2 | | Excludes purchase rights outstanding under the 2004 Employee Stock Purchase Plan. Under such plan, employees may purchase whole shares of stock at a price per share equal to 90% of the lower of the fair market value per share on the first day of the purchase period or the fair market value per share on the last day of the purchase period. As of December 31, 2013, 6,871,722 shares of common stock may be issued pursuant to stock options upon exercise, 3,596,808 shares of common stock may be issued pursuant to restricted stock units upon vesting and 3,747,622 shares of common stock may be issued pursuant to performance based stock units. The number of shares of common stock that may be issued under the outstanding and unvested performance based stock units for which the performance period has not ended is based on vesting of the maximum number of award shares. The actual number of shares of common stock that may be issued at the time of issuance will generally range from 0% to 200% of the target number (half of the maximum) based on the level of satisfaction of the applicable performance-based vesting condition over the vesting period.
| | | | | | Measurement Date | | Number of Shares | | Calendar Year
Revenue in ‘000 | December 31, 2014 | | 200% of Award Outstanding | | $10,960,000 | | | 100% of Award Outstanding | | $10,250,000 | | | 50% of Award Outstanding | | $9,945,000 | | | No Award | | less than $9,945,000 |
| 5 | For PSUs granted in 2014, represents the number of shares that are eligible to vest subject to the continued service vesting requirements, at an achievement of 122.9% of the target for such PSUs, which percentage was determined based on the Company��s fiscal 2015 revenue measured against the target for such revenue set forth in the award. Such shares will vest 1/3rd on June 1, 2016 and the remaining 2/3rds on December 1, 2017 provided the Named Executive is employed by the Company on such dates. |
3 | | As of December 31, 2013, the weighted-average exercise price of outstanding options to purchase common stock was $16.43 and no weighting was assigned to restricted stock units or performance based stock units, as no exercise price is applicable to restricted stock units or performance based stock units.
| | | | | | Measurement Date | | Number of Shares | | Calendar Year
Revenue in ‘000 | December 31, 2015 | | 200% of Award Outstanding | | $13,050,000 | | | 100% of Award Outstanding | | $12,228,000 | | | 50% of Award Outstanding | | $11,875,000 | | | No Award | | less than $11,875,000 |
| 6 | For PSUs granted in 2015, represents the number of unearned shares of stock not vested equal to the target award for such PSUs. The actual number of shares of stock that may vest will be determined by the Company’s fiscal 2016 performance versus target levels on two metrics: revenue (75% of the award) and non-GAAP EPS (25% of the award). For the shares subject to each of the metrics, the number that may vest may be zero, if a threshold level of performance is not achieved as to the metric, or between 50% and 200% of the target number of shares. After the Compensation Committee determines, based on the performance for the fiscal 2016 measurement period, the number of shares that may vest, such shares will vest 1/3rd on May 31, 2017 and the remaining 2/3rds on November 30, 2018 provided the Named Executive is employed by the Company on such dates. See “Long-Term Incentives – Stock-Based Awards” starting on page 23 for additional information. |
2015 Option Exercises and Stock Vested Table The following Option Exercises and Stock Vested table provides additional information about the value realized by the Named Executives on option award exercises and stock award vesting during the year ended December 31, 2015. | | | | | | | | | | (a) | | (b) | | (c) | | (d) | | (e) | | | | Option Awards | | Stock Awards | | Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on
Exercise1 ($) | | Number of Shares Acquired on Vesting
Date2 (#) | | Value Realized on
Vesting3 ($) | Francisco D’Souza | | — | | — | | 285,510 | | 17,899,516 | Gordon J. Coburn | | 40,000 | | 1,851,500 | | 152,571 | | 9,565,158 | Karen McLoughlin | | 20,000 | | 846,700 | | 58,215 | | 3,650,753 | Rajeev Mehta | | — | | — | | 135,110 | | 8,475,558 | Malcolm Frank | | — | | — | | 57,197 | | 3,586,918 |
| 1 | Value realized on exercise is calculated based upon the number of options exercised and the fair market value or sale price of the shares on the date of exercise less the exercise price, before any applicable tax withholding. |
| 2 | The number of shares shown in the table reflects the gross number of shares received by each Named Executive upon vesting of the stock awards. The Company reduced the number of shares issued to each Named Executive by automatically withholding a number of shares with a fair market value as of the vesting date sufficient to satisfy required tax withholdings. Each Named Executive actually received the following net number of shares of Company stock following such share withholding: Mr. D’Souza, 139,710; Mr. Coburn, 80,122; Ms. McLoughlin, 28,696; Mr. Mehta, 79,825; and Mr. Frank, 29,312. |
| 3 | Value realized on vesting is calculated by multiplying the number of shares acquired on vesting by the fair market value of the shares on the respective vesting date. |
2015 Pension Benefits Table None of the Named Executives participated in any defined benefit pension plans in 2015. 2015 Nonqualified Deferred Compensation Table The following table sets forth information with respect to the nonqualified deferred compensation arrangements in effect during 2015 for the Named Executives. | | | | | | | | | | | | (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | Name | | Executive Contributions in Last FY ($) | | Registrant Contributions in Last FY ($) | | Aggregate Earnings/(Losses) in Last FY ($) | | Aggregate Withdrawals/ Distributions ($) | | Aggregate Balance at Last FYE ($) | Francisco D’Souza | | — | | — | | — | | — | | — | Gordon J. Coburn | | — | | 81,228 1 | | (76,165) 2 | | — | | 1,247,905 3 | Karen McLoughlin | | — | | — | | — | | — | | — | Rajeev Mehta | | — | | — | | — | | — | | — | Malcolm Frank | | — | | — | | — | | — | | — |
| 1 | This amount is reported as compensation and is included in the “All Other Compensation” column of the 2015 Summary Compensation Table on page 31. |
| 2 | This amount is reported as compensation and is included in the “Changes in Pension Value and Nonqualified Deferred Compensation Earnings” column of the 2015 Summary Compensation Table on page 31. Earnings/(losses) are broken down between funds as follows: |
| 4 | | Includes 23,270,526 shares of Class A common stock available for future issuance under the 2009 Incentive Plan and 12,161,740 shares of Class A Common Stock available for future issuance under the 2004 Employee Stock Purchase Plan. As of December 31, 2013, there were no outstanding purchase periods under the 2004 Employee Stock Purchase Plan.
|
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONInvestment Fund
| | Earnings/(Losses)
Attributable to such Fund ($) | Mass Mutual Select Focused Value | | (90,998) | Mass Mutual Select Mid Cap Growth Equity II A | | 14,833 | DuringTotal
| | (76,165) | |
| 3 | Includes the amounts reported in columns (c) and (d) of this table plus such amounts previously reported in the Company’s Summary Compensation Table in previous years if such compensation was required to be disclosed. |
The Company has established this nonqualified deferred compensation arrangement for Mr. Coburn to serve as the economic equivalent of the retirement plan in which he participated while the Company was majority owned by IMS Health. Pursuant to such arrangement, the Company will credit Mr. Coburn’s deferred compensation account with an annual contribution in a dollar amount equal to 6% of his base salary and earned annual cash incentive for the year. Mr. Coburn can select from the 16 investment funds sponsored by Mass Mutual available to the plan to serve as the measures of the investment return on his account for each year. Mr. Coburn may change his investment elections up to six times per year. The account balance will become due and payable upon the occurrence of any of the following distributable events: (i) retirement at 55 years of age—payable six months following retirement in either a lump sum or 10 annual installments as elected by Mr. Coburn per plan provisions; (ii) termination of employment—payable in a lump sum six months following termination of employment; (iii) death or disability—immediate lump sum payment; and (iv) unforeseen emergency, as defined by IRC Section 409A—payable in a lump sum. POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL No Named Executive has an employment agreement that provides a specific term of employment. Accordingly, the employment of each Named Executive may be terminated at any time at the discretion of the Board. We have entered into Employment Agreements with each of the Named Executives that provided certain benefits upon the termination of their employment under certain prescribed circumstances. Under the Employment Agreements, if a Named Executive’s employment terminates for any reason other than Cause, death or disability or if the Named Executive resigns for Good Reason and the Company’s right to cure has expired (an “involuntary termination”) (other than a termination that coincides with, or occurs within the 12-month period immediately after, the first occurrence of a change in control) and if the Named Executive executes and does not revoke the applicable general release of claims in favor of the Company, we will pay such individual his or her then current base salary for the 22-month period following termination in regular installments, commencing on or as soon as practicable after the release is effective and within 35 days of the date of such termination, and an amount equal to the monthly COBRA medical insurance cost under the Company’s medical plan for the Named Executive, his or her spouse and dependents for the 12 months after termination. In addition, the portion of any outstanding equity awards that were subject to vesting solely upon continued service with the Company and would have vested had the Named Executive remained employed during the year following the termination will become fully vested and exercisable as of the termination date, and, with respect to
any equity award subject to vesting in whole or in part based on achievement of performance objectives, to the extent such performance period expired on or before the termination date, the performance objectives have been satisfied and the only condition remaining to vesting is continued employment, the portion of such equity awards that would have vested during the year following the termination date will become fully vested and exercisable as of the termination date. With respect to any equity award subject to vesting in whole or in part based on achievement of performance objectives, if the performance period has not expired on or before the termination date or the performance objectives have not been satisfied, the entire unvested portion of such equity awards will be forfeited. The Named Executive will also be entitled to any amounts earned, accrued and owed but not yet paid to Named Executive as of the termination date and any benefits accrued and earned in accordance with the terms of any benefits plans or programs, and this amount is not conditioned upon the release becoming effective. Under the Employment Agreements, “Cause” is generally defined to include: (i) willful malfeasance or willful misconduct by the Named Executive in connection with his or her employment, (ii) continuing failure to perform such duties as are requested by the Board, (iii) failure by the Named Executive to observe material policies of the Company applicable to him or her, (iv) the commission by the Named Executive of (x) any felony or (y) any misdemeanor involving moral turpitude, (v) the Named Executive engaging in any fraudulent act or embezzlement, or (vi) any material breach of the agreement. Under the Employment Agreements, “Good Reason” is generally defined as the occurrence of one or more of the following events: (i) a material diminution of the Named Executive’s authority, duties or responsibilities, (ii) a material diminution in his or her overall compensation package which is not caused by an overall policy to reduce senior employee compensation throughout the Company, (iii) the failure of the Company to obtain from its successor the express assumption of the agreement, and (iv) a change, without the Named Executive’s consent, in the principal place of work of the Named Executive to a location more than 50 miles from his or her primary work location, but only if the change is after a change in control. The Employment Agreements provide that the Named Executive must give the Company notice within 30 days of the action or omission giving rise to the Good Reason, and the Company then has a period of 30 days to correct the reason constituting grounds for Good Reason. If the Company does not correct the event during the cure period, the Named Executive has 30 days to terminate for Good Reason. The Employment Agreements also provide that in the event of an involuntary termination that coincides with, or occurs within the 12-month period immediately after, the first occurrence of a change in control, we will pay such individual the following, provided he or she executes and does not revoke the applicable release of claims: a cash payment equal to one times his or her annual base salary, to be paid in regular installments over a period of 12 months commencing on or as soon as practicable after the applicable release is effective and within 35 days of the date of such termination, a cash payment equal to the amount of the target annual cash incentive the Named Executive would otherwise have been eligible to receive for the performance year in which the termination occurs, assuming that the Named Executive and the Company have achieved 100% of performance targets and objectives, to be paid in a lump sum on or as soon as practicable after the release is effective and within 35 days of the date of such termination, and an amount equal to the monthly COBRA medical insurance cost under the Company’s medical plan for the Named Executive and his or her spouse and dependents for the 12 months after termination. In addition, the portion of any outstanding equity awards that were subject to vesting solely upon continued service with the Company will become fully vested and exercisable as of the termination date, and with respect to any equity award subject to vesting in whole or in part based on achievement of performance objectives, to the extent such performance period expired on or before the termination date, the performance objectives have been satisfied and the only condition remaining to vesting is continued employment, such equity awards will become fully vested and exercisable as of the termination date. Moreover, with respect the portion of any equity award subject to vesting in whole or in part based on achievement of performance objectives, to the extent the applicable performance period has not expired before the termination date, the Company must pro-rate the performance objectives for the period up to the closing of the change in control and make a good faith determination of the level of achievement of the performance objective and treat as fully vested and exercisable the proportionate amount of equity awards corresponding to that level of achievement. The Named Executive will also be entitled to any amounts earned, accrued and owed but not yet paid to Named Executive as of the termination date and any benefits accrued and earned in accordance with the terms of any benefits plans or programs, and this amount is not conditioned upon the effectiveness of the release. Pursuant to the Employment Agreements, a “change in control” is generally defined as a change in ownership or control of the Company effected through any of the following transactions: (i) consummation of a merger, consolidation or other reorganization approved by the stockholders, unless securities representing 50% or more of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly, by the persons who beneficially owned the Company’s outstanding voting securities immediately prior to such transaction, (ii) a sale, transfer or other disposition of all or substantially all of the Company’s assets, (iii) the closing of any
transaction or series of related transactions pursuant to which any person or any group of persons comprising a “group” within the meaning of Rule 13d-5(b)(1) of the Exchange Act (other than (A) the Company or (B) a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with, the Company) acquires directly or indirectly (whether as a result of a single acquisition or by reason of one or more acquisitions within the 12-month period ending with the most recent acquisition) the beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing (or convertible into or exercisable for securities possessing) more than 35% of the total combined voting power of the Company’s securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding immediately after the consummation of such acquisition or series of related acquisitions, whether any such acquisition involves a direct issuance from the Company or the acquisition of outstanding securities held by one or more of the Company’s existing stockholders, or (iv) a change in the composition of the Board over a period of 12 consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination. If a Named Executive is terminated due to death, disability or for Cause, he or she will receive any amounts earned, accrued and owed but not yet paid to him or her as of the termination date and any benefits accrued and earned in accordance with the terms of any benefit plan or program of the Company. However, all other obligations to the Named Executive will be extinguished as of the termination date. Pursuant to the Employment Agreements, each Named Executive has agreed not to engage in any competitive business in any capacity for one year following termination of employment and not to solicit any of our employees to leave our employ within the one-year period following termination of employment. Our Named Executives are also bound by confidentiality covenants of indefinite duration and by intellectual property covenants that require the Named Executives to fully and promptly disclose all inventions and works developed while at the Company and for a period of six months after termination.
Calculation of Potential Payments upon Termination or Change in Control The following table shows potential payments to our Named Executives under the various severance and other arrangements and agreements that were in effect on December 31, 2015 for various scenarios involving a change in control or termination of employment of each of our Named Executives, assuming a December 31, 2015 termination date and, where applicable, using the closing price of our Common Stock of $60.02 on December 31, 2015, as reported on NASDAQ. | | | | | | | | | | | | | | | Name | | Trigger | | Salary and
Bonus ($) | | | Benefits 3 ($) | | | Value of Equity Acceleration 4 ($) | | Total Value ($) | Francisco D’Souza | | Qualifying Termination Prior to Change in Control1 | | | 1,182,500 | | | | 9,610 | | | 11,657,144 | | 12,849,254 | | | | Qualifying Termination Following Change in Control2 | | | 1,193,250 | | | | 9,610 | | | 21,267,007 | | 22,469,867 | | | | Death or Disability | | | — | | | | — | | | — | | — | | | | Retirement | | | — | | | | — | | | — | | — | | | | Termination for Other Reasons | | | — | | | | — | | | — | | — | Gordon J. Coburn | | Qualifying Termination Prior to Change in Control1 | | | 1,124,750 | | | | 13,067 | | | 6,229,296 | | 7,367,113 | | | | Qualifying Termination Following Change in Control2 | | | 1,134,975 | | | | 13,067 | | | 11,364,667 | | 12,512,709 | | | | Death or Disability | | | — | | | | — | | | — | | — | | | | Retirement | | | — | | | | — | | | — | | — | | | | Termination for Other Reasons | | | — | | | | — | | | — | | — | Karen McLoughlin | | Qualifying Termination Prior to Change in Control1 | | | 744,333 | | | | 9,482 | | | 2,643,221 | | 3,397,036 | | | | Qualifying Termination Following Change in Control2 | | | 751,100 | | | | 9,482 | | | 5,120,846 | | 5,881,428 | | | | Death or Disability | | | — | | | | — | | | — | | — | | | | Retirement | | | — | | | | — | | | — | | — | | | | Termination for Other Reasons | | | — | | | | — | | | — | | — | Rajeev Mehta | | Qualifying Termination Prior to Change in Control1 | | | 987,250 | | | | 13,110 | | | 5,849,429 | | 6,849,789 | | | | Qualifying Termination Following Change in Control2 | | | 996,225 | | | | 13,110 | | | 10,757,145 | | 11,766,480 | | | | Death or Disability | | | — | | | | — | | | — | | — | | | | Retirement | | | — | | | | — | | | — | | — | | | | Termination for Other Reasons | | | — | | | | — | | | — | | — | Malcolm Frank | | Qualifying Termination Prior to Change in Control1 | | | 764,500 | | | | 13,110 | | | 2,583,381 | | 3,360,991 | | | | Qualifying Termination Following Change in Control2 | | | 771,450 | | | | 13,110 | | | 4,990,063 | | 5,774,623 | | | | Death or Disability | | | — | | | | — | | | — | | — | | | | Retirement | | | — | | | | — | | | — | | — | | | | Termination for Other Reasons | | | — | | | | — | | | — | | — |
| 1 | A Qualifying Termination is a termination of the Named Executive’s employment by the Company without cause or the employee for good reason. Represents 22 months’ additional base salary based on the salary earned by such Named Executive in 2015. |
| 2 | Represents 12 months’ additional base salary based on the salary earned by such Named Executive in 2015 and annual cash incentive payout at 100% of the 2015 target. |
| 3 | Represents 12 months of reimbursement for COBRA premiums. |
| 4 | Represents the value of RSU and PSU acceleration, as described above. |
While we believe that the amounts shown above and the assumptions upon which they are based provide reasonable estimates of the amounts that would have been due to the Named Executives in the event that any of the circumstances described above had occurred on December 31, 2015, the actual amounts due to the Named Executives upon a triggering event will depend upon the actual circumstances and the then applicable provisions of the Employment Agreements and the 2009 Incentive Plan, as in effect at the time of such event. In addition to the foregoing amounts indicated in the above table, Mr. Coburn will also be entitled to the balance of his nonqualified deferred compensation account, as described in the 2015 Nonqualified Deferred Compensation Table on page 35.
EQUITY COMPENSATION PLAN INFORMATION The following table provides information as of December 31, 2015 with respect to the shares of our Common Stock that may be issued under our existing equity compensation plans. We previously had four equity compensation plans, each of which was approved by our stockholders: (1) Amended and Restated 1999 Incentive Compensation Plan (the “1999 Plan”); (2) Amended and Restated Non-Employee Directors’ Stock Option Plan (the “Director Plan”); (3) Amended and Restated Key Employees’ Stock Option Plan (the “Key Employees’ Stock Option Plan”); and (4) Amended and Restated 2004 Employee Stock Purchase Plan (the “2004 Employee Stock Purchase Plan”). During 2009, the 2009 Incentive Compensation Plan (as amended, the “2009 Incentive Plan”) succeeded the 1999 Incentive Plan, the Director Plan and the Key Employees’ Stock Option Plan. The 2009 Incentive Plan was also approved by our stockholders. Awards granted under the previous plans are still valid; however, no additional awards may be granted from such previous plans. For additional information on our equity compensation plans, see Note 14 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015. | | | | | | | | | | (a) | | (b) | | (c) | Plan Category | | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | | Number of Securities Available for Future Issuance Under Equity Compensation Plans (excludes securities reflected in column (a)) | Equity compensation plans approved by security holders1 | | 11,366,359 2 | | $19.09 3 | | 21,072,858 4 | Equity compensation plans not approved by security holders | | — | | N/A | | — | | | | | | | | | Total | | 11,366,359 | | | | 21,072,858 |
| 1 | Consists of the 1999 Incentive Plan, the 2009 Incentive Plan and the 2004 Employee Stock Purchase Plan. |
| 2 | Excludes purchase rights outstanding under the 2004 Employee Stock Purchase Plan. Under such plan, employees may purchase whole shares of stock at a price per share equal to 90% of the lower of the fair market value per share on the first day of the purchase period or the fair market value per share on the last day of the purchase period. As of December 31, 2015, 4,165,651 shares of Common Stock may be issued pursuant to stock options upon exercise, 4,681,745 shares of Common Stock may be issued pursuant to RSUs upon vesting and 2,518,963 shares of Common Stock may be issued pursuant to PSUs upon vesting. The number of shares of Common Stock that may be issued under the outstanding and unvested PSUs for which the performance period has not ended is based on vesting of the maximum number of award shares. The actual number of shares of Common Stock that may vest will generally range from 0% to 200% of the target number based on the level of achievement of the applicable performance metric(s) and the continued service vesting requirements. |
| 3 | As of December 31, 2015, the weighted-average exercise price of outstanding options to purchase Common Stock was $19.09 and no weighting was assigned to RSUs or PSUs, as no exercise price is applicable to RSUs or PSUs. |
| 4 | Includes 12,916,223 shares of Common Stock available for future issuance under the 2009 Incentive Plan and 8,156,635 shares of Common Stock available for future issuance under the 2004 Employee Stock Purchase Plan. As of December 31, 2015, there were no outstanding purchase periods under the 2004 Employee Stock Purchase Plan. |
DIRECTOR COMPENSATION Discussion and Analysis The Company uses cash and stock-based compensation to attract and retain qualified individuals to serve on the Board. The Company sets compensation for directors who are not our employees or the employees of any of our subsidiaries (“non-employee Directors”) in light of the time commitment and experience level expected of its Directors. A Director who is an employee of the Company or any of its subsidiaries receives no cash or stock-based compensation for serving as a Director. Engagement of Compensation Consultant For purposes of establishing non-employee Director compensation for 2015, the Compensation Committee engaged Pay Governance, an independent executive compensation advisory firm, to review all elements of non-employee Director compensation, benchmark such compensation in relation to other comparable companies with which we compete for Board talent and provide recommendations to ensure that our non-employee Director compensation program remains competitive. Pay Governance benchmarked our non-employee Director compensation against the same group of technology-related firms used by Pay Governance in preparing its recommendations to the Compensation Committee in determining stock-based awards for executive officers in November 2015. See “Compensation Committee and Engagement of Compensation Consultant” and “Peer Group” on page 19. The Compensation Committee considered the benchmarking data and recommendations of Pay Governance in setting the 2015 cash and stock-based compensation of non-employee Directors set forth below. Cash Compensation Prior to the 2015 Annual Meeting, all non-employee Directors, other than our Chairman, received an annual retainer of $40,000 for their service on the Board (with no additional fees paid for attendance at meetings of the Board), our Chairman received an annual retainer of $140,000 (with no additional fees paid for attendance at meetings of the Board), the Chair of the Audit Committee received an additional annual retainer of $15,000, the Chair of the Compensation Committee received an additional annual retainer of $10,000 and the Chair of the Governance Committee received an additional annual retainer of $5,000. For purposes of establishing non-employee Director compensation for the director term commencing following the 2015 Annual Meeting, the Compensation Committee engaged Pay Governance to review all elements of non-employee Director compensation, benchmark such compensation in relation to other comparable companies with which we compete for Board talent and provide recommendations to ensure that the Company’s non-employee Director compensation program remained competitive. See “Engagement of Compensation Consultant” above. Based on the Pay Governance review, the Board determined that, commencing with the 2015 Annual Meeting, all non-employee Directors, other than our Chairman, would receive an annual retainer of $90,000 for their service on the Board (with no additional fees paid for attendance at meetings of the Board), our Chairman would receive an annual retainer of $240,000 (with no additional fees paid for attendance at meetings of the Board), the Chair of the Audit Committee would receive an additional annual retainer of $25,000, and the Chair of the Compensation Committee and the Chair of the Governance Committee each would receive an additional annual retainer of $15,000. All non-employee Directors receive $1,500 for attendance at each meeting of a committee of the Board, other than telephonic meetings that are held for 30 minutes or less, for which no attendance fee is paid. The Company’s compensation policy is to pay the annual retainers to Directors in advance following their election or reelection at the Company’s annual meeting of stockholders. In the event that a non-employee Director is nominated to the Board at any point during the year, that Director will receive a pro-rated amount of the retainer for the period from such election to the one-year anniversary of the Company’s last annual meeting of stockholders. Stock-Based Compensation Directors were previously eligible to participate in the 1999 Incentive Plan and the Director Plan. During 2009, the 2009 Incentive Plan succeeded the 1999 Incentive Plan and the Director Plan. Awards granted under the previous plans are still valid; however, no additional awards may be granted from the 1999 Incentive Plan and the Director Plan. All Directors are currently eligible to participate in our 2009 Incentive Plan. In 2015, all non-employee Directors received grants of options to purchase shares of our Common Stock and grants of RSUs under the 2009 Incentive Plan. All grants of options are subject to the Company’s written policy governing the grant of stock options which is described in “Long-Term Incentives – Stock Based Awards” starting on page 23. Those non-employee Directors who were re-elected to the Board at the 2015 Annual Meeting, consisting of all of the non-employee
Directors except Messrs. Abdalla and Chadwick, were granted options to purchase 6,371 shares of our Common Stock at an exercise price of $65.60 and 1,600 RSUs on June 2, 2015, the date of such annual meeting. The Company’s compensation policy provides that the annual stock-based awards to non-employee Directors are subject to pro-ration in the same manner as the cash compensation described under “Cash Compensation” on page 40. As a result, Mr. Abdalla received a lesser grant of options to purchase 4,368 shares of our Common Stock at an exercise price of $62.77 and 1,191 RSUs on September 15, 2015, the date of his election to the Board, and Mr. Chadwick received a lesser grant of options to purchase 998 shares of our Common Stock at an exercise price of $60.16 and 258 RSUs on April 9, 2016, the date of his election to the Board. Each of the options granted under the 2009 Incentive Plan vests ratably, 50% per year on the anniversary of such grant in 2016 and 2017 (or 2017 and 2018, in the case of the grants to Mr. Chadwick), and has an exercise price equal to the fair market value per share of Common Stock on the grant date or the closing price on the last trading day if granted on a weekend or holiday, and a maximum term of seven years measured from such date. The Directors will have a limited period in which to exercise their vested options following cessation of Board service. Each of the RSUs granted to the Directors under the 2009 Incentive Plan during 2015 vests ratably one-third per year on the anniversary of such grant in 2016, 2017 and 2018, subject to the deferral elections described below under “Deferral of Restricted Stock Units”. Upon a Director’s retirement while in good standing, the Board’s intent is to utilize its discretion to accelerate the vesting of such Director’s outstanding stock-based awards. Director Stock Ownership Guidelines The Company maintains a stock ownership and retention policy which is applicable to the Named Executives and non-employee Directors and designed to align their interests with those of stockholders. The policy requires the Chairman of the Board to hold a number of shares of our Common Stock equal to the lesser of 20,000 shares and four times the Chairman’s annual retainer. The policy requires other non-employee Directors to hold a number of shares of our Common Stock equal to the lesser of 6,000 shares and four times such non-employee Director’s annual retainer. Compliance with the policy is measured every June 30 and non-employee Directors are required to come into compliance with the policy within five years of becoming subject to it and meet any subsequently increased ownership requirements within five years of the increase. See “Stock Ownership Guidelines” on page 26 for additional information on the policy as well as its applicability to Directors who are employees. Hedging, Short Sale, Margin Account and Pledging Prohibitions All Directors are subject to the same insider trading policies of the Company that apply to employees that provide for: No hedging or speculation with respect to Cognizant securities; No short sales of Cognizant securities; No margin accounts with Cognizant securities; and Limited pledging of Cognizant securities. See “Hedging, Short Sale, Margin Account and Pledging Prohibitions” on page 26 for additional information on these restrictions. Deferral of Restricted Stock Units The non-employee Directors had the opportunity to defer settlement of the RSUs granted in 2015. Mr. Weissman elected to defer such settlement until the first to occur of (i) a change in control of the Company, (ii) the Director’s death or permanent disability or (iii) the July 1 immediately following his separation from service from the Company.Ms. Breakiron-Evans and Messrs. Klein and Wendel elected to defer such settlement until the first to occur of: (i) a change in control of the Company, (ii) the Director’s death or disability or (iii) (a) with respect to one-third of the Director’s RSUs (rounded down to the nearest whole share), the July 1 immediately following his or her separation from service from the Company, (b) with respect to one-third of his or her RSUs (rounded down to the nearest whole share), the second July 1 immediately following his or her separation from service from the Company and (c) with respect to the remainder of his or her RSUs, the third July 1 following his or her separation from service from the Company. Messrs. Abdalla, Fox, Mackay, Jr. and Patsalos-Fox did not elect to defer the settlement of their RSUs.
2015 Director Compensation Table The following table sets forth certain information regarding the compensation of each of our Directors for 2015. | | | | | | | | | | | | | | | | | | | | | | | | Name | | Fees Earned or Paid in Cash ($)1 | | Stock Awards ($)2 | | Option Awards ($)3 | | All Other
Compensation ($) | | Total ($) | | Zein Abdalla | | | | 30,884 4 | | | | | 74,759 4 | | | | | 74,780 4 | | | — | | 180,423 | | Maureen Breakiron-Evans | | | | 104,849 | | | | | 104,960 | | | | | 104,995 | | | — | | 314,804 | | John N. Fox, Jr. | | | | 78,041 | | | | | 104,960 | | | | | 104,995 | | | — | | 287,996 | | John E. Klein | | | | 230,486 | | | | | 104,960 | | | | | 104,995 | | | — | | 440,441 | | Leo S. Mackay, Jr. | | | | 79,541 | | | | | 104,960 | | | | | 104,995 | | | — | | 289,496 | | Lakshmi Narayanan | | | | 69,041 | | | | | 104,960 | | | | | 104,995 | | | — | | 278,996 | | Michael Patsalos-Fox | | | | 78,041 | | | | | 104,960 | | | | | 104,995 | | | — | | 287,996 | | Robert E. Weissman | | | | 88,849 | | | | | 104,960 | | | | | 104,995 | | | — | | 298,804 | Thomas M. Wendel | | | | 84,041 | | | | | 104,960 | | | | | 104,995 | | | — | | 293,996 |
| 1 | Consists of amounts described under “Director Compensation” starting on page 40. |
| 2 | Represents the aggregate grant date fair value of the RSUs granted in the 2015 fiscal year under the 2009 Incentive Plan, determined in accordance with FASB ASC Topic 718. The per share grant date fair value of each RSU awarded was $65.60, except for the award to Mr. Abdalla, which was $62.77. The reported dollar amounts do not take into account any estimated forfeitures related to continued service vesting requirements. For information regarding assumptions underlying the valuation of equity awards, see Note 14 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, Messrs. Fox, Howe, Klein2015. |
| 3 | Represents the aggregate grant date fair value for stock options granted in the 2015 fiscal year under the 2009 Incentive Plan, determined in accordance with FASB ASC Topic 718. The grant date fair value of each stock option was $16.48, except for the option granted to Mr. Abdalla, which was $17.12. The reported dollar amounts do not take into account any estimated forfeitures related to continued service vesting requirements. For information regarding assumptions underlying the valuation of equity awards, see Note 14 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015. |
| 4 | Mr. Abdalla was elected to the Board on September 15, 2015 and, Weissman served onas such, his fees and equity awards were pro-rated for the Compensation Committee for at least a portion of the year. No member of the Compensation Committee was or is a current or former officer or employee of the Company or any of its subsidiaries.None of our executive officers serve as members of the board of directors or compensation committee of any entity which has one or more of its executive officers serving as a member of our Board of Directors or Compensation Committee.year that he served.
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Director Stock and Option Awards Outstanding The following table sets forth the aggregate number of stock awards and the aggregate number of stock options held by each of our Directors at December 31, 2015. | | | | | | Name | | Aggregate Number of Stock Awards (#)1 | | Aggregate Number of Stock Options (#) | Zein Abdalla | | 1,191 | | 4,368 | Maureen Breakiron-Evans | | 18,495 | | 96,398 | John N. Fox, Jr. | | 4,002 | | 115,973 | John E. Klein | | 6,745 | | 76,398 | Leo S. Mackay, Jr. | | 8,508 | | 20,618 | Lakshmi Narayanan | | 4,002 | | 36,398 | Michael Patsalos-Fox | | 9,580 | | 46,398 | Robert E. Weissman | | 6,745 | | 86,398 | Thomas M. Wendel | | 6,745 | | 51,398 |
| | | 1 | Includes the RSUs granted in 2014 and 2015, with respect to which the settlement has been delayed for some directors, as described above. For Ms. Breakiron-Evans, Mr. Mackay, Jr. and Mr. Patsalos-Fox, also includes 11,750, 4,506 and 5,578 deferred stock units, respectively, to be settled upon the Director’s termination of service on the Board. | 2014 Proxy Statement |
| | | | | | COMPENSATION | | 42 | | Cognizant Technology Solutions Corporation | | 65 |
| Report of the Audit Committee of the Board of Directors AUDIT MATTERS
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PROPOSAL 3 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | | | What are you voting on? | | Our Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) as the independent registered public accounting firm to audit our consolidated financial statements and our internal control over financial reporting for 2016. We are asking our stockholders to ratify this appointment of PwC. |
| | | | | | | WHY STOCKHOLDERS ARE VOTING ON THIS PROPOSAL | | | | | | | Although ratification is not required by our By-laws or otherwise, the Board values the opinions of our stockholders and believes that stockholder ratification of the Audit Committee’s selection is a good corporate governance practice. If the selection is not ratified, the Audit Committee will take this fact into consideration in determining whether it is appropriate to select another independent auditor for 2016 or future years. Even if the selection is ratified, the Audit Committee may select a different independent auditor at any time during the year if it determines that this would be in the best interests of the Company and its stockholders. |
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| | The Board unanimously recommends a voteFOR the Ratification of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm for 2016. |
Vote Required The approval of this proposal requires the affirmative vote of a majority of the votes cast. Abstentions are not considered to be votes cast and, accordingly, will have no effect on the outcome of the vote on this proposal. Because brokers have discretionary authority to vote on the ratification of the appointment of PwC, we do not expect any broker non-votes in connection with this proposal. Our Auditor Review and Engagement Process The Audit Committee is directly responsible for the appointment, compensation (including negotiation and approval of the audit fee), retention and oversight of the independent registered public accounting firm that audits our financial statements and our internal control over financial reporting. Our Audit Committee and its chairperson are directly involved in the selection of the lead audit partner at the start of each rotation. To ensure continuing audit independence: The Audit Committee periodically considers whether there should be a regular rotation of the accounting firm that is retained, and considers the advisability and potential impact of selecting a different accounting firm; Neither the accounting firm nor any of its members is permitted to have, and none has, any direct or indirect financial interest in or any connection with us in any capacity other than as our auditors, providing audit and non-audit related services; and In accordance with SEC rules and PwC policies, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide services to our Company. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years. The members of the Audit Committee and the Board believe that the continued retention of PwC to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its stockholders. We Expect PricewaterhouseCoopers LLP to Attend the 2016 Annual Meeting PwC representatives are expected to attend the Annual Meeting. They will have an opportunity to make a statement if they wish and are expected to be available to respond to appropriate questions from stockholders.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS The Audit Committee has furnished the following report: | To the Board of Directors of Cognizant Technology Solutions Corporation: The Audit Committee of the Board of Directors is currently composed of four members and acts under a written charter, which is available under the Corporate Governance tab in the “Company Overview” section of the “About Cognizant” page of the Company’s website located at www.cognizant.com.www.cognizant.com, under the “Corporate Governance” tab. The members of the Audit Committee are independent Directors, as defined in its charter and the rules of theThe NASDAQ Stock Market LLC. The Audit Committee held nine meetings during 2013.2015. Management is responsible for the preparation of the Company’s financial statementsestablishing and for maintaining an adequate system of disclosure controls and procedures and internal control over financial reporting for that purpose.reporting. The Company’s independent registered public accounting firm is responsible for performing an independent integrated audit of the Company’s annual financial statements and management’s assessment of the effectiveness of the Company’s internal control over financial reporting. The Audit Committee is responsible for providing independent, objective oversight of these processes. The Audit Committee has reviewed the Company’s audited financial statements for the fiscal year ended December 31, 20132015 and has discussed these financial statements with management and the Company’s independent registered public accounting firm. The Audit Committee has also received from, and discussed with, the Company’s independent registered public accounting firm various communications that such independent registered public accounting firm is required to provide to the Audit Committee, including the matters required to be discussed by statementStatement on Auditing Standards No. 16, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board.Board (PCAOB), as may be modified or supplemented. The Company’s independent registered public accounting firm also provided the Audit Committee with formal written statements required by PCAOB Rule 3526 (Communications(Communications with Audit Committees Concerning Independence)Independence) describing all relationships between the independent registered public accounting firm and the Company, including the disclosures required by the applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence. In addition, the Audit Committee discussed with the independent registered public accounting firm its independence from Cognizant Technology Solutions Corporation. The Audit Committee also considered whether the independent registered public accounting firm’s provision of certain other non-audit related services to the Company is compatible with maintaining such firm’s independence. Based on its discussions with management and the independent registered public accounting firm, and its review of the representations and information provided by management and the independent registered public accounting firm, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.2015. By the Audit Committee of the Board of Directors of Cognizant Technology Solutions Corporation Zein Abdalla Maureen Breakiron-Evans John E. Klein Leo S. Mackay, Jr. Thomas M. Wendel |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND OTHER MATTERS The following table summarizes the fees of PwC, our independent registered public accounting firm, for each of the last two fiscal years. | | | | | | | | Fee Category | | 2014 | | | | 2015 | Audit Fees | | $3,348,300 | | | | $4,122,200 | Audit-Related Fees | | 859,500 | | | | 1,575,300 | Tax Fees | | 517,400 | | | | 1,080,600 | All Other Fees | | 289,100 | | | | 335,400 | | | | | | | | | Total Fees | | $5,014,300 | | | | $7,113,500 |
Audit Fees Audit fees consist of fees for the audit of our consolidated financial statements (including services necessary for rendering an opinion under Section 404 of the Sarbanes-Oxley Act), the review of our interim quarterly financial statements and other professional services provided in connection with statutory and regulatory filings or engagements. Audit-Related Fees Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit and the review of our financial statements and which are not reported under “Audit Fees”, including financial due diligence services related to business combinations. These services relate to attest services that are not required by statute or regulation, consultations concerning financial accounting and reporting matters, and independent assessment of controls related to outsourcing services. During 2015, we reclassified financial due diligence services related to business combinations from “All Other Fees” to “Audit-Related Fees”. These services were $744,000 and $945,600 for 2014 and 2015, respectively. Tax Fees Tax fees comprise fees for a variety of permissible services relating to tax compliance, tax planning and tax advice. These services include assistance in complying with local transfer pricing requirements, assistance with local tax audits and assessments, withholding tax and indirect tax matters, preparation and filing of local tax returns, and technical advice relating to local and international tax matters. All Other Fees For 2014, other fees primarily relate to advisory fees for immigration services. For 2015, other fees primarily relate to advisory fees for immigration and IT security services. Audit Committee Pre-Approval Policy and Procedures The Audit Committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm. This policy generally provides that we will not engage our independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the Audit Committee or the engagement is entered into pursuant to one of the pre-approval procedures described below. From time to time, the Audit Committee may pre-approve specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided. The Audit Committee has also delegated to Maureen Breakiron-Evans, the current Audit Committee Chair, the authority to approve any audit or non-audit services to be provided to us by our independent registered public accounting firm. Any approval of services by a member of the Audit Committee pursuant to this delegated authority is reported on at the next meeting of the Audit Committee. During 2014 and 2015, the Audit Committee approved all services provided to us by PwC that are subject to the pre-approval policies and procedures described above.
PROPOSAL 4 – STOCKHOLDER PROPOSAL REGARDING STOCKHOLDER ACTION BY WRITTEN CONSENT | | | What are you voting on? | | The following stockholder proposal will be voted on at the 2016 Annual Meeting only if properly presented by or on behalf of the stockholder proponent. The Board unanimously recommends a voteAGAINST the proposal for the reasons set forth following the proposal. |
The Company has been advised that James McRitchie and Myra K. Young, 9295 Yorkship Court, Elk Grove, California 95758, beneficial owners of 100 shares of the Company’s Common Stock, intend to submit the proposal set forth below at the Annual Meeting. Mr. McRitchie and Ms. Young have delegated John Chevedden to act on their behalf regarding the proposal. | Proposal 4 — Right to Act by Written Consent Resolved, Shareholders request that our board of directors undertake such steps as may be 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 be consistent with applicable law and consistent with giving shareholders the fullest power to act by written consent consistent with applicable law. This includes shareholder ability to initiate any topic for written consent consistent with applicable law. A shareholder right to act by written consent and to call a special meeting are 2 complimentary ways to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle. A shareholder right to act by written consent is one method to equalize our limited provisions for shareholders to call a special meeting. Delaware law allows 10% of shareholders to call a special meeting without mandating a holding period. However it takes 25% of Cognizant shareholders, from only those shareholders with at least one-year of continuous stock ownership, to call a special meeting. Thus potentially 50% of Cognizant shareholders could be disenfranchised from having any voice whatsoever in calling a special meeting due to the Cognizant one-year lock-out period. The average holding period for stock is less than one-year according to “Stock Market Investors Have Become Absurdly Impatient.” Please vote to enhance shareholder value: Right to Act by Written Consent — Proposal 4 |
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| | The Board unanimously recommends a voteAGAINST this proposal. |
Vote Required The approval of this proposal requires the affirmative vote of a majority of the votes cast. Abstentions and broker non-votes are not considered to be votes cast and, accordingly, will have no effect on the outcome of the vote on this proposal.
The Board’s Statement of Opposition The BoardUNANIMOUSLY recommends that stockholders voteAGAINST this proposal for the following reasons: | 1. | Substantially identical proposals were rejected by the Company’s stockholders in 2013 and 2015, upon the recommendation of the Board. Substantially the same proposal has been submitted, considered by the Board and rejected by stockholders at two of the previous three annual meetings of the Company. The Board has repeatedly evaluated whether adoption of the right to act by written consent would be in the best interests of the Company and its stockholders, and has repeatedly concluded that it would not. As discussed further below, the Board has implemented changes in its corporate governance practices where it has determined that a particular practice would benefit the Company and stockholders. The Board continues to believe that the right to act by written consent would not be a sound corporate governance practice and, in fact, could be detrimental to the Company’s ability to operate effectively and create long-term value for all stockholders. | |
| 2. | Implementation of the proposal is unnecessary given the Company’s governance practices, including the ability of stockholders to call special meetings, and could impose significant burdens on the Company. The Board believes, as it has in past years, that implementation of this proposal is unnecessary given the Company’s governance practices, including the ability of stockholders to call special meetings at any time. Stockholders may propose any proper matter for a vote at our annual meeting, and, in addition, stockholders holding 25% of the Company’s outstanding Common Stock may call a special meeting. In the Board’s view, action at an annual or special meeting supports stockholders’ interests more than action by written consent. At meetings of stockholders, all stockholders have the opportunity to express views on proposed actions and to participate in deliberations and vote. Such meetings occur at a time and date announced publicly in advance of the meeting. These provisions ensure that stockholders can raise matters for consideration while protecting stockholders interests in receiving notice of and an opportunity to voice concerns about proposed actions affecting the Company. The proposal, however, would allow stockholders to use the written consent procedure at any time and as frequently as they choose to act on a range of potentially significant matters, without a meeting, potentially without prior notice to all stockholders, and without an opportunity for fair and open discussion among all stockholders on the merits of the proposed action. Allowing stockholders to act by written consent could lead to a disordered state of corporate affairs, distract the Board and management, and impose significant financial and administrative burdens on the Company, with little or no corresponding benefit to stockholders. | |
| 3. | The Company’s existing corporate governance practices and policies already ensure stockholder democracy and the accountability of the Board. The Board believes that the adoption of this proposal is ill-advised in light of the sound corporate governance practices and stockholder protections the Company currently has in place. In addition to providing for stockholders’ right to call special meetings, the Company has been responsive to stockholder input and enhanced its governance practices and policies over the past several years to ensure the rights of our stockholders and the accountability of the Board, including: | |
| • | | Proxy Access By-law. In early 2016, the Board approved amended and restated By-laws which provide for proxy access. See “Director Nominees for Inclusion in Next Year’s Proxy Statement (Proxy Access)” on page 48. This new by-law permits a stockholder, or a group of stockholders, owning 3% or more of the Company’s Common Stock continuously for at least three years to nominate and include in the Company’s proxy materials directors constituting up to 25% of the board or two individuals, whichever is greater, provided that the stockholder(s) and nominee(s) satisfy the certain requirements outlined in the By-laws. | |
| • | | Majority Voting in Director Elections. The Company’s By-laws provide that, in an uncontested election of directors, a director nominee must receive more “for” votes than “against” votes to be elected. Our Corporate Governance Guidelines provide that any incumbent director nominee who fails to receive the requisite number of votes is expected to tender his or her resignation. | |
| • | | Board Declassification. In 2013, the Board recommended and the stockholders approved an amendment to the Company’s Certificate of Incorporation to declassify the Board. Each of our directors is now subject to re-election at each annual meeting of stockholders. | |
| • | | No Poison Pill. In 2003, the Company adopted a Rights Plan. That plan expired by its terms on March 5, 2013, and the Company decided not to adopt a new plan or amend the existing one to extend its term. | |
We believe that our existing corporate governance practices and policies strike the optimal balance between facilitating the monitoring of Board members by stockholders and enabling stockholders to act quickly in support of their interests, while avoiding the governance risk associated with the ability of stockholders to act by written consent.
STOCKHOLDER PROPOSALS FOR THE 2017 ANNUAL MEETING Proposals for Inclusion in Next Year’s Proxy Statement SEC rules permit stockholders to submit proposals for inclusion in our proxy statement if the stockholder and the proposal meet the requirements specified in Rule 14a-8 under the Exchange Act (“Rule 14a-8”). When to send these proposals. Any stockholder proposals submitted in accordance with Rule 14a-8 must be received at our principal executive offices no later than the close of business on December 30, 2016. Where to send these proposals. Proposals should be addressed to our Secretary at our offices at Glenpointe Centre West, 500 Frank W. Burr Blvd., Teaneck, New Jersey 07666. What to include. Proposals must conform to and include the information required by Rule 14a-8. Director Nominees for Inclusion in Next Year’s Proxy Statement (Proxy Access) We recently amended our By-laws to permit a group of stockholders who have owned a significant amount of the Company’s Common Stock (at least 3%) for a significant amount of time (at least three years) to submit director nominees (up to 25% of the Board and in any event not less than two directors) for inclusion in our proxy statement if the stockholder(s) and the nominee(s) satisfy the requirements specified in our By-laws. When to send these proposals. Notice of director nominees under these By-law provisions must be received no earlier than November 30, 2016 and no later than the close of business on December 30, 2016. In the event that the date of the 2017 Annual Meeting is more than 30 days before or more than 70 days after June 15, 2017, then our Secretary must receive such written notice not earlier than the close of business on the 150th day prior to the 2017 Annual Meeting and not later than the close of business on the later of the 120th day prior to the 2017 Annual Meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Company. Where to send these proposals. Notice should be addressed to our Secretary at our offices at Glenpointe Centre West, 500 Frank W. Burr Blvd., Teaneck, New Jersey 07666. What to include. Notice must include the information required by our By-laws, a copy of which is available upon request to our Secretary. Other Proposals or Nominees for Presentation at the 2017 Annual Meeting Our By-laws require that any stockholder proposal, including a director nomination, that is not submitted for inclusion in next year’s proxy statement (either under Rule 14a-8 or our proxy access By-laws), but is instead sought to be presented directly at such meeting, must be received by our Secretary in writing not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the anniversary of the preceding year’s annual meeting. When to send these proposals. Stockholder proposals or director nominations submitted under theseBy-law provisions must be received no earlier than the close of business on February 15, 2017 and no later than the close of business on March 17, 2017. In the event that the date of the 2017 Annual Meeting is more than 30 days before or more than 70 days after June 15, 2017, then our Secretary must receive any such proposal not earlier than the close of business on the 120th day prior to the 2017 Annual Meeting and not later than the close of business of the later of the 90th day prior to the 2017 Annual Meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Company. Where to send these proposals. Proposals should be addressed to our Secretary at our offices at Glenpointe Centre West, 500 Frank W. Burr Blvd., Teaneck, New Jersey 07666. What to include. Proposals must include the information required by our By-laws, a copy of which is available upon request to our Secretary. Management Discretion to Vote Proxies on These Proposals SEC rules permit management to vote proxies in its discretion in certain cases if the stockholder does not comply with the above deadlines and, in certain other cases, notwithstanding the stockholder’s compliance with these deadlines. NON-COMPLIANT PROPOSALS We reserve the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with the requirements set forth above or other applicable requirements.
ADDITIONAL GOVERNANCE INFORMATION CORPORATE GOVERANCE GUIDELINES The Board has adopted Corporate Governance Guidelines to assist the Board in the exercise of its responsibilities and to serve as a framework for the effective governance of the Company. We have posted our Corporate Governance Guidelines in the “Company Overview” section of the “About Cognizant” page of our website located atwww.cognizant.com, under the “Corporate Governance” tab, and you may also obtain a copy by writing to our Secretary at our offices at Glenpointe Centre West, 500 Frank W. Burr Blvd., Teaneck, New Jersey 07666. CODE OF ETHICS The Board has also adopted a written Code of Ethics, entitled “Cognizant’s Core Values and Standards of Business Conduct,” that applies to our Directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our Code of Ethics is posted in the “Company Overview” section of the “About Cognizant” page of our website located atwww.cognizant.com, under the “Corporate Governance” tab, and you may also obtain a copy by writing to our Secretary at our offices at Glenpointe Centre West, 500 Frank W. Burr Blvd., Teaneck, New Jersey 07666. We intend to post on our website all disclosures that are required by law or NASDAQ listing standards concerning any amendments to, or waivers from, any provision of our Code of Ethics. EXECUTIVE OFFICERS The following table identifies our current executive officers. None of our executive officers is related to any other executive officer or to any of our Directors. Our executive officers are elected annually by the Board and serve until their successors are duly elected and qualified. | | | | | | | Name | | Age | | Current Position | | In Current
Position Since | | Francisco D’Souza1 | | 47 | | Chief Executive Officer and Director | | 2007 | | Gordon J. Coburn2 | | 52 | | President | | 2012 | | Karen McLoughlin3 | | 51 | | Chief Financial Officer | | 2012 | | Rajeev Mehta4 | | 49 | | Chief Executive Officer, IT Services | | 2013 | | Malcolm Frank5 | | 50 | | Executive Vice President, Strategy and Marketing | | 2012 | | Ramakrishnan Chandrasekaran6 | | 58 | | Executive Vice Chairman, Cognizant India | | 2013 | | Debashis Chatterjee7 | | 50 | | Executive Vice President and President, Technology Solutions | | 2013 | | Ramakrishna Prasad Chintamaneni 8 | | 46 | | Executive Vice President and President, Banking and Financial Services | | 2013 | | Sumithra Gomatam9 | | 48 | | Executive Vice President and President, Industry Solutions | | 2013 | | Venkat Krishnaswamy10 | | 63 | | Executive Vice President and President, Healthcare and Life Sciences | | 2013 | | Steven Schwartz11 | | 48 | | Executive Vice President, Chief Legal and Corporate Affairs Officer | | 2013 | | Dharmendra Kumar Sinha12 | | 53 | | Executive Vice President and President, Client Services | | 2013 | | Sridhar Thiruvengadam13 | | 52 | | Chief Operating Officer | | 2013 |
| 1 | See biographical information on page 7. |
| 2 | Gordon Coburn was appointed President of the Company, effective February 6, 2012. From March 1998 until February 2012, Mr. Coburn served as the Company’s Chief Financial Officer and Treasurer and from January 2007 until February 2012, Mr. Coburn also held the position of Chief Operating Officer. Mr. Coburn also served as the Company’s Executive Vice President from December 2003 through December 2006. From November 1999 to December 2003, he served as our Senior Vice President. He previously was our Vice President from 1996 to November 1999. Mr. Coburn served as Senior Director– Group Finance and Operations for Cognizant Corporation from November 1996 to December 1997. From 1990 to October 1996, Mr. Coburn held key financial positions with The Dun & Bradstreet Corporation. Mr. Coburn serves on the Board of Directors of The Corporate Executive Board Company. He also served on the Board of Directors of ICT Group, Inc. until its acquisition on February 2, 2010. Mr. Coburn holds a Bachelor of Arts degree from Wesleyan University and a Master of Business Administration degree from the Amos Tuck School at Dartmouth College, where he serves as a member of its MBA Advisory Board. |
| 3 | Karen McLoughlin was appointed Chief Financial Officer of the Company, effective February 6, 2012. She previously served as the Company’s Senior Vice President of Finance and Enterprise Transformation, a role she held since January 2010. In such role, Ms. McLoughlin was responsible for the Company’s worldwide financial planning and analysis, enterprise risk management and enterprise transformation functions, including the facilitation and execution of various internal reengineering and transformation initiatives designed to enable the Company’s strategic vision. From August 2008 to January 2010, Ms. McLoughlin served as the Company’s Senior Vice President of Finance, responsible for overseeing the Company’s global financial planning and analysis team and enterprise risk management, and from October 2003 until August 2008, Ms. McLoughlin served as the Company’s Vice President of Global Financial Planning and Analysis. Prior to joining Cognizant in October 2003, Ms. McLoughlin held various financial management positions at Spherion Corporation from August 1997 to October 2003 and at Ryder System Inc. from July 1994 to August 1997. Prior to joining Ryder, she spent six years in the South Florida Practice of Price Waterhouse (now PricewaterhouseCoopers). Ms. McLoughlin has served on the Board of Directors of Best Buy Co., Inc. since 2015. Ms. McLoughlin has a Bachelor of Arts degree in Economics from Wellesley College and a Master of Business Administration degree from Columbia University. |
| 4 | Rajeev Mehta was appointed Chief Executive Officer, IT Services, effective December 4, 2013. In this role, Mr. Mehta is responsible for market facing activities across the Company as well as for delivery across our IT Services business. From February 2012 to December 2013, Mr. Mehta served as Group Chief |
| | | | | | | 49 | | ADDITIONAL GOVERNANCE INFORMATION |
| Executive– Industries and Markets. In this role, Mr. Mehta was responsible for leading our industry vertical and geographic market operations on a global basis. From August 2006 to February 2012, he served as our Chief Operating Officer, Global Client Services, responsible for our sales, business development and client relationship management organizations. Mr. Mehta served as Senior Vice President and General Manager of our Financial Services business segment from June 2005 to August 2006. From November 2001 to June 2005, he served as our Vice President and General Manager of our Financial Services business segment. From January 1998 to November 2001, Mr. Mehta served as our Director of the U.S. Central Region. Mr. Mehta served as our Senior Manager of Business Development from January 1997 to January 1998. Prior to joining Cognizant in 1997, Mr. Mehta was involved in implementing GE Information Services offshore outsourcing program and also held consulting positions at Deloitte & Touche and Andersen Consulting. Mr. Mehta holds a Bachelor of Science degree from the University of Maryland and a Master of Business Administration degree from Carnegie Mellon University. |
| 5 | Malcolm Frank was appointed Executive Vice President, Strategy and Marketing, effective February 6, 2012. Mr. Frank served as our Senior Vice President of Strategy and Marketing from August 2005 to February 2012. In both these roles, Mr. Frank’s responsibilities have included, and continue to include, directing all aspects of our corporate marketing function, including strategy and branding, industry and media relations, corporate communications and corporate marketing. From August 2005 until June 2009, Mr. Frank was also responsible for leading our field marketing function. Prior to joining Cognizant in August 2005, Mr. Frank was co-founder, President and Chief Executive Officer of CXO Systems, Inc., an independent software vendor providing dashboard solutions for senior managers, from March 2002 to July 2005. From June 1999 to September 2002, Mr. Frank was the founder, President, Chief Executive Officer and Chairman of Nervewire Inc., a management consulting and systems integration firm. Prior to founding Nervewire, Mr. Frank was a co-founder, executive officer, and Senior Vice President at Cambridge Technology Partners, where he ran Worldwide Marketing, Business Development, and several business units, from January 1990 to June 1999. Mr. Frank graduated from Yale University with a degree in Economics. |
| 6 | Ramakrishnan Chandrasekaran was appointed Executive Vice Chairman, Cognizant India, effective December 4, 2013. In this role, Mr. Chandrasekaran focuses on strengthening our strong relationship with industry bodies, driving strategic initiatives that strengthen outreach to the government, and further enhancing our brand equity through public relations in India. From February 2012 to December 2013, Mr. Chandrasekaran served as Group Chief Executive– Technology and Operations. In this role, Mr. Chandrasekaran was responsible for leading our solutions and delivery teams worldwide. From August 2006 to February 2012, he served as our President and Managing Director, Global Delivery, responsible for leading our global delivery organization, spearheading new solutions, and championing process improvements. Mr. Chandrasekaran served as our Executive Vice President and Managing Director from January 2004 through July 2006. Prior to that, from November 1999 to January 2004, he served as our Senior Vice President responsible for Independent Software Vendor relationships, key alliances, capacity growth, process initiatives, business development and offshore delivery. Mr. Chandrasekaran joined us as Assistant Vice President in December 1994, before being promoted to Vice President in January 1997. Prior to joining us, Mr. Chandrasekaran worked with Tata Consultancy Services. Mr. Chandrasekaran holds a Mechanical Engineering degree and Master of Business Administration degree from the Indian Institute of Management. |
| 7 | Debashis Chatterjee was appointed Executive Vice President and President, Technology Solutions, effective December 4, 2013. In this role, Mr. Chatterjee has responsibility for all of our horizontal practices within IT Services and is responsible for implementing best practices in service delivery and creating solutions across our horizontal practices. From May 2013 until his current appointment, Mr. Chatterjee served as Senior Vice President and Global Head, Technology and Information Services. From March 2012 to April 2013, he was Senior Vice President, Transformational Services. Previously, from April 2011 to January 2012, Mr. Chatterjee served as Vice President and Sectors Leader, Global Business Services, Global Delivery at IBM, a multinational technology and consulting company. From January 2010 to March 2011, Mr. Chatterjee was Senior Vice President and Global Head of Cognizant’s BFS practice, from April 2007 to December 2009, he was Senior Vice President and Global Delivery Head of BFS, and from April 2004 to March 2007, he was Vice President and Global Delivery Head of BFS. Prior to that, Mr. Chatterjee held various key management roles at Cognizant since joining us in 1996. Mr. Chatterjee has a Bachelor of Engineering in Mechanical Engineering from Jadavpur University in India. |
| 8 | Ramakrishna Prasad Chintamaneni was appointed Executive Vice President and President, Banking and Financial Services (“BFS”), effective December 4, 2013. In this role, Mr. Chintamaneni is responsible for leading the BFS practice. From 2011 to December 2013, Mr. Chintamaneni served as our Global Head of the BFS practice and was responsible for the practice’s sales, business development, consulting, client relationships, management and delivery, and global profit and loss. Previously, from 2010 to 2011, Mr. Chintamaneni served as our Global Head of Markets for the BFS practice. From 2006 to 2009, he served as our Head of BFS practice for North America. From 1999 through 2006, Mr. Chintamaneni served as our Client Partner, managing the relationships with several of our key BFS clients, and also led our U.S. Eastern Region’s BFS practice. Prior to joining Cognizant in 1999, Mr. Chintamaneni spent seven years in the investment banking and financial services industry, including working at Merrill Lynch and its affiliates for five years as an Investment Banker and a member of Merrill’s business strategy committee in India. Mr. Chintamaneni serves on the Board of Directors of NPower, a nonprofit that helps nonprofits, schools and individuals build technology skills by harnessing the power of the technology community. Mr. Chintamaneni obtained his Bachelor of Technology degree in Chemical Engineering from the Indian Institute of Technology, Kanpur and a Postgraduate Diploma in Business Management from the XLRI School of Management in India. |
| 9 | Sumithra Gomatam was appointed Executive Vice President and President, Industry Solutions, effective December 4, 2013. In this role, Ms. Gomatam oversees global delivery for all of our industry verticals and our Business Process Services unit, and is responsible for implementing best practices in services delivery and for creating solutions across our industry practices. Ms. Gomatam also leads our Communications and High Technology business units. From July 2008 to December 2013, Ms. Gomatam served as Senior Vice President, Projects. In this role, Ms. Gomatam served initially as our Global Delivery Head and then as Global Practice Leader for our testing practice. From March 2006 to July 2008, Ms. Gomatam served as Vice President, Projects, leading global delivery and building out the testing practice. From 2001 to March 2006, Ms. Gomatam served as an Account Relationship Manager and as part of our Core Delivery Leadership Team in our BFS practice. From 1995, when Ms. Gomatam joined us, until 2001, she held various key positions within The Dun & Bradstreet Corporation and Cognizant, including serving our BFS clients on application development and application maintenance projects. Ms. Gomatam received her B.E. in Electronics and Communication from Anna University. |
| 10 | Venkat Krishnaswamy was appointed President, Healthcare and Life Sciences, effective December 4, 2013. In this role, Mr. Krishnaswamy is focused on delivering solutions and services to the healthcare industry. From February 2012 to December 2013, Mr. Krishnaswamy served as Executive Vice President of Healthcare and Life Sciences. From April 2007 to February 2012, Mr. Krishnaswamy served as Senior Vice President and General Manager of Healthcare and Life Sciences. Mr. Krishnaswamy served as Vice President– Projects from January 2003 to April 2007 and as Director of Projects from April 1999 to January 2003. Upon joining Cognizant in 1997, Mr. Krishnaswamy served as Senior Manager until April 1999. Between 1997 and 2003, Mr. Krishnaswamy served in our BFS practice. Prior to joining Cognizant in 1997, Mr. Krishnaswamy spent over 10 years in retail and commercial banking with Colonial State Bank (now Commonwealth Bank of Australia). Mr. Krishnaswamy holds a Bachelor of Engineering degree from the University of Madras and a Masters degree in Electrical Engineering from the Indian Institute of Technology, New Delhi. |
| 11 | Steven Schwartz was appointed Executive Vice President, Chief Legal and Corporate Affairs Officer on December 4, 2013. In this role, Mr. Schwartz is responsible for our global legal teams, our global government affairs efforts and our global security team. From July 2007 to December 2013, Mr. Schwartz served as Senior Vice President, General Counsel and Secretary, having global responsibility for managing Cognizant’s legal function. Mr. Schwartz, who joined Cognizant in 2001, previously served as Vice President and General Counsel, a position he held from March 2003 to July 2007. From April 2002 to March 2003, he served as our Vice President and Chief Corporate Counsel. From October 2001 to December 2002, he served as our Chief Corporate Counsel. Mr. Schwartz serves on the Board of Directors of Information Technology Industry Council. Mr. Schwartz holds a Bachelor of Business Administration degree from the University of Miami, a Juris Doctor degree from Fordham University School of Law and a Master of Law (in Taxation) degree from the New York University School of Law. |
| 12 | Dharmendra Kumar Sinha was appointed Executive Vice President and President, Client Services, effective December 4, 2013. In this role, Mr. Sinha leads our global sales, field marketing and intermediary relations teams. He is also responsible for our strategic partnerships and alliances organization. From 2007 to December 2013, Mr. Sinha served as Senior Vice President and General Manager, Global Sales and Field Marketing. From 2004 to 2007, Mr. Sinha served as our Vice President, responsible for our Manufacturing, Logistics, Retail, Hospitality, and Technology verticals. In addition, he assumed the role of Head of Sales |
| | | | | | ADDITIONAL GOVERNANCE INFORMATION | | 50 | | |
| and managed our Field Marketing function. From January 2008 to December 2008, Mr. Sinha additionally managed the Insurance business unit. Prior to that, from 1998 to 2004, Mr. Sinha served as Director and subsequently as Vice President of the U.S. Western Region. From 1997 to 1998, Mr. Sinha served in various operational and business development positions. Prior to joining Cognizant in 1997, Mr. Sinha worked with Tata Consultancy Services and CMC Limited, an end-to-end IT solutions provider. Mr. Sinha has a Bachelor of Science Degree from Patna Science College, Patna and a Master’s Degree in Business Administration from Birla Institute of Technology, Mesra. |
| 13 | Sridhar Thiruvengadam was appointed Chief Operating Officer of the Company, effective May 8, 2013. Previously, from January 2012 to May 2013, Mr. Thiruvengadam served as an Executive Vice President of the Company, leading the global delivery operations for several of the Company’s industry verticals, and head of the Company’s Business Process Services practice. From January 2010 to January 2012, Mr. Thiruvengadam served as a Senior Vice President and global head of business process, infrastructure and testing services. From April 2007 to January 2010, Mr. Thiruvengadam served as the Company’s Chief People Officer in charge of talent acquisition, management, training and staffing. From March 2001 to March 2007, Mr. Thiruvengadam held several positions in the Company’s banking, financial services, healthcare and insurance practices, including Vice President and head of the Company’s insurance industry vertical. Mr. Thiruvengadam joined the Company as a project manager in November 1994. Mr. Thiruvengadam holds a Masters in Technology degree from the Indian Institute of Technology, Madras. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Class A Common Stock The following tables set forth certain information with respect to holdings of our Common Stock by (i) stockholders who beneficially owned more than 5% of the outstanding shares of our Common Stock as of December 31, 2015 and (ii) each of our Directors (which includes all nominees), each of our Named Executives, and all Directors and executive officers as a group, as of March 31, 2016. Unless otherwise indicated, the address for the individuals below is our address. Except as otherwise noted below, none of the shares reported as beneficially owned are currently pledged as security for any outstanding loan or indebtedness. Security Ownership of 5% Stockholders The following table sets forth the persons who, to our knowledge, beneficially owned as of December 31, 2015, more than 5% of the outstanding shares of our Common Stock. This information is based upon information furnished to us by each such person and/or based upon public filings with the SEC. | | | | | | Name and Address of Beneficial Owner | | Amount and Nature of Beneficial Ownership | | Percent of Class | | The Vanguard Group1 | | 35,987,955 | | 5.9% | 100 Vanguard Blvd. | | | Malvern, Pennsylvania 19355 | | | | BlackRock, Inc.2 | | 35,437,281 | | 5.8% | 55 East 52nd Street | | | New York, New York 10055 | | | | FMR LLC3 | | 33,362,791 | | 5.5% | 245 Summer Street | | | Boston, Massachusetts 02210 | | |
| 1 | Based solely on a Schedule 13G/A filed by The Vanguard Group on February 11, 2016 as of December 31, 2015. According to the Schedule 13G/A, the Vanguard Group has sole voting power over 1,131,118 shares of Common Stock, shared voting power over 61,100 shares of Common Stock, sole dispositive power over 34,787,958 shares of Common Stock and shared dispositive power of 1,199,997 shares of Common Stock. The Schedule 13G/A reports that Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd., each a wholly-owned subsidiary of The Vanguard Group, Inc., are the beneficial owners of 952,997 and 425,121 shares of Common Stock, respectively, as a result of their serving as investment manager of collective trust accounts and investment manager of Australian investment offerings, respectively. |
| 2 | Based solely on a Schedule 13G/A filed by BlackRock, Inc. on January 26, 2016 as of December 31, 2015. According to the Schedule 13G/A, BlackRock, Inc. has sole voting power over 30,103,175 shares of Common Stock, sole dispositive power over 35,402,961 shares of Common Stock and shared voting and dispositive power over 34,320 shares of Common Stock. The Schedule 13G reports that beneficial owner subsidiaries of the parent holding company are BlackRock (Channel Islands) Ltd, BlackRock (Luxembourg) S.A., BlackRock (Netherlands) B.V., BlackRock (Singapore) Limited, BlackRock Advisors (UK) Limited, BlackRock Advisors, LLC, BlackRock Asset Management Canada Limited, BlackRock Asset Management Deutschland AG, BlackRock Asset Management Ireland Limited, BlackRock Asset Management North Asia Limited, BlackRock Asset Management Schweiz AG, BlackRock Capital Management, BlackRock Financial Management, Inc., BlackRock Fund Advisors, BlackRock Fund Managers Ltd, BlackRock Institutional Trust Company, N.A., BlackRock International Limited, BlackRock Investment Management (Australia) Limited, BlackRock Investment Management (Korea) Ltd., BlackRock Investment Management (UK) Ltd, BlackRock Investment Management, LLC, BlackRock Japan Co Ltd, BlackRock Life Limited and Xulu, Inc. |
| 3 | Based solely on a Schedule 13G filed by FMR LLC on February 12, 2016 as of December 31, 2015. According to the Schedule 13G, FMR LLC has sole voting power over 2,237,097 shares of Common Stock and sole dispositive power over 33,362,791 shares of Common Stock. The Schedule 13G reports that beneficial owner subsidiaries of the parent holding company are FIAM LLC, Fidelity (Canada) Asset Management ULC, Fidelity Institutional Asset Management Trust Company, Fidelity Management & Research (Hong Kong) Limited, Fidelity Management Trust Company, Inc., FMR Co., Inc., FMR Investment Management (UK) Limited and Strategic Advisors, Inc. |
| | | | | | | 51 | | ADDITIONAL GOVERNANCE INFORMATION |
Security Ownership of Directors and Officers The following table sets forth the ownership of our Directors (which includes all nominees), each of our Named Executive Officers, and all Directors and executive officers as a group, as of March 31, 2016. This information is based upon information furnished to us by each such person and/or based upon Company records. | | | | | | | | Name | | Amount and Nature of Beneficial Ownership 1 | | | Percent of Class 2 | | Named Executives and Directors (which includes all nominees): | | | | | | | Francisco D’Souza3 | | | 1,513,244 | | | * | Gordon J. Coburn4 | | | 97,159 | | | * | Karen McLoughlin5 | | | 101,621 | | | * | Rajeev Mehta6 | | | 361,953 | | | * | Malcolm Frank7 | | | 754 | | | * | Zein Abdalla8 | | | — | | | * | Maureen Breakiron-Evans9 | | | 76,868 | | | * | Jonathan Chadwick10 | | | — | | | * | John N. Fox, Jr.11 | | | 106,111 | | | * | John E. Klein12 | | | 698,669 | | | * | Leo S. Mackay, Jr.13 | | | 12,756 | | | * | Lakshmi Narayanan14 | | | 112,187 | | | * | Michael Patsalos-Fox15 | | | 48,536 | | | * | Robert E. Weissman16 | | | 1,030,469 | | | * | Thomas M. Wendel17 | | | 116,793 | | | * | All Directors and executive officers as a group (23 persons)18 | | | 4,889,826 | | | * |
| 1 | Except as set forth in the footnotes to this table and subject to applicable community property law, the persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by such stockholder. |
| 2 | Applicable percentage of ownership is based on an aggregate of 606,249,605 shares of Common Stock outstanding on March 31, 2016. Such percentage also takes into account the Common Stock to which such individual or entity has the right to acquire beneficial ownership within 60 days after March 31, 2016, including, but not limited to, through the exercise of options which are currently exercisable or which will become exercisable within such 60-day period; however, such Common Stock will not be deemed outstanding for the purpose of computing the percentage owned by any other individual or entity. Such calculation is required by Rule 13d-3(d)(1)(i) under the Exchange Act. |
| 3 | Includes 291,244 shares of Common Stock owned of record, 980,000 shares of Common Stock subject to options which were exercisable as of March 31, 2016 or will become exercisable within 60 days after such date and 242,000 shares of Common Stock owned by the D’Souza Family 2012 Trust. Excludes 465,552 shares of Common Stock underlying PSUs and RSUs, which vest over time after 60 days after March 31, 2016. Also excludes 105,516 shares of Common Stock underlying PSUs granted in 2015, assuming 100% vesting based on target 2016 performance. See “Long-Term Incentives – Stock-Based Awards” starting on page 23 for more information. |
| 4 | Includes 97,159 shares of Common Stock owned of record. Excludes 248,782 shares of Common Stock underlying PSUs and RSUs, which vest over time after 60 days after March 31, 2016. Also excludes 56,386 shares of Common Stock underlying PSUs granted in 2015, assuming 100% vesting based on target 2016 performance. See “Long-Term Incentives – Stock-Based Awards” starting on page 23 for more information. |
| 5 | Includes 41,621 shares of Common Stock owned of record and 60,000 shares of Common Stock subject to options which were exercisable as of March 31, 2016. Excludes 115,528 shares of Common Stock underlying PSUs and RSUs, which vest over time after 60 days after March 31, 2016. Also excludes 28,201 shares of Common Stock underlying PSUs granted in 2015, assuming 100% vesting based on target 2016 performance. See “Long-Term Incentives – Stock-Based Awards” starting on page 23 for more information. |
| 6 | Includes 154,239 shares of Common Stock owned of record, 103,856 shares of Common Stock owned by the Rajeev Mehta 2012 Irrevocable Trust and 103,858 shares of Common Stock owned by the Ruchita Mehta 2012 Irrevocable Trust. Excludes 236,128 shares of Common Stock underlying PSUs and RSUs, which vest over time after 60 days after March 31, 2016. Also excludes 53,887 shares of Common Stock underlying PSUs granted in 2015, assuming 100% vesting based on target 2016 performance. See “Long-Term Incentives – Stock-Based Awards” starting on page 23 for more information. |
| 7 | Includes 754 shares of Common Stock owned of record. Excludes 111,329 shares of Common Stock underlying PSUs and RSUs, which vest over time after 60 days after March 31, 2016. Also excludes 26,426 shares of Common Stock underlying PSUs granted in 2015, assuming 100% vesting based on target 2016 performance. See “Long-Term Incentives – Stock-Based Awards” starting on page 23 for more information. |
| 8 | Excludes 5,559 shares of Common Stock underlying options and RSUs, which become exercisable or vest over time after 60 days after March 31, 2016. |
| 9 | Includes 1,075 shares of Common Stock owned of record and 75,793 shares of Common Stock underlying options which were exercisable as of March 31, 2016 or will become exercisable within 60 days after such date. Excludes 14,493 shares of Common Stock subject to RSUs which are vested as of March 31, 2016 but will not settle within 60 days of March 31, 2016. Excludes 14,607 shares of Common Stock underlying options and RSUs, which become exercisable or vest over time after such period. |
| 10 | Excludes 1,256 shares of Class A Common Stock underlying options and RSUs, which become exercisable or vest over time after 60 days after March 31, 2016. |
| 11 | Includes 10,743 shares of Common Stock owned of record and 95,368 shares of Common Stock underlying options which were exercisable as of March 31, 2016 or will become exercisable within 60 days after such date. Excludes 14,607 shares of Common Stock underlying options and RSUs, which become exercisable or vest over time after such period. |
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| 12 | Includes 495,004 shares of Common Stock owned of record, 65,793 shares of Common Stock subject to options which were exercisable as of March 31, 2016 or will become exercisable within 60 days after such date and 137,872 shares of Common Stock owned by the John E. Klein Family 2012 Irrevocable Trust. Excludes 2,743 shares of Common Stock subject to RSUs which are vested as of March 31, 2016 but will not settle within 60 days of March 31, 2016. Excludes 14,607 shares of Common Stock underlying options and RSUs, which become exercisable or vest over time after such period. |
| 13 | Includes 2,743 shares of Common Stock owned of record and 10,013 shares of Common Stock subject to options which were exercisable as of March 31, 2016 or will become exercisable within 60 days after such date. Excludes 4,506 shares of Common Stock subject to RSUs which are vested as of March 31, 2016 but will not settle within 60 days of March 31, 2016. Excludes 14,607 shares of Common Stock underlying options and RSUs, which become exercisable or vest over time after such period. |
| 14 | Includes 86,394 shares of Common Stock owned of record and 25,793 shares of Common Stock subject to options which were exercisable as of March 31, 2016 or will become exercisable within 60 days after such date. Excludes 14,607 shares of Common Stock underlying options and RSUs which become exercisable or vest over time after such period. |
| 15 | Includes 12,743 shares of Common Stock owned of record and 35,793 shares of Common Stock subject to options which were exercisable as of March 31, 2016 or will become exercisable within 60 days after such date. Excludes 5,578 shares of Common Stock subject to RSUs which are vested as of March 31, 2016 but will not settle within 60 days of March 31, 2016. Excludes14,607 shares of Common Stock underlying options and RSUs, which become exercisable or vest over time after such period. |
| 16 | Includes 954,676 shares of Common Stock owned of record and 75,793 shares of Common Stock subject to options which were exercisable as of March 31, 2016 or will become exercisable within 60 days after such date. Excludes 2,743 shares of Common Stock subject to RSUs which are vested as of March 31, 2016 but will not settle within 60 days of March 31, 2016. Excludes 14,607 shares of Common Stock underlying options and RSUs, which become exercisable or vest over time after such period. |
| 17 | Includes 60,000 shares of Common Stock owned of record, 40,793 shares of Common Stock subject to options which were exercisable as of March 31, 2016 or will become exercisable within 60 days after such date, and 16,000 shares of Common Stock owned by the Tom Wendel Charitable Remainder Unitrust. Excludes 2,743 shares of Common Stock subject to RSUs which are vested as of March 31, 2016 but will not settle within 60 days of March 31, 2016. Excludes 14,607 shares of Common Stock underlying options and RSUs, which become exercisable or vest over time after such period. |
| 18 | Includes an aggregate of 2,808,787 shares of Common Stock owned of record, 1,475,139 shares of Common Stock underlying options granted to our Directors and executive officers which are exercisable as of March 31, 2016 or within 60 days after such date, 2,314 shares of Common Stock subject to RSUs which are scheduled to vest within 60 days of March 31, 2016 and 603,586 shares of Common Stock held in various trusts. Excludes 32,806 shares of Common Stock subject to RSUs which are vested as of March 31, 2016 but will not settle within 60 days of March 31, 2016. Excludes 1,691,118 shares of Common Stock underlying options, PSUs and RSUs, which become exercisable or vest over time after such period. Also excludes 335,771 shares of Common Stock underlying PSUs granted in 2015, assuming 100% vesting based on target 2016 performance. |
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS Transactions with Related Persons Since January 1, 2015, there were no related person transactions that are required to be disclosed pursuant to Item 404 of Regulation S-K other than such matters disclosed herein under “Compensation” starting on page 16. Review of Related Person Transactions The Audit Committee of the Company is responsible for reviewing and approving all transactions between us and any related person that are required to be disclosed pursuant to Item 404 of Regulation S-K. Related persons can include any of our Directors or executive officers, certain of our stockholders, and any of their immediate family members. This obligation is set forth in our Audit Committee Charter. In evaluating related person transactions, the members of the Audit Committee apply the same standards of good faith and fiduciary duty they apply to their general responsibilities as a committee of the Board and as individual Directors. The Audit Committee will approve a related person transaction when, in its good faith judgment, the transaction is in the best interests of the Company. The Company’s legal staff is primarily responsible for monitoring and obtaining information from our Directors and executive officers with respect to potential related person transactions, and for then determining, based on the facts and circumstances, whether the related person has a direct or indirect material interest in any transaction with us. Each year, to help our legal staff identify related person transactions, we require each of our Directors, Director nominees and executive officers to complete a disclosure questionnaire identifying any transactions with us in which the officer or Director or their family members have an interest. In addition, our Code of Ethics describes our expectation that all Directors, officers and employees who may have a potential or apparent conflict of interest to, in the case of employees, notify our Chief Compliance Officer or General Counsel, or in the case of executive officers and Directors, notify our General Counsel or the Board. A copy of our Code of Ethics is posted in the “Company Overview” section of the “About Cognizant” page of our website located atwww.cognizant.com, under the “Corporate Governance” tab. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires our Directors, executive officers and stockholders who beneficially own more than 10% of any class of our equity securities registered pursuant to Section 12 of the Exchange Act (collectively, the “Reporting Persons”) to file initial statements of beneficial ownership of securities and statements of changes in beneficial ownership of securities with respect to our equity securities with the SEC. All Reporting Persons are required by SEC regulation to furnish us with copies of all reports that such Reporting Persons file with the SEC pursuant to Section 16(a). Based solely on our review of the copies of such forms received by us and upon written representations of the Reporting Persons received by us, we believe that there has been compliance with all Section 16(a) filing requirements applicable to such Reporting Persons with respect to the year ended December 31, 2015. | | | | | | | 53 | | ADDITIONAL GOVERNANCE INFORMATION |
| ADDITIONAL REFERENCE INFORMATION |
OTHER MATTERS AT THE 2016 ANNUAL MEETING OF STOCKHOLDERS The Board is not aware of any matter to be presented for action at the Annual Meeting other than the matters referred to above and does not intend to bring any other matters before the Annual Meeting. However, if other matters should come before the Annual Meeting, it is intended that holders of the proxies will vote thereon in their discretion. SOLICITATION OF PROXIES The accompanying proxy is solicited by and on behalf of the Board, whose Notice of Annual Meeting is attached to this proxy statement, and the entire cost of such solicitation will be borne by us. In addition to the use of mail, proxies may be solicited by personal interview, telephone, e-mail and facsimile by our Directors, officers and other employees who will not be specially compensated for these services. We have engaged MacKenzie Partners, Inc., 105 Madison Avenue, New York, NY, 10016, to assist us with the solicitation of proxies. We expect to pay MacKenzie Partners, Inc. a fee of $35,000 plus reimbursement for out-of-pocket expenses for its services. We will also request that brokers, nominees, custodians and other fiduciaries forward soliciting materials to the beneficial owners of shares held by such brokers, nominees, custodians and other fiduciaries. We will reimburse such persons for their reasonable expenses in connection therewith. COGNIZANT’S ANNUAL REPORT ON FORM 10-K A copy of Cognizant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, including financial statements and schedules thereto but not including exhibits, as filed with the SEC, will be sent to any stockholder of record on April 18, 2016 without charge upon written request addressed to: Cognizant Technology Solutions Corporation
Maureen Breakiron-Evans
John E. Klein
Leo S. Mackay, Jr.
Thomas M. Wendel
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Independent Registered Public Accounting Firm Fees and Other Matters
The following table summarizes the fees of PricewaterhouseCoopers LLP, our independent registered public accounting firm, billed to us for each of the last two fiscal years for audit services and billed to us in each of the last two fiscal years for other services:
| | | | | | | | | | Fee Category | | 2013 | | | 2012 | | Audit Fees | | $ | 2,897,500 | | | $ | 2,912,200 | | Audit-Related Fees | | | 145,200 | | | | 233,600 | | Tax Fees | | | 674,300 | | | | 566,700 | | All Other Fees | | | 678,200 | | | | 158,000 | | | | | | | | | | | Total Fees | | $ | 4,395,200 | | | $ | 3,870,500 | |
AUDIT FEES
Audit fees consist of fees for the audit of our consolidated financial statements and the effectiveness of our internal control over financial reporting under Section 404 of the Sarbanes Oxley Act, the review of the interim financial statements included in our quarterly reports on Form 10-Q and other professional services provided in connection with statutory and regulatory filings or engagements.
AUDIT-RELATED FEES
Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit and the review of our financial statements and which are not reported under “Audit Fees.” These services relate to attest services that are not required by statute or regulation, consultations concerning financial accounting and reporting standards and employee benefit audits.
TAX FEES
Tax fees comprise fees for a variety of permissible services relating to tax compliance, tax planning, and tax advice. These services include assistance in complying with local transfer pricing requirements, assistance with local tax audits and assessments, withholding tax and indirect tax matters, preparation and filing of local tax returns and technical advice relating to local and international tax matters.
ALL OTHER FEES
For 2013, the amount relates to fees related to an information security strategy review, immigration advisory services, information technology advisory fees and accounting research software fees. For 2012, the amount relates to immigration and human resource compliance advisory services and accounting research software fees.
AUDIT COMMITTEE PRE-APPROVAL POLICY AND PROCEDURES
The Audit Committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm. This policy generally provides that we will not engage our independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the Audit Committee or the engagement is entered into pursuant to one of the pre-approval procedures described below.
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND OTHER MATTERS
From time to time, the Audit Committee may pre-approve specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided.
The Audit Committee has also delegated to Maureen Breakiron-Evans the authority to approve any audit or non-audit services to be provided to us by our independent registered public accounting firm. Any approval of services by a member of the Audit Committee pursuant to this delegated authority is reported on at the next meeting of the Audit Committee. During 2013 and 2012, the Audit Committee approved all services provided to us by PricewaterhouseCoopers LLP that are subject to the pre-approval policies and procedures described above.
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Stockholders’ Proposals
Stockholders who intend to have a proposal considered for inclusion in our proxy materials for presentation at our 2015 Annual Meeting of Stockholders pursuant to Rule 14a-8 under the Exchange Act must submit the proposal to our Secretary at our offices at Glenpointe Centre West, 500 Frank W. Burr Blvd., Teaneck, New Jersey 07666, in writing not later than December 18, 2014.
Stockholders intending to present a proposal at the 2015 Annual Meeting of Stockholders, but not to include the proposal in our proxy statement, or to nominate a person for election as a director, must comply with the requirements set forth in our Amended and Restated By-laws. Our Amended and Restated By-laws require, among other things, that our Secretary receive written notice from the stockholder of record of their intent to present such proposal or nomination not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the anniversary of the preceding year’s annual meeting. Therefore, the Company must receive notice of such a proposal or nomination for the 2015 Annual Meeting of Stockholders no earlier than the close of business on February 3, 2015 and no later than the close of business on March 5, 2015. The notice must contain the information required by the Amended and Restated By-laws, a copy of which is available upon request to our Secretary. In the event that the date of the 2015 Annual Meeting of Stockholders is more than 30 days before or more than 70 days after June 3, 2015, then our Secretary must receive such written notice not earlier than the close of business on the 120th day prior to the 2015 Annual Meeting and not later than the close of business of the later of the 90th day prior to the 2015 Annual Meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Company.
We reserve the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with these or other applicable requirements.
Other Matters
Our Board of Directors is not aware of any matter to be presented for action at the Annual Meeting other than the matters referred to above and does not intend to bring any other matters before the Annual Meeting. However, if other matters should come before the Annual Meeting, it is intended that holders of the proxies will vote thereon in their discretion.
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Solicitation of Proxies
The accompanying proxy is solicited by and on behalf of our Board of Directors, whose Notice of Annual Meeting is attached to this proxy statement, and the entire cost of such solicitation will be borne by us. In addition to the use of mail, proxies may be solicited by personal interview, telephone, e-mail and facsimile by our Directors, officers and other employees who will not be specially compensated for these services. We will request that brokers, nominees, custodians and other fiduciaries forward soliciting materials to the beneficial owners of shares held by such brokers, nominees, custodians and other fiduciaries. We will reimburse such persons for their reasonable expenses in connection therewith.
Certain information contained in this proxy statement relating to the occupations and security holdings of our Directors and officers is based upon information received from the individual Directors and officers.
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Cognizant’s Annual Report on Form 10-K
A copy of Cognizant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, including financial statements and schedules thereto but not including exhibits, as filed with the SEC, will be sent to any stockholder of record on April 7, 2014 without charge upon written request addressed to:
Cognizant Technology Solutions Corporation Attention: Secretary Glenpointe Centre West 500 Frank W. Burr Blvd. Teaneck, New Jersey 07666 A reasonable fee will be charged for copies of exhibits. You also may access this proxy statement and our Annual Report on Form 10-K atwww.proxyvote.com. You also may access ourOur Annual Report on Form 10-K for the year ended December 31, 20132015 is also available atwww.cognizant.com. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, WE URGE YOU TO VOTE YOUR SHARES VIA THE TOLL-FREE TELEPHONE NUMBER OR OVER THE INTERNET, AS DESCRIBED IN THE ENCLOSED MATERIALS. IF YOU RECEIVED A COPY OF THE PROXY CARD BY MAIL, YOU MAY SIGN, DATE AND MAIL THE PROXY CARD IN THE ENCLOSED RETURN ENVELOPE. PROMPTLY VOTING YOUR SHARES WILL ENSURE THE PRESENCE OF A QUORUM AT THE ANNUAL MEETING AND WILL SAVE US THE EXPENSE OF FURTHER SOLICITATION.
By Order of the Board of Directors
Steven Schwartz, Secretary
Teaneck, New Jersey
April 17, 2014
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EXHIBIT A
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
2009 INCENTIVE COMPENSATION PLAN
ARTICLE ONE
GENERAL PROVISIONS
This 2009 Incentive Compensation Plan is intended to promote the business success and interests of Cognizant Technology Solutions Corporation, a Delaware corporation, by providing eligible persons in the Corporation’s service with the opportunity to participate in one or more cash or equity incentive compensation programs designed to encourage them to continue their service relationship with the Corporation and to contribute to the Corporation’s growth and long-term success.
Capitalized terms shall have the meanings assigned to such terms in the attached Appendix.
A. The Plan shall be divided into three separate incentive compensation programs:
— the Discretionary Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock or stock appreciation rights tied to the value of such Common Stock,
— the Stock Issuance Program under which eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock pursuant to restricted stock awards, restricted stock units, performance shares or other stock-based awards which vest upon the completion of a designated service period and/or the attainment ofpre-established performance milestones, or such shares of Common Stock may be issued through direct purchase or as a bonus for services rendered to the Corporation (or any Parent or Subsidiary), and
— the Incentive Bonus Program under which eligible persons may, at the discretion of the Plan Administrator, be provided with bonus opportunities through performance unit awards and other special cash incentive programs tied to the attainment of pre-established performance milestones.
B. The provisions of Articles One and Five shall apply to all incentive compensation programs under the Plan and shall govern the interests of all persons under the Plan.
III. | ADMINISTRATION OF THE PLAN |
A. The Compensation Committee shall have sole and exclusive authority to administer the Plan with respect to Section 16 Insiders. Administration of the Plan with respect to all other persons eligible to participate in the Plan may, at the Board’s discretion, be vested in the Compensation Committee or a Secondary Board Committee, or the Board may retain the power to administer those programs with respect to all such persons. In addition, administration of the Plan may, at the Board’s discretion, be vested in a Special Award Committee with authority to administer the Plan with respect to employees other than Section 16 Insiders and members of such Special Award Committee and to make Awards to such individuals under the Plan subject to such limitations and other terms and conditions as the Board shall specify from time to time. Notwithstanding the foregoing, any Awards for one or more members of the Compensation Committee (other than ad hoc or formulaic Awards made to all or substantially all of the non-employee Board members on substantially the same basis) must be authorized by a disinterested majority of the non-employee Board members.
B. Members of the Compensation Committee or any Secondary Board Committee or Special Award Committee shall serve for such period of time as the Board may determine and may be removed by the Board at any time. The Board may also at any time terminate the functions of any Secondary Board Committee or Special Award Committee and reassume all powers and authority previously delegated to such committee.
C. Each Plan Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration of the Plan and to make such determinations under, and issue such interpretations of, the provisions of the
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PlanRECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Portions of our disclosure, including the following table, include non-GAAP Income from Operations, non-GAAP operating margin, and non-GAAP EPS. These non-GAAP financial measures are not based on any outstanding Awards thereunder as itcomprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), and may deem necessary or advisable. Decisionsbe different from non-GAAP measures used by other companies. In addition, these non-GAAP measures should be read in conjunction with our financial statements prepared in accordance with GAAP. The reconciliations of Cognizant’s non-GAAP financial measures to the corresponding GAAP measures should be carefully evaluated. We seek to manage the Company to a targeted non-GAAP operating margin of 19% to 20% of revenue. We believe providing investors with an operating view consistent with how we manage the Company provides enhanced transparency into the operating results of the Plan Administrator withinCompany. For our internal management reporting and budgeting purposes and as performance metrics for certain of our executive compensation programs, we use non-GAAP financial information that does not include certain charges, including stock-based compensation expense, acquisition-related charges and netnon-operating foreign currency exchange gains or losses, for financial and operational decision making, to evaluate period-to-period comparisons, to determine portions of the scopecompensation of its administrative functions undercertain of our executive officers and for making comparisons of our operating results to those of our competitors. Therefore, it is our belief that the Plan shall be finaluse ofnon-GAAP financial measures excluding these costs provides a meaningful measure for investors to evaluate our financial performance. Accordingly, we believe that the presentation of non-GAAP Income from Operations, non-GAAP operating margin and binding onnon-GAAP EPS, when read in conjunction with our reported GAAP results, can provide useful supplemental information to our management and investors regarding financial and business trends relating to our financial condition and results of operations. A limitation of using non-GAAP financial measures versus financial measures calculated in accordance with GAAP is that non-GAAP measures do not reflect all parties who have an interestof the amounts associated with our operating results as determined in accordance with GAAP and exclude costs that are recurring, namely stock-based compensation expense, certain acquisition-related charges, and net non-operating foreign currency exchange gains or losses. In addition, other companies may calculate non-GAAP financial measures differently than us, thereby limiting the Plan under its jurisdiction or any Award thereunder. D. Serviceusefulness of these non-GAAP financial measures as a Plan Administratorcomparative tool. We compensate for these limitations by providing specific information regarding the members of the Compensation Committee or the Secondary Board Committee shall constitute service as Board members,GAAP amounts excluded from non-GAAP Income from Operations, non-GAAP operating margin and the membersnon-GAAP EPS to allow investors to evaluate such non-GAAP financial measures.
The following table presents a reconciliation of each such committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on such committee. No member of the Compensation Committee, the Special Award Committee or the Secondary Board Committee shall be liable for any act or omission made in good faith with respectnon-GAAP financial measure to the Plan or any Award thereunder.most comparable GAAP measure for the years ended December 31. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2011
($) | | | % of
Revenue | | | 2012
($) | | | % of
Revenue | | | 2013
($) | | | % of
Revenue | | | 2014
($) | | | % of
Revenue | | | 2015
($) | | | % of
Revenue | | | ($ in millions, except per share data) | | GAAP income from operations and operating margin | | | 1,136.5 | | | | 18.6 | | | | 1,361.5 | | | | 18.5 | | | | 1,677.9 | | | | 19.0 | | | | 1,884.9 | | | | 18.4 | | | | 2,142.0 | | | 17.3 | | Add: Stock-based compensation expense | | | 90.2 | | | | 1.5 | | | | 107.3 | | | | 1.5 | | | | 118.8 | | | | 1.3 | | | | 134.8 | | | | 1.3 | | | | 192.0 | | | 1.5 | | Add: Acquisition-related charges1 | | | 13.4 | | | | 0.2 | | | | 15.9 | | | | 0.2 | | | | 24.0 | | | | 0.3 | | | | 48.4 | | | | 0.5 | | | | 115.8 | | | 0.9 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-GAAP income from operations and non-GAAP operating margin | | | 1,240.1 | | | | 20.3 | | | | 1,484.7 | | | | 20.2 | | | | 1,820.7 | | | | 20.6 | | | | 2,068.1 | | | | 20.2 | | | | 2,449.8 | | | 19.7 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | GAAP diluted earnings per share | | | 1.42 | | | | | | | | 1.72 | | | | | | | | 2.02 | | | | | | | | 2.35 | | | | | | | | 2.65 | | | | | Effect of above operating adjustments, net of tax | | | 0.13 | | | | | | | | 0.15 | | | | | | | | 0.17 | | | | | | | | 0.23 | | | | | | | | 0.35 | | | | | Effect of non-operating foreign currency exchange gains and losses, net of tax2 | | | N/A3 | | | | | | | | 0.03 | | | | | | | | 0.08 | | | | | | | | 0.02 | | | | | | | | 0.07 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-GAAP diluted earnings per share | | | 1.553 | | | | | | | | 1.90 | | | | | | | | 2.27 | | | | | | | | 2.60 | | | | | | | | 3.07 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1 | Acquisition-related charges include, when applicable, amortization of purchased intangible assets included in the depreciation and amortization expense line on our consolidated statements of operations, external deal costs, acquisition-related retention bonuses, integration costs, changes in the fair value of contingent consideration liabilities, charges for impairment of acquired intangible assets and other acquisition-related costs. |
IV.2 | ELIGIBILITYNon-operating foreign currency exchange gains and losses are inclusive of gains and losses on related foreign exchange forward contracts not designated as hedging instruments for accounting purposes. |
A. The persons eligible to participate in the Plan are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary).
B. The Plan Administrator shall have full authority to determine, (i) with respect to Awards made under the Discretionary Grant Program, which eligible persons are to receive such Awards, the time or times when those Awards are to be made, the number of shares to be covered by each such Award, the time or times when the Award is to become exercisable, the vesting schedule (if any) applicable to the Award, the maximum term for which such Award is to remain outstanding and the status of a granted option as either an Incentive Option or a Non-Statutory Option; (ii) with respect to Awards under the Stock Issuance Program, which eligible persons are to receive such Awards, the time or times when the Awards are to be made, the number of shares subject to each such Award, the applicable performance and/or service vesting provisions, the issuance schedule in effect for the shares that vest and become issuable under such Award, the cash consideration (if any) payable for those shares and the form (cash or shares of Common Stock) in which the Award is to be settled; and (iii) with respect to Awards under the Incentive Bonus Program, which eligible persons are to receive such Awards, the time or times when the Awards are to be made, the performance objectives for each such Award, the amounts payable at designated levels of attained performance, any applicable service vesting requirements, the payout schedule for each such Award and the form (cash or shares of Common Stock) in which the Award is to be settled.
V.3 | The calculation of non-GAAP EPS for 2011 has not been conformed to the presentation of the other years and excludes the adjustment for the effect ofSTOCK SUBJECT TO THE PLANnon-operating foreign currency exchange gains and losses, net of tax. |
A. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Corporation on the open market. The number of shares of Common Stock initially reserved for issuance over the term of the Plan shall be limited to Twenty-Four Million (24,000,000) shares. The Plan shall serve as the successor to the Predecessor Plans, and no further stock option grants or other awards shall be made under the Predecessor Plans on or after the Plan Effective Date. However, all option grants and unvested share awards outstanding under the Predecessor Plans on the Plan Effective Date shall continue in full force and effect in accordance with their terms, and no provision of this Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of those awards with respect to their acquisition of shares of Common Stock thereunder.
B. Notwithstanding the foregoing, for each share of Common Stock issued without cash consideration pursuant to the Stock Issuance or the Incentive Bonus Program, the number of shares of Common Stock available for issuance under the Plan shall be reduced by 1.55 shares of Common Stock.
C. The maximum number of shares of Common Stock that may be issued pursuant to Incentive Options granted under the Plan shall be limited to Twenty-Four Million (24,000,000) shares, subject to periodic adjustment in accordance with Section V.G. of this Article One.
D. Each person participating in the Plan shall be subject the following limitations:
— for Awards denominated in shares of Common Stock at the time of grant (whether subsequently payable in cash or Common Stock, or a combination of both), the maximum number of shares of Common Stock for which such Awards may be made to such person in any calendar year shall not exceed One Million (1,000,000) shares of Common Stock in the aggregate, and
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— for Awards denominated in dollars at the time of grant (whether subsequently payable in cash or Common Stock, orINDEX OF DEFINED TERMS
Set forth below is a combination of both), the maximum dollar amount for which such Awards may be made to such person in any calendar year shall not exceed Three Million Dollars ($3,000,000). E. Shares of Common Stock subject to outstanding Awards made under the Plan shall be available for subsequent issuance under the Plan to the extent those Awards expire or terminate for any reason prior to the issuancelist of the shares of Common Stock subject to those Awards. Unvested shares issued under the Plan and subsequently forfeited or repurchased by the Corporation, at a price per share not greater than the original issue price paid per share, pursuant to the Corporation’s repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for subsequent reissuance.
F. Should the exercise price of an option under the Plan be paid with shares of Common Stock, then the authorized reserve of Common Stock under the Plan shall be reduced by the gross number of shares for which that option is exercised, and not by the net number of shares issued under the exercised stock option. Upon the exercise of any stock appreciation right under the Plan, the share reserve shall be reduced by the gross number of shares as to which such right is exercised, and not by the net number of shares actually issued by the Corporation upon such exercise. If shares of Common Stock otherwise issuable under the Plan are withheld by the Corporation in satisfaction of the withholding taxes or other taxes incurred in connection with the issuance, vesting or exercise of an Award or the issuance of Common Stock thereunder (including, without limitation any fringe benefit or employer taxes permitted to be passed through to the employee under applicable law), then the number of shares of Common Stock available for issuance under the Plan shall be reduced on the basis of the gross number of shares issued, vested or exercised under such Award, calculated in each instance prior to any such share withholding.
G. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, or should the value of outstanding shares of Common Stock be substantially reduced as a result of a spin-off transaction or an extraordinary dividend or distribution, or should there occur any merger, consolidation or other reorganization, then equitable adjustments shall be made by the Plan Administrator to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the number and/or class of securities by which the share reserve will be reduced for each security issued without cash consideration under the Stock Issuance and Incentive Bonus Programs, (iii) the maximum number and/or class of securities issuable under the Plan pursuant to Incentive Options, (iv) the maximum number and/or class of securities for which any one person may be granted Common Stock-denominated Awards under the Plan per calendar year, (v) the number and/or class of securities and the exercise or base price per share in effect under each outstanding Award under the Discretionary Grant Program, (vi) the number and/or class of securities subject to each outstanding Award under the Stock Issuance Program and the cash consideration (if any) payable per share, (vii) the number and/or class of securities subject to each outstanding Award under the Incentive Bonus Program denominated in shares of Common Stock and (viii) the number and/or class of securities subject to the Corporation’s outstanding repurchase rights under the Plan and the repurchase price payable per share. The adjustments shall be made in such manner as the Plan Administrator deems appropriate and such adjustments shall be final, binding and conclusive. In the event of a Change in Control, however, the adjustments (if any) shall be made solely in accordance with the applicable provisions of the Plan governing Change in Control transactions.
H. Outstanding Awards granted pursuant to the Plan shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
defined terms used within this proxy statement. | | | | | 2014 Proxy StatementDefined Term
| | Meaning | | See
Page No. | | 1999 Plan | | Amended and Restated 1999 Incentive Compensation Plan | | 39 | | 2004 Employee Stock Purchase Plan | | Amended and Restated 2004 Employee Stock Purchase Plan | | 39 | | 2009 Incentive Plan | | 2009 Incentive Compensation Plan | | 39 | | 2015 Annual Meeting | | 2015 Annual Meeting of Stockholders of the Company | | 5 | | 2015 Annual Report | | Company’s Annual Report to Stockholders for Year Ended December 31, 2015 | | 1 | | 2017 Annual Meeting | | 2017 Annual Meeting of Stockholders of the Company | | 1 | | Annual Meeting | | Annual Meeting of Stockholders of the Company to be held on June 15, 2016 | | 1 | | BFS | | Banking and Financial Services | | 50 | | Board or Board of Directors | | Board of Directors of the Company | | 1 | | Broadridge | | Broadridge Financial Solutions, Inc., the Company’s agent for distribution of this proxy statement and tabulator for the Annual Meeting | | 2 | | Cognizant | | Cognizant Technology Solutions Corporation | | A-31 | | Common Stock | | Class A Common Stock, $0.01 par value, of the Company | | 1 | | Company | | Cognizant Technology Solutions Corporation | | 1 | | CSRP | | Cognizant Technology Solutions Supplemental Retirement Plan | | 24 | | Director Plan | | Amended and Restated Non-Employee Directors’ Stock Option Plan | | 39 | | Directors | | Directors of the Company | | 1 | | Dodd-Frank Act | | Dodd-Frank Wall Street Reform and Consumer Protection Act | | 16 | | DSO | | Days Sales Outstanding | | 22 | | Employment Agreements | | Amended and Restated Executive Employment and Non-Disclosure,Non-Competition and Invention Assignment Agreements | | 28 | | Exchange Act | | Securities Exchange Act of 1934 | | 13 | | Executive Committee | | Gordon Coburn, Francisco D’Souza and Lakshmi Narayanan | | 27 | | FASB ASC | | Financial Accounting Standards Board Accounting Standards Codification | | N/A | | GAAP | | U.S. Generally Accepted Accounting Principles | | 55 | | Governance Committee | | Nominating and Corporate Governance Committee | | 14 | | Internet Notice | | Notice of Internet Availability of Proxy Materials | | 2 | | IRC | | U.S. Internal Revenue Code | | 17 | | IRS | | U.S. Internal Revenue Service | | 24 | | Key Employees’ Stock Option Plan | | Amended and Restated Key Employees’ Stock Option Plan | | 39 | | Named Executives | | The Company’s Chief Executive Officer, Chief Financial Officer and each of the Company’s three other most highly compensated executive officers whose total compensation for the 2015 fiscal year was in excess of $100,000 and who were serving as executive officers of the Company at the end of the 2015 fiscal year | | 31 | | NASDAQ | | The NASDAQ Stock Market LLC | | 13 | | non-GAAP EPS | | Non-GAAP diluted earnings per share (see “Reconciliation of Non-GAAP Financial Measures”) | | 25 (55) | | non-GAAP Income from Operations | | Non-GAAP income from operations (see “Reconciliation of Non-GAAP Financial Measures”) | | 22 (55) | | non-employee Directors | | Directors who are not employees of the Company or any of its subsidiaries | | 40 | | Pay Governance | | Pay Governance, LLC, independent compensation consultant to the Compensation Committee | | 19 | | PSUs | | Performance-based stock units | | 23 | | PwC | | PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm | | 43 | | Record Date | | April 18, 2016, the record date for the Annual Meeting | | 1 | | Reporting Persons | | Directors, executive officers and stockholders who beneficially own more than 10% of any class of the Company’s equity securities registered pursuant to Section 12 of the Exchange Act | | 53 | | RSUs | | Restricted stock units | | 23 | | Rule 14a-8 | | Rule 14a-8 under the Exchange Act | | 48 | | SEC | | U.S. Securities and Exchange Commission | | 2 | | TriZetto | | TZ US Parent, Inc. | | N/A |
ARTICLE TWO
DISCRETIONARY GRANT PROGRAM
Each option shall be evidenced by an Award Agreement in the form approved by the Plan Administrator;provided, however,that each such Award Agreement shall comply with the terms specified below. Each Award Agreement evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such options.
A.Exercise Price.
1. The exercise price per share shall be fixed by the Plan Administrator;provided, however, that such exercise price shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the grant date.
2. The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of the Award Agreement, be payable in one or more of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock (whether delivered in the form of actual stock certificates or through attestation of ownership) held for the requisite period (if any) necessary to avoid any resulting charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date,
(iii) to the extent the option is exercised for vested shares of Common Stock, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide instructions to (a) a brokerage firm (reasonably satisfactory to the Corporation for purposes of administering such procedure in compliance with the Corporation’s pre-clearance/pre-notification policies) to effect the immediate sale of all or a portion of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable income and employment taxes and Foreign Taxes required to be withheld by the Corporation by reason of such exercise and any employer taxes required to be paid by the Optionee under Section V.B, V.C or V.D of this Article II and (b) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm on such settlement date in order to complete the sale, or
(iv) to the extent the option is at the time exercisable for vested shares of Common Stock, through the surrender to the Corporation of all or any part of that vested portion for an appreciation distribution payable in shares of Common Stock with a Fair Market Value at the time of such option surrender equal to the dollar amount by which the then Fair Market Value of the shares of Common Stock subject to the surrendered portion exceeds the aggregate exercise price payable for those shares of Common Stock, with any resulting fractional share to be rounded down to the next whole share.
Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date.
B.Term and Exercisability of Options.
1. No option shall have a term in excess of seven (7) years measured from the option grant date. Unless a shorter term is specified in the Award Agreement, each option under the Discretionary Grant Program shall have such a seven (7)-year maximum term.
2. Unless otherwise set forth in the Award Agreement, each option shall vest and become exercisable for twenty-five percent (25%) of the option shares upon the Optionee’s completion of each year of Service over the four (4)-year period measured from the grant date. In no event, however, shall such option be exercisable for fractional shares.
3. The Plan Administrator shall also have the discretionary authority, consistent with Code Section 162(m), to structure one or more Awards under the Discretionary Grant Program so that those Awards shall vest and become exercisable only after the achievement of pre-established corporate performance objectives based on one or more Performance Goals and measured over the performance period specified by the Plan Administrator at the time of the Award
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C.Effect of Termination of Service.
1. Unless otherwise set forth in the Award Agreement, the following provisions shall govern the exercise of any options granted to an Optionee pursuant to the Discretionary Grant Program that are outstanding at the time of his or her cessation of Service or death:
(i) Should Optionee cease to remain in Service for any reason (other than death, Permanent Disability, Misconduct or Cause) while an option is outstanding, then Optionee (or any person or persons to whom an option is transferred pursuant to a permitted transfer under Paragraph F below) shall have a three (3)-month period measured from the date of such cessation of Service during which to exercise the option, but in no event shall the option be exercisable at any time after the expiration of the option term.
(ii) Should Optionee die while his or her option is outstanding, then the option may be exercised by (i) the personal representative of Optionee’s estate or (ii) the person or persons to whom the option is transferred pursuant to Optionee’s will or the laws of inheritance following Optionee’s death or (iii) the person to whom the option is transferred during Optionee’s lifetime pursuant to a permitted transfer under Paragraph F below, as the case may be. However, if Optionee dies while holding an outstanding option under the Discretionary Grant Program and has an effective beneficiary designation in effect for that option at the time of his or her death, then the designated beneficiary or beneficiaries shall have the exclusive right to exercise the option following Optionee’s death. Any such right to exercise the option shall lapse, and the option shall cease to be outstanding, upon the earlier of (i) the expiration of the twelve (12)-month period measured from the date of Optionee’s death and (ii) the expiration of the option term.
(iii) Should Optionee cease Service by reason of Permanent Disability while his or her option is outstanding, then Optionee (or any person or persons to whom this option is transferred pursuant to a permitted transfer under Paragraph F below) shall have a twelve (12)-month period measured from the date of such cessation of Service during which to exercise the option. In no event shall the option be exercisable at any time after the expiration of the option term.
(iv) The applicable period of post-Service exercisability in effect pursuant to the foregoing provisions of this Paragraph C.1 shall automatically be extended by an additional period of time equal in duration to any interval within such post-Service exercise period during which the exercise of the option or the immediate sale of the underlying shares of Common Stock purchasable under that option cannot be effected in compliance with applicable federal and state securities laws, but in no event shall such an extension result in the extension of the option beyond the expiration of the maximum option term.
(v) During the limited period of post-Service exercisability, the option may not be exercised in the aggregate for more than the number of shares of Common Stock for which such option is, at the time of Optionee’s cessation of Service, vested and exercisable pursuant to the vesting provisions of Paragraph B.2 above or the special vesting acceleration provisions of Section IV.A of this Article Two. The option shall not vest or become exercisable for any additional underlying shares of Common Stock, whether pursuant to the normal vesting provisions of Paragraph B.2 above or the special vesting acceleration provisions of Section IV.A of this Article Two, following Optionee’s cessation of Service, except to the extent (if any) specifically authorized by the Plan Administrator pursuant to an express written agreement with Optionee. Upon the expiration of such limited exercise period or (if earlier) upon the expiration of the term, the option shall terminate and cease to be outstanding for any exercisable shares of Common Stock for which the option has not otherwise been exercised.
(vi) Should Optionee’s Service be terminated for Misconduct or Cause or should Optionee otherwise engage in any Misconduct or other act or omission constituting grounds for termination for Cause while his or her option is outstanding, then such option, whether vested or unvested at the time, shall terminate immediately and cease to remain outstanding.
2. The Plan Administrator shall have complete discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to:
(i) extend the period of time for which the option is to remain exercisable following Optionee’s cessation of Service from the limited exercise period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term, and/or
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(ii) permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of Optionee’s cessation of Service but also with respect to one or more additional shares in which Optionee would have vested had Optionee continued in Service.
D.Stockholder Rights. The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become a holder of record of the purchased shares.CC
E.Repurchase Rights. The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the Optionee cease Service while such shares are unvested, the Corporation shall have the right to repurchase any or all of those unvested shares at a price per share equal to thelower of (i) the exercise price paid per share or (ii) the Fair Market Value per share of Common Stock at the time of repurchase. The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right.Cognizant
F.Transferability of Options. The transferability of options granted under the Plan shall be governed by the following provisions:World Headquarters
(i)Incentive Options: During the lifetime of the Optionee, Incentive Options shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or the laws of inheritance following the Optionee’s death.500 Frank W. Burr Blvd
(ii)Non-Statutory Options. Non-Statutory Options shall be subject to the same limitation on transfer as Incentive Options. Notwithstanding the foregoing, unless otherwise set forth in the Award Agreement, a Non-Statutory Option may be assigned in whole or in part during the Optionee’s lifetime, by gratuitous transfer to a revocable living trust established for the exclusive benefit of Optionee or Optionee and his or her spouse (the “Trust”) or pursuant to a domestic relations order to Optionee’s former spouse in settlement of their marital property rights (the “Spouse Transferee”). The assigned portion may only be exercised by the Trust or the Spouse Transferee acquiring the proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate.Teaneck, NJ 07666
(iii)Beneficiary Designations. Notwithstanding the foregoing, the Optionee may designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options under this Article Two (whether Incentive Options or Non-Statutory Options), and those options shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding those options. Such beneficiary or beneficiaries shall take the transferred options subject to all the terms and conditions of the applicable agreement evidencing each such transferred option, including (without limitation) the limited time period during which the option may be exercised following the Optionee’s death.
The terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of Articles One, Two and Six shall be applicable to Incentive Options. Options which are specifically designated as Non-Statutory Options when issued under the Plan shallnot be subject to the terms of this Section II.
A.Eligibility. Incentive Options may only be granted to Employees.
B.Dollar Limitation. The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000).
To the extent the Employee holds two (2) or more such options which become exercisable for the first time in the same calendar year, then for purposes of the foregoing limitations on the exercisability of those options as Incentive Options, such options shall be deemed to become first exercisable in that calendar year on the basis of the chronological order in which they were granted, except to the extent otherwise provided under applicable law or regulation.
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C.10% Stockholder. If any Employee to whom an Incentive Option is granted is a 10% Stockholder, then the exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the option grant date, and the option term shall not exceed five (5) years measured from the option grant date.
III. | STOCK APPRECIATION RIGHTS |
A.Authority. The Plan Administrator shall have full power and authority, exercisable in its sole discretion, to grant stock appreciation rights in accordance with this Section III to selected Optionees or other individuals eligible to receive option grants under the Discretionary Grant Program.
B.Types. Two types of stock appreciation rights shall be authorized for issuance under this Section III: (i) tandem stock appreciation rights (“Tandem Rights”) and (ii) Stand-Alone stock appreciation rights (“Stand-Alone Rights”).
C.Tandem Rights. The following terms and conditions shall govern the grant and exercise of Tandem Rights.
1. One or more Optionees may be granted a Tandem Right, exercisable upon such terms and conditions as the Plan Administrator may establish, to elect between the exercise of the underlying option for shares of Common Stock or the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of (i) the Fair Market Value (on the option surrender date) of the number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (ii) the aggregate exercise price payable for such vested shares.
2. Any distribution to which the Optionee becomes entitled upon the exercise of a Tandem Right may be made in (i) shares of Common Stock valued at Fair Market Value on the option surrender date, (ii) cash or (iii) a combination of cash and shares of Common Stock, as the Plan Administrator shall determine in its sole discretion. Unless otherwise specified in the applicable Award Agreement, the distribution shall be made in shares of Common Stock.
D.Stand-Alone Rights. The following terms and conditions shall govern the grant and exercise of Stand-Alone Rights:
1. One or more individuals eligible to participate in the Discretionary Grant Program may be granted a Stand-Alone Right not tied to any underlying option under this Discretionary Grant Program. The Stand-Alone Right shall relate to a specified number of shares of Common Stock and shall be exercisable upon such terms and conditions as the Plan Administrator may establish. In no event, however, may the Stand-Alone Right have a maximum term in excess of seven (7) years measured from the grant date. Except to the extent otherwise provided in the applicable Award Agreement, the provisions of Paragraphs B.1 and B.2 of Section I of this Article Two shall govern the term and exercisability of each Stand-Alone Right awarded under the Plan.
2. Upon exercise of the Stand-Alone Right, the holder shall be entitled to receive a distribution from the Corporation in an amount equal to the excess of (i) the aggregate Fair Market Value (on the exercise date) of the shares of Common Stock underlying the exercised right over (ii) the aggregate base price in effect for those shares.
3. The number of shares of Common Stock underlying each Stand-Alone Right and the base price in effect for those shares shall be determined by the Plan Administrator in its sole discretion at the time the Stand-Alone Right is granted. In no event, however, may the base price per share be less than the Fair Market Value per underlying share of Common Stock on the grant date.
4. Stand-Alone Rights shall be subject to the same transferability restrictions applicable to Non-Statutory Options under Section I.F of this Article Two. In addition, one or more beneficiaries may be designated for an outstanding Stand-Alone Right in accordance with substantially the same terms and provisions as set forth in Section I.F of this Article Two.
5. The distribution with respect to an exercised Stand-Alone Right may be made in (i) shares of Common Stock valued at Fair Market Value on the exercise date, (ii) cash or (iii) a combination of cash and shares of Common Stock, as the Plan Administrator shall determine in its sole discretion. Unless otherwise specified in the applicable Award Agreement, the distribution shall be made in shares of Common Stock.
6. The holder of a Stand-Alone Right shall have no stockholder rights with respect to the shares subject to the Stand-Alone Right unless and until such person shall have exercised the Stand-Alone Right and become a holder of record of the shares of Common Stock issued upon the exercise of such Stand-Alone Right.
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E.Post-Service Exercise. The provisions governing the exercise of Tandem and Stand-Alone Rights following the cessation of the recipient’s Service shall be the same as those set forth in Section I.C of this Article Two for the options granted under the Discretionary Grant Program, and the Plan Administrator’s discretionary authority under Section I.C.2 of this Article Two shall also extend to any outstanding Tandem or Stand-Alone Appreciation Rights.
A. In the event of an actual Change in Control transaction, each Award outstanding at that time under the Discretionary Grant Program but not otherwise fully vested and exercisable shall automatically accelerate and become exercisable immediately prior to the effective date of that Change in Control as to all of the shares of Common Stock at the time subject to such Award, unless (i) such Award is to be assumed by the successor corporation (or parent thereof) or is otherwise to continue in full force and effect pursuant to the terms of the Change in Control transaction or (ii) such Award is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing at the time on the Change in Control on any shares as to which the Award is not otherwise at that time vested and exercisable and provides for the subsequent vesting and payout of that spread in accordance with the same exercise/vesting schedule in effect for that Award or (iii) the acceleration of such Award is subject to other limitations imposed by the Plan Administrator.
B. All outstanding repurchase rights under the Discretionary Grant Program shall automatically terminate, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, immediately prior to the effective date of an actual Change in Control transaction, except to the extent: (i) those repurchase rights are to be assigned to the successor corporation (or parent thereof) or are otherwise to continue in full force and effect pursuant to the terms of the Change in Control transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator.
C. Immediately following the consummation of the Change in Control, all outstanding Awards under the Discretionary Grant Program shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change in Control transaction.
D. Each Award under the Discretionary Grant Program which is assumed in connection with a Change in Control or otherwise continued in effect shall be appropriately adjusted, immediately after such Change in Control, to apply to the number and class of securities into which the shares of Common Stock subject to that Award would have been converted in consummation of such Change in Control had those shares actually been outstanding at that time. Equitable adjustments to reflect such Change in Control shall also be made to (i) the exercise or base price per share in effect under each such assumed Award under the Discretionary Grant Program,provided the aggregate exercise or base price in effect for such securities shall remain the same, (ii) the maximum number and/or class of securities available for issuance over the remaining term of the Plan, (iii) the number and/or class of securities by which the share reserve will be reduced for each security issued without cash consideration under the Stock Issuance and Incentive Bonus Programs, (iv) the maximum number and/or class of securities which may be issued pursuant to Incentive Options granted under the Plan, (v) the maximum number and/or class of securities for which any one person may be granted Common Stock-denominated Awards under the Plan per calendar year, (vi) the number and/or class of securities and the exercise or base price per share in effect under each outstanding Award under the Discretionary Grant Program, (vii) the number and/or class of securities subject to each outstanding Award under the Stock Issuance Program and the cash consideration (if any) payable per share, (viii) the number and/or class of securities subject to each outstanding Award under the Incentive Bonus Program denominated in shares of Common Stock and (ix) the number and/or class of securities subject to the Corporation’s outstanding repurchase rights under the Plan and the repurchase price payable per share. To the extent the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control, the successor corporation may, in connection with the assumption or continuation of the outstanding Awards under the Discretionary Grant Program and subject to the Plan Administrator’s approval, substitute, for the securities underlying those assumed rights, one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change in Control transaction, provided such common stock is readily traded on an established U.S. securities exchange.
E. The Plan Administrator shall have the discretionary authority to structure one or more outstanding Awards under the Discretionary Grant Program so that those Awards shall, immediately prior to the effective date of an actual Change in Control transaction, vest and become exercisable as to all the shares of Common Stock at the time subject to those Awards and may be exercised as to any or all of those shares as fully vested shares of Common Stock, whether or not those Awards are to be assumed in the Change in Control transaction or otherwise continued in effect. In addition, the Plan Administrator
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shall have the discretionary authority to structure one or more of the Corporation’s repurchase rights under the Discretionary Grant Program so that those rights shall terminate immediately prior to the effective date of an actual Change in Control transaction, and the shares subject to those terminated rights shall thereupon vest in full.
F. The Plan Administrator shall have full power and authority to structure one or more outstanding Awards under the Discretionary Grant Program so that those Awards shall vest and become exercisable as to all the shares of Common Stock at the time subject to those Awards in the event the Optionee’s Service is subsequently terminated by reason of an Involuntary Termination within a designated period following the effective date of any Change in Control transaction in which those Awards do not otherwise fully accelerate. In addition, the Plan Administrator may structure one or more of the Corporation’s repurchase rights so that those rights shall immediately terminate with respect to any shares held by the Optionee at the time of such Involuntary Termination, and the shares subject to those terminated repurchase rights shall accordingly vest in full at that time.
G. The portion of any Incentive Option accelerated in connection with a Change in Control shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-statutory Option under the Federal tax laws.
A. The Corporation’s obligation to deliver shares of Common Stock or make a cash payment in connection with the grant, exercise, vesting or settlement of any Award under this Discretionary Grant Program shall be subject to the satisfaction of all applicable income and employment taxes, and Foreign Tax withholding requirements, any employer taxes passed through to the Optionee under Section V.B, V.C or V.D of this Article II and any other taxes required to be collected at the time of the grant, exercise, vesting or settlement of such Award. Accordingly, no shares shall be issued or cash payment made with respect to an outstanding Award under this Discretionary Grant Program until all such taxes have been collected.
B. Any Optionee who is subject to taxation in India shall be required to pay any fringe benefits or other tax payable by the Corporation (or the Parent or Subsidiary employing such Optionee) as a result of or with respect to the grant, vesting or exercise of an Award under the Discretionary Grant Program or the issuance of shares of Common Stock thereunder (the “Employer Option Taxes”). Optionee must pay such Employer Option Taxes at such times and in such form as determined by the Corporation (or such Parent or Subsidiary).
C. Any Optionee who is subject to taxation in the United Kingdom shall be liable for and pay all secondary Class 1 National Insurance Contributions which may be payable by the Corporation (or the Parent or Subsidiary employing such Optionee) arising in connection with the grant, vesting or exercise of an Award under the Discretionary Grant Program or the issuance of shares of Common Stock thereunder (the “Employer Option NIC”). The Optionee must pay such Employer Option NIC at such times and in such form as determined by the Corporation (or such Parent or Subsidiary).
D. Any Optionee subject to taxation in any jurisdiction shall pay any taxes or other amounts required to be paid by the Corporation (or any Parent or Subsidiary employing such Options) with respect to the grant, vesting or exercise of an Award under this Discretionary Grant Program or the issuance of shares of Common Stock thereunder, to the extent those taxes or other amounts are permitted to be passed through to the Optionee under applicable law. The Optionee must pay any such taxes or other amounts at such times and in such form as determined by the Corporation.
E. The Optionee shall enter into such additional agreements as may be required by the Corporation (or the Parent or Subsidiary employing Optionee) to effect the transfer of the Employer Option Taxes, Employer Option NIC and any other taxes or payments from the Corporation (or the Parent or Subsidiary employing Optionee) to the Optionee.
VI. | PROHIBITION ON REPRICING PROGRAMS |
The Plan Administrator shall not (i) implement any cancellation/regrant program pursuant to which outstanding options or stock appreciation rights under the Plan are cancelled and new options or stock appreciation rights are granted in replacement with a lower exercise price per share, (ii) cancel outstanding options or stock appreciation rights under the Plan with exercise prices per share in excess of the then current Fair Market Value per share of Common Stock for consideration payable in cash or equity securities of the Corporation or (iii) otherwise directly reduce the exercise price in effect for outstanding options or stock appreciation rights under the Plan, without in each such instance obtaining stockholder approval.
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ARTICLE THREE
STOCK ISSUANCE PROGRAM
Shares of Common Stock may be issued under the Stock Issuance Program, either as vested or unvested shares, through direct and immediate issuances. Shares of Common Stock may also be issued under the Stock Issuance Program pursuant to performance shares or restricted stock units which entitle the recipients to receive the shares underlying those Awards upon the attainment of designated Performance Goals or the satisfaction of specified Service requirements or upon the expiration of a designated time period following the vesting of those Awards. Each Award under the Stock Issuance Program shall be evidenced by an Award Agreement in the form approved by the Plan Administrator;provided, however, that each such Award Agreement shall comply with the terms specified below.
A.Issue Price/Consideration.
1. Shares of Common Stock may be issued under the Stock Issuance Program for any of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance:
(i) cash or check made payable to the Corporation,
(ii) past services rendered to the Corporation (or any Parent or Subsidiary); or
(iii) any other valid consideration under the State in which the Corporation is at the time incorporated.
2. However, for shares of Common Stock to be issued for cash consideration, the cash consideration payable per share shall be fixed by the Plan Administrator at the time of the Award, but in no event shall such cash consideration be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the Award date.
B.Vesting Provisions.
1. Shares of Common Stock issued under the Stock Issuance Program may, in the discretion of the Plan Administrator, be fully and immediately vested upon issuance as a bonus for Service rendered or may vest in one or more installments over the Participant’s period of Service and/or upon the attainment of specified performance objectives. The elements of the vesting schedule applicable to any unvested shares of Common Stock issued under the Stock Issuance Program shall be determined by the Plan Administrator and incorporated into the Award Agreement. Shares of Common Stock may also be issued under the Stock Issuance Program pursuant to performance shares or restricted stock units which entitle the recipients to receive the shares underlying those Awards upon the attainment of designated performance goals and/or the satisfaction of specified Service requirements or upon the expiration of a designated time period following the vesting of those Awards, including (without limitation) a deferred distribution date on or after termination of the Participant’s Service, or upon the occurrence of such other dates or events as determined by the Plan Administrator, subject to the requirements of Section 409A of the Code. Notwithstanding the foregoing, the following limitations shall apply with respect to the vesting schedules established for the Awards made under the Stock Issuance Program, subject to the acceleration provisions of Paragraphs B.7 and B.8 below and Section II of this Article Three:
(i) for any such Award which is to vest on the basis of Service, the minimum vesting period shall be three (3) years, with such vesting to occur in one or more installments over that period as determined by the Plan Administrator, but in no event more favorably than monthly; and
(ii) for any such Award which is to vest on the basis of performance objectives, the performance period shall have a duration of at least one year.
2. The Plan Administrator shall also have the discretionary authority, consistent with Code Section 162(m), to structure one or more Awards under the Stock Issuance Program so that the shares of Common Stock subject to those Awards shall vest (or vest and become issuable) upon the achievement of pre-established performance objectives based on one or more Performance Goals and measured over the performance period specified by the Plan Administrator at the time of the Award.
3. The Participant shall have full stockholder rights with respect to any shares of Common Stock issued to the Participant under the Stock Issuance Program, whether or not the Participant’s interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any dividends paid on such shares, subject to any applicable vesting requirements. The Participant shall not have any stockholder rights with respect to the shares of Common Stock subject to a performance share or restricted stock unit Award until that Award vests and the shares of Common Stock
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are actually issued thereunder. However, dividend-equivalent units may be paid or credited, either in cash or in actual or phantom shares of Common Stock, on outstanding performance share or restricted stock unit Awards, subject to such terms and conditions as the Plan Administrator may deem appropriate.
4. Any new, substituted or additional securities or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to the Participant’s unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares, spin-off transaction, extraordinary dividend or distribution or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration shall be issued subject to (i) the same vesting requirements applicable to the Participant’s unvested shares of Common Stock and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate. Equitable adjustments to reflect each such transaction shall also be made by the Plan Administrator to the repurchase price payable per share by the Corporation for any unvested securities subject to its existing repurchase rights under the Plan; provided the aggregate repurchase price shall in each instance remain the same.
5. Should the Participant cease to remain in Service while holding one or more unvested shares of Common Stock issued under the Stock Issuance Program or should the performance objectives not be attained with respect to one or more such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further stockholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash equivalent, the Corporation shall repay to the Participant thelower of (i) the cash consideration paid for the surrendered shares or (ii) the Fair Market Value of those shares at the time of cancellation.
6. The Plan Administrator may in its discretion waive the surrender and cancellation of one or more unvested shares of Common Stock which would otherwise occur upon the cessation of the Participant’s Service or the non-attainment of the performance objectives applicable to those shares. Any such waiver shall result in the immediate vesting of the Participant’s interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participant’s cessation of Service or the attainment or non-attainment of the applicable performance objectives. However, no vesting requirements tied to the attainment of performance objectives may be waived with respect to shares which were intended at the time of issuance to qualify as performance-based compensation under Code Section 162(m), except as otherwise provided in Section II of this Article Three.
7. Outstanding performance shares or restricted stock units under the Stock Issuance Program shall automatically terminate, and no shares of Common Stock shall actually be issued in satisfaction of those Awards, if the performance goals or Service requirements established for those Awards are not attained or satisfied. The Plan Administrator, however, shall have the discretionary authority to issue vested shares of Common Stock under one or more outstanding Awards of performance shares or restricted stock units as to which the designated performance goals or Service requirements have not been attained or satisfied. However, no vesting requirements tied to the attainment of performance goals may be waived with respect to Awards which were intended, at the time those Awards were made, to qualify as performance-based compensation under Code Section 162(m), except as otherwise provided in Section II of this Article Three.
8. The following additional requirements shall be in effect for any performance shares awarded under this Article Three:
(i) At the end of the performance period, the Plan Administrator shall determine and confirm the actual level of attainment for each performance objective and the extent to which the performance shares awarded for that period are to vest and become payable based on the attained performance levels.
(ii) The performance shares which so vest shall be paid as soon as practicable following the end of the performance period, unless such payment is to be deferred for the period specified by the Plan Administrator at the time the performance shares are initially awarded or the period designated by the Participant pursuant to a timely deferral election in accordance with the applicable requirements of Code Section 409A.
(iii) Performance shares may be paid in (i) cash, (ii) shares of Common Stock or (iii) any combination of cash and shares of Common Stock, as determined by the Plan Administrator in its sole discretion. Unless otherwise specified in the applicable Award Agreement, the distribution shall be made in shares of Common Stock.
(iv) Performance shares may also be structured so that the shares are convertible into shares of Common Stock, but the rate at which each performance share is to so convert shall be based on the attained level of performance for each applicable performance objective.
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A. Each outstanding Award under the Stock Issuance Program may be assumed in connection with a Change in Control or otherwise continued in effect. Each Award so assumed or continued in effect shall be adjusted immediately after the consummation of that Change in Control so as to apply to the number and class of securities into which the shares of Common Stock subject to that Award immediately prior to the Change in Control would have been converted in consummation of such Change in Control had those shares actually been outstanding at that time, and appropriate adjustments shall also be made to the cash consideration (if any) payable per share thereunder, provided the aggregate consideration shall remain the same. To the extent the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control, the successor corporation may, in connection with the assumption or continuation of the outstanding Awards and subject to the Plan Administrator’s approval, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change in Control transaction, provided such common stock is readily traded on an established U.S. securities exchange.
B. If an Award under the Stock Issuance Program is not assumed or otherwise continued in effect or replaced with a cash incentive program of the successor corporation which preserves the Fair Market Value of the underlying shares of Common Stock at the time of the Change in Control and provides for the subsequent vesting and payout of that value in accordance with the same vesting and issuance schedule in effect for those shares at the time of such Change in Control, then such Award shall vest, and the shares of Common Stock subject to that Award shall be issued as fully-vested shares, immediately prior to the effective date of the Change in Control or at such other time as set forth in the applicable Award Agreement.
C. The Plan Administrator shall have the discretionary authority to structure one or more unvested Awards under the Stock Issuance Program so that the shares of Common Stock subject to those Awards shall automatically vest (or vest and become issuable) in whole or in part on the effective date of an actual Change in Control transaction or upon the subsequent termination of the Participant’s Service by reason of an Involuntary Termination within a designated period following the effective date of that Change in Control transaction.
D. The Plan Administrator’s authority under Paragraph C of this Section II shall also extend to any Awards intended to qualify as performance-based compensation under Code Section 162(m), even though the automatic vesting of those Awards may result in their loss of performance-based status under Code Section 162(m).
E. All of the Corporation’s outstanding repurchase rights under the Stock Issuance Program shall terminate automatically, and all the shares of Common Stock subject to those terminated rights shall vest in full, immediately prior to the effective date of an actual Change in Control transaction, except to the extent (i) the Awards to which those repurchase rights are to be assumed by the successor corporation (or parent thereof) or are otherwise to continue in full force and effect pursuant to the terms of the Change in Control transaction, (ii) those Awards are to be replaced with a cash incentive program of the successor corporation which preserves, for each such Award, the Fair Market Value of the underlying shares of Common Stock at the time of the Change in Control and provides for the subsequent vesting and payout of that value in accordance with the same vesting schedule in effect for those shares at the time of such Change in Control or (iii) such accelerated vesting is precluded by other limitations imposed in the Stock Issuance Agreement.
III. | COLLECTION OF WITHHOLDING TAXES |
A. The Corporation (or the Parent or Subsidiary employing Participant) shall collect the employee portion of the U.S. FICA taxes (Social Security and Medicare) with respect to the shares of Common Stock subject to an Award issued under this Stock Issuance Program at the time those shares vest. Such taxes shall be based on the Fair Market Value of such shares on their vesting date. The Corporation (or the Parent or Subsidiary employing Participant) shall also collect the employee portion of the FICA taxes with respect to any dividend equivalents payable pursuant to the Award at the time those dividend equivalents vest. Such taxes shall be based on the cash amount and the fair market value of any other property underlying the dividend equivalents on the vesting date. Unless the Participant delivers a separate check payable to the Corporation in the amount of the FICA taxes required to be withheld from the Participant, the Corporation shall withhold those taxes from the Participant’s wages. However, if the Participant is at the time an executive officer of the Corporation, then such withholding taxes must be collected from the Participant through delivery of his or her separate check not later than the vesting date. Notwithstanding the foregoing, for any shares of Common Stock to be issued immediately upon vesting or for any divided equivalents to be paid immediately upon vesting, the employee portion of the applicable FICA taxes shall be collected in the
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same manner as the federal, state and local income taxes are to be withheld under Section III.B below. The foregoing tax collection provisions shall also be applicable to the employee portion of any Foreign Taxes that become due and payable upon the vesting of the shares of Common Stock subject to an Award issued under this Stock Issuance Program.
B. The Corporation shall collect the U.S. federal, state and local income taxes and/or all applicable Foreign Taxes required to be withheld with respect to the distribution of the phantom dividend equivalents to the Participant by withholding a portion of that distribution equal to the amount of those taxes, with the cash portion of the distribution to be the first portion so withheld.
C. Until such time as the Corporation provides the Participant with written or electronic notice to the contrary, the Corporation shall collect the U.S. federal, state and local income taxes and/or all applicable Foreign Taxes required to be withheld with respect to the issuance of the vested shares of Common Stock subject to the Award outstanding under this Stock Issuance Program through an automatic share withholding procedure pursuant to which the Corporation will withhold, at the time of such issuance, the number of shares (rounded up to the nearest whole share) with a Fair Market Value (measured as of the issuance date) equal to the amount of those taxes (the “Share Withholding Method”); provided, however, that the amount of any shares so withheld shall not exceed the amount necessary to satisfy the Corporation’s required tax withholding obligations using the minimum statutory withholding rates for federal and state tax purposes that are applicable to supplemental taxable income. Participant shall be notified in writing or electronically in the event such Share Withholding Method is no longer available.
D. Should any shares of Common Stock subject to an Award be distributed at time the Share Withholding Method is not available, then the U.S. federal, state and local income taxes and/or all applicable Foreign Taxes required to be withheld with respect to those shares shall be collected from the Participant through either of the following alternatives:
(i) the Participant’s delivery of his or her separate check payable to the Corporation in the amount of such taxes, or
(ii) the use of the proceeds from a next-day sale of the shares issued to the Participant, provided and only if (i) such a sale is permissible under the Corporation’s insider trading policies governing the sale of Common Stock, (ii) the Participant makes an irrevocable commitment, on or before the issuance of the vested shares, to effect such sale of the shares and (iii) the transaction is not otherwise deemed to constitute a prohibited loan under Section 402 of the Sarbanes-Oxley Act of 2002.
E. Any Participant who is subject to taxation in India shall be required to pay any fringe benefit or other tax payable by the Corporation (or the Parent or Subsidiary employing such Participant) as a result of or with respect to the grant, vesting or settlement of an Award under this Stock Issuance Program or the issuance of shares of Common Stock thereunder (the “Employer Issuance Taxes”) Until such time as the Corporation provides the Participant with written or electronic notice to the contrary, the Employer Issuance Taxes shall be collected through the Share Withholding Method.
F. Any Participant who is subject to taxation in the United Kingdom shall be liable for and pay all secondary Class 1 National Insurance Contributions which may be payable by the Corporation (or any Parent or Subsidiary employing or retaining or previously employing or retaining the Participant) arising in connection with the Award or the issuance of shares of Common Stock thereunder (the “Employer Issuance NIC”). Until such time as the Corporation provides the Participant with written or electronic notice to the contrary, the Employer Issuance NIC shall be collected through the Share Withholding Method.
G. Any Participant subject to taxation in any jurisdiction shall pay any taxes or other amounts that are required by the laws of that jurisdiction to be paid by the Corporation (or any Parent or Subsidiary employing such Participant) with respect to the grant, vesting or settlement of an Award under this Stock Issuance Program or the issuance of shares of Common Stock thereunder, to the extent those taxes or other amounts are permitted to be passed through to the Participant under applicable law. Until such time as the Corporation provides the Participant with written or electronic notice to the contrary, such taxes or other amounts shall be collected through the Share Withholding Method.
H. The Participant shall enter into such additional agreements as may be required by the Corporation (or the Parent or Subsidiary employing Participant) to effect the transfer of the Employer Issuance Taxes, Employer Issuance NIC and any other taxes or payments from the Corporation (or the Parent or Subsidiary employing Participant) to the Participant.
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ARTICLE FOUR
INCENTIVE BONUS PROGRAM
I. INCENTIVE BONUS TERMS
The Plan Administrator shall have full power and authority to implement one or more of the following incentive bonus programs under the Plan:
(i) cash bonus awards (“Cash Awards”),
(ii) performance unit awards (“Performance Unit Awards”), and
(iii) dividend equivalent rights (“DER Awards”).
A.Cash Awards. The Plan Administrator shall have the discretionary authority under the Plan to make Cash Awards which are to vest in one or more installments over the Participant’s continued Service with the Corporation or upon the attainment of specified performance goals. Each such Cash Award shall be evidenced by an Award Agreement in the form approved by the Plan Administrator;provided however, that each such Award Agreement shall comply with the terms specified below.
1. The elements of the vesting schedule applicable to each Cash Award shall be determined by the Plan Administrator and incorporated into the Award Agreement.
2. The Plan Administrator shall also have the discretionary authority, consistent with Code Section 162(m), to structure one or more Cash Awards so that those Awards shall vest upon the achievement of pre-established corporate performance objectives based upon one or more Performance Goals.
3. Outstanding Cash Awards shall automatically terminate, and no cash payment or other consideration shall be due the holders of those Awards, if the performance goals or Service requirements established for the Awards are not attained or satisfied. The Plan Administrator may in its discretion waive the cancellation and termination of one or more unvested Cash Awards which would otherwise occur upon the cessation of the Participant’s Service or the non-attainment of the performance objectives applicable to those Awards. Any such waiver shall result in the immediate vesting of the Participant’s interest in the Cash Award as to which the waiver applies. Such wavier may be effected at any time, whether before or after the Participant’s cessation of Service or the attainment or non-attainment of the applicable performance objectives. However, no vesting requirements tied to the attainment of performance goals may be waived with respect to awards which were intended, at the time those awards were granted, to qualify as performance-based compensation under Code Section 162(m), except as otherwise provided in Section II of this Article Four.
4. Cash Awards which become due and payable following the attainment of the applicable performance goals or satisfaction of the applicable Service requirement (or the waiver of such goals or Service requirement) may be paid in (i) cash, (ii) shares of Common Stock valued at Fair Market Value on the payment date or (iii) a combination of cash and shares of Common Stock, as the Plan Administrator shall determine in its sole discretion.
B.Performance Unit Awards. The Plan Administrator shall have the discretionary authority to make Performance Unit Awards in accordance with the terms of this Article Four. Each such Performance Unit Award shall be evidenced by an Award Agreement in the form approved by the Plan Administrator;provided however, that each such Award Agreement shall comply with the terms specified below.
1. A Performance Unit shall represent a participating interest in a special bonus pool tied to the attainment of pre-established performance objectives based on one or more Performance Goals. The amount of the bonus pool may vary with the level at which the applicable performance objectives are attained, and the value of each Performance Unit which becomes due and payable upon the attained level of performance shall be determined by dividing the amount of the resulting bonus pool (if any) by the total number of Performance Units issued and outstanding at the completion of the applicable performance period.
2. Performance Units may also be structured to include a Service requirement which the Participant must satisfy following the attainment of the applicable performance objectives in order to vest in those Performance Units.
3. Performance Units which become due and payable following the attainment of the applicable performance objectives and the satisfaction of any applicable Service requirement may be paid in (i) cash, (ii) shares of Common Stock valued at Fair Market Value on the payment date or (iii) a combination of cash and shares of Common Stock, as determined by the Plan Administrator in its sole discretion and set forth in the Award Agreement.
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C.Dividend Equivalent Right (“DER”) Awards. The Plan Administrator shall have the discretionary authority to make DER Awards in accordance with the terms of this Article Four. Each such DER Award shall be evidenced by an Award Agreement in the form approved by the Plan Administrator;provided however, that each Award Agreement shall comply with the terms specified below.
1. The DER Awards may be made as stand-alone awards or in tandem with other Awards made under the Plan. The term of each such DER Award shall be established by the Plan Administrator at the time of grant, but no DER Award shall have a term in excess of seven (7) years.
2. Each DER shall represent the right to receive the economic equivalent of each dividend or distribution, whether in cash, securities or other property (other than shares of Common Stock), which is made per issued and outstanding share of Common Stock during the term the DER remains outstanding. A special account shall be maintained on the books of the Corporation for each Participant to whom a DER Award is made, and that account shall be credited per DER with each such dividend or distribution made per issued and outstanding share of Common Stock during the term of that DER remains outstanding.
3. Payment of the amounts credited to such book account may be made to the Participant either concurrently with the actual dividend or distribution made per issued and outstanding share of Common Stock or may be deferred for a period specified by the Plan Administrator at the time the DER Award is initially made or designated by the Participant pursuant to a time deferral election made in accordance with the requirements of Code Section 409A.
4. Payment may be paid in (i) cash, (ii) shares of Common Stock or (iii) a combination of cash and shares of Common Stock, as determined by the Plan Administrator in its sole discretion and set forth in the Award Agreement. If payment is to be made in the form of Common Stock, the number of shares of Common Stock into which the cash dividend or distribution amounts are to be converted for purposes of the Participant’s book account may be based on the Fair Market Value per share of Common Stock on the date of conversion, a prior date or an average of the Fair Market Value per share of Common Stock over a designated period, as the Plan Administrator shall determine in its sole discretion.
A. The Plan Administrator shall have the discretionary authority to structure one or more Awards under this Incentive Bonus Program so that those Awards shall automatically vest in whole or in part immediately prior to the effective date of an actual Change in Control transaction or upon the subsequent termination of the Participant’s Service by reason of an Involuntary Termination within a designated period following the effective date of such Change in Control.
B. The Plan Administrator’s authority under Paragraph A of this Section II shall also extend to any performance bonus awards intended to qualify as performance-based compensation under Code Section 162(m), even though the automatic vesting of those awards may result in their loss of performance-based status under Code Section 162(m).
The Corporation’s obligation to deliver shares of Common Stock or make a cash payment in settlement of any Award under this Incentive Bonus Program shall be subject to the satisfaction of all applicable income, employment and Foreign Tax withholding requirements, any employer taxes passed through to the Optionee under Article Five, Section II and any other taxes required to be collected at the time of the issuance, vesting or settlement of such Award. Accordingly, no shares shall be issued or cash payment made with respect to an outstanding Award under this Incentive Bonus Program until such all such taxes have been collected.
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ARTICLE FIVE
MISCELLANEOUS
A. The Plan Administrator may, in its sole discretion, structure one or more Awards under the Stock Issuance or Incentive Bonus Programs so that the Participants may be provided with an election to defer the compensation associated with those Awards for federal income tax purposes. Any such deferral opportunity shall comply with all applicable requirements of Code Section 409A.
B. To the extent the Corporation maintains one or more separate non-qualified deferred compensation arrangements which allow the participants the opportunity to make notional investments of their deferred account balances in shares of Common Stock, the Plan Administrator may authorize the share reserve under the Plan to serve as the source of any shares of Common Stock that become payable under those deferred compensation arrangements. In such event, the share reserve under the Plan shall be reduced on a share-for-one share basis for each share of Common Stock issued under the Plan in settlement of the deferred compensation owed under those separate arrangements.
C. Notwithstanding any provision to the contrary in this Plan or any outstanding Award Agreement, to the extent any Award under this Plan may be deemed to create a deferred compensation arrangement under Section 409A of the Code, then the following limitations shall apply to such Award and the applicable Award Agreement (if not otherwise expressly provided therein):
— No shares of Common Stock or other amounts which become issuable or distributable under such Award Agreement by reason of the Participant’s cessation of Service shall actually be issued or distributed to such Participant until the date of his or her Separation from Service (as determined in accordance with the provisions of Section 1.409A-1(h) of the Treasury Regulations) or as soon thereafter as administratively practicable, but in no event later than thelater of (i) the close of the calendar year in which such Separation from Service occurs and (ii) the fifteenth day of the third calendar month following the date of such Separation from Service.
— Notwithstanding the foregoing paragraph, shares of Common Stock or other amounts which become issuable or distributable under such Award Agreement by reason of the Participant’s cessation of Service shall actually be issued or distributed to such Participant prior to theearlier of (i) the first day of the seventh (7th) month following the date of the Participant’s Separation from Service and (ii) the date of Participant’s death, if he or she is deemed at the time of such Separation from Service to be a specified employee under Section 1.409A-1(i) of the Treasury Regulations as determined by the Plan Administrator in accordance with consistent and uniform standards applied to all other Code Section 409A arrangements of the Corporation, and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Code Section 409A(a)(2). The deferred shares or other distributable amount shall be issued or distributed in a lump sum on the first day of the seventh (7th) month following the date of the Participant’s Separation from Service or (if earlier) the first day of the month immediately following the date the Corporation receives proof of his or her death.
A. The Corporation’s obligation to deliver shares of Common Stock upon the issuance, exercise, vesting or settlement of an Award under the Plan shall be subject to the satisfaction of all applicable income, employment and Foreign Tax withholding requirements, and any employer taxes passed through to the Optionee pursuant to the terms of the Plan or the applicable Award Agreement.
B. The Plan Administrator may, in its discretion, structure one or more Awards under the Plan so that all applicable federal, state, local and Foreign Taxes (including, without limitation, any employer fringe benefit or other taxes permitted to be passed through to the employee under applicable law) incurred in connection with the issuance, exercise, vesting or settlement of those Awards or the issuance of shares of Common Stock thereunder shall automatically be collected by withholding, from the shares of Common Stock otherwise issuable upon the issuance, exercise, vesting or settlement of such Awards or the issuance of Common Stock thereunder, the number of shares (rounded up to the nearest whole share) with an aggregate Fair Market Value equal to the dollar amount of those taxes. The shares of Common Stock so withheld shall reduce the number of shares of Common Stock authorized for issuance under the Plan.
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Unvested shares may, in the Plan Administrator’s discretion, be held in escrow by the Corporation until the Participant’s interest in such shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing those unvested shares.
IV. | EFFECTIVE DATE AND TERM OF THE PLAN |
A. The Plan shall become effective on the Plan Effective Date.
B. The Plan shall serve as the successor to each of the Predecessor Plans, and no further option grants or unvested share issuances shall be made under the Predecessor Plans if this Plan is approved by the stockholders at the 2009 Annual Meeting. Such stockholder approval shall not affect the option grants and unvested share awards outstanding under the Predecessor Plans at the time of the 2009 Annual Meeting, and those option grants and unvested share awards shall continue in full force and effect in accordance with their terms.
C. The Plan shall terminate upon theearliest to occur of (i) April 15, 2019, (ii) the date on which all shares available for issuance under the Plan shall have been issued as fully vested shares or (iii) the termination of all outstanding Awards in connection with a Change in Control. Should the Plan terminate on April 15, 2019, then all Awards outstanding at that time shall continue to have force and effect in accordance with the provisions of the documents evidencing those Awards.
A. The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects;provided, however, that stockholder approval shall be required for any amendment to the Plan which materially increases the number of shares of Common Stock authorized for issuance under the Plan (other than pursuant to Section V.E of Article One), materially increases the benefits accruing to Optionees or Participants, materially expands the class of individuals eligible to participate in the Plan, expands the types of awards which may be made under the Plan or extends the term of the Plan or to the extent such stockholder approval may otherwise required under applicable law or regulation or pursuant to the listing standards of the Stock Exchange on which the Common Stock is at the time primarily traded. However, no such amendment or modification shall adversely affect the rights and obligations with respect to Awards at the time outstanding under the Plan unless the Optionee or the Participant consents to such amendment or modification.
B. The Compensation Committee shall have the discretionary authority to adopt and implement from time to time such addenda or subplans to the Plan as it may deem necessary in order to bring the Plan into compliance with applicable laws and regulations of any foreign jurisdictions in which grants or awards are to be made under the Plan and/or to obtain favorable tax treatment in those foreign jurisdictions for the individuals to whom the grants or awards are made.
C. Awards may be made under the Plan that involve shares of Common Stock in excess of the number of shares then available for issuance under the Plan, provided no shares shall actually be issued pursuant to those Awards until the number of shares of Common Stock available for issuance under the Plan is sufficiently increased by stockholder approval of an amendment of the Plan authorizing such increase. If such stockholder approval is not obtained within twelve (12) months after the date the first excess Award is made, then all Awards granted on the basis of such excess shares shall terminate and cease to be outstanding.
Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes.
A. The implementation of the Plan, the granting of any Award under the Plan and the issuance of any shares of Common Stock in connection with the issuance, exercise or vesting of any Award under the Plan shall be subject to the Corporation’s procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the Awards made under the Plan and the shares of Common Stock issuable pursuant to those Awards.
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B. No shares of Common Stock or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable requirements of applicable securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any Stock Exchange on which Common Stock is then listed for trading.
VIII. | NO EMPLOYMENT/SERVICE RIGHTS |
Nothing in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, to terminate such person’s Service at any time for any reason, with or without cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A.Annual Meeting shall mean the 2009 annual meeting of the Corporation’s stockholders.
B.Award shall mean any of the following awards authorized for issuance or grant under the Plan: stock options, stock appreciation rights, direct stock issuances, restricted stock or restricted stock unit awards, performance shares, performance units, dividend-equivalent rights and cash incentive awards.
C.Award Agreement shall mean the agreement(s) between the Corporation and the Optionee or Participant evidencing a particular Award made to that individual under the Plan, as such agreement(s) may be in effect from time to time
D.Board shall mean the Corporation’s Board of Directors.
E.Cause shall, with respect to each Award made under the Plan, be defined in accordance with the following provisions:
— Cause shall have the meaning assigned to such term in the Award Agreement for the particular Award or in any other agreement incorporated by reference into the Award Agreement for purposes of defining such term.
— In the absence of any other Cause definition in the Award Agreement for a particular Award (or in any other agreement incorporated by reference into the Award Agreement), an individual’s termination of Service shall be deemed to be for Cause if such termination occurs by reason of (i) his or her continuing failure to perform the duties and functions assigned or delegated to such individual by the Corporation (or any Parent or Subsidiary for whom such individual renders Service), (ii) his or her failure to observe the material policies of the Corporation applicable to individuals in Service, (iii) his or her commission of any felony or (iv) his or her commission of any misdemeanor involving moral turpitude.
F.Change in Control shall, with respect to each Award made under the Plan, be defined in accordance with the following provisions:
— Change in Control shall have the meaning assigned to such term in the Award Agreement for the particular Award or in any other agreement incorporated by reference into the Award Agreement for purposes of defining such term.
— In the absence of any other Change in Control definition in the Award Agreement (or in any other agreement incorporated by reference into the Award Agreement), Change in Control shall mean a change in ownership or control of the Corporation effected through any of the following transactions:
(i) consummation of a merger, consolidation or other reorganization approved by the Corporation’s stockholders,unless securities representing fifty percent (50%) or more of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly, by the persons who beneficially owned the Corporation’s outstanding voting securities immediately prior to such transaction,
(ii) a sale, transfer or other disposition of all or substantially all of the Corporation’s assets,
(iii) the closing of any transaction or series of related transactions pursuant to which any person or any group of persons comprising a “group” within the meaning of Rule 13d-5(b)(1) of the 1934 Act (other than (A) the Corporation or (B) a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with, the Corporation) acquires directly or indirectly (whether as a result of a single acquisition or by reason of one or more acquisitions within the twelve (12)-month period ending with the most recent acquisition) the beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing (or convertible into or exercisable for securities possessing) more than thirty-five percent (35%) of the total combined voting power of the Corporation’s securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding immediately after the consummation of such acquisition or series of related acquisitions, whether any such acquisition involves a direct issuance from the Corporation or the acquisition of outstanding securities held by one or more of the Corporation’s existing stockholders, or
(iv) a change in the composition of the Board over a period of twelve (12) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such
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period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination.
G.Code shall mean the Internal Revenue Code of 1986, as amended.
H.Common Stock shall mean the Corporation’s Class A common stock, with a par value of $.01 per share.
I.Compensation Committee shall mean the Compensation Committee of the Board comprised of two (2) or more non-employee Board members.
J.Corporation shall mean Cognizant Technology Solutions Corporation, a Delaware corporation, and any corporate successor to all or substantially all of the assets or voting stock of Cognizant Technology Solutions Corporation which has by appropriate action assumed the Plan.
K.Discretionary Grant Program shall mean the discretionary grant program in effect under Article Two of the Plan pursuant to which stock options and stock appreciation rights may be granted to one or more eligible individuals.
L.Employee shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary, whether now existing or subsequently established), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.
M.Exercise Date shall mean the date on which the Corporation shall have received written or electronic notice of the option exercise.
N.Fair Market Value per share of Common Stock on any relevant date shall be the closing selling price per share of Common Stock at the close of regular hours trading (i.e., before after-hours trading begins) on date on question on the Stock Exchange serving as the primary market for the Common Stock, as such price is reported by the National Association of Securities Dealers (if primarily traded on the Nasdaq Global or Global Select Market) or as officially quoted in the composite tape of transactions on any other Stock Exchange on which the Common Stock is then primarily traded. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. Notwithstanding the foregoing, should a different method of Fair Market Value determination be required by applicable law or regulation of the foreign jurisdiction in which the Award is to be made under the Plan, then the Fair Market Value per share applicable to such Award shall be determined in accordance with the law or regulations of the foreign jurisdiction in which that Award is made.
O.Foreign Taxes shall, for purposes of tax withholding by the Corporation (or any Parent or Subsidiary employing the Optionee or Participant), mean any income tax, employment tax, social insurance, payroll tax, contributions, payment on account obligations or other amounts required to be withheld by the Corporation (such Parent or Subsidiary) in connection with the issuance, exercise, vesting or settlement of Award or the issuance of shares of Common Stock thereunder.
P.Good Reason shall, with respect to each Award made under the Plan, be defined in accordance with the following provisions:
— Good Reason shall have the meaning assigned to such term in the Award Agreement for the particular Award or in any other agreement incorporated by reference into the Award Agreement for purposes of defining such term.
— In the absence of any other Good Reason definition in the Award Agreement (or in any other agreement incorporated by reference into the Award Agreement), Good Reason shall mean an individual’s voluntary resignation following (A) a change in his or her position with the Corporation (or any Parent or Subsidiary) which materially reduces his or her duties and responsibilities, (B) a change in his or her reporting responsibilities so that such individual is required to report to a person whose duties, responsibilities and authority are materially less that those of the person to whom such individual previously reported, (C) a material reduction in his or her aggregate level of compensation (including base salary, fringe benefits and target bonus under any corporate-performance based bonus or incentive programs), with a reduction of more than fifteen percent (15%) to be deemed material for such purpose, or (D) a relocation of such individual’s place of employment by more than fifty (50) miles,provided, however, that such individual’s resignation for any of the foregoing reasons shall constitute an a resignation for Good Reason only if the following requirements are satisfied: (x) such individual provides written notice of the clause (A), (B) or (C) event to the Corporation (or the Parent or Subsidiary employer) within sixty (60) days after the occurrence of that event, (y) the Corporation (or the Parent or Subsidiary employer) fails to take appropriate remedial action to remedy such eventwww.cognizant.com
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within thirty (30) days after receipt of such notice and (z) such individual resigns from his or her employment with the Corporation (or the Parent or Subsidiary employer) within one hundred (120) days following the initial occurrence of the clause (A), (B) or (C) event.
Q.Incentive Bonus Program shall mean the incentive bonus program in effect under Article Four of the Plan.
R.Incentive Option shall mean an option which satisfies the requirements of Code Section 422.
S.Involuntary Termination shall mean the termination of the Service of any individual which occurs by reason of:
(i) such individual’s involuntary dismissal or discharge by the Corporation (or any Parent or Subsidiary) for reasons other than Cause or Misconduct, or
(ii) such individual’s voluntary resignation for Good Reason.
T.Misconduct shall mean the commission of any act of fraud, embezzlement or dishonesty by a recipient of an Award, any unauthorized use or disclosure by such individual of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such individual adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not in any way preclude or restrict the right of the Corporation (or any Parent or Subsidiary) to discharge or dismiss such individual or any other person in the Service of the Corporation (or any Parent or Subsidiary) for any other acts or omissions, but such other acts or omissions shall not be deemed for purposes of the Plan to constitute grounds for termination for Misconduct.
U.1934 Act shall mean the Securities Exchange Act of 1934, as amended.
V.Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422.
W.Optionee shall mean any person to whom an option or stock appreciation right is granted under the Discretionary Grant Program.
X.Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
Y.Participant shall mean any person who is issued (i) shares of Common Stock, restricted stock units, performance shares, performance units or other stock-based awards under the Stock Issuance Program or (ii) an incentive bonus award under the Incentive Bonus Program.
Z.Permanent Disability or Permanently Disabled shall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. The determination of whether an Optionee or Participant has become Permanently Disabled shall be made by the Plan Administrator based upon such medical or other evidence as it may deem necessary and appropriate, and such determination shall be conclusive and binding upon the Optionee or Participant.
AA.Performance Goals shall mean any of the following performance criteria upon which the vesting of one or more Awards under the Plan may be based: (i) revenue or revenue growth, (ii) operating or net income, (iii) operating or net income before charges for stock-based compensation and any taxes or fringe benefits incurred by the Corporation (or any Parent or Subsidiary) in settlement of stock-based awards, (iv) operating or net income before interest, taxes, depreciation, amortization and/or charges for stock-based compensation and any taxes or fringe benefits incurred by the Corporation (or any Parent or Subsidiary) in settlement of stock-based awards, (v) gross, operating or net profit margin, (vi) gross, operating or net profit margin before charges for stock-based compensation and any taxes or fringe benefits incurred by the Corporation (or any Parent or Subsidiary) in settlement of stock-based awards, (vii) earnings per share, (viii) return on assets, capital or stockholder equity, (ix) total stockholder return, (x) cash flow, (xi) measures in terms of days sales outstanding or accounts receivable outstanding, (xii) working capital, (xiii) market share, (xiv) increases in customer base, (xv) cost reductions or other expense control objectives, (xvi) market price of the Common Stock, whether measured in absolute terms or in relationship to earnings or operating income or in relation to various stock market or industry indicies, (xvii) budget objectives, (xviii) working capital, (xix) mergers, acquisitions or divestitures, (xx) measures of customer satisfaction or (xxi) economic value added, models. Each performance criteria may be based upon the attainment of specified levels of the Corporation’s performance under one or more of the measures described above relative to the performance of other entities
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and may also be based on the performance of any of the Corporation’s business units or divisions or any Parent or Subsidiary. Each applicable Performance Goal may include a minimum threshold level of performance below which no Award will be earned, levels of performance at which specified portions of an Award will be earned and a maximum level of performance at which an Award will be fully earned. Each applicable Performance Goal may be structured at the time of the Award to provide for appropriate adjustment for one or more of the following items: (A) asset impairments or write-downs; (B) litigation judgments or verdicts and expenses and settlement costs and expenses; (C) the effect of changes in tax laws or regulations, accounting principles or other applicable laws, regulations or provisions affecting reported results; (D) accruals for reorganization and restructuring programs; (E) any extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Corporation’s annual report to shareholders for the applicable year; (F) the operations of any business acquired by the Corporation or any Parent or Subsidiary or of any joint venture in which the Corporation or any Parent or Subsidiary participates; (G) the divestiture of one or more business operations or the assets thereof; (H) the costs incurred in connection with such acquisitions or divestitures or (I) non-operating foreign exchange gains or losses.
BB.Plan shall mean the Corporation’s 2009 Incentive Compensation Plan, as set forth in this document.
CC.Plan Administrator shall mean the particular entity, whether the Compensation Committee (or subcommittee thereof), the Board, the Special Award Committee or the Secondary Board Committee, which is authorized to administer the Discretionary Grant and Stock Issuance Programs with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under the Plan with respect to the persons under its jurisdiction.
DD.Plan Effective Date shall mean the June 5, 2009 date on which the Plan is approved by the stockholders at the 2009 Annual Meeting.
EE.Predecessor Plans shall mean (i) the Corporation’s Amended and Restated 1999 Incentive Compensation Plan, (ii) the Corporation’s Amended and Restated Non-Employee Directors’ Stock Option Plan and (iii) the Corporation’s Amended and Restated Key Employees’ Stock Option Plan, as each such plan is in effect immediately prior to the 2009 Annual Meeting.
FF.Secondary Board Committee shall mean a committee of one or more Board members appointed by the Board to administer the Plan with respect to eligible persons other than Section 16 Insiders.
GG.Section 16 Insider shall mean an officer or director of the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act.
HH. Service shall mean the performance of services for the Corporation (or any Parent or Subsidiary, whether now existing or subsequently established) by a person in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant or stock issuance. For purposes of the Plan, an Optionee or Participant shall be deemed to cease Service immediately upon the occurrence of the either of the following events: (i) the Optionee or Participant no longer performs services in any of the foregoing capacities for the Corporation or any Parent or Subsidiary or (ii) the entity for which the Optionee or Participant is performing such services ceases to remain a Parent or Subsidiary of the Corporation, even though the Optionee or Participant may subsequently continue to perform services for that entity. Service shall be deemed to continue during a period of military leave, sick leave or other personal leave approved by the Corporation for which the Optionee or Participant is provided with a right tore-employment following such leave;provided, however, that should such leave of absence exceed three (3) months, then for purposes of determining the period within which an Incentive Option may be exercised as such under the federal tax laws, the Optionee’s Service shall be deemed to cease on the first day immediately following the expiration of such three (3)-month period, unless Optionee is provided with the right to return to Service following such leave either by statute or by written contract. Service credit shall be given for vesting purposes for any period the Optionee or Participant is on a leave of absence to the extent (i) the leave of absence does not exceed three (3) months and the Optionee or Participant is provided with a right to re-employment following such leave, (ii) required by law, or (iii) expressly authorized by the Plan Administrator or by the Corporation’s written policy on leaves of absence, as in effect from time to time.
II.Special Award Committee shall mean a committee of one or more executive officers appointed by the Board to administer the Plan with respect to eligible employees other than members of such committee and Section 16 Insiders.
JJ.Stock Exchange shall mean the American Stock Exchange, the Nasdaq Global Market or the New York Stock Exchange.
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KK.Stock Issuance Program shall mean the stock issuance program in effect under Article Three of the Plan.
LL.Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
MM.10% Stockholder shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary).
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EXHIBIT B
FIRST AMENDMENT TO THE
COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION
2009 INCENTIVE COMPENSATION PLAN
Cognizant Technology Solutions Corporation, a Delaware corporation (the “Corporation”), originally adopted the Cognizant Technology Solutions Corporation 2009 Incentive Compensation Plan (as amended from time to time, the “Plan”) effective as of December 17, 2007, and the Plan was approved by the stockholders of the Corporation on December 17, 2007. Article Five, Section V.A of the Plan allows the Board of Directors of the Corporation to amend the Plan in certain respects at any time or from time to time.
In order to amend the Plan in certain respects, this First Amendment to the Plan has been adopted and approved by a resolution of the Board of Directors of the Corporation on February 19, 2014, effective as set forth below. This First Amendment to the Plan, together with the Plan, constitutes the entire Plan as amended to date.
1. Effective as of March 1, 2014, and subject to approval by the stockholders of the Corporation, Article One, Section V.D of the Plan is hereby amended in its entirety to read as follows:
D. Each person participating in the Plan shall be subject the following limitations:
— for Awards to Employees, consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary) denominated in shares of Common Stock at the time of grant (whether subsequently payable in cash or Common Stock, or a combination of both), the maximum number of shares of Common Stock for which such Awards may be made to such person in any calendar year shall not exceed Two Million Five Hundred Thousand (2,500,000) shares of Common Stock in the aggregate, and
— for Awards denominated in dollars at the time of grant (whether subsequently payable in cash or Common Stock, or a combination of both), the maximum dollar amount for which such Awards may be made to such person in any calendar year shall not exceed Four Million Dollars ($4,000,000),
— for Awards to non-employee members of the Board or the board of directors of any Parent or Subsidiary denominated in shares of Common Stock at the time of grant (whether subsequently payable in cash or Common Stock, or a combination of both), the maximum number of shares of Common Stock for which such Awards may be made to such person in any calendar year shall not exceed Fifty Thousand (50,000) shares of Common Stock in the aggregate.
2. Effective as of March 1, 2014, and subject to approval by the stockholders of the Corporation, Appendix Section AA of the Plan is hereby amended in its entirety to read as follows:
AA. Performance Goals shall mean any of the following performance criteria upon which the vesting of one or more Awards under the Plan may be based: (i) revenue or revenue growth, (ii) operating or net income, (iii) operating or net income before acquisition related charges, net non-operating foreign currency exchange gains or losses and/or charges for stock-based compensation and any taxes or fringe benefits incurred by the Corporation (or any Parent or Subsidiary) in settlement of stock-based awards, (iv) operating or net income before interest, taxes, depreciation, amortization and/or charges for stock-based compensation and any taxes or fringe benefits incurred by the Corporation (or any Parent or Subsidiary) in settlement of stock-based awards, (v) gross, operating or net profit margin, (vi) gross, operating or net profit margin before acquisition related charges, net non-operating foreign currency exchange gains or losses and/or charges for stock-based compensation and any taxes or fringe benefits incurred by the Corporation (or any Parent or Subsidiary) in settlement of stock-based awards, (vii) earnings per share, either before or after acquisition related charges, net non-operating foreign currency exchange gains or losses and/or charges for stock-based compensation and any taxes or fringe benefits incurred by the Corporation (or any Parent or Subsidiary) in settlement of stock-based awards, (viii) return on assets, capital or stockholder equity, (ix) total stockholder return, (x) cash flow, (xi) measures in terms of days sales outstanding or accounts receivable outstanding, (xii) working capital, (xiii) market share, (xiv) increases in customer base, (xv) cost reductions or other expense control objectives, (xvi) market price of the Common Stock, whether measured in absolute terms or in relationship to earnings or operating income or in relation to various stock market or industry indicies, (xvii) budget objectives, (xviii) working capital, (xix) mergers, acquisitions or divestitures, (xx) measures of customer satisfaction, (xxi) productivity measures, (xxii) funds from operations, (xxiii) operating efficiency, or (xxiv) economic value-added models. Each performance criteria may be based upon the attainment of specified levels of the Corporation’s performance under one or more of the measures described above relative to the performance of other entities and may also be based on the performance of any of
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the Corporation’s business units or divisions or any Parent or Subsidiary. Each applicable Performance Goal may include a minimum threshold level of performance below which no Award will be earned, levels of performance at which specified portions of an Award will be earned and a maximum level of performance at which an Award will be fully earned. Each applicable Performance Goal may be structured at the time of the Award to provide for appropriate adjustment for one or more of the following items: (A) asset impairments or write-downs; (B) litigation judgments or verdicts and expenses and settlement costs and expenses; (C) the effect of changes in tax laws or regulations, accounting principles or other applicable laws, regulations or provisions affecting reported results; (D) accruals for reorganization and restructuring programs; (E) any extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Corporation’s annual report to shareholders for the applicable year; (F) the operations of any business acquired by the Corporation or any Parent or Subsidiary or of any joint venture in which the Corporation or any Parent or Subsidiary participates; (G) the divestiture of one or more business operations or the assets thereof; (H) the costs incurred in connection with such acquisitions or divestitures or (I) non-operating foreign exchange gains or losses.
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COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION GLENPOINTE CENTRE WEST 500 FRANK W. BURR BLVD. TEANECK, NJ 07666 | |  VOTE BY INTERNET -www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and followFollow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by Cognizant Technology Solutions Corporationour company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | | | | | | | M72662-P48306E05843-P78126 | | KEEP THIS PORTION FOR YOUR RECORDS | — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — | | | DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION | | | | The Board of Directors recommends you vote FOR each of the following:nominees: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1. | | Election of Directors | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | | | | | | | | | | | | | | | | | | | | | Nominees | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1a. Michael Patsalos-Fox
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | Nominees | | | | | | For | | Against | | Abstain | | | | The Board of Directors recommends you vote FOR proposals 2 and 3. | | | | For | | Against | | Abstain | | | | | | | | | 1a. Zein Abdalla 1b. Maureen Breakiron-Evans 1c. Jonathan Chadwick 1d. Francisco D'Souza 1e. John N. Fox, Jr. 1f. John E. Klein 1g. Leo S. Mackay, Jr. 1h. Lakshmi Narayanan 1i. Michael Patsalos-Fox 1j. Robert E. Weissman 1k. Thomas M. Wendel | | ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ | | ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ | | ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ ¨ | | | | 2. | | Approval, on an advisory (non-binding) basis, of the compensation of the Company's named executive officers. | | | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | | | | | | | | | | | | | | 3. | | Ratification of the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the year ending December 31, 2016. | | | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | | | | | | | The Board of Directors recommends you vote FOR proposals 2, 3 andAGAINST proposal 4. | | | | For | | Against | | Abstain | | | | | | | | | | | | | | | | 2.4.
| | APPROVAL OF THE FIRST AMENDMENT TO THE COMPANY’S 2009 INCENTIVE COMPENSATION PLAN.Stockholder proposal requesting that the Board of Directors take the steps necessary to permit stockholder action by written consent.
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| | APPROVAL, ON AN ADVISORY (NON-BINDING) BASIS, OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
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| | RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2014.
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| | | | | NOTE:Note: TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY CONTINUATION, POSTPONEMENT OR ADJOURNMENT THEREOF.To transact such other business as may properly come before the meeting or any continuation, postponement or adjournment thereof.
| | | | | | | | | | | | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | | Date | | | | | | | | Signature (Joint Owners) Date | | Date
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — M72663-P48306E05844-P78126
| | | PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS OF COGNIZANT TECHNOLOGY SOLUTIONS CORPORATION CLASS A COMMON STOCK JUNE 3, 201415, 2016 | |
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| Please date, sign and mail your proxy card in the envelope provided as soon as possible. | The undersigned stockholderstockholder(s) of Cognizant Technology Solutions Corporation hereby appointsappoint(s) Steven E. Schwartz, Executive Vice President, Chief Legal and Corporate Affairs Officer and Secretary of the Company, Karen McLoughlin,Chief Financial Officer of the Company, and Gordon J. Coburn, President of the Company, as proxies, with full power of substitution, to vote all shares of the Company’sCompany's Class A Common Stock which the undersigned isstockholder(s) is/are entitled to vote at the Company’s 2014Company's 2016 Annual Meeting of Stockholders or any postponement, continuation or adjournment thereof. This proxy will be voted in the manner directed herein by the undersigned stockholder. If no direction is made, this proxy will be voted FOR each director nominee, and FOR Proposals 2 and 3 and AGAINST Proposal 4. The proxies are further authorized to vote in their discretion (1) for the election of any person to the Board of Directors if any nominee named herein becomes unable to serve or for good cause will not serve, (2) on any matter that the Board of Directors did not know would be presented at the Annual Meeting by a reasonable time before the proxy solicitation was made, (3) on any proposal omitted from the Company’s proxy statement and this proxy card pursuant to Rule 14a-8, and (4)(3) on such other business as may properly come before the meeting or any continuation, postponement or adjournment thereof. | | | Continued and to be signed on reverse side |
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