– | Shares Outstanding On The Record Date |
– | Quorum |
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INFORMATION ABOUT WHO OWNS MOLEX STOCK
SECURITY OWNERSHIP OF DIRECTORS, MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forthBoard may be filled only by persons elected by the outstanding equity securities of Molex beneficially owned asBoard to fill a vacancy (including a vacancy created by an increase in the size of the Record DateBoard). A director elected by the Board to fill a vacancy (including a vacancy created by an increase in the size of the Board) will serve for the remainder of the full term of the class of directors in which the vacancy occurred and until such director’s successor is elected and qualified, or until such director’s earlier death, resignation or removal.
STOCK OWNERSHIP GUIDELINES FOR EXECUTIVE OFFICERS AND DIRECTORS
The stock ownership guidelines for executive officers are expressed in terms of the ratio of the value of the stock owned to the base salary. The stock ownership ratio that has been set for executive officers is at least two, subject to the following exceptions: someone who is retiring within the next three years; someone who is a newly appointed executive officer of Molex will have five years to achieve the specified ratio; or special circumstances, e.g., someone who, in the opinionrecommendation of the Nominating and Corporate Governance Committee, would suffer hardship.
The outside directors haveEdgar D. Jannotta, John H. Krehbiel, Jr., Donald G. Lubin, and Robert J. Potter are all nominees forre-election to the opportunity to obtain Molex stock or its equivalent by acquiring shares in the open market, exercising stock options granted to them on an annual basis, and/or participating in the Deferred Compensation Plan that pays cash based upon the value of phantom stock units that tracks the value of Molex stock as described in greater detail below in the section entitled “DIRECTORS’ COMPENSATION.” The outside directors have stock ownership guidelines expressed in terms of shares of Molex stock or phantom stock units rather than a ratio. With the exception of hardship, the outside director stock ownership guidelines are, after 3 years, 500 shares/units and, after 6 years, 1,000 shares/units.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires Molex’s directors and executive officers, among others (“Reporting Persons”), to file reports of Molex stock ownership and changes in Molex stock ownership with the SEC and The Nasdaq Stock Market, Inc. Persons subject to §16 are required by SEC regulations to furnish Molex with copies of all §16(a) reports that they file. As a matter of practice, Molex’s staff assists Molex’s executive officers and directors in preparing and filing these reports. Based solely on its review of the copies of such reports furnished to Molex and on written representations, Molex believes that during the last fiscal year, the Reporting Persons filed the required reports on a timely basis under §16(a) except that, during fiscal year 2005, D. K. Carnahan filed an amended Form 4 to correct a inadvertent error regarding the amount of phantom stock credited to his deferred compensation account. Mr. Carnahan& rsquo;s original Form 4 was filed timely; however, the amended Form 4 was filed four business days after the filing of the original Form 4.
INFORMATION ABOUTCORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
ORGANIZATION AND ELECTION OF THE BOARD OF DIRECTORS
Under the by-laws of Molex, the board of directors can set the number of directors between six and fifteen. As a matter of policy, the board of directors has decided that the number of directors should be not less than 12 or more than 15 directors. Currently, the board of directors comprises 13 members who are divided into three classes with staggered terms. Specifically, the board of directors is divided into Class I, Class II and Class III directors, with one class to beBoard. If elected, each year. As a result, Molex stockholders elect approximately one-third ofnominee would serve until the board of directors each year at the2011 annual meeting of stockholders for a term expiring at the third meeting following their election.
Vacancies on the board of directors may occur due to a number of reasons including, death, resignation, removal or expanding the size of the board of directors. Under Molex’s by-laws, the board of directors has the authority to fill any vacancy until the next Annual Stockholders’ Meeting when the stockholders will vote on the candidate(s).
Molex’s board of directors has created four committees to perform certain functions. A description of these committees and their responsibilities are setstockholders.
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BOARD INDEPENDENCE
Under
In July of 2005, the board of directors determined that eight outside directors of Molex are “independent”, forming an independent majority as required under the Nasdaq Rules. The names of the independent members of Molex’s board of directors are:
The Nasdaq Rules also require that the members of the Compensation Committee and the Nominating and Corporate Governance Committee be independent as defined above. The level of independence for members of the Audit Committee is higher than that required for the other independent board or committee members. The board of directors determined that all the members of the Compensation Committee and the Nominating and Corporate Governance Committee are independent and that all three of the outside directors comprising the Audit Committee have met the higher independent standards and the other requirements set forth in greater detail in the section entitled “COMMITTEES OF THE BOARD OF DIRECTORS.”
MEETINGS AND DIRECTOR ATTENDANCE
During the last fiscal year, there were 12 meetings of the board of directors and one unanimous written consent. The independent members of the board of directors meet regularly in executive session without the presence of management or inside directors three times every year at the conclusion of each scheduled quarterly meeting except the meeting held in October. Although Molex has no formally designated “Lead Director”, the Chairman of the Nominating and Corporate Governance Committee acts as Chairman for these executive sessions.
During last fiscal year, each director attended at least 75% of the aggregate of the total number of meetings of the board of directors and committees on which he or she served.
Molex’s corporate governance guidelines require the members of the board of directors to make every reasonable effort to attend Molex Annual Stockholders’ Meeting. Last year, all the members of the board of directors were present.
PROCESS FOR NOMINATING BOARD CANDIDATES
An updated publication of the Nominating and Corporate Governance Committee (“NCGC”) charter containing the most current qualifications and procedures for nominating director candidates is available on Molex’s Web site, www.molex.com, by first clicking on “Investors”, then “Corporate Governance” and “Nominating and Corporate Governance Committee Charter.”
Board Qualifications
The minimum qualifications sought by Molex for members of the Board of directors are described in Exhibit A to the NCGC charter available on Molex’s Web site at www.molex.com. Generally, candidates are selected on the basis of outstanding achievement in their professional careers, broad experience, wisdom, personal and professional integrity, their ability to make independent, analytical inquiries, and their experience with and understanding of the business environment in which Molex operates.
Procedures for Identifying and Evaluating Director Candidates
The “Procedures for Identifying and Evaluating Candidates for Director” are set forth in Exhibit B to the NCGC charter available on Molex’s Web site at www.molex.com. As a general statement of policy, the written procedure provides:
“The Company is of the view that the continuing service of qualified incumbents promotes stability and continuity in the boardroom, contributing to the Board’s ability to work as a collective body, while giving the Company the benefit of the familiarity and insight into the Company’s affairs that its directors have accumulated during their tenure. Accordingly, the process of the Committee for identifying nominees shall reflect the Company's practice of re-nominating incumbent directors who continue to satisfy the Committee’s criteria for membership on the Board, whom the Committee believes continue to make important contributions to the Board and who consent to continue their service on the Board.”
The NCGC will identify and/or solicit recommendations for new candidates when there is no qualified and available incumbent. The NCGC has the authority to retain a third party, such as a professional recruiter, to assist in identifying qualified candidates. Professional services of this kind have been used in the past.
Procedures for Shareholders Submitting Nominating Recommendations
The “Procedures for Shareholders Submitting Nominating Recommendations” are set forth in Exhibit C to the NCGC charter available on Molex’s Web site at www.molex.com. The procedures cover the timing, manner and address for submission, information concerning the recommending stockholder(s) and information concerning the proposed nominee. Shareholders may recommend candidates by writing to the Secretary of Molex at 2222 Wellington Court, Lisle, IL 60532. Among other things, the recommendation must include the following information:
Properly submitted stockholder recommendations will be evaluated with the same criteria as candidates that are recommended internally. The procedures state “Acceptance of a recommendation does not imply that the NCGC will nominate the recommended candidate.”
RESTRICTIONS AND OTHER CONDITIONS FOR CONTINUING BOARD SERVICE
Removal for Cause
Section 141(k) of the Delaware General Corporation Law (“§141(k)”) provides that directors serving on a classified board cannot be removed without cause, unless the certificate of incorporation provides otherwise. Molex’s Certificate of Incorporation does not prohibit the application of §141(k) to its board of directors. Therefore, the stockholders of Molex cannot remove incumbent directors from office without a valid reason for doing so under Delaware law.
Limitations on the Number of Additional Boards on Which Molex Directors May Serve
Aside from removal for cause, Molex has issued guidelines regarding continued service on the board of directors. Because of the increasing demands of public board service, the number of additional public company boards of directors on which Molex directors may serve is limited as follows:
Change of Employment
Any member of the board of directors whose principal job changes is required to submit his or her resignation. Depending upon whether the change of employment is deemed to affect an individual’s qualifications or desirability to serve on Molex’s board of the directors, the board of directors, in its discretion, may accept the resignation.
Term Limits and Retirement
Molex has decided not to impose term limits or mandatory retirement requirements. Molex is in a specialized global industry that is not easily understood. The experience obtained at Molex over a prolonged period through different business cycles in the marketplace is an extremely valuable asset. It is the judgment of the board of directors that the experience acquired over a long tenure with Molex outweighs any potentially negative consequences for not having term limits or a mandatory retirement age.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The “Procedures for Shareholder Communications With Directors” are set forth in Exhibit D to the NCGC Charter available on Molex’s Web site at www.molex.com. The procedures set forth where to address communications and how the communications will be handled. Any communications to the Board, either as a group or to individual members, or questions regarding these procedures may be addressed to the Corporate Secretary at 2222 Wellington Court, Lisle, IL 60532.
Stockholder Proposals
In order to be considered for inclusion in our proxy materials for Molex’s 2006 Annual Stockholders’ Meeting, a stockholder proposal must be submitted to the Corporate Secretary, at the Corporate headquarter address noted above on or before May 26, 2006. Molex’s by-laws provide that stockholder nominations for persons for election to Molex’s board of directors and proposals for business to be considered at an annual stockholders meeting that are not included in our proxy materials must satisfy certain conditions including submitting notice of such nomination or proposal to Molex not more than 90 days or less than 60 days prior to the anniversary of the preceding year’s annual meeting of stockholders. Proxies solicited with respect to next year’s Annual Stockholders Meeting may confer discretionary authority to vote on various matters, including any matter with respect to which Molex did not receive notice by August 29, 2006.
COMMITTEES OF THE BOARD OF DIRECTORS
Molex has four committees of the board of directors. They are the Compensation Committee, the Audit Committee, the Nominating and Corporate Governance Committee and the Executive Committee. Each committee operates in accordance with a charter that can be viewed on Molex’s Web site (www.molex.com). Information about each committee is set forth below in the table.
DIRECTORS’ COMPENSATION
Director Fees
Effective July 1, 2005, each director who is not a salaried employee of Molex receives an annual retainer of $50,000 per year for serving as a director. In addition, non-employee directors receive $3,000 for attending a regular or special board meeting, $2,000 for attending a board committee meeting, and are reimbursed for all reasonable travel and out-of-pocket expenses associated with attending such meetings. The chairmen of the committees are given an additional amount as his or her committee meeting fee in view of their increased responsibilities. The meeting fee paid to the chairmen of Compensation and Nominating and Corporate Governance Committees is $3,000 per meeting while the meeting fee for the chairman of the Audit Committee is $4,000 per meeting.
Prior to July 1, 2005, each director who was not a salaried employee of Molex received compensation at the rate of $35,000 per year for serving
Stock Options
Each outsideWilliam Blair & Company LLC, an international investment banking firm, since 2001. He has served in numerous capacities at William Blair since 1965, including Senior Director, Senior Partner and Managing Partner. Mr. Jannotta is a director receives an automatic annual non-discretionary stock option grant under the 2000 Molex Incorporated Incentive Stock Option Plan (the of Aon Corporation.
Notwithstanding the foregoing, the number of shares subject to the annual option given to each outside director under the 2000 ISO Plan cannot exceed 3,000 shares or an amount whose fair market value on the date of grant is $100,000. Because the these financial goals were not achieved for the fiscal year just ended, the number of shares subject to the option that will be granted to the outside directors with respect to such year will be determined by multiplying 200 by the number of years of service or fraction thereof.
Deferred Compensation Plan
Each director is eligible to participate in The Molex Incorporated Deferred Compensation Plan and the newly adopted 2005 Molex Outside Directors’ Deferred Compensation Plan under which he or she may elect on a yearly basis to defer all or a portion of the following year’s compensation. A participant may elect to have the amount deferred (1) accrue interest during each calendar quarter at a rate equal to the average six month Treasury Bill rate in effect at the beginning of each calendar quarter, or (2) credited as phantom stock “units” whereby each unit is equal to one share of Common Stock. The cumulative amount that is deferred for each participating director is subject to the claims of the general creditors of Molex. Upon termination of serviceserved as a director the accumulated amount is distributed in a lump sum. At the time of distribution, any stock units are converted into cash by multiplying the number of units by the fair market value of the stock as of the payment date.
CODE OF ETHICS AND CONDUCT
Molex has adopted a Code of Ethics and Conduct (the “Code”). The full text of the Code can be found on Molex’s Web site at www.molex.com. The Code applies not only to the executive and financial officers, but also to all employees and the members of the board of directors. Molex intends to post any amendments to or waivers from the Code on its Web site.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
The following information is provided with respect to all of the members of the board of directors:
DIRECTORS WHO ARE SUBJECT TO ELECTION THIS YEAR
Class III Directors
John H. Krehbiel, Jr.(a) — Co-Chairman of the Board of Molex.(b) Director since 1966(c) and member of the Executive Committee. Age 68.
President of Molex 1975-1999 and Chief Operating Officer 1996-1999. Mr. Krehbiel became Co-Chairman in1999. From 1999 andto 2001, he served as Co-Chief Executive Officer of Molex. From 1996 to 1999, he served as Chief Operating Officer, and from 1975 to 1999, he served as President of Molex.
1996.
Prior1990. From 1987 to founding R. J. Potter Company in 1990, Dr. Potter was President and Chief Executive Officer of Datapoint Corporation, (local area networks, video teleconferencing and computer systems) from 1987 to 1990.a leader in network-based data processing. Dr. Potter serves on the boardis a director of directors of Cree, Inc. and Zebra Technologies Corporation.
In 1959, Mr. Jannotta joined William Blair & Company, serving in various capacities including Managing Partner (1977-1995), Senior Partner (1995-1996), Senior Director (1996-2001), and Chairman (2001-). During the last five years, William Blair & Company, LLCWanger Advisors Trusts.
Donald G. Lubin — Partner of Sonnenschein Nath & Rosenthal LLP (private law practice). Director since 1994. Age 71.
Mr. Lubin joined Sonnenschein Nath & Rosenthal LLP in 1957, has beenserved as a partner since 1964 and was Chairman from 1990 to 1996. Sonnenschein Nath & Rosenthal LLP is one of Molex’s outside law firms that has performed services on behalfdirector of Molex since 1987.1993. Since 1988, he has served in various engineering, marketing and managerial positions with Molex. Mr. LubinKrehbiel has been Vice President, Product Development and Commercialization for Molex’s Global Commercial Products Division since July 2007. From 2003 to 2007, he was President, Connector Products Division (Americas), and from 2002 to 2003, he served on the board of directors of McDonald’s Corporation from 1967 to 2004.as President, Automotive Division (Americas).
6
New Class I Director Subject to Election This Year
Mr. Landsittel has 34 years of experience in public accounting andHe previously served as Chairman of the Auditing Standards Board of the American Institute of Certified Public Accountants. From 1963 to 1997, Mr. Landsittel served as an auditor in various positions with Arthur Andersen LLP, including Managing Director and other functional leadership positions, and served as engagement partner on larger commercial accounts. Since 1997,LLP. Mr. Landsittel is a Trustee of Burnham Investors Trust.
CLASS I DIRECTORS WHOSE TERM EXPIRES 2006
Fred L. Krehbiel(a) —was re-elected in January 2008. Mr. Laymon has been Corporate Vice President of the Connector Products Division (Americas).(b) DirectorHuman Resources at Chevron Corporation since 1993. Age 40.
Mr. Krehbiel worked at Molex since 1988 in various engineering, marketing and managerial capacities.March 2008. Prior to his current position, he served as the President of the Automotive Division (Americas) from 2000-2003.
Douglas K. Carnahan — Retired former executive of Hewlett-Packard Company (computers, computer peripherals and instrumentation). Director since 1997 and Chairman of the Audit Committee. Age 64.
that, Mr. Carnahan joined Hewlett-Packard in 1968 and served in several diverse positions in manufacturing, engineering and management. He served as General Manager of the Printing Systems Group from 1989-1993 andLaymon was elected Vice President in 1992. From 1994-1998, Mr. Carnahan was General Manager of the Measurement Systems Organization. In 1996, he was elected Senior Vice President. Mr. Carnahan continued managing the Measurement Systems Organization that included Hewlett-Packard’s analytical, medical, components and information storage businesses until he retired in 1998.
Joe W. Laymon — Group Vice President, Corporate Human Resources &and Labor Affairs offor Ford Motor Company (automobile manufacturer). Director since 2002 and member of the Compensation Committee. Age 52.
After working for the U.S. State Department-Agency for International Development, Mr. Laymon held various human resource positions at Xerox Corporation (1979-1996) and Eastman Kodak Company (1996-2000). He joined Ford Motor Company in Marchfrom 2004 to 2008. From 2000 as theto 2004 he was Executive Director (2000-2001) and then Vice President (2001-2004) of Human Resources Business Operations before assuming his present positionfor Ford.
7
the listing standards of NASDAQ and the more stringent independence test established by the Board. The Board has determined that the following directors are independent: Michael J. Birck, Michelle L. Collins, — Managing Director Edgar D. Jannotta, Kazumasa Kusaka, David L. Landsittel, Joe W. Laymon, James S. Metcalf and Robert J. Potter. Donald G. Lubin has determined that he is not independent in light of Svoboda, Collins LLC (private equity firm). Director since 2003his long-standing role as a legal advisor to Molex and memberthe Krehbiel family, and the Board agrees with Mr. Lubin’s determination.
• | Mr. Birck is the Chairman of Tellabs which is a Molex customer. The Board reviewed Molex’s sales to Tellabs during FY08 and determined that this relationship does not affect Mr. Birck’s status as an independent director; | |
• | Mr. Jannotta is the Chairman of William Blair which provides investment banking services to Molex. The Board reviewed the amount of fees paid to William Blair for such services during FY08 and determined that this relationship does not affect Mr. Jannotta’s status as an independent director; | |
• | Mr. Laymon was previously Group Vice President, Corporate Human Resources, at Ford Motor Company which is a Molex customer. The Board reviewed Molex’s sales to Ford during FY08 and determined that this relationship does not affect Mr. Laymon’s status as an independent director. | |
• | From time to time, we make charitable contributions to organizations with which a non-employee director has an affiliation. The Board reviewed all such charitable contributions and determined that they did not affect the independent status of any non-employee director. |
The charters of each of these committees are posted on our Web site,www.molex.com, on the Investor Relations page under Corporate Governance.
8
CLASS II DIRECTORS WHOSE TERM EXPIRES 2007
the Board. The Nominating Committee also determines Board membership qualifications, selects, evaluates and recommends to the Board nominees for election to the Board, and reviews the performance of the Board. During FY08 the Nominating Committee met twice.
– | Process for Identifying Board Candidates |
– | Stockholder Proposals and Nominations |
9
Mr. Krehbiel was elected Vice Chairman
– | Outside Board Memberships |
– | Change in Director Occupation |
– | Stockholder Communication with the Board |
Masahisa Naitoh — Chairman and CEO of The Institute of Energy Economics, Japan (private think tank). Director since 1995 and member of the Compensation Committee. Age 67.
During the last five years, Mr. Naitoh has been associatedwriting with various Japanese government agencies and companies and academic institutions around the world. He has served with The Institute of Energy Economics since 1994 in different positions. From 1997-2003, he worked for Itochu Corporation, a Japanese global trading firm, first as a Senior Managing Director (1997-1998), then as Executive Vice President (1998-2000), and finally as Executive Vice Chairman (2000-2003). Mr. Naitoh also serves on the board of directors of E. I. DuPont de Nemours and Company.
Michael J. Birck — Chairmanany particular director, any committee of the Board, or the directors as a group by following the “Procedures for Stockholder Communications with Directors” included in this Proxy Statement asAppendix II.
Mr. BirckCommittee is a founder of Tellabs, Inc.paid $3,000 per committee meeting attended, and was its President and Chief Executive Officer from its inception in 1975 until 2000 and from 2002 to 2004. Mr. Birck has held the title of Chairmanchair of the Board of Tellabs since its founding to the present time.Audit Committee is paid $4,000 per committee meeting attended. In addition, to serving on the board ofnon-employee directors of Tellabs, Inc., he also serves on the board of Illinois Tool Works Inc.
Martin P. Slark — Vice Chairman and Chief Executive Officer of Molex.(b) Director since 2000 and member of the Executive Committee. Age 50.
PROPOSAL 2: ADOPTION OF THE AMENDED AND RESTATED 1998 MOLEX STOCK OPTION AND RESTRICTED STOCK PLAN
OVERVIEW OF THE PLAN
Background
On October 23, 1998, the board of directors of Molex (the “Board”) adopted The 1998 Molex Incorporated Stock Option Plan (the “1998 Plan”). The 1998 Plan has never been brought before the stockholders for approval. A copy of the 1998 Plan document (as amended and restated effective as of January 1, 2005) is attached at the end of this proxy statement as Appendix A. The 1998 Plan is primarily used to grant discounted options (below fair market value) to employees who are neither executive officers nor directors.
On October 22, 2004, the American Jobs Creation Action Act of 2004 was enacted, which added new §409A to the Internal Revenue Code of 1986, as amended (“§409A”). Under §409A, the vesting and exercise of discounted options under the 1998 Plan could result in unexpected and punitive tax consequences to the employees. In order to comply with §409A, the 1998 Plan is required to be amended by December 31, 2005. Accordingly, on July 29, 2005 the Board, subject to stockholder approval, amended and restated the 1998 Plan effective as of January 1, 2005.
Purpose of the 1998 Plan
The purpose of the 1998 Plan is to induce employees to remain in the employ of Molex and to encourage such employees to secure or increase on reasonable terms their ownership of Molex Class A Common Stock (the “Stock”). The Company believes the 1998 Plan will promote continuity of management and increase incentive and personal interest in the welfare of the Company by those who are primarily responsible for shaping, carrying out the long-range plans of the Company and securing its continued growth and financial success
Vote Necessary to Adopt the Proposal
Adoption of this proposal will require the affirmative vote of the holders of a majority of the shares of the Common Stock entitled to vote and present in person or by proxy, voting as a class, and the holders of the majority of the shares of the Class B Common Stock entitled to vote and present either in person or by proxy, voting as a class. Directors and officers of Molex control approximately 40.4% of the outstanding Common Stock and approximately 97.1% of the outstanding Class B Common Stock entitled to vote. The directors and officers intend to vote for this proposal. Abstentions will have the same effect as a vote against the proposal. Broker “non-votes” will not be considered entitled to vote as to this matter and will have no effect on the adoption of the amendment and restatement.
Your Board of Directors recommends a vote FOR this proposal. The enclosed proxy will be voted FOR the proposal unless a contrary specification is made.
GENERAL PLAN INFORMATION
The following is a description of the material provisions of the 1998 Plan. The description is qualified in its entirety by reference to the full 1998 Plan document appended to this proxy statement as Appendix A.
Duration of the Plan
Subject to stockholder approval, the amended and restated 1998 Plan will be effective on January 1, 2005 and terminate on October 31, 2009, unless terminated earlier by the Board.
Administration
All determinations, interpretations and other decisions of the Committee with respect to the 1998 Plan or any award granted thereunder are final, conclusive and binding.
Stock Reserved Under the Plan
There are 12,500,000 shares of Stock shares reserved for issuance under the 1998 Plan subject to adjustment more fully discussed under the heading entitled “Adjustment of the Number of Shares”. The Stock issued under the 1998 Plan may be treasury shares purchased on the open market or otherwise, authorized but unissued shares, or reacquired shares. The shares already granted as of September 2, 2005 is 6,102,408 leaving 6,397,592 shares remaining that could be granted. As of September 2, 2005 the closing price of a share of Stock was $25.46.
Eligibility
Any employee of Molex or any affiliate company of Molex is eligible to participate in the 1998 Plan. Employees who are specifically excluded from participating in the 1998 Plan include the following: executive officers, directors and key employees under §409A.
Types of Grants/Awards
Amendment or Termination of the Plan
TERMS AND CONDITIONS OF THE GRANT/AWARD
Vesting
Subject to the terms of the 1998 Plan, a grantee may exercise that part of his or her option that is “vested” or “exercisable” according to a “vesting schedule.” All vesting schedules start with an “initial waiting period” during which no shares are “vested” or “exercisable.” Then, depending upon the vesting schedule, all or a specified portion of the shares subject to the option grant or restricted stock award are vested and may be acquired. The Committee determines the vesting schedule (which may not be the samereimbursed for all participants or for all grants/awards). There are four general types of vesting:reasonable travel and out-of-pocket expenses associated with attending Board and committee meetings and continuing education seminars.
10
“Typical Vesting.” The “initial waiting period” is one year and is vested in 25% increments during each of the succeeding 4 years, each commencing with the anniversary of the grant/award. The right to acquire Stock is “cumulative”. This means that, in any given year, a grantee may acquire those shares he or she could have acquired in a previous year, but did not, provided that the option/award has not terminated or expired. All options/awards are subject to the Typical Vesting schedule unless otherwise specified in the option/award agreement.
“Other Vesting.” After the “initial waiting period,” a grantee may exercise an option or become vested in shares under a restricted stock award in amounts and at times determined by the Committee at the date of grant/award, provided that the time in which an option/award becomes 100% vested cannot exceed 8 years from the date of grant. The vesting schedule is solely within the discretion of the Committee and may vary from option grant to option grant and restricted stock award to restricted stock award.
If all the conditions set forth above have been satisfied, the unvested shares of each of the grantee’s outstanding options shall vest during the term of the agreement in any manner and in any amounts (or not at all) that the Committee, in its sole discretion, shall deem appropriate, but not later than the date when the shares of each particular option would have otherwise vested.
Expiration or Termination of Option/Award
Exercise/Distribution of Option/Award Shares
The exercised option shares may be paid in one of three ways: by cash; or by a
The restricted stock award shares are distributed on the vesting dates according to the vesting schedule. No consideration is due from the employee other than employment at Molex or any of its subsidiaries and affiliates at the time of distribution.
Special Transition Rules
Notwithstanding the explanation of vesting and exercisability of stock options described above, in order to comply with §409A, the 1998 Plan has special vesting and exercise requirements for options subject to §409A. In particular, all options that vests in 2005 must be exercised by December 1, 2005 or they will automatically be exercised on that date with the payment of net shares being made as soon as practicable. All options vesting on or after January 1, 2006 will automatically be exercised on the option’s vesting date.
Adjustment of the Number of Shares and Exercise Price
Under certain circumstances, the number of shares subject to any option or restricted stock award and the number of shares reserved for issuance under the 1998 Plan (but not yet covered by an option or restricted stock award) will be adjusted. These circumstances include the following: stock dividend; stock split; reorganization; recapitalization or any other capital change that the Committee deems to require an equitable adjustment. If the number of shares subject to any option is adjusted for any reason, the option price for each share will be adjusted such that the price per share multiplied by the number of shares remains the same both before and after the adjustment.
No adjustment will require Molex to sell a fractional share. The total substitution or adjustment with respect to each grant/award agreement will be limited accordingly.
RESTRICTIONS REGARDING GRANTS/AWARDS AND THE COVERED SHARES
FEDERAL INCOME TAX EFFECTS OF THE PLAN
The following discussion is only a summary of the U.S. federal income tax consequences of options under the 1998 Plan and does not cover the U.S. federal income tax effects if the described conditions are not met. The following discussion does not purport to be complete and does not describe state, local or foreign tax law.
U.S. Tax Consequences When an Option/Restricted Stock Award Is Granted
Under the present federal income tax laws, there is no taxable income recognized when aannual automatic non-discretionary stock option is granted at 100% of fair market value or restricted stock award awarded subject to vesting at a future date. No deduction is available to the Company when a stock option or restricted stock award is granted.
U.S. Tax Consequences When an Option/Award Is Acquired
NQSOs - Ordinary Tax. An exercise of any portion of a NQSO results in additional ordinary income for federal income tax purposes in the calendar year of exercise. The amount of additional ordinary income in any given year of exercise is equal to the aggregate fair market value on the date of exercise less the aggregate option price paid for the number of shares received. Molex is allowed a deduction equal to the amount recognized by the grantee as additional ordinary income.
Restricted Stock Award Shares - Ordinary Tax. The vesting of any portion of a restricted stock award results in the recognition of additional ordinary income for federal income tax purposes in the calendar year of vesting equal to the fair market value of the shares received on the date of vesting. The Company is allowed a deduction equal to the amount recognized by the grantee as additional ordinary income.
Distribution of Stockgrant under the 1998 Plan may be subject to income tax withholding, and the Company is obligated to collect the tax applicable to such income. The Committee may, in its discretion, satisfy that tax obligation by withholding from the shares to be delivered in connection with the award a number of shares having a value equal to the minimum statutory federal income tax withholding, plus state, if applicable, and payroll taxes. The value of each share to be withheld will be the fair market value of a share of Stock at the time the restricted stock award becomes vested.
U.S. Tax Consequences When Shares Acquired Under the Plan Are Sold
Upon the sale of the shares of Stock acquired upon exercise of an option, the excess of the aggregate selling price over the aggregate tax basis will be taxable as a capital gain (or loss). Such capital gain (or loss) will be long-term if the shares have been held for more than 12 months after the date a grantee becomes subject to taxation with respect to the acquisition, and short-term if the shares have been held for less than that period. The holding period for purposes of determining whether the capital gain (or loss) is a long-term or short-term gain (or loss) commences on the date of the acquisition of the shares. This amount must be reported for the calendar year of sale. No tax consequences accrue to the Company upon sale. The tax basis for shares acquired under the 1998 Plan is the fair market value on the date of acquisition for option shares or the date of vesting for restricted stock award shares.
Potential Limitation of Company Deductions Under §162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended denies a deduction to any publicly held corporation for compensation paid to certain employees in a taxable year to the extent that compensation exceeds $1,000,000. It is possible that compensation attributable to the distribution of restricted stock award shares received by a grantee may cause this limitation to be exceeded in any particular year although this has not yet occurred.
Special Provisions for Deferred Compensation
Generally, awards that are considered to be “deferred compensation” and which comply with §409A with regard to the timing and acceleration of payment, as well as the timing of elections to defer payment, are not taxed until the time the award is paid or distributed. In addition, the Company is entitled to a deduction at the time and in the amount the grantee recognizes income. Any violation of §409A could trigger a 20% penalty tax to be paid by the grantee, as well as other penalties applicable to the grantee.
PLAN BENEFITS
PROPOSAL 3: ADOPTION OF THE 2005 MOLEX EMPLOYEE STOCK AWARD PLAN
OVERVIEW OF THE PLAN
Background
On July 29, 2005, the board of directors (the “Board”) adopted The 2005 Molex Employee Stock Award Plan (the “ESA Plan”). A copy of the Plan document is attached at the end of this proxy statement as Appendix B.
Purpose of the Plan
The purpose of the ESA Plan is to recognize employees with Molex Incorporated Class A Common Stock (“Stock”) by rewarding those employees for certain achievements, including, but not limited to, certain service anniversaries, work results, patents, and sales goals. Accordingly, the ESA Plan is broad in scope with respect to those who are eligible to participate and individual awards under the ESA Plan are expected to be limited in size, with most individual awards under the ESA Plan expected to be less than 50 shares (and in any event subject to a 3,000 shares per employee per fiscal year limit).
Vote Necessary to Adopt the Proposal
Adoption of this proposal will require the affirmative vote of the holders of a majority of the shares of the Common Stock entitled to vote and present in person or by proxy, voting as a class, and the holders of the majority of the shares of the Class B Common Stock entitled to vote and present either in person or by proxy, voting as a class. Directors and officers of Molex control approximately 40.4% of the outstanding Common Stock and approximately 97.1% of the outstanding Class B Common Stock entitled to vote. The directors and officers intend to vote for this proposal. Abstentions will have the same effect as a vote against the proposal. Broker “non-votes” will not be considered entitled to vote as to this matter and will have no effect on the adoption of the amendment and restatement.
Your Board of Directors recommends a vote FOR this proposal. The enclosed proxy will be voted FOR the proposal unless a contrary specification is made.
GENERAL PLAN INFORMATION
The following is a description of the material provisions of the ESA Plan. The description is qualified in its entirety by reference to the full ESA Plan document appended to this proxy statement as Appendix B.
Duration of the Plan
Subject to stockholder approval, the ESA Plan shall commence upon stockholder approval, and shall continue until all reserved shares of Stock (as explained below) have been awarded unless terminated earlier by the Board.
Administration
A committee (the “Committee”) appointed by the Board administers the ESA Plan. In the absence of such Committee appointment, the Board will constitute the Committee. The Committee has the complete authority, in its sole discretion, to determine the eligible employees to whom a stock award shall be granted and the number of shares of Stock comprising each such award, not to exceed 3,000 shares of Stock in any fiscal year for any one employee. In making such determinations, the Committee may take into account the nature of the services rendered by the respective employee, his/her present and potential contribution to the Company’s success, the value of his/her achievement that is being recognized and such other factors as the Committee, in its discretion, shall deem relevant. At the time an award is granted, the Committee shall have the discretion to place conditions or restrictions on such award.
The Committee may interpret and administer the ESA Plan and establish, amend, suspend or waive any rules relating to the ESA Plan. The Committee may also take any other action that may be necessary or advisable for administering the ESA Plan, including, but not limited to establishing rules and regulations for the administration of the ESA Plan. All determinations, interpretations and other decisions of the Committee with respect to the ESA Plan or any award granted thereunder are final, conclusive and binding.
Stock Reserved Under the Plan
The shares reserved for issuance under the ESA Plan are 250,000 shares of Stock, subject to adjustment in the event of a stock dividend or other capital stock change and including awards made pending stockholder approval of the ESA Plan. The Stock issued under the ESA Plan may be treasury shares purchased on the open market or otherwise, authorized but unissued shares, or reacquired shares.
Eligibility
Any employee, including executive officers, of Molex or any affiliate company of Molex is eligible to participate in the Plan (“Participant”).
Amendment or Termination of the Plan
The Board may amend any part of or terminate the ESA Plan without stockholder approval, except if stockholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the shares of Stock are listed or quoted.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following discussion is only a summary of the U.S. federal income tax consequences of acquiring Stock under the ESA Plan and does not cover the U.S. federal income tax effects if the described conditions are not met. The following discussion does not purport to be complete and does not describe state, local or foreign tax law.
U.S. Tax Consequences When Stock Is Acquired by an Employee
The Participant recognizes additional ordinary income for federal income tax purposes in the calendar year of acquisition equal to the fair market value of the shares received on the date of acquisition. The Company is allowed a deduction equal to the amount recognized by the Participant as additional ordinary income.
Stock awards under the ESA Plan may be subject to income tax withholding, and the Company is obligated to collect the tax applicable to such income. The Committee may, in its discretion, satisfy that tax obligation by withholding from the shares to be delivered in connection with the award a number of shares having a value equal to the minimum statutory federal income tax withholding, plus state, if applicable, and payroll taxes. The value of each share to be withheld will be the fair market value of the Stock at the time of the award.
U.S. Tax Consequences When Shares Acquired Under the Plan Are Sold
Upon the sale of the shares of Stock acquired under the ESA Plan, the excess of the aggregate selling price over the aggregate tax basis will be taxable as a capital gain (or loss). Such capital gain (or loss) will be long-term if the shares have been held for more than 12 months after the date of acquisition, and short-term if the shares have been held for less than that period. The holding period for purposes of determining whether the capital gain (or loss) is a long-term or short-term gain (or loss) commences on the date of the acquisition of the shares. This amount must be reported for the calendar year of sale. No tax consequences accrue to the Company upon sale. The tax basis for shares acquired under the ESA Plan is the fair market value on the date of acquisition.
PLAN BENEFITS
The size of future purchases of Stock by eligible employees under the ESA Plan is not determinable as of the date of this proxy statement because of the discretionary nature of such transactions.
PROPOSAL 4: ADOPTION OF THE 2005 MOLEX EMPLOYEE STOCK PURCHASE PLAN
OVERVIEW OF THE PLAN
Background
On July 29, 2005, the board of directors (the “Board”) adopted The 2005 Molex Employee Stock Purchase Plan (the “ESP Plan”). A copy of the ESP Plan document is attached at the end of this proxy statement as Appendix C.
The ESP Plan replaces The 2004 Molex Incorporated Employee Stock Purchase Plan (the “Old Plan”) that the stockholders approved last year at its annual meeting. After the annual meeting, Congress passed the American Jobs Creation Action Act of 2004 that had unforeseen negative consequences to participation in employee stock purchase plans that do not meet the requirements of §423(b) of the Internal Revenue Code, as amended (“§423(b)”). As a result, no shares were used under the Old Plan because it did not meet those requirements. The ESP Plan that is proposed for stockholder approval is intended to meet the requirements of §423(b).
Purpose of the Plan
The purpose of the ESP Plan is to help and encourage employees of Molex and its participating subsidiaries to own Molex Class A Common Stock (“Stock”).
Vote Necessary to Adopt the Proposal
Adoption of this proposal will require the affirmative vote of the holders of a majority of the shares of the Common Stock entitled to vote and present in person or by proxy, voting as a class, and the holders of the majority of the shares of the Class B Common Stock entitled to vote and present either in person or by proxy, voting as a class. Directors and officers of Molex control approximately 40.4% of the outstanding Common Stock and approximately 97.1% of the outstanding Class B Common Stock entitled to vote. The directors and officers intend to vote for this proposal. Abstentions will have the same effect as a vote against the proposal. Broker “non-votes” will not be considered entitled to vote as to this matter and will have no effect on the adoption of the amendment and restatement.
Your Board of Directors recommends a vote FOR this proposal. The enclosed proxy will be voted FOR the proposal unless a contrary specification is made.
GENERAL PLAN INFORMATION
The following is a description of the material provisions of the ESP Plan. The description is qualified in its entirety by reference to the full ESP Plan document appended to this proxy statement as Appendix C.
Duration of the Plan
Subject to stockholder approval, the ESP Plan will commence on or after April 1, 2006. The ESP Plan will terminate ten years after becoming effective unless earlier terminated by the Board or when all the shares of Stock reserved under the ESP Plan have been used to satisfy employee purchases.
Administration
A committee (the “Committee”) appointed by the Board administers the ESP Plan. The Committee has wide latitude in providing policies and procedures regarding the implementation in accordance with the terms and conditions of the ESP Plan including the authority, in its sole discretion, to:
Stock Reserved Under the Plan
There are 500,000 shares of Stock reserved for issuance under the ESP Plan subject to adjustment more fully discussed under the heading entitled “Adjustment of the Number of Shares”. The Stock issued under the ESP Plan may be treasury shares purchased on the open market or otherwise, authorized but unissued shares, or reacquired shares.
Eligibility
Any employee of Molex or any affiliate company of Molex is eligible to participate in the ESP Plan (“Participant”). Employees who are specifically excluded from participating in the ESP Plan include the following: executive officers or 5% stockholders; employees who have been employed less than one year; and Employees who do not customarily work at least 5 months during the calendar year.
Participation
Eligible employees may elect to participate in the ESP Plan under terms and conditions set forth in the ESP Plan document and provided by the Committee. A Participant may withdraw from the ESP Plan at any time. If a participant terminates employment with Molex, contributions to the ESP Plan not yet used to purchase Stock will be refunded and participation will automatically end.
Employee Contributions
The amount of Participant contributions that can be used to purchase Stock under the ESP Plan is limited to no more than 15% of the Participant’s base salary not to exceed $4,000 in any given calendar year.
Purchase Price
The Committee sets the purchase price (the “Purchase Price”) for each calendar quarter ending March 31, June 30, September 30 and December 31 (“Offering Period”). Subject to the Board’s ability to modify the Purchase Price described below, the Purchase Price is determined by multiplying the lower of the closing price of a share of Stock on either the first day or the last day of each Offering Period by a percentage set by the Committee not less than 85%.
Allocation of Stock
At the end of each Offering Period, the Participant’s contribution will be used to purchase whole shares of Stock that will be credited to a Participant’s account by dividing the Participant’s contribution for the Offering Period by the Purchase Price. Any amount remaining after the purchase of whole shares will be added to the Participant’s contribution in the following Offering Period or refunded to the Participant if he/she has withdrawn from the ESP Plan.
Withdrawal and Termination of Employment
Holding Period for Stock
All shares of Stock acquired by a Participant must be held at least six months. After six months, a Participant may withdraw all or any portion of his/her shares.
Amendment and Termination of the Plan
The Board, at its discretion, may amend the ESP Plan at any time, subject to stockholder approval if required by the applicable SEC or Nasdaq Rules. At this time, these rules require that Molex’s stockholders must approve all material amendments to the ESP Plan. The Committee retains authority to make minor or administrative modifications to the ESP Plan.
In the event the Board determines that the ongoing operation of the ESP Plan may result in unfavorable financial accounting consequences, the Board may, in its discretion and, to the extent necessary or desirable, modify or amend the ESP Plan to reduce or eliminate such accounting consequences including, but not limited to:
Such modifications or amendments shall not require stockholder approval or the consent of any Participants.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following discussion is only a summary of the U.S. federal income tax consequences of acquiring Stock under the ESP Plan and does not cover the U.S. federal income tax effects if the described conditions are not met. The following discussion does not purport to be complete and does not describe state, local or foreign tax law.
U.S. Tax Consequences When Stock Is Credited to an Employee’s Account
Because the ESP Plan is intended to meet the requirements of §423, when the shares of Stock are credited to a Participant’s account at the end of an Offering Period, the Participant will recognize no income for the spread, if any, between the Purchase Price and the fair market value at the end of the Offering Period or the discounted portion of the Purchase Price relative to the fair market value.
U.S. Tax Consequences When Shares Acquired Under the Plan Are Sold
For purposes of the U. S. Tax laws, a Participant will avoid a disqualifying disposition and will receive favorable tax treatment if he or she holds Stock acquired under the ESP Plan until the later of two years after the first day of the Offering Period related to the Stock or one year after the Participant acquired the Stock. Upon the sale of Stock after this period, the Participant will realize ordinary income in the year of the sale equal to the lesser of: the amount by which the fair market value of the Stock at the beginning of the Offering Period related to that Stock exceeded the Purchase Price or the amount by which the fair market value of the Stock at the time of the sale exceeded the Purchase Price. Any further gain is taxed in the calendar year of the sale at capital gain rates. No tax consequences accrue to the Company upon sale.
If a Participant makes a disqualifying disposition of Stock (by selling the Stock before the end of the required holding period), the Participant will realize ordinary income in the year of the sale equal to the difference between the Purchase Price of the Stock and the fair market value of the Stock on the date it was acquired by the Participant. The Company will be entitled to take a deduction under §162 of the Code in the year of the disposition.
PLAN BENEFITS
PROPOSAL 5: ADOPTION OF THE 2005 MOLEX INCENTIVE STOCK OPTION PLAN
OVERVIEW OF THE PLAN
Background
On June 30, 2005, the 2000 Molex Incorporated Incentive Stock Option Plan (the “2000 ISO Plan”) expired. On July 29, 2005 upon the recommendation of the Compensation Committee, the board of directors (the “Board”) approved the 2005 Molex Incentive Stock Option Plan (the “2005 ISO Plan”) and authorized the 2005 ISO Plan to be brought before the stockholders at the Annual Stockholders’ Meeting in order to replace the expired 2000 ISO Plan. A copy of the 2005 ISO Plan document is attached at the end of this proxy statement as Appendix D.
Purpose of the Plan
The purpose of the 2005 ISO Plan is to induce certain designated employees and the directors to remain in the service of Molex (the “Company”), and any of its subsidiaries, and to encourage such employees and directors to secure or increase on reasonable terms their stock ownership in the Company. The Company believes the 2005 ISO Plan will promote continuity of management and increase incentive and personal interest in the welfare of the Company by those who are primarily responsible for shaping, carrying out the long-range plans of the Company and securing its continued growth and financial success. The Company intends for the 2005 ISO Plan (except where otherwise noted) to meet the requirements of §422(a) of the Internal Revenue Code, as amended.
Vote Necessary to Adopt the Proposal
Adoption of this proposal will require the affirmative vote of the holders of a majority of the shares of the Common Stock entitled to vote and present in person or by proxy, voting as a class, and the holders of the majority of the shares of the Class B Common Stock entitled to vote and present either in person or by proxy, voting as a class. Directors and officers of Molex control approximately 40.4% of the outstanding Common Stock and approximately 97.1% of the outstanding Class B Common Stock entitled to vote. The directors and officers intend to vote for this proposal. Abstentions will have the same effect as a vote against the proposal. Broker “non-votes” will not be considered entitled to vote as to this matter and will have no effect on the adoption of the amendment and restatement.
Your Board of Directors recommends a vote FOR this proposal. The enclosed proxy will be voted FOR the proposal unless a contrary specification is made.
GENERAL PLAN INFORMATION
The following is a description of the material provisions of the 2005 ISO Plan. The description is qualified in its entirety by reference to the full 2005 ISO Plan document appended to this proxy statement as Appendix D.
Duration of the Plan
If the 2005 ISO Plan is approved, the 2005 ISO Plan will expire on October 31, 2010 unless terminated earlier by the Board. After that date, no more options may beare granted however, previously granted options could be exercised.
Administration
The 2005 ISO Plan is administered by a committee (the “Committee”) comprising at least two members of the Board appointed by the Board under the terms and conditions set forth in the 2005 ISO Plan document. The Board has designated the Compensation Committee of the Board, all of who are independent directors, to administer the 2005 ISO Plan.
The Committee may take into account the nature of the services rendered by the individual, the individual’s present and potential contribution to Molex’s success, and such other factors as the Committee deems relevant.
Stock Reserved Under the Plan
If the 2005 ISO Plan is approved, 500,000 shares of Molex’s Class A Common Stock (the “Stock”) will be reserved for issuance under the 2005 ISO Plan subject to adjustment more fully discussed under the heading entitled “Adjustment of the Number of Shares and Exercise Price”. If any stock option granted under the 2005 ISO Plan expires or otherwise terminates without having been exercised in full, the shares of stock not purchased shall again become available for grants under the 2005 ISO Plan. The Stock issued under the 2005 ISO Plan may be treasury shares purchased on the open market or otherwise, authorized but unissued shares, or reacquired shares.
Eligibility
Only executive officers and directors (“Participants”) are eligible to receive a grant of stock under the 2005 ISO Plan.
Types of Grants/Awards
There are two types of grants/awards under the 2005 ISO Plan. They are:
Automatic Nondiscretionary Grants to Outside Directors
Each director who is not an employee of the Company shall receive only an automatic nondiscretionary stock option grant on the date of the Annual Stockholders Meeting every year duringannual meeting of stockholders with an exercise price equal to the termclosing price of the 2005 ISO Plan. AnyClass A Common Stock on the grant date. Each option granted to a director who is not an employeevests ratably over four years commencing on the first anniversary of the Company shall be a NQSO.grant date and expires five years from the grant date. The amountnumber of shares subject tounderlying the options that will be automatically granted to each outside director for each year shall be the amount of shares equal to 200option is 500 multiplied by the number of years of service or fraction thereof. The amountnumber of shares for each year of service shall increaseunderlying a stock option grant cannot exceed 5,000 shares or $150,000 in value, whichever is less.
Fees Earned or | Option | All Other | ||||||||||||||
Name | Paid in Cash($)(1) | Awards($)(2) | Compensation($) | Total($) | ||||||||||||
Michael J. Birck | 85,000 | 21,202 | - | 106,202 | ||||||||||||
Michelle L. Collins | 104,000 | 6,379 | - | 110,379 | ||||||||||||
Edgar D. Jannotta | 93,000 | 27,037 | - | 120,037 | ||||||||||||
Kazumasa Kusaka | 87,000 | 604 | - | 87,604 | ||||||||||||
David L. Landsittel | 126,000 | 3,124 | - | 129,124 | ||||||||||||
Joe W. Laymon | 26,000 | - | - | 26,000 | ||||||||||||
Donald G. Lubin | 81,000 | 21,202 | - | 102,202 | ||||||||||||
James S. Metcalf | 60,000 | 604 | - | 60,604 | ||||||||||||
Robert J. Potter | 114,000 | 27,037 | - | 141,037 |
(1) | Includes amounts deferred at the election of a director. | |
(2) | The amounts shown represent the compensation costs of option awards for financial reporting purposes under FAS 123(R), rather than an amount paid to or realized by the director. The FAS 123(R) value as of the grant date is spread over the number of months of service required for the grant to become non-forfeitable. There can be no assurance that the FAS 123(R) amounts will ever be realized. Assumptions used in the calculation of these compensation costs are included in Note 17 to the consolidated financial statements included in the Annual Report onForm 10-K filed with the SEC on August 6, 2008. Option awards to acquire the following number of shares were outstanding as of June 30, 2008: Mr. Birck 13,400; Ms. Collins 4,000; Mr. Jannotta 17,000; Mr. Kusaka 500; Mr. Landsittel 2,100; Mr. Laymon 0; Mr. Lubin 13,400; Mr. Metcalf 500; and Dr. Potter 17,000. |
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Class B | Class A | |||||||||||||||||||||||||||||||
Common Stock | Common Stock | Total Voting | Common Stock | |||||||||||||||||||||||||||||
Name | # Shares(1) | % | # Shares | % | Shares | # Shares(1) | # Options(2) | % | ||||||||||||||||||||||||
Michael J. Birck | 36,615 | * | - | - | 36,615 | 3,000 | 7,900 | * | ||||||||||||||||||||||||
Michelle L. Collins | 5,097 | * | - | - | 5,097 | - | 1,950 | * | ||||||||||||||||||||||||
Edgar D. Jannotta | 147,709 | * | - | - | 147,709 | 76,989 | 11,000 | * | ||||||||||||||||||||||||
Frederick A. Krehbiel | 25,004,012 | (3) | 25.4 | 47,052.5 | 49.9 | 25,051,064.5 | 117,335 | (4) | 150,000 | * | ||||||||||||||||||||||
Fred L. Krehbiel | 959,785 | 1.0 | 1,701 | 1.8 | 961,486 | 408,900 | 204,000 | * | ||||||||||||||||||||||||
John H. Krehbiel, Jr. | 31,847,329 | (5) | 32.4 | 41,949.5 | 44.5 | 31,889,278.5 | 4,586,730 | (6) | 170,000 | 6.0 | ||||||||||||||||||||||
Kazumasa Kusaka | - | * | - | - | - | - | 125 | * | ||||||||||||||||||||||||
David L. Landsittel | 8,658 | * | - | - | 8,658 | - | 725 | * | ||||||||||||||||||||||||
Joe W. Laymon | 4,383 | * | - | - | 4,383 | - | - | * | ||||||||||||||||||||||||
Donald G. Lubin | 35,565 | * | - | - | 35,565 | 10,674 | 7,900 | * | ||||||||||||||||||||||||
James S. Metcalf | - | * | - | - | - | - | 125 | * | ||||||||||||||||||||||||
Robert J. Potter | 49,818 | * | - | - | 49,818 | 6,009 | 11,000 | * | ||||||||||||||||||||||||
Martin P. Slark (7) | 116,402 | * | - | - | 116,402 | 119,460 | 809,375 | 1.2 | ||||||||||||||||||||||||
Liam G. McCarthy (8) | 27,631 | * | - | - | 27,631 | 71,332 | 248,290 | * | ||||||||||||||||||||||||
James E. Fleischhacker (9) | 105,246 | * | - | - | 105,246 | 51,689 | 419,687 | * | ||||||||||||||||||||||||
David D. Johnson | 2,548 | * | - | - | 2,548 | 35,272 | 160,000 | * | ||||||||||||||||||||||||
David B. Root (10) | 862 | * | - | - | 862 | 45,759 | 87,187 | * | ||||||||||||||||||||||||
All Directors and Executive Officers as a Group (21 people) (11) | 36,959,163 | 37.5 | 90,703 | 96.2 | 37,049,866 | 5,605,057 | 2,492,451 | 10.2 |
* | Less than 1% | |
(1) | Includes stock units credited to the accounts of non-employee directors under our deferred compensation plans. Stock units are distributed in shares of Common Stock. Messrs. Jannotta and Potter were participants in the deferred compensation plan at the time that Molex issued its Class A Common Stock so their stock unit accounts were credited with one share of Class A Common Stock for each share of Common Stock credited to their accounts at the time of the issuance. | |
(2) | These are stock options exercisable within 60 days of September 2, 2008. | |
(3) | Includes 21,407,343 shares held by the Krehbiel Limited Partnership. Mr. Krehbiel and his brother John H. Krehbiel, Jr. are each general and limited partners of the Partnership and share the power to vote and dispose of the shares held by the Partnership. Also includes 3,578,186 shares owned indirectly as trustee for family members and 3,745 shares beneficially owned by Mr. Krehbiel’s spouse. Mr. Krehbiel disclaims beneficial ownership and/or personal beneficial interest in the shares owned as trustee for family members. | |
(4) | Includes 109,593 shares owned indirectly as trustee for family members, and 3,666 shares beneficially owned by Mr. Krehbiel’s spouse. Mr. Krehbiel disclaims beneficial ownership and/or personal beneficial interest in the shares owned as trustee for family members. | |
(5) | Includes 21,407,343 shares held by the Krehbiel Limited Partnership. See footnote (3) above. Also includes 9,691,112 shares owned indirectly by a trust, 221,275 shares owned indirectly as trustee for family members, and 6,952 shares beneficially owned by Mr. Krehbiel’s spouse. Mr. Krehbiel disclaims beneficial ownership and/or personal beneficial interest in the shares owned as trustee for family members. 649,752 of these shares are pledged to a financial institution as collateral for a line of credit. | |
(6) | Includes 3,844,521 shares owned indirectly by a trust, 35,575 shares owned indirectly as trustee for family members and 3,602 shares beneficially owned by Mr. Krehbiel’s spouse. Mr. Krehbiel disclaims beneficial ownership and/or personal beneficial interest in the shares owned as trustee for family members. | |
(7) | Includes 115,759 Common Stock shares and 85,979 Class A Common Stock shares beneficially owned by a trust, and 643 Common Stock shares and 9,641 Class A Common Stock shares beneficially owned by family members. | |
(8) | Includes 4,755 Class A Common Stock shares owned by Mr. McCarthy’s spouse. | |
(9) | Includes 27 Common Stock shares and 42 Class A Common Stock shares beneficially owned by Mr. Fleischhacker’s spouse. | |
(10) | Includes 3 Class A Common Stock shares owned by Mr. Root’s spouse. | |
(11) | The |
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Class A | ||||||||||||||||
Common Stock | Common Stock | |||||||||||||||
Name | # Shares | % | # Shares | % | ||||||||||||
Krehbiel Limited Partnership (1) 2222 Wellington Court Lisle, IL 60532 | 21,407,343 | 21.7 | % | - | - | |||||||||||
Dodge & Cox (2) 555 California Street, 40th Floor San Francisco, CA 94104 | - | - | 13,994,887 | 17.7 | ||||||||||||
Invesco Ltd. (3) 1360 Peachtree Street NE Atlanta, GA 30309 | - | - | 11,198,947 | 14.2 | ||||||||||||
GE Asset Management Inc. (4) 3001 Summer Street P.O. Box 7900 Stamford, CT 06904 | - | - | 10,719,722 | 13.6 | ||||||||||||
Wells Fargo & Company (5) 420 Montgomery Street San Francisco, CA 94163 | - | - | 5,375,828 | 6.8 |
(1) | See footnote (3) of the | |
(2) | As reported in |
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(4) | As reported in a Schedule 13G filed on February 13, 2008 by GE Asset Management Inc. (GEAM) and the | |
(5) | As reported in a Schedule 13G dated February 7, 2008 by |
Limitation on Grants/Awards To Any One Individual
If the 2005 ISO Plan is approved, the maximum number of shares that can be granted or awarded under the 2005 ISO Plan to one individual during a calendar year cannot exceed 10%recommendation of the shares reserved for issuance under the 2005 ISO Plan (currently 50,000 shares) or 250,000 shares whichever is less.
Amendment or Termination of the Plan
The Board, at its discretion, may amend or terminate the 2005 ISO Plan at any time,Compensation Committee and subject to stockholder approval, if requiredthe Board approved the Molex Incorporated Annual Incentive Plan (AIP). In the past, we have provided annual cash bonus opportunities to executive officers and other key employees pursuant to individual bonus arrangements. We have determined that adoption of a plan to govern annual cash bonuses is appropriate, will provide us with consistency in the administration of annual bonuses and will also comply with the requirements of Section 162(m) of the Internal Revenue Code.
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TERMS AND CONDITIONS OF THE GRANT/AWARD
Vesting
Subjectperformance measures as compared to the termsperformance of a group of comparator companies, or published or special indices, or the Compensation Committeeand/or the CEO may select a share price as compared to various stock market indices.
“Normal Vesting.” The “initial waiting period” is one year and the option vests in 25% increments during eachentitled to payment of the succeeding 4 years, each commencing with the anniversary of the grant. The right to exercise options is “cumulative”. This means that, in any given year, an employee may acquire those shares he or she could have acquired in a previous year, but did not, provided that the option/bonus has not terminated or expired. All options are subject to the Normal Vesting schedule unless otherwise specified in the option agreement.
“Other Vesting.” After the “initial waiting period,” an employee may exercise an option in amounts and at times determined by the Committee at the date of grant/award, provided that the time in which an option/bonus becomes 100% vested cannot exceed 10 years from the date of grant. The vesting schedule is solely within the discretion of the Committee and may vary from option grant to option grant, provided that the vesting schedule cannot be more rapid than the “Normal Vesting.”
Expiration or Termination of Option
No NQSO grant can provide for exercise more than 2 years from the date that an option becomes 100% vested, although exercise may be limited to a shorter period, and no ISO grant can provide for exercise more than 1 year from the date that an option becomes 100% vested. Ifbonus. A participant whose employment is terminated prior to a determination date for any reason, other than discharge for cause or voluntary resignation, may receive a full or partial bonus as determined by the expiration date,Compensation Committeeand/or the option will terminate uponCEO, as applicable.
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Number of | Shares | |||||||||||
Shares | Outstanding | Available | ||||||||||
Authorized | Awards as of | for Grant as of | ||||||||||
Existing Plan | for Grant | June 30, 2008 | June 30, 2008 | |||||||||
The 1998 Molex Stock Option and Restricted Stock Plan | 12,500,000 | 3,663,119 | 3,218,797 | |||||||||
The 2000 Molex Long-Term Stock Plan | 12,000,000 | 5,885,198 | 4,155,395 | |||||||||
The 2005 Molex Incentive Stock Option Plan | 500,000 | 47,700 | 451,750 |
Exercise of Option
Optionsuse under the SIP. The Existing Plans will remain in effect until the awards previously granted under those plans have been exercised, forfeited, are otherwise terminated, or any and all restrictions lapse, as the case may be, exercised only in accordance with the terms and conditions established byof such awards. In the 2005 ISO Plan document and the Committee. Generally, an option may be exercised by a written notice to the Company of an intent to exercise a specified number of shares of Stock. Payment to the Company for the aggregate or total amount of the option price for the number of shares being exercised must accompany the written notice. Payments may be made in one of two ways: by cash; or by a “stock swap”. In a stock swap, the employee tenders already owned Common Stock or Class A Common Stock as all or part of the aggregate option purchase price, valued at the closing price on the date of exercise as reported by the Wall Street Journal.
Adjustment of the Number of Shares and Exercise Price
Under certain circumstances, the number ofevent that any shares subject to any option and the number of reserved for issuance under the 2005 ISO Plan (but not yet covered by an option or bonus) will be adjusted. These circumstances include the following: stock dividend; stock split, or any other capital change that the Committee deems to require an equitable adjustment. If the number of shares subject to option is adjusted for any reason, the option price for each share will be adjusted such that the price per share multiplied by the number of shares remains the same both before and after the adjustment.
RESTRICTIONS REGARDING GRANTS AND THE COVERED SHARES
Transfer
Any optionoutstanding awards granted under the 2005 ISO Plan cannot be transferred and can only be exercised byExisting Plans again become available for the employee during his/her life. If the Participant should die while still employed by the Company or anyissuance of its subsidiaries, the option,awards pursuant to the extent it could have been acquired byExisting Plans, then such shares will become available for use under the employee onSIP.
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Sale of Stock Acquired Under the Plan
The shares covered by the 2005 ISO Plan might not be registered under The Securities Act of 1933 (the “Securities Act”) and, therefore, might not be freely tradable. If the shares to be sold are held by an affiliate (as defined by SEC Rule 144), the shares may be sold subject to the conditions and limitations set forth in Rule 144.
FEDERAL INCOME TAX EFFECTS OF THE PLAN
The following discussion is only a summary of the U.S. federal income tax consequences of options under the 2005 ISO Plan and does not cover the U.S. federal income tax effects if the described conditions are not met. The following discussion does not purport to be complete and does not describe state, local or foreign tax law.
For the purposes of the discussion relating to U.S. tax consequences, the following definitions will apply: The “date of grant” is the date that appears in the stock agreement. The “date of exercise” is the date when the Participant pays the Company for the shares purchased pursuant to an option. The “date of sale” is the date that the Participant has agreed to deliver stock (originally purchased pursuant to an option) to a subsequent third party purchaser. “Aggregate option price” is the total amount of money which the employee paid the Company in order to exercise a particular portion of an option. “Aggregate fair market value” is the total fair market value of the shares acquired under the 2005 ISO Plan.
U.S. Tax Consequences When an Option Is Granted
Under the present federal income tax laws, there is no taxable income recognized when a stock option is granted at 100% of fair market value. No deduction is available to the Company when a stock option is granted.
U.S. Tax Consequences When an Option Is Exercised
NQSOs - Ordinary Tax. An exercise of any portion of a NQSO results in ordinary income for federal income tax purposes for the employees in the calendar year of exercise. The amount of ordinary income in any given year of exercise is equal to the aggregate fair market value on the date of exercise less the aggregate option price paid for the particular number of shares. Molex is allowed a deduction equal to the amount recognized by the employee as additional ordinary income.
Such option exercises under the 2005 ISO Plan are subject to income tax withholding, and the Company is obligated to collect the tax applicable to such income. The Committee may, in its discretion, satisfy that tax obligation by withholding from the shares to be delivered in connection with the award a number of shares having a value equal to the minimum statutory federal income tax withholding, plus state, if applicable, and payroll taxes. The value of each share to be withheld will be the fair market value of the Stock at the time of the exercise.
U.S. Tax Consequences When Shares Acquired Under the Plan Are Sold
Upon the sale of the shares of Stock acquired upon exercise of an NQSO, the excess of the aggregate selling price over the aggregate “tax basis” will be taxable as a capital gain (or loss). Such capital gain (or loss) will be long-term if the shares have been held for more than 12 months after the date of exercise, and short-term if the shares have been held for less than that period. The Tax basis for shares acquired by exercising a NQSO is the fair market value on the date of acquisition for the option shares.
Upon sale of shares of Stock acquired upon exercise of an ISO, if the shares have been held for at least two years from the date the option was granted or one year from the date of exercise (or comes within an exception to the “disqualifying disposition: rules), the excess of the aggregate selling price over the aggregate tax basis will be taxable as long-term capital gain. For an ISO, the “tax basis” is the exercise (purchase) price for the option shares.
If the ISO holding period requirement has not been met at the time the sale of the shares occur, there is a “disqualifying disposition”. In such an event, the amount that would have been taxed upon exercise if the option were an NQSO (but not more than the gain realized upon the sale) is taxed in the year of disposition as ordinary income. Any further gain is taxable as a long-term or short-term capital gain depending upon the holding period.
Potential Limitation of Company Deductions Under §162(m)
Section 162(m) of the Internal Revenue Code by qualifying awards as performance-based compensation.
• | The number of shares that remains available for grant under the Existing Plans on the date of the annual meeting, and | |
• | Shares that would have again become available for issuance pursuant to the terms of awards previously granted under the Existing Plans and outstanding on the date of the annual meeting if those awards expire, terminate or are otherwise forfeited before being exercised or settled in full. |
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PLAN BENEFITS
The size of future grants to eligible employees under the 2005 ISO Plan isdirectors and executive officers may not determinable asbe less than 100% of the date of this proxy statement because of either the discretionary nature of such grants or, in the casefair market value of the automatic non-discretionary grants to non-employee directors, the lack of knowledge regarding the price of the shares of Stock on the grant date. The current non-employeeStock Option Plan Committee may grant stock options to employees who are not executive officers at an exercise price that is less than the fair market value of the shares on the grant date. Employees who are not executive officers generally receive stock options with an exercise price equal to 50% of the fair market value.
PROPOSAL 6: ADOPTION OF THE AMENDED AND RESTATED 2000 MOLEX LONG-TERM STOCK PLAN
OVERVIEW OF THE AMENDED AND RESTATED PLAN
Background
In 2000,
Purposethe relevant performance period. The performance goals will be objectively measurable and will be based upon one or more of the Planfollowing performance measures: net earnings or net income (before or after taxes); earnings per share; net sales or revenue growth; net operating profit; return measures (including, but not limited to, return on assets, return on net assets, capital, invested capital, equity, sales, or revenue); cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment); EBIT or earnings before or after taxes, interest, depreciation,and/or amortization; gross or operating margins; productivity ratios; share price (including, but not limited to, growth measures and total shareholder return); expense targets; margins; operating efficiency; market share; total shareholder return; customer satisfaction; working capital targets; and economic value added or EVA ® (net operating profit after tax minus the sum of capital multiplied by the cost of capital).
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• | The purchase or other acquisition by any person, entity or group of persons, within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or any comparable successor provisions, or beneficial ownership (within the meaning ofRule 13d-4 promulgated under the Exchange Act) of more than fifty percent (50%) of either the outstanding shares of common stock of Molex or the combined voting power of Molex’s then outstanding voting securities entitled to vote generally; | |
• | The approval by Molex’s stockholders of a reorganization, merger or consolidation, in each case, with respect to which persons who were Molex stockholders immediately prior to such reorganization, merger or consolidation, immediately thereafter, own more than fifty percent (50%) of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company’s then outstanding securities; | |
• | A liquidation or dissolution of Molex; or | |
• | The sale of all or substantially all of Molex’s assets (i.e., greater than 40% of the total gross fair market value of all of the assets of Molex immediately prior to such sale or disposition) within a12-month period ending on the date of the most recent sale or disposition. |
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Proposed Amendments
Adoption of this proposal willright to withhold from wages or other amounts otherwise payable such withholding taxes as may be required by law, to otherwise require the affirmative voteparticipant to pay such withholding taxes or to take such other action as may be necessary to satisfy such withholding obligations. Non-employee directors are not subject to withholding by us and must make their own arrangements for satisfying any tax obligations they may have in connection with the grant or exercise of an award under the SIP.
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Your Board of Directors recommends a vote FOR this proposal. The enclosed proxy will be voted FOR the proposal unless a contrary specification is made.
GENERAL PLAN INFORMATION
The following is a description of the material provisions of the L-T Plan. The description is qualified in its entirety by reference to the full L-T Plan document appended to this proxy statement as Appendix E.
Duration of the Plan
The L-T Plan will expire on October 31, 2010, unless earlier terminated by the Board. After that date, no more options may be granted or bonus shares awarded; however, previously granted options or bonus shares can be exercised or distributed.
Administration
The L-T Plan is administered by a committee (the “Committee”) comprising at least two members of the Board appointed by the Board under the terms and conditions set forth in the L-T Plan document. The Board has designated the Compensation Committee of the Board to administer the L-T Plan. At this time, the Compensation Committee consists of Robert J. Potter, Masahisa Naitoh and Joe W. Laymon, all of who are independent directors.
The Committee has the complete authority, in its sole discretion, to determine the following:
The Committee may take into account the nature of the services rendered by the individual, the individual’s present and potential contribution to Molex’s success, and such other factors as the Committee deems relevant.
Stock Reserved Under the Plan
If the amended and restated L-T Plan is approved, the amount of Stock reserved for issuance under the L-T Plan are 12,000,000 shares of Molex’s Class A Common Stock (the “Stock”) subject to adjustment more fully discussed under the heading entitled “Adjustment of the Number of Shares and Exercise Price”. If any stock award granted under the L-T Plan expires or otherwise terminates without having been exercised in full, the shares of stock not purchased shall again become available for grants under the L-T Plan. The Stock issued under the L-T Plan may be treasury shares purchasedvotes on the open market or otherwise, authorized but unissued shares, or reacquired shares.
As of June 30, 2005, 781,984 shares remained available for future grants under the L-T Plan. Approval of the amended and restated L-T Plan will increase the shares available for future grant by 6,000,000 shares.
Eligibility
Only executive officers and members of Molex’s Executive Management Committee are eligible to receive a grant or award of stock under the L-T Plan.
Types of Grants/Awards
There are two types of grants/awards under the L-T Plan. They are:
Limitation on Grants/Awards To Any One Individual
The maximum number of shares that can be granted/awarded under the L-T Plan to one individual during a calendar year cannot exceed 500,000 shares.
Amendment or Termination of the Plan
The Board, at its discretion, may amend or terminate the L-T Plan at any time, subject to stockholder approval if required by SEC rules or the listing requirements of any national securities exchanges or trading systems on which any of the Company’s equity securities are listed. At this time, these rules require that all material amendments to the L-T Plan be subject to the approval of Molex’s stockholders.
TERMS AND CONDITIONSYOUR BOARD OF THE GRANT/AWARD
Vesting
Subject to the terms of the L-T Plan, a Participant may exercise that part of his or her option that is “vested”DIRECTORS RECOMMENDS A VOTE “FOR” ITEM 3 or “exercisable” according to a “vesting schedule.” All vesting schedules start with an “initial waiting period” during which no shares are “vested” or “exercisable.” Then, depending upon the vesting schedule, all or a specified portion of the shares subject to the option grant or bonus award are vested and may be acquired. The Committee determines the vesting schedule (which may not be the same). There are three general types of vesting:
“Typical Vesting.” The “initial waiting period” is one year and the option vests or stock bonus becomes distributable in 25% increments during each of the succeeding 4 years, each commencing with the anniversary of the grant. The right to acquire Stock is “cumulative”. This means that, in any given year, a Participant may acquire those shares he or she could have acquired in a previous year, but did not, provided that the option/bonus has not terminated or expired. All options/awards are subject to the Typical Vesting schedule unless otherwise specified in the agreement.
“Other Vesting.” After the “initial waiting period,” a Participant may exercise an option in amounts and at times determined by the Committee at the date of grant/award, provided that the time in which an option/bonus becomes 100% vested cannot exceed 7 years from the date of grant. The vesting schedule is solely within the discretion of the Committee and may vary from option grant to option grant and bonus award to bonus award, provided that the vesting schedule may not be more rapid than Typical Vesting.
Expiration or Termination of Option/Bonus
No option grant or bonus award can provide for exercise or distribution more than 6 years from the date that an option/bonus becomes 100% vested, though it may be a shorter period. If employment is terminated prior to the expiration date, the option will terminate upon the earliest of: the expiration date if the termination of employment is caused by one of the events causing accelerated vesting or the date of termination of employment if the termination is for other reasons. Upon termination of any grant/award, the unexercised or undistributed shares of Stock are forfeited and become available for future grants/awards.
Exercise/Distribution of Option/Bonus Shares
Options may be exercised and/or bonus shares acquired only in accordance with the terms and conditions of the L-T Plan document and as established by the Committee. For an option, payment to the Company for the aggregate or total amount of the option price for the number of shares being purchased or exercised accompanies a written notice. Payment may be made in one of two ways: by cash, or by a “stock swap”. In a stock swap, the employee tenders already owned Common Stock or Class A Common Stock as all or part of the aggregate option purchase price valued at the closing price on the date of exercise as reported by the Wall Street Journal.
The bonus shares are distributed on the vesting dates according to the vesting schedule. No consideration is due from the Participant other than the continued employment at Molex (unless subject to accelerated vesting).
Adjustment of the Number of Shares and Exercise Price
RESTRICTIONS REGARDING GRANTS/AWARDS AND THE COVERED SHARES
Transfer
Any option granted or bonus awarded under the L-T Plan cannot be transferred and can only be exercised or acquired by the Participant during his/her life. If the Participant should die while still employed by the Company or any of its subsidiaries, the option and/or bonus, to the extent it could have been acquired by the Participant on the date of death, may be exercised or acquired by the personal representative (executor or administrator) within one year after the date of death (in the case of an option), or delivered to such personal representative (in the case of bonus shares), but not later than one year from the date the option becomes 100% vested.
Sale of Stock Acquired Under the Plan
It is intended that the all of the shares covered by the L-T Plan will be registered under The Securities Act of 1933 (the “Securities Act”) and will be freely tradable if held by non-affiliates. If the shares to be sold are held by an “affiliate” (as defined by SEC Rule 144), the shares may be sold subject to the conditions and limitations set forth in Rule 144.
FEDERAL INCOME TAX EFFECTSRATIFICATION OF THE PLAN
The following discussion is only a summary of the U.S. federal income tax consequences of option and bonus shares under the L-T Plan and does not cover the U.S. federal income tax effects if the described conditions are not met. The following discussion does not purport to be complete and does not describe state, local or foreign tax law.
For the purposes of the discussion relating to U.S. tax consequences, the following definitions will apply: The “date of grant” is the date that appears in the stock agreement. The “date of exercise” is the date when the Participant pays the Company for the shares purchased pursuant to an option or acquires shares of stock pursuant to a stock bonus award. The “date of sale” is the date that the Participant has agreed to deliver stock (originally purchased pursuant to an option) to a subsequent third party purchaser, usually a stockbroker. “Aggregate option price” is the total amount of money which the Participant paid the Company in order to exercise a particular portion of an option. “Aggregate fair market value” is the total fair market value of the shares acquired under the L-T Plan.
U.S. Tax Consequences When an Option/Bonus Is Granted/Awarded
Under the present federal income tax laws, there is no taxable income recognized when a stock option is granted at 100% of fair market value or bonus shares are awarded subject to vesting at a future date. No deduction is available to the Company when a stock option is granted or bonus shares are awarded.
U.S. Tax Consequences When Option/Bonus Shares Are Acquired
NQSOs - Ordinary Tax. An exercise of any portion of a NQSO results in additional ordinary income for federal income tax purposes in the calendar year of exercise. The amount of additional ordinary income in any given year of exercise is equal to the aggregate fair market value on the date of exercise less the aggregate option price paid for the particular number of shares. Molex is allowed a deduction equal to the amount recognized by the Participant as additional ordinary income.
Bonus Shares - Ordinary Tax. The vesting of any portion of a stock bonus award results in the recognition of additional ordinary income for federal income tax purposes in the calendar year of vesting equal to the fair market value of the shares received on the date of vesting. The Company is allowed a deduction equal to the amount recognized by the Participant as additional ordinary income.
Distribution of Stock under the L-T Plan may be subject to income tax withholding, and the Company is obligated to collect the tax applicable to such income. The Committee may, in its discretion, satisfy that tax obligation by withholding from the shares to be delivered in connection with the award a number of shares having a value equal to the minimum statutory federal income tax withholding, plus state, if applicable, and payroll taxes. The value of each share to be withheld will be the fair market value of the Stock at the time of the award.
U.S. Tax Consequences When Shares Acquired Under the Plan Are Sold
Upon the sale of the shares of Stock acquired upon exercise of an option or distribution of bonus shares, the excess of the aggregate selling price over the aggregate tax basis will be taxable as a capital gain (or loss). Such capital gain (or loss) will be long-term if the shares have been held for more than 12 months after the date a Participant becomes subject to taxation with respect to the acquisition, and short-term if the shares have been held for less than that period. The holding period for purposes of determining whether the capital gain (or loss) is a long-term or short-term gain (or loss) commences on the date of the acquisition of the shares. This amount must be reported for the calendar year of sale. No tax consequences accrue to the Company upon sale. The tax basis for shares acquired under the L-T Plan is the fair market value on the date of acquisition for option shares or the date of vesting for bonus shares.
Potential Limitation of Company Deductions Under §162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended, denies a deduction to any publicly held corporation for compensation paid to certain employees in a taxable year to the extent that compensation exceeds $1,000,000. It is possible that compensation attributable to the distribution of stock bonus shares received by a Participant may cause this limitation to be exceeded in any particular year.
Certain kinds of compensation, including “qualified performance-based compensation,” are disregarded for purposes of the deduction limitation. Compensation attributable to stock options granted under the L-T Plan is expected to qualify as “qualified performance-based compensation” Distribution of the bonus shares will not be exempt as “qualified performance-based compensation.”
PLAN BENEFITS
The size of future grants to eligible employees under the L-T Plan is not determinable as of the date of this proxy statement because of the discretionary nature of such grants.
PROPOSAL NO. 7: RATIFICATIONSELECTION OF INDEPENDENT AUDITORS
MOLEX’S INDEPENDENT AUDITORS
Molex
Ernst & Young LLP has served as Molex’s principal independent auditors since December 2004.meeting. A representative of Ernst & Young LLPE&Y is expected to be present at the upcoming Annual Meeting of Stockholdersannual meeting and will be offered thehave an opportunity to make a statement if desiredhe or she so desires, and will be available to respond to appropriate questions.
Vote Necessary to Adopt
Although stockholder approvalselection of E&Y as Molex’s independent auditors is not required by the appointmentBylaws or otherwise, but the Board believes that as a matter of Ernst & Young LLP is beingcorporate practice the selection of E&Y should be submitted to Molex’s stockholders for ratification atratification. If the Annual Stockholders’ Meeting with a view towards soliciting stockholders’ opinions, whichstockholders do not ratify the selection, the Audit Committee will take into consideration in future deliberations.
Adoption of this proposal will requireconsider whether or not to retain E&Y. Even if the affirmative vote of the holders of a majority of the shares of the Common Stock entitled to vote and present in person or by proxy, voting as a class, and the holders of the majority of the shares of the Class B Common Stock entitled to vote and present either in person or by proxy, voting as a class. Directors and officers of Molex control approximately 40.4% of the outstanding Common Stock and approximately 97.1% of the outstanding Class B Common Stock entitled to vote. The directors and officers intend to vote for this proposal. Abstentions will have the same effect as a vote against the proposal. Broker “non-votes” will not be considered entitled to vote as to this matter and, accordingly, will have no effect on this proposal.
Your Board of Directors recommends a vote FOR this proposal. The enclosed proxy will be voted FOR the proposal unless a contrary specificationselection is made.
REPORT OF THE AUDIT COMMITTEE
The information contained in this report shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission (“SEC”), nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates such information by reference in such filing.
The audit committee of the Company’s Board of Directors (the “Audit Committee”) consists of three non-employee directors, Messrs. Carnahan (Chairman), Potter and Landsittel, each of whom the Board of Directors has determined to be independent as defined in applicable Nasdaq and SEC rules. During the fiscal year ended June 30, 2005,ratified, the Audit Committee conducted 19 meetings and agreed to one unanimous written consent.
Mr. Landsittel was appointed toin its discretion may direct the appointment of a different independent auditor at any time during the year if the Audit Committee on July 15, 2005,determines that such a change would be in the best interests of Molex and the Board of Directors has determined that he qualifies as an “audit committee financial expert” within the meaning of SEC rules. Two other directors served on the Committee for a portion of fiscal 2005: Mr. Birck served on the its stockholders.
Report
Amonginternal audit function. Molex’s management is responsible for preparing the financial statements, establishing and maintaining the system of internal controls, and assessing the effectiveness of Molex’s internal control over financial reporting. E&Y is responsible for auditing the annual financial statements and expressing opinions on the conformity of the financial statements with U.S. generally accepted accounting principles, and on the effectiveness of Molex’s internal control over financial reporting based on its other functions,audit.
Management is responsible for Molex’s2008 and the reasonableness of significant estimates and judgments made in preparing the financial statements, andas well as the clarity of the disclosures in the financial reporting process, including the systemsstatements. The Audit Committee also discussed separately with Molex’s internal auditor and E&Y, with and without management present, their evaluations of internal controls. The independent auditors are responsible for performing an independent audit of Molex’s consolidated financial statements and internal control over financial reporting and the overall quality of Molex’s financial reporting.
21
In the discharge of its duties,non-audit services, the Audit Committee performedhas considered whether the following:
Based
This report is submitted on behalf2008 for filing with the SEC. The Audit Committee also approved the selection of E&Y as Molex’s independent auditors for the members of thefiscal year ending June 30, 2009.
Douglas K. Carnahan, ChairmanRobert J. Potter
David L. Landsittel, (MemberChairman
Michelle L. Collins
Robert J. Potter
FY08 | FY07 | |||||||
Audit Fees (1) | $3,529,439 | $3,712,018 | ||||||
Audit-Related Fees (2) | $444,981 | $524,469 | ||||||
Tax Fees (3) | $1,277,292 | $931,879 | ||||||
All Other Fees (4) | - | $17,405 | ||||||
Total | $5,251,712 | $5,185,771 |
(1) | Audit Fees were principally for audit work performed on the consolidated financial statements and internal control over financial reporting, as well as work generally only the independent auditors can reasonably be expected to provide, such as statutory audit services. | |
(2) | Audit-related fees were principally for consultations as to the accounting or disclosure treatment of transactions or events, services related to post-acquisition reviews, royalty audits and local grant audits, preliminary due diligence pertaining to potential business acquisitions/dispositions and financial statement audits of employee benefit plans. The FY07 fees include services provided by E&Y relating to the review of our past stock option granting practices. | |
(3) | Tax fees were principally for services related to domestic and international tax compliance and reporting, including services related to expatriate tax compliance. | |
(4) | During FY07, Molex reimbursed E&Y for its reasonable costs incurred in responding to discovery subpoena related to the securities litigation in which Molex was involved. |
AUDITOR TRANSITION
Pre-Approval of Services
In connection with the potential engagement as Molex’s new independent auditors, Molex and Ernst & Young LLP discussed the nature of the matters described in Item 4.01 of the Form 8-K and in the 8-K Amendment (including the letter of Deloitte & Touche LLP filed as an exhibit thereto), including the reportable event disclosed therein and the matter that was the subject of a disagreement, as that term is defined in paragraph 304(a)(1)(iv) of Regulation S-K, with Deloitte & Touche LLP.
During the two fiscal years ended June 30, 2004 and during the interim period through the date of Ernst & Young LLP’s engagement on December 9, 2004, Molex did not consult with Ernst & Young LLP regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report was provided to the Company nor oral advice was provided that Ernst & Young LLP concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as that term is defined in paragraph 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K, or a reportable event required to be reported under paragraph 304(a)(1)(v) of Regulation S-K.
INDEPENDENT AUDITOR’S FEES
Policies and Procedures Regarding the Approval of Auditor Fees and Services
The Audit Committee’s Pre-Approval Policy allows for the pre-approval of audit, audit-related, tax and other authorized services that are specifically listed by the Committee on an annual basis. The Audit Committee may delegate pre-approval authority to one or morethe Chairman of its members.the Audit
22
• | Performance - We endeavor to align executive compensation with the achievement of operational and financial results and individual contributions. | |
• | Balance - We balance rewards for our demanding executive roles between short-term and long-term financial and strategic decisions to enhance performance over time. | |
• | Competitiveness - We believe that in total our executive compensation should be targeted above the median of our peer group. This target compensation positioning allows us to retain highly experienced executives and to effectively recruit highly qualified candidates when necessary. |
23
Name | Target | Maximum | ||||||
Mr. Slark | 75 | % | 150 | % | ||||
Mr. McCarthy | 60 | % | 120 | % | ||||
Mr. Johnson | 60 | % | 120 | % | ||||
Mr. Fleischhacker | 50 | % | 100 | % | ||||
Mr. Root | 50 | % | 100 | % |
24
25
Fees Billed by the Independent Auditors
Deloitte & Touche LLP served as Molex’s independent auditors during the fiscal year ended June 30, 2004. In addition, Deloitte & Touche LLP performed certain audit services in connection with their uncompleted review of Molex’s Form 10-QCEO to approve such perquisites for the quarter ended September 30, 2004 prior to their resignation in November 2004. All of the fees paid to Deloitte & Touche LLP for such periods areother executive officers. The Committee must separately approve perquisites not specified included in the table below. Ernstpolicy or amounts that exceed the specified amounts.
26
Fiscal Year 2005 | Fiscal Year 2004 | ||||||||||||||||
Ernst & Young | Deloitte & Touche | Deloitte & Touche | |||||||||||||||
Audit Fees | |||||||||||||||||
Fiscal Years 2003-04 Financial Statements | $ | 3,250,000 | |||||||||||||||
Fiscal Year 2005 Financial Statements | $ | 2,586,969 | |||||||||||||||
Fiscal Year 2005 Internal Controls | $ | 1,100,000 | |||||||||||||||
Total | $ | 6,836,969 | (a) | $ | 238,500 | $ | 1,122,350 | ||||||||||
Audit-Related Fees | $ | 0 | $ | 18,250 | $ | 153,850 | |||||||||||
Tax Fees | $ | 17,806 | $ | 103,636 | $ | 1,371,180 | |||||||||||
All Other Fees | $ | 0 | $ | 0 | $ | 110,000 | |||||||||||
TOTAL FEES | $ | 6,854,775 | (a) | $ | 360,386 | $ | 2,757,380 | ||||||||||
A descriptionour of the types of services provided in each category is as follows:
Audit Fees. These are feesNamed Executive Officers (NEO) for all services performed to comply with generally accepted auditing standards including:
Audit Related Fees. These are fees for services that are reasonably related to the performance of the audit or review of the financial statements. These services are traditionally performed by the independent auditors and include audits of employee benefit plans, services related to acquisition or divestiture activities including due diligence and other procedures related to acquisitions, internal control-related services, attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards.
Tax Fees. These are fees for services that primarily include work relating to tax compliance, tax planning, employee tax services and other tax-related matters. Generally, tax compliance includes preparation and/or review of original and amended company tax returns, claims for refund, assistance with tax audits and appeals. Tax planning includes tax advice related to acquisitions and divestitures, employee benefit plans and requests for rulings or technical advice from taxing authorities. Employee tax services include preparation and/or assistance regarding employee tax returns such as tax services for Molex personnel assigned to a location different from their home country (“Expatriate”).
During fiscal years 2005 and 2004, Molex paid Ernst & Young LLP and Deloitte & Touche LLP the tax fees set forth in the above table for the preparation of various entity tax returns, assistance with tax audits, restructuring tax counseling, international tax advice, employee tax services and general tax advice. Of the tax fees paid for fiscal year 2004 to Deloitte & Touche LLP, $489,670 was for tax compliance, $376,160 was for international tax planning advice and $505,350 was generally for Expatriate tax services.
All Other Fees. These are fees for all other services not included as audit fees, audit-related fees and/or tax fees as set forth above. During fiscal year 2004, Molex paid Deloitte & Touche LLP for services relating to employee compensation statements and other miscellaneous services.
INFORMATION ABOUTCOMPENSATION AND EXECUTIVE OFFICER TRANSACTIONS
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth information on compensation for services rendered in all capacities to Molexduring FY08 and its subsidiaries for the fiscal years indicated for each individual that served as our Chief Executive Officer during the last completed fiscal year and the four other most highly compensated executive officers of Molex (collectively, the “Executives”) based on total salary and bonus payments for the last completed fiscal year.
Non-Equity | ||||||||||||||||||||||||||||
Stock | Option | Incentive Plan | All Other | |||||||||||||||||||||||||
Name | Year | Salary | Awards(1) | Awards(1) | Compensation(2) | Compensation(3) | Total | |||||||||||||||||||||
Martin P. Slark | 2008 | 878,333 | 1,380,194 | 1,627,679 | - | 163,212 | 4,049,418 | |||||||||||||||||||||
Vice Chairman & | 2007 | 833,333 | 1,120,651 | 1,858,885 | - | 199,854 | 4,012,723 | |||||||||||||||||||||
Chief Executive Officer | ||||||||||||||||||||||||||||
Liam G. McCarthy | 2008 | 568,332 | 550,926 | 839,148 | - | 93,302 | 2,051,708 | |||||||||||||||||||||
President & Chief | 2007 | 545,825 | 413,499 | 762,822 | - | 155,583 | 1,877,729 | |||||||||||||||||||||
Operating Officer | ||||||||||||||||||||||||||||
James E. Fleischhacker | 2008 | 480,291 | 539,048 | 778,047 | - | 75,048 | 1,872,434 | |||||||||||||||||||||
Executive Vice President & President, Transportation Products Division | 2007 | 461,818 | 567,327 | 1,007,831 | - | 82,332 | 2,119,308 | |||||||||||||||||||||
David D. Johnson | 2008 | 477,400 | 616,012 | 552,701 | - | 64,143 | 1,710,256 | |||||||||||||||||||||
Executive Vice President, Treasurer & Chief Financial Officer | 2007 | 455,000 | 458,833 | 392,484 | - | 103,596 | 1,409,913 | |||||||||||||||||||||
David B. Root | 2008 | 392,460 | 366,013 | 374,358 | - | 306,151 | 1,438,982 | |||||||||||||||||||||
Executive Vice President & President, Commercial Products Division | 2007 | 376,500 | 258,465 | 381,544 | - | 92,952 | 1,109,461 |
(1) | ||
(2) | Since our annual incentive performance measures were not met in FY08 and FY07, the NEOs did not receive a bonus. | |
(3) | See the “All Other Compensation |
27
Company | ||||||||||||||||||||||||||||
Contributions to | ||||||||||||||||||||||||||||
Defined | Life | |||||||||||||||||||||||||||
Tax | Retirement/ | Contribution | Insurance | |||||||||||||||||||||||||
Name | Year | Perquisite(1) | Gross-Up(2) | Severance | Plans(3) | Premiums | Total | |||||||||||||||||||||
M. Slark | 2008 | 67,687 | 737 | - | 91,493 | 3,295 | 163,212 | |||||||||||||||||||||
2007 | 57,752 | 1,993 | - | 136,086 | 4,023 | 199,854 | ||||||||||||||||||||||
L. McCarthy | 2008 | 32,307 | 125 | - | 59,268 | 1,602 | 93,302 | |||||||||||||||||||||
2007 | 58,876 | 408 | - | 94,523 | 1,776 | 155,583 | ||||||||||||||||||||||
J. Fleischhacker | 2008 | 22,486 | 843 | - | 50,117 | 1,602 | 75,048 | |||||||||||||||||||||
2007 | 7,970 | 166 | - | 72,420 | 1,776 | 82,332 | ||||||||||||||||||||||
D. Johnson | 2008 | 11,911 | 814 | - | 49,816 | 1,602 | 64,143 | |||||||||||||||||||||
2007 | 25,038 | - | - | 76,782 | 1,776 | 103,596 | ||||||||||||||||||||||
D. Root | 2008 | 262,838 | 724 | - | 40,987 | 1,602 | 306,151 | |||||||||||||||||||||
2007 | 32,204 | 125 | - | 58,847 | 1,776 | 92,952 |
Name and Principal Positions (a) | Year | _Salary_ | Bonus (b) | Compensation (c) | (No. Shares) | Compensation (g) | |||
Co-Chairman and Chief Executive Officer | 2004 2003 | $450,000 $450,000 | $ 195,570 $ 0 | * $ 47,412 | 20,000 (e) 20,000 (e) | $ 45,017 $ 81,606 | |||
(2) | President | 2004 2003 | $570,835 $516,002 | $ 300,000 $ 0 | * * | 175,000 (f) 175,000 (f) | $ 55,686 $ 45,050 | ||
(3) | See the “Company Contributions Table.” |
Overseas | ||||||||||||||||||||||||||||||||||||
Leased | Financial | Medical | Assignment | Spousal | ||||||||||||||||||||||||||||||||
Name | Year | Vehicle | Planning | Exam | Expenses(1) | Clubs(2) | Travel | Gifts(3) | Total | |||||||||||||||||||||||||||
M. Slark | 2008 | 30,680 | 26,996 | 1,465 | - | 8,546 | - | - | 67,687 | |||||||||||||||||||||||||||
2007 | 19,264 | 23,354 | 1,685 | - | 6,490 | - | 6,959 | 57,752 | ||||||||||||||||||||||||||||
L. McCarthy | 2008 | 27,107 | 5,200 | - | - | - | - | - | 32,307 | |||||||||||||||||||||||||||
2007 | 45,716 | 8,406 | - | - | 300 | - | 4,454 | 54,422 | ||||||||||||||||||||||||||||
J. Fleischhacker | 2008 | 7,626 | 12,792 | - | - | 350 | 1,718 | - | 22,486 | |||||||||||||||||||||||||||
2007 | 1,422 | 6,198 | - | - | 350 | - | - | 7,970 | ||||||||||||||||||||||||||||
D. Johnson | 2008 | 7,597 | 2,364 | 1,950 | - | - | - | - | 11,911 | |||||||||||||||||||||||||||
2007 | 22,239 | 2,799 | - | - | - | - | - | 25,038 | ||||||||||||||||||||||||||||
D. Root | 2008 | 1,499 | - | - | 248,766 | 12,573 | - | - | 262,838 | |||||||||||||||||||||||||||
2007 | 23,196 | - | 2,674 | - | 750 | 5,584 | - | 32,204 |
Corporate Vice President | Mr. Root served on expatriate assignment in Singapore during all of FY08. The amount shown includes rent and | 2004 2003 | $544,244 $467,985 | $ 214,932 $ 0 | * * | 100,000 (f) 100,000 (f) | $ 583,618 $ 67,843 | ||
Executive Vice President and Regional President, Far East South; Former Acting Chief Financial Officer | 2004 2003 | $462,473 $396,908 | $ 232,800 $ 0 | $104,188 * | 125,000 (f) 140,000 (f) | $ 45,756 $ 32,844 | |||
(2) | Corporate Vice President | 2004 2003 | $497,319 $446,186 | $ 183,791 $ 0 | * * | 10,522 10,522 | 44,287 (f) 48,715 (f) | $ 12,353 $ 11,775 | |
Former Vice Chairman and Chief Executive Officer; Vice President, Strategic Planning | |||||||||
(3) | 2004 2003 | $675,003 $597,876 | $ 400,000 $ 0 | * * | 300,000 (f) 300,000 (f) | $ 65,697 $ 51,098 |
The |
28
Name | Year | 401(k) Plan | Profit-Sharing | SERP | Total | |||||||||||||||
M. Slark | 2008 | 2,300 | 21,741 | 67,452 | 91,493 | |||||||||||||||
2007 | 2,300 | 21,021 | 112,765 | 136,086 | ||||||||||||||||
L. McCarthy | 2008 | 2,300 | 21,741 | 35,227 | 59,268 | |||||||||||||||
2007 | 2,300 | 21,021 | 71,202 | 94,523 | ||||||||||||||||
J. Fleischhacker | 2008 | 2,300 | 21,741 | 26,076 | 50,117 | |||||||||||||||
2007 | 2,300 | 21,021 | 49,099 | 72,420 | ||||||||||||||||
D. Johnson | 2008 | 2,300 | 21,741 | 25,775 | 49,816 | |||||||||||||||
2007 | 2,300 | 21,021 | 53,461 | 76,782 | ||||||||||||||||
D. Root | 2008 | 2,300 | 21,741 | 16,946 | 40,987 | |||||||||||||||
2007 | 2,300 | 21,021 | 35,526 | 58,847 |
29
Estimated Possible Payouts Under | All Other | All Other | ||||||||||||||||||||||||||||||
Non-Equity Incentive Plan Awards | Stock | Option | Grant Date | |||||||||||||||||||||||||||||
($)(1) | Awards: | Awards: | Exercise or | Fair Value | ||||||||||||||||||||||||||||
| Number of | Number of | Base Price | of Stock | ||||||||||||||||||||||||||||
Shares of | Securities | of Option | and Option | |||||||||||||||||||||||||||||
Grant | Stock or | Underlying | Awards | Award | ||||||||||||||||||||||||||||
Name | Date | Threshold | Target | Maximum | Units (#) | Options (#) | ($/Sh) | ($)(2) | ||||||||||||||||||||||||
M. Slark | 08/15/07 | 0 | 658,749 | 1,317,499 | 75,000 | 200,000 | 22.82 | 2,951,500 | ||||||||||||||||||||||||
L. McCarthy | 08/15/07 | 0 | 340,999 | 681,998 | 30,000 | 125,000 | 22.82 | 1,459,600 | ||||||||||||||||||||||||
J. Fleischhacker | 08/15/07 | 0 | 240,145 | 480,291 | 20,000 | 60,000 | 22.82 | 828,400 | ||||||||||||||||||||||||
D. Johnson | 08/15/07 | 0 | 286,440 | 572,880 | 25,000 | 100,000 | 22.82 | 1,190,500 | ||||||||||||||||||||||||
D. Root | 08/15/07 | 0 | 196,230 | 392,460 | 25,000 | 60,000 | 22.82 | 942,500 |
(1) | As further described in | |
Name | Fiscal Year | Financial Planning, Personal Tax Advice and Income Tax Return Preparation | Personal Use of Company Car or Company Car Allowance | Net Overseas Assignment Expenses Including Relocation, Overseas Living Plus/Minus Tax Equalization | Personal Life Insurance Premiums | |||||
F. A. Krehbiel............. | 2003 | $30,775 | ** | ** | $12,470 | |||||
M. P. Slark.................. | 2005 | $22,050 | $16,099 | ** | ** | |||||
R. B. Mahoney............ | 2005 2004 | ** ** | $87,121 $19,865 | $31,948 $79,271 | ** ** | |||||
W. W. Fichtner........... | 2005 | ** | $30,855 | ** | $17,580 | |||||
J. J. King..................... | 2005 | ** | $18,535 | ** | ** |
30
Option Awards | Stock Awards | |||||||||||||||||||||||
Number of | Number of | Market | ||||||||||||||||||||||
Securities | Securities | Number of | Value of | |||||||||||||||||||||
Underlying | Underlying | Shares or | Shares or | |||||||||||||||||||||
Unexercised | Unexercised | Units of | Units of | |||||||||||||||||||||
Options | Options | Option | Option | Stock That | Stock That | |||||||||||||||||||
Exercisable | Unexercisable | Exercise Price | Expiration | Have Not | Have Not | |||||||||||||||||||
Name | (#) | (#) | ($) | Date | Vested (#) | Vested ($)(3) | ||||||||||||||||||
M. Slark | 59,532 | (1) | 0 | 28.80 | 07/19/2008 | 0 | 0 | |||||||||||||||||
100,000 | 0 | 22.28 | 07/25/2009 | 0 | 0 | |||||||||||||||||||
75,000 | 0 | 23.62 | 06/02/2010 | 0 | 0 | |||||||||||||||||||
175,000 | 0 | 25.99 | 10/24/2013 | 0 | 0 | |||||||||||||||||||
131,250 | 43,750 | 24.76 | 07/29/2009 | 5,000 | 114,550 | |||||||||||||||||||
93,750 | 93,750 | 23.86 | 10/28/2010 | 31,250 | 715,938 | |||||||||||||||||||
46,875 | 140,625 | 29.79 | 08/15/2011 | 46,875 | 1,073,907 | |||||||||||||||||||
0 | 200,000 | 22.82 | 08/15/2002 | 75,000 | 1,718,250 | |||||||||||||||||||
L. McCarthy | 18,452 | (1) | 0 | 28.80 | 07/19/2008 | 0 | 0 | |||||||||||||||||
6,250 | 0 | 22.28 | 07/25/2009 | 0 | 0 | |||||||||||||||||||
17,990 | 0 | 25.99 | 10/24/2013 | 0 | 0 | |||||||||||||||||||
13,350 | 4,450 | 25.51 | 08/26/2009 | 925 | 21,192 | |||||||||||||||||||
75,000 | 75,000 | 23.54 | 07/01/2010 | 12,500 | 286,375 | |||||||||||||||||||
31,250 | 93,750 | 29.79 | 08/15/2011 | 22,500 | 515,475 | |||||||||||||||||||
0 | 125,000 | 22.82 | 08/15/2012 | 30,000 | 687,300 | |||||||||||||||||||
J. Fleischhacker | 0 | 12,500 | (2) | 21.81 | 07/29/2009 | 0 | 0 | |||||||||||||||||
0 | 93,750 | (2) | 28.32 | 07/22/2010 | 0 | 0 | ||||||||||||||||||
54,362 | 0 | 28.80 | 07/19/2008 | 0 | 0 | |||||||||||||||||||
70,000 | 0 | 22.28 | 07/25/2009 | 0 | 0 | |||||||||||||||||||
50,000 | 0 | 23.62 | 06/02/2010 | 0 | 0 | |||||||||||||||||||
100,000 | 0 | 25.99 | 10/24/2013 | 0 | 0 | |||||||||||||||||||
75,000 | 25,000 | 24.76 | 07/29/2009 | 6,000 | 137,460 | |||||||||||||||||||
28,125 | 28,125 | 23.86 | 10/28/2010 | 9,375 | 214,782 | |||||||||||||||||||
15,000 | 45,000 | 29.79 | 08/15/2011 | 15,000 | 343,650 | |||||||||||||||||||
0 | 60,000 | 22.82 | 08/15/2012 | 20,000 | 458,200 | |||||||||||||||||||
D. Johnson | 75,000 | 25,000 | 22.80 | 05/16/2010 | 6,250 | 143,188 | ||||||||||||||||||
15,000 | 15,000 | 24.33 | 09/12/2010 | 5,000 | 114,550 | |||||||||||||||||||
18,750 | 56,250 | 29.79 | 08/15/2011 | 11,250 | 257,738 | |||||||||||||||||||
0 | 100,000 | 22.82 | 08/15/2012 | 18,750 | 429,563 | |||||||||||||||||||
25,000 | 572,750 | |||||||||||||||||||||||
D. Root | 0 | 8,000 | 9.275 | 10/09/2011 | 0 | 0 | ||||||||||||||||||
28,125 | 28,125 | 26.06 | 07/28/2010 | 9,374 | 214,758 | |||||||||||||||||||
15,000 | 45,000 | 29.79 | 08/15/2011 | 15,000 | 343,650 | |||||||||||||||||||
0 | 60,000 | 22.82 | 08/15/2012 | 25,000 | 572,750 |
(1) | These options expired unexercised on July 19, 2008. | |
(2) | These are long-term options to acquire shares of Molex Common Stock that vest on the tenth anniversary of the |
Name | Fiscal Year | 401(k) Plan (ii) | Retirement | |||||||||
(3) | 2004 2003 | $ 18,400 $ 18,400 | $ 2,000 $ 2,000 | $ 24,617 $ 9,753 | N/A N/A | $ 0 $ 165,095 | ||||||
2004 2003 | $ 18,400 $ 18,400 | $ 2,000 $ 2,000 | $ 35,286 $ 24,650 | N/A N/A | N/A N/A | |||||||
2004 2003 | N/A N/A | N/A N/A | $121,549 $ 67,843 | N/A N/A | $ 462,069 $ 0 | |||||||
2004 2003 | $ 18,400 $ 18,400 | $ 2,000 $ 2,000 | $ 25,356 $ 12,444 | N/A N/A | N/A N/A | |||||||
2004 2003 | N/A N/A | N/A N/A | N/A N/A | $ 12,353 $ 11,775 | N/A N/A | |||||||
2004 2003 | $ 18,400 $ 18,400 | $ 2,000 $ 2,000 | $ 45,297 $ 30,698 | N/A N/A | N/A N/A |
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2005 AND YEAR-END OPTION VALUESM
No. of Shares | At June 30, 2005 | |||||||||||||||
Acquired Upon | Value | Number of Unexercised Options | Value of Unexercised In-the-Money Options (b) | |||||||||||||
Name | Stock Class | Exercise | Realized (a) | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||
F. A. Krehbiel.................... | Common | 0 | ― | 0 | 0 | ― | ― | |||||||||
Class A | 0 | ― | 50,004 | 69,996 | $ 31,003 | $ 30,993 | ||||||||||
M. P. Slark........................ | Common | 36,293 | $ 533,384 | 101,330 | 226,563 | $ 530,960 | $ 1,266,563 | |||||||||
Class A | 0 | ― | 236,159 | 408,633 | $ 179,000 | $ 179,000 | ||||||||||
R. B. Mahoney................... | Common | 0 | ― | 0 | 99,414 | ― | $ 285,617 | |||||||||
Class A | 0 | ― | 197,929 | 305,293 | $ 71,600 | $ 143,200 | ||||||||||
G. Tokuyama..................... | Common | 0 | ― | 0 | 0 | ― | ― | |||||||||
Class A | 0 | ― | 180,000 | 140,000 | $ 179,000 | $ 179,000 | ||||||||||
W. W. Fichtner.................. | Common | 0 | ― | 0 | 40,000 | ― | $ 122,100 | |||||||||
Class A | 0 | ― | 134,566 | 179,349 | $ 87,202 | $ 87,198 | ||||||||||
J. J. King.......................... | Common | 101,293 | $1,212,582 | 125,000 | 226,563 | $ 654,989 | $ 1,266,563 | |||||||||
Class A | 0 | ― | 468,178 | 707,862 | $ 358,000 | $ 358,000 |
OPTION GRANTS IN FISCAL YEAR 2005
Individual Grants | ||||||||||||||
Options Granted (No. Shares of | Percentage of Total Options Granted to Employees in | Exercise Price | Expiration | Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term (d) | ||||||||||
Name | Class A Stock) | Fiscal 2005 (c) | ($/Share) | Date | 5% | 10% | ||||||||
F. A. Krehbiel................. | 38,474 (b) | 1.7015% | $24.76 | 07/29/09 | $ 263,190 | $ 581,582 | ||||||||
1,526 (b) | 0.0675% | $27.24 | 07/29/09 | $ 6,661 | $ 19,289 | |||||||||
M. P. Slark.................... | 175,000 (a) | 7.7393% | $24.76 | 07/29/09 | $ 1,197,128 | $ 2,645,340 | ||||||||
R. B. Mahoney............... | 125,000 (a) | 5.5280% | $24.76 | 07/29/09 | $ 855,091 | $ 1,889,528 | ||||||||
G. Tokuyama................. | 0 | ― | ― | ― | ― | ― | ||||||||
W. W. Fichtner.............. | 49,505 (a) | 2.1893% | $24.76 | 07/29/09 | $ 338,650 | $ 748,329 | ||||||||
58,876 (a) | 2.6038% | $24.27 | 06/02/10 | $ 381,374 | $ 842,736 | |||||||||
J. J. King....................... | 300,000 (a) | 13.2673% | $24.76 | 07/29/09 | $ 2,052,219 | $ 4,534,868 |
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Option Awards | Stock Awards | |||||||||||||||
Number | Number | |||||||||||||||
of Shares | Value | of Shares | Value | |||||||||||||
Acquired on | Realized on | Acquired on | Realized on | |||||||||||||
Name | Exercise (#) | Exercise($)(1) | Vesting(#)(2) | Vesting($)(3) | ||||||||||||
M. Slark | 249,767 | 1,408,585 | 41,250 | 1,060,363 | ||||||||||||
L. McCarthy | 6,250 | 91,745 | 15,404 | 381,635 | ||||||||||||
J. Fleischhacker | 58,593 | 552,298 | 19,187 | 215,350 | ||||||||||||
D. Johnson | - | - | 18,750 | 475,500 | ||||||||||||
D. Root | 8,250 | 119,963 | 9,688 | 240,676 |
(1) | The aggregate dollar value realized upon exercise of stock options reflects the | |
(2) | Includes the following number of shares retained by Molex for the | |
(3) | The aggregate dollar value realized on vesting of the | |
EQUITY COMPENSATION PLAN INFORMATION
Plan Category | a | b | c | |||
Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||
Common | Class A | Common | Class A | Common | Class A | |
Equity Compensation Plans Approved By Security Holders | ||||||
The 1991 Molex Incorporated Incentive Stock Option Plan Approved: 10/25/1991 Expired: 6/30/2000 | 1,248,166 | Only Common Stock may be issued | $21.8253 | Only Common Stock may be issued | 0 | Only Common Stock may be issued |
The 2000 Molex Incorporated Executive Stock Bonus Plan Approved: 10/20/2000 Expired: 6/30/2005 | Only Class A Stock may be issued. | 0 | Only Class A Stock may be issued | $0.00 | Only Class A Stock may be issued | 0 |
The 2000 Molex Incorporated Incentive Stock Option Plan Approved: 10/20/2000 Expired: 6/30/2005 | Only Class A Stock may be issued. | 345,890 | Only Class A Stock may be issued. | $26.7313 | Only Class A Stock may be issued. | 0 |
The 2000 Molex Incorporated Long-Term Stock Plan Approved: 10/20/2000 Amended: 10/24/2003 Expires: 9/30/2007 | Only Class A Stock may be issued. | 4,832,085 | Only Class A Stock may be issued. | $23.0685 | Only Class A Stock may be issued. | 781,984 |
Equity Compensation Plans Not Approved By Security Holders * | ||||||
The 1990 Molex Incorporated Stock Option Plan Approved: 2/01/1990 Expired: 6/30/1999 | 487,669 | Only Common Stock may be issued | $11.0741 | Only Common Stock may be issued. | 0 | Only Common Stock may be issued |
The 1998 Molex Incorporated Stock Option Plan Approved: 10/23/1998 Expires: 6/30/2009 | Only Class A Stock may be issued. | 4,073,781 | Only Class A Stock may be issued. | $11.3597 | Only Class A Stock may be issued. | 6,397,592 |
Total | 1,735,835 | 9,251,756 | $18.8048 | $18.0497 | 0 | 7,179,576 |
Long-Term Accelerated | ||
CERTAIN TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS
Retirement Arrangement with a Former Executive Officer
W. W. Fichtner, Corporate Vice Presidentthe timing and Regional Presidentmethod of Europe, retired from Molex as ofdistribution at the end of the fiscal year ended June 30, 2005. As a result of Fichtner’s retirement, all of his stock options and bonus awards became fully vested pursuantdeferral period. With regard to the termsdeferral period, participants may elect a fixed deferral period of five or ten years or to defer payment until separation from service. Payment of fixed period deferrals begin as of the plansdate elected provided the participant is still employed at that time. Participants who leave employment prior to the end of an elected fixed deferral period must begin receiving payments after separation from service even if the fixed period has not expired.
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• | Any transaction between us and another company at which a related person’s only relationship is as an employee (other than an executive officer), director or beneficial owner of less than 10% of that company’s shares, if the aggregate amount involved does not exceed the greater of 2% of the other company’s gross revenues for that year or $200,000; | |
• | Any charitable contribution by us to an organization at which a related person’s only relationship is as an employee (other than an executive officer) or director, if the aggregate amount involved does not exceed the greater of 2% of the charitable organization’s total annual receipts for that year or $200,000; | |
• | Any transaction where the related person’s interest arises solely from the ownership of our stock and all stockholders received or will receive the same benefit on a pro rata basis; and | |
• | Any transaction involving a related person where the rates or charges involved are determined by competitive bids. |
family member’s total compensation (salary, bonus, perquisites and value of equity awards) exceeds $120,000and/or the family member is appointed an officer.
J.
G. Tokuyama As of March 31, 2008, we had accrued $105,000 for Frederick A. Krehbiel’s arrangement and Molex have entered into an arrangement regarding Mr. Tokuyama’s retirement. The arrangement provides$202,000 for the reduction of Mr. Tokuyama’s responsibilities over the next 10 years, during which time Mr. Tokuyama’s annual base salary will be reduced from ¥61,194,800 (approximately $550,800) for fiscal year 2005 to ¥36,716,900 (approximately $330,500) for fiscal years 2006 through 2014. If G. Tokuyama dies during the term of this arrangement, Molex will pay his spouse, if she survives him, the balance of the payments otherwise due Tokuyama until all the payments have been made or until the spouse dies.
Employee Loan
Prior to this fiscal year and before he assumed the position of an executive officer of Molex on July 1, 2005, G. C. Brock, Vice President, received a non-interest bearing personal loan from Molex for €200,000 (approximately $240,000 based on recent exchange rates). The largest amount outstanding for the loan at any time during the fiscal year ended June 30, 2005 was €66,000 (approximately $79,200 based on recent exchange rates). The loan was forgiven during June 2005 leaving no balance due.
Compensation of Non-Named Executive Officer Employee Directors
John H. Krehbiel, Jr., Co-Chairman’s arrangement. These amounts are included in the table below under “All Other Compensation.”
All Other | ||||||||||||||||
Compensation | ||||||||||||||||
Name | Salary($) | Bonus($) | ($)(1) | Total($) | ||||||||||||
Frederick A. Krehbiel | 450,000 | - | 180,242 | 630,242 | ||||||||||||
Fred L. Krehbiel | 221,273 | - | 38,700 | 259,973 | ||||||||||||
John H. Krehbiel, Jr. | 450,000 | - | 264,179 | 714,179 |
(1) | These amounts are comprised of amounts contributed by us to qualified and non-qualified benefit plans, perquisites, executive life insurance premiums, taxgross-ups and the amounts accrued pursuant to the arrangements involving future compensation for Frederick A. Krehbiel and John H. Krehbiel, Jr. |
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(c) | ||||||||||||||||||||||||
Number of securities | ||||||||||||||||||||||||
remaining available | ||||||||||||||||||||||||
(a) | (b) | for future issuance | ||||||||||||||||||||||
Number of shares | Weighted-average | under equity | ||||||||||||||||||||||
to be issued upon | exercise price | compensation plans | ||||||||||||||||||||||
exercise of outstanding | of outstanding | (excluding shares | ||||||||||||||||||||||
options | options | reflected in column (a)) | ||||||||||||||||||||||
Common | Class A | Common | Class A | Common | Class A | |||||||||||||||||||
Plan Category | Stock | Stock | Stock | Stock | Stock | Stock | ||||||||||||||||||
Equity compensation plans approved by stockholders | 223,438 | 9,750,217 | $ | 27.59 | $ | 19.02 | - | 7,825,942 | ||||||||||||||||
Equity compensation plans not approved by stockholders | - | - | - | - | - | - |
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1. | Manner and Address for Submission.All stockholders nominating recommendations must be in writing, addressed to the Secretary at 2222 Wellington Court, Lisle, IL 60532. Submissions must be made by mail, courier or personal delivery.E-mailed submissions will not be considered. |
2. | Information Concerning the Recommending Stockholders.A nominating recommendation must be accompanied by the following information concerning each recommending stockholder: |
• | The name and address, including telephone number, of the recommending stockholder; | |
• | The number and class of Molex stock owned by the recommending stockholder and the time period for which such shares have been held; | |
• | If the recommending stockholder is not a stockholder of record, a statement from the record holder of the shares (usually a broker or bank) verifying the holdings of the stockholder and a statement from the recommending stockholder of the length of time that the shares have been held. (Alternatively, the stockholder may furnish a current Schedule 13D, Schedule 13G, Form 3, Form 4 or Form 5 filed with the Securities and Exchange Commission reflecting the holdings of the stockholder, together with a statement of the length of time that the shares have been held); and | |
• | A statement from the stockholder as to whether the stockholder has a good faith intention to continue to hold the reported shares through the date of Molex’s next annual meeting of stockholders. |
3. | Information Concerning the Proposed Nominee. A nominating recommendation must be accompanied by the following information concerning the proposed nominee: |
• | The information required by Item 401 of SECRegulation S-K; | |
• | The information required by Item 403 of SECRegulation S-K; and | |
• | The information required by Item 404 of SECRegulation S-K. |
4. | Relationships Between the Proposed Nominee and the Recommending Stockholder. The nominating recommendation must describe all relationships between the proposed nominee and the recommending stockholder and any agreements or understandings between the recommending stockholder and the nominee regarding the nomination. |
5. | Other Relationships of the Proposed Nominee. The nominating recommendation shall describe all relationships between the proposed nominee and any of Molex’s competitors, customers, suppliers or other persons with special interests regarding Molex. |
6. | Qualifications of the Proposed Nominee. The recommending stockholder must furnish a statement supporting its view that the proposed nominee possesses the minimum qualifications prescribed by the Committee for nominees, and briefly describing the contributions that the nominee would be expected to make to the Board. |
7. | Ability to Represent All Stockholders. The recommending stockholder must state whether, in the view of the stockholder, the nominee, if elected, would represent all stockholders and not serve for the purpose of advancing or favoring any particular stockholder or other Molex constituency. |
8. | Timing for Submissions Regarding Nominees for Election at Annual Meetings. A stockholder (or group of stockholders) wishing to submit a nominating recommendation for an annual meeting of stockholders must ensure that it is received by Molex, as provided above, not less than 60 days |
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nor more than 90 days prior to the first anniversary of the preceding year’s annual meeting of stockholders. In the event that the date of the annual meeting of stockholders for the current year is more than 30 days following the first anniversary date of the annual meeting of stockholders for the prior year, the submission of a recommendation will be considered timely if it is submitted a reasonable time in advance of the mailing of Molex’s proxy statement for the annual meeting of stockholders for the current year. |
9. | Stockholder Groups. If a recommendation is submitted by a group of two or more stockholders, the information regarding recommending stockholders must be submitted with respect to each stockholder in the group. |
10. | No Obligation to Nominate a Candidate. Acceptance of a recommendation for consideration does not imply that the Committee will interview or nominate the recommended candidate. |
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Fred L. Krehbiel, a director
1. | Molex’s acceptance and forwarding of communications to the Board or its members does not imply that the directors owe or assume any fiduciary duty to the person submitting the communication - applicable law prescribes all such duties. |
2. | Communications to the directors must be in writing and sent to the Secretary at 2222 Wellington Court, Lisle, IL 60532. |
3. | The following types of communications are not appropriate for delivery to directors: |
§ | Communications regarding individual grievances or other interests that are personal to the party submitting the communications and could not be construed to be of concern to the stockholders or other constituencies of Molex such as employees, customers, suppliers, etc.; | |
§ | Communications that advocate engaging in illegal activities; | |
§ | Communications that contain offensive, scurrilous or abusive content; and | |
§ | Communications that have no rational relevance to Molex’s business or operations. |
4. | All communications must be accompanied by the following information regarding the person submitting the communication: |
§ | If the person is a stockholder, a statement of the type and amount of the Molex stock that the person holds; | |
§ | If the person is not a stockholder and is submitting the communication as an interested party, the nature of the person’s interest in Molex; | |
§ | The address, telephone number ande-mail address, if any, of the person. |
5. | Upon receipt by the Secretary, the following will occur: |
§ | The communication will be logged identifying the person submitting the communication, the nature of its content and the action taken with respect to the communication. | |
§ | A review as to whether the conditions of these procedures have been complied with. | |
§ | An acknowledgement will be sent to the submitter advising whether the communication will be forwarded and if not, why not. |
6. | If a communication is not presented to the directors because of failure to meet the conditions of these procedures, that communication must nonetheless be made available to any director to whom it was directed and who wishes to review it. |
7. | Communications deemed appropriate for delivery shall be delivered to the directors on periodic basis, generally in advance of each regularly scheduled meeting of the Board. |
8. | If so instructed by the Chairman of the Board, communications directed to the Board as a whole, but relating to the competence of one of the Board’s committees, shall be delivered to that committee, with a copy to the Chairman. |
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1. | Purpose |
2. | Definitions |
Advancement of Legal Expenses
Between March 2, 2005 and April 22, 2005 seven separate complaints were filed, each purporting to be on behalf of a class of Molex stockholders, against Molex, and certain Molex officers and employees. The stockholder actions have been consolidated before Judge Ruben Castillo in a case pending in the United States District Court for the Northern District of Illinois Eastern Division entitled The Takara Trust v. Molex Incorporated, et. al., Case No. 05C 1245. The Consolidated Amended Complaint alleges, among other things, that during the period from July 27, 2004 to February 14, 2005 the named defendants made or caused to be made a series of materially false or misleading statements about Molex’s business, prospects, operations, and financial statements which constituted violations of Section 10(b) of the Exchange Act of 1934,1986, as amended, and Rule 10b-5any successor statute and the regulations promulgated hereunderthereunder, as it or they may be amended from time to time.
Pursuant to the provisions of the Company’s certificate of incorporation, fees and other expenses incurredcalculations made in connection with legal and regulatory proceedings, includingsetting the litigation against Molex and certain current and former executive officers and directors relatingPerformance Measures for the related Award:
(1) | Net earnings or net income (before or after taxes); | |
(2) | Earnings per share; | |
(3) | Net sales or revenue growth; | |
(4) | Net operating profit; |
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(5) | Return measures (including, but not limited to, return on assets, return on net assets, capital, invested capital, equity, sales, or revenue); | |
(6) | Cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment); | |
(7) | EBIT or earnings before or after taxes, interest, depreciation,and/or amortization; | |
(8) | Gross or operating margins; | |
(9) | Productivity ratios; | |
(10) | Share price (including, but not limited to, growth measures and total shareholder return); | |
(11) | Expense targets; | |
(12) | Margins; | |
(13) | Operating efficiency; | |
(14) | Market share; | |
(15) | Total shareholder return; | |
(16) | Customer satisfaction; | |
(17) | Working capital targets; and | |
(18) | Economic value added or EVA® (net operating profit after tax minus the sum of capital multiplied by the cost of capital). |
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The information contained in this report shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission (“SEC”), nor shall such information be incorporated by reference into any future filingRule 16b-3 under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except toand (ii) who satisfy the extent that the Company specifically incorporates such information by reference in such filing.
The compensation committee of the Company’s Board of Directors (the “Committee”) consists of three non-employee directors, Messrs. Robert J. Potter (Chairman), Masahisa Naitoh and Joe W. Laymon, all of whom, in the opinion of the Board of Directors, meet the independence requirements of Nasdaq, are “non-employee directors” pursuant to SEC Rule 16b-3, and arean “outside directors”director” for purposes of §162(m) of the Internal Revenue Code. During the fiscal year ended June 30, 2005, the Committee conducted three meetings and agreed to three unanimous written consents.
Code Section 162(m). The Committee is a standing committee of the Board of Directors and operates under a written charter adopted by the Board of Directors. The Committee charter is available on our Web site, www.molex.com, by first clicking on “Investors”, then “Corporate Governance” and “Compensation Committee Charter.” In fiscal year 2005, the Board did not modify or reject in any material way any recommendation or action of the Committee.
In accordance with its written charter, the Committee approves compensation for the executive officers (the “Executive Officers”) of Molex, including the Co-Chairmen of the Board, F. A. Krehbiel and J. H. Krehbiel, Jr., and the Chief Executive Officer (“CEO”) in accordance with the Committee charter. F. A. Krehbiel and M. P. Slark, Molex’s former and current CEO, respectively, and J. H. Krehbiel, Jr. are evaluated and their compensation administered in the same general fashion as the other Executive Officers.
The compensation program for Executive Officers is designed to attract, motivate and retain talented executives who will strive to attain the Company’s strategic and financial objectives and thereby increase stockholder value. The guiding principles governing the philosophies behind the compensation of Executive Officers are:
There are three general components of executive compensation that are used to achieve the principles set forth above. They are base salary, merit bonus and stock plans.
When comparing Molex executive compensation with other companies, the Committee uses survey data of comparably sized manufacturing/electronics companies (the “Comparator Group”) provided by an outside consultant. The survey data for the Comparator Group was divided into each of the three different types of compensation and distributed over four quartiles for positions similar to those held by the Executive Officers. The companies comprising the Comparator Group are not necessarily the same as those in the Peer Group in the section entitled “Stockholder Return Performance Presentation” included in this proxy statement. Molex’s most direct competitors for executive talent are more frequently manufacturing companies of the same size as Molex while many of the Peer Group companies are much smaller than Molex and some are also involved in different types of businesses.
Molex seeks to have the overall executive compensationPlan shall be somewhat above that of the Comparator Group average. When compared to the Comparator Group, Executive Officers’ base salaries are somewhat above average while their merit bonuses are below average. Grants under the stock plans described herein have been historically below the Comparator Group average, however, during the last three years the grants were somewhat above average.
Annual Base Salary
The performance of all Executive Officers is reviewed annually and any salary increases are based upon the competitive base salary range in the second and third highest quartiles paid by the Comparator Group and the individual’s performance during the previous year. While there is no specific weight given to a particular factor in determining salary increases, individual performance is the principal factor.
The Co-Chairmen have requested the Committee not to entertain an increase in base salary for the fourth consecutive year despite the Committee’s judgment that they have made numerous significant contributions over the last fiscal year as well as the previous three fiscal years. Accordingly, F. A. Krehbiel and J. H. Krehbiel, Jr. received no increase in their annual base salary of $450,000 each. M. P. Slark, Molex’s new CEO, received a salary increase of 18.0% based upon his fiscal year 2005 salary to an annual rate of $750,000. This increase took effect on July 1, 2005. The reasons for the increase in salary include recognition of M. P. Slark’s leadership in achieving significant annual gains in revenue and his promotion to the Chief Executive Officer position effective July 1, 2005.
Merit Bonus
The merit bonus is a short-term incentive calculated as a percentage of base salary according to a plan that covers all Executive Officers, including the CEO. There have been instances in the past where, due to difficult business conditions or imminent restructuring, officer bonuses have been eliminated despite the fact that the goals necessary to merit a bonus had been achieved.
The merit bonus percentage calculated for each Executive Officer for fiscal year 2005 was based on three financial components and one discretionary non-financial component. The goals on which these components are based are recommended by top management and reviewed, modified and approved by the Committee at the beginning of each fiscal year. A percentage is awarded for each of the components that correspond to the following goals:
The percentage awarded for each component described above is subject to a sliding scale ranging between 0% and a predetermined maximum percentage depending upon how far below or above the year-end results achieved are from the stated goal. In order to be eligible to receive a bonus, two conditions must take place: (1) the sum of the percentages awarded for the first two financial components and the non-financial component must be greater than zero and (2) the percentage awarded for the net after tax component must be greater than zero.
Under the bonus plan, the maximum bonus percentage that can be paid to the CEO is 102% of base salary plus a discretionary amount, if any, in the event that the Committee, in its judgment, believes that unusual circumstances warrant such an additional amount. The amount of any bonus set forth above can be downwardly adjusted within the discretion of the Committee if the business conditions warrant the adjustment. No Executive Officer received a merit bonus for fiscal year 2005 because the financial criteria set forth above were not met.
The Compensation Committee reviewed and approved a new cash merit bonus plan for fiscal year 2006 that is calculated as a percentage of base salary. The new plan covers all Executive Officers, including the CEO. This plan provides that cash bonuses will be paid to Executive Officers based on the achievement of two components: a certain profit before tax (“PBT”) goal and individual performance objectives. The cash bonus opportunity for Executive Officers under such plan ranges from 0% to 150% of base salary. Payments to Executive Officers under the plan may be more or less than a target bonus as a function of the Company’s results and individual performance. The cash bonus opportunity is 30% of base salary based on achievement of minimum performance goals, 60% of base salary based on achievement of target performance goals (the “Target”) and 120% of base salary based on achievement of maximum performance goals. If the minimum performance goals are not achieved, n o bonus is payable under this plan.
The Compensation Committee, in its discretion, may downwardly adjust the potential bonus award to a lesser percentage, if any, to take into consideration unusual events. In addition, the Committee, in its discretion, may award an additional percentage not to exceed 30% of base salary to reflect unusual contributions to Molex.
An overview of the cash merit bonus plan is shown in the table below.
Percent of Budgeted PBT Achieved | Maximum Bonus as a Percent of Base Salary for Achieving | Total* | |
PBT Goal | Individual Goals | ||
115% or more | 96% | 24% | 120% |
Between 100%-115% | Pro rata percentage between 48% and 96% (Each 0.1% of PBT above the Target translates into an additional 0.32% of salary above 48%) | Pro rata percentage between 12% and 24% (Each 0.1% of PBT above the Target translates into an additional 0.08% of salary above 12%) | |
Target = 100% | 48% | 12% | 60% |
Between 95%-100% | Pro rata percentage between 24% and 48% (Each 0.1% of PBT below the Target translates into a reduction of 0.48% of salary below 48%) | Pro rata percentage between 6% and 12% (Each 0.1% of PBT below the Target translates into a reduction of 0.12% of salary below 12%) | |
95% | 24% | 6% | 30% |
Less than 95% | 0% | 0% | 0% |
Stock Plans
Molex has three stock-based equity plans administered by the Committee in which an Executive Officer may participate: The 2000 Molex Incorporated Incentive Stock Option Plan (the “2000 ISO Plan”), The 2000 Molex Incorporated Executive Stock Bonus Plan (the “Stock Bonus Plan”) and The 2000 Molex Incorporated Long-Term Stock Plan (the “Long-Term Plan”). These three stock plans provide long-term incentives to Executive Officers and encourage long-term growth of the Company. The shares granted or awarded in all three plans are Class A Common Stock.
The number of options granted to an Executive Officer under the 2000 ISO Plan or the Long-Term Plan is at the discretion of the Committee. Using equity plans that inherently depend upon stock performance over the long-term provides a strong link between management interests and those of the Company’s stockholders. The Committee considers both long-term individual and company performance and previous grants when determining stock option grants for a given year.
The 2000 Molex Incorporated Incentive Stock Option Plan. Each Executive Officer may, at the discretion of the Committee, receive an annual grant of options to acquire shares not to exceed 250,000 shares or 10% of the shares reserved for Plan (currently 10% of 500,000 shares), whichever is less. Both F. A. Krehbiel and J. H. Krehbiel, Jr. each received an incentive stock option for 1,526 shares of Class A Common Stock at a price of $27.24 per share and a non-qualified option for 38,474 shares of Class A Common Stock at a price of $24.76 per share under the 2000 ISO Plan. The 2000 ISO Plan expired and the 2005 Molex Incentive Stock Option Plan is proposed to replace the 2000 ISO Plan. (See Proposal 5 on page 26.)
The 2000 Molex Incorporated Executive Stock Bonus Plan. The Stock Bonus Plan provides for the award of a stock bonus at the end of a fiscal year during which Molex’s financial performance has been exemplary. The Committee may, in its sole discretion, award a stock bonus to eligible persons subject to the financial goal limitations set forth below.
No shares can be awarded for a given fiscal year if (a) the increase in Molex’s net sales revenue did not either equal at least 15% or exceed two times the worldwide connector market growth or (b) the effect of an award would be to lower Molex’s net profit (after taxes) as a percent of sales below 10%. In a given year, an eligible person can receive a maximum amount of stock whose fair market value on June 30 is equal to: 25% of the person’s base salary if the increase in Molex’s sales exceeded either 15% or two times the worldwide connector market growth but was less than 20%; or 50% of the person’s base salary if Molex’s sales increased 20% or more.
The Committee may award a cash bonus to offset taxes, thereby encouraging the recipient to hold the stock awarded. The stock and tax offset bonuses are distributed in four equal annual installments commencing on the June 30 ending the fiscal year for which the bonus has been awarded or as soon thereafter as practicable. If an individual who is awarded a bonus has not yet received his completed distribution and voluntarily leaves Molex before retirement, the balance due him is subject to forfeiture.
For the fiscal year just ended, the financial conditions necessary to award a stock bonus under the Stock Bonus Plan were not met. Accordingly, no awards were granted. The Stock Bonus Plan expired on June 30, 2005.
The 2000 Molex Incorporated Long-Term Stock Plan. Under the Long-Term Plan, the Committee has the complete authority in its sole discretion in awarding benefits in the form of both stock options and stock bonuses (i.e., no consideration given at the time of distribution) including the amounts, the prices and other terms and conditions. All of the awards under the Long-Term Plan, whether in the form of stock options or stock bonuses, that were given during last fiscal year are: (i) nonqualified; (ii) exercisable or distributable one year after grant or award; (iii) subject to expiration ten years after grant; and (iv) subject to vesting (for options) or subject to distribution (for bonus shares) in 25% annual increments on the anniversary of the grant or award. During last fiscal year, J. J. King, the former CEO, received an option for 300,000 shares of Class A Common Stock at a price of $25.99 per share. In addition, he received, in tandem, a bonus share award of 40,000 shares of Class A Common Stock. M. P. Slark, the new CEO effective July 1, 2005 received an option for 175,000 shares of Class A Common Stock at a price of $25.99 per share. In addition, he received, in tandem, a bonus share award of 20,000 shares of Class A Common Stock under the Long-Term Stock Plan.
Review of All Components of Executive Compensation
The Committee has reviewed all components of compensation of the Company’s Chief Executive Officer (“CEO”) with respect to Employees other than Executive Officers and Covered Employees. The Committee and the CEO shall be referred to individually and collectively as “Administrator” herein, as applicable.
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10. | Repayment of Awards |
Effect of §162(m)a subsequent restatement of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code deniesCompany’s financial statements.
11. | Termination of Employment |
12. | Miscellaneous |
This report is submitted on behalfwritten consent of the membersAdministrator in its sole discretion, except by will or by the laws of descent and distribution.
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Robert J. Potter, ChairmanMasahisa NaitohJoe W. Laymon
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Plan. The graph set forth below provides comparisonsBoard may at any time amend, suspend or discontinue the Plan, in whole or in part. The Administrator may at any time alter or amend any or all Award Schedules under the Plan to the extent permitted by law. No such action may be effective with respect to any Code Section 162(m) Award to any Covered Employee without approval of the yearly percentageCompany’s shareholders if such approval is required by Code Section 162(m)(4)(C). In the event that applicable tax and/or securities laws change to permit Administrator discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Administrator shall have sole discretion to make such changes without obtaining shareholder approval.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN (a)(Molex Incorporated, S&P 500 Index and Peer Group Index)
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |
Molex Common Stock (MOLX) | 100.00 | 76.10 | 70.08 | 56.69 | 67.54 | 55.13 |
Molex Class A Common (MOLXA) | 100.00 | 85.49 | 78.93 | 66.53 | 79.18 | 68.57 |
S & P 500 Index (b) | 100.00 | 85.17 | 69.85 | 70.03 | 83.41 | 88.68 |
Peer Group Index (c) | 100.00 | 57.29 | 38.96 | 35.46 | 51.51 | 43.17 |
OTHER INFORMATION
Other Business. Management intends to present no business other than that herein specifically mentionedmatter at the Company’s Annual Meeting of Stockholders and knows of noto be held on October 31, 2008 (or such other business that maydate as shall be properly presenteddetermined by others. If, however, any other business properly comes up for action at the meeting, the proxy holders will vote with respect thereto in their discretion.Board).
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APPENDIX A
ARTICLE I. GENERAL
1.1Name of PlanThree Prior Plans. The name of the plan described in detail herein shall be This Plan is intended to supercede and replace:
This Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock and Performance Shares.
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1.3Eligibility. Any regular employee
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ARTICLE II. TERM OF PLAN
2.1Effective Date. Upon approvalfrom time to time. For purposes of this Plan, references to sections of the Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision, as well as any applicable interpretative guidance issued related thereto.
2.2Expiration. This Plan shall expire October 31, 2009, unless terminatedEmployees, with respect to an applicable Performance Period by the Compensation Committee by the earlier byof:
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ARTICLE III. STOCK SUBJECT TO PLAN
3.1Class
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3.2Number of Shares.Twelve million-five hundred thousand (12,500,000) shares
3.3Source of Stock. Upon the exercise of options or as restricted stock awards vestCompensation Committee may take any action under the Plan that would otherwise be the responsibility of the Stock Option Plan Committee.
3.4Expired, Forfeited or Canceled Options. If any such options granted under the Plan shall expire, be forfeited or canceled for any reason without having been exercised in full, the unpurchased or unexercised shares subject thereto shall again be available for the purposesother provisions of thethis Plan.
ARTICLE IV. ADMINISTRATION
4.1 Committee. A committee (the “Committee”) shall administer the Plan under the terms, conditions and powers set forth herein.
4.2Makeup of the Committee.
4.3ActionBoard (or any other successor committee designated by the Committee.Board).
If not specified in the Plan, the time at which the Committee must or may take any determination shall be determined by the Committee, and such determination may thereafter by modified by the Committee. Any action, determination, interpretation or other decision by the Committee with respect to the Plan shall be final, conclusive and binding on all persons and entities, including the Company, its affiliates, any eligible employee, any person claiming any rights under the Plan from or through any grantee of an award under the Plan, and stockholders, except to the extent the Committee may subsequently modify, or take further action not inconsistent with, its prior action.
4.4Power to Grant Options. Subject to the express provisions of the Plan, the Committee shall have complete authority, in its sole discretion, to determine the employees to whom, and the time or times at which, options shall be granted, the option periods, the vesting schedule and the number of shares to be subject to each option, and such other terms and provisions of the option agreements (which need not be identical). In making such determinations, the Committee may take into account the nature of the services rendered by the respective employees, their present and potential contribution to the Company’s success, and such other factors as the Committee in its discretion shall deem relevant.
4.5 Power to Buy Option Stock. The Committee, in its sole discretion, if it believes that a particular optionee is suffering under an undue financial hardship, may cause the Company to buy as Treasury Stock up to fifty percent (50%) of the option stock actually exercised by that particular optionee. In such a case, the Company shall pay to the optionee the fair market value of the shares of option stock at the time the Committee elects to repurchase.
4.6 Power to Grant Restricted Stock Awards. Subject to the express provisions of the Plan, the Committee shall have complete authority, in its sole discretion, to determine the employees to whom, and the time or times at which, restricted stock awards shall be granted, the vesting schedule and the number of shares to be subject to each award, and such other terms and provisions of the awards (which need not be identical). In making such determinations, the Committee may take into account the nature of the services rendered by the respective employees, their present and potential contribution to the Company’s success, and such other factors as the Committee in its discretion shall deem relevant.
4.7 Other Powers. The express grant of any specific power to the Committee, or the taking of any action of the Committee, shall not be construed as limiting any power or authority of the Committee. Subject to and consistent with the provisions of the Plan, the Committee shall have full power and authority, in its sole discretion, to:
ARTICLE V. GRANT OF OPTION OR RESTRICTED STOCK AWARD
5.1Price. The acquisition price of any of the shares of Stock granted under this Plan may be any percentage of the fair market value of the Stock of the Company on the date of grant as determined by the Committee including 0%.
5.2Fair Market Value. For the purposes of this Article, fair market value shall be the closing price of the Stock on the date of granting the option as reported by the Wall Street Journal.
5.3Evidence of Option. Options granted shall be evidenced by agreements, warrants, and/or other instruments in such form as the Committee shall deem advisable and shall contain such terms, provisions, and conditions not inconsistent herewith as may be determined by the Committee.
5.4Rights as a Shareholder. An optionee shall have no rights as a stockholder with respect to shares covered by his option until the day of issuance of stock certificate to him and after such shares are fully paid.
5.5Grant of Restricted Stock Award. The Committee shall have the complete authority, in its sole discretion, to determine the eligible employees to whom a restricted stock award shall be granted, the vesting schedule, the number of shares to be subject to each award, and such other terms and provisions of the awards.
5.6 Evidence ofRestricted Stock Award. Restricted stock awards granted shall be evidenced by agreements, warrants, and/or other instruments in such form as the Committee shall deem advisable and shall contain such terms, provisions, and conditions not inconsistent herewith as may be determined by the Committee.
ARTICLE VI. EXERCISE OF OPTION
6.1Initial Waiting Period. No option shall be exercisable until at least one year after the date of grant.
6.2Vesting Periods. After the initial waiting period, an optionee may exercise his option to the extent that the shares covered by said option become vested. The vesting schedule is as follows:
6.3Cumulative Rights. The right to exercise any option as set forth in Section 6.2 shall be cumulative. That is, an optionee may exercise in any given year those shares he could have exercised in a previous year but did not.
6.4Expiration. No option may be exercised after one (1) year from the date the option becomes one hundred percent (100%) vested.
6.5Form of Exercise. The option may only be exercised according to the terms and conditions established by the Committee, consistent with the limits set forth herein, at the time the option is granted; provided, however, that the Committee, in its discretion, may require that any optionee shall receive only the net shares of Stock provided under such option after subtracting the aggregate exercise price and amounts for withholding of applicable taxes from the fair market value of the Stock subject to the option as of the date of exercise. Subject to the foregoing terms and conditions, an option may be exercised by a written notice delivered to the Company’s principal office of the optionee’s intent to exercise the option with respect to a specified number of shares of Stock along with payment to the Company of the amount of the aggregate option purchase price for the number of shares of Stock exercised. Stock that is already owned by an optionee may be tendered as all or part of the aggregate option purchase price. If Stock is used for payment, it shall be valued at the closing price on the date of exercise as reported by the Wall Street Journal.
ARTICLE VII. TERMINATION OF OPTION
7.1Expiration Date. Every option granted under this Plan shall terminate and expire at the earliest of
ARTICLE VIII. TRANSFERABILITY
8.1Non-Transferable. No option or restricted stock award granted under the Plan is transferable, and only the optionee can exercise any option granted during his or her life subject to Section 8.2 of this Article.
8.2Death. In the event of the death of an optionee while still employed by the Company or a parent or a subsidiary, his option, to the extent he or she could have exercised it on the date of his or her death, may be exercised by the personal representative of the estate of the optionee within one (1) year after the date of his or her death in accordance with the terms established by the Committee at the time the option was granted, but (as set forth in Article VII) not later than the expiration date set forth in Section 6.4.
ARTICLE IX. ADJUSTMENT OF NUMBER OF SHARES
9.1Stock pidends. In the event that a pidend shall be declared upon the Stock payable in shares of Stock, the number of shares of stock then subject to any such option or restricted stock award and the number of shares reserved for issuance pursuant to the Plan, but, not yet covered by an option or restricted stock award, shall be adjusted by addition to each such share the number of shares which would be distributable thereon if such share had been outstanding on the date fixed for determining the stockholders entitled to receive such stock pidend.
9.2Reorganization. In the event that the outstanding shares of the Stock shall be changed into or exchanged for a different number of kind of shares of Stock or other securities of the Company, or of another corporation, whether through reorganization, recapitalization, stock split up, combination of shares merger or consolidation, then, there shall be substituted for each share of Stock subject to any such option or restricted stock award and for each share of Stock reserved for issuance pursuant to the Plan, but, not yet covered by an option or restricted stock award, the number and kind of shares of Stock or other securities into which each outstanding share of Stock shall be so changed or for which each such share of Stock shall be exchanged.
9.3Other Changes. In the event there shall be any change, other than as specified above in this Article, in the number or kind of outstanding shares of the Stock or of any stock or other securities into which such stock shall have been changed or for which it shall have been exchanged, then, if the Committee shall, in its sole discretion, determine that such change equitably requires an adjustment in the number or kind of shares theretofore reserved for issuance pursuant to the Plan, but, not yet covered by an option or restricted stock award and of the shares then subject to an option or restricted stock award, such adjustments shall be made by the Committee and shall be effective and binding for all purposes of the Plan and of each option or restricted stock award.
9.4Adjusted Option Price. In the case of any substitution or adjustment as provided for in this Article, the option price in each stock option agreement for each share covered thereby prior to such substitution or adjustment will be the option price for all shares of Stock or other securities which shall have been substituted for such share or to which such share shall have been adjusted pursuant to this Article.
9.5Fractional Shares. No adjustment or substitutions provided for in this Article shall require the Company in any stock option agreement to sell a fractional share, and the total substitution or adjustment with respect to each stock option agreement shall be limited accordingly.
ARTICLE X. SECURITIES REGULATION
10.1Registered Stock. The Company shall not be obligated to sell or issue any shares under any option or restricted stock award granted hereunder unless and until the shares with respect to which the option or restricted stock award is being exercised are effectively registered or exempt from registration under the Securities Act of 1933 and for any other federal or state law governing the sale and issuance of such shares or any securities exchange regulation to which the Company might be subject.
10.2Unregistered Stock. In the event the shares are not effectively registered, but can be issued by virtue of an exemption, the Company may issue option shares to an optionee if the optionee represents that he is acquiring such shares as an investment and not with a view to, or for sale in connection with, the distribution of any such shares. Certificates for shares of Stock thus issued shall bear an appropriate legend reciting such representation.
ARTICLE XI. TRANSITION RULES FOR 2005 AND THEREAFTER
11.1 Effective Date and Applicability. Notwithstanding any other provision of the Plan or any award agreement to the contrary, with respect to any option or restricted stock awarded under the Plan that the Committee determines to be subject to Code §409A, the provisions of this Article XI shall be effective as of January 1, 2005 and shall apply only to those employees who are subject to United States income tax laws.
11.2 Options Vesting in 2005. Notwithstanding any provision under the Plan or any option agreements to the contrary, any option granted under the Plan that vests during 2005 and has not been exercised as of December 1, 2005 shall be automatically exercised as of December 1, 2005. The payment of the net shares under any such option, after applicable tax withholding, shall be made as soon as administratively practicable after December 1, 2005.
11.3Options Vesting on or after January 1, 2006. Any options granted under the Plan which vest on or after January 1, 2006 shall be automatically exercised as of such vesting date and the payment of the net shares under any such option, after applicable tax withholding, shall be made as soon as administratively practicable after such exercise date.
11.4Authority To take Action To Comply with §409A. The Board of Directors of the Company and/or the Committee shall have the authority to adopt such amendments to the Plan and to take any and all such actions as may be necessary or appropriate to comply in good faith with Code §409A and any Treasury Regulations or similar guidance issued thereunder. With respect to any outstanding option agreements subject to Code §409A, the Committee shall have the authority to enter into consent agreements with the optionees for purposes of modifying the applicable terms of such outstanding option agreements in order to bring them into compliance with Code §409A and the provisions of this Article XI.
ARTICLE XII. AMENDMENT AND TERMINATION
12.1Authority.Subject to Section 12.2, the Board of Directors may, at any time and from time to time, alter, amend, suspend, discontinue or terminate the Plan in whole or in part without the approval of the Company’s stockholders, except that any amendment or alteration shall be subject to approval of the Company’s stockholders if such approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the shares of Stock may be listed or quoted.
12.2 Awards Previously Granted. Except as otherwise specifically provided in the Plan or an award agreement under the Plan, no termination, amendment, or modification of the Plan shall adversely affect in any material way any award previously granted under the Plan without the written consent of the grantee of such award.
ARTICLE XIII. MISCELLANEOUS
13.1No Contract of Employment. Any participation under the Plan shall not be construed as giving an employee a future right of employment with the Company. Employment remains at the will of the Company.
13.2Governing Law. This Plan and all matters relating to this Plan shall be interpreted and construed under the laws of the state of Illinois.
APPENDIX B
ARTICLE I. GENERAL INFORMATION REGARDING THE PLAN
1.1 Title - The title of the stock award plan described herein is “The 2005 Molex Employee Stock Award Plan” (the “Plan”).
1.2 Issuer - The issuer of the stock that is the subject of the Plan is Molex Incorporated, a Delaware corporation, having its principal place of business at 2222 Wellington Court, Lisle, Illinois 60532 (the “Company”). The Company’s phone number is (630) 969-4550.
1.3 General Purposes of the Plan - The Company desires to establish the Plan to recognize employees of the Company and its affiliates by rewarding those employees for certain achievements, including, but not limited to, certain service anniversaries, work results, patents, and sales goals.
1.4 Duration - The Plan shall commence upon stockholder approval, and shall continue thereafter until all reserved shares of Stock (as defined below) have been awarded.
1.5 Eligible Employees - A person shall be eligible to receive a stock award if he or she is an employee of the Company or any of its affiliates. Officers of the Company, who are also employees, shall be eligible to participate in the Plan only to the extent, and under the same circumstances, as other employees of the Company pursuant to guidelines as may be established by the Committee.
1.6 Securities to be Offered - The shares reserved for award under the Plan shall consist of two hundred fifty thousand (250,000) shares of Molex Incorporated Class A Common Stock, $.05 par value (the “Stock”). The Stock shall be issued from either authorized but unissued shares or Treasury Stock as the Committee, in its judgment, deems advisable. Upon the receipt of a stock certificate under the Plan, an employee shall have all the rights normally associated with stock ownership, including the right to vote, if any, and receive dividends, if any.
1.7 Securities Regulation and Restrictions on Resale - The Company shall not be obligated to issue any shares under any award granted hereunder unless and until the award shares are effectively registered or exempt from registration under the Securities Act of 1933 and from any other federal or state law governing the distribution and issuance of such shares or any securities exchange regulation to which the Company might be subject. In the event the Stock is not effectively registered, but can be issued by virtue of an exemption, the Company may issue shares of Stock to an employee if the employee represents that he is acquiring such shares received under the Plan as an investment and not with the view to, or for sale in connection with, the distribution of any such shares. Certificates for shares of Stock thus issued may bear an appropriate legend reciting such representation.
ARTICLE II. ADMINISTRATION OF THE PLAN
2.1 The Committee - A committee (the “Committee”) appointed by the Board of Directors of the Company (the “Board”) shall administer the Plan. No compensation shall be paid to the Committee members under the Plan. However, the Board shall have the power and authority to provide compensation to any person appointed to the Committee who is not an employee of the Company.
2.2 Action by the Committee - A simple majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by a majority of the members shall be fully as effective as if it had been made by a majority vote at a meeting.
2.3 Powers of the Committee - The express grant of any specific power to the Committee, or the taking of any action of the Committee, shall not be construed as limiting any power or authority of the Committee. In addition to making awards as set forth in Section3.1 hereof and subject to and consistent with the provisions of the Plan, the Committee shall have full power and authority, in its sole discretion, to
Any action, determination, interpretation or other decision by the Committee with respect to the Plan shall be final, conclusive and binding on all persons and entities, including the Company, its affiliates, any eligible employee, any person claiming any rights under the Plan from or through any grantee of an award under the Plan, and stockholders, except to the extent the Committee may subsequently modify, or take further action not inconsistent with, its prior action.
ARTICLE III. STOCK AWARD
3.1 Awarding the Stock - Subject to the limitation of Section 3.3 hereof, the Committee has the complete authority, in its sole discretion, to determine the eligible employees to whom a stock award shall be granted and the number of shares comprising each such award. In making such determinations, the Committee may take into account the nature of the services rendered by the respective employee, his or her present and potential contribution to the Company’s success, the value of his or her achievement that is being recognized and such other factors as the Committee, in its discretion, shall deem relevant. At the time an award is granted, the Committee shall have the discretion to place conditions or restrictions on such award.
3.2 Consideration - No monetary consideration shall pass from an employee to the Company.
3.3 Limitation of Shares Awarded to an Individual Each Year - No single employee shall be awarded more than 3000 shares of Stock under this Plan in any fiscal year of the Company.
3.4 Distribution of Award - The Committee may issue Stock awards in its discretion at any time during the fiscal year or pursuant to established guidelines set by the Committee which it may change or revoke at any time in its sole discretion.
3.5 Tax Withholding - Stock awards under the Plan may be subject to income tax withholding, and the Company is obligated to collect the tax applicable to such income. The Committee may, in its discretion, satisfy that tax obligation by withholding from the shares to be delivered in connection with the award a number of shares having a value equal to the minimum statutory federal income tax withholding, plus state, if applicable, and payroll taxes. The value of each share to be withheld will be the fair market value of the Stock at the time of the award.
3.6 Adjustment of the Number of Shares - The number of shares of Stock subject to any award under the Plan, but not yet distributed, and the number of shares reserved for issuance pursuant to the Plan, but not yet covered by an award, shall be adjusted to reflect any stock dividend, stock split or any other capital stock change. The Committee shall equitably make any other adjustments in its sole discretion. No adjustment shall require the Company to award a fractional share.
ARTICLE IV. MISCELLANEOUS
4.1 Amendment and Termination. The Board may, at any time and from time to time, alter, amend, suspend, discontinue or terminate the Plan in whole or in part without the approval of the Company’s stockholders, except that any amendment or alteration shall be subject to approval of the Company’s stockholders if such approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the shares of Stock may be listed or quoted.
4.2 Governing Law. This Plan and all matters relating to this Plan shall be interpreted and construed under the laws of the state of Illinois.
APPENDIX C
Molex Incorporated (the “Corporation”) hereby establishes the 2005 Molex Employee Stock Purchase Plan (the “Plan”). The Plan provides an incentive for present and future employees of the Corporation and its Participating Employers to acquire a proprietary interest (or increase an existing proprietary interest) in the Corporation through the purchase of shares of the Corporation’s common stock at a discount. The Corporation intends that the Plan qualify as an “employee stock purchase plan” under Code §423, and that the Plan shall be administered, interpreted and construed in a manner consistent with the requirements of Code §423.
Under the Plan, except where the context otherwise indicates, the following definitions shall apply.
2.1 “Administrator” means the person, persons or committee designated by the Board as responsible for the administration of the Plan as provided in Article 3.
2.2 “Board” means the Board of Directors of the Corporation.
2.3 “Code” means the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.
2.4 “Committee” means the Compensation Committee or such Administrator as may be appointed by the Board.
2.5 “Corporation” means Molex Incorporated, a Delaware corporation, or any business which, with the consent of the Board, succeeds to its business by merger, reorganization, consolidation or otherwise and adopts this Plan as its own.
2.6 “Compensation” means with respect to each Participant, such Participant’s total base wages and or salary actually paid to a Participant by an Employer during the Offering Period, plus the amount of any tax-deferred or tax-exempt contributions made by the Employer on behalf of the Participant pursuant to a Code §401(k) qualified “cash or deferred” arrangement, a Code §125 “cafeteria plan,” or a Code §132(f)(4) qualified transportation fringe benefit arrangement maintained by the Employer. Compensation shall exclude all other forms of remuneration, including but not limited to, overtime payments, bonus payments, commissions, and other monetary remuneration, if any, which is paid by the Employer to an Eligible Employee during a Plan year plus any other accrued unpaid earnings, nonqualified deferred compensation and other payments as determined by the Committee.
2.7 “Effective Date” means April 1, 2006.
2.8 “Eligible Employee” means any individual who is an employee of an Employer for tax withholding purposes. For purposes of the Plan, the employment relationship shall be treated as continuing while the individual is on sick leave or other authorized leave of absence. The following employees of an Employer shall not be Eligible Employees for Plan purposes:
2.9 “Employer” means the Corporation and each Participating Employer.
2.10 “Exercise Date” means the last business day of an Offering Period.
2.11 “Fair Market Value” means, on any given date, the closing price of the Shares on the principal national securities exchange on which the Shares are listed on such date, or, if the Shares are not listed on any national securities exchange, the mean between the bid and asked prices of the Shares as reported on the NASDAQ, or if the Shares are not so reported, the fair market value of the Shares as determined by the Committee in good faith. If there are no sales reports or bid or ask quotations, as the case may be, for a given date, the closest preceding date on which there were sales reports shall be used.
2.12 “Offering Date” the first business day of an Offering Period.
2.13 “Offering Period” means a period established by the Committee or the Board pursuant to Section 17.3 during which an option to purchase Shares is granted pursuant to the Plan. Each Offering Period shall begin on the Offering Date of such Offering Period and shall end on the Exercise Date of such Offering Period. Unless changed by the Committee or the Board pursuant to Section 17.3, the Offering Periods shall be:
January 1 through March 31
April 1 through June 30
July 1 through September 30
October 1 through December 31
The initial Offering Period shall be April 1, 2006 through June 30, 2006.
2.14 “Participant” means an Eligible Employee who has elected to participate in the Plan by filing an enrollment agreement with the Corporation as provided in Article 5.
2.15 “Participating Employer” means any Subsidiary designated by the Committee, in its sole discretion, for participation in the Plan.
2.16 “Plan” means the 2005 Molex Employee Stock Purchase Plan, as set forth herein, and as may be amended from time to time.
2.17 “Purchase Price” means the per Share purchase price established by the Committee, in its sole discretion, under an option to purchase Shares, which price shall not be less than 85% of the Fair Market Value of a Share on the Offering Date or 85% of the Fair Market Value of a Share on the Exercise Date, whichever is lower. The Purchase Price established by the Committee shall apply to each Offering Period until subsequently changed by the Committee.
2.18 “Share” means a share, $.05 par value, of Class A common stock of the Corporation. Shares subject to the Plan may be authorized, but unissued Shares, Shares held in treasury or Shares acquired by the Corporation.
2.19 “Subsidiary” means any corporation (other than the Corporation) that owns, directly or indirectly, 50% or more of the total combined voting power of all classes of stock or other equity interests and that otherwise qualifies as a “subsidiary corporation” within the meaning of Code §424(f) or any successor thereto.
3.1 Committee as Administrator. The Committee shall be the Administrator, unless and until otherwise directed by the Board. From time to time, the Board may increase the size of the Committee and appoint additional members, remove members (with or without cause) and appoint new members in substitution of current members, fill vacancies, and remove all members of the Committee and, thereafter, directly administer the Plan or authorize another person, persons or committee to administer the Plan. Notwithstanding any other provision in the Plan, the Board may, at any time or from time to time, administer the Plan, and in such case, reference herein to the Committee shall mean the Board.
3.2 Committee Actions. The Committee shall meet at such times and places and upon such notice as it may determine. A majority of the Committee shall constitute a quorum. Any act or determination by the Committee may be taken at any meeting at which a quorum is present and shall be by majority vote of those members entitled to vote. Members of the Board or Committee who are eligible to participate in the Plan may vote on any and all matters, including matters affecting Plan administration or option grants pursuant to the Plan.
3.3 Powers of the Committee. The Committee shall have all the powers vested in it by the terms of the Plan. In addition, the Committee shall have the power and authority to take all other actions necessary to carry out the purpose and intent of the Plan and make all other determinations necessary or advisable for Plan administration, including, but not limited to, the authority, in its sole discretion, to:
The Committee may, in its discretion, request advice or assistance, or employ such other persons as it deems necessary or appropriate for the proper administration of the Plan, including, but not limited to employing a brokerage firm, bank or other financial institution to assist in the purchase of Shares, delivery of reports or other administrative aspects of the Plan.
3.4 Effect of Committee’s Decision. The Committee’s actions and determinations with respect to any matter relating to the Plan pursuant to the powers vested in it hereunder shall be in its sole and absolute discretion and shall be final, conclusive and binding on all persons, including the Corporation, its stockholders, Participants and any other employee of the Corporation, and their successors in interest. All rules and determinations of the Committee in the administration of the Plan shall be uniformly and consistently applied to all persons in similar circumstances.
3.5 Limited Liability. To the maximum extent permitted by law and the Corporation’s charter, no member of the Board or Committee shall be liable for any action taken or decision made in good faith relating to the Plan or any option grant under the Plan.
3.6 Indemnification. To the maximum extent permitted by law and the Corporation’s charter, the members, including former members of the Board and Committee shall be indemnified by the Corporation with respect to all their activities under the Plan.
ARTICLE 4. ELIGIBILITY TO PARTICIPATE IN THE PLAN
Subject to limitations imposed by Code §423(b), each person who is an Eligible Employee as of an Offering Date shall be eligible to participate in the Plan for the Offering Period beginning on that Offering Date. All Eligible Employees shall have the same rights and privileges within the meaning of Code §423(b)(5).
ARTICLE 5. ELECTION TO PARTICIPATE IN THE PLAN
5.1 Enrollment. Each Eligible Employee may elect to participate in the Plan by completing an enrollment agreement in the form required by the Corporation and filing such enrollment agreement with the Corporation’s human resources office no later than 15 days before the applicable Offering Date, unless the Committee establishes another deadline for filing the enrollment agreement with respect to a given Offering Period.
5.2 Rolling Elections. Unless a Participant withdraws from participation in the Plan as provided in Article 10 or authorizes a different payroll deduction by timely filing a new enrollment agreement with the Corporation’s human resources office no later than 15 days before the Offering Date of a succeeding Offering Period, a Participant who is participating in an Offering Period as of the Exercise Date of such Offering Period shall be deemed to have (i) elected to participate in the immediately succeeding Offering Period, and (ii) authorized the same payroll deduction percentage for such immediately succeeding Offering Period as was in effect for such Participant immediately before such succeeding Offering Period.
6.1 Payroll Deductions. All Participant contributions to the Plan shall be made only by payroll deductions. By filing an enrollment agreement with respect to an Offering Period, the Participant shall authorize payroll deductions to be made, on an after-tax basis (based on eligible pre-tax Compensation), during the Offering Period in an amount from 1% to 15% (in whole percentages) of the Compensation that the Participant receives on each payroll date during such Offering Period, and in each subsequent Offering Period in which the election remains effective as described in Section 5.2; provided, however, that a Participant’s payroll deductions shall not exceed $4,000 in any calendar year. Payroll deductions for an Offering Period shall begin on the first payroll date following the Offering Date and shall end on the last payroll date in the Offering Period to which such authorization is applicable, unless sooner terminated by the Participant as provided below in Article 10. The Committee may, in its discretion change the maximum percentage of Compensation permitted to be contributed for any Offering Period before the Offering Date. Notwithstanding the above, the Committee may, in its discretion with respect to any Offering Period, permit all Participants who have not withdrawn from participation in accordance with Article 10 to make one lump sum contribution by check no later than ten (10) days prior to the last day of an Offering Period; provided, however, that a Participant’s total contributions for such Offering Period shall not exceed 15% of Compensation, nor shall a Participant’s total contributions exceed $4,000 in any calendar year.
6.2 Use of Contributions. All payroll deductions made for a Participant shall be deposited in the Corporation’s general corporate account and shall be credited to a bookkeeping account for the Participant under the Plan. No interest shall accrue on or be credited with respect to the payroll deductions of a Participant under the Plan. A Participant may not make any additional contributions into such account. The Corporation may use all payroll deductions received or held by the Corporation under the Plan for any corporate purpose, and the Corporation shall not be obligated to segregate such payroll deductions.
6.3 Changes to Contributions. Except as provided in Article 10, a Participant may not change his or her contribution election during an Offering Period. A Participant may change his or her contribution election with respect to a succeeding Offering Period by timely filing a new enrollment agreement before such Offering Period.
7.1 Subject to the limitations in Article 13 and Section 7.2 below, on the Offering Date of each Offering Period, each Participant in such Offering Period shall be given an option to purchase on the Exercise Date of such Offering Period up to a number of whole Shares determined by dividing such Participant’s payroll deductions accumulated during the Offering Period by the Purchase Price established for such Offering Period.
7.2 Notwithstanding any provision of the Plan to the contrary, no Eligible Employee shall be granted an option under the Plan (i) if, immediately after the grant, such Employee (or any other person whose stock would be attributed to such Eligible Employee pursuant to Code §424(d)) would own capital stock of the Corporation, and/or hold outstanding options to purchase such stock, possessing 5% or more of the total combined voting power or value of all classes of the capital stock of the Corporation or of any Subsidiary, or (ii) which permits such Eligible Employee’s rights to purchase stock under all Code §423 employee stock purchase plans of the Corporation and its Subsidiaries to accrue at a rate which exceeds $25,000 of fair market value of such stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time.
The Participant’s option for the purchase of shares for an Offering Period shall be exercised automatically on the Exercise Date of such Offering Period, and the maximum number of whole Shares subject to the option shall be purchased for such Participant at the Purchase Price established for that Offering Period, as provided above in Article 7. No fractional Shares shall be purchased. Any payroll deductions accumulated in a Participant’s account which are not sufficient to purchase a whole Share shall continue to be credited to the Participant’s account for the subsequent Offering Period; provided, however, that if a Participant has withdrawn from participation in accordance with Article 10, any amount remaining after the purchase of whole Shares shall be returned to the Participant. Shares purchased for a Participant shall be allocated to an account for the Participant as soon as administratively feasible following an Offering Period and the application of any limits (imposed by the Code or the Plan) on the purchase of Shares set forth in the Code and/or the Plan.
ARTICLE 9. HOLDING PERIOD AND DELIVERY OF SHARES
9.1 Holding Period. Unless changed by the Committee, a Participant may not sell, transfer or otherwise dispose of any Shares purchased under the Plan until the sixth month anniversary of the Exercise Date as of which such purchase occurred, other than by the laws of descent and distribution. Any sale after the expiration of such mandatory holding period and before the date on which the applicable holding period to avoid a disqualifying disposition (within the meaning of Treasury Regulation §1.421-5) expires may be made only through the brokerage firm or other financial institution employed by the Committee to assist in the administration of the Plan.
9.2 Delivery of Share Certificates. Share certificates shall not be delivered to Participants until the later of (i) the date on which the applicable holding period to avoid a disqualifying disposition (within the meaning of Treasury Regulation §1.421-5) expires, or (ii) the date that a Participant specifically requests a certificate for Shares purchased pursuant to the Plan. Shares to be delivered to a Participant under the Plan may be registered in the name of the Participant, or, if the Participant so designates, in the name of the Participant and his or her spouse with right of survivorship.
9.3 Securities Registration of Shares. Notwithstanding anything in the Plan to the contrary, the grant and exercise of options to purchase Shares under the Plan, and the Corporation’s obligation to sell and deliver Shares upon the exercise of options to purchase Shares shall be subject to all applicable federal, state and foreign laws, rules and regulations, and to such approvals by any regulatory or governmental agency as may, in the opinion of counsel for the Corporation, be required, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed. If the Shares offered for sale or sold under the Plan are offered or sold pursuant to an exemption from registration under the Securities Act of 1933, the Corporation may restrict the transfer of such Shares and may legend the Share certificates representing such Shares in such manner as it deems advisable to ensure the availability of such exemption. The Committee may require the Participant to provide appropriate written investment or other representations, in order to comply with applicable securities laws or in furtherance of the preceding provisions of this Section.
ARTICLE 10. TERMINATION OF PARTICIPATION
10.1 Withdrawal from Participation. Any Participant may withdraw from participation under the Plan at any time by providing a written notice of withdrawal to the Corporation’s human resources office. Upon receipt of a Participant’s notice of withdrawal, payroll deductions shall cease, and all of the Participant’s payroll deductions previously credited to the Participant’s bookkeeping account shall be applied in accordance with Article 8. A Participant shall not be permitted to withdraw payroll deductions previously credited to his bookkeeping account.
10.2 Resumption of Participation. Payroll deductions shall not resume on behalf of a Participant who has withdrawn from the Plan, unless the Participant timely files a new enrollment agreement with the Corporation during the enrollment period preceding the commencement of a new Offering Period as described in Section 5.1. A Participant’s withdrawal from an Offering Period shall not have any effect upon the Participant’s eligibility to participate in (i) any similar plan that may hereafter be adopted by the Corporation, or (ii) an Offering Period beginning after the Offering Period immediately following the Offering Period from which the Participant withdraws except to the extent provided in Section 10.1.
10.3 Ineligibility; Termination of Employment. If a Participant ceases to be an Eligible Employee during an Offering Period, or the Participant’s employment with the Corporation and all Subsidiaries terminates before the Exercise Date of the Offering Period for any reason, including retirement or death, the payroll deductions credited to the Participant’s account shall be returned to the Participant or, in the case of death, to the Participant’s beneficiary, and the Participant’s options to purchase Shares under the Plan shall automatically terminate.
ARTICLE 11. DESIGNATION OF BENEFICIARY
11.1 Designation. A Participant may designate a beneficiary to receive any benefits which may be or become payable to the Participant upon his death, by notifying the Committee in writing, at any time before Participant’s death, in such manner and on such form as the Committee deems acceptable for that purpose. A Participant may revoke any beneficiary designation or designate a new beneficiary at any time without the consent of a beneficiary or any other person.
11.2 Absence of Designation. If a Participant dies without having made an effective designation of beneficiary under the Plan, or if the designated beneficiary has failed to survive the Participant, the Corporation shall deliver any Shares and/or cash which may become payable from the Participant’s bookkeeping account under the Plan to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Corporation), the Corporation, in its discretion, may deliver such Shares and/or cash to (i) the Participant’s surviving spouse, if any, or (ii) if none, to any one or more dependents or relatives of the Participant known to the Corporation, if any, or (iii) if none, then to such other person as the Corporation may designate. The Corporation may require such evidence of survivorship or kinship as it deems appropriate as a condition for making a distribution hereunder.
Neither payroll deductions credited to a Participant’s account nor any rights with regard to the exercise of an option or to receive Shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution, or as provided in Article 11) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Corporation, in its discretion, may treat such act as an election to withdraw from participation in accordance with Article 10 hereof. During a Participant’s lifetime, a Participant’s option to purchase Shares hereunder is exercisable only by the Participant.
ARTICLE 13. SHARES SUBJECT TO THE PLAN
Subject to adjustments as provided in Article 16, the maximum number of Shares that shall be made available for sale under the Plan shall be FIVE HUNDRED THOUSAND (500,000) Shares. If and to the extent that any option to purchase Shares shall not be exercised for any reason, or if such right to purchase Shares shall expire or terminate as provided herein, the Shares that have not been so purchased hereunder shall again become available for the purposes of the Plan, unless the Plan shall have been terminated. If, on a given Exercise Date, the number of Shares with respect to which options are to be exercised exceeds the number of Shares then available under the Plan, the Committee shall make a pro rata allocation of the Shares remaining available for purchase in as uniform a manner as shall be practicable and as it shall determine to be equitable.
ARTICLE 14. SHAREHOLDER RIGHTS
Participants shall have no interest or voting right in, or rights to receive dividends in respect of, Shares covered by an option until such option has been exercised and Shares certificates have been issued in the name of the Participant. Share certificates need not be delivered to the Participant in order for the Participant to have any such stockholder rights.
ARTICLE 15. ACCOUNTS AND REPORTS
Individual accounts shall be maintained for each Participant in the Plan. Following each Exercise Date and allocation of Shares to Participants’ accounts, statements of account shall be given to Participants who have purchased Shares, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of Shares purchased and the remaining cash balance, if any.
16.1 Changes in Capitalization. In the event of a reclassification, recapitalization, stock split, stock dividend, combination of Shares, or other similar or extraordinary event, the maximum number and/or kind of shares reserved for issuance under the Plan, the number and/or kind of Shares each Participant may purchase per Offering Period (pursuant to Article 7) and the per share purchase price of Shares which may be issued to any Participant upon the exercise of options granted under the Plan shall be adjusted to reflect such event, and the Committee shall make such adjustments as it deems appropriate and equitable in the number, kind and price of issued Shares, and in any other matters which relate to the options and which are affected by such changes in the Corporation’s common stock.
16.3 Merger or Asset Sale. In the event of a proposed sale of all or substantially all of the assets of the Corporation, or the merger of the Corporation with or into another corporation, the Plan and each outstanding option may be assumed or an equivalent option substituted by the successor corporation or a parent or subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the option, the Offering Period then in progress shall be shortened by setting a new Exercise Date (the “New Exercise Date”), which shall be the day before the date of the Corporation’s proposed sale or merger. In such event, the Committee shall notify each Participant in writing, at least ten days before the New Exercise Date, that the Exercise Date for the Participant’s option has been changed to the New Exercise Date and that the Participant’s option shall be exercised automatically on the New Exercise Date, unless the Participant has withdrawn from the Offering Period before such date as provided in Article 10.
16.4 In all cases, the Committee shall have full discretion to exercise any of the powers and authority provided under this Article 16, and the Committee’s actions hereunder shall be final and binding on all Participants. No fractional Shares of stock shall be issued under the Plan pursuant to any adjustment authorized under the provisions of this Article 16.
17.1 The Board may at any time, or from time to time, amend the Plan in any respect; provided, however, that the Plan may not be amended in any way that will cause options issued under the Plan to fail to meet the requirements for employee stock purchase plans as defined in Code §423 or any successor thereto, including, without limitation, stockholder approval, if required. Except as provided in Article 18, no amendment shall adversely affects the rights of any Participant with respect to any previous or outstanding right to purchase Shares as of the later of the date such amendment is adopted or effective.
17.2 In addition to the powers granted to the Committee in the Plan, the Committee shall be authorized to make minor or administrative modifications to the Plan as well as modifications to the Plan that may be dictated by requirements of federal or state laws applicable to the Corporation, laws of foreign jurisdictions governing the participation of Eligible Employees, or that may be authorized or made desirable by such laws. The Committee may amend or modify the grant of any outstanding option in any manner to the extent that the Committee would have had the authority to grant such option as so amended or modified.
17.3 In the event the Board determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board may, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to:
Such modifications or amendments shall not require stockholder approval or the consent of any Participants.
(a) on the Exercise Date that Participants become entitled to purchase a number of Shares greater than the number of reserved Shares remaining available for purchase under the Plan; or
(b) at any time, at the discretion of the Board.
18.2 In the event that the Plan terminates under circumstances described in Section 18.1(a), any Shares remaining as of the termination date shall be sold to Participants on a pro rata basis. Except as provided in Article 17, no such termination shall affect rights to purchase Shares previously granted; provided, however, that an Offering Period may be terminated by the Board on any Exercise Date if the Board determines that termination of the Offering Period or the Plan is in the best interests of the Corporation and its stockholders.
All notices or other communications by a Participant to the Corporation under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Corporation at the location, or by the person, designated by the Corporation for the receipt thereof.
ARTICLE 20. SHAREHOLDER APPROVAL
The Plan is subject to approval by stockholders of the Corporation within 12 months before or after the date the Board adopts the Plan. For purposes of the preceding sentence, the Plan is adopted as of the date on which the Board approves the Plan. If such stockholder approval is not obtained at the first stockholders meeting at which the Plan is on the agenda, but in any event within 12 months after the Board’s adoption of the Plan, the Plan shall be canceled and any pending options shall be null and void.
The Corporation may make such provisions, as it deems appropriate, for withholding by the Corporation pursuant to all applicable tax laws of such amounts as the Corporation determines it is required to withhold in connection with the purchase or sale by a Participant of any Shares acquired pursuant to the Plan. The Corporation may require a Participant to satisfy any relevant tax requirements before delivering any Shares to such Participant.
ARTICLE 22. NO EMPLOYMENT RIGHTS
The right to elect to participate in the Plan shall not constitute an offer of employment to Eligible Employees nor shall participation in the Plan guarantee a Participant’s continued employment. Participation in the Plan shall not limit the right of an Employer to terminate a Participant’s employment at any time.
ARTICLE23. RELIANCE ON REPORTS
Each member of the Committee and each member of the Board shall be fully justified in relying, acting or failing to act, and shall not be liable for having so relied, acted or failed to act in good faith, upon any report made by the independent public accountants of the Corporation and upon any other information furnished in connection with the Plan by any other person or persons other than him or herself.
ARTICLE24. TITLES AND HEADINGS
The titles and headings of the Articles and Sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control.
Subject to stockholder approval, the Plan shall become effective as of the Effective Date. The Plan shall continue in effect for a term of ten years from the Effective Date unless sooner terminated under Article 18.
APPENDIX D
ARTICLE I. GENERAL
1.1Name of Plan - The name of the plan described in detail herein shall be The 2005 Molex Incentive Stock Option Plan (the "Plan").
1.2 Purpose - The purpose of the Plan is to induce certain designated employees and the directors to remain in the employ of Molex Incorporated, a Delaware corporation (the "Company"), and any of its subsidiaries, and to encourage such employees and directors to secure or increase on reasonable terms their stock ownership in the Company. The Company believes the Plan will promote continuity of management and increase incentive and personal interest in the welfare of the Company by those who are primarily responsible for shaping, carrying out the long-range plans of the Company and securing its continued growth and financial success.
It is also the purpose of the Plan (except where otherwise noted) to meet the requirements §422(a) of the Internal Revenue Code, as amended. Thus, all provisions of the Plan shall be interpreted and construed with this goal in mind.
1.3Eligibility - The following persons shall be eligible to receive a grant under the Plan: any director or executive officer of Molex Incorporated.
ARTICLE II. TERM OF PLAN
2.1Effective Date - The Plan shall become effective upon adoption by the Board of Directors of the Company subject to the subsequent approval by the stockholders of the Company within one (1) year of adoption by the Board of Directors. If the stockholders do not approve the Plan within one (1) year of adoption, then this Plan shall cease to exist and all options granted hereunder shall become void.
2.2Expiration - This Plan shall expire October 31, 2010 and no option shall be granted on or after such expiration date. However, expiration of the Plan shall not affect outstanding unexpired options previously granted.
ARTICLE III. STOCK SUBJECT TO PLAN
3.1Class of Stock - The stock that shall be subject to option under the Plan shall be Molex Incorporated Class A Common Stock, par value 5¢ per share (the "Stock").
3.2Number of Shares – Five hundred thousand (500,000) shares of the Stock shall be reserved for issue upon the exercise of options granted under the Plan. The Stock issued under the Plan may be treasury shares purchased on the open market or otherwise, authorized but unissued shares, or reacquired shares.
3.3Expired, Forfeited or Canceled Options - If any such options granted under the Plan shall expire, be forfeited or canceled for any reason without having been exercised in full, the unexercised shares subject thereto shall again be available for the purpose of the Plan.
ARTICLE IV. ADMINISTRATION
4.1Committee - A committee (the "Committee") shall administer the Plan under the terms and conditions and powers set forth herein
4.2 �� Makeup of the Committee - The Committee shall consist of two or more members of the Board of Directors of the Company. In the absence of any action by the Board to the contrary, the Committee shall be the Compensation Committee of the Board of Directors.
4.3Action by the Committee - A majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by a majority of the members of thesuch respective Committee shall be fully as effective as if it had been made by a majority vote at a meeting duly called and held.
If not specified All actions taken and all interpretations and determinations made by the respective Committee shall be final and binding upon the Participants, the Company, and all other interested individuals. Notwithstanding the foregoing, members of the Board or the respective Committee who are either eligible for Awards or have been granted Awards may vote on any and all matters, including matters affecting the administration of the Plan or the grant of Awards pursuant to the Plan. However, no such member shall act upon the granting of a specific Award to himself or herself, but any such member may be counted in determining the existence of a quorum at any meeting of the Board or the respective Committee during which action is taken with respect to the granting of an Award to him or her.
4.4Power to Grant Options - Subject to the express provisions of the Plan, the Committee shall have complete authority, in its sole discretion, to determine the employees to whom, and the time or times at which, optionsAwards shall be granted the option periods, the vesting schedule and the numberterms and conditions of shares to beeach Award, including, but not limited to:
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4.5Grantsthereof;
(a) | Five million (5,000,000) Shares; and |
4.6Automatic Grant of Options to Outside Directors - Notwithstanding Sections 4.4 and 4.5, each director who is not an employee of the Company shall receive only an automatic nondiscretionary stock option grant on the dateEffective Date; and
Notwithstanding the foregoing, no option grant to an outside director shall exceed the lesser of 3,000 shares or the number of shares whose fair market value on the date of grant does not exceed $100,000.00.
4.7Other Powers - The express grant of any specific power to the Committee, or the taking of any action of the Committee, shall not be construed as limiting any power or authority of the Committee. Subject to and consistent with the provisions of the Plan, the Committee shall have full power and authority, in its sole discretion, to
ARTICLE V. GRANT OF OPTION
5.1Option Price - The option price shall be the fair market value of the Stock on the date of granting the option. Notwithstanding, the foregoing, only in the case of an ISO grant, if an optionee owns more than ten percent (10%) of the voting power of all classes of the Company’s stock, then the option price shall be one hundred-ten percent (110%) of the fair market value of the Stock on the date of granting the option.
5.2Fair Market Value - For the purposes of this Plan, fair market value shall be the closing price of the Stock on the date of granting the option as reported by the Wall Street Journal.
5.3Evidence of Option - Options granted shall be evidenced by agreements, warrants, and/or other instruments in such form as the Committee shall deem advisable and shall contain such terms, provisions and conditions not inconsistent herewith as may be determined by the Committee.
ARTICLE VI. EXERCISE OF OPTION
6.1Initial Waiting Period - No option shall be exercisable until at least one (1) year after the date of grant, unless one of the events set forth in Section 6.4 occurs.
6.2Vesting Periods - After the initial waiting period, an optionee may exercise his optionAwards to the extent that shares covered by said option become vested.they are exercised for or settled in vested and nonforfeitable Shares).
6.3Cumulative Rights - The right to exercise any option as set forth in Section 6.2 shall be cumulative. That is, an optionee may exercise in any given year those unexpired shares he could have exercised in a previous year but did not.
6.4Accelerated Vesting - Notwithstanding the foregoing, all options shall immediately vest and become immediately exercisable for a period of one (1) year after oneShares of the following events:
6.5Expiration - No option may be exercised more than two (2) years from the date the option becomes one hundred percent (100%) vested. Notwithstanding the foregoing, allissued pursuant to ISOs must be exercised within one (1) year from the date the option becomes one hundred percent (100%) vested.
6.6Form of Exercise - The option may only be exercised according to the terms and conditions established by the Committee, consistent with the limits set forth herein, at the time the option is granted. Subject to the foregoing terms and conditions, an option may be exercised by a written notice delivered to the Company’s principal office of intent to exercise the option with respect to a specified number of shares of Stock and payment to the Company of the amount of the option purchase price for the number of shares of Stock with respect to which the option is then exercised. The payment may be either in cash or in stock of the Company. If stock is used for payment, such stock shall be valued at the closing price as reported by the Wall Street Journal on the date of exercise.
6.7 Tax Withholding – Option exercises under the Plan may be subject to income tax withholding, and the Company would be obligated to collect the tax applicable to such income. The Committee may, in its discretion, satisfy that tax obligation by withholding from the shares to be delivered in connection with the award a number of shares having a value equal to the minimum statutory federal income tax withholding, plus state, if applicable, and payroll taxes. The value of each share to be withheld will be the fair market value of the Stock at the time of the exercise.
6.8Rights as a Shareholder - An optionee shall have no rights as a stockholder with respect to shares covered by his option until the day of issuance of a stock certificate to him and until after such shares are fully paid.
ARTICLE VII. TERMINATION OF OPTION
Every option granted to each optionee under this Plan shall be two hundred and fifty thousand (250,000) Shares.
ARTICLE VIII. TRANSFERABILITY
8.1Non-Transferable - Any optionissuance of such Shares, are settled in cash in lieu of Shares, shall be available again for grant under this Plan. Moreover, if the Option Price of any Option granted under thethis Plan is satisfied by tendering Shares to the Company, only the number of Shares issued, net of the Shares tendered, if any, will be delivered for purposes of determining the maximum number of Shares available for delivery under this Plan. The Shares available for issuance under this Plan may be authorized and unissued Shares, Shares available on the open market or treasury shares purchased on the open market or otherwise reacquired.
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ARTICLE IX. ADJUSTMENT OF NUMBER OF SHARES
9.1Stock Dividends - In the event that a dividend shall be declared upon the Stock payable in shares of stockproperty of the Company, thecombination of Shares, exchange of Shares, dividend in kind, or other like change in capital structure, number of shares of stock then subjectissued Shares or distribution (other than normal cash dividends) to any such option and the number of shares reserved for issuance pursuant to the Plan, but, not yet covered by an option, shall be adjusted by adding to each such share the number of shares which would be distributable thereon (or any equivalent value of Stock as determined by the Committee in its sole discretion) if such share had been outstanding on the date fixed for determining the stock holders entitled to receive such stock dividend.
9.2Reorganization - In the event that the outstanding shares of Stock shall be changed into or exchanged for a different number or kind of shares of stock or other securitiesstockholders of the Company, or any similar corporate event or transaction (a “Corporate Transaction”), the respective Committee, in order to prevent dilution or enlargement of another corporation, whether through reorganization, recapitalization, stock split up, combination of shares, mergerParticipants’ rights under this Plan, shall substitute or consolidation, then, there shall be substituted for each share of Stock subject to any such option and for each share of Stock reserved for issuance pursuant to the Plan, but, not yet covered by an option,adjust, as applicable, the number and kind of sharesShares that may be issued under this Plan or under particular forms of stock or other securities into which each outstanding share of Stock shall be so changed or for which each such share of Stock shall be exchanged.
9.3Other Changes - In the event there shall be any change, other than as specified above in this Article, inAwards, the number orand kind of outstanding shares of stock of the Company or of any stock or other securities into which such stock shall have been changed or for which it shall have been exchanged, then, if the Committee shall, in its sole discretion, determine that such change equitably requires an adjustment in the number or kind of shares theretofore reserved for issuance pursuant to the Plan, but, not yet covered by an option and of the shares thenShares subject to an option or options, such adjustments shall be made byoutstanding Awards, the CommitteeOption Price applicable to outstanding Awards, the annual award limits, and shall be effective and binding for all purposes of the Plan and of each stock option agreement.other value determinations applicable to outstanding Awards. Notwithstanding the foregoing, with respect to Corporate Transactions, the Board may also:
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9.4Adjusted Option Price - In the caseParticipants reasonable written notice (which may include, without limit, notice by electronic means) within a reasonable time of any substitution or adjustment as provided for in this Article, the option price in each stock option agreement for each share covered thereby prior to such substitution or adjustment will be the option price for all shares of Stock or other securities which shall have been substituted for such share or to which such share shall have been adjusted pursuant to this Article.
9.5determinations it makes.
ARTICLE X. SECURITIES REGULATION
10.1Registered
10.2Unregistered Stock - In the event the shares are not effectively registered, but, can be issued by virtue of an exemption, the Company may issue option shares to an optionee if the optionee represents that he is acquiring such shares as an investment and not with a view to, or for sale in connection with, the distribution of any such shares. Certificates for shares of Stock thus issued shall bear an appropriate legend reciting such representation.
ARTICLE XI. MISCELLANEOUS
11.1No Contract of Employment - A grant or participation under the PlanParticipant shall not be construed as giving an optioneedeemed to have incurred a future righttermination of employment if the Participant’s status as an Employee or Director terminates and the Participant is then, or immediately thereafter becomes, an eligible individual due to another status or relationship with the Company. Employment remains at the willCompany or any Subsidiary.
11.2Governing Law - This Plan and all matters relatingOptions. Subject to the terms and provisions of this Plan, shallOptions may be interpretedgranted to Participants in such number, and construed under the laws of the State of Illinois.
11.3Amendment of Plan - The Board of Directors, at its discretion, may amend the Planupon such terms, and at any time subjectand from time to stockholder approval if required by SEC rules or the listing requirements of any national securities exchanges or trading systems on which any of the Company’s equity securities are listed.
APPENDIX E
ARTICLE I. GENERAL
1.1Name of Plan - The name of the plan described in detail herein shall be The 2000 Molex Long-Term Stock Plan (the “Plan”).
1.2 Purpose - The purpose of the Plan is to reward and induce certain designated key management employees to remain in the employ of Molex Incorporated, a Delaware corporation (the “Company”), and any of its subsidiaries, and to encourage such employees to secure or increase their stock ownership in the Company through the grant of both stock options and/or stock bonuses. The Company believes the Plan will promote continuity of management and increase incentive and personal interest in the welfare of the Company by those who are primarily responsible for shaping, carrying out the long-range plans of the Company and securing its continued growth and financial success.
1.3 Eligibility - The following persons shall be eligible to receive a grant under the Plan: any executive officer of Molex Incorporated or any member of the Executive Management Committee.
ARTICLE II. TERM OF PLAN
2.1Effective Date - The Plan shall become effective upon adoption by the Board of Directors of the Company subject to the subsequent approval by the stockholders of the Company within one (1) year of adoption by the Board of Directors. If the stockholders do not approve the Plan within one (1) year of adoption, then this Plan shall cease to exist and all options granted hereunder shall become void.
2.2Expiration - This Plan shall expire October 31, 2010 and no option shall be granted or stock bonuses awarded on or after such expiration date. However, expiration of the Plan shall not affect outstanding unexpired options previously granted.
ARTICLE III. STOCK SUBJECT TO PLAN
3.1 Class of Stock - The stock that shall be subject to award under the Plan shall be Molex Incorporated Class A Common Stock, par value 5¢ per share (the “Stock”).
3.2Number of Shares - Twelve million (12,000,000) shares of the Stock shall be reserved for issue upon the exercise of options granted under the Plan. The Stock issued under the Plan may be treasury shares purchased on the open market or otherwise, authorized but unissued shares, or reacquired shares.
3.3 Expired, Forfeited or Canceled Options - If any options granted or stock bonuses awarded under the Plan shall expire, be forfeited, not distributed and/or canceled for any reason without having been exercised or distributed in full, the unexercised shares (in the case of options) or the shares not distributed (in the case of stock bonuses) subject thereto shall again be available for the purpose of the Plan.
ARTICLE IV. ADMINISTRATION
4.1Committee - The Plan shall be administered by a committee (the “Committee”) under the terms and conditions and powers set forth herein.
4.2Makeup of the Committee - The Committee shall consist of two or more members of the Board of Directors of the Company. In the absence of any action by the Board to the contrary, the Committee shall be the Compensation Committee of the Board of Directors.
If not specified in the Plan, the time at which the Committee must or may take any determination shall be determined by the respective Committee, in its sole discretion; provided that ISOs may be granted only to eligible Employees of the Company or any Subsidiary (as permitted under Code Sections 422 and 424).
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4.4Power to Grant Stock Options and/or Stock Bonuses - Subject to the express provisions of the Plan, the Committee shall have complete authority, in its sole discretion and shall be specified in the Award Agreement;provided, however, the Option Price must be at least equal to determineone hundred percent (100%) of the employeesFMV of the Shares as determined on the Grant Date. With respect to whom,a Participant who owns, directly or indirectly, more than ten percent (10%) of the total combined voting power of all classes of the stock of the Company or any Subsidiary, the Option Price of Shares subject to an ISO shall be at least equal to one hundred and ten percent (110%) of the Fair Market Value of such Shares on the ISO’s Grant Date.
4.5Overall Limitationvest ratably over four years commencing on the Number of Shares Granted/Awarded Annually - No one employee can receive options grants and/or bonus awards exceeding five hundred- thousand (500,000) shares (adjusted as set forth in Article IX) from the Plan in a single calendar year.
4.6Other Powers - The express grant of any specific power to the Committee, or the taking of any action of the Committee, shall not be construed as limiting any power or authority of the Committee. Subject to and consistent with the provisions of the Plan, the Committee shall have full power and authority, in its sole discretion, to
4.7 Tax Withholding – Distribution of Stock under the Plan may be subject to income tax withholding, and the Company is obligated to collect the tax applicable to such income. The Committee may, in its discretion, satisfy that tax obligation by withholding from the shares to be delivered in connection with the award a number of shares having a value equal to the minimum statutory federal income tax withholding, plus state, if applicable, and payroll taxes. The value of each share to be withheld will be the fair market value of the Stock at the time of the award.
ARTICLE V. GRANT OF OPTION AND/OR BONUS
5.1Option Price - The option price for any shares subject to an option grant under this Plan shall be the fair market value of the Stock on the date of granting the option. For the purposes of this Plan, fair market value shall be the closing price of the Stock on the date of granting the option as reported by the Wall Street Journal.
5.2Bonus Price - Any stock bonus awarded under this Plan shall be acquired by the employee without any monetary consideration subject to the terms and conditions of the Plan. Bonus shares may be awarded in tandem with options grants or alone within the discretion of the Committee.
5.3Evidence of Option/Bonus - Options granted and/or bonuses awarded shall be evidenced by agreements, warrants, and/or other instruments in such form as the Committee shall deem advisable and shall contain such terms, provisions and conditions not inconsistent herewith as may be determined by the Committee.
ARTICLE VI. STOCK ACQUISITION: VESTING AND EXERCISE OF OPTION/BONUS
6.1Initial Waiting Period - No option or bonus shall be acquired until at least one (1) year after the date of grant or award, unless one of the events set forth in Section 6.4 occurs.
6.2Vesting Schedules - After the initial waiting period, an employee may exercise his option and/or receive distribution of bonus shares to the extent that shares covered by the option and/or bonus become vested. All options and bonuses must vest one hundred percent (100%) within seven (7) years from the date of grant/award. The vesting schedules are as follows:
a.Typical Schedule: In the absence of any schedule to the contrary, the typical vesting schedule shall vest to the maximum extent of 25% of the total number of shares covered thereby during each of the succeeding four (4) years, each commencing with thefirst anniversary of the grantGrant Date. The percentages vested and exercisable are cumulative with respect to any Option.
b.Other Schedules: Notwithstanding Section 6.2a, the shares covered by an option and/or bonus shall vest in amounts and at times the Committee, in its sole discretion, shall determine.Involuntary Termination.
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6.3Cumulative Rights - The right to exercise any option as
6.4Accelerated Vesting - Notwithstanding the foregoing, all options and bonus shares shall immediately vest and become immediately exercisable for a period of time set forth in Section 7.1 after one ofapplicable Award Agreement.
a. Death; or
b. Total disablement; or
c. Retirement, if all of the following conditions are met atAward Agreement does not specify the time of termination of employment:
(1) The employee has reached age 59½; and
(2) The employee was employed at least fifteen (15) consecutive years with the Company and/or any of its subsidiaries; and
(3) The Committee, in its sole discretion, approves the accelerated vesting to any extent it desires.
6.5Expiration - No option may be exercised after six (6) years from the date the option becomes one hundred percent (100%) vested.
6.6Form of Exercise -
a. Options. Options may only be exercised according to the terms and conditions established by the Committee, consistent with the limits set forth herein, at the time the option is granted. Subject to the foregoing terms and conditions, any shares covered bywhich an option may be exercised by a written notice delivered to the Company’s principal office of intent to exercise the option with respect to a specified number of shares of Stock and payment to the Company of the amount of the option purchase price for the number of shares of Stock with respect to which the option isOption shall expire, then exercised. The payment may be either in cash or in stock of the Company. If stock is used for payment, such stock shall be valued at the closing price as reported by the Wall Street Journal on the date of exercise.
b. Bonus Shares. Bonus shares shall be distributed on the vesting dates according to the vesting schedule.
6.7Rights as a Shareholder - An employee shall have no rights as a stockholder with respect to shares covered by an option/bonus until the day of issuance of a stock certificate and until after such shares are fully paid for.
ARTICLE VII. TERMINATION OF OPTION
7.1 Every option/bonus granted/awardedevery Option granted to each employeeParticipant under this Plan shall terminate and expire at the earliest of:
a. the date of expiration set when such option/bonus was granted/awarded; or
b. six (6) years
c. immediately
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ARTICLE VIII. TRANSFERABILITY
8.1Non-Transferable -
8.2subparagraph (ii) immediately below.
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ARTICLE IX. ADJUSTMENT OF NUMBER OF SHARES
9.1
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9.2Reorganization -
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9.3Other Changes -include the singular, and the singular shall include the plural.
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9.4Adjusted Option Price - In the case of any substitutionissued or adjustment as provided for in this Article, the acquisition price in each stock option for each share covered thereby prior to such substitution or adjustment will be the option price for all shares of Stock or other securities which shall have been substituted for such share or to which such share shall have been adjusteddelivered pursuant to this Article.
9.5 Fractional Shares - No adjustmentPlan or substitutions provided for in this Articleany Award. The respective Committee shall require the Company to sell a fractional share, and the total substitutiondetermine whether cash, Awards, or adjustment with respect to each stock agreementother property shall be limited accordingly.
ARTICLE X. SECURITIES REGULATION
10.1 Registered Stock -issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
10.2 Unregistered Stock - In the event the shares are not effectively registered, but, can be issued by virtue of an exemption, the Company may issue option shares to an employee if the employee represents that he or she is acquiring such shares as an investment and not with a view to, or for sale in connection with, the distributionpayment of any such shares. Certificates for sharestax.
ARTICLE XI. MISCELLANEOUS
11.1 No Contractthis Plan. The adoption of Employment - Any participation under thethis Plan shall not be construed as giving an employee a future right of employment withcreating any limitations on the Company. Employment remains at the willpower of the Company.
11.2 Governing Law - This Plan and all matters relatingBoard or respective Committee to theadopt such other compensation arrangements as it may deem desirable for any Participant.
11.3AmendmentIllinois, excluding any conflicts or choice of Plan - The Boardlaw rule or principle that might otherwise refer construction or interpretation of Directors, at its discretion,this Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award Agreement, recipients of an Award under this Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Illinois, to resolve any and all issues that may amend thearise out of or relate to this Plan ator any time, subjectrelated Award Agreement.
11.4 Termination of Plan - The Board, of Directors may, at its discretion, terminateor a respective Committee appointed by the Plan at any time for any reason. TerminationBoard, or an officer of the PlanCompany shall not affect unexpired outstanding options previously granted.
APPENDIX F
EXCERPT FROM FORM 8-K FILED NOVEMBER 18, 2004
Item 4.01 Changes in Registrant’s Certifying Accountant.
On November 13, 2004, Deloitte & Touche LLP,be indemnified and held harmless by the independent registered public accounting firm engaged to audit Molex’s consolidated financial statements, resigned effective as of such date.
The Audit Committee of Molex’s Board of Directors did not recommend, nor was it asked to approve, Deloitte’s resignation. As of the filing hereof on November 18, 2004, the Audit Committee had commenced the process of identifyingCompany against and engaging a new independent registered public accounting firm, but has not engaged a new independent registered public accounting firm for Molex.
The reports of Deloitte on Molex’s consolidated financial statements for the years ended June 30, 2003 and 2004 did not contain an adverse opinionfrom any loss, cost, liability, or a disclaimer of opinion and were not qualifiedexpense that may be imposed upon or modified as to uncertainty, audit scopereasonably incurred by him or accounting principles, except as described in the following sentence. The report of Deloitte on Molex’s consolidated financial statements for the year ended June 30, 2004 indicated that, as described in Note 3 to such consolidated financial statements, the consolidated statement of cash flows for the year ended June 30, 2003 had been restated.
There were no “reportable events” as that term is described in Item 304(a)(1)(v) of Regulation S-K during the fiscal years ended June 30, 2003 and 2004, or during the subsequent interim period through November 13, 2004, except as described in the following seven paragraphs.
As disclosed in Molex’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2004, included in the results for the three months ended September 30, 2004 is a charge of $8.0 million ($5.8 million after-tax or $0.03 per share), of which $3.0 million ($2.2 million after-tax) related to fiscal 2004. This adjustment related to the omission of certain intercompany inventory in the Company’s calculation of profit-in-inventory (PII) elimination. The Company has concluded that the amounts related to fiscal 2004 and prior years are not material, both individually and in the aggregate, to the trends of the financial statements for those periods affected, and to a fair presentation of the Company’s results of operations and financial statements. Accordingly, results for fiscal 2004 and prior years have not been restated. Also included in the results for the three months ended September 30, 2004 is a reversal of a prior year insurance accrual of $2.7 million ($2.0 million after-tax), which was no longer required, and a reduction in inventory allowance of $1.5 million ($1.1 million after-tax).
In mid-July, 2004, Molex’s Corporate Finance Group identified an issue with the “in-transit” intercompany inventory in the calculation of profit-in-inventory elimination. On July 21, 2004, Molex’s Vice President, Treasurer and Chief Financial Officer brought this matter to the attention of other members of senior management including Molex’s Vice Chairman and Chief Executive Officer. Molex management determined to further investigate including to determine how this situation occurred, an estimate of the amounts involved, and to review all inventory allowances to ensure that overall inventories were accounted for appropriately. Molex management concluded, based on the preliminary available estimates of the potential magnitude known at that time, that the amounts related to fiscal 2004 and prior years would not be material, either individually or in the aggregate, to the trends of the financial statements for those periods affected, and to a fair presentation of Molex’s results of operations and financial statements. Molex subsequently issued a press release announcing its results of operations for the fiscal fourth quarter and year ended June 30, 2004 on July 27, 2004. On September 10, 2004, a representation letter dated August 20, 2004 was signed by Molex’s Vice Chairman and Chief Executive Officer and its Vice President, Treasurer and Chief Financial Officer and delivered to Deloitteher in connection with the auditor resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of Molex’s financial statements as ofany action taken or failure to act under this Plan and for the year ended June 30, 2004against and the filing of Molex’s Annual Report on Form 10-K on September 10, 2004.
Molex’s fiscal first quarter ended on September 30, 2004. As part of the quarter-end close process, Molex reviewed the PII issuefrom any and initially recorded only a portion of the estimated adjustment attributable to prior years, as the full analysis of all inventory allowances was not complete. At a scheduled meeting on October 15, 2004, management discussed with Deloitte the nature, estimated amount and proposed accounting treatment of the PII omission as it related to prior years. During this meeting, management also discussed with Deloitte an issue which had been identified relating to the treatment of componentsamounts paid by him or her in Molex’s calculations of slow and excess inventory allowance as well as the status of the self-insurance reserve. At a meeting of the Audit Committee on October 19, 2004 to discuss the fiscal first quarter results attended by representatives of Molex and Deloitte, Molex’s Vice President, Treasurer and Chief Financial Officer and Deloitte discussedsettlement thereof, with the Audit CommitteeCompany’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the omission with respectCompany an opportunity, at its own expense, to PII as well as other items includinghandle and defend the reversal of a prior year insurance accrualsame before he or she undertakes to handle and the status of the Company’s analysis of other inventory allowances. Molex and Deloitte agreed as to the estimated amount of the adjustment with respect to PII, but disagreed regarding Molex’s proposed accounting treatment. Deloitte informed Molex that the entire estimated PII impact should be recorded in the fiscal quarter ended September 30, 2004. The Audit Committee asked management and Deloitte to work jointly to determine the appropriate accounting treatment, and after further discussions, the entire estimated PII impact was recorded in the fiscal first quarter ended September 30, 2004. Molex issued a press release announcing its results of operations for the fiscal first quarterdefend it on October 20, 2004. At a meeting of the Audit Committee on October 21, 2004, the resolution of the PII adjustment was discussed as well as the adjustment recorded by Molex for the reduction in inventory allowance. The Audit Committee Chairman provided reports of the October 19 and 21 meetings of the Audit Committee to the full Board of Directors on October 22, 2004.
On October 21, 2004, in response to a question from Deloitte, Molex’s Vice President, Treasurer and Chief Financial Officer confirmed that she was aware of the potential for a PII adjustment prior to delivery of the representation letter on September 10, 2004. On October 27, 2004, Deloitte for the first time expressed to the Audit Committee that the omission with respect to PII described above should have been disclosed in the representation letter dated August 20, 2004 signed by Molex’s Vice Chairman and Chief Executive Officer and Vice President, Treasurer and Chief Financial Officer and delivered to Deloitte on September 10, 2004. Molex’s Vice Chairman and Chief Executive Officer and Vice President, Treasurer and Chief Financial Officer did not believe that the matter was required to be addressed in that letter. Deloitte also suggested that the Audit Committee inquire as to the circumstances surrounding this matter.
The Audit Committee, with the assistance of independent legal and accounting advisors, conducted an inquiry into the omission and related matters. The Audit Committee concluded that it concurs with management’s recommendations as to the accounting treatment forhis/her own behalf, unless such omission and no additional adjustments were identified asloss, cost, liability, or expense is a result of this inquiry.his/her own willful misconduct or except as expressly provided by statute. The Audit Committee also concluded that no one deliberately withheld information regarding the PII issue from Deloitte with the intentforegoing right of affecting Molex’s financial statements. The Audit Committee presented the findingsindemnification shall not be exclusive of the inquiryany other rights of indemnification to Deloitte. Deloitte requested additional information relating to this matter, including factual discrepancies regarding written materials and recollections of relevant parties. The Audit Committee made further inquiries and provided Deloitte with additional information in response to its requests.
Molex filed a Form 12b-25 with the Commission on November 10, 2004 that extended the filing deadline of the Form 10-Q for the fiscal quarter ended September 30, 2004 until November 15, 2004. The Molex Board of Directors on November 10 named Robert Mahoney, an Executive Vice President and former Chief Financial Officer of Molex, as the Acting Chief Financial Officer, and reassigned the prior Vice President, Treasurer and Chief Financial Officer to the position of Vice President and Treasurer. The Board’s action was in response to Deloitte having advised Molex that, because of its view that this matter should have been disclosed in the representation letter dated August 20, 2004 delivered to Deloitte on September 10, 2004, Deloitte would require representations and certifications from a new principal accounting and financial officer in connection with Molex’s future filings with the Securities and Exchange Commission containing financial statements, including the Form 10-Q for the fiscal quarter ended September 30, 2004. Deloitte further advised Molex that it was considering whether it would require representations and certifications from a new principal executive officer in connection with Molex’s future SEC filings.
After further discussions among Molex, Deloitte and the Audit Committee, Deloitte advised Molex on November 13, 2004 that Deloitte was unwilling to continue to rely on the representations of Molex’s Vice Chairman and Chief Executive Officer and Vice President, Treasurer and (former) Chief Financial Officer who had signed the representation letter dated August 20, 2004. Deloitte further advised Molex that Deloitte was willing to complete its review of Molex’s unaudited financial statements for the fiscal quarter ended September 30, 2004 towhich such individuals may be included in Molex’s Form 10-Q for that fiscal quarter, but subject to a new condition. This newly-imposed condition was that Molex’s Vice Chairman and Chief Executive Officer and Vice President, Treasurer and (former) Chief Financial Officer no longer serve as officers of Molex or in management roles where they have any significant responsibilities for the maintenance of Molex’s books and records, preparation of Molex’s financial statements, or are an integral part ofentitled under the Company’s underlying system of internal accounting controls. Molex’s Audit Committee and Board of Directors each unanimously rejected this condition imposed by Deloitte. Following the communication of Molex’s position, representatives of Deloitte advised Molex on November 13, 2004 that Deloitte was resigningcharter documents, as Molex’s independent auditors effective immediately.
In connection with the audits of Molex’s consolidated financial statements for the years ended June 30, 2003 and 2004, and during the subsequent interim period through November 13, 2004, there were no disagreements between Molex and Deloitte on anya matter of accounting principleslaw, or practices, financial statement disclosure,otherwise, or auditing scope or procedure, which, if not resolved to the satisfaction of Deloitte, would have caused Deloitte to make reference thereto in its report, except as described above and in this paragraph with respect to Deloitte’s disagreement with the accounting treatment of the PII adjustment initially proposed by Molex management. Deloitte informed Molexany power that the entire estimated PII impact should be recorded in the fiscal quarter ended September 30, 2004. The issue was discussed with the Audit Committee. The Audit Committee asked management and DeloitteCompany may have to work jointly to determine the appropriate accounting treatment, and after further discussions, the entire estimated PII impact was recorded in the fiscal first quarter ended September 30, 2004 as reflected in the earnings press release issued on October 20, 2004 and in the Form 10-Q filed with the Commission on November 15, 2004.indemnify them or hold them harmless.
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Molex has authorized Deloitte to respond fully to the inquiries of any potential successor accountant concerning the subject matter of the foregoing.
Molex has requested that Deloitte furnish a letter addressed to the Securities and Exchange Commission stating whether it agrees with the above statements. Molex will amend this Form 8-K and attach a copy of such letter as an exhibit promptly after Deloitte furnishes the letter to Molex.
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Item 4.01Changes
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in Registrant’s Certifying Accountant.
As indicated inhand when you access the Current Report on Form 8-K filedweb site and follow the instructions to obtain your records and to create an electronic voting instruction form.
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EXHIBIT 16.1
[Letterhead of Deloitte & Touche LLP]
November 30, 2004
Securities and Exchange Commission
Mail Stop 11-3
450 5th Street, N.W.
Washington, D.C. 20549
Dear Sirs/Madam:
We have read Item 4.01 of Form 8-K of Molex Incorporated, (the “Company”) dated November 13, 2004 and have the following comments:c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
FIRST PARAGRAPH
We agree with the statements made in this paragraph.
SECOND PARAGRAPH
We have no basis upon which to agree or disagree with the statements made in this paragraph.
THIRD AND FOURTH PARAGRAPHS
We agree with the statements made in these paragraphs.
FIFTH PARAGRAPH
We have no basis upon which to agree or disagree with the statements made in this paragraph, as we did not complete our review of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2004 prior to our resignation.
SIXTH PARAGRAPH
The statements made by the Company in the first four sentences of this paragraph are describing events which occurred in July 2004 shortly after the Company’s June 30, 2004 fiscal year end and before the Company had issued a press release on July 27, 2004, announcing its fiscal 2004 results and before the Company filed, on September 10, 2004, its financial statements for fiscal 2004. Deloitte and Touche LLP (“Deloitte” or “D&T”) did not become aware of such events until subsequent to October 14, 2004. Our comments below are based solely on discussions with management and the Audit Committee Chairman, and a written chronology (the “Chronology”) prepared by the then, Vice President, Treasurer and Chief Financial Officer (the “CFO”) which was provided to us by the Audit Committee Chairman on November 2, 2004. Based upon the foregoing, we have the following comments:
With respect to the fifth sentence of this paragraph, we agree that the Company issued a press release on July 27, 2004. We make no comment as to the accuracy or completeness of the Company’s press release.
We agree with the statements made in the sixth sentence of this paragraph; however, such statements do not indicate that the representation letter was also later signed by the Executive Vice President/President Far East South, and that a second representation letter, dated September 10, 2004, reaffirming the representations made as of August 20, 2004, was provided to us and was signed by the Vice Chairman and Chief Executive Officer (the “CEO”) and the CFO.
SEVENTH PARAGRAPH
We agree with the statements made in the first sentence of this paragraph.
We disagree with the statements made in the second sentence of this paragraph because it is incomplete and inaccurately suggests that the amount of the PII Error was not known. The Company initially recorded approximately $2 million of the PII Error in the first quarter of fiscal 2005 and indicated an intention of recording the remainder in the subsequent fiscal 2005 quarters. Also, the Company indicated that the reversal of the self-insurance reserve would be recorded to offset a portion of the remaining adjustments resulting from the PII Error. The Company’s reference to a “full analysis of all inventory allowances” has no impact on the PII Error.
We agree with the statements made in the third sentence of this paragraph. For purposes of clarity, we had not previously been informed of the PII Error, nor were we informed in the October 15, 2004 meeting that the PII Error and self-insurance reserve matters had been identified by the Company prior to the filing of the Company’s 2004 annual report on Form 10-K.
We agree with the statements made in the fourth sentence of this paragraph. For purposes of clarity, the Company had not recorded a reduction to its inventory allowances or self-insurance reserve at the time of the October 15, 2004 meeting. The Company’s written analysis, provided to us at this meeting, also indicated that the reductions in the inventory component allowance of $300,000 to $500,000 were appropriate, and that the Company’s accounts receivable reserve was potentially overstated by approximately $3 million to $4 million.
We agree with the statements made in the fifth sentence of this paragraph. For purposes of clarity, the potential over accrual of the accounts receivable reserve of $3 million to $4 million was also discussed at the October 19, 2004 Audit Committee Meeting.
We disagree with the statements made in the sixth sentence of this paragraph because as of October 19, 2004 we had performed no procedures regarding the amount of the PII Error and were not in a position to have been in agreement with such amount. We agree that we disagreed with the Company’s proposed accounting treatment for the PII Error.
We agree with the statement made in the seventh sentence as to the timing of recording of such adjustment, however, we disagree with the statement suggesting that the PII Error was an estimate. The amount of the PII Error was determinable and known to management.
We agree with the statements made in the eighth sentence of this paragraph. For purposes of clarity, after the October 19, 2004 Audit Committee Meeting, the CFO informed us that if the Company were required to record the entire PII Error in the first quarter, she would offset the entry by recording adjustments to inventory allowances so that income for the quarter would not change from the preliminary income amount available at the time of the October 15, 2004 meeting. The reported income amount shown in the Company’s October 20, 2004 press release and in its Form 10-Q filing for the quarter ended September 30, 2004 do not differ from the preliminary income amount available on October 15, 2004.
With respect to the ninth sentence of this paragraph, we agree that the Company issued a press release on July 27, 2004. We make no comment as to the accuracy or completeness of the Company’s press release.
We agree with the statements made in the tenth sentence of this paragraph. For purposes of clarity, on October 21, 2004, we had not completed our procedures relating to the adjustment recorded by the Company for the reduction in inventory allowance since the support had not been provided to us by the Company.
We have no basis upon which to agree or disagree with the statements made in the eleventh sentence of this paragraph.
EIGHTH PARAGRAPH
We agree that the CFO made the statements as indicated in the first sentence of this paragraph; however, the CFO’s characterization of the PII Error as “potential” was not correct because the amount of the PII Error was known in July 2004.
We disagree with the statement made in the second sentence of this paragraph because it is incomplete and inaccurate. On October 28, 2004, we informed the Co-Chairmen of the Board that the CFO had knowledge of the errors prior to filing the June 30, 2004 Form 10-K and failed to disclose such errors to us. Later that day, we informed the Audit Committee Chairman. At that time we requested that the Audit Committee, with assistance of experienced counsel, conduct an investigation into the matter to determine the facts and circumstances surrounding the CFO’s knowledge of the errors at the time she signed the representation letters; whether anyone else at the Company had knowledge of the errors; whether the CFO had instructed anyone to withhold such information from us; whether there were any other events which had transpired that had not been properly communicated; whether there were any other significant reserve adjustments, accounting matters or errors that had not been disclosed by management to us; and whether any illegal acts had occurred. We advised the Audit Committee Chairman that we would be unable to complete our review of the first quarter until the investigation was completed to our satisfaction and any remedial action was taken. We further informed the Audit Committee Chairman that it was highly unlikely that we would be willing to continue to rely on the CFO’s representations in connection with our reviews or audits.
We have no basis upon which to agree or disagree with the statements made in the third sentence of this paragraph as to the CEO’s and CFO’s actual beliefs; however, the stated beliefs are inconsistent with the written representations included in the representation letters to us dated August 20, 2004 and September 10, 2004 and signed by the CEO and CFO on September 10, 2004, which state, among other things, that there are no transactions (such as the PII Error and the self-insurance reserve over-accrual) that had not been properly recorded in the accounting records, and that no matters had come to management’s attention subsequent to June 30, 2004 that required consideration as adjustments to or disclosures in the financial statements.
We disagree with the statements made in the fourth sentence of this paragraph. As discussed above, on October 28, 2004 we requested that the Audit Committee conduct an investigation and informed them we would be unable to complete our review of the Company’s financial statements for the quarter ended September 30, 2004 until such investigation had been completed to our satisfaction and any appropriate remedial action had been taken.
NINTH PARAGRAPH
We disagree with the statements made in the first sentence of this paragraph because they are incomplete. On November 1, 2004, we met with the CEO, and he informed us that he set the tone for communications and that he probably did discuss with the CFO not informing Deloitte of the PII Error; and that he had not read the representation letter prior to signing it.
On November 2, 2004, the Chairman of the Audit Committee provided us with the Chronology prepared by the CFO stating that the matters in question had been discussed at the July 21, 2004 management meeting. As a result of receiving this information, we informed the Chairman of the Audit Committee that our willingness to rely on representations of the CEO was now also in question. On November 3, 2004, we informed the Chairman of the Audit Committee of the following: (1) we had concluded that we were no longer willing to rely on the representations of either the CEO or the CFO; (2) the Audit Committee should conduct an investigation and engage outside independent counsel to directly assist the Audit Committee; and (3) we would be unable to complete our review of the first quarter until the investigation was completed to our satisfaction and any appropriate remedial actions were taken.
We have no basis upon which to agree or disagree with the statements made in the second and third sentences of this paragraph. Such statements are consistent with the written report that was ultimately provided to us.
We agree with the statements made in the fourth sentence of this paragraph.
We disagree with the statements made in the fifth sentence of this paragraph because they are incomplete. On November 9, 2004, after receiving a verbal report on the results of the investigation, we informed the Audit Committee Chairman and independent counsel that the investigation was not complete and that additional work should be performed to; (1) resolve the discrepancies between the facts as presented to us by the investigators and the information contained in the Chronology, the comments made to us by the CEO discussed above and other information provided to us by the Audit Committee Chairman; (2) perform a search of personal files and emails to determine whether other individuals had knowledge of the matters and whether there were other accounting matters or errors that had not been disclosed to us; and (3) determine whether any illegal acts had occurred.
We agree with the statements made in the sixth sentence of this paragraph. For purposes of clarity, the written report was provided to us on November 11, 2004 and a written supplement was provided to us on November 13, 2004.
TENTH PARAGRAPH
We agree with the statements made in the first sentence of this paragraph. For purposes of clarity, we were provided with a draft of the Form 12b-25 less than two hours before the filing deadline. We were in the process of providing our comments on the draft of the Form 12b-25 to the Company’s outside counsel, when we were informed by them that there was insufficient time to consider our comments prior to the filing deadline. We make no comment as to the accuracy or completeness of the Company’s Form 12b-25 filed on November 10, 2004.
We agree with the statements made in the second sentence of this paragraph.
We have no basis upon which to agree or disagree with the statements made in the third sentence of this paragraph; however, as previously stated, we had informed the Audit Committee Chairman that we were no longer willing to rely on the representations of either the CEO or the CFO.
We disagree with the statements made in the fourth sentence of this paragraph. Various members of Senior Management and the Board informed us that they believed the investigation could show that the CEO did not knowingly misrepresent matters to us. We informed the Company that we could reconsider our willingness to rely on the CEO’s representations if the results of the investigation so warranted; however, as the investigation was not complete, we did not withdraw our previous communication regarding our unwillingness to rely on the CEO’s representations.
ELEVENTH PARAGRAPH
We agree with the statements made in the first and fifth sentences of this paragraph.
We disagree with the statements made in the second and third sentences of this paragraph as to the imposition of new conditions. We had previously communicated to the Audit Committee Chairman and the Co-Chairmen of the Board that we were unwilling to rely on the representations of the CEO and CFO and that their having roles in the Company in which they would have significant authority or responsibilities with respect to the Company’s accounting books and records, financial reporting, or system of internal control would not be acceptable. After considering the Company’s November 10, 2004 announcement that the Vice President, Treasurer and Chief Financial Officer would be reassigned to the position of Vice President and Treasurer, we concluded that under the circumstances, the parameters of such previous communications would preclude both the CEO and former CFO from being officers of the Company. We informed the Company of such conclusion on November 13, 2004.
We have no basis upon which to agree or disagree with the statements made in the fourth sentence of this paragraph.
TWELFTH PARAGRAPH
We agree with the statements made in the first and third sentences of this paragraph.
We agree with the statements made in the second sentence as to the timing of recording of such adjustment, however, we disagree with the statements suggesting that the PII Error was an estimate as opposed to an error whose amount was determinable and known to management.
We agree with the statements made in the fourth sentence of this paragraph. For purposes of clarity, we did not complete our review of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2004 prior to our resignation. In addition, we make no comment as to the accuracy or completeness of the Company’s press release.
THIRTEENTH PARAGRAPH
We agree with the statements made in this paragraph.
FOURTEENTH PARAGRAPH
We agree with the statements made in the first sentence of this paragraph.
We have no basis upon which to agree or disagree with the statements made in the second sentence of this paragraph.
Yours Truly,
/s/ Deloitte & Touche LLP
cc: Louis A. Hecht, Corporate Secretary and General Counsel, Molex Incorporated
cc: Robert B. Mahoney, Executive Vice President, President Far East South and Acting Chief Financial Officer,
Molex Incorporated
cc: Douglas K. Carnahan, Chairman of Audit Committee, Molex Incorporated
MOLEX INCORPORATED
2005 ANNUAL MEETING OF STOCKHOLDERSOctober 28, 2005 10:00 a.m.
3000 Warrenville Road, Lisle, Illinois 60532
(630) 505-1000
GENERAL DIRECTIONS
near the Intersection of Naperville and Warrenville Roads | |
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | MLXIN1 | KEEP THIS PORTION FOR YOUR RECORDS | ||
DETACH AND RETURN THIS PORTION ONLY |
MOLEX INCORPORATED | ||||||||||||||||
THE BOARD OF DIRECTORS RECOMMENDS A | ||||||||||||||||
Vote on Directors | For | Withhold | For All | To withhold authority to vote, mark “For All Except” and write the nominee’s number(s) for which authority is withheld on the line below | ||||||||||||
1. | Election of Directors of Molex Incorporated – | □ | □ | □ |
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Nominees: 01) John H. Krehbiel, Jr.; 02) Robert J. Potter; | ||||||||||||||||
Class I nominee to serve a one year term | ||||||||||||||||
Nominees: 05) David L. Landsittel | ||||||||||||||||
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Vote On Proposals | For | Against | Abstain |
| For | Against | Abstain | |||||||||
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2. | Adoption of the Amended and Restated 1998 | □ | □ | □ |
| 4. | Adoption of the 2005 Molex Employee Stock | □ | □ | □ | ||||||
3. | Adoption of the 2005 Molex Employee Stock | □ | □ | □ |
| 5. | Adoption of the 2005 Molex Incentive Stock | □ | □ | □ | ||||||
Please sign your name exactly as it appears as it is imprinted on the card. When joint tenants hold shares, both should sign. When signing as an attorney, as executor, administrator trustee or guardian, please give your full title. If a corporation, please sign in full corporate name by the president or other authorized officer. If a partnership, please sign the partnership name by authorized person(s). |
| 6. | Adoption of the Amended and Restated 2000 | □ | □ | □ | ||||||||||
| 7. | Ratification of the appointment of Ernst & Young | □ | □ | □ | |||||||||||
Yes | No | |||||||||||||||
HOUSEHOLDING ELECTION-Please indicate if you consent to receive certain future investor communications in a single package per household. | □ | □ | ||||||||||||||
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Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
MOLEX INCORPORATED | For All | Withhold All | For All Except | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | ||||||||||
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE LISTED NOMINEES AND “FOR” EACH OF THE OTHER ITEMS | o | o | o | |||||||||||
Item 1 - Election of Directors. | ||||||||||||||
Class III Nominees to Serve a Three-Year Term | ||||||||||||||
01) 02) 03) 04) | Edgar D. Jannotta John H. Krehbiel, Jr. Donald G. Lubin Robert J. Potter |
For | Against | Abstain | |||||||||||
Item 2 - Approval of the Molex Incorporated Annual Incentive Plan | o | o | o | ||||||||||
Item 3 - Approval of the 2008 Molex Stock Incentive Plan | o | o | o | ||||||||||
Item 4 - Ratification of Selection of Independent Auditors | o | o | o | ||||||||||
Ratification of the appointment of Ernst & Young LLP as the independent auditors of Molex for the fiscal year ending June 30, 2009. | |||||||||||||
(NOTE: Please sign exactly as your name(s) appear(s) hereon. All holders must sign. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. If a corporation, please sign in full corporate name, by authorized officer. If a partnership, please sign in partnership name by authorized person.) |
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
31, 2008
(Continued, and to be signed and dated, on the reverse side.)