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“Good Cause”
shall be deemed to exist if, and only if, we notify the executive, in writing, within 60 days of its knowledge that one of the following events occurred: (1) the executive has engaged in acts or omissions constituting dishonesty, intentional breach of fiduciary obligation or intentional wrongdoing or malfeasance, in each case that results in substantial harm to the Company; or (2) the executive has been convicted of a criminal violation involving fraud or dishonesty.
“Good Reason”
shall be deemed to exist if, and only if: (1) there is a significant diminution in the nature or the scope of the executive’s authorities or duties; (2) there is a significant reduction in the executive’s monthly rate of base salary and the executive’s opportunity to earn a bonus under an incentive bonus compensation plan we maintain or the executive’s benefits; (3) we change by 50 miles or more the principal location at which the executive is required to perform services as of the date of a Change-in-Control; or (4) there is a material breach of the Change-in-Control and Termination Agreement.The Change-in-Control and Termination Agreements provide for a lump sum payment of two (three in the case of Mr. Hamrock) times the executive’s current annual base salary and target incentive bonus compensation. The executive will also receive a pro rata portion of the executive’s targeted incentive bonus for the year of termination. The Change-in-Control and Termination Agreements also provide that in the event of a Change-in-Control, the executive’s total Change-in-Control
related payments will be equal to the best “net benefit” which is equal to the greater of: (i) the after-tax value of the executive’s total
severance amountChange-in-Control related payments reduced by the 20% excise tax and other federal, state, local and other taxes; and (ii) the after-tax value of the executive’s
severance amountChange-in-Control related payments that has been reduced to the extent necessary so that it would not trigger an excise tax, reduced for federal, state, local and other taxes (in each case, without a gross-up).
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In addition, the Change-in-Control and Termination Agreements provide for the executives to receive 130% of the COBRA continuation premiums due for the two-year period (three in the case of Mr. Hamrock) following termination. In the event of a Change-in-Control, all equity awards which have been granted to each of the Named Executive Officers under the Omnibus Plan and are outstanding as of December 31,
2018,2019, will vest only upon a termination of employment in connection with a Change-in-Control.
| Severance
($) | Pro Rata
Target
Bonus
Payment
($) | Equity
Grants
($) | Welfare
Benefits
($) | Outplacement
($) | Total
Payment
($) |
Joseph Hamrock
| | | | | | | | | | | | | | | | | | |
Voluntary Termination(1) | — | — | | 7,786,302 | | — | — | | 7,786,302 | |
Retirement(2) | — | — | — | — | — | — |
Disability(2) | — | — | | 6,442,931 | | — | — | | 6,442,931 | |
Death(2) | — | — | | 6,442,931 | | — | — | | 6,442,931 | |
Involuntary Termination(3) | | 1,000,000 | | — | — | | 26,552 | | | 25,000 | | | 1,051,552 | |
Change-in-Control(4)(5) | | 6,600,000 | | | 1,200,000 | | | 10,917,713 | | | 86,513 | | | 25,000 | | | 18,829,226 | |
Donald E. Brown
| | | | | | | | | | | | | | | | | | |
Voluntary Termination(1) | — | — | — | — | — | — |
Retirement(2) | — | — | — | — | — | — |
Disability(2) | — | — | | 1,931,518 | | — | — | | 1,931,518 | |
Death(2) | — | — | | 1,931,518 | | — | — | | 1,931,518 | |
Involuntary Termination(3) | | 575,000 | | — | — | | 24,088 | | | 25,000 | | | 624,088 | |
Change-in-Control(4)(5) | | 2,012,500 | | | 431,250 | | | 3,038,552 | | | 51,682 | | | 25,000 | | | 5,558,984 | |
Pablo A. Vegas
| | | | | | | | | | | | | | | | | | |
Voluntary Termination(1) | — | — | — | — | — | — |
Retirement(2) | — | — | — | — | — | — |
Disability(2) | — | — | | 1,584,806 | | — | — | | 1,584,806 | |
Death(2) | — | — | | 1,584,806 | | — | — | | 1,584,806 | |
Involuntary Termination(3) | | 525,000 | | — | | | | | 26,865 | | | 25,000 | | | 576,865 | |
Change-in-Control(4)(5) | | 1,837,500 | | | 393,750 | | | 2,660,052 | | | 56,929 | | | 25,000 | | | 4,973,231 | |
Violet G. Sistovaris
| | | | | | | | | | | | | | |
Voluntary Termination(1) | — | — | | 1,276,271 | | — | — | | 1,276,271 | |
Retirement(2) | — | — | | 1,383,680 | | — | — | | 1,383,680 | |
Disability(2) | — | — | | 1,383,680 | | — | — | | 1,383,680 | |
Death(2) | — | — | | 1,383,680 | | — | — | | 1,383,680 | |
Involuntary Termination(3) | | 475,000 | | — | — | | 17,851 | | | 25,000 | | | 517,851 | |
Change-in-Control(4)(5) | | 1,615,000 | | | 332,500 | | | 2,192,167 | | | 38,599 | | | 25,000 | | | 4,203,266 | |
Carrie J. Hightman
| | | | | | | | | | | | | | | | | | |
Voluntary Termination(1) | — | — | | 5,805,734 | | — | — | | 5,805,734 | |
Retirement(2) | — | — | | 1,627,166 | | — | — | | 1,627,166 | |
Disability(2) | — | — | | 1,627,166 | | — | — | | 1,627,166 | |
Death(2) | — | — | | 1,627,166 | | — | — | | 1,627,166 | |
Involuntary Termination(3) | | 490,000 | | — | — | | 18,044 | | | 25,000 | | | 533,044 | |
Change-in-Control(4)(5) | | 1,568,000 | | | 294,000 | | | 2,487,215 | | | 39,076 | | | 25,000 | | | 4,413,291 | |
| | Joseph Hamrock
| | | | | | | | | | | | | | | | | | | |
| | Voluntary Termination(1) | | | — | | | — | | | 8,551,112 | | | — | | | — | | | 8,551,112 | |
| | Retirement(2) | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Disability(2) | | | — | | | — | | | 8,006,199 | | | — | | | — | | | 8,006,199 | |
| | Death(2) | | | — | | | — | | | 8,006,199 | | | — | | | — | | | 8,006,199 | |
| | Involuntary Termination(3) | | | 1,000,000 | | | — | | | — | | | 28,384 | | | 25,000 | | | 1,053,384 | |
| | Change-in-Control(4) | | | 6,600,000 | | | 1,200,000 | | | 13,145,937 | | | 93,577 | | | 25,000 | | | 21,064,514 | |
| | Donald E. Brown
| | | | | | | | | | | | | | | | | | | |
| | Voluntary Termination(1) | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Retirement(2) | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Disability(2) | | | — | | | — | | | 2,106,820 | | | — | | | — | | | 2,106,820 | |
| | Death(2) | | | — | | | — | | | 2,106,820 | | | — | | | — | | | 2,106,820 | |
| | Involuntary Termination(3) | | | 600,000 | | | — | | | — | | | 25,734 | | | 25,000 | | | 650,734 | |
| | Change-in-Control(4) | | | 2,100,000 | | | 450,000 | | | 3,333,283 | | | 55,961 | | | 25,000 | | | 5,964,244 | |
| | Carrie J. Hightman
| | | | | | | | | | | | | | | | | | | |
| | Voluntary Termination(1) | | | — | | | — | | | 6,376,000 | | | — | | | — | | | 6,376,000 | |
| | Retirement(2) | | | — | | | — | | | 1,652,081 | | | — | | | — | | | 1,652,081 | |
| | Disability(2) | | | — | | | — | | | 1,652,081 | | | — | | | — | | | 1,652,081 | |
| | Death(2) | | | — | | | — | | | 1,652,081 | | | — | | | — | | | 1,652,081 | |
| | Involuntary Termination(3) | | | 500,000 | | | — | | | — | | | 19,285 | | | 25,000 | | | 544,285 | |
| | Change-in-Control(4) | | | 1,600,000 | | | 300,000 | | | 2,554,153 | | | 42,314 | | | 25,000 | | | 4,521,467 | |
| | Violet G. Sistovaris
| | | | | | | | | | | | | | | | | | | |
| | Voluntary Termination(1) | | | — | | | — | | | 1,401,633 | | | — | | | — | | | 1,401,633 | |
| | Retirement(2) | | | — | | | — | | | 1,517,252 | | | — | | | — | | | 1,517,252 | |
| | Disability(2) | | | — | | | — | | | 1,517,252 | | | — | | | — | | | 1,517,252 | |
| | Death(2) | | | — | | | — | | | 1,517,252 | | | — | | | — | | | 1,517,252 | |
| | Involuntary Termination(3) | | | 500,000 | | | — | | | — | | | 19,093 | | | 25,000 | | | 544,093 | |
| | Change-in-Control(4) | | | 1,700,000 | | | 350,000 | | | 2,377,842 | | | 41,929 | | | 25,000 | | | 4,494,771 | |
| | Pablo A. Vegas | | | | | | | | | | | | | | | | | | | |
| | Voluntary Termination(1) | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Retirement(2) | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Disability(2) | | | — | | | — | | | 2,037,554 | | | — | | | — | | | 2,037,554 | |
| | Death(2) | | | — | | | — | | | 2,037,554 | | | — | | | — | | | 2,037,554 | |
| | Involuntary Termination(3) | | | 600,000 | | | — | | | — | | | 28,697 | | | 25,000 | | | 653,697 | |
| | Change-in-Control(4) | | | 2,100,000 | | | 450,000 | | | 3,260,899 | | | 61,887 | | | 25,000 | | | 5,897,786 | |
| (1)
| Amounts payable to each of the Named Executive Officers as shown in the Pension Benefits Table and the Non-qualified Deferred Compensation Table and under the tax-qualified, nondiscriminatory 401(k) Plan are not included.included in the table. Upon voluntary termination on December 31, 2018,2019, Mr. Hamrock would be eligible to receive 111,235 shares under the RSUs granted on July 13, 2015, due to conversion of the 2013 performance shares in connection with the Separation, 74,087 shares under the RSUs granted on July 13, 2015, due to the conversion of the 2014 performance shares in connection with the Separation, 62,972 shares under the RSUs granted on January 29, 2015 due to the 2015 annual incentive award and 58,858 shares under the RSUs granted on July 13, 2015 due to his assumption of additional responsibilities in connection with the Separation. |
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58,858 shares under the RSUs granted on July 13, 2015 due to his assumption of additional responsibilities in connection with the Separation. Ms. Sistovaris would be eligible to receive 14,563 shares under the RSUs granted on July 13, 2015, due to the conversion of the 2014 performance shares in connection with the Separation, 21,068 shares under the RSUs granted on January 29, 2015 due to the 2015 annual incentive award, and 14,715 shares under the RSUs granted on July 13, 2015 due to her assumption of additional responsibilities in connection with the Separation. Ms. Hightman would be eligible to receive 123,216 shares under the RSUs granted on July 13, 2015, due to the conversion of the 2013 performance shares in connection with the Separation, 60,442 shares under the RSUs granted on July 13, 2015, due to the conversion of the 2014 performance shares in connection with the Separation, and 45,365 shares under the RSUs granted on January 29, 2015 due to the 2015 annual incentive award. These shares were subject to delayed vesting in accordance with the terms of the award agreements due to limitations on deductibility under Section 162(m) of the Code. The value of these shares was determined by multiplying the closing price of our common stock on December 31, 2018,2019, which was $25.35$27.84 per share, by the number of shares that were subject to delayed payout.
| (2)
| Special vesting rules apply in the event of Retirement, Disability or death pursuant to the terms and conditions of our equity award agreements as discussed above in the Compensation Discussion and Analysis-“Compensation Committee Actions Related to 2018 Compensation-LTIP Awards.”agreements. As of December 31, 2018,2019, Mses. Hightman and Sistovaris were the only Named Executive Officers eligible for Retirement, no other Named Executive Officer was eligible.Retirement. The number of shares that would have vested in the event of each executive’s Retirement, Disability or death is as follows: Ms. Hightman, 64,18859,342 shares and Ms. Sistovaris 54,58354,499 shares. For the balance of the Named Executive Officers, the number of shares that would have vested in the event of the executive’s Retirement, Disability or death is as follows: Mr. Hamrock, 254,159287,579 shares; Mr. Brown, 76,19475,676 shares; and Mr. Vegas, 62,51773,188 shares. The value of the equity grants was determined by multiplying the closing price of our common stock on December 31, 2018,2019, which was $25.35$27.84 per share, by the number of shares that would have vested upon the Retirement, Disability or death, as applicable, of the Named Executive Officer. These amounts do not include the value of shares subject to delayed vestingdistribution due to limitations on deductibility under Section 162(m) of the Code referred to in footnote (1) above, which are payable on the earlier to occur of the Named Executive Officer’s termination of employment, the date the Named Executive Officer is no longer subject to Section 162(m) of the Code, or the date the shares could be paid and be deductible under Section 162(m) of the Code. |
| (3)
| Amounts shown reflect payments to be made upon the involuntary termination of each Named Executive Officer eligible under our Executive Severance Policy described above. These amounts do not include the value of shares subject to delayed vestingdistribution due to limitations on deductibility under Section 162(m) of the Code referred to in footnote (1) above, which are payable on the earlier to occur of the Named Executive Officer’s termination of employment, the date the Named Executive Officer is no longer subject to Section 162(m) of the Code, or the date the shares could be paid and be deductible under Section 162(m) of the Code. |
| (4)
| Amounts shown reflect payments to be made upon termination of employment in the event of a Change-in-Control of the Company under the Change-in-Control and Termination Agreements described above which have been reduced by excise tax payments, if applicable.above. These amounts do not include the value of shares subject to delayed vestingdistribution due to limitations on deductibility under Section 162(m) of the Code referred to in footnote (1) above, which are payable on the earlier to occur of the Named Executive Officer’s termination of employment, the date the Named Executive Officer is no longer subject to Section 162(m) of the Code or the date the shares could be paid and be deductible under Section 162(m) of the Code. As described above, the Change-in-Control and Termination Agreements do not provide for any “gross-up” payments to executives for excise taxes incurred with respect to benefits received under a Change-in-Control and Termination Agreement. The Change-in-Control and Termination Agreements provide that in the event of a Change-in-Control, the executive’s total Change-in-Control will be equal to the best “net benefit” which is equal to the greater of: (i) the after-tax value of the executive’s total severance amountChange-in-Control related payments (reduced by the 20% excise tax and other federal, state, local and other taxes); and (ii) the after-tax value of the executive’s severance amountChange-in-Control related payments that has been reduced to the extent necessary so that it would not trigger an excise tax, reduced for federal, state, local and other taxes (in each case, without a gross-up). |
| (5) | Amounts shown for The amounts reflected in this table do not reflect the Named Executive Officers have not been reduced underapplication of the best “net benefit” provision in the Change-in-Control and Termination Agreements as described above because none of the Named Executive Officers would have been in a better after-tax position as the result of a benefit reduction.provision. |
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As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following disclosure about the relationship of the annual total compensation of our employees to the annual total compensation of our CEO.
For 2018,2019, our last completed fiscal year:
The median annual total compensation of all employees (other than our CEO) was $97,754;$110,318; and
The annual total compensation of our CEO, as reported in the 20182019 Summary Compensation Table, was $5,778,515.$6,628,690.
Based on this information, for 2018,2019, the ratio of the annual total compensation of Mr. Hamrock, our CEO, to the annual total compensation of the median employee is estimated to be 5960 to 1. Because there were no significant changes to the employee population or compensation arrangements during 2018 or 2019, we did not re-identify a new median employee for purposes of the 20182019 pay ratio disclosure. To determine the annual total compensation of our median employee and our CEO, we took the following steps consistent with Item 402(u) of Regulation S-K:
| 1.
| We reviewed the composition of roles and total number of employees as of October 31, 2018,2019, and determined that our employee population, all of whom continue to be located in the United States, was substantially similar to 2017. This population consisted of our full-time, part-time and temporary employees, as determined for employment law purposes. |
| 2.
| To identify the 2017 “median employee” from our employee population, we prepared a full census of all our employees (except our CEO) using our existing centralized payroll database of base cash compensation (base salary plus overtime and shift premiums, calculated based on the hours worked during the relevant period) that is used internally to calculate annual cash incentive compensation and profit sharing eligibility. We used base cash compensation as our compensation measure as it is the principal form of compensation delivered to all of our employees and annualized compensation for any employeeemployees hired during 2017 who did not work an entire year. |
| 3.
| We reviewed the 2017 median employee’s circumstances and determined that that there had been no significant change. |
| 4.
| Once we confirmed that our median employee need not be re-identified, we combined all of the elements of such employee’s compensation for 20182019 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $97,754. Once calculated, we noted that the decline in the median employee’s annual total compensation was consistent with that of the employee population, and confirmed that the median employee need not be re-identified.$110,318. |
| 5.
| With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column (column (j) of our 20182019 Summary Compensation Table)Table included in this Proxy Statement. |
SEC rules for identifying the median employee and calculating the pay ratio allow companies to use various methodologies and assumptions, which may lead to a lack of comparability across companies.
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EQUITY COMPENSATION PLAN INFORMATION The following table
sets forth certainprovides information
for all equity compensation plans and individual compensation arrangements (whether with employees or non-employees, such as directors), in effect as of December 31,
2018.Plan Category | Number of
Securities to
be Issued Upon
Exercise
of Outstanding
Options,
Warrants and
Rights
(#)(a) | Weighted-
Average
Exercise
Price of
Outstanding
Options,
Warrants
and
Rights
($)(b)(2) | 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(1) | | 2,595,752 | | — | | 4,086,365 | |
Equity compensation plans not approved by security holders | — | — | — |
Total | | 2,595,752 | | — | | 4,086,365 | |
2019 regarding the number of shares of our common stock that may be issued under our equity compensation plans.
| | Equity compensation plans approved by security holders(1) | | | 4,359,141 | | | — | | | 4,404,844 | |
| | Equity compensation plans not approved by security holders | | | — | | | — | | | — | |
| | Total | | | 4,359,141 | | | — | | | 4,404,844 | |
| (1)
| Plans approved by security holders includeconsist of the following: the Non-Employee Director Stock Incentive Plan, approved by the stockholders on May 20, 2003 (no shares remain available for future issuance under the plan),; the Omnibus Plan approved by the stockholders on May 11, 2010 (and re-approved for Code Section 162(m) purposes on May 12, 2015),2010; and the Company’s Employee Stock Purchase Plan, approved by the stockholders on May 12, 2015.7, 2019. As of December 31, 2018, 3,793,5572019, 3,313,183 shares remained available for issuance under the Omnibus Plan and 292,8081,091,661 shares remained available for purchase under the Employee Stock Purchase Plan. The Employee Stock Purchase Plan provides the opportunity for eligible employees to acquire shares of our common stock at a 10% discount. For purposes of this table, we have included the number of shares issuable under outstanding performance stock unitshare awards assuming performance targets are achieved.achieved at the maximum achievement level. |
(2)
| (2) | In calculating the weighted-average exercise price of outstanding options, restricted stock units and performance stock units (if applicable) which can convert into shares of common stock upon vesting, are excluded. Restricted stock units and performance stock unitsshare awards are payable at no cost to the grantee on a one-for-one basis. As of December 31, 2019, there were no outstanding stock options under the Non-Employee Director Stock Incentive Plan or the Omnibus Plan. |
PROPOSAL 2 — ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
Pursuant to Section 14A of the Exchange Act, we are asking stockholders to approve, in an advisory vote, the compensation paid to our Named Executive Officers, as disclosed under the heading “Executive Compensation” above, including the “Compensation Discussion and Analysis,” commonly known as a “Say-on-Pay” proposal.
The Board encourages stockholders to carefully review the Executive Compensation section of this proxy statement, including the Compensation Discussion and Analysis, for a thorough discussion of our executive compensation program and philosophy. Our compensation program is designed to be significantly performance-based and to attract and retain highly-qualified individuals who enhance long-term stockholder value by contributing to our ongoing success. All facets of our compensation program are regularly monitored by the Compensation Committee to ensure that the program is well-tailored to fulfill our compensation philosophy and objectives.
In considering this proposal, stockholders may wish to consider the following factors that we believe demonstrate our commitment to maintaining a robust compensation program:
Compensation is closely tied to both corporate and individual performance;
Annual and long-term incentive compensation opportunities are contingent on the Company achieving pre-established goals;
Total compensation packages are competitive with those offered by members of our Comparative Group;
Perquisites are appropriately limited in number and modest in dollar value; and
OurWe believe our compensation program does not create incentives for behaviors that create material risk to the Company.
As discussed in the Executive Compensation section of this proxy statement, the Compensation Committee and the Board believe that our executive compensation program fulfills the objectives of our compensation philosophy in a prudent and effective manner.
Accordingly, the following resolution is submitted for an advisory stockholder vote at the Annual Meeting:
RESOLVED
, that the compensation paid to our Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved on an advisory basis.As this is an advisory vote, the result will not be binding on the Company, the Board or the Compensation Committee, although the Compensation Committee and the Board will carefully consider the outcome of the vote when evaluating our compensation program and philosophy.
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The affirmative vote of a majority of the shares present
in personat the virtual Annual Meeting or represented by proxy at the meeting and entitled to vote is needed to approve the advisory vote on the compensation of the Named Executive Officers. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” the advisory approval of executive compensation of our Named Executive Officers. Abstentions by those present or represented by proxy will have the same effect as a vote against the Say-on-Pay proposal. Brokers will not have discretionary authority to vote on the Say-on-Pay proposal. Accordingly, there could be broker non-votes, which will have no effect on the vote.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF NAMED EXECUTIVE OFFICER
COMPENSATION ON AN ADVISORY BASIS.PROPOSAL 3 — RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee of the Board is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit our financial statements. The Audit Committee appointed Deloitte as our independent registered public accounting firm for
2019.2020. As part of its oversight of our relationship with our independent registered public accounting firm and to assure continuing independence of such firm, the Audit Committee considers whether it is appropriate to adopt a policy of rotating its independent registered public accounting firm on a regular basis. Further, in conjunction with ensuring the rotation of such firm’s lead engagement partner, the Audit Committee and its Chair are directly involved with the selection of Deloitte’s lead engagement partner. The Audit Committee also reviews proposals for all auditing services (including fees and terms thereof) of our independent registered public accounting firm and approves all such proposals prior to the commencement or performance of such services, subject to the pre-approval policies and procedures described under “Independent Registered Public Accounting Firm Fees.”
Deloitte has served as our independent registered public accounting firm since 2002 and has the requisite understanding of our business, accounting policies and practices, and internal control over financial reporting to drive audit quality and efficient fee structures. As a result of this expertise, and, as noted above, the Audit Committee’s oversight designed to assure continuing independence, the Board and its Audit Committee consider Deloitte well qualified to serve as our independent registered public accounting firm. Further, the Board believes that the continued retention of Deloitte is in our best interest and the best interest of our stockholders. Although action by stockholders for this matter is not required, the Board and the Audit Committee believe that it is appropriate to seek stockholder ratification of this appointment in order to provide stockholders a means of communicating the stockholders’ level of satisfaction with the performance of the independent registered public accounting firm and their level of independence from management. If the proposal is not approved and the appointment of Deloitte is not ratified by the stockholders, the Audit Committee will take this into consideration and will reconsider the appointment. A representative of Deloitte will be
presentrepresented at the
meeting,virtual Annual Meeting, will be given an opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions.
The affirmative vote of a majority of the shares present
in personduring the virtual Annual Meeting or represented by proxy
at the meeting and entitled to vote is needed to ratify the appointment of Deloitte as our independent registered public accounting firm for
2019.2020. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” the ratification of the appointment of Deloitte. Abstentions by those present or represented by proxy will have the same effect as a vote against the proposal. Brokers will have discretionary authority to vote on this proposal, and, accordingly, there will not be any broker non-votes.
THE BOARD AND ITS AUDIT COMMITTEE UNANIMOUSLY RECOMMEND A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF DELOITTE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2019.2020.
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PROPOSAL 4 - APPROVAL OF THE NISOURCE INC. 2020 OMNIBUS INCENTIVE PLAN At the Annual Meeting, our stockholders will be asked to approve the NiSource Inc. 2020 Omnibus Incentive Plan (the “2020 Plan”), which was adopted by the Board, subject to stockholder approval, on January 31, 2020. The purpose of the 2020 Plan is to achieve both short-term and long-term objectives of the Company by (a) aligning compensation of participants with the interests of our stockholders, (b) enhancing the interest of participants in the growth and success of the Company, and (c) attracting and retaining participants of outstanding competence.
If the 2020 Plan is adopted by our stockholders, 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 that the Company has used equity in a reasonable manner, with a 3-year average annual share usage run rate through March 24, 2020 of approximately 0.2% of the Company’s outstanding shares of common stock (assuming target payout for performance awards). The Board evaluated the potential dilutive effects of the share authorization under the 2020 Plan and believes that, including the shares requested, our potential dilution overhang as of March 24, 2020 of approximately 4.0% was reasonable. If the 2020 Plan is approved by our stockholders, it will replace the Company’s 2010 Omnibus Incentive Plan (the “2010 Plan”), which will expire on May 11, 2020.
Certain Features of the 2020 Plan
The following features of the 2020 Plan are designed to reinforce alignment between the equity compensation arrangements awarded pursuant to the 2020 Plan and our stockholders’ interests:
Minimum vesting period of one year for all awards, subject to the following exceptions: (i) awards with respect to up to 5% of the available shares under the 2020 Plan and (ii) the ability to accelerate or continue the vesting upon terminations of employment or as otherwise determined by the Compensation Committee in accordance with the terms of the Plan;
No discounting of stock options or stock appreciation rights;
No “evergreen” share increase provision;
No “reload” option provision;
No repricing or replacement of underwater stock options or stock appreciation rights without stockholder approval;
No dividend equivalents on stock options or stock appreciation rights;
No payment of dividends or dividend equivalents on unvested or unearned awards;
Individual non-employee director compensation (cash and equity) limit of $700,000 per year;
No liberal definition of “Change in Control;” and
Prohibition on the transfer of awards for value.
Description of the 2020 Plan
The following description of the 2020 Plan is qualified in its entirety by reference to the plan document, a copy of which is attached as Exhibit A to this Proxy Statement.
Administration. The 2020 Plan will be administered by the Compensation Committee, or such other committee as the Board shall appoint from time to time, which shall consist of two or more directors all of whom are intended to satisfy the requirements for a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act and an “independent director” under the rules of the NYSE. The Compensation Committee has the discretion to interpret the 2020 Plan and any award or other agreement employed by the Company in the administration of the 2020 Plan. Subject to the provisions of the 2020 Plan, the Compensation Committee has the power to:
determine when and to whom awards will be granted;
determine the type of award granted;
determine the fair market value of shares or other property, where applicable;
determine the terms, conditions, and restrictions applicable to each award and any shares acquired pursuant to such awards;
determine how an award will be settled;
approve one or more forms of award agreements;
amend, modify, extend, cancel, or renew any award or waive any restrictions or conditions applicable to any award or any shares acquired upon the exercise of an award;
accelerate, continue, extend, or defer the exercisability of any award or the vesting of any award;
prescribe, amend, or rescind any rules and regulations relating to the administration of the 2020 Plan;
correct any defect, supply any omission or reconcile any inconsistency in the 2020 Plan or any award agreement; and
make all other determinations necessary or advisable for the administration of the 2020 Plan.
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Notwithstanding the foregoing and except as otherwise determined by the Board, the Board will perform the functions of the Compensation Committee for purposes of granting awards to non-employee directors.
The Compensation Committee may delegate some or all of its power and authority under the 2020 Plan to the Board, a subcommittee of the Board, a member of the Board, the President and Chief Executive Officer or other executive officer of the Company as the Compensation Committee deems appropriate, except that it may not delegate its power and authority to a member of the Board, the Chief Executive Officer or any executive officer with regard to awards to persons subject to Section 16 of the Exchange Act.
Eligibility. Employees and non-employee directors of the Company or its affiliates, or any person expected to become an employee or a non-employee director of the Company or its affiliates, are eligible to participate in the 2020 Plan if designated as a participant by the Compensation Committee or, with respect to non-employee directors, the Board. As of the record date, the Company had ten non-employee directors, and the Company and its affiliates had approximately 8,300 employees who would be eligible to participate in the 2020 Plan if selected by the Compensation Committee or the Board, as applicable.
Non-Employee Director Award Limit. 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 shall not exceed $700,000.
Number of Shares and Limitations. Subject to the adjustment provisions contained in the 2020 Plan, 10,000,000 shares of common stock are initially reserved for awards under the 2020 Plan, other than substitute awards. On the record date, the closing sales price per share of the Company’s common stock as reported on the NYSE was $21.94.
Any shares subject to outstanding awards granted under either the 2020 Plan or the 2010 Plan that are not issued or delivered by reason of the expiration, termination, cancellation or forfeiture of such awards or the settlement of such awards in cash, shall again be available for grant under the 2020 Plan. In addition, any shares subject to outstanding awards granted under either the 2020 Plan or the 2010 Plan that are tendered or withheld in order to satisfy tax withholding obligations relating to an award shall again be available for issuance under the 2020 Plan. Shares withheld, surrendered or tendered in payment of the exercise price of an award granted under the 2020 Plan or 2010 Plan or shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of awards shall not become available for issuance under the 2020 Plan.
Minimum Vesting Provisions. No award granted under the 2020 Plan will become exercisable or vested prior to the one-year anniversary of the date of grant; provided, however, that the minimum vesting provisions will not apply to awards granted under the 2020 Plan with respect to the number of shares which, in the aggregate, does not exceed five percent of the total number of shares initially available under the 2020 Plan. In addition, the minimum vesting provisions contained in the 2020 Plan will not restrict the right of the Compensation Committee to accelerate or continue the vesting or exercisability of an award upon or after a termination of employment or otherwise pursuant to the administration or change in control provisions of the 2020 Plan.
Change in Control. Upon a Change in Control, no cancellation, termination, acceleration of exercisability or vesting, lapse of any restriction, settlement or other payment will occur with respect to any outstanding award that is effectively assumed by the successor to the Company in such Change in Control. The award agreements for any assumed awards will provide that if a participant’s employment is terminated by the Company other than for cause or by the participant due to good reason, in each case, within two years following the Change in Control, any conditions on the participant’s rights under, or any restrictions on transfer or exercisability will lapse and any performance-based restrictions will be deemed to have been achieved at target.
In the event an award is not effectively assumed in connection with the Change in Control, such award will become fully exercisable, all restrictions on such award will terminate, any performance measures will be deemed to have been achieved at target level performance and, subject to Section 409A of the Code, such awards will be immediately payable. Except as otherwise provided for in an award agreement, if the Company has terminated the service of a participant other than for cause or if the participant has terminated service due to good reason, in each case, during the one year prior to Change in Control but after a third party and/or the Company has taken steps reasonably calculated to effect such Change in Control and the participant can demonstrate that such termination was in connection with or in anticipation of such Change in Control, then the award will vest upon such Change in Control, with any performance-based restrictions deemed to have been achieved at target.
Under the terms of the 2020 Plan, a “Change in Control” is generally defined as (i) certain acquisitions of more than 30% of the Company’s then outstanding securities eligible to vote for the election of our Board, (ii) the consummation of certain mergers or consolidations involving the Company, (iii) the consummation of a sale of 50% or more of the aggregate book value of the assets of the Company and its affiliates, or (iv) a change in our Board resulting in the incumbent directors ceasing to constitute at least a majority of our Board.
Performance Measures. The grant, vesting or payout of awards under the 2020 Plan may be conditioned upon the attainment of performance targets, the number and type of which will be determined by the Compensation Committee. The performance measures established by the Compensation Committee may relate to corporate, division, department, or business unit performance and may be established in terms of any one or a combination of the following performance measures: (i) growth in gross revenue; (ii) earnings per share; (iii) operating earnings per share; (iv) business unit operating earnings; (v) specified revenue targets; (vi) expense control; (vii) productivity; (viii) ratio of earnings to stockholders’ equity or to total assets; (ix) dividend payments; (x) total stockholders’ return; (xi) operating income; (xii) return on capital or return on investment; (xiii) return on assets; (xiv) return on net assets; (xv) operating margins; (xvi) earnings before interest and taxes; (xvii) earnings before interest taxes depreciation; amortization and depletion; (xviii) funds from operations; (xix) total debt or change in total debt or the rating on our debt as determined by external rating agencies; (xx) cash from operations; (xxi) gross margins; (xxii) return on equity; (xxiii) net income; (xxiv) pre-tax income; (xxv) specified customer satisfaction targets; (xxvi) specified safety targets; (xxvii) specified reliability targets and (xxviii) such other criteria as the Compensation Committee may determine whether or not listed in the 2020 Plan. Multiple performance measures may be used and may have the same or different weighting, and they may relate to absolute performance or relative performance as measured against other institutions or divisions or units thereof. In establishing a performance measure or determining the related achievement, the Compensation Committee may provide that achievement of the applicable performance measures
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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, 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.
Types of Awards. The types of awards that may be granted under the 2020 Plan include incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards, and other stock-based awards.
Subject to certain restrictions applicable to stock options, awards granted under the 2020 Plan will be exercisable by the participants at such times as are determined by the Compensation Committee. In addition to the general characteristics of all of the awards described in this Proxy Statement, the basic characteristics of awards that may be granted under the 2020 Plan are as follows:
Incentive and Nonqualified Stock Options (“ISOs” and “NSOs”)
Both incentive and nonqualified stock options may be granted to participants at such exercise prices as the Compensation Committee may determine, but the exercise price for any option, other than with respect to substitute awards, may not be less than 100% of the fair market value of a share of the Company’s common stock on the grant date. Stock options may be granted and exercised at such times as the Compensation Committee may determine, except that (a) ISOs may be granted only to employees, (b) no ISOs may be granted more than ten years after the date on which the Board approved the 2020 Plan, (c) an option shall not be exercisable more than ten years after the date of grant, and (d) the aggregate fair market value of the shares of common stock of the Company with respect to which ISOs granted under the 2020 Plan and any other plan of the Company first become exercisable in any calendar year for any employee may not exceed the $100,000 maximum amount permitted under Section 422(d) of the Code. Additional restrictions apply to an ISO granted to an individual who beneficially owns more than 10% of the combined voting power of all classes of stock of the Company.
The purchase price payable upon exercise of options generally may be paid in any of the following methods:
in cash;
by authorizing a third party with which the optionee has a brokerage or similar account to sell the shares (or a sufficient portion of such shares) acquired upon the exercise of the option and remit to the Company a portion of the sale proceeds sufficient to pay the entire option exercise price to the Company;
by delivering shares that have an aggregate fair market value on the date of exercise equal to the option exercise price;
by authorizing the Company to withhold from the total number of shares as to which the option is being exercised the number of shares having a fair market value on the date of exercise equal to the aggregate option exercise price for the total number of shares as to which the option is being exercised;
by such other means by which the Compensation Committee determines to be consistent with the purpose of the 2020 Plan and applicable law; or
by any combination of items listed above.
Stock Appreciation Rights (“SARs”)
The value of an SAR granted to a participant is determined by the appreciation in the number of shares the Company’s common stock subject to the SAR during its term, subject to any limitations upon the amount or percentage of total appreciation that the Compensation Committee may determine at the time the right is granted. The participant receives all or a portion of the amount by which the fair market value of a specified number of shares, as of the date the SAR is exercised, exceeds a base price specified by the Compensation Committee at the time the right is granted. Except with respect to substitute awards or SARs granted in tandem with a previously granted option, the base price specified by the Compensation Committee must be at least 100% of the fair market value of the specified number of shares of the Company’s common stock to which the right relates, determined as of the date the SAR is granted. An SAR may be granted in connection with a previously or contemporaneously granted option, or independent of any option. An SAR may be paid in cash, shares of the Company’s common stock or a combination of cash and shares as determined by the Compensation Committee and provided in the applicable award agreement. No SAR may be exercised more than ten years after its date of grant.
Restricted Stock and Restricted Stock Units (“RSUs”)
The Compensation Committee may grant participants awards of restricted stock and RSUs. Restricted stock involves the granting of shares to participants subject to restrictions on transferability and any other restrictions the Compensation Committee may impose. The restrictions lapse if either the holder continues to perform services to the Company or its affiliates for a specified period of time established by the Compensation Committee under the applicable award agreement or satisfies other restrictions, including performance-based restrictions, during the period of time established by the Compensation Committee. RSUs are similar to restricted stock except that no shares actually are awarded to the participant on the grant date, and the holder typically does not enjoy any shareholder rights with respect to the units. Restricted stock awards are settled in shares. RSU awards may be settled in cash, shares, or a combination of cash and shares, as determined by the Compensation Committee and provided in the applicable award agreement.
Performance Shares
The Compensation Committee may grant participants awards of performance shares. The period of time over which performance targets are measured will be of such duration as the Compensation Committee shall determine in an award agreement. Upon satisfaction of the applicable performance targets during the performance period, the participant will be entitled to receive shares of common stock of the Company.
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Performance Units
The Compensation Committee may grant participants awards of performance units. The period of time over which performance targets are measured will be of such duration as the Compensation Committee shall determine in an award agreement. Upon satisfaction of the applicable performance targets during the performance period, the participant will be entitled to receive either shares, cash, or a combination of shares and cash as determined by the Compensation Committee and provided in the applicable award agreement.
Cash-Based Awards
Cash-based awards entitle the participant to payment in amounts of cash determined by the Compensation Committee based upon the achievement of specified performance targets during a specified performance period, which typically will be one year unless otherwise determined by the Compensation Committee. Each cash-based award will have its value determined by the Compensation Committee.
Other Stock-Based Awards
The Compensation Committee may also grant other awards that are valued in whole or in part by reference to, or are otherwise based on and/or payable in, shares of common stock of the Company. Other stock-based awards are a catch-all category to provide for awards of stock-based compensation that do not fit within the scope of the other specifically described types of awards. Payments with respect to other stock-based awards may be made in cash, shares, or a combination of cash and shares as determined by the Compensation Committee. The Compensation Committee has the discretion to determine the terms and conditions of these other stock-based awards.
Dividends and Dividend Equivalents
Awards other than options and SARs may provide for the payment of dividends or dividend equivalents, which payments may be credited to an account or deemed reinvested in additional shares. Any dividends or dividend equivalents paid with respect to an award subject to vesting conditions will be subject to the same vesting conditions as the underlying awards.
Termination of Service. The award agreement will specify the impact on the award of a participant’s termination of employment or service. If a participant ceases to be an employee or director of the Company or its affiliates, the Compensation Committee may provide for special vesting and payment conditions upon such termination in the applicable award agreement.
Transferability. In general, awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order under the Employee Retirement Income Security Act of 1974, as amended. Except as otherwise provided in the 2020 Plan, all rights with respect to an award granted to a participant shall be available during his or her lifetime only to such participant. Notwithstanding the foregoing, a participant, at any time prior to his death, may assign all or any portion of an NSO or SAR to: (i) his or her spouse or lineal descendant; (ii) the trustee of a trust for the primary benefit of his or her spouse or lineal descendant; or (iii) a tax-exempt organization as described in Section 501(c)(3) of the Code.
Notwithstanding the foregoing, non-employee directors may assign all or any portion of any award granted to them to assignees described above. In the event of an assignment, the spouse, lineal descendant, trustee or tax-exempt organization shall be entitled to all of the rights of the participant with respect to the assigned portion of such award, and such portion of the award shall continue to be subject to all of the terms, conditions and restrictions applicable to the award as set forth in the 2020 Plan and in the related award agreement, immediately prior to the effective date of the assignment. Any such assignment shall be permitted only if (i) the participant does not receive any consideration therefore, and (ii) the assignment is expressly approved by the Compensation Committee or its delegate. Further notwithstanding the foregoing, no ISO may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or the laws of descent or distribution.
Duration, Adjustments, Modifications, Terminations. The 2020 Plan will remain in effect until all shares of the Company subject to the 2020 Plan are distributed, or the 2020 Plan is terminated as described below.
If any change is made to the Company common stock subject to the 2020 Plan, or subject to any award agreement under the 2020 Plan, without the receipt of consideration by the Company, such as through a stock split, stock dividend, extraordinary distribution, recapitalization, combination of shares, exchange of shares or other similar transaction, appropriate adjustments will be made in the number, class and price of shares subject to each outstanding award and the numerical share limits contained in the 2020 Plan.
Subject to applicable law, the 2020 Plan also gives the Board and Compensation Committee the right to terminate, suspend or amend the 2020 Plan. No termination, suspension or amendment of the 2020 Plan shall materially adversely affect any right acquired by any participant under an award granted before the date of such termination, suspension or amendment, unless such participant shall consent.
Forfeiture. The Compensation Committee may specify in an award agreement that the participant’s rights, payments, and benefits with respect to an award shall be subject to reduction, cancellation, forfeiture, clawback or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an award. Such events may include, but shall not be limited to, termination of service for cause or any act by a participant, whether before or after termination of service, that would constitute cause for termination of service.
If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, and if the participant knowingly or through gross negligence engaged in the misconduct, or knowingly or through gross negligence failed to prevent the misconduct, or if the participant is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the participant shall reimburse the Company the amount of any payment in settlement of an award
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earned or accrued during the twelve-month period following the first public issuance or filing with the SEC of the financial document embodying such financial reporting requirement. In addition, awards granted under the 2020 Plan and any cash payment or shares of Company common stock delivered pursuant to an award are subject to forfeiture, recovery or other action pursuant any clawback or recoupment policy that we may adopt.
Withholding. The 2020 Plan permits the Company to withhold from awards an amount sufficient to cover any required withholding taxes. The 2020 Plan also permits the Company to require a participant to remit to the Company an amount sufficient to satisfy any required withholding taxes. In lieu of cash, the Compensation Committee may permit a participant to cover withholding obligations through a reduction in the number of shares to be delivered to such participant or by delivery of shares already owned by the participant.
Federal Tax Considerations
The following is a brief summary of certain United States federal income tax consequences generally arising with respect to awards under the 2020 Plan. This discussion does not address all aspects of the United States federal income tax consequences of participating in the 2020 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 2020 Plan. Each participant is advised to consult his or her personal tax advisor concerning the application of the 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 Code. Section 162(m) of the Code limits to $1 million the amount that a publicly held corporation is allowed each year to deduct for compensation paid to the corporation’s “covered employees.” “Covered employees” include the corporation’s chief executive officer, chief financial officer and three next most highly compensated executive officers. If an individual is determined to be a covered employee for any year beginning after December 31, 2016, then that individual will continue to be a covered employee for future years, regardless of changes in the individual’s compensation or position.
Nonqualified Stock Options. A participant will have no taxable income, and the Company will not be entitled to any related deduction, at the time a NSO is granted under the Plan. At the time of exercise of NSOs, the participant will realize ordinary income, and the Company will be entitled to a deduction, except to the extent the deduction limits of Section 162(m) of the Code apply, equal to the excess of the fair market value of the stock on the date of exercise over the option exercise price. Upon disposition of the shares, any additional gain or loss realized by the participant will be taxed as a capital gain or loss.
Incentive Stock Options. A participant will have no taxable income, and the Company will not be entitled to any related deduction, at the time an ISO is granted under the Plan or at the time of exercise. If a participant disposes of shares acquired from the exercise of an ISO no earlier than (a) two years after the grant of the option and (b) one year after the exercise of the option (both (a) and (b) collectively referred to as the “Holding Periods”), then no taxable income (except for purposes of the alternative minimum tax) will result in connection with the exercise of such ISO, and the Company will not be entitled to any deduction in connection with such exercise. Upon disposition of the shares after expiration of the Holding Periods, any gain or loss realized by a participant will be a capital gain or loss. The Company will not be entitled to a deduction with respect to a disposition of the shares by a participant after the expiration of the Holding Periods.
Except in the event of death, if the participant disposes of the shares before the end of the Holding Periods (a “Disqualifying Disposition”), such participant will recognize a gain (taxable at ordinary income tax rates) which equals the lesser of (a) the difference between the fair market value on the exercise date and the option exercise price, or (b) the difference between the sale price of the shares and the option exercise price in the year of disposition. The balance, if any, will be taxed as short-term or long-term capital gain, depending upon how long the participant held the shares. The Company will be entitled to a deduction at the same time and in the same amount as the participant is deemed to have realized ordinary income, except to the extent the deduction limits of Section 162(m) of the Code apply. If the participant pays the option exercise price with shares that were originally acquired pursuant to the exercise of an ISO and the Holding Periods for such shares have not been met, the participant will be treated as having made a Disqualifying Disposition of such shares, and the tax consequence of such Disqualifying Disposition will be as described above.
Stock Appreciation Rights. There will be no federal income tax consequences to either the participant or the Company upon the grant of an SAR. The participant, however, generally must recognize ordinary taxable income upon the exercise or surrender of an SAR in an amount equal to the fair market value (on the date of exercise) of the shares exercised, less the exercise price. This amount is deductible by the Company, except to the extent the deduction limits of Section 162(m) of the Code apply. Gain or loss recognized upon any later sale or other disposition of the acquired shares generally will be a capital gain or loss.
Restricted Stock. Unless the participant files an election to be taxed under Section 83(b) of the Code, the participant will not realize income upon the grant of restricted stock. Instead, the participant will realize ordinary income, and the Company will be entitled to a corresponding deduction (except to the extent the deduction limits of Section 162(m) of the Code apply), when the restrictions constituting a substantial risk of forfeiture lapse. The amount of such ordinary income and deduction will be the fair market value of the restricted stock on the date the restrictions constituting a substantial risk of forfeiture lapse less the amount paid, if any, for such restricted stock. If the participant files an election to be taxed under Section 83(b) of the Code, the tax consequences to the participant and the Company will be determined as of the date of the grant of the restricted stock rather than as of the date of the lapse of the restrictions constituting a substantial risk of forfeiture.
When the participant disposes of restricted stock, the difference between the amount received upon such disposition and the fair market value of such shares on the date the participant realizes ordinary income will be treated as a capital gain or loss.
Restricted Stock Units. A recipient of RSUs will not recognize taxable income upon the award of RSUs, and the Company will not be entitled to a deduction at such time. Upon payment or settlement of a RSU award, the participant will recognize ordinary income equal to the value of the shares or
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cash received and the Company will be entitled to a corresponding deduction, except to the extent the deduction limits of Section 162(m) of the Code apply. Upon disposition of shares received by a participant in payment of an award, the participant will recognize capital gain or loss equal to the difference between the amount received upon such disposition and the fair market value of the shares on the date they were originally transferred to the participant.
Performance Shares, Performance Units, and Cash-Based Awards. Generally, the participant will not realize taxable income on the date of grant of a performance share, performance unit, or cash-based award. Instead, the participant will realize ordinary income, and the Company will be entitled to a corresponding deduction (except to the extent the deduction limits of Section 162(m) of the Code apply), in the year cash, shares, or a combination of cash and shares are delivered to the participant in settlement of the award. The amount of such ordinary income and deduction will be the amount of cash paid plus the fair market value of the shares transferred, if any, on the date of transfer. Upon disposition of shares received by a participant in payment of an award, the participant will recognize capital gain or loss equal to the difference between the amount received upon such disposition and the fair market value of the shares on the date they were originally transferred to the participant.
New Plan Benefits
The Compensation Committee has the discretion to grant awards under the 2020 Plan and, therefore, it is not possible as of the date of this Proxy Statement to determine future awards that will be received by our Named Executive Offices or others under the 2020 Plan. See the section entitled “Executive Compensation - 2019 Grants of Plan-Based Awards Table” above for grants made to each of our Named Executive Officers under the 2010 Plan during 2019.
Vote Required
Proxies solicited by the Board will be voted “FOR” approval of the 2020 Plan unless stockholders specify otherwise in their proxies. Pursuant to NYSE rules, approval of our 2020 Plan requires the affirmative vote of a majority of the votes cast on this item at the meeting, with abstentions considered as a vote cast for purposes of this item only. A stockholder voting through a proxy who abstains with respect to approval of the 2020 Plan is in effect a negative vote, but a stockholder (including a broker) who does not give authority to a proxy to vote or withholds authority to vote on the approval of the 2020 Plan shall not be considered present and entitled to vote on the proposal. Brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes; broker non-votes will have no effect on the vote.
THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE NISOURCE INC. 2020 OMNIBUS INCENTIVE PLAN.
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PROPOSAL 5 — STOCKHOLDER PROPOSAL REGARDING STOCKHOLDER RIGHT TO ACT BY WRITTEN CONSENT Mr. John Chevedden of 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, who beneficially owns at least 100 shares of common stock, has informed the Company that he plans to present the following proposal at the meeting.
Proposal 5 — Right to Act by Written Consent
Shareholders request that our board of directors take the steps necessary to permit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. This written consent is to give shareholders the fullest power to act by written consent consistent with applicable law. This includes shareholder ability to initiate any appropriate topic for written consent.
Hundreds of major companies enable shareholder action by written consent. This proposal topic won majority shareholder support at 13 large companies in a single year. This included 67%-support at both Allstate and Sprint. This proposal topic also won 63%-support at Cigna Corp. (CI) in 2019. This proposal topic would have received higher votes than 63% to 67% at these companies if more shareholders had access to independent proxy voting advice.
Taking action by written consent is a means shareholders can use to raise important matters outside the normal annual meeting cycle like the election of a new director. This becomes more important when NiSource director Wayne DeVeydt is rejected by 25% of shares at the 2019 annual meeting.
Plus our higher 25%-threshold for shareholders to call a special meeting has bureaucratic pitfalls that trigger minor shareholder errors that could mean that 50% of shares would need to ask for a special meeting in order to be sure of obtaining the minimum threshold of 25% of requests without errors. One can be sure that management will have an eagle eye to spot any errors.
The right for shareholders to act by written consent is gaining acceptance as a more important right than the right to call a special meeting. This seems to be the conclusion of the Intel Corporation (INTC) shareholder vote at the 2019 Intel annual meeting.
The directors at Intel apparently thought they could divert shareholder attention away from written consent by making it less difficult for shareholders to call a special meeting. However Intel shareholders responded with greater support for written consent in 2019 compared to 2018.
Following a 45%-vote for a written consent shareholder proposal The Bank of New York Mellon Corporation (BK) said it adopted written consent in 2019.
Written consent won 43%-support at a previous NiSource annual meeting. This 43%-support may have been majority support from the shareholders who had access to independent proxy voting advice. What do the NiSource directors have to say about this level of support?
However the 2018 NiSource proxy said in effect that NiSource management prefers to pay more attention to the voice of the shareholders who do not have access to independent proxy voting advice. NiSource has made no effort to see that all shareholders have access to independent proxy voting advice.
Please vote yes:
Right to Act by Written Consent — Proposal 5
Board of Directors’ Statement in Opposition
Your Board of Directors unanimously recommends a vote AGAINST this proposal.
The Board of Directors and its Nominating and Governance Committee have considered this proposal and concluded that it is unnecessary and not in the best interests of our stockholders.
Requiring that stockholder action be taken at a meeting effectively safeguards the broader interests of all stockholders. In addition, our stockholders already have the right to call special meetings.
Our Amended and Restated Certificate of Incorporation provides that stockholder action must be effected at a duly called annual or special meeting and may not be effected by written consent. The communications and processes associated with a stockholder meeting protect the interests of all stockholders by providing every stockholder with an opportunity to discuss concerns with other stockholders and with the Board of Directors and management and allowing all stockholders to vote on any proposals. This proposal, however, would enable a group of stockholders controlling a majority of the vote to take action — even significant action, such as electing new directors or agreeing to sell the Company — without any input or vote from the other stockholders. This action could become effective without the knowledge of all of the stockholders and without providing all stockholders an opportunity to ask questions, be heard or raise any objection.
Our Bylaws provide that special meetings of our stockholders may be called at the request of the holders of 25% of our outstanding common stock. This is just under one-half of the percentage of stockholders that would be necessary to act by written consent under this proposal. Such stockholders who would otherwise propose to act by written consent already have the right to call a special meeting or propose matters to be considered at an annual meeting. The ability to call a special meeting gives stockholders the opportunity to consider extraordinary events that are of interest to a broad base of stockholders that cannot be delayed until the next annual meeting. Stockholder meetings offer important protections and advantages that are absent from the written consent process, as described below:
The meeting and the stockholder vote take place in a transparent manner on a specified date that is publicly announced well in advance;
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All interested stockholders are given the chance to express their views and cast their votes;
The meeting provides stockholders with a forum for open discussion and consideration of the proposed stockholder action;
Accurate and complete information about the proposed stockholder action is widely distributed in the proxy statement before the meeting, which promotes a well-informed discussion on the merits of the proposed action; and
The Board is able to analyze and provide a recommendation with respect to actions proposed to be taken at a stockholder meeting.
The Board believes that it is not in the best interests of the Company and its stockholders to allow a group of majority stockholders to dictate decisions of the Company without a meeting, as it could effectively disenfranchise minority stockholders and does not allow for a full discussion of all views. If this proposal were implemented, proposed stockholder actions involving important decisions could be approved without the important safeguard of advance notice to all of our stockholders and without the benefit of enabling all of our stockholders to consider the proposals, express their views, and vote.
Multiple stockholder actions by written consent could lead to substantial confusion and disruption.
Permitting stockholder action by written consent could also create substantial confusion and disruption at a widely held public company like NiSource. Multiple groups of stockholders would be able to solicit written consents at any time and as frequently as they choose on a range of issues, some of which may be duplicative or conflicting. In contrast, the orderly stockholder meeting process allows for actions to be clearly articulated to the Board and stockholders and avoids duplicative and conflicting proposals.
We have strong corporate governance practices that provide Board accountability to stockholder concerns.
The Board further believes that our strong corporate governance framework makes the adoption of this proposal unnecessary. Our corporate governance practices and policies ensure the Board remains accountable to stockholders. These extensive strong governance practices include:
Annual election of directors;
Majority voting for all directors with resignation policy;
Stockholder right to call special meetings;
No supermajority voting provisions;
Proxy access bylaw (3% ownership / 3 years / 20%);
Separate independent chairman and CEO;
All directors independent except CEO; and
Annual “Say-on-Pay” advisory votes.
In addition, stockholders may communicate directly with the Board at any time. For further information on how our stockholders may communicate with any director, any Board committee or the full Board, see the section titled “Communications with the Board and Non-Management Directors” on page 13. We believe that this comprehensive package of governance practices and policies, including our special meeting bylaw, protects stockholder rights without the expense and risk associated with the stockholder right to act by written consent.
For the reasons set forth above, the Board believes that the implementation of this proposal is not in the best interests of the Company and its stockholders.
Vote Required
If this proposal is properly presented at the meeting, approval requires the affirmative vote of a majority of the shares present at the virtual Annual Meeting or represented by proxy, and entitled to vote. Proxies submitted without direction pursuant to this solicitation will be voted AGAINST the stockholder proposal. Abstentions will have the same effect as a vote against the proposal. We believe brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes.
THE BOARD BELIEVES THAT THIS PROPOSAL IS NOT IN THE BEST INTERESTS OF STOCKHOLDERS AND RECOMMENDS A VOTE “AGAINST” THIS PROPOSAL.
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Our Audit Committee consists of Messrs. Bunting, Butler, DeVeydt
Kabat and Jesanis and Dr. Woo. Each member of the Audit Committee is independent as defined by the applicable NYSE and SEC rules and meets the additional independence standard set forth by the Board in the Corporate Governance Guidelines. Each member of the Audit Committee also is “financially literate” for purposes of applicable NYSE rules. The Board has determined that
Michael E.Mr. Jesanis, the Chair of the Audit Committee,
Theodore H.and Messrs. Bunting
Jr., Wayne S.and DeVeydt
and Kevin T. Kabat are “audit committee financial experts” as defined by SEC rules.
The Audit Committee is responsible for, among other things, assisting the Board in monitoring the integrity of our financial statements; reviewing the qualifications and independence of our independent registered public accounting firm; overseeing the performance of our internal audit function and independent registered public accounting firm; and reviewing our risk assessment process. The Audit Committee has the sole authority to appoint, retain or replace the independent registered public accounting firm and is directly responsible for the compensation and oversight of the work of the independent registered public accounting firm for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us. The independent registered public accounting firm reports directly to the Audit Committee.
In the performance of its responsibilities, the Audit Committee met regularly with the members of our internal audit function and Deloitte, our independent registered public accounting firm, with and without management present, to discuss the results of its examinations, evaluations of our internal controls, and the overall quality of our financial reporting. The Audit Committee also met regularly with management to discuss accounting, auditing, internal control, financial reporting, earnings and risk management matters. During these meetings, the Audit Committee reviewed and discussed, among other items, the audited consolidated financial statements, the unaudited interim financial statements,
and significant accounting policies applied by us in our financial statements
and non-GAAP financial measures, with management and Deloitte. The Audit Committee also discussed with, and received regular status reports from, our internal audit function and Deloitte on the overall scope and plans for their audits, including the scope and plans for evaluating the effectiveness of internal controls over financial reporting.
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The Audit Committee has discussed with Deloitte the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. The Audit Committee also has received the written disclosures and the letter from Deloitte required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with audit committees concerning independence and has discussed with Deloitte its independence. The Audit Committee has considered whether Deloitte’s provision of non-audit services to us is compatible with maintaining Deloitte’s independence. 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 our Annual Report on Form 10-K for the year ended December 31, 2018.
2019.
The Audit Committee has appointed Deloitte to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2019.2020. In determining whether to reappoint Deloitte, the Audit Committee took into consideration various factors, including the historical and recent performance of Deloitte on the audit; the professional qualifications of the firm and the lead audit partner; the quality of ongoing discussions with Deloitte; the results of an internal survey of Deloitte’s service and quality; the appropriateness of fees; and evidence supporting the firm’s independence, objectivity and professional skepticism. Although the Audit Committee has sole authority to appoint the independent registered public accounting firm, the Audit Committee has recommended that the Board seek stockholder ratification of the appointment at the Annual Meeting as a matter of good corporate governance.
| | | Audit Committee
|
| | | |
| | | Michael E. Jesanis, Chair
|
| | | Theodore H. Bunting, Jr.
|
| | | Eric L. Butler
|
| | | Wayne S. DeVeydt
Kevin T. Kabat
|
| | | Carolyn Y. Woo |
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
The following table represents the aggregate fees for professional services billed by Deloitte for the fiscal years ended December 31,
20182019 and
2017. | 2018 | 2017 |
Audit Fees(1) | $ | 4,796,000 | | $ | 4,604,000 | |
Audit-Related Fees(2) | | 581,871 | | | 608,129 | |
Tax Compliance(3) | — | — |
Tax Advice and Tax Planning(4) | — | — |
All Other Fees(5) | | 17,006 | | | 22,514 | |
2018.
| | Audit Fees(1) | | | $4,940,000 | | | $4,796,000 | |
| | Audit-Related Fees(2) | | | 524,721 | | | 581,871 | |
| | Tax Compliance(3) | | | — | | | — | |
| | Tax Advice and Tax Planning(4) | | | — | | | — | |
| | All Other Fees(5) | | | 23,208 | | | 17,006 | |
(1)
| (1) | Audit Fees — These are feesFees for professional services performed by Deloitte for the audit of our annual financial statements in our Annual Report on Form 10-K and review of financial statements included in our Quarterly Report on Form 10-Q filings and services that are normally provided in connection with statutory and regulatory filings or engagements. |
(2)
| (2) | Audit-Related Fees — These are feesFees for the assurance and related services performed by Deloitte that are reasonably related to the performance of the audit or review of our financial statements. These fees included services provided by Deloitte in connection with the audit of our benefit plans. |
(3)
| (3) | Tax Compliance — These are feesFees for professional services performed by Deloitte with respect to tax compliance. |
(4)
| (4) | Tax Advice and Tax Planning — These are feesFees for professional services performed by Deloitte with respect to tax advice and tax planning. |
(5)
| (5) | All Other Fees — These are feesFees for permissible work performed by Deloitte that does not fit within the above categories. |
Pre-Approval Policies and Procedures. During 2018,2019, the Audit Committee approved all audit, audit-related and non-audit services provided to us by Deloitte prior to management engaging the independent registered public accounting firm for those purposes. The Audit Committee’s current practice is to consider for pre-approval annually all audit, audit-related and non-audit services proposed to be provided by our independent registered public accounting firm for the year. Additional fees for other proposed audit-related or non-audit services (not within the scope of the approved audit engagement) which have been properly presented to the Pre-Approval Subcommittee of the Audit Committee (consisting of Michael E. Jesanis) by our Vice President and Chief Accounting Officer may be considered and, if appropriate, approved by the Pre-Approval Subcommittee of the Audit Committee, subject to later ratification by the full Audit Committee. In no event, however, will any non-audit service be approved by the Pre-Approval Subcommittee that would result in the independent registered public accounting firm no longer being considered independent under the applicable SEC rules. In appointing Deloitte as our independent registered public accounting firm, the Audit Committee has considered whether the provision of the non-audit services rendered by Deloitte is compatible with maintaining the firm’s independence.
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PROPOSAL 4 - AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board has approved, and is recommending to stockholders for approval, an amendment to our Certificate of Incorporation to increase the number of authorized shares of common stock from 400 million to 600 million and a corresponding increase to the number of authorized shares of all classes of capital stock from 420 million to 620 million. The proposed amendment would not increase the number of authorized shares of preferred stock.
Under our Certificate of Incorporation, the total number of shares of all classes of stock which the Company has the authority to issue is 420 million. Of these authorized shares, common stock comprises 400 million shares and preferred stock comprises 20 million shares. As of December 31, 2018, approximately 376.3 million shares of common stock were issued, including approximately 4.0 million treasury shares, with approximately 23.4 million shares of common stock reserved for possible future issuance under our stock plans and our at-the-market equity offering (“ATM”) program. Of these reserved shares, approximately 4.7 million shares are committed to be issued in December 2019 to complete a forward equity sale executed under the ATM program in December 2018. As a result, approximately 140,000 authorized shares of common stock remain available for issuance for future purposes and the Board deems it advisable to increase our authorized shares of common stock. The adoption of the proposed amendment would provide for an additional 200 million shares of common stock for future issuance. As of December 31, 2018, we also had approximately 420,000 shares of preferred stock issued.
Our business is capital intensive, requiring significant resources to fund operating expenses, capital project expenditures, scheduled debt maturities and interest payments, and dividend payments on our common stock and preferred stock. In addition to internal sources to fund liquidity and capital requirements for 2019 and beyond, we expect to rely on external sources of funds, including, but not limited to, equity financings such as the previously announced expected yearly issuance of $200 million to $300 million of equity each year in 2019 and 2020, subject to market and other conditions, to meet long-term cash needs, including cash requirements to fund the capital requirements of our capital programs and for other general corporate purposes. In connection with such equity financings, we announced in November 2018 our ATM equity offering program under which we may sell shares of our common stock having an aggregate sales price of up to $500 million.
We also plan to issue additional shares of common stock pursuant to our Employee Stock Purchase Plan, as further described in Proposal 6 (approval of Amended and Restated Employee Stock Purchase Plan to increase the number of shares available under the plan), which we believe is an important component of our efforts to attract and retain qualified employees.
The Board believes that it is advisable and in the best interests of our stockholders to increase the number of authorized shares of common stock to provide us with greater flexibility in considering and planning for future business needs, such as raising additional capital through the sale of equity securities, convertible debt securities or other equity-linked securities, purchases under our employee stock plans, grants of equity incentive awards to employees (subject to any required future stockholder approvals under equity plans), potential strategic transactions, stock dividends, stock splits, and other general corporate purposes. Approval of this amendment by stockholders at the Annual Meeting will enable us to take timely advantage of market conditions and other opportunities that may become available to us without the expense and delay of arranging a special meeting of stockholders in the future. Other than the planned annual equity financings described above and the routine practices of issuing shares pursuant to employee stock plans and employee equity incentive awards, we have no present plans, proposals, or arrangements with respect to the issuance of any additional shares of common stock authorized upon approval of the proposed amendment.
Existing holders of shares of our common stock have no preemptive rights under our Certificate of Incorporation to purchase any additional shares of common stock issued by the Company. The additional shares of common stock, if and when issued, would have the same rights and privileges as the shares of common stock currently authorized. Approval of this proposal and the issuance of additional authorized shares of common stock would not affect the rights of the holders of currently outstanding shares of our common stock, except for the effects incidental to increasing the number of shares outstanding. The effects include dilution of voting power of existing stockholders, decreasing earnings per share, and, depending on the price at which they are issued, could be dilutive to our existing stockholders.
We have not proposed the increase in the authorized number of shares of common stock with the intention of using the additional shares for anti-takeover purposes, although an issuance of additional shares could, in certain circumstances, make an attempt to acquire control of the Company more difficult. We are not at this time aware of any such attempts and we are not proposing this increase in response to any third-party effort to acquire control of the Company.
The Board has approved, and is now submitting for approval by our stockholders, an amendment to Article IV of the Certificate of Incorporation as set forth in Exhibit A to increase the number of authorized shares of common stock from 400 million to 600 million and a corresponding increase to the number of authorized shares of capital stock from 420 million to 620 million. The Board has determined that the amendment is advisable and in the best interest of our stockholders.
If our stockholders approve this proposal, the proposed amendment will become effective immediately upon the filing of the proposed amendment with the Secretary of State of the State of Delaware.
Vote Required
The affirmative vote of a majority of the outstanding shares of our common stock is needed to approve the amendment to the Certificate of Incorporation. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” approval of the amendment. Brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes. Abstentions and broker non-votes will have the same effect as a vote against the proposal.
THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
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PROPOSAL 5 - APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO ELIMINATE THE REQUIREMENT OF “CAUSE” FOR REMOVAL OF DIRECTORS
On December 21, 2015, in In re VAALCO Energy, Inc.Stockholder Litigation, Consol. C.A. No. 11775-VCL (Del. Ch. Dec. 21, 2015), the Delaware Court of Chancery issued an opinion invalidating as a matter of law provisions of the certificate of incorporation and bylaws of VAALCO Energy, Inc., a Delaware corporation, that permitted removal of VAALCO’s directors by its stockholders only for cause. The Court of Chancery held that, in the absence of a classified board or cumulative voting, VAALCO’s “only for cause” director removal provisions conflicted with Section 141(k) of the Delaware General Corporation Law and were therefore invalid.
We do not have a classified board or provide for cumulative voting. Currently, Section A.4 of Article V of our Certificate of Incorporation provides that, subject to the rights of the holders of any series of preferred stock to elect directors under specified circumstances, directors may be removed from office only for cause and only by the affirmative vote of a majority of the combined voting power of our then-outstanding shares of stock entitled to vote generally, voting together as a single class.
The Board has approved, and is now submitting for approval by our stockholders, an amendment to Section A.4 of Article IV of the Certificate of Incorporation to delete the provision specifying that directors are removable only with cause. The proposed change to the Certificate of Incorporation is attached hereto as Exhibit B (marked to show the effect of the amendment). The Board has determined that the amendment is advisable and in the best interest of our stockholders.
If our stockholders approve this proposal, the proposed amendment will become effective immediately upon the filing of the proposed amendment with the Secretary of State of the State of Delaware.
Vote Required
The affirmative vote of a majority of the outstanding shares of common stock is needed to approve the amendment to the Certificate of Incorporation. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” approval of the amendment. Brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes. Abstentions and broker non-votes will have the same effect as a vote against the proposal.
THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO PROVIDE THAT DIRECTORS ARE REMOVABLE WITH OR WITHOUT CAUSE.
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PROPOSAL 6 - APPROVAL OF AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES AVAILABLE UNDER THE PLAN
We maintain the NiSource Inc. Employee Stock Purchase Plan, which was most recently amended and restated effective August 1, 2012 (the “ESPP”). The ESPP, or a predecessor plan, has been maintained by us and our predecessors since 1964. We believe that the ESPP is an important component of our efforts to attract and retain qualified employees. We believe it also encourages employees to become our stockholders, which we believe assists in aligning their long-term interests with those of our stockholders.
Proposed Amendment and Restatement
The proposed amendment and restatement would (i) increase the maximum number of shares of our common stock remaining available for future purchase under the ESPP by 1 million shares and (ii) make certain other administrative changes. The purpose of the amendment and restatement is to ensure that we are able to continue to provide all current and new employees interested in participating in the ESPP with sufficient shares available for purchase in light of strong employee interest in ESPP participation.
Description of the ESPP
The following is a description of the terms of the ESPP, as proposed to be amended and restated. This description is qualified in its entirety by reference to the plan document, as proposed to be amended and restated, a copy of which is attached to this proxy statement as Exhibit C and incorporated herein by reference.
General. The ESPP provides eligible employees of the Company and its participating subsidiaries with the opportunity to purchase our common stock at a discount from market value through payroll deductions. The primary purposes of the ESPP are to provide employees of the Company and its participating subsidiaries an additional means of saving a portion of their earnings and to encourage employee ownership of our common stock.
Shares Subject to Award. Under the proposed amendment, the maximum number of shares of our common stock that may be purchased in the future under the ESPP will be increased from 243,244 as of February 28, 2019 to 1,243,244 shares of common stock, less shares purchased under the ESPP on March 31, 2019. The number of shares that can be purchased may increase in the future with additional stockholder approval. This number may also increase or decrease proportionately, as appropriate, in the event of a future stock dividend, stock split or combination of our common stock, spin-off, reorganization or recapitalization. If at any time the number of shares remaining available for purchase under the ESPP is not sufficient to satisfy all then outstanding purchase rights, the available shares will be apportioned among all participants on an equitable basis. The closing price of our common stock as reported on the NYSE on February 28, 2019 was $26.98.
Administration. The ESPP is administered by the Compensation Committee of our Board of Directors (the “ESPP Administrator”). The ESPP Administrator has the right to interpret the provisions of the ESPP and to make all rulings or interpretations regarding the ESPP.
Eligibility. The ESPP is open to each active employee of the Company and its participating subsidiaries who either (a) is a (i) full-time employee or (ii) part-time employee who customarily works for the Company or any subsidiary more than 20 hours per week for more than five months in any calendar year; or (b) in the case of a part-time employee whose customary employment is 20 hours or less per week, is customarily employed by the Company or a participating subsidiary for at least six months in any calendar year. All of our subsidiaries are eligible to participate in the ESPP if approved by the NiSource Benefits Committee.
No employee is eligible to participate in the ESPP if, immediately after participating, the employee would own, directly or indirectly, stock possessing 5% or more of the total combined voting power or value of all classes of our stock, including any stock which the employee may purchase under outstanding rights and options. In addition, no employee may accrue the right to purchase shares under the ESPP (and any other employee stock purchase plan of the Company and its affiliates) with a fair market of more than $25,000 for each calendar year. As of February 28, 2019, approximately 8,095 employees were eligible to participate in the ESPP.
Participation. The ESPP provides for four savings periods during each calendar year. Savings accumulated by an employee through payroll deductions will be used at the end of each savings period to purchase as many full and fractional shares of our common stock as possible at the purchase price determined for that savings period. Savings periods are the three-month periods from January 1 to March 31, April 1 to June 30, July 1 to September 30 and October 1 to December 31.
Each savings period includes all paydays within that period. The purchase price per share assigned to our common stock for any savings period will be 90% of the closing price of our common stock on the NYSE on the last trading day of the savings period. Shares of our common stock purchased under the ESPP will come from treasury shares, authorized but unissued shares or open market purchases of our common stock. The shares purchased will be credited and outstanding to an employee as of the close of business on the last day of each savings period.
An employee is eligible to participate in the ESPP on the first day of the month in which such employee first meets the eligibility criteria. At the time of enrollment, employees must also elect an amount that will be deducted from their paychecks for the purchase of our common stock. Payroll deductions can be in any full dollar amounts, not less than $10 per regular pay period, and not more than $20,000 per calendar year. An employee may increase, decrease or stop payroll deduction at any time. An employee’s death, retirement or termination of employment with the Company or its affiliates will be considered an automatic termination from participation in the ESPP.
To terminate participation in the ESPP, an employee may change his or her contribution to $0 and payroll deduction amounts that have not been used to purchase any of our common stock and remain in the employee’s individual brokerage account will be refunded to the employee as soon as administratively possible.
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Effect of Certain Corporate Events. In the event of a dissolution or liquidation of the Company, all offerings will terminate prior to the consummation of the proposed transaction or, at the Board’s discretion, the purchase date of any offering will be accelerated so that the outstanding rights may be exercised before or concurrent with the proposed transaction. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation where the Company is not the surviving corporation, all offerings will terminate prior to the consummation of the proposed event, unless the surviving corporation assumes the rights under the ESPP or substitutes similar rights, or the Board, at its discretion, provides that participants may exercise outstanding rights.
Duration, Termination and Amendment. Unless earlier terminated by the Board, the ESPP will terminate when the maximum number of shares of our common stock available for sale under the ESPP has been purchased. We reserve the right to modify, suspend or terminate the ESPP, by action of the Board of Directors or the ESPP Administrator, as of the beginning of any savings period. Notice of suspension, modification or termination will be given to all participants. Upon termination of the ESPP for any reason, the cash then credited to an employee’s account will be refunded by our payroll department. All full and fractional shares of our common stock held in individual employee’s brokerage account will be available to the employee.
The Board or the ESPP Administrator may also amend the ESPP from time to time to meet changes in legal requirements or for any other reason. In no event, however, may the Board or the ESPP Administrator amend the ESPP to (i) materially adversely affect any rights outstanding under the ESPP during the savings period in which such amendment is to be effected, (ii) increase the maximum number of shares of common stock which may be purchased under the ESPP without stockholder approval, (iii) decrease the purchase price of the common stock below 90% of the fair market value of the closing price of our common stock on the NYSE on the last trading day of the savings period, or (iv) adversely affect the qualification of the Plan under Section 423 of the Code.
Certain Federal Income Tax Consequences. The following discussion briefly summarizes certain U.S. federal income tax consequences to participants under the ESPP. The discussion is based upon current interpretations of the Code, and the regulations promulgated thereunder. This summary describes the general tax principles that apply and is provided only for general information. Certain types of taxes, such as state, local and non-U.S. taxes, are not discussed. Tax laws are complex and subject to change and may vary depending on individual circumstances and from locality to locality. The summary does not discuss all aspects of income taxation that may be relevant to a participant in light of his or her personal investment circumstances. This summarized tax information is not tax advice.
The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code. An employee will not realize taxable income at the time he or she purchases shares of common stock under the ESPP. The length of time an employee holds shares of common stock before disposing of them is an important variable in determining federal income tax consequences. A holding period starts the day after the day shares are purchased (i.e., the last day the common stock was traded on the NYSE in the applicable savings period).
For an employee who sells or otherwise disposes of shares of common stock purchased under the ESPP, federal income tax considerations will differ, depending upon how long he or she has held the shares. Under present law, if the employee holds the shares at least two years before disposing of them, the employee will recognize ordinary income at the time of sale or disposition equal to the lesser of (1) the excess of the fair market value of the shares at the time of disposition over the purchase price, or (2) 10% of the fair market value of the shares on the date of grant (i.e., the last day of the savings period). Any gain on the disposition in excess of the amount treated as ordinary income will be long-term capital gain. We are not entitled to take a deduction for the amount of the discount in the circumstances described above. If the sale price is less than the purchase price, then there is no ordinary income, and the employee will have a capital loss equal to the difference between the sale price and the purchase price.
Under present law, if an employee holds shares less than two years before disposing of them, the employee will recognize ordinary income on the excess of the fair market value of the stock on the purchase date over the purchase price. Any difference between the sale price of the shares and the fair market value on the purchase date will be capital gain or loss. We will be allowed a deduction in the year of disposal equal to the amount recognized as ordinary income.
Specific Benefits. The benefits that will be received by or allocated to persons eligible to participate in the ESPP in the future cannot be determined at this time because the amount of contributions set aside to purchase shares of our common stock under the ESPP (subject to the limits of the plan) are entirely within the discretion of each participant.
Requires Increase in Authorized Shares of the Company. The proposed increase in authorized shares under the Amended and Restated ESPP will require an increase in total authorized shares of common stock under our Certificate of Incorporation. Stockholders are being asked to approve such an increase in authorized shares in Proposal 4 of this proxy statement. The proposed amendments to the Amended and Restated ESPP will not be effectuated unless stockholders approve this Proposal 6 as well as Proposal 4 to increase the total authorized shares of common stock under our Certificate of Incorporation.
Vote Required
Approval of our Amended and Restated ESPP to increase the number of shares available under the plan requires the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” approval of the amendment. Abstentions will have the same effect as a vote against the proposal. Brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes; broker non-votes will have no effect on the vote.
THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF OUR AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES AVAILABLE UNDER THE PLAN.
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PROPOSAL 7 — STOCKHOLDER PROPOSAL REDUCING THE THRESHOLD STOCK OWNERSHIP REQUIREMENT FOR STOCKHOLDERS TO CALL A SPECIAL STOCKHOLDER MEETING FROM 25% TO 10%
Mr. John Chevedden of 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, who beneficially owns at least 200 shares of common stock, has informed us that he plans to present the following proposal at the meeting.
Proposal 7 - Special Shareholder Meeting Improvement
Resolved, Shareowners ask our board to take the steps necessary (unilaterally if possible) to amend our bylaws and each appropriate governing document to give holders in the aggregate of 10% of our outstanding common stock the power to call a special shareowner meeting (or the closest percentage to 10% according to state law). This proposal does not impact our board’s current power to call a special meeting.
Special meetings allow shareowners to vote on important matters, such as electing new directors that can arise between annual meetings. This proposal topic won more than 70%-support at Edwards Lifesciences and SunEdison in 2013. The 70% support would have been higher if all shareholders had access to independent proxy voting advice.
Scores of Fortune 500 companies allow a more practical percentage of shares to call a special meeting compared to the higher requirement of NiSource. Our higher 25%-threshold for shareholders to call a special meeting may be unreachable due to time constraints and detailed technical requirements that can disqualify many shareholders from participation. NiSource shareholders previously voted 65% in favor of the owners of 10% of shares to have the right to call a special meeting, sponsored by Ray T. Chevedden - the very topic of this proposal.
Stockholder proposals such as this have had an important role in improving the governance rules of our company. For instance, NiSource adopted annual election of each director and a rudimentary version of a shareholder right to call a special meeting after shareholder proposals on these topics were received.
A more practical rule to enable shareholders to call a special meeting would also put shareholders in a better position to give input on improving the qualifications of our directors.
Deborah Henretta, a director assigned to 2 important Board committees, owned only $4000 of stock and was paid $230,000 for perhaps 300 hours of work a year. Carolyn Woo had 20-years long tenure. Long-tenure can impair the independence of a director. Independence is of greater importance for directors serving on our most important board committees. And Ms. Woo served on both our Audit and Nomination Committees.
Richard Thompson was age 78 and had additional oversight duties as Chairman. Mr. Thompson did not serve on any other major Board of Directors to keep his skills up-to-date. Richard Abdoo was age 75.
Any claim that a shareholder right to call a special meeting can be costly - may be moot. When shareholders have a good reason to call a special meeting - our board should be able to take positive responding action to make a special meeting unnecessary.
Please vote yes:
Special Shareholder Meeting Improvement- Proposal 7
Board of Directors’ Statement in Opposition
Your Board of Directors unanimously recommends a vote AGAINST this proposal.
The Board of Directors and its Nominating and Governance Committee have considered this proposal and concluded that it is unnecessary and not in the best interests of our stockholders.
Our Certificate of Incorporation and Bylaws include a stockholder right to call special meetings that the Board believes strikes the appropriate balance between enhancing stockholder rights and adequately protecting the best interests of all of our stockholders.
Under our Certificate of Incorporation and Bylaws, stockholders holding at least 25% of the shares of common stock issued and outstanding may call a special meeting, which is consistent with the majority practice of S&P 500 companies that provide stockholders with this right. According to a recent survey, approximately 61% of S&P 500 companies provide stockholders with the right to call a special meeting. Of those companies that have this right, approximately 62% have an ownership threshold equal to or greater than 25%, while only approximately 18% of S&P 500 companies with such right have a 10% or less ownership threshold.
In its consideration of this proposal, the Board evaluated a number of factors, including the interests of our stockholders, the resources required to convene a special meeting, the existing opportunities for stockholders to engage with the Board and management between annual meetings, and the characteristics and composition of our stockholder base. The Board continues to believe that the current 25% ownership threshold provides an appropriate balance between providing accountability to stockholders and enabling the Board and management to focus on meeting our business objectives and enhancing stockholder value.
The Board believes that special meetings should only be called to consider extraordinary events that are of interest to a broad base of stockholders and that cannot be delayed until the next annual meeting. Implementation of the 10% ownership threshold could significantly disrupt our operations and increase our costs. For every special meeting, we are required to provide each stockholder a notice of meeting and proxy materials, which results in significant legal, printing and mailing and administrative expenses, as well as other costs normally associated with holding a stockholder meeting. Additionally, preparing for stockholder meetings requires significant attention of our directors, officers and employees, diverting their attention away
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from performing their primary function, which is to operate our business in the best interests of our stockholders. The current 25% threshold prevents a small number of stockholders, which may be composed of stockholders with special interests, from calling a special meeting that may not be in the best interest of all of our stockholders. Accordingly, the current 25% ownership threshold is a more appropriate standard to ensure that special meetings are held only for matters important to a larger group of stockholders.
We have strong corporate governance practices that provide Board accountability to stockholder concerns.
The Board further believes that our strong corporate governance framework makes the adoption of this proposal unnecessary. In addition to giving stockholders a meaningful right to call a special meeting in our bylaws, our corporate governance practices and policies ensure the Board remains accountable to stockholders. These extensive strong governance practices include:
Annual election of directors;
Majority voting for all directors with resignation policy;
Stockholder right to call special meetings;
No supermajority voting provisions;
Proxy access bylaw (3% ownership / 3 years / 20%);
Separate independent chairman and CEO;
All directors independent except CEO; and
Annual “Say-on-Pay” advisory votes.
In addition, stockholders may communicate directly with the Board at any time. For further information on how our stockholders may communicate with any director, any Board committee or the full Board, see the section titled “Communications with the Board and Non-Management Directors” on page 13.
We believe that this comprehensive package of governance practices and policies, including our existing special meeting bylaw, protects stockholder rights without the expense and risk associated with lowering the ownership threshold necessary to call a special meeting.
For the reasons set forth above, the Board believes that the implementation of this proposal is not in the best interests of the Company and its stockholders.
Vote Required
If this proposal is properly presented at the meeting, approval requires the affirmative vote of a majority of the shares present at the meeting in person or represented by proxy, and entitled to vote. Proxies submitted without direction pursuant to this solicitation will be voted AGAINST the stockholder proposal. Abstentions will have the same effect as a vote against the proposal. We believe brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes.
THE BOARD BELIEVES THAT THIS PROPOSAL IS NOT IN THE BEST INTERESTS OF OUR STOCKHOLDERS AND RECOMMENDS A VOTE “AGAINST” THIS PROPOSAL.
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STOCKHOLDER PROPOSALS AND NOMINATIONS FOR 20202021 ANNUAL MEETING
Stockholders may submit proposals appropriate for stockholder action at the
20202021 Annual Meeting consistent with the requirements of Rule 14a-8 under the Exchange Act, all other rules of the SEC relating to stockholder proposals and our Bylaws. Written notice containing the required information should be addressed to the attention of our Corporate Secretary at NiSource Inc., 801 E. 86
th Avenue, Merrillville, Indiana 46410. For your proposal to be considered for inclusion in our proxy statement in connection with the
20202021 Annual Meeting, we must receive your written proposal no later than December
3, 2019.14, 2020.
Stockholder proposals not intended to be included in our proxy statement (including director nominations) may be brought before the
20202021 Annual Meeting by filing a notice of stockholder’s intent to do so no earlier than January
8, 2020,19, 2021, and no later than February
7, 2020.18, 2021. The notice must include all of the information required to be set forth in any such notice by our Bylaws.
Stockholders who intend to submit director nominees for inclusion in our proxy materials for the
20202021 Annual Meeting must comply with the requirements of proxy access as set forth in our Bylaws. The stockholder or group of stockholders who wish to submit director nominees pursuant to proxy access must deliver the required materials to us no earlier than November
3, 2019,14, 2020, and no later than December
3, 2019.14, 2020.
If you would like a copy of our Bylaws, please contact our Corporate Secretary at the above address or access our Bylaws filed with the SEC as Exhibit 3.1 to our Current Report on Form 8-K filed on January 26, 2018. Failure to comply with our Bylaw procedure and deadlines may preclude presentation and consideration of the matter or of the proposed nominee for election at the
20202021 Annual Meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEBased on a review of reports filed with the SEC and written representations that no other reports were required under Section 16(a) of the Exchange Act, we believe that all of our directors, officers and beneficial owners of more than 10% of our common stock who are required to file such reports did file all such reports on a timely basis during 2018.
ANNUAL REPORT AND FINANCIAL STATEMENTS
Attention is directed to the financial statements contained in our Annual Report for the year ended December 31, 2018.2019. As of the mail date of this Proxy Statement, a copy of the Annual Report has been sent, or is concurrently being sent, to stockholders of record as of March 12, 2019.24, 2020. These statements and other reports filed with the SEC are available through our website at https://www.nisource.com/filings.
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AVAILABILITY OF FORM 10-K
A copy of our Annual Report on Form 10-K for the fiscal year ended December 31,
2018,2019, including the financial statements and the financial statement schedules, but without exhibits, is contained within our Annual Report which has been sent, or is concurrently being sent, to you and is available free of charge to any stockholder upon written request to NiSource Inc., c/o Corporate Secretary, 801 East
86th86th Avenue, Merrillville, Indiana 46410 and is also available on our website at
https://www.nisource.com/filings.MULTIPLE STOCKHOLDERS SHARING THE SAME ADDRESS — “HOUSEHOLDING” The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single set of proxy materials addressed to those stockholders. This process, which is commonly referred to as “householding,” may potentially provide extra convenience for stockholders and cost savings for companies or the intermediary.
You may receive proxy materials through an intermediary who uses householding to deliver proxy materials. If so, a single copy of the proxy materials may be delivered to multiple stockholders sharing an address unless the affected stockholder provides contrary instructions. Once you have received notice from your broker that they will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If this applies to you and you would prefer to receive separate copies of the proxy materials, please notify your broker that you no longer wish to participate in householding. Additionally, you may direct your written request for a copy of the proxy materials to NiSource Inc., c/o Corporate Secretary, 801 East
86th86th Avenue, Merrillville, Indiana 46410, or you may request a copy by telephone at (877) 647-5990. If your broker is not currently householding (i.e., you received multiple copies of our proxy statement), and you would like to request delivery of a single copy, you should contact your broker and find out if this option is available to you.
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The Board does not intend to bring any other matters before the Annual Meeting other than those described in this proxy statement. If any other matters do properly come before the meeting, it is the intention of the persons named in the enclosed form of proxy to vote the proxy in accordance with their judgment on such matters.
Whether or not you plan to attend the
virtual Annual Meeting, you can be sure your shares are represented at the meeting by submitting your completed proxy by telephone, through the Internet or by promptly marking, dating, signing and returning the enclosed proxy card.
| | | BY ORDER OF THE BOARD OF DIRECTORS |
| | | |
| | | |
| | | John G. Nassos
Anne-Marie W. D'Angelo
|
| | | Senior Vice President, General Counsel and |
| | | Corporate Secretary |
Dated: April 1, 201913, 2020 | | | |
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NISOURCE INC.
2020 Omnibus Incentive Plan
Article I
AmendmentPurpose and Duration
Section 1.1 Purpose. The Plan is designed to
Our Certificatepromote the achievement of
Incorporation to Increaseboth short-term and long-term objectives of NiSource Inc. (the “Company”) by (a) aligning compensation of Participants with the
Numberinterests of
Authorized SharesCompany stockholders, (b) enhancing the interest of
Common Stock(additions are underlined; deletions are struck-out)Article IVParticipants in the growth and success of the CertificateCompany, and (c) attracting and retaining Participants of Incorporationoutstanding competence.
Section 1.2 Effective Date and Duration. This Plan, if approved by a majority of the votes cast by Company stockholders at the May 2020 annual meeting, shall be effective at such date and shall remain in effect, subject to the right of the Board or the Committee to amend and terminate the Plan at any time as provided in this Plan, until all Shares subject to it shall have been purchased or acquired according to the Plan’s provisions. In no event, however, may an ISO be amendedgranted under the Plan more than ten years after the date the Plan was approved by the Board.
Article II
Definitions
Whenever used in the Plan, unless otherwise noted, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized:
Section 2.1 1934 Act. “1934 Act” means the Securities Exchange Act of 1934, as
follows:The total numberamended.
Section 2.2 Affiliate. “Affiliate” means any entity that is a Subsidiary or a parent corporation, as defined in Code Section 424(e), of shares of all classes of stockthe Company, or any other entity designated by the Committee as covered by the Plan in which the CorporationCompany has, directly or indirectly, at least a 20% voting interest.
Section 2.3 Alternative Award. “Alternative Award” has the meaning set forth in Section 15.1.
Section 2.4 Award. “Award” means any Option, SAR, Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit, Cash-Based Award, or Other Stock-Based Award granted to a Participant under the Plan.
Section 2.5 Award Agreement. “Award Agreement” means a written or electronic statement or agreement prepared by the Company that sets forth the terms, conditions and restrictions applicable to Awards granted under the Plan.
Section 2.6 Board or Board of Directors. “Board” or “Board of Directors” means the Board of Directors of the Company.
Section 2.7 Cash-Based Award. “Cash-Based Award” means an Award granted to a Participant, in accordance with Article XI of this Plan.
Section 2.8 Cause. “Cause,” unless such term or an equivalent term is otherwise defined with respect to an Award by the Participant’s Award Agreement, shall be as defined in any employment agreement between the Company and a Participant as in effect on the date of grant with respect to an Award; provided however, that if there is no such employment agreement, “Cause” shall mean any of the following: (a) the Participant’s conviction of any criminal violation involving dishonesty, fraud or breach of trust; (b) the Participant’s violation of the Company’s code of conduct and/or code of ethics; (c) the Participant’s performance of any act which would materially and adversely impact the business of the Company; or (d) the Participant’s willful and substantial nonperformance of assigned duties. Notwithstanding the foregoing, the Committee shall have authoritysole discretion with respect to issue is Four hundred twenty Six hundred twenty million (420,000,000 620,000,000), of which Twenty million (20,000,000) sharesthe application of the par value $.01 each are toprovisions of subsections (a)-(d) above, and such exercise of discretion shall be of a class designated Preferred Stockconclusive and Four hundred Six hundred million (400,000,000 600,000,000) sharesbinding upon the Participant and all other persons.
Section 2.9 CEO. “CEO” means the Chief Executive Officer of the par valueCompany.
Section 2.10 Change in Control. “Change in Control” means the occurrence of $.01 each are to beany of a class designated Common Stock.the following events:
(a)
| The acquisition by an entity, person or group (including all “affiliates” or “associates” of such entity, person or group) of beneficial ownership, as that term is defined in Rule 13d-3 under the 1934 Act, of capital stock of the Company entitled to exercise more than 30% of the outstanding voting power of all capital stock of the Company entitled to vote in elections of directors (“Voting Power”); provided, however, that a Change in Control shall not be deemed to occur by virtue of the following acquisitions: (i) by the Company or any Subsidiary; (ii) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary; (iii) by any underwriter temporarily holding securities pursuant to an offering of such securities; or (iv) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege, unless the security being so converted was itself acquired directly from the Company; |
(b)
| The effective time of (i) a merger or consolidation of the Company with one or more other corporations unless the holders of the outstanding Voting Power of the Company immediately prior to such merger or consolidation (other than the surviving or resulting corporation or any “affiliate” or “associate” thereof) hold at least 50% of the Voting Power of the surviving or resulting corporation (in substantially the same proportion as the Voting Power of the Company immediately prior to such merger or consolidation), or (ii) a transfer of 50% or more of the aggregate book value of the assets of the Company and its “affiliates” and “associates” as set forth on the most recent balance sheet of the Company, prepared on a consolidated basis, by its regularly employed, independent, certified public accountants, other than to an entity of which the Company owns at least 50% of the Voting Power; or |
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Exhibit B
Amendment to Our Certificate of Incorporation to Eliminate(c)
| The election to the Board of candidates who were not recommended for election by the Board, if such candidates constitute a majority of those elected in that particular election (for this purpose, recommended directors will not include any candidate who becomes a member of the Board as a result of an actual or threatened election contest or proxy or consent solicitation on behalf of anyone other than the Board or as a result of any appointment, nomination, or other agreement intended to avoid or settle a contest or solicitation). |
For the
Requirement of “Cause” for Removal of Directors(additions are underlined; deletions are struck-out)Article V.A.4 of the Certificate of Incorporation to be amended as follows:
4. Subject to the rights of the holders of any series of Preferred Stock to elect directors under specified circumstances, any director or directors may be removed from office at any time, but only for cause and only by the affirmative vote of a majority of the combined voting power of all of the then-outstanding shares of stock of the Corporation entitled to vote generally, voting together as a single class (it being understood that for all purposes of this Article V, each share of Preferred Stock shallSection 2.10, “affiliate” and “associate” have the number of votes, if any, granted to it pursuant to this Amended and Restated Certificate of Incorporation of any resolution adopted pursuant to Article IV).
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Exhibit C
AMENDED AND RESTATED NISOURCE INC.
EMPLOYEE STOCK PURCHASE PLAN
This Amended and Restated NiSource Inc. Employee Stock Purchase Plan (“ESPP” or “Plan”), adopted by the Board as of February 1, 2019, provides eligible employees (referred to herein as “you”) of NiSource Inc. (“NiSource”) and its participating subsidiaries (as described below) with the opportunity to purchase shares of common stock of NiSource, $.01 par value (“Common Stock”), at a discount from market value through payroll deductions. The primary purposes of the Plan are to provide employees of NiSource and its participating subsidiaries an additional means of saving a portion of their earnings and to encourage employee ownership of Common Stock. Further information concerning the Plan, including the number of shares of Common Stock to be offered pursuant to the Plan, ismeaning set forth herein. The Plan, as amended and restated herein, will become effective upon stockholder approval of the Plan within 12 months following the date on which it was adopted by the Board.
1. WHAT IS THE PLAN?
The Plan offers a convenient and economical way for eligible employees of NiSource to initiate or increase their ownership of Common Stock. Once you are enrolled in the Plan, your payroll deductions will be used by Fidelity Investments to purchase Common Stock (both full and fractional shares) for you.
2. WHO MAY PARTICIPATE?
Participating companies are:
(1) NiSource; and
(2) those subsidiaries of NiSource whose Boards of Directors have adopted resolutions requesting participation in the Plan for their employees and whose requests are approved by the NiSource Benefits Committee.
You may participate if:
(1) you are an active employee of NiSource or a participating subsidiary; and
(2) you are either: (a) a (i) full-time employee, or (ii) a part-time employee whose customary employment is more than 20 hours per week and more than five months in any calendar year; or (b) if you are part-time employee whose customary employment is 20 hours or less per week, you are customarily employed by NiSource or a participating subsidiary for at least six months in any calendar year.
However, even if you qualify under these rules, you may not acquire any right to purchase Common StockRule 12b-2 under the Plan if:
(1) immediately after participating, you would own at least 5% of1934 Act. Notwithstanding the total combined voting power or value of all classes of stock of NiSource or any subsidiary including any stock which the employee may purchase under outstanding rights and options; or
(2) such right would permit youforegoing, a Change in Control shall not be deemed to purchase stock under this Plan or any similar employee stock purchase plan of NiSource with a fair market value of more than $25,000 in a calendar year.
3. HOW DOES THE PLAN OPERATE?
The Plan provides for four Savings Periods during each calendar year. Savings accumulated by you through payroll deductions will be used at the end of each Savings Period to purchase as many full and fractional shares of Common Stock as possible at the purchase price determined for that Savings Period.
4. WHAT ARE THE SAVINGS PERIODS?
Savings Periods are the three-month periods from January 1 to March 31, April 1 to June 30, July 1 to September 30 and October 1 to December 31. Each Savings Period includes all paydays within that period.
5. WHEN CAN I START MY PARTICIPATION IN THE PLAN?
You become eligible to participate in the Plantake place with respect to any Participant by virtue of any transaction in which such Participant is a member in a group effecting an acquisition of the first Savings Period commencing on orCompany and, after the day on which you first meet the criteria listed in response to question 2. Whether or not you participatesuch acquisition, such Participant holds an equity interest in the Plan is your decision.
6. IF I AM ELIGIBLE, HOW DO I ENROLL IN THE PLAN?
You may enroll at netbenefits.fidelity.com or by contacting a Fidelity Stock Plan Services Representative. As partentity that has acquired the Company; provided, further, with respect to any nonqualified deferred compensation that becomes payable on account of the enrollment process, you will establishChange in Control, the transaction or event described in clause (a), (b), or (c) of this Section 2.10 also constitutes a Fidelity Account® - an individual brokerage account,“change in control event,” as defined in Treasury Regulation § 1.409A-3(i)(5), if required in order for the payment not to manage your ESPP. You must also elect an amount that will be deducted from your paycheck to contribute towards the purchase of Common Stock. Fidelity will send your payroll deduction election to the NiSource Payroll Department so that your payroll deduction can be added to your
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payroll record. Your payroll deduction will begin as quickly as administratively possible. At the time that you enroll, or anytime thereafter, you can designate a beneficiary on your Fidelity Account. If you are a Plan participant at the time of your death, your Fidelity Account will be distributed to the beneficiaries designated by you. You can complete the beneficiary designation online at fidelity.com. Once you have successfully completed your beneficiary designation, you should receive confirmation by postal mail. Any payroll deductions that have not been used to purchase shares of Common Stock at the time of death will be paid to your estate in cash.
7. WHAT IS A PAYROLL ELECTION?
A payroll election directs your employer to deduct money from your pay in a specified amount while you are a participant in the Plan. The payroll election remains effective until you change your payroll election at netbenefits.fidelity.com or by calling a Fidelity Stock Plan Services Representative.
8. WHEN WILL THE PAYROLL DEDUCTIONS START AND IN WHAT AMOUNT MAY THEY BE MADE?
Your payroll deductions will begin as soon as administratively possible. Payroll deductions can be in any full dollar amounts, not less than $10 per regular pay period, and not more than $20,000 per calendar year.
9. WHAT IF I DECIDE TO CHANGE OR STOP MY PAYROLL DEDUCTION?
You may change or stop your payroll deduction at any time. To make this change, you must complete a new payroll election at netbenefits.fidelity.com or by calling a Fidelity Stock Plan Services Representative.
10. WHAT HAPPENS TO THE MONEY DEDUCTED FROM MY PAY?
Your payroll deductions will be credited to your NiSource Inc. Purchase Account (“Purchase Account”) under the Plan. On the last trading day of each Savings Period, the balance in your Purchase Account will be applied to purchase full and fractional shares of Common Stock as described in response to question 13. No interest is paid to any employee on the amounts accumulated in his or her Purchase Account under the Plan.
11. WHAT WILL BE THE PRICE OF SHARES PURCHASED UNDER THE PLAN?
The purchase price per share assigned to the Common Stock for any Savings Period will be 90%violate Section 409A of the fair market value onCode.
Section 2.11 Code. “Code” means the
purchase date. For purposes of the Plan, fair market value is the closing price of the Common Stock on the New York Stock Exchange (“NYSE”) on the last trading day of the Savings Period.Shares of Common Stock purchased under the Plan will come from treasury shares, authorized but unissued shares or open market purchases of Common Stock. You will pay no brokerage commissions, fees or service charges in connection with purchases of Common Stock under the Plan.
12. HOW MANY SHARES MAY BE PURCHASED BY PARTICIPANTS UNDER THE PLAN?
Under this Amended and Restated ESPP, the maximum number of shares of Common Stock that may be purchased in the future under the Plan is 1,243,244 as of February 1, 2019, pending approval of 1,000,000 of these shares by stockholders. This number may increase again in the future with stockholder approval. This number may also increase or decrease proportionately, as appropriate, in the event of a future stock dividend, stock split or combination of Common Stock, spin-off, reorganization or recapitalization. If the number of shares remaining available for purchase under the Plan is not sufficient to satisfy all then outstanding purchase rights, the available shares will be apportioned among all participants on an equitable basis.
13. HOW MANY SHARES CAN I BUY IN EACH SAVINGS PERIOD?
The number of shares of Common Stock purchased by you during each Savings Period will be determined by dividing your Purchase Account balance by the purchase price per share for that Savings Period (the last trading day of the Savings Period). Shares will be allocated to four decimal places. The number of shares you can purchase will depend on the size of your payroll deductions and the fair market value of the Common Stock as of each purchase date. For example, if you have authorized deductions of $200.00 for the Savings Period and the fair market value of a share of Common Stock on the purchase date is $20.00, then your purchase price would be 90% of $20.00 or $18.00, and you would purchase 11.1111 shares of Common Stock ($200/$18.00). The number of shares purchased is also subject to an annual limit as indicated in question 14. You can estimate the number of shares that will be purchased with your contributions at netbenefits.fidelity.com. See answer to question 27.
14. IS THERE AN ANNUAL CONTRIBUTION LIMIT ON THE NUMBER OF SHARES PURCHASED?
The Internal Revenue Service limits purchases under an Employee Stock Purchase PlanCode of 1986, as amended from time to $25,000 worth of stock in any one calendar year, valued as oftime.
Section 2.12 Committee. “Committee” means the
first day of the Savings Period. Therefore, the Plan will multiply the value of the Common Stock on the first trading date of the Savings Period by the number of shares purchased at the end of the Savings Period and limit the total value of shares purchased for all Savings Periods in the calendar year to $25,000. Any payroll deduction amounts not used to purchase shares as a result of the contribution limit will be refunded.15. CAN COMMON STOCK BE PURCHASED UNDER THE PLAN FOR CASH?
No. Common Stock can be purchased only through payroll deductions.
16. WHAT HAPPENS TO THE SHARES I PURCHASE?
The shares you purchase will be considered credited to you as of the close of business on the last day of each Savings Period. Your shares will be deposited into your Fidelity Account as soon as administratively possible following the purchase date.
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17. HOW WILL SHARES PURCHASED UNDER THE PLAN BE REGISTERED?
The shares will be registered in “street name” at Fidelity. This means that your shares will be registered in the name of Fidelity and you will be designated as the beneficial owner.
18. HOW DO I SELL SHARES THAT I HAVE PURCHASED THROUGH THE PLAN?
Any shares held in your Fidelity Account can be sold by Fidelity at your direction. You will have the ability to place “real time” orders to sell your Common Stock (or any other brokerage order) during regular market hours. The proceeds from the sale of your shares will be deposited into your Fidelity Account. Any sale of shares in your Fidelity Account will be subject to commissions and fees governing that account, as outlined in the Brokerage Commission Schedule contained within the Customer Agreement that you will complete when you enroll. Please refer to the answer to question 20 or the Brokerage Commission Schedule contained within your Customer Agreement on Fidelity.com for further details. Commissions and fees are subject to change.
Fidelity also provides you the ability to place an order to sell your Common Stock, when and how you prefer. You can trade 24 hours a day online or using Fidelity’s Automated Service Telephone (FAST®). You can also place your trade with a Fidelity Stock Plan Services Representative, excluding holidays of the New York Stock Exchange.
Certain restrictions are imposed by the Federal securities laws and NiSource policy on sales of Common Stock by officers and certain other employees. All other employees may sell Common Stock purchased under the Plan without any restrictions.
19. ARE THERE ANY RESTRICTIONS ON THE TRANSFER OF SHARES PURCHASED UNDER THE PLAN?
Any shares purchased under the Plan are restricted from transfer to another financial institution for a two-year period. However, in light of certain Federal tax requirements, each employee on entering the Plan agrees to notify NiSource if he or she disposes of any shares of Common Stock purchased under the Plan within two years after the purchase date. You are still eligible to sell shares during this two year holding period, however, under current law you will be subject to additional federal income tax. See answer to question 35.
20. WHAT IS THE COST TO PARTICIPATE IN THE PLAN?
There are no brokerage commissions, fees or service charges connected with Common Stock purchases. These costs are paid by NiSource. However, you will pay all costs incurred in the sale of shares in your Fidelity Account. All sales will be subject to commissions and fees governing your Fidelity Account, as outlined in the Brokerage Commission Schedule contained within the Customer Agreement. Please refer to your Customer Agreement on Fidelity.com for further details. Commissions and fees are subject to change.
You will also be charged a regulatory transaction fee per dollar of the total principal amount of the sale proceeds or a portion thereof. This regulatory fee is paid to the Securities and Exchange Commission (“SEC”) at the time of sale and is required for all equity trades. This regulatory transaction fee is subject to modification by the SEC.
21. CAN MY RIGHTS UNDER THE PLAN BE ASSIGNED OR TRANSFERRED TO ANOTHER PERSON?
No. Your rights under the Plan cannot be assigned or transferred to another person.
22. MAY I TERMINATE MY PARTICIPATION IN THE PLAN AT ANY TIME?
Yes. Further, your death, retirement or termination of employment with NiSource, or your cessation of eligibility as a participating employee, will be considered your automatic termination from participation in the Plan.
23. HOW DO I TERMINATE MY PARTICIPATION IN THE PLAN AND WHEN IS IT EFFECTIVE?
You can terminate your participation by changing your contribution to $0 on netbenefits.fidelity.com or by calling a Fidelity Stock Plan Services Representative. If you terminate your participation, Fidelity will inform NiSource to stop any future payroll deductions and to refund any payroll deductions in your Purchase Account that have not been used to purchase Common Stock. Your payroll deduction and refund will be made as soon as administratively possible on your payroll check.
24. WHAT HAPPENS WHEN I TERMINATE MY PARTICIPATION?
The shares of Common Stock will remain in your Fidelity Account until transferred or sold. You cannot transfer shares to another financial institution until two years after the date of purchase. You can sell shares at any time but the sale will be subject to additional federal income tax as described in question 35. The cost to sell shares is described in the answer to question 20.
25. MAY I WITHDRAW THE CASH IN MY PURCHASE ACCOUNT OR SUSPEND MY PAYROLL DEDUCTIONS WITHOUT TERMINATING MY PARTICIPATION IN THE PLAN?
Withdrawing the cash balance credited to your Purchase Account does not terminate your participation in the Plan. However, it does discontinue your payroll deductions. To resume your payroll deductions, you will need to elect a new payroll deduction amount at netbenefits.fidelity.com.
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26. WHAT HAPPENS IF I DIE, RETIRE, TERMINATE MY EMPLOYMENT OR OTHERWISE CEASE TO BE ELIGIBLE TO PARTICIPATE?
Upon the occurrence of such event, your participation in the Plan will stop. The cash balance in your Purchase Account will be refunded to you, or your estate in the event of your death. The shares of Common Stock will remain in your Fidelity Account or in the event of your death will be transferred to your designated beneficiary
27. HOW DO I LEARN ABOUT THE STATUS OF MY PURCHASE AND FIDELITY ACCOUNTS?
Each payroll deduction will be shown on your pay stub. In addition, you will receive a monthly statement from Fidelity if you have any activity (purchase, sale, transfer or dividend reinvestment) in your Fidelity Account. Should you have no activity in your Fidelity Account, you will receive a quarterly statement. You will also receive confirmations for transactions that are made in your account. If you would prefer to receive information online, you can sign up for e-delivery at Fidelity.com. Even if you do not elect to sign up for e-delivery, you can access your statements and confirmation online at any time.
These statements contain information that is helpful for tax reporting and cost basis purposes; therefore, you should keep the statements until all shares of Common Stock purchased under the Plan and Fidelity Account have been disposed of and all tax obligations have been met. You can also access your Fidelity Account information at any time at netbenefits.fidelity.com. You will be able to view your accumulated contributions and estimate the number of shares that will be purchased with your contributions at any time. Once logged in, click on the link for the NiSource ESPP and select Estimate Purchase. There, you will see your total accumulated contributions for the current savings period and the estimated number of shares that will be purchased with your contributions. You will also receive all reports issued to stockholders of NiSource, including annual reports and proxy solicitation material.
28. WHO ADMINISTERS THE PLAN?
The Compensation Committee of the Board of Directors, or such other committee as the Board shall appoint from time to time, which shall consist of NiSourcetwo or more directors all of whom are intended to satisfy the requirements for a “non-employee director” within the meaning of Rule 16b-3 of the 1934 Act, and an “independent director” under the rules of the New York Stock Exchange (or any other national securities exchange which is the Administratorprincipal exchange on which the Shares may then be traded); provided, however, that any action taken by the Committee shall be valid and effective whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership specified above.
Section 2.13 Company. “Company” means NiSource Inc., a Delaware corporation, or any successor thereto.
Section 2.14 Disability or Disabled. “Disability” or “Disabled” means a condition that (a) causes the Participant to be unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, (b) causes the Participant, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, to receive income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company or its Affiliates or (c) causes the Participant to be eligible to receive Social Security disability payments. The Committee, in its sole discretion, shall determine the date of any Disability.
Section 2.15 Employee. “Employee” means any person who is an employee of the Company or any Affiliate; provided, however, that with respect to ISOs, “Employee” means any person who is considered an employee of the Company or any Affiliate for purposes of Treasury Regulation Section 1.421-1(h).
Section 2.16 ERISA. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
Section 2.17 Fair Market Value. “Fair Market Value” means, on any given date and as may be specified in an Award Agreement, the closing sales price per Share (or, if otherwise specified by the Committee, a price that is based on the opening, actual, high, low, or average sales prices per Share) of the Company’s common stock as reported on the New York Stock Exchange or such other established securities market on which the Shares are traded, or, if there were no reported sales of Shares on such date, then, unless otherwise required under the Code, the business day immediately preceding such date; provided, however, that if the Shares are not traded on an established securities market or if Fair Market Value for any date cannot be so determined, Fair Market Value shall be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion, shall at such time deem appropriate and in compliance with Code Section 409A. Notwithstanding the above, for purposes of broker-facilitated cashless exercises of Awards involving Shares under the Plan, “Fair Market Value” shall mean the real-time selling price of such Shares as reported by the broker facilitating such exercises.
Section 2.18 Good Reason. “Good Reason” means, with respect to a Participant, (a) there is a significant diminution in the nature or the scope of the Participant’s authorities or duties; (b) there is a significant reduction in the Participant’s monthly rate of base salary or the Participant’s target opportunity under the incentive bonus compensation plan maintained by Company in which the Participant participates; (c) the Company changes by 50 miles or more the principal location at which the Participant is required to perform services as of the date of a Change in Control; or (d) the Company or any successor materially breaches any Award Agreement or Alternative Award with the Participant granted in accordance with this Plan. However, should youNotwithstanding the foregoing, in order to terminate employment for Good Reason, (i) within 30 days of the occurrence of an event described in Clauses (a)-(d) above, Participant shall deliver written notice in accordance with the notice provisions set forth in the Participant’s Award Agreement of his or her intention to terminate employment for Good Reason, which notice specifies in reasonable detail the circumstances claimed to give rise to the Participant’s right to terminate employment for Good Reason, (ii) the Company shall not have cured such circumstances within 30 days following the Company’s receipt of such notice, and (iii) the Participant terminates his or her employment within 60 days following the expiration of the cure period. If, however, the Company cures such conditions, any subsequent termination of employment by the Participant will not be considered to be made for Good Reason.
Section 2.19 Grant Price. “Grant Price” means the price established at the time of grant of an SAR pursuant to Article VII (Stock Appreciation Rights), used to determine whether there is any payment due upon exercise of the SAR.
Section 2.20 Incentive Stock Option or ISO. “Incentive Stock Option” or “ISO” means an Option that meets the requirements of Code Section 422 (or any successor Code section), which is intended by the Committee to constitute an Incentive Stock Option.
Section 2.21 Nonemployee Director. “Nonemployee Director” means a member of the Board who is not an Employee.
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Section 2.22 Nonqualified Stock Option or NSO. “Nonqualified Stock Option” or “NSO” means an option to purchase Shares that does not constitute an Incentive Stock Option under Code Section 422 (or any successor Code section).
Section 2.23 Option. “Option” means a right to purchase Shares in accordance with the terms and conditions of the Plan.
Section 2.24 Option Exercise Price. “Option Exercise Price” means the price at which a Share may be purchased by a Participant pursuant to an Option
Section 2.25 Other Stock-Based Award. “Other Stock-Based Award” means an Award granted to a Participant in accordance with Article XII of this Plan.
Section 2.26 Participant. “Participant” means an Employee or Nonemployee Director who is selected to receive an Award or who has an outstanding Award granted under the Plan.
Section 2.27 Performance Measure. “Performance Measure” means one or more business criteria that may be used by the Committee in establishing Performance Targets for Awards under the Plan. The Performance Measures established by the Committee may relate to corporate, division, department, or business unit performance and may be established in terms of any one or a combination of the following Performance Measures: (i) growth in gross revenue; (ii) earnings per share; (iii) operating earnings per share; (iv) business unit operating earnings; (v) specified revenue targets; (vi) expense control; (vii) productivity; (viii) ratio of earnings to stockholders’ equity or to total assets; (ix) dividend payments; (x) total stockholders’ return; (xi) operating income; (xii) return on capital or return on investment; (xiii) return on assets; (xiv) return on net assets; (xv) operating margins; (xvi) earnings before interest and taxes; (xvii) earnings before interest taxes depreciation; amortization and depletion; (xviii) funds from operations; (xix) total debt or change in total debt or the rating on our debt as determined by external rating agencies; (xx) cash from operations; (xxi) gross margins; (xxii) return on equity; (xxiii) net income; (xxiv) pre-tax income; (xxv) specified customer satisfaction targets; (xxvi) specified safety targets; (xxvii) specified reliability targets and (xxviii) such other criteria as the Committee may determine whether or not listed herein. Multiple Performance Measures may be used and may have the same or different weighting, and they may relate to absolute performance or relative performance as measured against other institutions or divisions or units 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, 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 shall be subject to such other special rules and conditions as the Committee may establish at any time.
Section 2.28 Performance Shares. “Performance Shares” means an Award designated as Performance Shares and granted to a Participant in accordance with Article IX of the Plan.
Section 2.29 Performance Targets. “Performance Targets” means the criteria and objectives that are established by the Committee for grants of Awards under the Plan subject to any one or more Performance Measures.
Section 2.30 Performance Unit. “Performance Unit” means an Award designated as a Performance Unit and granted to a Participant in accordance with Article X of this Plan.
Section 2.31 Period of Restriction. “Period of Restriction” means the period during which the transfer of Shares underlying an Award is limited in some way, or the Shares are subject to a substantial risk of forfeiture.
Section 2.32 Plan. “Plan” means the NiSource Inc. 2020 Omnibus Incentive Plan, as may be amended from time to time.
Section 2.33 Prior Plans. “Prior Plans” means the NiSource, Inc. 2010 Omnibus Incentive Plan and each other equity plan maintained by the Company under which awards are outstanding as of the effective date of this Plan.
Section 2.34 Restricted Stock. “Restricted Stock” means an Award that is a grant of Shares delivered to a Participant, subject to restrictions described in Article VIII of this Plan.
Section 2.35 Restricted Stock Unit or RSU. “Restricted Stock Unit” or “RSU” means an Award that is subject to the restrictions described in Article VIII of this Plan and is a promise of the Company to deliver at the end of a Period of Restrictions (a) one Share for each RSU, (b) cash in an amount equal to the Fair Market Value of one Share for each RSU, or (c) a combination of (a) and (b), in each case, as determined by the Committee and set forth in the Award Agreement.
Section 2.36 Retirement. “Retirement” means, with respect to Employees, retirement as defined in the Company’s tax-qualified pension plan as in effect on the date of grant with respect to an Award, unless defined otherwise in an Award Agreement.
Section 2.37 Section 409A Regulations. “Section 409A Regulations” means the U.S. Treasury Regulations promulgated pursuant to Code Section 409A.
Section 2.38 Service. “Service” means a Participant’s work for the Company or an Affiliate, either as an Employee or Nonemployee Director.
Section 2.39 Shares. “Shares” means the shares of common stock of the Company, $0.01 par value per share.
Section 2.40 Stock Appreciation Right or SAR. “Stock Appreciation Right” or “SAR” means an Award designated as an SAR in accordance with the terms of Article VII of the Plan.
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Section 2.41 Subsidiary. “Subsidiary” means any corporation, partnership, joint venture, or other entity in which the Company has a majority voting interest; provided, however, that with respect to ISOs, the term “Subsidiary” shall include only an entity that qualifies under Code Section 424(f) as a “subsidiary corporation” with respect to the Company.
Section 2.42 Substitute Award. “Substitute Award” means 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 an Option or SAR.
Section 2.43 Tandem SAR. “Tandem SAR” means a SAR that is granted in connection with a related Option, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (with a similar cancellation of the Tandem SAR when a Share is purchased under the Option). Except for the medium of payment, the terms of a Tandem SAR shall be identical in all material respects to the terms of the related Option.
Section 2.44 Voting Power. “Voting Power” has the meaning set forth in Section 2.10.
Article III
Administration
Section 3.1 Administration by the Committee. The Plan shall be administered by the Committee. All questions
concerningof interpretation of the Plan, of any Award Agreement or of any other form of agreement or other document employed by the Company in the administration of the Plan or
your Fidelity Account, you should contact Fidelityof any Award shall be determined by the Committee, and such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or
NiSource Stockholder Services.29. WHAT IS THE RESPONSIBILITY OF NISOURCE AND THE ADMINISTRATOR UNDER THE PLAN?
NiSourcesuch Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the AdministratorCommittee in the exercise of its discretion pursuant to the Plan or Award Agreement or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest therein. Notwithstanding the foregoing and except as otherwise determined by the Board, the Board shall perform the functions of the Committee for purposes of granting Awards under the Plan to Nonemployee Directors.
Section 3.2 Powers of the Committee. In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, willthe Committee shall have the full and final power and authority, in its discretion:
(a)
| to determine the persons to whom, and the time or times at which, Awards shall be granted and the number of Shares to be subject to each Award; |
(b)
| to determine the type of Award granted; |
(c)
| to determine the Fair Market Value of Shares or other property where applicable; |
(d)
| to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any Shares acquired pursuant thereto, including, without limitation, (i) the exercise or purchase price of Shares pursuant to any Award, (ii) the method of payment for Shares purchased pursuant to any Award, (iii) the method for satisfaction of any tax withholding obligation arising in connection with Award, including by the withholding or delivery of Shares, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any Shares acquired pursuant thereto, (v) the time of the expiration of any Award, (vi) the effect of the Participants termination of Service on any of the foregoing, and (vii) all other terms, conditions and restrictions applicable to any Award or Shares acquired pursuant thereto not inconsistent with the terms of the Plan; |
(e)
| to determine how an Award will be settled, as provided under an Award Agreement; |
(f)
| to approve one or more forms of Award Agreement; |
(g)
| to amend, modify, extend, cancel or renew any Award or to waive any restrictions or conditions applicable to any Award or any Shares acquired upon the exercise thereof; |
(h)
| to accelerate, continue, extend or defer the exercisability of any Award or the vesting of any Award, including with respect to the period following a Participants termination of Service; |
(i)
| to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without limitation, as the Committee deems necessary or desirable to comply with the laws or regulations of or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose citizens may be granted Awards; and |
(j)
| to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement and to make all other determinations and take such other actions with respect to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law. |
Section 3.3 Action by the Committee. A majority of the members of the Committee shall constitute a quorum for any meeting of the Committee, and the act of a majority of the members present at any meeting at which a quorum is present or the act approved in writing by a majority of all the members of the Committee shall be the act of the Committee. In the performance of their duties under this Plan, the Committee members shall be entitled to rely upon information and advice furnished by the Company’s officers, employees, accountants or counsel, or any executive compensation consultant or other professional retained by the Company or the Committee to assist in the administration of this Plan.
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The Committee may delegate some or all of its power and authority hereunder to the Board (or any members thereof) or, subject to applicable law, to a subcommittee of the Board, a member of the Board, the CEO or other executive officer of the Company as the Committee deems appropriate; provided, however, that the Committee may not delegate its power and authority to a member of the Board, the CEO or other executive officer of the Company with regard to the selection for participation in this Plan of an officer, director or other person subject to Section 16 of the 1934 Act or decisions concerning the timing, pricing or amount of an Award to such an officer, director or other person.
Section 3.4 Indemnification. No member of the Board or of the Committee, and neither the CEO nor any other executive officer to whom the Committee delegates any of its power and authority hereunder, shall be liable for any act doneaction taken, or determination made, hereunder in good faith and the members of the Board and the Committee and the CEO or other executive officer shall be entitled to indemnification and reimbursement by the Company in connectionrespect of any claim, loss, damage or expense (including attorneys’ fees) arising therefrom to the full extent permitted by law (except as otherwise may be provided in the Company’s Certificate of Incorporation and/or By-laws) and under any directors’ and officers’ liability insurance that may be in effect from time to time.
Article IV
Stock Subject to the Plan
Section 4.1 Aggregate Shares. Subject to adjustment as provided under the Plan 10,000,000 Shares shall initially be available for all Awards under this Plan, other than Substitute Awards. Any of the authorized Shares may be used for any type of Award under the Plan, and any or all of 10,000,000 Shares may be allocated to Incentive Stock Options. Such Shares may be authorized and unissued Shares, treasury Shares, or Shares acquired on the open market.
Section 4.2 Share Counting. To the extent that Shares subject to an outstanding Award granted under the Plan or an outstanding award granted under a Prior Plan, other than Substitute Awards, are not issued or delivered by reason of (a) the expiration, termination, cancellation or forfeiture of such award (excluding shares subject to an Option cancelled upon settlement in shares of a related Tandem SAR or shares subject to a Tandem SAR cancelled upon exercise of a related Option) or (b) the settlement of such award in cash, then such Shares shall again be available under this Plan. Shares tendered or withheld in order to satisfy tax withholding obligations, including with respect awards granted under a Prior Plan, will be available for issuance again under the Plan. Notwithstanding anything herein to the contrary, (a) Shares equal in number to the Shares withheld, surrendered or tendered in payment of the exercise price of an Award, including awards granted under a Prior Plan, and (b) Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Awards, including awards granted under a Prior Plan, shall not become available for issuance again under the Plan.
Section 4.3 Adjustment to Number of Shares. In the event of any equity restructuring (within the meaning of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation or any successor or replacement accounting standard) that causes the per share value of the Shares to change, such as a stock 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 Option and SAR (including the number and class of securities subject to each outstanding Option or SAR and the Option Exercise Price or Grant Price) and the terms of each other outstanding 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 Options and SARs in accordance with Code Section 409A. 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 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.
Section 4.4 Corporate Transactions. The number of Shares available for Awards under this Plan shall not be reduced by (a) the number of Shares subject to Substitute Awards or (b) available shares under a stockholder 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 this Plan (subject to applicable stock exchange requirements).
Section 4.5 Minimum Vesting Requirements. No Award granted under the Plan shall become exercisable or vested prior to the one-year anniversary of the date of grant; provided, however, that such restriction shall not apply to Awards granted under this Plan with respect to the number of Shares which, in the aggregate, does not exceed five percent (5%) of the total number of Shares initially available for Awards under this Plan. This Section 4.5 shall not restrict the right of the Committee to accelerate or continue the vesting or exercisability of an award upon or after a termination of employment or otherwise pursuant to Section 3.2 of the Plan or Article XV of the Plan.
Article V
Eligibility and Participation
Section 5.1 Eligibility to Receive Awards. Persons eligible to receive Awards under the Plan are Employees and Nonemployee Directors, and persons expected to become Employees and Nonemployee Directors of the Company and its Affiliates as the Committee in its sole discretion may select from time to time. Except as otherwise provided for in an Award Agreement, for purposes of this Plan, references to employment by the Company shall also mean employment by an Affiliate, and references to employment shall include service as a Nonemployee Director. The Committee shall determine, in its sole discretion, the extent to which a Participant shall be considered employed during an approved leave of absence. The aggregate value of cash compensation and the grant date fair value of Shares that may be awarded or granted during any fiscal year of the Company to any Nonemployee Director shall not exceed $700,000.
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Section 5.2 Participation in the Plan. Subject to the other provisions of this Plan, the Committee has the full discretion to grant Awards to eligible persons described in Section 5.1. Eligible persons may be granted more than one Award. Eligibility in accordance with this Section, however, shall not entitle any person to be granted an Award, or, having been granted an Award, to be granted an additional Award.
Article VI
Options
Section 6.1 Grant of Options. Options shall be evidenced by Award Agreements in such form and not inconsistent with the Plan
or for any good faith omissionas the Committee shall approve from time to
act, including, without limitation, any claim of liability arising out of failure to terminate a participant’s Purchase Account upon such participant’s death or retirement prior totime. Award Agreements shall specify the
receipt of notice in writingOption Exercise Price, the duration of the
event.30. WHO INTERPRETS THE PLAN?
The AdministratorOption, the number of Shares to which the Plan reservesOption pertains, provisions for vesting and exercisability, whether the right to interpretOption is an ISO or NSO, and such other provisions as the Committee shall determine. Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with the following terms and conditions.
Section 6.2 Option Exercise Price. The Option Exercise Price shall not be less than 100% of the Fair Market Value of a Share on the day the Option is granted. Notwithstanding the foregoing, in the case of an Option that is a Substitute Award, the Option Exercise Price of the Shares subject to such 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 purchase 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 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 Company, over (y) the aggregate purchase price of such shares.
Section 6.3 Exercise of Options. Each Award Agreement shall state the period or periods of time within which the Option may be exercised by the optionee, in whole or in part, which shall be such period or periods of time as may be determined by the Committee, provided that the Option exercise period shall not end later than ten years after the date of the grant of the Option. The Committee shall have the power to permit in its discretion an acceleration of the previously determined exercise terms, within the terms of the Plan, under such circumstances and upon such terms and conditions as it deems appropriate.
Section 6.4 Payment of Option Exercise Price. Except as otherwise provided in the Plan, or in any Award Agreement, the optionee shall pay the Option Exercise Price upon the exercise of any Option (i) in cash, (ii) by authorizing a third party with which the optionee has a brokerage or similar account to sell the Shares (or a sufficient portion of such Shares) acquired upon the exercise of the Option and remit to the Company a portion of the sale proceeds sufficient to pay the entire Option Exercise Price to the Company, (iii) by delivering Shares that have an aggregate Fair Market Value on the date of exercise equal to the Option Exercise Price; (iv) by authorizing the Company to withhold from the total number of Shares as to which the Option is being exercised the number of Shares having a Fair Market Value on the date of exercise equal to the aggregate Option Exercise Price for the total number of Shares as to which the Option is being exercised, (v) by such other means by which the Committee determines to be consistent with the purpose of the Plan and applicable law, or (vi) by any combination of (i), (ii), (iii), (iv), and (v). In the case of an election pursuant to (i) above, cash shall mean cash or check issued by a federally insured bank or savings and loan association and made payable to NiSource Inc. In the case of payment pursuant to (ii) or (iii) above, the optionee’s authorization must be made on or prior to the date of exercise and shall be irrevocable. In lieu of a separate election governing each exercise of an Option, an optionee may file a blanket election with the Committee, which shall govern all future exercises of Options until revoked by the optionee. Upon exercise of an Option and payment of the applicable Option Exercise Price, the Participant shall be entitled to receive from the Company the number of Shares with respect to which the Option is exercised.
Section 6.5 Termination of Service. Each Option Award Agreement shall set forth the extent, if any, to which the Participant shall have the right to continued or accelerated vesting of the Option following termination of the Participant’s Service. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
Section 6.6 Additional Rules for Incentive Stock Options.
(a)
| Employees. Incentive Stock Options may be granted only to Employees of the Company or a Subsidiary and not to Employees of any Affiliate unless such entity is classified as a “disregarded entity” of the Company or the applicable Subsidiary under the Code. Incentive Stock Options may not be granted to Nonemployee Directors. |
(b)
| Exercise Limitations. The Committee, in its sole discretion, may provide in each Award Agreement the period or periods of time within which the Option may be exercised by the optionee, in whole or in part, provided that the Option period shall not end later than ten years after the date of the grant of the Option. The aggregate Fair Market Value (determined with respect to each Incentive Stock Option at the time of grant) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by an individual during any calendar year (under all incentive stock option plans of the Company and its Subsidiaries) shall not exceed $100,000. If the aggregate Fair Market Value (determined at the time of grant) of the Shares subject to an Option, which first becomes exercisable in any calendar year, exceeds this limitation, so much of the Option that does not exceed the applicable dollar limit shall be an Incentive Stock Option and the remainder shall be a Nonqualified Stock Option; but in all other respects, the original Award Agreement shall remain in full force and effect. Notwithstanding anything herein to the contrary, if an Incentive Stock Option is granted to an individual who owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporations, within the meaning of Code Section 422(b)(6), (i) the purchase price of each Share subject to the Incentive Stock Option shall be not less than one hundred ten percent (110%) of the Fair Market Value of the Share on the date the Incentive Stock Option is granted, and (ii) the Incentive Stock Option shall expire, and all rights to purchase Shares thereunder shall cease, no later than the fifth anniversary of the date the Incentive Stock Option was granted. |
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(c)
| Rights Upon Termination of Service. The rules under Section 6.6 of this Plan generally shall apply when an optionee holding an ISO terminates Service. Notwithstanding the foregoing, in accordance with Code Section 422, if an Incentive Stock Option is exercised more than ninety days after termination of Service, that portion of the Option exercised after such date shall automatically be a Nonqualified Stock Option, but, in all other respects, the original Award Agreement shall remain in full force and effect. |
Section 6.7 Other Terms. The Award Agreements with respect to Options shall contain such other terms and provisions and conditions not inconsistent with the Plan as shall be determined by the Committee.
Article VII
Stock Appreciation Rights
Section 7.1 Grant of SARs. Stock Appreciation Rights shall be evidenced by Award Agreements in such form and not inconsistent with the Plan as the Committee shall approve from time to time. Award Agreements shall specify the Grant Price of the SAR, the duration of the SAR, the number of Shares to which the SAR pertains, provisions for vesting and exercisability, and such other provisions as the Committee shall determine. Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with the following terms and conditions. An SAR may be a Tandem SAR or may not be granted in connection with an Option.
Section 7.2 Grant Price. The Grant Price of a Tandem SAR shall be the Option Exercise Price of the related Option. The Grant Price of an SAR other than a Tandem SAR shall be determined by the Committee; provided, however, that such Grant Price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such SAR (or, if earlier, the date of grant of the Option for which the SAR is exchanged or substituted). Notwithstanding the foregoing, in the case of an SAR that is a Substitute Award, the Grant Price per Share of the Shares subject to such SAR 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 Grant 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 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 Company, over (y) the aggregate base price of such shares.
Section 7.3 Term of SAR. SARs shall be granted for a period of not more than ten years, and shall be exercisable in whole or in part, at such time or times and subject to such other terms and conditions, as shall be prescribed by the Committee at the time of grant, subject to the provisions of this Plan.
Section 7.4 Special Rules for Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to Shares for which its related Option is then exercisable. Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR will expire no later than the expiration of the underlying ISO; (ii) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Option Exercise Price of the underlying ISO and the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Exercise Price of the ISO.
Section 7.5 Termination of Service. Each SAR Award Agreement shall set forth the extent, if any, to which the Participant shall have the right to continued or accelerated vesting of the SAR following termination of the Participant’s Service. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
Section 7.6 Payment. Upon exercise of a Stock Appreciation Right, the Participant shall be entitled to receive payment from the Company in an amount equal to the product of (i) and (ii) where (i) is the excess of the Fair Market Value of a Share on the date of exercise over the Grant Price and (ii) is the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee and as set forth in the Award Agreement, payment shall be made in cash, in Shares, or in a combination thereof.
Section 7.7 Other Terms. The Award Agreements with respect to SARs shall contain such other terms and provisions and conditions not inconsistent with the Plan as shall be determined by the Committee.
Article VIII
Restricted Stock and Restricted Stock Units
Section 8.1 Grants. The Committee, at any time and from time to time, may grant Shares of Restricted Stock or grant Restricted Stock Units to Participants in such amounts as the Committee shall determine. Each Restricted Stock or Restricted Stock Unit grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units issued to the Participant, and such other provisions as the Committee shall determine. Such Award Agreements shall be consistent with the provisions of this Article VIII
Section 8.2 Period of Restriction. The end of any Period of Restriction for Restricted Stock or Restricted Stock Units may be conditioned upon the satisfaction of such conditions as are established by the Committee in its sole discretion and set forth in an applicable Award Agreement. Such conditions include, without limitation, restrictions based upon the continued Service of the Participant, the achievement of specific Performance Targets, time-based restrictions on vesting following the attainment of the Performance Targets, and/or restrictions under applicable federal or state securities laws, prohibitions against transfer, and repurchase by the Company or right of first refusal. The Committee shall have the power to permit in its discretion, an acceleration of the expiration of the applicable Period of Restriction with respect to any part or all of the Shares or number of Restricted Stock Units awarded to a Participant.
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Section 8.3 Certificates. If a certificate is issued in respect of Shares awarded to a Participant, each certificate shall be deposited with the Company, or its designee, and shall bear the following legend:
“This certificate and the shares represented hereby are subject to the terms and conditions (including forfeiture and restrictions against transfer) contained in the NiSource Inc. 2020 Omnibus Incentive Plan and an Award Agreement entered into by the registered owner. Release from such terms and conditions shall be obtained only in accordance with the provisions of the Plan and Award Agreement, a copy of each of which is on file in the office of the Secretary of said Company.”
Section 8.4 Lapse of Restrictions. A Restricted Stock Award Agreement or Restricted Stock Unit Award Agreement shall specify the terms and conditions upon which any restrictions upon Shares awarded or RSUs awarded under the Plan shall lapse, as determined by the Committee. With respect to a Restricted Stock Award, upon termination of any applicable Period of Restriction (and the satisfaction or attainment of applicable Performance Measures), the restrictions shall be removed from the requisite number of any Shares that are held in book entry form, and all certificates evidencing ownership of the requisite number of Shares shall be delivered to the holder of such Award. With respect to a Restricted Stock Unit Award, upon termination of any applicable Period of Restriction (and the satisfaction or attainment of applicable Performance Measures) the Shares or, if applicable, cash payment with respect to the Restricted Stock Unit Award shall be distributed to the Participant in accordance with the Restricted Stock Unit Award Agreement (but no later than the March 15 of the year after the year in which such Period of Restriction ends except as otherwise provided for in the Award Agreement).
Section 8.5 Termination of Service. Each Restricted Stock Award Agreement and Restricted Stock Unit Award Agreement shall set forth the extent, if any, to which the Participant shall have the right to continued or accelerated vesting of Shares of Restricted Stock or Restricted Stock Units following termination of the Participant’s Service. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
Section 8.6 Code Section 83(b) Election. If a Participant makes an election pursuant to Code Section 83(b) with respect to a Restricted Stock Award, the Participant shall be required to promptly file a copy of such election with the Company.
Section 8.7 Other Terms. The Award Agreements with respect to Restricted Stock or Restricted Stock Units shall contain such other terms and provisions and conditions not inconsistent with the Plan as shall be determined by the Committee.
Article IX
Performance Shares Awards
Section 9.1 Grants of Performance Shares. The Committee, at any time and from time to time, may grant Awards of Performance Shares to Participants in such amounts as the Committee shall determine. Each Performance Shares grant shall be evidenced by an Award Agreement that shall specify the applicable performance period, the number of Shares subject to a Performance Shares Award that are to be delivered to the Participant upon satisfaction of the Performance Targets by the expiration of the performance period, and such other provisions as the Committee shall determine. Such Award Agreements shall be consistent with the provisions of this Article IX.
Section 9.2 Performance Period and Performance Targets. At the time of award, the Committee, in its sole discretion shall establish a performance period and the Performance Targets to be achieved during the applicable performance period with respect to an Award of Performance Shares.
Section 9.3 Delivery of Shares. Following the conclusion of each performance period, the Committee shall determine the extent to which the Performance Targets have been attained for such period as well as the other terms and conditions established by the Committee. The Committee shall determine the amount of Shares, if any, to be delivered to the Participant in satisfaction of the Award.
Section 9.4 Termination of Service. Each Performance Shares Award Agreement shall set forth the extent, if any, to which the Participant shall have the right to continued or accelerated vesting of Performance Shares following termination of the Participant’s Service. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Performance Shares Awards granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
Section 9.5 Other Terms. The Award Agreements with respect to Performance Shares shall contain such other terms and provisions and conditions not inconsistent with the Plan as shall be determined by the Committee.
Article X
Performance Units
Section 10.1 Grant of Performance Units. Subject to the terms of the Plan, Performance Units may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee. Performance Units shall be evidenced by Award Agreements that are subject to the terms of this Article X.
Section 10.2 Performance Period and Performance Targets. At the time of award, the Committee, in its sole discretion, shall establish a performance period and the Performance Targets to be achieved during the applicable performance period with respect to an Award of Performance Units.
Section 10.3 Value of Performance Units. At the time Performance Units are granted, the Committee shall establish with respect to each such Award a value for each Performance Unit, which may vary thereafter determinable from criteria specified by the Committee at the time of Award.
Section 10.4 Payment of Performance Units. Following the conclusion of each performance period, the Committee shall determine the extent to which the Performance Targets have been attained for such period as well as the other terms and conditions established by the Committee. The Committee
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shall determine what, if any, payment is due on the Performance Units. Except as otherwise set forth in the Award Agreement, payment shall be made as soon as practicable after the end of the applicable performance period, but no later than the March 15 of the year after the year in which such performance period ends, in cash, in Shares, or in a combination thereof, as the Committee may determine and as set forth in the Award Agreement.
Section 10.5 Termination of Service. Each Performance Unit Award Agreement shall set forth the extent, if any, to which the Participant shall have the right to continued or accelerated vesting of Performance Units following termination of the Participant’s Service. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Performance Units Awards granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
Section 10.6 Other Terms. The Award Agreements with respect to Performance Units shall contain such other terms and provisions and conditions not inconsistent with the Plan as shall be determined by the Committee.
Article XI
Cash-Based Awards
Section 11.1 Grant of Cash-Based Awards. Subject to the terms of the Plan, Cash-Based Awards may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee, subject to the terms of this Article XI.
Section 11.2 Performance Period and Performance Targets. At the time of award, the Committee, in its sole discretion, shall establish a performance period and the Performance Targets to be achieved during the applicable performance period with respect to Cash-Based Awards.
Section 11.3 Value of Cash-Based Awards. At the time Cash-Based Awards are granted, the Committee shall establish the value of such Awards, which may vary thereafter determinable from criteria specified by the Committee at the time of Award.
Section 11.4 Payment of Cash-Based Awards. Following the conclusion of each performance period, the Committee shall determine what, if any, payment is due with respect to a Cash-Based Award. Except as otherwise set forth in the Award Agreement, payment shall be made in cash as soon as practicable after the end of the applicable performance period, but no later than the March 15 of the year after the year in which such performance period ends, in accordance with the Company’s payroll practices.
Section 11.5 Termination of Service. With respect to Cash-Based Awards, the Committee shall set forth the extent, if any, to which the Participant shall have the right to continued or accelerated vesting of such Cash-Based Awards following termination of the Participant’s Service. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Cash-Based Awards granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
Section 11.6 Other Terms. The Award Agreements with respect to Cash-Based Awards shall contain such other terms and provisions and conditions not inconsistent with the Plan as shall be determined by the Committee.
Article XII
Other Stock-Based Awards
The Committee may from time to time grant Shares and other Awards under the Plan that are valued in whole or in part by reference to, or are otherwise based upon and/or payable in Shares. The Committee, in its sole discretion, shall determine the terms and conditions of such Awards, which shall be consistent with the terms and purposes of the Plan.
Article XIII
Dividends and Dividend Equivalents
No dividends or dividend equivalents may be awarded with respect to any Options or SARs. An Award (other than Options or SARs) may, if so determined by the Committee, provide the Participant with the right to receive dividend payments, or, in the case of Awards that do not involve the issuance of Shares concurrently with the grant of the Award, dividend equivalent payments with respect to Shares subject to the Award (both before and after the Shares are earned, vested or acquired), which payments shall be credited to an account for the Participant, or deemed to have been reinvested in additional Shares, which shall be subject to the same vesting and performance conditions as the underlying Award. Dividend or dividend equivalent amounts credited to an account for the Participant may be settled in cash or Shares or a combination of both, as determined by the Committee. Except as provided otherwise in an Award Agreement, any Participant entitled to receive a cash dividends or dividend equivalents pursuant to his applicable Award may, by written election filed with the Company, at least ten days before the date of payment of such dividend equivalent, elect to have such dividend equivalent credited to an account maintained for his benefit under a dividend reinvestment plan maintained by the Company.
Article XIV
Beneficiary Designation
Each Participant under the Plan may, from time to time, name 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
sole discretion.31. HOW LONG WILL THE PLAN BE IN EFFECT?
Unless earlier terminateddeath before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the Boardsame Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the absence of Directorsany such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.
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Article XV
Change in Control
Section 15.1 Effect of NiSource,Change in Control.
(a)
| Upon a Change in Control, no cancellation, termination, acceleration of exercisability or vesting, lapse of any Period of Restriction or settlement or other payment shall occur with respect to any outstanding Award, if the Committee (as constituted immediately prior to the consummation of the transaction constituting the Change in Control) reasonably determines, in good faith, prior to the Change in Control that such outstanding Awards shall be honored or assumed, or new rights substituted (such honored, assumed or substituted Award being hereinafter referred to as an “Alternative Award”) by the successor, provided that any Alternative Award must: |
i.
| be (A) based on shares of common stock that are traded on a registered U.S. securities exchange or (B) an award of cash having the same economic value; |
ii.
| provide the Participant (or each Participant in a class of Participants) with rights and entitlements substantially equivalent to or better than the rights, terms and conditions applicable under such Award, including, but not limited to, an identical or better exercise or vesting schedule and identical or better timing and methods of payment; |
iii.
| have substantially equivalent economic value to such Award (determined at the time of the Change in Control); and |
iv.
| have terms and conditions which provide that in the event that the Participant suffers an involuntary termination of Service by the Company other than for Cause or a voluntary termination for Good Reason within two years following the Change in Control, any conditions on the Participant’s rights under, or any restrictions on transfer or exercisability applicable to, each such Award held by such Participant shall be waived or shall lapse, as the case may be, and any performance-based restrictions shall be deemed to have been achieved at target level performance. |
(b)
| All outstanding Awards for which Alternative Awards are not granted in accordance with this section shall become fully exercisable; all restrictions thereon shall terminate; any performance-based restrictions shall be deemed to have been achieved at target level performance; and such Awards shall be immediately payable, except to the extent that later payment is necessary to comply with Code Section 409A. |
(c)
| Except as otherwise set forth in the Award Agreement, if the Company has terminated the Service of a Participant other than for Cause, or if the Participant has terminated Service for Good Reason, during the year before the consummation of a Change in Control but after a third party and/or the Company had taken steps reasonably calculated to effect such Change in Control, and the Participant reasonably demonstrates that such termination of Service was in connection with or in anticipation of the Change in Control, then: all of the Participant’s outstanding Awards shall become fully exercisable; all restrictions thereon shall terminate; any performance-based restrictions shall be deemed to have been achieved at target level performance; and such Awards shall be payable within 60 days after the Change in Control, except to the extent that later payment is necessary to comply with Code Section 409A. |
Article XVI
Deferrals
The Committee may permit (upon timely election by the Plan will terminate whenParticipant) or require a Participant to defer such Participant’s receipt of the maximum numberpayment of sharescash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, the lapse or waiver of restrictions with respect to Restricted Stock or Performance Shares, or the satisfaction of any requirements or goals with respect to Performance Units, Cash-Based Awards or Other Stock-Based Awards. If any such deferral election is required or permitted, the Committee may, in its sole discretion, establish rules and procedures for such payment deferrals in a manner consistent with Code Section 409A and the regulations thereunder.
Article XVII
Withholding
Section 17.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.
Section 17.2 Share Withholding. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising as a result of Awards granted hereunder, Participants may elect, subject to the approval of the Committee or as otherwise provided for in the Award Agreement, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares. Shares of Common Stock
available for saleto 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 Company, such other rate as will not cause adverse accounting consequences under the
Plan have been purchased. (See responseaccounting rules then in effect, and is permitted under applicable IRS withholding rules). All such elections shall be irrevocable, made in writing before the date in which income is realized by the recipient in connection with the particular transaction, signed by the Participant, and shall be subject to
question 12.)32. MAY THE PLAN BE TERMINATED OR AMENDED?
NiSource reservesany restrictions or limitations that the rightCommittee, in its sole discretion, deems appropriate.
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Article XVIII
Compliance with Code Section 409A
Section 18.1 Awards Subject to modify, suspendCode Section 409A. The provisions of this Section 18.1 shall apply to any Award or terminateportion thereof that is or becomes subject to Code Section 409A, notwithstanding any provision to the contrary contained in the Plan by actionor the Award Agreement applicable to such Award. Awards subject to Code Section 409A include, without limitation:
(a)
| Any Nonqualified Stock Option or SAR that permits the deferral of compensation other than the deferral of recognition of income until the exercise or transfer of the Option or SAR or the time the shares acquired pursuant to the exercise of the Option or SAR first become substantially vested. |
(b)
| Any Award that either provides by its terms, or under which the Participant makes an election, for settlement of all or any portion of the Award either (i) on one or more dates following the end of the Short-Term Deferral Period (as defined below) or (ii) upon or after the occurrence of any event that will or may occur later than the end of the Short-Term Deferral Period. |
Subject to the Section 409A Regulations or other applicable guidance, the term “Short-Term Deferral Period” means the period ending on the later of (i) the 15th day of the Boardthird month following the end of Directorsthe Company’s fiscal year in which the applicable portion of NiSourcethe Award is no longer subject to a substantial risk of forfeiture or its Compensation Committee,(ii) the 15th day of the third month following the end of the Participant’s taxable year in which the applicable portion of the Award is no longer subject to a substantial risk of forfeiture. For this purpose, the term “substantial risk of forfeiture” shall have the meaning set forth in Section 409A Regulations or other applicable guidance.
Section 18.2 No Acceleration of Distributions. Notwithstanding anything to the contrary herein, this Plan does not permit the acceleration of the time or schedule of any distribution under this Plan pursuant to any Award subject to Code Section 409A, except as provided by Code Section 409A and Section 409A Regulations.
Section 18.3 Separation from Service. If any amount shall be payable with respect to any Award hereunder as a result of a Participant’s termination of employment or other Service and such amount is subject to the provisions of Code Section 409A, then notwithstanding any other provision of this Plan, a termination of employment or other Service will be deemed to have occurred only at such time designated byas the Board or Compensation Committee, which in no eventParticipant has experienced a “separation from service” as such term is defined for purposes of Code Section 409A.
Section 18.4 Timing of Payment to a Specified Employee. If any amount shall be
earlier thanpayable with respect to any Award hereunder as a result of a Participant’s “separation from service” (as such term is defined for purposes of Code Section 409A) at such time as the Participant is a “specified employee” and such amount is subject to the provisions of Code Section 409A, then notwithstanding any other provision of this Plan, no payment shall be made, except as permitted under Code Section 409A, prior to the first day of
any Savings Period in which such change is made. Noticethe seventh (7th) calendar month beginning after the Participant’s “separation from service” (or the date of
suspension, modificationhis or
terminationher earlier death). The Company may adopt a specified employee policy that will apply to identify the specified employees for all deferred compensation plans subject to Code Section 409A; otherwise, specified employees will be
given to all participants.In no event, however, mayidentified using the default standards contained in the regulations under Code Section 409A.
Article XIX
Amendment and Termination
Section 19.1 Amendment, Modification, and Termination of the Plan. The Board or the Compensation Committee may at any time terminate, suspend or amend the Plan without the authorization of stockholders to (i)the extent allowed by law, including without limitation any rules issued by the Securities and Exchange Commission under Section 16 of the 1934 Act, insofar as stockholder approval thereof is required in order for the Plan to continue to satisfy the requirements of Rule 16b-3 under the 1934 Act, or the rules of any applicable stock exchange; provided, however, that neither the Board nor the Committee may adopt any Plan amendment that seeks to modify the prohibition on repricing of Options or SARs set forth in Section 19.2 or the Nonemployee Director compensation limit set forth in Section 5.1 without stockholder approval. No termination, suspension or amendment of the Plan shall materially adversely affect any right acquired by any Participant under an Award granted before the date of such termination, suspension or amendment, unless such Participant shall consent; but it shall be conclusively presumed that any adjustment for changes in capitalization as provided for herein does not adversely affect any such right.
Section 19.2 Amendment of Awards. The Committee may unilaterally amend the terms of any Award Agreement previously granted, except that (i) no such amendment may materially impair the rights outstandingof any Participant under the applicable Award without the Participant’s consent, unless such amendment is necessary to comply with applicable law, stock exchange rules or accounting rules; and (ii) in no event may an Option or SAR be amended or modified, other than as provided in Section 4.3, to decrease the Option or SAR exercise or base price thereof, or be cancelled in exchange for cash, a new Option or SAR with a lower exercise price or base price, or other Awards, or otherwise be subject to any action that would be treated for accounting purposes as a “repricing” of such Option or SAR, unless such action is approved by the Company’s stockholders.
Article XX
Miscellaneous
Section 20.1 Approval Restrictions. Each Award under the Plan duringshall be subject to the Savings Periodrequirement that, if at any time the Committee shall determine that (i) the listing, registration or qualification of the Shares subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any government regulatory body, or (iii) an agreement by the recipient of an Award with respect to the disposition of Shares is necessary or desirable as a condition of, or in connection with, the granting of such award or the issue or purchase of Shares thereunder, such Award may not be consummated in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained, free of any conditions not acceptable to the Committee.
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Section 20.2 Securities Law Compliance. With respect to Participants subject to Section 16 of the 1934 Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. If any provision of this Plan or of any Award Agreement would otherwise frustrate or conflict with the intent expressed in the preceding sentence, that provision to the extent possible shall be interpreted and deemed amended in the manner determined by the Committee so as to avoid the conflict. To the extent of any remaining irreconcilable conflict with this intent, the provision shall be deemed void as applicable to Participants who are then subject to Section 16 of the 1934 Act. In addition, no Shares will be issued or transferred pursuant to an Award unless and until all then applicable requirements imposed by federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any stock exchanges upon which such amendment is to be effective, (ii) increase the maximum number of shares of Common Stock whichShares may be purchasedlisted, have been fully met. As a condition precedent to the issuance of Shares pursuant to the grant, exercise, vesting or settlement of an Award, the Company may require the Participant to take any reasonable action to meet such requirements. The Committee may impose such conditions on any Shares issuable under the Plan (except withas it may deem advisable, including, without limitation, restrictions under the approvalSecurities Act of 1933, as amended, under the requirements of any stock exchange upon which such Shares of the stockholders of NiSource,same class are then listed, and under any blue sky or as described in responseother securities laws applicable to question 12), (iii) decrease the purchase price of the Common Stock below 90% of the fair market value, or (iv) adversely affect the qualification of the Plan under such Shares.
Section
423 of the Internal Revenue Code.Upon termination of the Plan for any reason, the cash then credited to your Purchase Account will be refunded to you20.3 Gender and Number. Except where otherwise indicated by the NiSource Payroll Department. All fullcontext, any masculine term used herein also shall include the feminine, the plural shall include the singular and fractional sharesthe singular shall include the plural.
Section 20.4 Rights as a Stockholder. The recipient of
Common Stock held in your Fidelity Account will be available to you in your Fidelity Account.33. HOW ARE MY RIGHTS UNDER THE PLAN AFFECTED BY EVENTS SUCH AS A DISSOLUTION, LIQUIDATION OR MERGER OF NISOURCE?
In the event of the proposed dissolution or liquidation of NiSource, any and all offeringsAward under the Plan, will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board.Plan, shall have no rights as a stockholder with respect thereto unless and until certificates for Shares are issued to the recipient.
Section 20.5 Forfeiture. The BoardCommittee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of Service for Cause or any act by a Participant, whether before or after termination of Service, that would constitute Cause for termination of Service.
Section 20.6 Rights as Employee or Nonemployee Director. No person, even though eligible pursuant to Article V, shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall confer on any Participant a right to remain an Employee or Nonemployee Director or interfere with or limit in any way any right of the Company or Affiliate to terminate the Participant’s Service at any time. To the extent that an Employee of an Affiliate receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean that the Company is the Employee’s employer or that the Employee has an employment relationship with the Company.
Section 20.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise or settlement of any Award.
Section 20.8 Effect on Other Plans. Unless otherwise specifically provided, participation in the Plan shall not preclude a Participant’s eligibility to participate in any other benefit or incentive plan. Any Awards made pursuant to the Plan shall not be considered as compensation in determining the benefits provided under any other plan.
Section 20.9 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or an Affiliate to take any action which such entity deems to be necessary or appropriate.
Section 20.10 Over/Under Payments. If any Participant or beneficiary receives an underpayment of Shares or cash payable under the terms of any Award, payment of any such shortfall shall be made as soon as administratively practicable. If any Participant or beneficiary receives an overpayment of Shares or cash payable under the terms of any Award for any reason, the Committee or its delegate shall have the right, in its sole discretion,
declare that your right to
purchase shares under the Plan will terminate as of a date fixed by the Board and give youtake whatever action it deems appropriate, including but not limited to the right to
purchase sharesrequire repayment of
Common Stocksuch amount or to reduce future payments under this Plan, to recover any such overpayment. Notwithstanding the foregoing, if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the
Plan.Insecurities laws, and if the event of a proposed sale of allParticipant knowingly or substantially allthrough gross negligence engaged in the misconduct, or knowingly or through gross negligence failed to prevent the misconduct, or if the Participant is one of the assetsindividuals subject to automatic forfeiture under Section 304 of NiSource,the Sarbanes-Oxley Act of 2002, the Participant shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the mergertwelve- (12-) month period following the first public issuance or filing with the United States Securities and Exchange Commission of NiSource withthe financial document embodying such financial reporting requirement. In addition and notwithstanding the foregoing, the Awards granted under this Plan and any cash payment or into another corporation (or a parentShares delivered pursuant to such an award are subject to forfeiture, recovery by the Company or subsidiaryother 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 implementing rules and regulations thereunder, or as otherwise required by law
Section 20.11 Unfunded Obligation. Participants shall have the status of
another corporation) when NiSource is notgeneral unsecured creditors of the
surviving corporation, any and all offerings underCompany. Any amounts payable to Participants pursuant to the Plan shall
terminatebe unfunded and unsecured obligations for all purposes, including, without limitation, Title I of ERISA. No Affiliate shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Committee or any Affiliate and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of any Affiliate. The Participants shall have no claim against any Affiliate for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan.
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immediately prior
Section 20.12 No Liability With Respect to Adverse Tax Treatment. Notwithstanding any provision of this Plan to the consummationcontrary, in no event shall the Company or any Affiliate be liable to a Participant on account of such proposed action, unless otherwise provided byan Award’s failure to (i) qualify for favorable U.S., foreign, state, local, or other tax treatment or (ii) avoid adverse tax treatment under U.S., foreign, state, local, or other law, including, without limitation, Code Section 409A.
Section 20.13 Severability. In the Board. The Board may, in the exercise of its sole discretion in such instances, and in lieu of assumption or substitutionevent any provision of the rights to purchase sharesPlan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of Common Stockthe Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
Section 20.14 Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by a successor corporation, provide that you will haveany governmental agencies or national securities exchanges as may be required.
Section 20.15 Governing Law. To the
right to purchase shares underextent not preempted by federal law, the
Plan.IfPlan, and all agreements hereunder, shall be construed in accordance with and governed by the Board permits a share purchaselaws of the state of Indiana.
Section 20.16 Successors. All obligations of the Company under the Plan in lieu of the assumption or substitution of the rightwith respect to purchase shares of Common Stock by a successor corporation in the event of a merger or sale of assets, the Board will notify you that the rightsAwards granted hereunder shall be fully exercisable for a periodbinding on any successor to the Company.
Section 20.17 Provisions Regarding Transferability of ten (10) days from the date of such notice (or such other period of time as the Board shall determine), and the rights shall terminate upon the expiration of such period.34. IS AN EMPLOYEE REQUIRED TO ENTER THE PLAN?
Absolutely not. Each employee who participates in the Plan does so on a strictly voluntary basis. Each employee should decide whether the purchase of shares is a wise investment for him or her. An employee may wish to consult a specialist in investment or tax matters before making his or her decision.
35. IS THE PLAN SUBJECT TO ANY PROVISIONS OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 (“ERISA”)?
The Plan is not subject to any provisions of ERISA.
Awards. (a)
| General. Except as otherwise provided below, Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Code or Title 1 of the ERISA or the rules thereunder. Except as otherwise provided in the Plan, all rights with respect to an Award granted to a Participant shall be available during his or her lifetime only to such Participant. |
(b)
| Nonqualified Stock Options and Stock Appreciation Rights. No NSO or SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Code or Title 1 of ERISA or the rules thereunder. Notwithstanding the foregoing or anything in part (a) above, a Participant, at any time prior to his death, may assign all or any portion of the NSO or SAR to (i) his spouse or lineal descendant, (ii) the trustee of a trust for the primary benefit of his spouse or lineal descendant, or (iii) a tax-exempt organization as described in Code Section 501(c)(3). In such event the spouse, lineal descendant, trustee or tax-exempt organization shall be entitled to all of the rights of the Participant with respect to the assigned portion of such NSO or SAR, and such portion of the NSO or SAR shall continue to be subject to all of the terms, conditions and restrictions applicable to the NSO or SAR as set forth herein, and in the related Award Agreement, immediately prior to the effective date of the assignment. Any such assignment shall be permitted only if (i) the Participant does not receive any consideration therefore, and (ii) the assignment is expressly approved by the Committee or its delegate. Any such assignment shall be evidenced by an appropriate written document executed by the Participant, and a copy thereof shall be delivered to the Committee or its delegate on or prior to the effective date of the assignment. |
(c)
| Incentive Stock Options. Notwithstanding anything in part (a) and (b) above, no ISO may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or the laws of descent or distribution. |
(d)
| Nonemployee Directors. Notwithstanding anything in parts (a), (b), or (c) to the contrary, a Nonemployee Director at any time prior to his or her death, may assign all or any portion of an Award granted to him or her under the Plan to (i) his or her spouse or lineal descendant, (ii) the trustee of a trust for the primary benefit of his or her spouse or lineal descendant or (iii) a tax-exempt organization as described in Code Section 501(c)(3). In such event, the spouse, lineal descendant, trustee, or tax-exempt organization shall be entitled to all of the rights of the Participant with respect to the assigned portion of such Award, and such portion of the Award shall continue to be subject to all of the terms, conditions and restrictions applicable to the Award as set forth herein, and in the related Award Agreement, immediately prior to the effective date of the assignment. Any such assignment shall be permitted only if (i) the Participant does not receive any consideration therefore, and (ii) the assignment is expressly approved by the Committee or its delegate. Any such assignment shall be evidenced by an appropriate written document executed by the Participant, and a copy thereof shall be delivered to the Committee or its delegate on or prior to the effective date of the assignment. |
