insurance maintained and/or paid for by the Company; provided that in the event the long-term disability insurance benefits exceed the amount to be paid to him, he shallwill remain entitled to receive the excess insurance payments.
(8)
In the event of a termination in connection with a change in control, Messrs. Wehmer, Dykstra and Murphy are entitled to an excise tax gross-up payment to be paid by the Company if the present value of the NEO’s parachute
payments exceeds his safe harbor. Excise tax gross up payments were calculated in accordance with Section 280G of the Code. Effective May 20, 2009, the Company adopted a policy that it will not enter into any new or materially amended agreements with NEOs that include any excise tax gross-up provisions with respect to payments contingent upon a change in control.control and, accordingly, the excise tax gross-up provision was eliminated from Mr. Wehmer’s 2023 amended and restated employment agreement.
(9)
The employment agreements for Mr. Stoehr and Mr. Crane provide that in the event the potential payments would constitute “excess parachute payments” within the meaning of Section 280G of the Code, or any interest or penalties with respect to such excise tax, then the amount of the payout would be automatically reduced to an amount equal to $1.00 less than three times (3x) the “base amount” as defined in Section 280G(3) of the Code (the “Reduced Payment”). This reduction will not apply if the sum of the amount of severance pay less the amount of excise tax payable by the NEO is greater than the Reduced Payment.
CEO PAY RATIO DISCLOSURE
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Company is providing the following disclosure about the relationship of the annual total compensation of our employees to the annual total compensation of Mr. Wehmer, our Founder and Chief Executive Officer as of December 31, 2021. We believe that the pay ratio disclosed below is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.
For 2021,
•The median of the annual total compensation of all of our employees, other than Mr. Wehmer, was $69,558.
•Mr. Wehmer’s annual total compensation, as reported in the Total column of the 2021 Summary Compensation Table, was $7,140,312. Due to the change to all stock-based LTIP awards in 2021, which were previously cash and stock based, Mr. Wehmer’s total compensation increased as a basis for the Pay Ratio calculation.
•Based on this information, the ratio of the annual total compensation of Mr. Wehmer to the median of the annual total compensation of all employees is estimated to be 102.7 to 1.
We selected October 1, 2021 as the date on which to determine our median employee. As of that date, we had had approximately 5,869 employees. The pay ratio disclosure rules provide an exemption for companies to exclude non-U.S. employees from the median employee calculation if non-U.S. employees in a particular jurisdiction account for five percent (5%) or less of the Company’s total number of employees. We applied this de minimis exemption when identifying the median employee by excluding 102 employees in Canada. After taking into account the de minimis exemption, 5,767 employees in the United States and zero employees located outside of the United States were considered for identifying the median employee.
For purposes of identifying the median employee from the employee population base, other than Mr. Wehmer, we considered W-2 gross taxable wages for calendar year 2021. In addition, for employees, who commenced employment with the Company after January 1, 2021 and who terminated prior to December 31, 2021, we annualized their compensation.
In determining the annual total compensation of the median employee, such employee’s compensation was calculated in accordance with Item 402(c)(2)(x) of Regulation S-K, as required pursuant to the SEC executive compensation disclosure rules. This calculation is the same calculation used to determine total compensation for purposes of the 2021 Summary Compensation Table with respect to each of the NEOs.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Company’s Compensation Discussion & Analysis with management and, based on such review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion & Analysis be included in the Company’s Proxy Statement, its Annual Report on Form 10-K and such other filings with the SEC as may be appropriate.
Compensation Committee
| ELIZABETH H. CONNELLY (CHAIR) | | | SUZET M. MCKINNEY | |
BRUCE K. CROWTHER (CHAIR) | H. PATRICK HACKETT, JR. |
PETER D. CRIST | GARY D. “JOE” SWEENEY |
WILLIAM J. DOYLE | | KARIN GUSTAFSON TEGLIA | |
CEO PAY RATIO DISCLOSURE
PROPOSAL NO. 2 — APPROVAL OF THE 2022 STOCK INCENTIVE PLAN
General
AtAs required by Section 953(b) of the Annual Meeting, our shareholders will be asked to approve the Wintrust Financial Corporation 2022 Stock Incentive Plan (the “2022 Plan”). The 2022 Plan was approved by the Board on April 5, 2022, subject to shareholder approval,Dodd-Frank Wall Street Reform and will replace the Wintrust Financial Corporation 2015 Stock Incentive Plan (the “2015 Plan”). As of March 31, 2022, there were 393,810 shares that remained available for future grants under the 2015 Plan (assuming outstanding performance awards are counted at the maximum vesting level), and which will cease to be available for future grants under the 2015 Plan if the 2022 Plan is approved by our shareholders.
If the 2022 Plan is approved by shareholders, we will continue to be able to make awards of long-term equity incentives, which we believe are critical for attracting, motivating, rewarding and retaining a talented management team who will contribute to our success. The Board believes thatConsumer Protection Act, the Company has granted equity in a reasonable manner, with a three-year average burn rate of approximately 0.60%is providing the following disclosure about the relationship of the outstanding sharesannual total compensation of Common Stock.
Purposeour employees to the annual total compensation of the 2022 Plan
The 2022 Plan is intended to provide the Company with the ability to provide market-responsive, stock-based incentivesMr. Wehmer, our Founder and other rewards for officers, employees, directors and consultantsChief Executive Officer as of the Company and its subsidiaries that (i) provide such award recipients with a stake in the growth of the Company and (ii) encourage them to continue in the service of the Company and its subsidiaries.
December 31, 2022. We believe that the 2022 Plan will enhance our ability to link pay to performance and our ability to attract key employees to manage our banks and other businesses. ratio disclosed below is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.
For 2022,
•
The 2022 Plan will also help promotemedian of the retentionannual total compensation of key employees while further aligning their interests with thoseall of our shareholders. Accordingly, management believesemployees, other than Mr. Wehmer, was $71,918.
•
Mr. Wehmer’s annual total compensation, as reported in the ability to award equity incentives is an important component in continuing the Company’s growth.
Key FeaturesTotal column of the 2022 PlanSummary Compensation Table, was $7,542,089.
•
Based on this information, the ratio of the annual total compensation of Mr. Wehmer to the median of the annual total compensation of all employees is estimated to be 104.9 to 1.
We believe that the following features of theselected October 1, 2022 Plan will help assure that the 2022 Plan both provides incentives to our employees and protects shareholder value:
•the 2022 Plan will be administered by the Compensation Committee, comprised entirely of independent directors;
•under the 2022 Plan, 1,200,000 shares, plus any shares of Common Stock that are available for awards under the 2015 Plan as of the effective date of the 2022 Plan will initially be available for awards;
•the 2022 Plan prohibits repricing of stock options or stock appreciation rights (“SARs”) without prior shareholder approval;
•except with respect to substitute awards granted in connection with a corporate transaction or due to a capitalization adjustment, the purchase price of stock options and the base price for SARs granted under the 2022 Plan may not be less than the fair market value of a share of Common Stock on the date on which to determine our median employee. As of grant;
•subjectthat date, we had had approximately 5,205 employees. The pay ratio disclosure rules provide an exemption for companies to certain exceptions describedexclude non-U.S. employees from the median employee calculation if non-U.S. employees in the 2022 Plan, the 2022 Plan includes a minimum vesting period of 12 monthsparticular jurisdiction account for awards granted under the plan;
•no dividend equivalents on stock optionsfive percent (5%) or SARs;
•no dividend or dividend equivalents paid on unearned awards;
•annual non-employee director compensation limit, which cannot be amended without shareholder approval;
•the 2022 Plan does not include liberal share recycling provisions with respect to stock options and SARs; and
•the 2022 Plan does not contain a liberal change in control definition and the 2022 Plan includes “double-trigger” provisions for the acceleration of vesting of outstanding equity awards following a change in control of the Company.
Description of the 2022 Plan
The following is a description of the terms of the 2022 Plan. This description is qualified in its entirety by reference to the plan document, a copy of which is attached to this Proxy Statement as Annex A and incorporated herein by reference.
Shares Available. Under the 2022 Plan, the number of shares of our Common Stock available for awards will initially equal (i) 1,200,000 shares plus (ii) any shares of Common Stock that are available for awards under the 2015 Plan as of the effective date of the 2022 Plan. No more than 1,000,000 shares of Common Stock in the aggregate may be issued under the 2022 Plan in connection with incentive stock options, subject to adjustment in accordance with the capitalization adjustment provisions included in the 2022 Plan. The number of available shares will be reduced by the sum of the aggregate number of shares of Common Stock which become subject to outstanding awards.
Shares covered by an award granted under the 2022 Plan will not be counted as used under the 2022 Plan unless and until they are actually issued and delivered to a participant. Consequently, to the extent that shares of Common Stock subject to an outstanding award granted under either the 2022 Plan or the 2015 Plan, the 2007 Plan or any other plan previously maintained by the Company under which equity awards remain outstanding (collectively, the “Predecessor Plans”), are not issued or delivered by reason of (i) the cancellation, termination, forfeiture or lapse of such award (excluding shares of Common Stock subject to a stock option cancelled upon settlement of a related tandem SAR or subject to a tandem SAR cancelled upon exercise of a related stock option), or (ii) the settlement of such award in cash, then such shares of Common Stock will again be available under the 2022 Plan. In addition, shares of Common Stock subject to an award granted under the 2022 Plan or a Predecessor Plan, other than a stock option or SAR, will again become available for issuance under the 2022 Plan if the shares are delivered to or withheld by the Company to pay the withholding taxes payable with respect to such award.
Notwithstanding anything to the contrary, shares of Common Stock subject to an award under the 2022 Plan will not again be available for issuance under the 2022 Plan if such shares are (i) shares that were subject to a stock option or SAR and were not issued or delivered upon the net settlement of such stock option or SAR, (ii) shares delivered to or withheld by the Company to satisfy the tax withholding obligations relating to an outstanding stock option or SAR or (iii) shares repurchased by the Company with the proceeds received from payment of the exercise price of a stock option.
The number of shares of Common Stock available for awards under the 2022 Plan will not be reduced by (i) the number of shares of Common Stock subject to substitute awards or (ii) available shares under a shareholder approved plan of a company or other entity which was a party to a corporate transaction with the Company (as appropriately adjusted to reflect such corporate transaction) which become subject to awards granted under the 2022 Plan (subject to applicable stock exchange requirements).
The shares of Common Stock subject to awards under the 2022 Plan and available for future awards may be reserved for issuance outless of the Company’s total authorized but unissued shares or shares reacquirednumber of employees. We applied this de minimis exemption when identifying the median employee by excluding 125 employees in Canada and heldone employee in treasury.
On March 31, 2022Puerto Rico. After taking into account the closing sale pricede minimis exemption, 5,079 employees in the United States and zero employees located outside of the Company’s Common Stock, as reported onUnited States were considered for identifying the Nasdaq Global Select Market, was $92.93.median employee.
For purposes of identifying the median employee from the employee population base, other than Mr. Wehmer, we considered W-2 gross taxable wages for calendar year 2022. In addition, we annualized compensation for employees who commenced employment with the Company after January 1, 2022 Plan will be administered by a committeeor who terminated prior to December 31, 2022.
In determining the annual total compensation of the Boardmedian employee, such employee’s compensation was calculated in accordance with Item 402(c)(2)(x) of Directors (or a subcommittee thereof) or such other committee designated byRegulation S-K, as required pursuant to the Board, with each member of such committee intendedSEC executive compensation disclosure rules. This calculation is the same calculation used to be (i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act and (ii) “independent” within the meaningdetermine total compensation for purposes of the rules of the Nasdaq. Currently, it is anticipated that the2022 Summary Compensation Committee will administer the 2022 Plan. The Compensation Committee will make determinationsTable with respect to each of the participation of employees, directors and consultants in the 2022 Plan and, except as otherwiseNEOs.
PAY VERSUS PERFORMANCE
As required by law or the 2022 Plan, the grant termsSection 953(b) of awards including vesting schedules, price, length of relevant performance, restriction or vesting periods, post-retirement and termination rights, payment alternatives, and such other terms and conditions as the Compensation Committee deems appropriate. Such grant terms will be set forth in an award agreement. The Compensation Committee will also have final, binding authority to interpret and construe the provisions of the 2022 Plan and the award agreements. The Compensation Committee may, in its sole discretion and for any reason at any time, take action such that (i) any or all outstanding stock options and SARs will become exercisable in part or in full, (ii) all or a portion of the restriction period applicable to any outstanding award will lapse, (iii) all or a portion of the performance period applicable to any outstanding award will lapse and (iv) the performance goals (if any) applicable to any outstanding award will be deemed to be satisfied at the target or any other level.
The Compensation Committee may designate other persons to carry out its responsibilities under such conditions and limitations as it may set, other than its authority with regard to awards granted to persons who are subject to Section 16 of the Exchange Act. To the extent deemed necessary or advisable, including for purposes of Section 16 of the Exchange Act, the independent members of the Board may act as the committee under the 2022 Plan.
Awards. The following types of awards may be granted under the 2022 Plan:
Stock Options. Stock options may be granted in the form of incentive stock options within the meaning of Section 422 of the Code or stock options not meeting such Code definition (“nonqualified stock options”). The 2022 Plan permits 1,000,000 of the shares available under the 2022 Plan to be awarded in the form of incentive stock options if the Compensation Committee so determines. The exercise period for any stock option will be determined by the Compensation Committee at the time of grant which may provide that stock options may be exercisable in installments, provided that no stock option will be exercised later than ten years after its date of grant. Except in the case of substitute awards granted in connection with a corporate transaction, the exercise price per share of Common Stock of any stock option may not be less than the fair market value of a share of Common Stock on the date of grant. Each stock option may be exercised in whole, at any time, or in part, from time to time, after the grant becomes exercisable. The Compensation Committee will provide for the exercise price to be payable in cash, payable in shares of already owned Common Stock, payable through the withholding of Common Stock which would otherwise be delivered to the participant, or in any combination of cash, already owned or withheld Common Stock, pursuant to a broker-assisted cashless exercise program, or by such methods as the Compensation Committee may deem appropriate.
Stock Appreciation Rights. SARs may be granted independently of any stock option or in tandem with all or any part of a stock option granted under the 2022 Plan, upon such terms and conditions as the Compensation Committee may determine. Upon exercise, a SAR entitles a participant to receive the excess of the fair market value of a share of Common Stock on the date the SAR is exercised over the base price of the SAR. Except in the case of substitute awards granted in connection with a corporate transaction, the base price of a SAR will not be less than 100% of the fair market value of a share of Common Stock on the date of grant. The Compensation Committee will determine whether a SAR will be settled in cash, Common Stock or a combination of cash and Common Stock. Upon exercise of a SAR granted in conjunction with a stock option, the stock option or the portion thereof to which the SAR relates will be surrendered. Each SAR will not be exercisable more than ten years after its date of grant.
Restricted Shares. Restricted shares are shares of Common Stock that may not be sold or otherwise disposed of during a restricted period after grant, the duration of which will be determined by the Compensation Committee. The Compensation Committee may provide for the lapse of such restrictions in installments. A recipient of a grant of restricted shares will generally earn unrestricted ownership thereof only if the individual is continuously employed by the Company or a subsidiary during the entire restricted period. Unless otherwise set forth in a restricted share award agreement, the holder of restricted shares will have rights as a shareholder of the Company, including the right to vote and receive dividends with respect to the restricted shares; provided, however, that distributions, including regular cash dividends, will be deposited by the Company and will be subject to the same restrictions as the restricted shares.
Restricted Share Units. Restricted share units are fixed or variable share or dollar denominated units valued, at the Compensation Committee’s discretion, in whole or in part by reference to, or otherwise based on, the fair market value of the Company’s Common Stock. The Compensation Committee will determine the terms and conditions applicable to restricted share units, including any applicable restrictions, conditions or contingencies, which may be related to individual, corporate or other categories of performance. The agreement awarding restricted share units will specify (i) whether such award may be settled in shares of Common Stock, cash or a combination thereof, and (ii) whether the holder will be entitled to receive dividend equivalents, with respect to such award. Any dividend equivalents with respect to restricted share units that are subject to vesting conditions will be subject to the same restrictions as such restricted share units. Prior to the settlement of a restricted share unit in shares of Common Stock, the holder of a restricted share unit will have no rights as a shareholder of the Company with respect to the shares of Common Stock subject to such award.
Performance Awards. Performance awards are a fixed or variable share or dollar denominated award subject to such conditions of vesting, performance and time of payment as the Compensation Committee may determine. The agreement relating to a performance award will specify whether such award may be settled in shares of Common Stock (including restricted shares), cash or a combination thereof. The agreement relating to a performance award will provide, in the manner determined by the Compensation Committee, for the vesting of such performance award if the specified performance measures are satisfied or met during the specified performance period. Any dividend or dividend equivalents with respect to a performance award that is subject to vesting conditions will be subject to the same restrictions as such performance award. Prior to the settlement of a performance award in shares of Common Stock, the holder of such award will have no rights as a shareholder of the Company with respect to such shares.
Stock Awards. The Compensation Committee may grant a stock award representing an unrestricted transfer of ownership, subject to compliance with the exceptions to the minimum vesting provisions included in the 2022 Plan.
Other Incentive Awards. The Compensation Committee may grant other types of awards of Common Stock or awards based in whole or in part by reference to Common Stock (“Other Incentive Awards”). The Compensation Committee will determine the time at which grants of such Other Incentive Awards are to be made, the size of such awards and all other conditions of such awards, including any restrictions, deferral periods or performance requirements. Any distribution, dividend or dividend equivalents with respect to Other Incentive Awards that are subject to vesting conditions shall be subject to the same vesting conditions as the underlying awards.
Termination of Employment. The disposition of an award in the event of the retirement, disability, death or other termination of a participant’s employment or service will be as determined by the Compensation Committee as set forth in the award agreement.
Transferability. Except to the extent permitted by the Compensation Committee with respect to nonqualified stock options, no award will be assignable or transferable except by will, the laws of descent and distribution or the beneficiary designation procedures under the 2022 Plan.
Performance Measures. Under the 2022 Plan, the vesting, exercisability or payment of certain awards may be made subject to the satisfaction of performance measures. The performance goals applicable to a particular award will be determined by the Compensation Committee and may include one or more of the following corporate-wide or subsidiary, division, operating unit or individual measures: the attainment by a share of Common Stock of a specified value within or for a specified period of time; increase in shareholder value; earnings per share; return on equity; return on assets; return on investments; return on total capital or invested capital; return to shareholders (including dividends); total shareholder return; revenues; cash flow(s); attainment of expense levels or cost reduction goals; market share; charge-offs; loan losses and loan loss reserves; losses from discontinued operations; reductions in non-performing assets; net income; operating income; operating expenses; gross profit or margin; operating profit or margin; interest expenses; expense management; economic value added; net cash provided by operations; price-to-earnings growth; customer satisfaction; customer acquisition; business expansion; cost targets; reductions in errors and omissions; reductions in lost business; management of employment practices and employee benefits; supervision of litigation; supervision of information technology; efficiency; acquisitions and divestitures, productivity; employee retention; succession management; management of the cost of insurance claims; achievement of regulatory compliance performance goals; satisfactory internal or external audits; improvements in financial ratings; measurable marketing effectiveness; market penetration; achievement of diversity goals; or any such other goals as the Committee may determine, whether or not listed in the 2022 Plan. The applicable performance measures may be determined on a pre-tax or post-tax basis or on an absolute or relative basis and may include comparisons based on current internal targets, the past performance of the Company (including the performance of one or more subsidiaries, divisions, or operating units) or the past or current performance of other companies or market indices (or a combination of such past and
current performance). In addition to the ratios specifically enumerated above, performance goals may include comparisons relating to capital (including, but not limited to, the cost of capital), shareholders’ equity, shares outstanding, assets or net assets, sales, or any combination thereof. In establishing a performance measure or determining the achievement of the applicable performance measures may be amended or adjusted to include or exclude components of any performance measure, including, without limitation, foreign exchange gains and losses, asset write-downs, acquisitions and divestitures, change in fiscal year, change in tax rates, unbudgeted capital expenditures, special charges such as restructuring or impairment charges, debt refinancing costs, extraordinary or noncash items, unusual, infrequently occurring, nonrecurring or one-time events affecting the Company or its financial statements or changes in law or accounting principles. Performance measures will be subject to such other special rules and conditions as the Committee may establish at any time.
Minimum Vesting and Restricted Period. No award granted under the 2022 Plan (other than cash-based awards) may become exercisable or vest prior to the first anniversary of the date of grant; provided, however, that the following awards will not be subject to this minimum vesting requirement: (i) any substitute awards granted in connection with awards that are assumed, converted or substituted pursuant to a merger, acquisition or similar transaction entered into by the Company or any of its subsidiaries, (ii) shares of Common Stock delivered in lieu of fully vested cash obligations, and (iii) any additional awards the Committee may grant, up to a maximum of five percent (5%) of the available share reserve authorized for issuance under the 2022 Plan. The minimum vesting requirement does not apply to the Compensation Committee’s discretion to provide for accelerated exercisability or vesting of any award, including in cases of retirement, death, disability or a change in control, in the terms of the award agreement or otherwise.
Adjustments. In the event of any equity restructuring (within the meaning of Financial Accounting Standards Board Accounting Codification Topic 718 Compensation - Stock Compensation) that causes the per share value of shares of Common Stock to change, such as a share dividend, stock split, spinoff, rights offering or recapitalization through an extraordinary cash dividend, the number and class of securities available under the 2022 Plan, the terms of each outstanding stock option and SAR (including the number and class of securities subject to each outstanding stock option or SAR and the purchase price or base price per share), the terms of each outstanding restricted share award and restricted share unit award (including the number and class of securities subject thereto), and the terms of each outstanding performance award (including the number and class of securities subject thereto) will be appropriately adjusted by the Compensation Committee, such adjustments to be made in the case of outstanding stock options and SAR without an increase in the aggregate purchase price or base price and in accordance with Section 409A of the Code. In the event of any other change in corporate capitalization, including a merger, consolidation, reorganization, or partial or complete liquidation of the Company, such equitable adjustments described in the foregoing sentence may be made as determined to be appropriate and equitable by the Compensation Committee to prevent dilution or enlargement of rights of participants.
Change in Control. The Company will undergo a change in control in the event of certain acquisitions of 50% or more of the Company’s Common Stock, a change in the majority of the Board, or the consummation of a reorganization, merger or consolidation (unless, among other conditions, the Company’s shareholders receive more than 50% of the stock of the surviving company), a sale or disposition of all or substantially all of the assets of the Company, or a complete liquidation or dissolution of the Company.
In the case of change in control events in which the awards are not effectively replaced in accordance with the terms of the 2022 Plan, then, upon such change in control, all stock options and SARs outstanding will become immediately exercisable and remain exercisable for the remainder of their term, all restrictions on restricted shares will lapse, all restricted share units will become fully vested and, unless otherwise specified in a participant’s award agreement, all payout opportunities under all outstanding awards subject to performance-based vesting requirements will be earned based on actual performance through the effective date of the change in control, and the vesting of all such awards will be accelerated as of the effective date of the change in control or, if the performance metrics cannot be measured through the date of the change in control or as otherwise determined by the Board (as constituted prior to the change in control), threshold, target, maximum or any interim performance level determined by the Board (as constituted prior to the change in control). In addition, the Board (as constituted before the change in control) may, in its sole discretion, require outstanding awards, in whole or in part, to be cancelled, and to provide for the holder to receive a cash payment (or shares in the resulting corporation or its parent corporation) in an amount (or having a value) equal to (i) in the case of a stock option or SAR, the number of shares then subject to the portion of such award cancelled multiplied by the excess, if any, of the highest per share price offered to holders of Common Stock in the change in control transaction, over the purchase price or base price per share subject to the award, (ii) in the case of restricted shares, restricted share units, performance awards denominated in Common Stock or Other Incentive Awards, the number of shares of Common Stock or units then subject to the portion of such award cancelled to the extent the performance criteria (if any) applicable to such award are satisfied or deemed satisfied under the 2022 Plan
multiplied by the highest per share price offered to holders of Common Stock in the change in control transaction and (iii) in the case of performance awards and Other Incentive Awards denominated in cash, the value of the award then subject to the portion of such award surrendered to the extent the performance criteria applicable to such award are satisfied or deemed satisfied pursuant to the 2022 Plan.
In the event of the termination of a participant’s employment by the Company without “cause” or, to the extent permitted in the award agreement, the termination of a participant’s employment by the participant for a “constructive termination” or “good reason,” in each case, within the 18-month period following the occurrence of a change in control in which the outstanding awards were effectively assumed or otherwise remained outstanding, then, upon such termination of employment, all stock options and SARs outstanding will become immediately exercisable and remain exercisable for the remainder of their term, all restrictions on restricted shares will lapse, all restricted share units will become fully vested and, unless otherwise specified in a participant’s award agreement, with respect to awards subject to performance-based vesting conditions, (i) in the event the termination of employment occurs during the first twelve months of a performance period, all unvested awards will be prorated based on the greater of actual performance through the date of termination of employment and target performance, with the award prorated based on the number of full months the employee participated in the performance period, and the vesting of all such awards will be accelerated as of the effective date of such termination of employment and (ii) in the event the termination of employment occurs on or after the first anniversary of the commencement of the performance period, all unvested awards will be earned at the greater of actual performance through the date of termination of employment (if measurable through the date of such termination of employment) and target performance.
Amendments and Termination. The Board may at any time suspend or terminate the 2022 Plan. The Board may amend the 2022 Plan at any time, subject to any requirement of shareholder approval imposed by applicable law, rule or regulation, including any rule or regulation of the Nasdaq Global Select Market or any other stock exchange on which the Common Stock is then traded, provided that no amendment may change the non-employee director limit set forth in the plan or the prohibition on repricing without shareholder approval. No termination, amendment, or modification of the 2022 Plan or an award agreement may adversely affect in any material way any awards previously granted under the 2022 Plan without such award holder’s written consent. There will be no set termination date for the 2022 Plan, although no incentive stock options may be granted more than ten years after the effective date of the 2022 Plan.
Eligible Employees. Employees (including prospective employees), directors and consultants of the Company or any subsidiary will be eligible to participate in the 2022 Plan. The aggregate value of cash compensation and the grant date fair value of shares of Common Stock that may be awarded or granted during any fiscal year of the Company to any non-employee director, for his or her services as a non-employee director, will not exceed $750,000; provided, that this limit will not apply to distributions of previously deferred compensation under a deferred compensation plan maintained by the Company or compensation received by the director in his or her capacity as an executive officer or employee of the Company.
As of March 31, 2022, approximately 5,184 employees of the Company and its subsidiaries and 12 non-employee directors would be eligible to participate in the 2022 Plan. In addition, while consultants are eligible to participate in the 2022 Plan, the Company has a practice of not granting equity awards to its consultants, and at this time does not foresee changing that practice.
Clawback of Awards. Awards granted under the 2022 Plan and any cash payment or shares of Common Stock delivered pursuant to an award will be subject to forfeiture, recovery by the Company or other action pursuant to the applicable award agreement or any clawback or recoupment policy which the Company may adopt from time to time, including without limitation any such policy which the Company may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act, and implementingItem 402(v) of Regulation S-K, the Company is providing the following information for “Compensation Actually Paid,” as calculated per SEC disclosure rules, and regulations thereunder, the Company’s financial performance against specific performance metrics for each of the last three completed calendar years. The table below summarizes “Compensation Actually Paid” to Mr. Wehmer, the Company’s Principal Executive Officer (“PEO”) during 2022, and the average “Compensation Actually Paid” to our NEOs other than Mr. Wehmer. In determining the “Compensation Actually Paid,” we are required to make various adjustments to amounts that have been reported in the Summary Compensation Table in previous years as the valuations methods for this section differ from those required in the Summary Compensation Table, primarily as it relates to equity valuations. Under the Summary Compensation Table rules, equity awards are reflected as compensation in the year of grant based on the full grant date fair value, whereas equity awards are reported as “Compensation Actually Paid” during the vesting period and are impacted by changes in the Company’s stock price through the vesting date. Similar to the Summary Compensation Table, “Compensation Actually Paid” includes the value of equity awards as compensation prior to vesting and, thus, such compensation may never be realized by the NEOs if the underlying vesting conditions are not satisfied.
| | Year(1) | | | | Summary Compensation Table Total PEO(2) ($) | | | | Compensation Actually Paid to PEO(3) ($) | | | | Average Summary Compensation Table Total for Non-PEO NEOs(2) ($) | | | | Average Compensation Actually Paid to Non-PEO NEOs(3) ($) | | | | Value of Initial Fixed $100 Investment Based On(4): | | | | Net Income ($ in millions) | | | | Adjusted EPS(6) ($) | | |
| Wintrust TSR ($) | | | | Peer Group TSR(5) ($) | | |
| | 2022 | | | | | | 7,542,089 | | | | | | | 8,359,216 | | | | | | | 2,350,417 | | | | | | | 2,507,670 | | | | | | | 125.94 | | | | | | | 99.06 | | | | | | | 510 | | | | | | | 12.63 | | | |
| | 2021 | | | | | | 7,140,312 | | | | | | | 9,915,585 | | | | | | | 2,066,281 | | | | | | | 2,621,076 | | | | | | | 133.32 | | | | | | | 119.74 | | | | | | | 466 | | | | | | | 9.64 | | | |
| | 2020 | | | | | | 5,702,248 | | | | | | | 2,873,349 | | | | | | | 1,672,199 | | | | | | | 1,155,692 | | | | | | | 88.23 | | | | | | | 87.20 | | | | | | | 293 | | | | | | | 9.83 | | | |
(1)
Mr. Wehmer served as the Company PEO for each year as reported and the Company’s other NEOs for each year are Messrs. Dykstra, Murphy, Crane and Stoehr.
(2)
Amounts reported in this column represent (i) the total compensation reported in the Summary Compensation Table for the applicable year for Mr. Wehmer and (ii) the average of the total compensation reported in the Summary Compensation Table for the Company’s NEOs for the applicable year other than Mr. Wehmer.
(3)
SEC rules require certain adjustments be made to the Summary Compensation Table totals to determine “Compensation Actually Paid” as reported in the Pay-versus-Performance Table. “Compensation Actually Paid” does not necessarily represent cash and/or equity value transferred to the applicable NEO without restriction, but rather is a value calculated under applicable SEC rules. In general, “Compensation Actually Paid” is calculated as otherwise required by law.the total compensation reported in the Summary Compensation Table adjusted to include the fair market value of equity awards as of December 31 of the applicable year or, if earlier, the vesting date. The Company does not provide a defined benefit plan so no adjustment for pension benefits is included. The following table details these adjustments:
New Plan Benefits. The number
| | Year | | | | Summary Compensation Table Total ($)(a) | | | | (Minus) Grant Date Fair Value of Stock Awards Granted in Fiscal Year ($)(b) | | | | Plus Fair Value at Fiscal Year-End of Outstanding and Unvested Stock Awards Granted in Fiscal Year ($)(c) | | | | Plus/(Minus) Change in Fair Value of Outstanding and Unvested Stock Awards Granted in Prior Fiscal Years ($)(d) | | | | Plus Fair Value at Vesting of Stock Awards Granted in Fiscal Year that Vested During Fiscal Year ($)(e) | | | | Plus/(Minus) Change in Fair Value as of Vesting Date of Stock Awards Granted in Prior Years for which Applicable Vesting Conditions Were Satisfied During Fiscal Year ($)(f) | | | | (Minus) Fair Value as of Prior Fiscal Year- End of Stock Awards Granted in Prior Fiscal Years that Failed to Meet Applicable Vesting Conditions During Fiscal Year ($)(g) | | | | Equals Compensation Actually Paid ($) | | |
| | Wehmer | | |
| | 2022 | | | | | | 7,542,089 | | | | | | | (2,878,750) | | | | | | | 2,848,340 | | | | | | | 847,537 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | 8,359,216 | | | |
| | 2021 | | | | | | 7,140,312 | | | | | | | (2,530,000) | | | | | | | 4,319,490 | | | | | | | 985,783 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | 9,915,585 | | | |
| | 2020 | | | | | | 5,702,248 | | | | | | | (1,265,000) | | | | | | | — | | | | | | | (751,895) | | | | | | | — | | | | | | | — | | | | | | | (812,004) | | | | | | | 2,873,349 | | | |
| | Other NEOs(h) | | |
| | 2022 | | | | | | 2,350,417 | | | | | | | (771,875) | | | | | | | 763,616 | | | | | | | 165,512 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | 2,507,670 | | | |
| | 2021 | | | | | | 2,066,281 | | | | | | | (511,438) | | | | | | | 873,110 | | | | | | | 193,123 | | | | | | | — | | | | | | | — | | | | | | | — | | | | | | | 2,621,076 | | | |
| | 2020 | | | | | | 1,672,199 | | | | | | | (247,813) | | | | | | | — | | | | | | | (130,396) | | | | | | | — | | | | | | | — | | | | | | | (138,298) | | | | | | | 1,155,692 | | | |
(a)
Represents Total Compensation as reported in the Summary Compensation Table for the indicated fiscal year. With respect to the other NEOs, amounts shown represent averages.
(b)
Represents the grant date fair value of the stock optionsawards granted during the indicated fiscal year, computed in accordance with the methodology used for financial reporting purposes.
(c)
Represents the fair value as of the indicated fiscal year-end of the outstanding and other formsunvested stock awards granted during such fiscal year, computed in accordance with the methodology used for financial reporting purposes.
(d)
Represents the change in fair value during the indicated fiscal year of each stock award that was granted in a prior fiscal year and that remained outstanding and unvested as of the last day of the indicated fiscal year, computed in accordance with the methodology used for financial reporting purposes and, for awards subject to performance-based vesting conditions, based on the probable outcome of such performance-based vesting conditions as of the last day of the fiscal year.
(e)
Represents the fair value at vesting of the stock awards that will bewere granted underand vested during the 2022 Planindicated fiscal year, computed in accordance with the methodology used for financial reporting purposes.
(f)
Represents the change in fair value, measured from the prior fiscal year-end to the vesting date, of each stock award that was granted in a prior fiscal year and which vested during the indicated fiscal year, computed in accordance with the methodology used for financial reporting purposes.
(g)
Represents the fair value as of the last day of the prior fiscal year of the stock awards that were granted in a prior fiscal year and which failed to meet the applicable vesting conditions in the indicated fiscal year, computed in accordance with the methodology used for financial reporting purposes.
(h)
See footnote 1 above for the NEOs included in the average for each year.
(4)
Pursuant to rules of the SEC, the comparison assumes $100 was invested on December 31, 2019. Historic stock price performance is not currently determinable.necessarily indicative of future stock price performance.
Federal
(5)
The Peer Group TSR utilizes the NASDAQ Global Select Market bank stock as the peer group index, which is the same industry index used in the Company’s Annual Report on Form 10-K.
(6)
As noted in the “CD&A,” for 2022, the Committee views Adjusted EPS as an important metric of Company performance. Fifty percent of the performance-based RSUs vest based on the Company’s three-year cumulative earnings per share as adjusted to exclude income taxes, acquisition-related charges, and the provision for credit losses with such amount being further reduced by actual net charge-offs of loans.
Relationship Between Pay and Performance
We believe the “Compensation Actually Paid” in each of the years reported above and over the three-year cumulative period are reflective of the Committee’s emphasis on “pay-for-performance” as the “Compensation Actually Paid” fluctuated year-over-year, primarily due to the result of our stock performance and our varying levels of achievement against pre-established performance goals under our short-term incentive awards and the LTIP.
The following charts display the “Compensation Actually Paid” to the PEO and the average of the “Compensation Actually Paid” to the other NEOs as compared to the Company’s Adjusted EPS, Net Income Tax Consequencesand TSR over the three most recently completed years as well as the relationship between the Company’s TSR and the Peer Group TSR over such three-year period.
Performance Measures Used to Link Company Performance and Compensation Actually Paid to the NEOs
The following is a brief summarylist of certain United States federal income tax consequences generally arising with respect to awards underfinancial performance measures, which in our assessment represent the 2022 Plan. This discussion does not address all aspects of the United States federal income tax consequences of participating in the 2022 Plan that may be relevant to participants in light of their personal investment or tax circumstances and does not discuss any state, local or non-United States tax consequences of participating in the 2022 Plan. Each participant is advised to consult his or her particular tax advisor concerning the application of the applicable United
States federal income tax laws to such participant’s particular situation, as well as the applicability and effect of any state, local or non-United States tax laws before taking any actions with respect to any awards.
Section 162(m) of the Internal Revenue Code.Section 162(m) of the Code generally limits to $1 million the amount that a publicly held corporation is allowed each year to deduct for the compensation paid to each of the corporation’s chief executive officer, the corporation’s chiefmost important financial officer and certain other current and former executive officers of the corporation.
Stock Options. A participant will not recognize taxable income at the time an option is granted and the Company will not be entitled to a tax deduction at that time. A participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) upon exercise of a non-qualified stock option equal to the excess of the fair market value of the shares purchased over their exercise price, and the Company will be entitled to a corresponding deduction, subject to the deduction limits under Section 162(m) of the Code. A participant will not recognize income (except for purposes of the alternative minimum tax) upon exercise of an incentive stock option. If the shares acquired by exercise of an incentive stock option are held for the longer of two years from the date the option was granted and one year from the date it was exercised, any gain or loss arising from a subsequent disposition of those shares will be taxed as long-term capital gain or loss, and the Company will not be entitled to any deduction. If, however, those shares are disposed of within the above-described period, then in the year of that disposition the participant will recognize compensation taxable as ordinary income equal to the excess of (1) the lesser of the amount realized upon that disposition and the fair market value of those shares on the date of exercise over (2) the exercise price, and the Company will be entitled to a corresponding deduction, subject to the deduction limits under Section 162(m) of the Internal Revenue Code.
SARs. A participant will not recognize taxable income at the time SARs are granted and the Company will not be entitled to a tax deduction at that time. Upon exercise, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) in an amount equal to the fair market value of any shares delivered and the amount of cash paidperformance measures used by the Company and the Company will be entitled to a corresponding deduction, subjectlink compensation actually paid to the deduction limits under Section 162(m) of the Code.NEOs for 2022:
Stock Awards.A participant will not recognize taxable income at the time restricted stock is granted and the Company will not be entitled to a tax deduction at that time, unless the participant makes an election to be taxed at that time. If such election is made, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time of the grant in an amount equal to the excess of the fair market value for the shares at such time over the amount, if any, paid for those shares. If such election is not made, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) at the time the restrictions constituting a substantial risk of forfeiture lapse in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for those shares. The amount of ordinary income recognized by making the above-described election or upon the lapse of restrictions constituting a substantial risk of forfeiture is deductible by the Company as compensation expense, subject to the deduction limits under Section 162(m) of the Code. In addition, a participant receiving dividends with respect to restricted stock for which the above-described election has not been made and prior to the time the restrictions constituting a substantial risk of forfeiture lapse will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee), rather than dividend income, in an amount equal to the dividends paid and the Company will be entitled to a corresponding deduction, subject to the deduction limits under Section 162(m) of the Code.•
A participant will not recognize taxable income at the time a restricted stock unit is granted and the Company will not be entitled to a tax deduction at that time. Upon settlement of restricted stock units, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) in an amount equal to the fair market value of any shares delivered and the amount of any cash paid by the Company, and the Company will be entitled to a corresponding deduction, subject to the deduction limits under Section 162(m) of the Code.Adjusted EPS
A participant who receives shares of common stock that are not subject to any restrictions under the 2022 Plan will recognize compensation taxable as ordinary income on the date of grant in an amount equal to the fair market value of such shares on that date, and the Company will be entitled to a corresponding deduction, subject to the deduction limits under Section 162(m) of the Code.
Performance Awards. A participant will not recognize taxable income at the time performance awards are granted and the Company will not be entitled to a tax deduction at that time. Upon settlement of performance awards, the participant will recognize compensation taxable as ordinary income (and subject to income tax withholding in respect of an employee) in an•
amount equal to the fair market value of any shares delivered and the amount of cash paid by the Company, and the Company will be entitled to a corresponding deduction, subject to the deduction limits under Section 162(m) of the Code.
Other Incentive Awards. The federal income tax consequences of Other Incentive Awards will depend on how such awards are structured. Generally, the Company will be entitled to a deduction with respect to such awards only to the extent that the recipient realizes compensation income in connection with such awards and only to the extent not subject to the deduction limits of Section 162(m) of the Code. It is anticipated that Other Incentive Awards will usually result in compensation income to the recipient in some amount. However, some forms of Other Incentive Awards may not result in any compensation income to the recipient or any income tax deduction for the Company.•
Required VoteTSR relative ranking within KRX Index
The approval of the 2022 Plan requires the affirmative vote of a majority of the shares of Common Stock represented at the Annual Meeting, in person or by proxy, and entitled to vote thereon. Abstentions will have the same effect as a vote against the proposal. Broker non-votes will have no impact on whether the proposal passes.
THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDERS VOTE “FOR” APPROVAL OF THE WINTRUST FINANCIAL CORPORATION 2022 STOCK INCENTIVE PLAN.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information as of December 31, 2021,2022, relating to the Company’s equity compensation plans pursuant to which common stock is authorized for issuance:
| | | | | | | | | | | | | | | | | | | | |
EQUITY COMPENSATION PLAN INFORMATION |
Plan | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | Weighted-average exercise price of outstanding options, warrants and rights (b) | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
Equity compensation plans approved by security holders | | | | | | |
WTFC 1997 Stock Incentive Plan, as amended | | 85,000 | | $ | — | | | — |
WTFC 2007 Stock Incentive Plan | | 56,323 | | $ | 25.43 | | | — |
WTFC 2015 Stock Incentive Plan | | 1,068,127 | | $ | 5.49 | | | 963,175 |
WTFC Employee Stock Purchase Plan | | — | | $ | — | | | 262,650 |
WTFC Directors Deferred Fee and Stock Plan | | — | | $ | — | | | 493,702 |
| | 1,209,450 | | $ | 6.03 | | | 1,719,527 |
Equity compensation plans not approved by security holders (1) | | | | | | |
N/A | | — | | $ | — | | | — |
Total | | 1,209,450 | | $ | 6.03 | | | 1,719,527 |
| | EQUITY COMPENSATION PLAN INFORMATION | | |
| | Plan | | | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | | | Weighted-average exercise price of outstanding options, warrants and rights (b) | | | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | |
| | Equity compensation plans approved by security holders | | | | | | | | | | | | | | | | | | | | | | | |
| | WTFC 1997 Stock Incentive Plan, as amended | | | | | | 85,000 | | | | | | $ | — | | | | | | | — | | | |
| | WTFC 2007 Stock Incentive Plan | | | | | | 24,054 | | | | | | $ | — | | | | | | | — | | | |
| | WTFC 2015 Stock Incentive Plan | | | | | | 1,333,630 | | | | | | $ | 1.66 | | | | | | | — | | | |
| | WTFC 2022 Stock Incentive Plan | | | | | | 21,910 | | | | | | $ | — | | | | | | | 1,600,800 | | | |
| | WTFC Employee Stock Purchase Plan | | | | | | — | | | | | | $ | — | | | | | | | 221,110 | | | |
| | WTFC Directors Deferred Fee and Stock Plan | | | | | | — | | | | | | $ | — | | | | | | | 434,528 | | | |
| | | | | | | | 1,464,594 | | | | | | $ | 1.51 | | | | | | | 2,256,438 | | | |
| | EQUITY COMPENSATION PLAN INFORMATION | | |
| | Plan | | | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | | | Weighted-average exercise price of outstanding options, warrants and rights (b) | | | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | |
| | Equity compensation plans not approved by security holders(1) | | | | | | | | | | | | | | | | | | | | | | | |
| | N/A | | | | | | — | | | | | | $ | — | | | | | | | — | | | |
| | Total | | | | | | 1,464,594 | | | | | | $ | 1.51 | | | | | | | 2,256,438 | | | |
|
(1)
Excludes 18,06513,875 shares of the Company’s common stock issuable pursuant to the exercise of options granted under the plan of STC Bancshares Corporation. The weighted average exercise price of these options is $41.90.$42.18. No additional awards will be made under this plan.
PROPOSAL NO. 32 — APPROVAL OF, ON AN ADVISORY (NON-BINDING) BASIS, THE COMPANY’S EXECUTIVE COMPENSATION AS DESCRIBED IN THIS PROXY STATEMENT
Background of the Proposal
As the Company has done in years past and as required pursuant to Section 14A of the Exchange Act, we are providing shareholders with an opportunity to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers as disclosed in this Proxy Statement. The Company believes that it is appropriate to seek the views of shareholders on the design and effectiveness of the Company’s executive compensation program. Although this vote is advisory and thus non-binding, the Board and the Compensation Committee value the opinions of the shareholders and will consider the outcome of this “Say on Pay” vote when evaluating our compensation philosophy, policies and practices.
At the annual meetings of shareholders held in 2022, 2021, 2020, and 2019,2020, we provided our shareholders with the opportunity to cast an advisory vote to approve the compensation of our named executive officers as disclosed in the applicable proxy statement. Our shareholders overwhelmingly approved such proposals, with an average of more than 91%90% of the votes cast each year in favor. In accordance with the preference expressed by our shareholders at
At the 2017 annual meeting, we asked our shareholders to indicate if we should hold an advisory vote on the compensation of our named executive officers every one, two or three years. Our Board recommended and shareholders we intend to hold aapproved an annual Say on Pay vote on an annual basis at least untilvote. As required by Section 14A of the next frequency vote. In 2023,Exchange Act, we willare again askasking our shareholders to consider the appropriate frequency of thefuture Say on Pay vote.votes at the Annual Meeting (see Proposal No. 3).
Executive Compensation
The Company believes that its compensation policies and procedures, which are reviewed and approved by the Compensation Committee, encourage a culture of pay-for-performance and are strongly aligned with the long-term interests of shareholders. As more fully set forth under “Executive Compensation — Compensation Discussion & Analysis,” the Compensation Committee has taken a number of actions in recent years to further strengthen the Company’s compensation philosophy and objectives and the percentage of the compensation of senior executives which is “at risk.” As always, the Compensation Committee will continue to review all elements of the executive compensation program and take any steps it deems necessary to continue to fulfill the objectives of the program.
Shareholders are encouraged to carefully review the “Executive Compensation — Compensation Discussion & Analysis” section of this Proxy Statement for a detailed discussion of the Company’s executive compensation program. Because this shareholder vote is advisory, it will not be binding on the Board. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.
The Board has authorized a shareholder vote on the Company’s executive compensation as reflected in the Compensation Discussion & Analysis, including the disclosures regarding named executive officer compensation provided in the various tables included in this Proxy Statement, the accompanying narrative disclosures and the other compensation information provided in this Proxy Statement. This proposal, commonly known as a “Say on Pay” proposal, gives the Company’s shareholders the opportunity to endorse or not endorse the Company’s executive pay program and policies through the following resolution:
“Resolved, that the shareholders of Wintrust Financial Corporation approve, on a non-binding advisory basis, the compensation of the named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and narrative discussion in this Proxy Statement for the 20222023 Annual Meeting of Shareholders.”
Required Vote
The approval of the non-binding advisory resolution approving the compensation of our named executive officers described in this Proxy Statement requires the affirmative vote of a majority of the shares of Common Stock represented at the Annual Meeting, online or by proxy, and entitled to vote thereon. Abstentions will have the same effect as a vote against the proposal. Broker non-votes will have no impact on whether the proposal passes.
THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDERS VOTE “FOR” THE APPROVAL OF, ON AN ADVISORY (NON-BINDING) BASIS, THE COMPANY’S EXECUTIVE COMPENSATION AS DESCRIBED IN THIS PROXY STATEMENT.
PROPOSAL NO. 3 — APPROVAL OF, ON AN ADVISORY (NON-BINDING) BASIS, THE FREQUENCY OF FUTURE SHAREHOLDER ADVISORY VOTES ON EXECUTIVE COMPENSATION
Background of the Proposal
As required by Section 14A of the Exchange Act, every six years, the Company will provide shareholders with an opportunity to vote to approve, on an advisory (non-binding) basis, the frequency of the Say on Pay vote as described in Proposal No. 2. We are asking shareholders whether future Say on Pay votes should be held every one, two or three years.
Because our Board views it as a good corporate governance practice, and because at our 2017 annual meeting approximately 77% of the votes cast were in favor of an annual Say on Pay vote, we again are asking our shareholders to approve an annual Say on Pay vote. Our reasons in support of an annual Say on Pay vote are further described below.
Frequency of Say on Pay Advisory Vote
After careful consideration, our Board recommends that shareholders vote “ONE YEAR” as the frequency of future Say on Pay votes for a number of reasons, including the following:
•
An annual Say on Pay vote allows us to obtain shareholder input on our executive compensation program on a more consistent basis which aligns more closely with our objective to engage in regular dialogue with our shareholders on corporate governance matters, including our executive compensation philosophy, policies and practices;
•
A one-year frequency provides the highest level of accountability and communication by enabling the Say on Pay vote to correspond with the most recent executive compensation information presented in our proxy statement for the annual meeting;
•
A longer approach may make it more difficult for the Compensation Committee to understand and respond to the voting results because it may be unclear whether the shareholder vote pertains to the most recent executive compensation information presented in our proxy statement or to pay practices from the previous two years or both; and
•
Holding Say on Pay votes annually reflects sound corporate governance principles and is consistent with a majority of institutional investor policies.
Shareholders are not voting to approve or disapprove of the Board’s recommendation. Instead, the proxy card provides shareholders with four choices with respect to this proposal: holding a Say on Pay vote every one year, two years or three years or shareholders may abstain from voting on the proposal. For the reasons discussed above, we are asking our shareholders to vote for a ONE YEAR frequency on Say on Pay votes.
Required Vote
This vote is an advisory vote only, and therefore it will not bind the Company or our Board. However, the Board and the Compensation Committee will consider the voting results as appropriate when adopting a policy on the frequency of future Say on Pay votes. The option of one year, two years or three years that receives the highest number of votes cast by shareholders will be considered by the Board as the shareholders’ recommendation as to the frequency of future Say on Pay votes. Nevertheless, the Board may decide that it is in the best interests of our shareholders and the Company to hold Say on Pay votes more or less frequently than the option approved by our shareholders.
THE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDERS VOTE IN FAVOR OF “ONE YEAR” FOR THE FREQUENCY OF THE APPROVAL OF, ON AN ADVISORY (NON-BINDING) BASIS, THE COMPANY’S EXECUTIVE COMPENSATION.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board oversees the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for the consolidated financial statements and the reporting process, including the systems of internal controls.
In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the audited consolidated financial statements of the Company set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 20212022 with management of the Company. The Audit Committee also discussed with Ernst & Young LLP, an independent registered public accounting firm for the Company, which is responsible for expressing an opinion on the conformity of those audited consolidated financial statements with United States generally accepted accounting principles, the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC.
The Audit Committee has received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the auditors’ communications with the Audit Committee concerning independence and has discussed with Ernst & Young LLP their independence from the Company.
In reliance on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20212022 for filing with the SEC.
Audit Committee
| | | | | |
KARIN GUSTAFSON TEGLIA (CHAIR) | SUZET M. MCKINNEY |
MARLA F. GLABE | GARY D. “JOE” SWEENEY |
SCOTT K. HEITMANN | |
KARIN GUSTAFSON TEGLIA (CHAIR)
MARLA F. GLABE
GARY D. “JOE” SWEENEY
PROPOSAL NO. 4 — RATIFICATION OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 20222023
The Audit Committee has appointed Ernst & Young LLP, independent registered public accounting firm, as auditors for the Company and its subsidiaries for the fiscal year ended December 31, 2022.2023. The Board and the Audit Committee recommend that shareholders ratify the appointment of Ernst & Young LLP as independent auditors for the Company and its subsidiaries. If shareholders do not ratify the appointment, the Audit Committee will reconsider its selection. Ernst & Young LLP has served as independent registered public accounting firm for the Company since 1999 and is considered by the Board and the Audit Committee to be well qualified. One or more representatives of Ernst & Young LLP are expected to attend the Annual Meeting and afforded an opportunity to make a statement, if they desire to do so, and to respond to questions from shareholders.
Required Vote
Ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 20222023 requires the affirmative vote of a majority of the shares of Common Stock represented at the Annual Meeting, online or by proxy, and entitled to vote thereon. Abstentions will have the same effect as a vote against ratification. Brokers will have discretionary authority to vote on this proposal.
THE BOARD OF DIRECTORS AND AUDIT COMMITTEE UNANIMOUSLY RECOMMEND THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2022.2023.
AUDIT AND NON-AUDIT FEES PAID
The Company’s independent auditors for the fiscal years ended December 31, 20212022 and 20202021 were Ernst & Young LLP. Under its charter, the Audit Committee is solely responsible for reviewing the qualifications of the Company’s independent auditors and selecting the independent auditors for the current fiscal year.
The following is a description of the fees billed to the Company by Ernst & Young LLP for the years ended December 31, 20212022 and December 31, 2020:2021:
Audit Fees: Audit fees include fees billed by Ernst & Young LLP for the review and audit of the Company’s annual financial statements and review of financial statements included in the Company’s quarterly reports filed with the SEC, as well as services normally provided by an independent auditor in connection with statutory and regulatory filings or engagements. Aggregate fees for audit services were$2,479,618 in 2021 $2,770,313 in 2022 and $2,498,146$2,479,618 in 2020.2021.
Audit-Related Fees: Audit-related fees include fees for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements. Aggregate fees for audit-related services were $38,000 $25,000 in 20212022 and $38,000 in 2020.2021.
Tax Fees: Tax fees include fees for tax compliance, tax return preparation advice and tax planning services. Aggregate fees for tax services were $823,917 in 2022 and $527,757 in 2021 and $700,430 in 2020.2021.
All Other Fees: This category comprises all fees billed by Ernst & Young LLP to the Company not included in the previous three categories, which includes services provided for on-line accounting and auditing standards, interpretive guidance and regulatory advisory services. Aggregate fees for other services were $6,725 in 2022 and $5,220 in 2021 and $11,145 in 2020.2021.
The Audit Committee pre-approves all services, including both audit and non-audit services, provided by the Company’s independent auditor. For audit services, the independent auditor provides the Audit Committee with an engagement letter outlining the scope of the audit services proposed to be performed during the year and the fees to be charged, which must be formally accepted by the Audit Committee before the audit commences.
Management also submits to the Audit Committee a list of non-audit services that it recommends the independent auditor be engaged to provide and an estimate of the fees to be paid for each. The Audit Committee considers whether the provision of non-audit services by the Company’s independent auditor is compatible with maintaining the auditor’s independence. The Audit Committee must approve the list of non-audit services and the estimated fees for each such service before the commencement of the work.
To ensure prompt handling of unexpected matters, the Audit Committee has delegated the authority to amend and modify the list of approved permissible non-audit services and fees to the Audit Committee Chair. If the Chair exercises this delegation of authority, she reports the action taken to the Audit Committee at its next regular meeting.
All audit and permissible non-audit services provided by Ernst & Young LLP to the Company for fiscal year 20212022 were pre-approved by the Audit Committee in accordance with these procedures.
SHAREHOLDER PROPOSALS FOR THE 20232024 ANNUAL MEETING
Shareholder proposals intended to be presented at the Company’s 20232024 Annual Meeting of Shareholders must be received in writing by the Secretary of the Company no later than December 15, 20228, 2023 in order to be considered for inclusion in the proxy material for that meeting. Any such proposals shall be subject to the requirements of Rule 14a-8 of the proxy rules adopted under the Exchange Act. Furthermore, in order for any shareholder to properly propose any business for consideration at the 20232024 Annual Meeting, including the nomination of any person for election as a Director, or any other matter raised other than pursuant to Rule 14a-8 of the proxy rules adopted under the Exchange Act, written notice of the shareholder’s intention to make such proposal must be furnished to the Company in accordance with the By-laws. Pursuant to the By-laws, the deadline for such notice is February 25, 20232024 (but not before January 26, 2023)2024). In addition to satisfying the foregoing requirements under our By-laws, to comply with the universal proxy rules, (once effective), shareholders who intend to solicit proxies in support of director nominees other than management’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 27, 2023.26, 2024.
OTHER BUSINESS
The Company is unaware of any other matter to be acted upon at the Annual Meeting for shareholder vote. In case of any matter properly coming before the Annual Meeting for shareholder vote, unless discretionary authority has been denied the proxy holders named in the proxy card accompanying this Proxy Statement, such persons shall vote in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Kathleen M. Boege
Corporate Secretary
ANNEX AANNUAL MEETING OF SHAREHOLDERS OF WINTRUST FINANCIAL CORPORATION
2022 STOCK INCENTIVE PLAN
1.Purpose; Effect on Predecessor Plan. The purpose of the Wintrust Financial Corporation 2022 Stock Incentive Plan is May 25, 2023 9:00 AM Central Time GO GREEN e-Consent makes it easy to benefit the Corporation and its Subsidiaries by enabling the Corporation to offer certain present and future officers, employees, directors and consultants stock-based incentivesgo paperless. With e-Consent, you can quickly access your proxy material, statements and other equity interestseligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Annual Meeting of Shareholders, Proxy Statement, Form of Electronic Proxy Card, Annual Report on Form 10-K and Annual Letter to Shareholders are available at https://materials.proxyvote.com/97650W Please sign, date and mail your proxy card in the Corporation, thereby providing them a stakeenvelope provided as soon as possible. + Please detach along perforated line and mail in the growthenvelope provided.+ 052523 THEBOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH DIRECTOR NOMINEE, AND "FOR" PROPOSALS 2 AND 4, AND "EVERY 1 YEAR" ON PROPOSAL 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE • 0 1. Election of Directors FOR A.GA.tlST ABSTAN E li zabeth H . Co n nelly Timothy S. Crane Peter D. Crist Brian A. Kenney Deborah L. Hall Lefevre Suzet M. McKinney Gary D. "Joe" Sweeney FOR AGAtlST ABSTAN William J. Doyle Marla F. Gl abe H. Patrick Hackett, Jr. Scott K. Heitmann Karin Gustafson Teglia Alex E. Washington, Ill Edward J. Wehmer 2. Proposal lo approve, on an advisory (non-binding) basis, the Corporation and encouraging them to continue in the service of the Corporation and its Subsidiaries.
This Plan replaces the Predecessor Plans. As of the Effective Date, no further awards shall be granted under the Predecessor Plans.
2.Definitions.
a.“Award” includes, without limitation, stock options (including incentive stock options under Section 422 of the Code), stock appreciation rights, performance awards, stock awards, restricted share or unit awards, or other awards that are valued in whole or in part by reference to, or are otherwise based on, the Corporation’s Common Stock (“Other Incentive Awards”), all on a stand alone, combination or tandem basis,Company's executive compensation as described in the 2023 Proxy Statement. -----------------------------i Every Every Every 3 . P roposal to approve , on an advisory (non •bind ing) basis, theD D D D 1 year 2 years 3 years ABSTAN frequency of future shareholder advisory votes to approve the Company's executive compensation every one, two or granted under this Plan.
b.“Award Agreement” means a written or electronic agreement betweenthree years. FOR AGAtJST ABSTAN 4. Propo sal to ratify the Corporationappointment of Ernst & Young LLP lo serve as the independent registered public accounting firm for fiscal year 2023. To change the address on your account, please check the box at right and each Participant setting forthindicate your new address in the terms and conditions of each Award made under this Plan.
c.“Board” meansaddress space above. Please note that changes to the Board of Directors of the Corporation.
d.“Code” means the Internal Revenue Code of 1986, as amended from time to time.
e.“Committee” means the Compensation Committee of the Board, or a subcommittee thereof, or such other committee of the Board as may be designated by the Board from time to time to administer this Plan, with each member of such committee intended to be (i) a “Non-Employee Director” within the meaning of Rule 16b-3 under the Exchange Act and (ii) “independent” within the meaning of the rules of the Nasdaq Global Select Market or any other stock exchange on which the Common Stock is then traded.
f.“Common Stock” means the Common Stock, no par value, of the Corporation.
g.“Corporation” means Wintrust Financial Corporation, an Illinois corporation.
h.“Director” means a non-employee director of the Corporation or a Subsidiary.
i.“Effective Date” means May 26, 2022, the date of the approval of the Plan by the shareholders of the Corporation.
j.“Employee” means an employee or prospective employee of the Corporation or a Subsidiary.
k.“Exchange Act” means the Securities Exchange Act of 1934, as amended.
l.“Fair Market Value” means the average of the highest and the lowest quoted selling pricesregistered name(s) on the Nasdaq Global Select Marketaccount may not be submitted via this method. D D D • • Signature of Shareholder - - - - - - - - - - - - - Date: - - - - Signature of Shareholder - - - - - - - - - - - - - Date: [ J Note: Please sign exactl y as your name or names appear on the relevant valuation date or, if there were no sales on the valuation date, on the next preceding date on which such selling prices were recorded; provided, however, that, to the extent permitted under Section 409A of the Code, the Committee may modify the definition of Fair Market Value to mean the closing selling price on the Nasdaq Global Select Market on the relevant valuation date or, if there were no sales on the valuation date, on the next preceding date on which such closing selling prices were recorded; provided, further, that the Corporation may in its discretion use the closing selling price or such other permissible method for determining the value of the shares on the day preceding the date as of which such value is being determined to the extent the Corporation determines such method is more practical for administrative purposes, such as for purposes of tax withholding.
m.“Participant” means an Employee, Director or a consultant who has been granted an Award under the Plan.
n.“Plan” means this Wintrust Financial Corporation 2022 Stock Incentive Plan.
o.“Predecessor Plan” means the Wintrust Financial Corporation 2007 Stock Incentive Plan, the Wintrust Financial Corporation 2015 Stock Incentive Plan, and each other plan previously maintained by the Corporation under which equity awards remain outstanding as of the Effective Date.
p.“Replacement Award” means an Award granted in place of outstanding Awards in connection with a Change in Control if: (i) it is of the same type as the replaced Award; (ii) it has a value intended to preserve the value of the replaced Award; (iii) it relates to publicly traded equity securities of the Corporation or its successor in the Change in Control or another entity that is affiliated with the Corporation or its successor following the Change in Control; and (iv) its other terms and conditions are not less favorable to the Participant than the terms and conditions of the replaced Award (including the provisions that would apply in the event of a subsequent Change in Control). Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of the replaced Award if the requirements of the preceding sentence are satisfied. The determination of whether the conditions for Replacement Awards are satisfied shall be made by the Board, as constituted immediately before the Change in Control, in its sole discretion.
q.“Subsidiary” means any corporation or other entity, whether domestic or foreign, in which the Corporation has or obtains, directly or indirectly, a proprietary interest of at least 50% (or 20%, if providing an Award to an Employee, Director or consultant of such Subsidiary is based upon legitimate business criteria, as defined in Section 409A of the Code and the regulations promulgated thereunder) by reason of stock ownership or otherwise.
r.“Substitute Award” shall mean an Award granted under this Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction, including a merger, combination, consolidation or acquisition of property or stock; provided, however, that in no event shall the term “Substitute Award” be construed to refer to an award made in connection with the cancellation and repricing of a stock option or stock appreciation right.
3.Eligibility. Any Employee, Director or consultant selected by the Committee is eligible to receive an Award. In addition, the Committee may select former Employees and Directors who have a consulting arrangement with the Corporation or a Subsidiary whom the Committee determines have a significant responsibility for the success and future growth and profitability of the Corporation. The Committee’s selection of a person to participate in this Plan at any time shall not require the Committee to select such person to participate in this Plan at any other time. Except as provided otherwise in an Award Agreement, for purposes of this Plan, references to employment by the Corporation shall also mean employment by a Subsidiary, and references to employment shall include service as a Director or consultant. The Committee shall determine, in its sole discretion, the extent to which a participant shall be considered employed during any periods during which such participant is on a leave of absence. The aggregate value of cash compensation and the grant date fair value of shares of Common Stock that may be awarded or granted during any fiscal year of the Company to any Director, for his or her services as a Director, shall not exceed $750,000; provided, however, that this limit shall not apply to distributions of previously deferred compensation under a deferred compensation plan maintained by the Company or compensation received by the director in his or her capacity as an executive officer or employee of the Company.
4.Plan Administration.
a.Except as otherwise determined by the Board, the Plan shall be administered by the Committee. The Committee shall make determinations with respect to the participation of Employees, Directors and consultants in the Plan and, except as otherwise required by law or this Plan, the terms of Awards, including vesting schedules, price, length of relevant performance, restriction or vesting periods, post-retirement and termination rights, payment alternatives such as cash, stock, contingent awards or other means of payment consistent with the purposes of this Plan, and such other terms and conditions as the Committee deems appropriate.The Committee may, in its sole discretion and for any reason at any time, take action such that (i) any or all outstanding stock options and stock appreciation rights shall become exercisable in part or in full, (ii) all or a portion of the restriction period applicable to any outstanding Award shall lapse, (iii) all or a portion of the performance period applicable to any outstanding Award shall lapse and (iv) the performance goals (if any) applicable to any outstanding Award shall be deemed to be satisfied at the target or any other level.
b.The Committee, by majority action thereof (whether taken during a meeting or by written consent), shall have authority to interpret and construe the provisions of the Plan and the Award Agreements and make determinations pursuant to any Plan provision or Award Agreement which shall be final and binding on all persons. No member of the Committee shall be liable for any action or determination made in good faith, and the members of the Committee shall be entitled to indemnification and reimbursement in the manner provided in the Corporation’s Articles of Incorporation and By-Laws, as may be amended from time to time.
c.The Committee may designate persons other than its members to carry out its responsibilities under such conditions or limitations as it may set, other than its authority with regard to Awards granted to a Participant who is an officer or director of the Corporation for purposes of Section 16 of the Exchange Act. To the extent deemed necessary or advisable, including for purposes of Section 16 of the Exchange Act, the independent members of the Board may act as the Committee hereunder.
5.Stock Subject to the Provisions of this Plan. The stock subject to the provisions of this Plan shall be made available from shares of authorized but unissued Common Stock, shares of authorized and issued Common Stock reacquired and held as treasury shares or otherwise, or a combination thereof. Subject to adjustment in accordance with the provisions of Section 10, the total number of shares of Common Stock which may be issued under the Plan or with respect to which all Awards may be granted shall equal (i) 1,200,000 shares plus (ii) any shares of Common Stock that are available for awards under the Wintrust Financial Corporation 2015 Stock Incentive Plan as of the effective date of this Plan. Subject to adjustment as provided in Section 10, no more than 1,000,000 shares of Common Stock in the aggregate may be issued under the Plan in connection with Incentive Stock Options. The number of shares of Common Stock that remain available for future grants under the Plan shall be reduced by an amount equal to the number of shares subject to each Award granted under the Plan. Upon:
a.a payout of an Award in the form of cash; or
b.a cancellation, termination, forfeiture, or lapse for any reason (with the exception of the termination of a tandem Award upon exercise of the related Award, or the termination of a related Award upon exercise of the corresponding tandem Award) of any Award (or portion thereof) or any award (or portion thereof) granted under the Predecessor Plan, then the number of shares of Common Stock underlying any such Award or such award granted under a Predecessor Plan, which were not issued as a result of any of the foregoing actions shall again be available for the purposes of Awards under the Plan. Shares of Common Stock subject to an Award granted under this Plan or the Predecessor Plan, other than a stock option or stock appreciation right, shall again become available for issuance under this Plan if suchProxy. When shares are delivered toheld jointty, each holder shoold sign. When signing as executor, administrator,at1omey, trus tee or withheld byguardian , please give fuH title as such If the Company to pay the purchase price or withholding taxes payable with respect to such award. Shares of Common Stock subject to an Award under this Plan shall not again be available for issuance under this Plan if such shares are: (i) shares that were subject to a stock option or stock appreciation right and were not issued or delivered upon the net settlement or net exercise of such stock option or stock appreciation right; (ii) shares delivered to or withheld by the Corporation to satisfy the tax withholding obligations relating to an outstanding stock option or stock appreciation right; or (iii) shares that are repurchased by the Corporation with proceeds received from payment of the exercise price of a stock option. The number of shares of Common Stock that again become available pursuant to this paragraph shall be equal to one share of Common Stock for each share subject to an award granted under this Plan or any Predecessor Plan.signer
The number of shares of Common Stock available for Awards under this Plan shall not be reduced by (i) the number of shares of Common Stock subject to Substitute Awards or (ii) available shares under a shareholder approved plan of a company or other entity which was a party to a corporate transaction with the Corporation (as appropriately adjusted to reflect such corporate transaction) which become subject to Awards granted under this Plan (subject to applicable stock exchange requirements).
6.Awards under this Plan. As the Committee may determine, the following types of Awards may be granted under this Plan on a stand-alone, combination or tandem basis:
a.Stock Option. A right to buy a specified number of shares of Common Stock at a fixed exercise price during a specified time, all as the Committee may determine. The exercise price of any stock option shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such Award; provided, however, in the case of a stock option that is a Substitute Award, the exercise price per share of the shares subject to such stock option may
be less than 100% of the Fair Market Value per share on the date of grant, provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate exercise price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transactioncorporation, please sign full corporate name by duly authorizedofficer, giving rise to the Substitute Award, such fair market value to be determined by the Committee) of the shares of the predecessor company or other entity that were subject to the grant assumed or substituted for by the Corporation, over (y) the aggregate exercise price of such shares. No stock option shall be exercised later than ten (10) years after its date of grant.
b.Incentive Stock Option. An Award in the form of a stock option which is intended to comply, and complies, with the requirements of Section 422 of the Code or any successor section of the Code,tu• title as it may be amended from time to time. Each stock option, or portion thereof, that is not an Incentive Stock Option shall be a nonqualified stock option.
c.Stock Appreciation Right. A right to receive the excess of the Fair Market Value of a share of Common Stock on the date the stock appreciation right is exercised over the Fair Market Value of a share of Common Stock on the date the stock appreciation right was granted, payable in shares of Common Stock (including restricted shares) or, to the extent provided in the applicable Award Agreement, cash or a combination of both. The exercise price of any stock appreciation right shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such Award; provided, however, in the case of a stock appreciation right thatsuch. If signer is a Substitute Award, the exercise price per share of the shares subject to such stock appreciation right may be less than 100% of the Fair Market Value per share on the date of grant, provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate exercise price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determinedpartnership, please sign in partnership name by the Committee) of the shares of the predecessor company or other entity that were subject to the grant assumed or substituted for by the Corporation, over (y) the aggregate exercise price of such shares. No stock appreciation right shall be exercised later than ten (10) years after its date of grant.authorized person.
d.Restricted Shares. A transfer of Common Stock to a Participant, subject to such restrictions on transfer or other incidents of ownership, or subject to specified vesting or performance conditions, for such periods of time as the Committee may determine. Unless otherwise set forth in the Award Agreement, and subject to the terms and conditions of a restricted share Award, the Participant shall have all rights as a shareholder of the Corporation, including, but not limited to, voting rights, the right to receive dividends and the right to participate in any capital adjustment applicable to all holders of Common Stock; provided, however, that a distribution with respect to shares of Common Stock, including a regular cash dividend, shall be deposited with the Corporation and shall be subject to the same restrictions as the shares of Common Stock with respect to which such distribution was made.
e. Restricted Share Unit. A fixed or variable share or dollar denominated unit subject to such conditions of vesting, performance and time of payment as the Committee may determine, which are valued at the Committee’s discretion in whole or in part by reference to, or otherwise based on, the Fair Market Value of Common Stock. The Award Agreement shall specify (i) whether such Award may be settled in shares of Common Stock, cash or a combination of both and (ii) whether the holder thereof shall be entitled to receive dividend equivalents, and, if determined by the Committee, interest on, or the deemed reinvestment of, any deferred dividend equivalents, with respect to the number of shares of Common Stock subject to such Award. Any dividend equivalents with respect to restricted share units that are subject to vesting conditions shall be subject to the same restrictions as such restricted share units. Prior to the settlement of a restricted share unit Award, the holder of such Award shall have no rights as a shareholder of the Corporation with respect to the shares of Common Stock subject to such Award.
f.Performance Award. A fixed or variable share or dollar denominated Award subject to such conditions of vesting, performance and time of payment as the Committee may determine. The Award Agreement shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of such performance award if the specified performance goals are satisfied or met during the specified performance period and for the forfeiture of such Award if the specified performance goals are not satisfied or met during the specified performance period. The Award Agreement shall specify whether such Award may be settled in shares of Common Stock (including restricted shares) or cash or a combination thereof. Any dividends or dividend equivalents with respect to a performance award shall be subject to the same restrictions as such performance award. Prior to the settlement of a performance award in shares of
Common Stock, including restricted shares, the holder of such Award shall have no rights as a shareholder of the Corporation.
g.Stock Award. An unrestricted transfer of ownership of Common Stock.
h.Other Incentive Awards. Other Incentive Awards which are related to or serve a similar function to those Awards set forth in this Section 6, including, but not limited to, Other Incentive Awards related to the establishment or acquisition by the Corporation or any Subsidiary of a new or start-up business or facility. Any distribution, dividend or dividend equivalents with respect to Other Incentive Awards that are subject to vesting conditions shall be subject to the same vesting conditions as the underlying awards.
The Committee may from time to time, establish, amend or adjust performance criteria with respect to an Award, including, but not limited to, one or more of the following corporate-wide or subsidiary, division, operating unit or individual measures: the attainment by a share of Common Stock of a specified value within or for a specified period of time; increase in shareholder value; earnings per share; return on equity; return on assets; return on investments; return on total capital or invested capital; return to shareholders (including dividends); total shareholder return; revenues; cash flow(s); attainment of expense levels or cost reduction goals; market share; charge-offs; loan losses and loan loss reserves; losses from discontinued operations; reductions in non-performing assets; net income; operating income; operating expenses; gross profit or margin; operating profit or margin; interest expenses; expense management; economic value added; net cash provided by operations; price-to-earnings growth; customer satisfaction; customer acquisition; business expansion; cost targets; reductions in errors and omissions; reductions in lost business; management of employment practices and employee benefits; supervision of litigation; supervision of information technology; efficiency; acquisitions and divestitures, productivity; employee retention; succession management; management of the cost of insurance claims; achievement of regulatory compliance performance goals; satisfactory internal or external audits; improvements in financial ratings; measurable marketing effectiveness; market penetration; achievement of diversity goals; or such other goals as the Committee may determine, whether or not listed herein. Each such goal may be determined on a pre-tax or post-tax basis or on an absolute or relative basis and may include comparisons based on current internal targets, the past performance of the Corporation (including the performance of one or more subsidiaries, divisions, or operating units) or the past or current performance of other companies or market indices (or a combination of such past and current performance). In addition to the ratios specifically enumerated above, performance goals may include comparisons relating to capital (including, but not limited to, the cost of capital), shareholders’ equity, shares outstanding, assets or net assets, sales, or any combination thereof. In establishing a performance measure or determining the achievement of a performance measure, the Committee may provide that achievement of the applicable performance measures may be amended or adjusted to include or exclude components of any performance measure, including, without limitation, foreign exchange gains and losses, asset write-downs, acquisitions and divestitures, change in fiscal year, change in tax rates, unbudgeted capital expenditures, special charges such as restructuring or impairment charges, debt refinancing costs, extraordinary or noncash items, unusual, infrequently occurring, nonrecurring or one-time events affecting the Corporation or its financial statements or changes in law or accounting principles. Performance measures shall be subject to such other special rules and conditions as the Committee may establish at any time.
7.Award Agreements.
a.Each Award under the Plan shall be evidenced by an Award Agreement. Delivery of an Award Agreement to each Participant shall constitute an agreement, subject to Section 9 hereof, between the Corporation and the Participant as to the terms and conditions of the Award.
b.Notwithstanding any other provision of the Plan to the contrary, Awards granted under the Plan (other than cash-based Awards) shall vest no earlier than the first anniversary of the date on which the Award is granted; provided, that the following awards shall not be subject to the foregoing minimum vesting requirement: any (i) Substitute Awards granted in connection with awards that are assumed, converted or substituted pursuant to a merger, acquisition or similar transaction entered into by the Corporation or any of its Subsidiaries, (ii) shares of Common Stock delivered in lieu of fully vested cash obligations, and (iii) any additional awards the Committee may grant, up to a maximum of five percent (5%) of the available share reserve authorized for issuance under the Plan pursuant to Section 5 (subject to adjustment under Section 10); and, provided, further, that the foregoing restriction does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any Award, including in cases of termination of employee due to retirement, death or disability, in the terms of the Award Agreement or otherwise.TABLE OF CONTENTSAnnex A-5
8.Other Terms and Conditions.
a.Nontransferability. No Award shall be transferable other than by will, the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Corporation or, to the extent expressly permitted in the Award Agreement, to the Participant’s family members, a trust or entity established by the Participant for estate planning purposes or a charitable organization designated by the Participant, in each case, without consideration. Except to the extent permitted by the foregoing sentence or the Award Agreement, each Award may be exercised or settled during the Participant’s lifetime only by the Participant or the Participant’s legal representative or similar person. Except as permitted by the second preceding sentence, no Award may be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any Award, such Award and all rights thereunder shall immediately become null and void.
b.Beneficiary Designation. Each Participant under the Plan may name, from time to time, any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Corporation, and will be effective only when filed by the Participant in writing with the Corporation during his or her lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to his or her estate.
c.Termination of Employment. The termination of each Award in the event of the retirement, disability, death or other termination of a Participant’s employment or service, shall be as determined by the Committee and set forth in the Award Agreement.
d.Rights as a Shareholder. A Participant shall have no rights as a shareholder with respect to shares covered by an Award until the date the Participant or his nominee, guardian or legal representative is the holder of record.
e.Payments by Participants. The Corporation may determine that Awards for which a payment is due from a Participant may be payable: (i) in cash by personal check, bank draft or money order payable to the order of the Corporation, by money transfers or direct account debits; (ii) through the delivery or deemed delivery based on attestation to the ownership of previously acquired shares of Common Stock with a Fair Market Value equal to the total payment due from the Participant; (iii) authorizing the Corporation to withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value, determined as of the date of exercise, equal to the amount necessary to satisfy such obligation; (iv) by a combination of the methods described in (i), (ii) and (iii) above; (v) except as may be prohibited by applicable law, in cash by a broker-dealer acceptable to the Corporation to whom the Participant has submitted an irrevocable notice of exercise or sell; or (vi) by such other methods as the Corporation may deem appropriate and permitted by applicable law; provided, however, that any decisions regarding the payments by Participants subject to Section 16 of the Exchange Act shall be determined by the Committee.
f.Withholding. The Corporation shall have the right to require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash pursuant to an Award made hereunder, payment by the holder of such Award of any federal, state, local or other taxes which may be required to be withheld or paid in connection with such Award. An Award Agreement may provide that (i) the Corporation shall withhold whole shares of Common Stock which would otherwise be delivered to a holder, having an aggregate Fair Market Value determined as of the date the obligation to withhold or pay taxes arises in connection with an Award (the “Tax Date”), or withhold an amount of cash which would otherwise be payable to a holder, in the amount necessary to satisfy any such obligation or (ii) the holder may satisfy any such obligation by any of the following means: (A) a cash payment to the Corporation, (B) delivery (either actual delivery or by attestation procedures established by the Corporation) to the Corporation of previously owned whole shares of Common Stock having an aggregate Fair Market Value, determined as of the Tax Date, equal to the amount necessary to satisfy any such obligation, (C) authorizing the Corporation to withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value, determined as of the Tax Date, or withhold an amount of cash which would otherwise be payable to a holder, in either case equal to the amount necessary to satisfy any such obligation, (D) a cash payment by a broker-dealer acceptable to the Corporation to whom the Participant has submitted an irrevocable notice of exercise or sell or (E) any combination of (A), (B) and (C), in each case to the extent set forth in the Award Agreement. Shares of Common Stock to be delivered or withheld may not have an aggregate Fair Market Value in excess of the amount
determined by applying the minimum statutory withholding rate (or, if permitted by the Corporation, such higher withholding rate to the extent consistent with fixed plan accounting in accordance with Generally Accepted Accounting Principles). Any fraction of a share of Common Stock which would be required to satisfy such an obligation shall be disregarded and the remaining amount due shall be paid in cash by the holder.
g.Deferral. The receipt of payment of cash or delivery of shares of Common Stock that would otherwise be due to a Participant under any Award other than a stock option or stock appreciation right may be deferred to the extent permitted by an applicable deferral plan established by the Corporation or a Subsidiary and in accordance with Section 409A of the Code. The Committee shall establish rules and procedures relating to any such deferrals and the payment of any tax withholding with respect thereto.
h.No Repricing or Cancellation for Cash. Notwithstanding anything in this Plan to the contrary and subject to Sections 10 and 12, without the approval of the shareholders of the Corporation, neither the Board nor the Committee will amend any previously granted Award to (i) reduce the exercise price of an outstanding stock option or stock appreciation right, (ii) cancel an outstanding stock option or stock appreciation right in exchange for another stock option or stock appreciation right with a lower exercise price or (iii) cancel any previously granted stock option or stock appreciation right in exchange for cash or another Award if the exercise price of such stock option or stock appreciation right exceeds the Fair Market Value of a share of Common Stock on the date of such cancellation.
i.No Dividend Equivalents on Stock Options or Stock Appreciation Rights. Notwithstanding anything in an Award Agreement to the contrary, the holder of a stock option or stock appreciation right shall not be entitled to receive dividend equivalents with respect to the number of shares of Common Stock subject to such stock option or stock appreciation right.
9.Amendments, Modification and Termination. The Board may at any time and from time to time, terminate, suspend or discontinue this Plan. The Board of Directors may at any time and from time to time, alter or amend this Plan, subject to any requirement of shareholder approval imposed by applicable law, rule or regulation, including any rule or regulation of the Nasdaq Global Select Market or any other stock exchange on which the Common Stock is then traded; provided, however, that no amendment to the Plan shall be effective without the approval of the Corporation’s shareholders if such amendment seeks to modify the Director compensation limit set forth in this Plan or the prohibition on repricing of stock options or stock appreciation rights set forth in this Plan. No termination, amendment, or modification of the Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award.
10.Recapitalization. In the event of any equity restructuring (within the meaning of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation) that causes the per share value of shares of Common Stock to change, such as a share dividend, stock split, spinoff, rights offering or recapitalization through an extraordinary cash dividend, the number and class of securities available under this Plan, the terms of each outstanding stock option and stock appreciation right (including the number and class of securities subject to each outstanding stock option or stock appreciation right and the purchase price or base price per share), the terms of each outstanding restricted share Award and restricted share unit Award (including the number and class of securities subject thereto), and the terms of each outstanding performance award (including the number and class of securities subject thereto) shall be appropriately adjusted by the Committee, such adjustments to be made in the case of outstanding stock options and stock appreciation right without an increase in the aggregate purchase price or base price and in accordance with Section 409A of the Code. In the event of any other change in corporate capitalization, including a merger, consolidation, reorganization, or partial or complete liquidation of the Corporation, such equitable adjustments described in the foregoing sentence may be made as determined to be appropriate and equitable by the Committee to prevent dilution or enlargement of rights of participants. In either case, the decision of the Committee regarding any such adjustment shall be final, binding and conclusive.
11.Rights as Employees, Directors or Consultants. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of or as a Director of or as a consultant to the Corporation or a Subsidiary. Further, the Corporation and each Subsidiary expressly reserve the right at any time to dismiss a Participant free from any liability, or any claim under the Plan, except as provided herein or in any Award Agreement issued hereunder.
12.Change in Control.
a.In the event of a Change in Control (as defined below) pursuant to which the outstanding Awards are not replaced with a Replacement Award, the following shall occur upon a Change in Control with respect to any such Awards outstanding as of such Change in Control:
i.any and all stock options and stock appreciation rights granted hereunder shall become immediately exercisable, and shall remain exercisable for the remainder of their term, subject to any limitations on such term provided in the Award Agreement or pursuant to Section 8(c) hereof;
ii.any restrictions imposed on restricted shares shall lapse and all restricted share units shall become fully vested;
iii.unless otherwise specified in a Participant’s Award Agreement at time of grant, the payout opportunities attainable under all outstanding Awards subject to performance-based vesting conditions shall be earned based on actual performance through the effective date of the Change in Control and the vesting of all such Awards shall be accelerated as of the effective date of the Change in Control or, if the performance metrics cannot be measured through the date of the Change in Control or as otherwise determined by the Board (as constituted prior to the Change in Control), threshold, target, maximum or any interim performance level determined by the Board (as constituted prior to the Change in Control); and
iv.the Board (as constituted prior to such Change in Control) may, in its discretion, require outstanding Awards, in whole or in part, to be surrendered to the Corporation by the holder, and to be immediately cancelled by the Corporation, and to provide for the holder to receive (1) a cash payment in an amount equal to (a) in the case of a stock option or stock appreciation right, the number of shares of Common Stock then subject to the portion of such Award surrendered multiplied by the excess, if any, of the highest per share price offered to holders of Common Stock in any transaction whereby the Change in Control takes place, over the purchase price or base price per share of Common Stock subject to such Award, (b) in the case of restricted shares, restricted share units, performance awards denominated in Common Stock, or Other Incentive Awards, the number of shares of Common Stock or units then subject to the portion of such Award surrendered to the extent the performance criteria (if any) applicable to such Award are satisfied or deemed satisfied pursuant to Section 12(a)(iii) multiplied by the highest per share price offered to holders of Common Stock in any transaction whereby the Change in Control takes place and (c) in the case of performance awards and Other Incentive Awards denominated in cash, the value of the award then subject to the portion of such Award surrendered to the extent the performance criteria applicable to such Award are satisfied or deemed satisfied pursuant to Section 12(a)(iii); (2) shares of capital stock of the corporation resulting from such Change in Control, or a parent corporation thereof, having a fair market value not less than the amount determined under clause (1) above; or (3) a combination of the payment of cash pursuant to clause (1) above and the issuance of shares pursuant to clause (2) above.
b.Except as otherwise provided for in Section 12(a), in the event of the termination of a Participant’s employment by the Corporation without cause (as defined the Award Agreement) or, to the extent permitted in the Award Agreement, the termination of a Participant’s employment by the Participant for a constructive termination or good reason (as defined in the Award Agreement), in each case, within the 18-month period following the occurrence of a Change in Control, then the following shall occur with respect to any and all Awards held by the Participant as of such termination of employment:
i.any and all stock options and stock appreciation rights shall become immediately exercisable, and shall remain exercisable for the remainder of their term, subject to any limitations on such term provided in the Award Agreement or pursuant to Section 8(c) hereof;
ii.any restrictions imposed on restricted shares shall lapse and all restricted share units shall become fully vested; and
iii.unless otherwise specified in a Participant’s Award Agreement at the time of grant, with respect to Awards subject to performance-based vesting conditions, (y) in the event the termination of employment occurs during the first twelve months of a performance period, all unvested Awards shall be prorated based on the greater of (1) actual performance through the date of termination of employment (if measurable through the date of such termination of employment) and (2)
target performance, with the Award prorated based on the number of full months the employee participated in the performance period, and the vesting of all such Awards shall be accelerated as of the effective date of such termination of employment and (z) in the event the termination of employment occurs on or after the first anniversary of the commencement of the performance period, all unvested Awards shall be earned at the greater of (1) actual performance through the date of the termination of employment (if measurable through the date of such termination of employment) and (2) target performance.
c.A “Change in Control” of the Corporation shall be deemed to have occurred upon the happening of any of the following events:
i.The acquisition, other than from the Corporation, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either the then outstanding shares of Common Stock of the Corporation or the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors, but excluding, for this purpose, any such acquisition by the Corporation or any of its Subsidiaries, or any employee benefit plan (or related trust) of the Corporation or its Subsidiaries, or any corporation with respect to which, following such acquisition, more than 50% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of all or substantially all directors is then beneficially owned, directly or indirectly, by the individuals and entities who were the beneficial owners, respectively, of the Common Stock and voting securities of the Corporation immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the then outstanding shares of Common Stock of the Corporation or the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors, as the case may be; or
ii.Individuals who, as of the date hereof, constitute the Board (as of the date hereof the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Corporation’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Corporation (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act);
iii.The consummation of a reorganization, merger or consolidation of the Corporation, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the Common Stock and voting securities of the Corporation immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of Common Stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation; or
iv.a complete liquidation or dissolution of the Corporation or of the sale or other disposition of all or substantially all of the assets of the Corporation.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than 50% of the outstanding voting securities of the Corporation as a result of the acquisition of outstanding voting securities by the Corporation which reducesthe number of outstanding voting securities of the Corporation; provided, that if after such acquisition by the Corporation such person becomes the beneficial owner of additional voting securities of the Corporation that increases the percentage of outstanding voting securities of the Corporation beneficially owned by such person, a Change in Control of the Corporation shall then occur.
Solely with respect to any award that constitutes “deferred compensation” subject to Section 409A of the Code and that is payable on account of a Change in Control (including any installments or stream of payments that are accelerated on account of a Change in Control), a Change in Control shall occur only if such event also constitutes a “change in the ownership”, “change in effective control”, and/or a “change in the ownership of a substantial portion of assets” of the Corporation as those terms are defined under Treasury Regulation §1.409A-3(i)(5), but only to the extent necessary to
establish a time or form of payment that complies with Section 409A of the Code, without altering the definition of Change in Control for purposes of determining whether a participant’s rights to such Award become vested or otherwise unconditional upon the Change in Control.
13.Governing Law. To the extent that federal laws do not otherwise control, the Plan and all Award Agreements hereunder shall be construed in accordance with and governed by the law of the State of Illinois, provided, however, that in the event the Corporation’s state of incorporation shall be changed, then the law of the new state of incorporation shall govern.
14.Restrictions on Shares.Each Award made hereunder shall be subject to the requirement that if at any time the Corporation determines that the listing, registration or qualification of the shares of Common Stock subject to such award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of shares thereunder, such shares shall not be delivered unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Corporation. The Corporation may require that certificates evidencing shares of Common Stock delivered pursuant to any award made hereunder bear a legend indicating that the sale, transfer or other disposition thereof by the holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the rules and regulations thereunder.
15.Savings Clause. This Plan is intended to comply in all aspects with applicable law and regulation, including, with respect to those Employees who are officers or directors for purposes of Section 16 of the Exchange Act, including Rule 16b-3 under the Exchange Act. In case any one or more of the provisions of this Plan shall be held invalid, illegal or unenforceable in any respect under applicable law and regulation (including Rule 16b-3), the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provision shall be deemed null and void; however, to the extent permissible by law, any provision which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Plan to be construed in compliance with all applicable laws (including Rule 16b-3) so as to foster the intent of this Plan.
16.Term. The Plan shall remain in effect until terminated by the Board, provided, however, that no incentive stock option shall be granted under this Plan on or after the ten year anniversary of the Effective Date.
17.Awards Subject to Clawback. The Awards granted under this Plan and any cash payment or shares of Common Stock delivered pursuant to an Award are subject to forfeiture, recovery by the Corporation or other action pursuant to the applicable Award Agreement or any clawback or recoupment policy which the Corporation may adopt from time to time, including without limitation any such policy which the Corporation may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by law.
18.Foreign Employees. Without amending this Plan, the Committee may grant awards to eligible persons who are foreign nationals and/or reside outside the U.S. on such terms and conditions different from those specified in this Plan as may in the judgment of the Committee be necessary or desirable to foster and promote achievement of the purposes of this Plan and, in furtherance of such purposes the Committee may make such modifications, amendments, procedures, subplans and the like as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in which the Corporation or its Subsidiaries operates or has employees.
19.Section 409A of the Code. This Plan is intended to comply with the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent. To the extent that any award is subject to Section 409A of the Code, it shall be paid in a manner that will comply with Section 409A of the Code, including proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto. Notwithstanding anything herein to the contrary, any provision in this Plan that is inconsistent with Section 409A of the Code shall be deemed to be amended to comply with Section 409A of the Code and to the extent such provision cannot be amended to comply therewith, such provision shall be null and void. The Corporation shall have no liability to a Participant, or any other party, if an award that is intended to be exempt from, or compliant with, Section 409A of the Code is not so exempt or compliant or for any action taken by the Committee or the Corporation and, in the event that any amount or benefit under this Plan becomes subject to penalties under Section 409A of the Code, responsibility for
payment of such penalties shall rest solely with the affected Participants and not with the Corporation. Notwithstanding any contrary provision in this Plan or an Award Agreement, any payment(s) of “nonqualified deferred compensation” (within the meaning of Section 409A of the Code) that are otherwise required to be made under this Plan to a “specified employee” (as defined under Section 409A of the Code) as a result of such employee’s separation from service (other than a payment that is not subject to Section 409A of the Code) shall be delayed for the first six (6) months following such separation from service (or, if earlier, the date of death of the specified employee) and shall instead be paid (in a manner set forth in the Award Agreement) upon expiration of such delay period.
0001015328 3 2022-01-01 2022-12-31