(5) | In recognition of Mr. Ryan’s strong contribution to his operating company achieving its budgeted operating income in fiscal 2015, Mr. Ryan received a discretionary short-term incentive compensation bonus of $78,042, or 21.8% of his base salary at June 30, 2015. Mr. Ryan’s bonus was based on record financial performance for his operating company. He did not receive any bonus attributable to the safety, consolidated operating income or ROIC portions of the plan. | | (6) | Mr. Turner was paid a bonus for his efforts inoperating company. He did not receive any bonus attributable to the successful closingsafety or consolidated operating income portions of the KNAC acquisition during fiscal 2014.annual short-term incentive compensation plan or any bonus attributable to the long-term cash based AROIC plan. |
Grants of Plan-Based Awards During Fiscal 2016 2017The following table sets forth information with respect to grants of plan-based awards in fiscal 20162017 to the Named Executive Officers: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Possible Payouts Under Non-equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards (1) | | All Other Stock Awards: Number of shares of Stock or Units (#) (2) | | All Other Option Awards: Number of Securities Underlying Options (#) | | Exercise or Base Price of Option Awards ($/Sh) | | Grant Date Fair Value of Stock and Option Awards ($) (3) | | Name | | Approval Date | | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | | | | | John R. Hewitt | | 8/25/2015 | | | | 375,000 |
| | 750,000 |
| | 1,125,000 |
| (4) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | | | 8/25/2015 | | | | 312,500 |
| | 625,000 |
| | 937,500 |
| (5) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | | | 8/25/2015 | | 8/25/2015 | | — |
| | — |
| | — |
| | 7,976 |
| | 31,904 |
| | 63,808 |
| | 31,904 |
| | — |
| | — |
| | 1,352,411 |
| | Joseph F. Montalbano | | 8/25/2015 | | | | 153,563 |
| | 307,125 |
| | 460,688 |
| (4) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | | | 8/25/2015 | | | | 98,438 |
| | 196,875 |
| | 295,313 |
| (5) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | | | 8/25/2015 | | 8/25/2015 | | — |
| | — |
| | — |
| | 2,513 |
| | 10,050 |
| | 20,100 |
| | 10,050 |
| | — |
| | — |
| | 426,020 |
| | Kevin S. Cavanah | | 8/25/2015 | | | | 135,671 |
| | 271,343 |
| | 407,014 |
| (4) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | | | 8/25/2015 | | | | 86,969 |
| | 173,938 |
| | 260,907 |
| (5) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | | | 8/25/2015 | | 8/25/2015 | | — |
| | — |
| | — |
| | 2,220 |
| | 8,879 |
| | 17,758 |
| | 8,879 |
| | — |
| | — |
| | 376,381 |
| | James P. Ryan | | 8/25/2015 | | | | 114,968 |
| | 229,936 |
| | 344,903 |
| (4) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | | | 8/25/2015 | | | | 59,693 |
| | 119,385 |
| | 179,078 |
| (5) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | | | 8/25/2015 | | 8/25/2015 | | — |
| | — |
| | — |
| | 1,524 |
| | 6,094 |
| | 12,188 |
| | 6,094 |
| | — |
| | — |
| | 258,325 |
| | Jason W. Turner | | 8/25/2015 | | | | 103,230 |
| | 206,460 |
| | 309,690 |
| (4) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | | | 8/25/2015 | | | | 57,350 |
| | 114,700 |
| | 172,050 |
| (5) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | | | 8/25/2015 | | 8/25/2015 | | — |
| | — |
| | — |
| | 1,464 |
| | 5,855 |
| | 11,710 |
| | 5,855 |
| | — |
| | — |
| | 248,193 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-equity Incentive Plan Awards | | | Estimated Future Payouts Under Equity Incentive Plan Awards (1) | | | All Other Stock Awards: Number of shares of Stock or Units (#) (2) | | | All Other Option Awards: Number of Securities Underlying Options (#) | | | Exercise or Base Price of Option Awards ($/Sh) | | | Grant Date Fair Value of Stock and Option Awards ($) (3) | | Name | | Grant Date | | | Minimum ($) | | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | | | | John R. Hewitt | |
| 8/23/2016
8/23/2016 8/23/2016 |
| |
| 187,500
— — |
| |
| 375,000
312,500 — |
| |
| 750,000
625,000 — |
| |
| 1,125,000
937,500 — | (4)
(5) | |
| —
— 9,159 |
| |
| —
— 36,635 |
| |
| —
— 73,270 |
| |
| —
— 36,635 |
| |
| —
— — |
| |
| —
— — |
| |
| —
— 1,462,103 |
| Joseph F. Montalbano | | | 8/23/2016 | | | | 93,023 | | | | 186,047 | | | | 372,094 | | | | 558,141 | (4) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 8/23/2016 | | | | — | | | | 115,763 | | | | 231,525 | | | | 347,288 | (5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 8/23/2016 | | | | — | | | | — | | | | — | | | | — | | | | 3,393 | | | | 13,571 | | | | 27,142 | | | | 13,571 | | | | — | | | | — | | | | 541,619 | | Kevin S. Cavanah | | | 8/23/2016 | | | | 81,403 | | | | 162,806 | | | | 325,611 | | | | 488,417 | (4) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 8/23/2016 | | | | — | | | | 101,301 | | | | 202,602 | | | | 303,903 | (5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 8/23/2016 | | | | — | | | | — | | | | — | | | | — | | | | 2,969 | | | | 11,876 | | | | 23,752 | | | | 11,876 | | | | — | | | | — | | | | 473,971 | | James P. Ryan | | | 8/23/2016 | | | | 78,994 | | | | 157,988 | | | | 315,975 | | | | 473,963 | (4) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 8/23/2016 | | | | — | | | | 70,217 | | | | 140,433 | | | | 210,650 | (5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | 8/23/2016 | | | | — | | | | — | | | | — | | | | — | | | | 2,058 | | | | 8,232 | | | | 16,464 | | | | 8,232 | | | | — | | | | — | | | | 328,539 | | Jason W. Turner | |
| 8/23/2016
8/23/2016 8/23/2016 |
| |
| 74,197
— — |
| |
| 148,394
65,953 — |
| |
| 296,787
131,905 — |
| |
| 445,181
197,858 — | (4)
(5) | |
| —
— 1,933 |
| |
| —
— 7,732 |
| |
| —
— 15,464 |
| |
| —
— 7,732 |
| |
| —
— — |
| |
| —
— — |
| |
| —
— 308,584 |
|
| | (1) | Represents the number of shares which may be issued pursuant to fiscal 20162017 performance unit awards to the Named Executive Officers that cliff vest three years after the grant date. The number of shares of common stock received upon vesting of the performance units will range between 0% and 200% of the number of performance units awarded as determined by the three-year Total Shareholder Return on the Company'sCompany’s common stock when compared to the Total Shareholder Return on the common stock of a group of peer companies selected by the Compensation Committee of the Board of Directors.Board. The fiscal 20162017 performance unit awards are described above under the caption "Compensation“Compensation Discussion and Analysis"Analysis”. |
| | (2) | Amounts shown represent service-based restricted stock unitsRSUs granted to the Named Executive Officers in fiscal 2016.2017. The awards vest in four equal annual installments beginning one year after the grant date.date, subject to the Named Executive Officer’s continued employment with the Company. |
| | (3) | Amounts shown are calculated based upon the grant date fair value calculated in accordance with ASC718 – Compensation—Stock Compensation.ASC718. The grant date fair value of the service-based restricted stock unitsRSUs is calculated by multiplying the number of restricted stock unitsRSUs awarded by the closing stock price on the date of grant. The grant date fair value of the performance units is calculated using a Monte Carlo model. The model estimated the fair value of the award based on approximately 100,000 simulations of the future prices of the Company'sCompany’s common stock compared to the future prices of its peer companies based on historical volatilities. The model also took into account the expected dividends over the performance period. See Notes 1 and 10 of the Notes to the Consolidated Financial Statements included in the Company’s fiscal 20162017 Annual Report on Form10-K for a full discussion of the Company’s stock based compensation accounting policies. The specific grant date fair values are as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Service-Based Awards | | | Performance-Based Awards | | | | | Name | | Shares (#) | | | Value per Share ($) | | | Grant Date Fair Value ($) | | | Shares at target (#) | | | Value per Share ($) | | | Grant Date Fair Value ($) | | | Total Grant Date Fair Value ($) | | John R. Hewitt | | | 36,635 | | | | 17.25 | | | | 631,954 | | | | 36,635 | | | | 22.66 | | | | 830,149 | | | | 1,462,103 | | Joseph F. Montalbano | | | 13,571 | | | | 17.25 | | | | 234,100 | | | | 13,571 | | | | 22.66 | | | | 307,519 | | | | 541,619 | | Kevin S. Cavanah | | | 11,876 | | | | 17.25 | | | | 204,861 | | | | 11,876 | | | | 22.66 | | | | 269,110 | | | | 473,971 | | James P. Ryan | | | 8,232 | | | | 17.25 | | | | 142,002 | | | | 8,232 | | | | 22.66 | | | | 186,537 | | | | 328,539 | | Jason W. Turner | | | 7,732 | | | | 17.25 | | | | 133,377 | | | | 7,732 | | | | 22.66 | | | | 175,207 | | | | 308,584 | |
| | (4) | The amounts shown are the cash incentive compensation award potential for each Named Executive Officer under our annual/short-term incentive compensation plan described above under the caption "Compensation“Compensation Discussion and Analysis."” Actual payouts to the Named Executive Officers for the applicable fiscal year are reported in the Summary Compensation Table as a portion of the amount shown under the column “Non-Equity“Non-Equity Incentive Plan Compensation.” |
| | (5) | Amounts shown represent the potential cash awards for each Named Executive Officer under the cash portion of our fiscal 20162017 long-term incentive award described above under the caption "Compensation“Compensation Discussion and Analysis"Analysis”. The actual cash payout can range from 0% to 150% of the target payout and is based on average Return on Invested Capital for fiscal 20152017 and fiscal 2016.2018. Actual payouts for the applicable fiscal year are reported in the Summary Compensation Table as a portion of the amount shown under the column "Non-Equity“Non-Equity Incentive Plan Compensation."” |
Outstanding Equity Awards at FiscalYear-End for 2016 2017The following table sets forth certain information with respect to outstanding equity awards held by the Named Executive Officers as of June 30, 2016: | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | Name | | Number of Securities Underlying Unexercised Options Exercisable (#) | | Number of Securities Underlying Unexercised Options Unexercisable (#) | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) (1) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (1) | | | | | | | | | | | | | | | | | | John R. Hewitt | | — |
| | — |
| | — |
| | — |
| | 69,243 |
| | 1,141,817 |
| | 80,938 |
| | 1,334,668 |
| Joseph F. Montalbano | | 21,050 |
| | — |
| | 10.19 |
| | 11/17/2021 |
| | 23,409 |
| | 386,014 |
| | 27,503 |
| | 453,524 |
| Kevin S. Cavanah | | 16,850 |
| | — |
| | 10.19 |
| | 11/17/2021 |
| | 20,389 |
| | 336,215 |
| | 24,051 |
| | 396,601 |
| James P. Ryan | | 9,813 |
| | — |
| | 10.19 |
| | 11/17/2021 |
| | 15,968 |
| | 263,312 |
| | 20,198 |
| | 333,065 |
| Jason W. Turner | | 8,000 |
| | — |
| | 10.19 |
| | 11/17/2021 |
| | 14,212 |
| | 234,356 |
| | 13,229 |
| | 218,146 |
|
2017: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | Name | | Number of Securities Underlying Unexercised Options Exercisable (#) | | | Number of Securities Underlying Unexercised Options Unexercisable (#) | | | Option Exercise Price ($) | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (#) | | | Market Value of Shares or Units of Stock That Have Not Vested ($) (1) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | | Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (1) | | John R. Hewitt | | | — | | | | — | | | | — | | | | — | | | | 78,058 | | | | 729,842 | | | | 17,135 | | | | 160,212 | | Joseph F. Montalbano | | | 21,050 | | | | — | | | | 10.19 | | | | 11/17/2021 | | | | 26,908 | | | | 251,590 | | | | 5,906 | | | | 55,221 | | Kevin S. Cavanah | | | 16,850 | | | | — | | | | 10.19 | | | | 11/17/2021 | | | | 23,623 | | | | 220,875 | | | | 5,189 | | | | 48,517 | | James P. Ryan | | | — | | | | — | | | | — | | | | — | | | | 16,828 | | | | 157,342 | | | | 3,582 | | | | 33,492 | | Jason W. Turner | | | 8,000 | | | | — | | | | 10.19 | | | | 11/17/2021 | | | | 16,147 | | | | 150,974 | | | | 3,397 | | | | . | |
| | (1) | Based on the closing price of our common stock on June 30, 20162017 of $16.49.$9.35. |
The stock awards vest according to the following schedule: | | | | | | | | | | | | | | | Number of Shares or Units of Stock That Have Not Vested | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Name | | Shares | | Vest Date | | Shares | | Vest Date | John R. Hewitt | | 7,976 |
| | 8/25/2016 | | 43,423 |
| (1 | ) | 8/27/2016 | | | 5,611 |
| | 8/26/2016 | | 5,611 |
| (1 | ) | 8/26/2017 | | | 6,275 |
| | 8/27/2016 | | 31,904 |
| (1 | ) | 8/25/2018 | | | 7,958 |
| | 11/16/2016 | |
|
| | | | | 7,976 |
| | 8/25/2017 | | | | | | | 5,610 |
| | 8/26/2017 | | | | | | | 6,275 |
| | 8/27/2017 | | | | | | | 7,976 |
| | 8/25/2018 | | | | | | | 5,610 |
| | 8/26/2018 | | | | | | | 7,976 |
| | 8/25/2019 | | | | | Joseph F. Montalbano | | 2,513 |
| | 8/25/2016 | | 15,686 |
| (1 | ) | 8/27/2016 | | | 1,767 |
| | 8/26/2016 | | 1,767 |
| (1 | ) | 8/26/2017 | | | 2,267 |
| | 8/27/2016 | | 10,050 |
| (1 | ) | 8/25/2018 | | | 3,525 |
| | 11/16/2016 | |
|
| | | | | 2,513 |
| | 8/25/2017 | | | | | | | 1,767 |
| | 8/26/2017 | | | | | | | 2,266 |
| | 8/27/2017 | | | | | | | 2,512 |
| | 8/25/2018 | | | | | | | 1,767 |
| | 8/26/2018 | | | | | | | 2,512 |
| | 8/25/2019 | | | | | Kevin S. Cavanah | | 2,220 |
| | 8/25/2016 | | 13,610 |
| (1 | ) | 8/27/2016 | | | 1,562 |
| | 8/26/2016 | | 1,562 |
| (1 | ) | 8/26/2017 | | | 1,967 |
| | 8/27/2016 | | 8,879 |
| (1 | ) | 8/25/2018 | | | 2,893 |
| | 11/16/2016 | |
|
| | | | | 2,220 |
| | 8/25/2017 | | | | | | | 1,561 |
| | 8/26/2017 | | | | | | | 1,966 |
| | 8/27/2017 | | | | | | | 2,220 |
| | 8/25/2018 | | | | | | | 1,561 |
| | 8/26/2018 | | | | | | | 2,219 |
| | 8/25/2019 | | | | | James P. Ryan | | 1,524 |
| | 8/25/2016 | | 13,032 |
| (1 | ) | 8/27/2016 | | | 1,072 |
| | 8/26/2016 | | 1,072 |
| (1 | ) | 8/26/2017 | | | 1,883 |
| | 8/27/2016 | | 6,094 |
| (1 | ) | 8/25/2018 | | | 2,893 |
| | 11/16/2016 | |
|
| | | | | 1,524 |
| | 8/25/2017 | | | | | | | 1,072 |
| | 8/26/2017 | | | | | | | 1,883 |
| | 8/27/2017 | | | | | | | 1,523 |
| | 8/25/2018 | | | | | | | 1,071 |
| | 8/26/2018 | | | | | | | 1,523 |
| | 8/25/2019 | | | | | Jason W. Turner | | 1,464 |
| | 8/25/2016 | | 6,344 |
| (1 | ) | 8/27/2016 | | | 1,030 |
| | 8/26/2016 | | 1,030 |
| (1 | ) | 8/26/2017 | | | 917 |
| | 8/27/2016 | | 5,855 |
| (1 | ) | 8/25/2018 | | | 1,336 |
| | 11/16/2016 | |
|
| | | | | 1,050 |
| | 12/23/2016 | | | | | | | 1,464 |
| | 8/25/2017 | | | | | | | 1,029 |
| | 8/26/2017 | | | | | | | 916 |
| | 8/27/2017 | | | | | | | 1,050 |
| | 12/23/2017 | | | | | | | 1,464 |
| | 8/25/2018 | | | | | | | 1,029 |
| | 8/26/2018 | | | | | | | 1,463 |
| | 8/25/2019 | | | | |
| | | | | | | | | | | | | | | | | | | Number of Shares or Units of Stock That Have Not Vested | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | | Name | | Shares | | | Vest Date | | | Shares | | | Vest Date | | John R. Hewitt | | | 9,159 | | | | 8/23/2017 | | | | — | (1) | | | 8/26/2017 | | | | | 7,976 | | | | 8/25/2017 | | | | 7,976 | (1) | | | 8/25/2018 | | | | | 5,610 | | | | 8/26/2017 | | | | 9,159 | (1) | | | 8/23/2019 | | | | | 6,275 | | | | 8/27/2017 | | | | | | | | | | | | | 9,159 | | | | 8/23/2018 | | | | | | | | | | | | | 7,976 | | | | 8/25/2018 | | | | | | | | | | | | | 5,610 | | | | 8/26/2018 | | | | | | | | | | | | | 9,159 | | | | 8/23/2019 | | | | | | | | | | | | | 7,976 | | | | 8/25/2019 | | | | | | | | | | | | | 9,158 | | | | 8/23/2020 | | | | | | | | | | Joseph F. Montalbano | | | 3,393 | | | | 8/23/2017 | | | | — | (1) | | | 8/26/2017 | | | | | 2,513 | | | | 8/25/2017 | | | | 2,513 | (1) | | | 8/25/2018 | | | | | 1,767 | | | | 8/26/2017 | | | | 3,393 | (1) | | | 8/23/2019 | | | | | 2,266 | | | | 8/27/2017 | | | | | | | | | | | | | 3,393 | | | | 8/23/2018 | | | | | | | | | | | | | 2,512 | | | | 8/25/2018 | | | | | | | | | | | | | 1,767 | | | | 8/26/2018 | | | | | | | | | | | | | 3,393 | | | | 8/23/2019 | | | | | | | | | | | | | 2,512 | | | | 8/25/2019 | | | | | | | | | | | | | 3,392 | | | | 8/23/2020 | | | | | | | | | | Kevin S. Cavanah | | | 2,969 | | | | 8/23/2017 | | | | — | (1) | | | 8/26/2017 | | | | | 2,220 | | | | 8/25/2017 | | | | 2,220 | (1) | | | 8/25/2018 | | | | | 1,561 | | | | 8/26/2017 | | | | 2,969 | (1) | | | 8/23/2019 | | | | | 1,966 | | | | 8/27/2017 | | | | | | | | | | | | | 2,969 | | | | 8/23/2018 | | | | | | | | | | | | | 2,220 | | | | 8/25/2018 | | | | | | | | | | | | | 1,561 | | | | 8/26/2018 | | | | | | | | | | | | | 2,969 | | | | 8/23/2019 | | | | | | | | | | | | | 2,219 | | | | 8/25/2019 | | | | | | | | | | | | | 2,969 | | | | 8/23/2020 | | | | | | | | | | James P. Ryan | | | 2,058 | | | | 8/23/2017 | | | | — | (1) | | | 8/26/2017 | | | | | 1,524 | | | | 8/25/2017 | | | | 1,524 | (1) | | | 8/25/2018 | | | | | 1,072 | | | | 8/26/2017 | | | | 2,058 | (1) | | | 8/23/2019 | | | | | 1,883 | | | | 8/27/2017 | | | | | | | | | | | | | 2,058 | | | | 8/23/2018 | | | | | | | | | | | | | 1,523 | | | | 8/25/2018 | | | | | | | | | | | | | 1,071 | | | | 8/26/2018 | | | | | | | | | | | | | 2,058 | | | | 8/23/2019 | | | | | | | | | | | | | 1,523 | | | | 8/25/2019 | | | | | | | | | | | | | 2,058 | | | | 8/23/2020 | | | | | | | | | | Jason W. Turner | | | 1,933 | | | | 8/23/2017 | | | | — | (1) | | | 8/26/2017 | | | | | 1,464 | | | | 8/25/2017 | | | | 1,464 | (1) | | | 8/25/2018 | | | | | 1,029 | | | | 8/26/2017 | | | | 1,933 | (1) | | | 8/23/2019 | | | | | 916 | | | | 8/27/2017 | | | | | | | | | | | | | 1,050 | | | | 12/23/2017 | | | | | | | | | | | | | 1,933 | | | | 8/23/2018 | | | | | | | | | | | | | 1,464 | | | | 8/25/2018 | | | | | | | | | | | | | 1,029 | | | | 8/26/2018 | | | | | | | | | | | | | 1,933 | | | | 8/23/2019 | | | | | | | | | | | | | 1,463 | | | | 8/25/2019 | | | | | | | | | | | | | 1,933 | | | | 8/23/2020 | | | | | | | | | |
| | (1) | Represents fiscal 2014, 2015, 2016 and 20162017 performance unit awards to the Named Executive Officers that cliff vest three years after the grant date. If threshold performance is achieved, the performance units are converted to the Company'sCompany’s common stock upon vesting. The number of shares of common stock received for each performance unit will vary from zero to two based on the Total Shareholder Return on the Company'sCompany’s common stock when compared to Total Shareholder Return on common stock of peer companies selected by the Compensation Committee of the Board of Directors.Board. The Total Shareholder Return Goals are as follows: |
| | | | | | | Shareholder Return Goal | | Total Shareholder Return | | Shares of Common Stock for Each Performance Unit | | Threshold | | 25th percentile of Peer Group | | | 0.25 | | Above Threshold | | 35th percentile of Peer Group | | | 0.50 | | Target | | 50th percentile of Peer Group | | | 1.00 | | Above Target | | 75th percentile of Peer Group | | | 1.50 | | Maximum | | 90th percentile of Peer Group | | | 2.00 | |
The performance period (fiscal 2014, 2015, 2016 and 2016)2017) for the fiscal 20142015 performance unit award has been completed. In August 2016,2017, the Compensation Committee certified that the Company’s relative Total Shareholder Return for the performance period resulted in an award of 1.73 shareswas below the amount required for each performance unit granted.a Threshold payout. Accordingly, the number of shares presented for the fiscal 20142015 performance unit award is equal to the number of shares actually earned for that period.zero. Based on the Company's relative Total Shareholder Return for fiscal 2015 and 2016 (two-thirds of the performance period for the fiscal 2015 award), the fiscal 2015 award is presented at the Threshold performance level. Based on the Company'sCompany’s relative Total Shareholder Return for fiscal 2016 (one-thirdand 2017(two-thirds of the performance period for the fiscal 2016 award), the fiscal 2016 award is presented at the TargetThreshold performance level. Based on the Company’s relative Total Shareholder Return for fiscal 2017(one-third of the performance period for the fiscal 2017 award), the fiscal 2017 award is also presented at the Threshold performance level.
Option Exercises and Stock Vested During Fiscal 2016 2017The following table sets forth information with respect to the value realized by our Named Executive Officers upon the exercise of stock options and the vesting of restricted stock unitsRSUs in fiscal 2016. | | | | | | | | | | | | | | | | Fiscal 2016 | | | Option Awards | | Stock Awards | Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) (1) | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) (2) | | | | | | | | | | John R. Hewitt | | — |
| | — |
| | 108,490 |
| | 2,408,572 |
| Joseph F. Montalbano | | — |
| | — |
| | 45,166 |
| | 1,020,619 |
| Kevin S. Cavanah | | 12,000 |
| | 162,720 |
| | 36,528 |
| | 822,912 |
| James P. Ryan | | 7,137 |
| | 57,239 |
| | 35,779 |
| | 810,334 |
| Jason W. Turner | | — |
| | — |
| | 18,372 |
| | 412,206 |
|
2017. | | | | | | | | | | | | | | | | | | | Fiscal 2017 | | | | Option Awards | | | Stock Awards | | Name | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($) (1) | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($) (2) | | John R. Hewitt | | | — | | | | — | | | | 71,243 | | | | 1,202,599 | | Joseph F. Montalbano | | | — | | | | — | | | | 25,757 | | | | 437,080 | | Kevin S. Cavanah | | | — | | | | — | | | | 22,251 | | | | 377,034 | | James P. Ryan | | | 9,813 | | | | 121,289 | | | | 20,404 | | | | 346,472 | | Jason W. Turner | | | — | | | | — | | | | 12,140 | | | | 211,257 | |
| | (1) | The value realized is the difference between the option exercise price and the sales price of the common stock on the date of exercise, multiplied by the number of shares for which the options were exercised. |
| | (2) | The value realized is the closing sales price of the common stock on the vesting date, multiplied by the number of shares for which the restrictions lapsed. The stock awards that vested in fiscal 2017 relate to service-based and performance-based awards and were as follows: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Service-Based Awards | | | Performance-Based Awards | | | Total | | Name | | Shares (#) | | | Value ($) | | | Shares (#) | | | Value ($) | | | Shares (#) | | | Value ($) | | John R. Hewitt | | | 27,820 | | | | 489,159 | | | | 43,423 | | | | 713,440 | | | | 71,243 | | | | 1,202,599 | | Joseph F. Montalbano | | | 10,072 | | | | 179,375 | | | | 15,685 | | | | 257,705 | | | | 25,757 | | | | 437,080 | | Kevin S. Cavanah | | | 8,642 | | | | 153,438 | | | | 13,609 | | | | 223,596 | | | | 22,251 | | | | 377,034 | | James P. Ryan | | | 7,372 | | | | 132,356 | | | | 13,032 | | | | 214,116 | | | | 20,404 | | | | 346,472 | | Jason W. Turner | | | 5,797 | | | | 107,042 | | | | 6,343 | | | | 104,215 | | | | 12,140 | | | | 211,257 | |
The performance based awards that vested in fiscal 2017 were the fiscal 2014 performance unit awards that were based on relative Total Shareholder Return from fiscal 2014 through the end of fiscal 2016. The Company’s performance over the vesting period was in the 82nd percentile; therefore, 173% of the target performance was earned.
Potential Payments Upon Termination or Change of Control We have entered into Change of Control/Severance Agreements with Mr.Messrs. Hewitt, Mr. Cavanah, Mr. Montalbano, Mr. Ryan and Mr. Turner. These agreements are designed to promote stability, continuity and focus for key members of leadership during periods of uncertainty that may be created by change of control situations. Additionally, the use of such agreements is a competitive practice that enhances our ability to attract and retain leadership talent. Under these agreements, payment of benefits may occur under two circumstances:
If we experience a “Change of Control” and the executive suffers an “Adverse Event” or is terminated without “Cause,” either on the date of the Change of Control or within 24 months following the Change of Control date; or
| • | | If we experience a “Change of Control”and the executive suffers an “Adverse Event” or is terminated without “Cause,” either on the date of the Change of Control or within 24 months following the Change of Control date; or |
The executive is terminated from employment at any time for reasons other than Cause. “Change of Control” means (i) a “changethe acquisition by any “person” or “group” (as defined pursuant to Section 13(d) under the Securities Exchange Act) of “beneficial ownership” (as defined in ownership”Rule13d-3 under the Exchange Act) of in excess of 35% of the Company of greater than 50%combined voting power of the outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Voting Securities”); (ii) during any one (1) year period, individuals who at the beginning of such period constituted the Board of the Company (the “Board”) (together with any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at leasttwo-thirds (2/3) of the directors of the Company then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved (but excluding, for purposes of this definition, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board) cease for any reason to constitute a majority of the members of the Board; (iii) consummation of a merger, consolidation, recapitalization or reorganization of the Company, other than a merger, consolidation, recapitalization or reorganization which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent, either by remaining outstanding or by being converted into voting stock of the Company withinsurviving entity (or if the surviving entity is a six month period; (ii)subsidiary of another entity, then of the parent entity of such surviving entity), more than fifty percent (50%) of the total voting power represented by the voting stock of the surviving entity (or parent entity) outstanding immediately after such merger, consolidation, recapitalization or reorganization; (iv) a “change in the effective control” of the Company as determined by a change of greater than 35% of the outstanding voting stock of the Company by a person or persons acting as a group within a twelve month period; or (iii) a “change in the ownership”ownership of a substantial portion of the assetsassets” of the Company as these terms are defined under Internal Revenue Code § 409A(a)(2)(A)(v) and Treasury Regulations §1.409A-3(g)(5) or other then existing and applicable Treasury Regulations promulgated under Code § 409A that define the terms “change of control” for deferred compensation arrangements.
complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of related transactions) of all or substantially all of the Company’s assets to any Person.“Cause” means, with reference to a severance event, that the executive has been severed from employment with the Company because of the executive’s theft of Company property, embezzlement or dishonesty that results in harm to the Company; continued gross or willful neglect of his or her job responsibilities after receiving written warnings regarding such neglect from the Company; conviction of a felony or pleading nolo contendere to a felony charged under state or federal law; or willful violation of Company policy. A determination by the Company’s Board of Directors that an event constituting “Cause” under this Agreement has occurred is binding upon the Company and the executive. “Adverse Event” means that the executive has experienced an event that has a material adverse impact on the executive’s job position, responsibilities, duties, authorities, compensation or opportunities within the Company. An Adverse Event shall be considered “material” when: (i) the executive experiences any reduction in base salary; (ii) the executive experiences a reduction in salary range or opportunity for increases in salary; (iii) the executive experiences a reduction in incentive compensation range or opportunity; (iv) there is a material reduction in the executive’s executive benefits or perquisites; (v) the executive is reassigned to a position or role with a lower salary range, salary opportunity, incentive range or incentive opportunity; or (vi) the executive experiences a material reduction in responsibilities. In the event payment of benefits is triggered under these agreements, the executive officer will be paid in the manner outlined below. All benefits paid under these agreements are conditioned upon the executive executing anon-interference,non-solicitation, waiver and release of claims and confidentiality agreement in a form satisfactory to us. Failure to execute such an agreement prior to the payment date is considered an absolute forfeiture of the severance benefit. In the event an executive officer is terminated for Cause, all benefits and payments under the agreement are forfeited. In the event an executive suffers an Adverse Event or is terminated from employment for reasons other than Cause, each within 24 months of a Change of Control, benefits are paid as follows: Mr. Hewitt, Mr. Cavanah and Mr. Montalbano – Paid an amount equal to two years of base salary plus the average annual bonus compensation paid to the executive in the lesser of the previous three years or the number of full fiscal years the executive has been employed in the position. All forms of equity benefits vest and restrictions on such benefits lapse immediately. Mr. Ryan and Mr. Turner – Paid an amount equal to one yearandone-half years of base salary plus the average annual bonus compensation paid to the executive in the previous three calendar years. All forms of equity benefits vest and restrictions on such benefits lapse immediately.
InEven in the absence of a Change of Control, in the event an executive is terminated from employment for reasons other than Cause, benefits are paid as follows: Mr. Hewitt – Paid an amount equal to one year of base salary plus bonus compensation in an amount equal to 75%his target short-term incentive payout which is currently 100% of base salary. Mr. Cavanah, Mr. Montalbano, and Mr. Turner – Paid an amount equal to one year of base salary plus the lesser of the average annual bonus compensation paid to the executive in the previous three years or the number of full fiscal years the executive has been employed in the position. Mr. Ryan – Paid an amount equal to one year of base salary plus the lesser of the average annual bonus compensation paid to the executive in the previous three years or the number of full fiscal years the executive has been employed in the position. All forms of equity benefits vest and restrictions on such benefits lapse immediately. We have also entered into Change of Control Agreements with other executive officers and key members of management. These agreements are designed to promote stability, continuity and focus for key personnel during periods of uncertainty that may be created by potential change of control situations. We seek to offer some security and protection when asking officers and managers to remain engaged through uncertain times. Under these agreements, payment of benefits occurs in the event of a Change of Control and the executive officer/manager has suffered an Adverse Event or been terminated from employment for reasons other than Cause, either on the date of the Change of Control or within six months of the Change of Control date. There is no general severance clause in these agreements. In the event payment of benefits is triggered under these agreements, the executive officer/manager will be paid an amount equal to one year of base salary. In addition, all equity awards immediately vest and all restrictions on such benefits lapse. All benefits paid under these agreements are conditional upon the executive officer/manager executing anon-interference,non-solicitation, waiver and release of claims and confidentiality agreement in a form satisfactory to us. Failure to execute such an agreement prior to the payment date will be considered an absolute forfeiture of the severance benefit. In the event an executive officer/manager is terminated for Cause, all benefits and payments under the agreement are forfeited. Benefits will be paid in the calendar year the triggering event occurs and, generally, within thirty days of the date of the triggering event. In no case shall the payment of the severance benefits be paid later than March 15 following the calendar year in which the event occurred.
The following table shows potential payments to our Named Executive Officers under existing contracts, agreements, plans or arrangements, whether written or unwritten for various scenarios involving a termination of each of such Named Executive Officers, assuming a June 30, 20162017 termination date and, where applicable, using the closing price of our common stock on June 30, 20162017 of $16.49.$9.35. These amounts are estimates only. The actual amounts to be paid out can only be determined at the time of such executive officer’s separation from us. Except for certain terminations which entitle a Named Executive Officer to severance payments under the agreements described above, and except for the acceleration of vesting of equity awards upon retirement, death or disability to which a Named Executive Officer may be entitled under his respective award agreements, there are no agreements, arrangements or plans that entitle the Named Executive Officers to severance, perquisites or other enhanced benefits upon their termination of employment. Any agreement to provide such other payments or benefits to a terminating executive would be at the discretion of the Compensation Committee. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change of Control with Adverse Event or Termination | | Termination by the Company at any Time for Reasons Other than Cause | | Voluntary Termination | | Retirement | | Death, Disability or Change of Control (No Adverse Event) | | | Name | | Salary Severance ($) (1) | | Non-Equity Incentive Plan Severance ($) (2) | | Value of Stock Options That Would Vest ($) (3) | | Value of RSUs, Performance Units and Cash-Based LTI Awards for Which Restrictions Would Lapse ($) (4) | | Salary Severance ($) (1) | | Non-Equity Incentive Plan Severance ($) (5) | | Value of Stock Options That Would Vest ($) (3) | | Value of RSUs and Performance Units for Which Restrictions Would Lapse ($) | | No Contractual Benefits | | Value of RSUs, Performance Units and Cash-Based LTI Awards for Which Restrictions Would Lapse (6) | | Value of Stock Options That Would Vest ($) (3) | | Value of RSUs, Performance Units and Cash-Based LTI Awards for Which Restrictions Would Lapse ($) (4) | | Maximum Potential Payments | John R. Hewitt | | 1,500,000 |
| | 253,207 |
| | — |
| | 3,701,882 |
| | 750,000 |
| | 562,500 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 3,701,882 |
| | 5,455,089 |
| Joseph F. Montalbano | | 945,000 |
| | 128,015 |
| | — |
| | 1,211,572 |
| | 472,500 |
| | 128,014 |
| | — |
| | — |
| | — |
| | 652,496 |
| | — |
| | 1,211,572 |
| | 2,284,587 |
| Kevin S. Cavanah | | 834,900 |
| | 114,337 |
| | — |
| | 1,063,229 |
| | 417,450 |
| | 114,337 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1,063,229 |
| | 2,012,466 |
| James P. Ryan | | 383,226 |
| | 116,880 |
| | — |
| | 797,484 |
| | 383,226 |
| | 116,880 |
| | — |
| | 558,714 |
| | — |
| | — |
| | — |
| | 797,484 |
| | 1,297,590 |
| Jason W. Turner | | 344,100 |
| | 16,775 |
| | — |
| | 688,679 |
| | 344,100 |
| | 16,775 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 688,679 |
| | 1,049,554 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Change of Control with Adverse Event or Termination for Reasons Other than Cause | | | Termination by the Company at any Time for Reasons Other than Cause | | | Voluntary Termination | | | Retirement | | | Death, Disability or Change of Control (No Adverse Event) | | | | | Name | | Salary Severance ($) (1) | | | Non-Equity Incentive Plan Severance ($) (2) | | | Value of Stock Options That Would Vest ($) (3) | | | Value of RSUs, Performance Units and Cash-Based LTI Awards for Which Restrictions Would Lapse ($) (4) | | | Salary Severance ($) (1) | | | Non-Equity Incentive Plan Severance ($) (5) | | | Value of Stock Options That Would Vest ($) (3) | | | Value of RSUs and Performance Units for Which Restrictions Would Lapse ($) | | | No Contractual Benefits | | | Value of RSUs, Performance Units and Cash-Based LTI Awards for Which Restrictions Would Lapse (6) | | | Value of Stock Options That Would Vest ($) (3) | | | Value of RSUs, Performance Units and Cash-Based LTI Awards for Which Restrictions Would Lapse ($) (4) | | | Maximum Potential Payments | | John R. Hewitt | | | 1,500,000 | | | | 43,234 | | | | — | | | | 2,830,515 | | | | 750,000 | | | | 750,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,830,515 | | | | 4,373,749 | | Joseph F. Montalbano | | | 992,250 | | | | 17,704 | | | | — | | | | 966,941 | | | | 496,125 | | | | 17,704 | | | | — | | | | — | | | | — | | | | 515,740 | | | | — | | | | 966,941 | | | | 1,976,895 | | Kevin S. Cavanah | | | 868,296 | | | | 15,642 | | | | — | | | | 849,874 | | | | 434,148 | | | | 15,642 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 849,874 | | | | 1,733,812 | | James P. Ryan | | | 631,950 | | | | 39,144 | | | | — | | | | 591,191 | | | | 421,300 | | | | 39,144 | | | | — | | | | 331,373 | | | | — | | | | — | | | | — | | | | 591,191 | | | | 1,262,285 | | Jason W. Turner | | | 593,574 | | | | 11,183 | | | | — | | | | 563,121 | | | | 395,716 | | | | 11,183 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 563,121 | | | | 1,167,878 | |
| | (1) | Represents payment of one andone-half or two years of base salary for the event specified based on base salary as of June 30, 2016.2017. |
| | (2) | Represents payment ofnon-equity incentive severance for the event specified based on the average annual bonus compensation paid to the executive in the lesser of the previous three years or the number of full fiscal years the executive has been employed in the position. |
| | (3) | Represents the value the Named Executive Officer would realize for the vesting of all nonvested stock options for the specified event. The value is the difference between the option exercise price and the market price of the common stock as of the close of business on June 30, 2015,2016, multiplied by the number of nonvested stock options at June 30, 2016.2017. At June 30, 2016,2017, all of the stock options held by the NEOs were already exercisable. |
| | (4) | Represents the value the Named Executive Officer would realize upon the lapsing of restrictions on RSUs, performance units and cash LTI awards due to the specified event. The value shown is the number of unvested RSUs and performance units, assuming a target performance level, at June 30, 20162017 multiplied by the market price of common stock at the close of business on June 30, 20162017 plus the value of the cash LTI awards, which are also assumed to vest based on the target level of performance. |
| | (5) | Represents 75%100% of annual salary for Mr. Hewitt. For Mr.Messrs. Montalbano, Mr. Cavanah, Mr. Turner and Mr. Ryan, the amount represents payment ofnon-equity incentive severance for the event specified based on the average annual bonus compensation paid to the executive in the lesser of the previous three years or the number of full fiscal years the executive has been employed in the position. |
| | (6) | Represents the value the Named Executive OfficerMr. Montalbano would realize for the lapsing of restrictions on RSUs, performance units and cash LTI awards due to the Named Executive Officer’shis retirement. The value shown is the number of unvested RSUs at June 30, 20162017 for which restrictions would lapse at retirement multiplied by the market price of common stock at the close of business on June 30, 2016.2017. Restrictions lapse on performance units, RSUs and cash LTI awards upon retirement on a pro rata basis based on the number of full and partial months served in the applicable performance period. The performance units and cash LTI awards are assumed to vest at the target level of performance. Messrs. Hewitt, Cavanah, Ryan, and Turner were not eligible for retirement at June 30, 2016.2017. |
PROPOSAL NUMBER 3: Advisory Vote to Approve Named Executive Officer Compensation Pursuant to Section 14A of the Securities Exchange Act of 1934, as amended, and Rule14a-21 promulgated thereunder, we are seeking an advisory vote from our stockholders to approve our Named Executive Officer compensation, as set forth below. We are asking for stockholder approval of the compensation of our Named Executive Officers as disclosed in this proxy statement in accordance with SEC rules, which disclosures include the disclosures under the caption “Compensation Discussion and Analysis,” the compensation tables and the narrative discussion accompanying the compensation tables. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the policies and practices described in this proxy statement.
our Named Executive Officers every year.As discussed under the heading “Compensation Discussion and Analysis,” our executive compensation and benefit programs are designed to attract, motivate and retain a talented management team and to appropriately reward individual contributions to the achievement of our strategic goals. The Board of Directors believes this approach establishes a solid alignment of our executives’ and stockholders’ interests. We use the following principles in the design and administration of our executive compensation program:
| | • | | Competitiveness – Our compensation programs are designed to ensure we can attract, motivate and retain the talent needed to lead and grow the business. Targets for base salary, short-term and long-term compensation are generally based on median (50th percentile) market levels. |
Support Business Objectives, Strategy and Values – Ultimately our compensation program is designed to drive the achievement of annual business objectives, support the creation of long-term value for our stockholders, and promote and encourage behavior consistent with our core values and guiding principles.
| | • | | Pay for Performance – While we establish target pay levels at or near the median or 50th percentile market levels for target level performance, our plans provide the opportunity for significantly greater rewards for outstanding performance. At the same time, performance that does not meet expectations is not rewarded. |
Individual Performance – In addition to objective company-wide, business unit and operating unit financial measures, our programs emphasize individual performance and the achievement of personal objectives.
Integrated Approach – We look at compensation in total and strive to achieve an appropriate balance of immediate, short-term and long-term compensation components, with the ultimate goal of aligning executive compensation with long-term stockholder value. Approval of this advisory vote requires the affirmative vote of the majority of shares present in person or by proxy at the Annual Meeting and entitled to vote for the adoption of this proposal. The Board of Directorsunanimously recommends a vote “For” the approval of the compensation of our Named Executive Officers as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC.The Board of Directors welcomes our stockholders’ views on this subject, and will carefully consider the outcome of this vote. However, as an advisory vote, the outcome is not binding on us or the Board. PROPOSAL NUMBER 4: Advisory Vote on the Frequency of a Future Advisory Votes on Executive CompensationIn accordance with Section 14A of the Securities Exchange Act of 1934, as amended, and Rule14a-21 promulgated thereunder, we are also including in this proxy statement a separate proposal to enable our stockholders to vote, on an advisory andnon-binding basis, for their preference as to how frequently we should seek futuresay-on-pay advisory votes on the compensation of our Named Executive Officers. Stockholders may indicate whether future advisory votes on executive compensation should occur every one, two or three years. Stockholders also may, if they wish, abstain from casting a vote on this proposal. This advisory vote on the frequency of futuresay-on-pay votes must be provided to stockholders at least once every six years. At our 2011 annual meeting, we sought an advisory vote from our stockholders on whether future advisory votes on executive compensation of the nature reflected in Proposal 4 should occur every year, every two years or every three years. Theone-year option received the greatest number of votes, and the Board confirmed that advisory votes on executive compensation would be held on an annual basis. Our Board continues to believe that a frequency of every “1 year” for the advisory vote on executive compensation is the most appropriate policy for our company. The Board believes that an annual advisory vote on executive compensation is consistent with our practice of seeking input and engaging in dialogue with our stockholders on corporate governance matters and our executive compensation philosophy, policies and practices. Stockholders will be able to specify one of four choices for this proposal on the proxy card: one year, two years, three years, or abstaining. Stockholders will not be voting to approve or disapprove our Board’s recommendation. The option of one year, two years or three years that receives the greatest number of votes will be considered the preferred option of stockholders. Although this advisory vote on the frequency of thesay-on-pay vote isnon-binding, our Board will take into account the outcome of the vote when considering the frequency of future advisory votes on executive compensation.The Board unanimously recommends that you vote to conduct future advisory votes on executive compensation every year. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Transactions with Related Persons
Both theThe son and son-in-law of James H. Miller, an independent member of our Board, of Directors, areis employed by subsidiariesa subsidiary of the Company in anon-executive officer positionsposition and, since the beginning of fiscal 2016, each2017, received total cash compensation in excess of $120,000. In addition, the son of Joseph F. Montalbano, our Chief Operating Officer, is employed by a subsidiary of the Company in anon-executive officer position and, since the beginning of fiscal 2016,2017, received total cash compensation in excess of $120,000. The Audit Committee reviewed and ratified the employment relationship of Mr. Miller’s son and son-in-law and Mr. Montalbano’s son. In approving these relationships, the Audit Committee considered the following:
The compensation and other terms of employment of Mr. Miller’s and Mr. Montalbano’s immediate family members are determined on a basis consistent with the Company’s human resources policies and are comparable to other Company employees at similar levels.
Mr. Miller’s son and son-in-law werewas employed by subsidiariesa subsidiary of the Company prior to the time Mr. Miller joined the Board.
Mr. Montalbano’s son was selected from a pool of qualified candidates and does not report directly to his father. On September 5, 2017, John D. Chandler, a member of our Board since June 20, 2017, became Senior Vice President and Chief Financial Officer of The Williams Companies, Inc. (“Williams”) and of WPZ GP LLC, the general partner of Williams Partners, L.P. We performed approximately $0.2 million of work for subsidiaries of Williams in fiscal 2017. The Audit Committee reviewed and ratified the transactions between subsidiaries of Williams and us. In approving these transactions, the Audit Committee considered the following: The work performed by us on behalf of subsidiaries of Williams in fiscal 2017 occurred before Mr. Chandler became a member of our Board and before Mr. Chandler was employed as an executive officer of Williams.
The transactions between us and subsidiaries of Williams were negotiated entirely at arm’s length. 31The transactions were insignificant to each of Williams and Matrix, and Mr. Chandler has no personal interest in the transactions.
The transactions will in no way impair the ability of Mr. Chandler to act in our best interests.
Review, Approval or Ratification of Transactions with Related Persons The Company’s Corporate Governance Guidelines, which are available on the Corporate Governance page in the Investor Relations section of our website, matrixservicecompany.com, provide that the Company shall conduct an appropriate review of all transactions with related persons for potential conflict of interest situations on an ongoing basis, and all such transactions shall be approved by the Audit Committee or another independent body of the Board. The Corporate Governance Guidelines further provide that the term “transactions with related persons” refers to all transactions which are required to be disclosed pursuant to Item 404 of RegulationS-K.In the course of its review and approval or ratification of a transaction, the Audit Committee will consider:
the nature of the related person’s interest in the transaction; the material terms of the transaction; the significance of the transaction to the related person; the significance of the transaction to us; whether the transaction would impair the judgment of a director or executive officer to act in our best interest; and any other matters the Audit Committee deems appropriate. Our Corporate Governance Guidelines also provide that each director and executive officer is required to complete a Director and Officer Questionnaire on an annual basis, and to update such information when the questionnaire responses become incomplete or inaccurate. The Director and Officer Questionnaire requires disclosure of any transactions with the Company in which the director or executive officer, or any member of his or her immediate family, has a direct or indirect material interest.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of August 31, 2016,2017, certain information with respect to the shares of common stock beneficially owned by (i) each person known by the Company to own beneficially more than 5% of its outstanding shares of Common Stock, (ii) each director and director nominee of the Company, (iii) each executive officer of the Company named in the Summary Compensation Table herein and (iv) all directors, director nominees and executive officers of the Company as a group. Unless otherwise noted, each of the persons listed below has sole voting and investment power with respect to the shares listed. | | | | | | | | | | Identity of Beneficial Owner | | Shares Beneficially Owned | | | | Calculated Ownership % (1) | | | | | | | | BlackRock, Inc. | | 2,741,146 |
| | (2) | | 10.3 | % | 40 East 52nd Street | | | | | | | New York, NY 10022 | | | | | | | | | | | | | | Royce & Associates, LLC | | 2,676,795 |
| | (3) | | 10.1 | % | 745 Fifth Avenue | | | | | | | New York, NY 10151 | | | | | | | | | | | | | | Dimensional Fund Advisors LP | | 1,441,079 |
| | (4) | | 5.4 | % | 6300 Bee Cave Road | | | | | | | Austin, TX 78746 | | | | | | | | | | | | | | Michael J. Hall | | 76,100 |
| | (5) | | * |
| I. Edgar Hendrix | | 29,800 |
| | (5) | | * |
| Paul K. Lackey | | 34,200 |
| | (5) | | * |
| Tom E. Maxwell | | 38,329 |
| | (5) | | * |
| Jim W. Mogg | | 14,700 |
| | (5) | | * |
| James H. Miller | | 1,825 |
| | (5) | | * |
| John W. Gibson | | — |
| | (5) | | * |
| John R. Hewitt | | 174,931 |
| | (5) | | * |
| Joseph F. Montalbano | | 60,936 |
| | (5) | | * |
| Kevin S. Cavanah | | 88,227 |
| | (5) | | * |
| James P. Ryan | | 82,099 |
| | (5) | | * |
| Jason W. Turner | | 30,483 |
| | (5) | | * |
| All directors, director nominees and executive officers as a group (15 persons) | | 673,907 |
| | (5) | | 2.5 | % |
| | | | | | | | | Identity of Beneficial Owner | | Shares Beneficially Owned | | | Calculated Ownership % (1) | | BlackRock, Inc. 40 East 52nd Street New York, NY 10022 | | | 3,364,054 | (2) | | | 12.6 | % | Royce & Associates, LP 745 Fifth Avenue New York, NY 10151 | | | 2,008,520 | (3) | | | 7.5 | % | Dimensional Fund Advisors LP 6300 Bee Cave Road Austin, TX 78746 | | | 1,845,596 | (4) | | | 6.9 | % | LSV Asset Management 155 North Wacker Drive, Suite 4600 Chicago, IL 60606 | | | 1,808,750 | (5) | | | 6.8 | % | The Vanguard Group 100 Vanguard Boulevard Malvern, PA 19355 | | | 1,385,209 | (6) | | | 5.2 | % | Michael J. Hall | | | 76,100 | (7) | | | | * | I. Edgar Hendrix | | | 29,800 | (7) | | | | * | Tom E. Maxwell | | | 38,329 | (7) | | | | * | Jim W. Mogg | | | 14,700 | (7) | | | | * | James H. Miller | | | 1,825 | (7) | | | | * | John W. Gibson | | | — | (7) | | | | * | John D. Chandler | | | — | (7) | | | | * | Martha Z. Carnes | | | — | (7) | | | | * | John R. Hewitt | | | 178,173 | (7) | | | | * | Joseph F. Montalbano | | | 48,635 | (7) | | | | * | Kevin S. Cavanah | | | 87,714 | (7) | | | | * | James P. Ryan | | | 50,010 | (7) | | | | * | Jason W. Turner | | | 35,714 | (7) | | | | * | All directors, director nominees and executive officers as a group (17 persons) | | | 656,405 | (7) | | | 2.5 | % |
| | | * | Indicates ownership of less than one percent of the outstanding shares of common stock. |
| | (1) | Shares of common stock which were not outstanding but which could be acquired by an executive officer upon exercise of an option within 60 days of August 31, 20162017 are deemed outstanding for the purpose of computing the percentage of outstanding shares beneficially owned by such person. Such shares, however, are not deemed to be outstanding for the purpose of computing the percentage of outstanding shares beneficially owned by any other person. |
| | (2) | Information is as of December 31, 20152016 and is based on the Schedule 13G13G/A dated January 8, 201612, 2017 filed by BlackRock, Inc. (“BlackRock”). BlackRock is a parent holding company or control person in accordance with Rule13d-1(b)(1)(ii)(G). BlackRock has sole voting power over 2,663,2793,289,944 shares and sole dispositive power over all of the shares shown. |
| | (3) | Information is as of MarchDecember 31, 2016 and is based on the Schedule 13G/A dated January 11, 2017 filed by Royce & Associates, LP. (“Royce”). Royce is a registered investment adviser. Royce has sole voting and dispositive power over all of the shares shown. |
(4) | Information is as of December 31, 2016 and is based on the Schedule 13G dated April 7, 2016 filed by Royce & Associates, LLC. (“Royce”). Royce is a registered investment advisor. Royce has sole dispositive voting and disposition power over all of the shares shown. |
| | (4) | Information is as of December 31, 2015 and is based on the Schedule 13G dated February 9, 20162017 filed by Dimensional Fund Advisors LP (“Dimensional”). Dimensional is a registered investment advisor.adviser. Dimensional has sole voting power over 1,345,2681,742,152 shares and dispositive power over all of the shares shown. |
(5) | Information is as of December 31, 2016 and is based on the Schedule 13G dated February 6, 2017 filed by LSV Asset Management (“LSV”). LSV is a registered investment adviser. LSV has sole voting power over 1,094,617 shares and dispositive power over all of the shares shown. |
(5)(6) | Information is as of December 31, 2016 and is based on the Schedule 13G dated February 10, 2017 filed by The Vanguard Group (“Vanguard”). Vanguard is a registered investment advisor. Vanguard has sole voting power over 32,200 shares, sole dispositive power over 1,353,258 shares, shared voting power over 1,294 shares and shared dispositive power over 31,951 shares. |
(7) | Includes the following shares of common stock that are issuable upon the exercise of stock options that are currently exercisable or are exercisable within 60 days after August 31, 2016:2017: Mr. Cavanah – 16,850 shares; Mr. Montalbano - Montalbano—21,050 shares; Mr. Ryan - 9,813 shares; Mr. Turner - Turner—8,000 shares; 1517 directors and executive officers as a group – 62,26363,050 shares. There are 1,490 RSUsAlso includes the following shares of common stock that are issuable upon the vesting of RSUs within 60 days ofafter August 31, 2016.2017: 17 directors and executive officers as a group—1,490 shares. |
Equity Ownership Guidelines The Board of Directors believes that our executive officers should demonstrate their commitment to and belief in the Company’s long-term profitability. Accordingly, each executive officer is expected to maintain a significant investment in the Company through the ownership of Company stock. Stock ownership more closely aligns our executive officers’ interests and actions with the interests of the Company’s stockholders. Our Equity Ownership Guidelines, which were most recently revised in August 2011, and were reviewed and reaffirmed in August 2014 are as follows:
Amount of Ownership – Defined as a multiple of the individual’s base salary as noted below. These multiples represent the minimum amount of Company stock an executive officer should seek to acquire and maintain.maintain: | | | | | | | | | | President/CEO | | 5 times base salary | | CFO/COO/Presidents of the twothree principal operating subsidiaries | | 3 times base salary | | All other executive officers | | 1 times base salary | | | | |
Timing: The executive officers have until five years after the date of their appointment as an executive officer to acquire the ownership levels discussed above. Thereafter, they are expected to retain this level of ownership during their tenure with the Company. Compliance will be evaluated on an annual basis as of June 30 of each year.
Eligible Forms of Equity: shares owned separately by the executive officer or owned either jointly with, or separately by, his or her immediate family members residing in the same household; shares held in trust for the benefit of the executive officer or immediate family members; shares purchased in the open market; shares purchased through the Company’s Employee Stock Purchase Plan; vested and unvested time-based restricted stock or restricted stock units;RSUs; unvested performance or market based performance units, restricted stock or restricted stock unitsRSUs but only to the extent that the Company recognizes compensation expense with respect to such performance units, restricted stock or restricted stock units;RSUs; and thein-the-money value of vested and unexercised stock options. All of our executive officers have met the equity ownership guidelines as of June 30, 2016, with the exception of Mr. Turner and Mr. Bennett. Mr. Turner, who was promoted to President of Matrix North American Construction, Inc. in December 2013, will have until December 2018 to comply with the guidelines. Mr. Bennett, who was appointed as Vice President and Chief Information Officer in October of 2014, will have until October of 2019 to comply with the guidelines. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors and executive officers, and persons who own more than 10% of the Company’s common stock, to report their initial ownership of the common stock and any subsequent changes in ownership of the common stock with the SEC and NASDAQ and to furnish the Company with a copy of each such report. To the Company’s knowledge, based solely on the Company’s review of the copies of such reports received by the Company and on written representations by certain reporting persons that no other reports were required during and with respect to fiscal 2016,2017, all Section 16(a) filing requirements applicable to its executive officers and directors, and 10% stockholders were complied with on a timely basis.
PROPOSAL NUMBER 4:
Approval of an Amendment to the Restated Certificate of Incorporation to Allow for the Removal of Directors With or Without Cause by a Majority Vote of the Stockholders.
Stockholder action at the Annual Meeting will be requested with respect to the approval of an amendment (the “Charter Amendment”) to the Restated Certificate of Incorporation of the Company (the “Charter”) to provide that any director of the Company may be removed with or without cause, upon the affirmative vote of a majority of the combined voting power of the outstanding shares of capital stock of the company entitled to vote generally in the election of directors, voting together as a single class.
Our Charter currently provides that a director may be removed only for cause and by the affirmative vote of the holders of at least 66-2/3% of the outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class.
On December 21, 2015, the Delaware Chancery Court issued an opinion in In re VAALCO Energy, Inc. Stockholder Litig., C.A. No. 11775--VCL (Del. Ch. Dec. 21, 2015), invalidating as a matter of law provisions of the certificate of incorporation and bylaws of VAALCO Energy, Inc., a Delaware corporation, that permitted the removal of VAALCO’s directors by its stockholders only for cause. The Court held that, in the absence of a classified board or cumulative voting, VAALCO’s “only for cause” director removal provisions conflict with § 141(k) of the Delaware General Corporation Law and are therefore invalid.
Article VII, Section 4 of the Charter, and Article III, Section 3 of our Amended and Restated Bylaws (the “Bylaws”), contain “only for cause” and “supermajority” director removal provisions, and we do not have a classified board of directors or cumulative voting. As such, and in light of the statute and case law, the Board of Directors is requesting stockholder approval of the Charter Amendment to provide that any director or directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. The Charter Amendment is attached to this proxy statement as Appendix A.
If the Charter Amendment is approved by our stockholders, it will become effective upon the filing thereof with the Secretary of State of the State of Delaware. If the Charter Amendment is not approved by our stockholders, Section 4 of Article VII of the Charter will continue to be in conflict with §141(k) of the Delaware General Corporation Law.
Our Board of Directors intends to approve conforming changes to Article III, Section 3 of the Bylaws, if the Charter Amendment is approved by the stockholders, in order to provide that, consistent with §141(k) of the Delaware General Corporation Law, any director or directors may be removed, with or without cause, by the holders of a majority of the outstanding shares of capital stock then entitled to vote at the election of directors. No stockholder approval is being requested nor is required with respect to such amendment of the Bylaws.
Approval of this proposal requires the affirmative vote of at least 66-2/3% of the combined voting power of the outstanding shares of capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class, outstanding on the record date for the Annual Meeting. Abstentions and broker non-votes will have the same effect as an “Against” vote. The Board of Directors recommends a vote “For” the approval of the Charter Amendment.
PROPOSAL NUMBER 5:
Approval of the Matrix Service Company 2016 Stock and Incentive Compensation Plan.
At the Annual Meeting, the stockholders will be asked to approve the Matrix Service Company 2016 Stock and Incentive Compensation Plan (the “2016 Plan”) to reserve 1,800,000 shares of common stock for issuance thereunder and the material plan terms thereof for purposes of complying with the stockholder approval requirements of Section 162(m) of the Internal Revenue Code (the “Code”). If approved, the 2016 Plan will be effective as of November 11, 2016. We believe approval of the 2016 Plan is advisable in order to:
ensure we have an adequate number of shares available in connection with our compensation program; and
allow us to grant awards that may qualify as “performance-based compensation” under Section 162(m).
On August 23, 2016, our Board of Directors, subject to the approval of our stockholders, approved the 2016 Plan. The proposed 2016 Plan is attached hereto as Appendix B.
Reasons for the Proposed 2016 Plan
The use of stock- and cash-based awards under the predecessor Matrix Service Company 2012 Stock and Incentive Compensation Plan (the “Prior Plan”) has been a key component of our compensation program since its original adoption in 2012. Cash- and stock-based compensation awards assist us in attracting and retaining capable, talented individuals to serve in the capacity of employees, officers and directors. The Prior Plan originally authorized us to issue up to 1,300,000 shares of common stock. An additional 1,000,000 shares of common stock became available in connection with the amendment of the Prior Plan effective November 13, 2014. As of June 30, 2016, 1,249,780 shares remained available for us to issue as awards under the Prior Plan, and 771,022 shares (including 333,973 performance units at target and 437,049 shares representing unvested restricted stock units) are subject to outstanding awards under the Prior Plan. At June 30, 2016 there are 143,036 shares (20,973 shares representing unvested restricted stock units and 122,063 shares issuable upon the exercise of share options) subject to outstanding awards under the frozen 2004 Stock Incentive Plan. If the 2016 Plan is approved, no more awards will be made under the Prior Plan on and after the November 11, 2016 effective date of the 2016 Plan.
The Board has determined that, in order to ensure that there are sufficient shares available to meet our needs for future grants during the coming years, the adoption of the 2016 Plan reserving 1,800,000 shares is necessary and desirable to give us a competitive edge in today’s volatile business environment. The ability to grant cash- and stock-based compensation awards is critical to our ability to attract and retain highly qualified individuals. Our successful operation and our ability to create long-term value for our stockholders depend on the efforts of our employees, including management, and we believe that it is in the best interest of our stockholders for those individuals to have an ownership interest in us in recognition of their present and potential contributions and to align their interests with those of our stockholders. In fiscal 2016, over 66% of equity awards were granted to employees other than the NEOs. Further details about our awards currently outstanding can be found in the sections on “Securities Authorized for Issuance under Equity Compensation Plans,” “Compensation Discussion and Analysis,” and “Executive Compensation.”
The 2016 Plan is a broad-based plan under which we may grant awards to all employees, including our officers and officers of our affiliates, and to non-employee members of the Board. We believe approval of the 2016 Plan will give us flexibility to continue to make cash- and stock-based grants under the 2016 Plan over the next few years in amounts determined appropriate by the Compensation Committee, which will administer the 2016 Plan (as discussed more fully below); however, this timeline is simply an estimate used by us to determine the number of new shares to ask our stockholders to approve and future circumstances may require us to change our expected equity grant practices. These circumstances include, but are not limited to, the future price of our common stock, award levels/amounts provided by our competitors and hiring activity during the next few years, including hiring activity related to mergers and acquisitions. It is our current practice to grant cash-based and stock-based compensation awards to key employees on an annual basis during the first quarter of each fiscal year based on targeted dollar values that are generally competitive with industry peers. For example, the aggregate targeted dollar value for the annual grants we made in fiscal 2016 was approximately $7.3 million. In addition, it is our current practice to grant stock-based compensation on an annual basis to our non-employee directors in the second quarter of each fiscal year, which are also based on targeted dollar values that are generally competitive with industry peers. Fluctuations in our stock price may result in stock-based awards for a given year requiring a larger or smaller number of shares in order to capture the same grant date value as a prior year’s award, which impacts the rate at which we utilize shares for compensation purposes. The closing market price of our common stock as of August 31, 2016 was $18.49 per share.
The 2016 Plan will allow us to use, if desired, a variety of equity compensation alternatives in structuring compensation arrangements for our personnel. While we are aware of the potential dilutive effect of compensatory equity awards, we also recognize the significant motivational and performance benefits that may be achieved from making such awards. As of August 31, 2016, the total number of shares of our outstanding common stock was 26,520,376. Our current dilution (which is the number of shares available for grant under the Prior Plan as of August 31, 2016, divided by the total number of shares of our common stock outstanding) is approximately 3.2%. If the 2016 Plan is approved, the potential dilution from authorized issuances for stock-based awards will increase to approximately 6.8%. In determining the number of shares to request pursuant to this proposal, the Compensation Committee considered the foregoing factors and decided that 1,800,000 shares was the appropriate number to allow us to effectuate an effective equity compensation program over the coming years.
In addition to the approval of the 2016 Plan to authorize the reservation of 1,800,000 shares, our stockholders are being asked to approve the material plan terms of the 2016 Plan so that awards granted under the 2016 Plan that are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) may be fully deductible by us and our affiliates. Although we have not adopted a policy that all compensation paid to our executive officers must be tax-deductible and we expect we may pay compensation to our executives that is not fully deductible, the 2016 Plan is intended, in part, to qualify for exemption from the deduction limitations of Section 162(m) by providing “performance-based compensation” to “covered employees” within the meaning of Section 162(m). Under Section 162(m), the federal income tax deductibility of compensation paid to our Chief Executive Officer and three other most highly compensated officers (other than our Chief Executive Officer or Chief Financial Officer) determined pursuant to the executive compensation disclosure rules under the Securities Exchange Act of 1934 (“Covered Employees”) may be limited to the extent such compensation exceeds $1,000,000 in any taxable year. However, we may deduct compensation paid to our Covered Employees in excess of that amount if it qualifies as “performance-based compensation” as defined in Section 162(m).
In addition to certain other requirements, in order to qualify for this exemption, the regulations under Section 162(m) require that the material plan terms of the 2016 Plan be periodically disclosed to and approved by our stockholders. Under the Section 162(m) regulations, the material plan terms of the 2016 Plan are:
the maximum amount of compensation that may be paid to an individual under the 2016 Plan during a specified period;
the employees eligible to receive compensation under the 2016 Plan; and
the business criteria on which the performance goals are based.
We intend that awards under the 2016 Plan may be designed to qualify for exemption from the deduction limitations of Section 162(m), in the event we choose to structure compensation in a manner that will satisfy the “performance-based compensation” exemption to Section 162(m). Accordingly, we are asking stockholders to approve the material plan terms of the 2016 Plan for Section 162(m) purposes so that awards under the 2016 Plan that are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) may be deductible by us.
The material plan terms of the 2016 Plan for Section 162(m) purposes that the stockholders are being asked to approve are disclosed below as follows:
the maximum amount of compensation is described in the section entitled “Summary of the 2016 Plan-Individual Limits on Awards;”
the eligible employees are described in the section entitled “Summary of the 2016 Plan-Eligibility;” and
the business criteria are described in the section entitled “Summary of the 2016 Plan-Performance-Based Compensation.”
Consequences of Failing to Approve the Proposal
The 2016 Plan will not be implemented unless approved by our stockholders. If the 2016 Plan is not approved by our stockholders, the Prior Plan will remain in effect in its current form, and we will continue to grant awards thereunder until our share reserve under the Prior Plan is exhausted, which could occur as soon as the time of our next annual grant during the first quarter of fiscal 2018, based on current expected equity grant practices (noting again that the share reserve could last for a longer period of time, depending on our future equity grant practices, which we cannot predict with certainty).
Summary of the 2016 Plan
The following summary provides a general description of the material features of the 2016 Plan but is not a complete description of all provisions of the 2016 Plan and is qualified in its entirety by reference to the full text of the 2016 Plan attached as Appendix A, which is incorporated by reference in this proposal. The purpose of the 2016 Plan is to promote the success and enhance the value of the Company by linking the personal interests of our employees and non-employee directors to those of our stockholders, and by providing an incentive for outstanding performance. The 2016 Plan permits the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards (collectively referred to as “Awards”).
Key Features of the 2016 Plan
Key features of the 2016 Plan include:
No discounted options or related Awards may be granted;
Except as otherwise provided in an Award agreement at the time of grant or thereafter by the Compensation Committee, Awards are generally non-transferrable, except to an Award recipient’s immediate family member, pursuant to a qualified domestic relations order, by will or the laws of descent and distribution, or to a trust of which the Award recipient is and remains the sole beneficiary for his or her lifetime;
No automatic Award grants are made to any eligible individual;
Awards may be designed to meet the requirements for deductibility as “performance-based compensation” under Section 162(m) of the Code upon stockholder approval of the eligible employees, business criteria and maximum annual per person compensation limits;
Limitations on the maximum number or amount of Awards that may be granted to certain individuals during any fiscal year;
No repricing of stock options or stock appreciation rights without stockholder approval;
Except under limited circumstances, all awards must include a minimum one-year vesting period;
Awards are subject to potential reduction, cancellation, forfeiture, recoupment or other clawback under certain specified circumstances in accordance with our current clawback policy and any other clawback policies we may adopt; and
Administration. The Compensation Committee of the Board of Directors (the “Committee”), will administer the 2016 Plan and will have authority to make Awards under the 2016 Plan, to set the terms of the Awards, to interpret the 2016 Plan, to establish any rules or regulations relating to the 2016 Plan that it determines to be appropriate and to make any other determination that it believes necessary or advisable for the proper administration of the 2016 Plan.
Eligibility. Consistent with certain provisions of Section 162(m) and the accompanying regulations, the employees eligible to receive compensation must be set forth in the plan and approved by our stockholders. All employees and non-employee directors of the Company and its affiliates are eligible to receive Awards under the 2016 Plan, as determined by the Committee. Eligible employees and non-employee directors who are designated by the Committee to receive an Award under the 2016 Plan are referred to as “Participants.” As of August 31, 2016, we had approximately 4,200 employees and seven non-employee directors who would be eligible to be Participants in the 2016 Plan.
Individual Limits on Awards. Consistent with certain provisions of Section 162(m) and accompanying regulations, restrictions on the maximum number of shares that may be granted to a Participant in a specified period and restrictions on the maximum amount of cash compensation payable pursuant to an Award under the 2016 Plan to a Participant must be provided for in the plan and approved by our stockholders. The 2016 Plan contains limits on the Awards granted to any Participants who are subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, as amended (“Insiders”). Accordingly, unless the Committee determines that an Award to an Insider will not be designed to qualify as performance-based compensation under Section 162(m),
The maximum number of shares that may be awarded in the form of stock options or stock appreciation rights to any Insider in any fiscal year is 400,000 shares.
The maximum number of shares that may be awarded in the form of restricted stock or restricted stock units to any Insider in any fiscal year is 400,000 shares.
The maximum number of shares that may be awarded in the form of performance shares or performance units to any Insider in any fiscal year is 400,000 shares.
The maximum number of shares that may be awarded in the form of cash-based Awards to any Insider in any fiscal year is $5,000,000.
The maximum number of shares that may be awarded in the form of other stock-based Awards to any Insider in any fiscal year is 400,000 shares.
In addition, no individual who is a non-employee director will be granted Awards covering more than 100,000 shares in the aggregate during any fiscal year, and in no event will the grant date fair value of Awards granted to a non-employee director exceed $400,000 in the aggregate during any fiscal year.
Number of Shares Subject to the 2016 Plan. The number of shares of our common stock reserved for issuance under the 2016 Plan is 1,800,000 shares, subject to certain adjustments as provided in the 2016 Plan.
Share Counting Rules. The following are other rules for counting shares against the applicable share limits of the 2016 Plan:
For Awards settled in cash or a form other than shares, the shares that would have been delivered had there been no such cash or other settlement will not be counted against the shares available for issuance under the 2016 Plan.
For shares that are delivered pursuant to the exercise of a stock appreciation right or stock option, the number of underlying shares to which the exercise related shall be counted against the applicable share limits, as opposed to the number of shares actually issued. For example, if a stock option relates to 1,000 shares and is exercised on a cashless basis at a time when the payment due to the Participant is 150 shares, then 1,000 shares shall be charged against the applicable share limits.
Except as otherwise provided below, shares that are subject to Awards that expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under the Prior Plan or the 2016 Plan will again be available for subsequent Awards under the 2016 Plan.
Shares that are exchanged by a Participant or withheld by us as full or partial payment in connection with any Award other than an option or stock appreciation right granted under either the Prior Plan or the 2016 Plan, as well as any shares exchanged by a Participant or withheld to satisfy the tax withholding obligations related to any such Award, will be available for subsequent Awards under the 2016 Plan. This includes shares subject to any awards that are outstanding under the Prior Plan as of the November 11, 2016 effective date of the 2016 Plan, which shares may become available for re-issuance under the 2016 Plan in the circumstances described in the preceding sentence. The number shares subject to outstanding awards under the Prior Plan as of August 31, 2016 is 951,812.
Shares that are exchanged by a participant or withheld by us to pay the exercise price of an option or stock appreciation right granted under the Prior Plan or the 2016 Plan, as well as any shares exchanged or withheld to satisfy the tax withholding obligations related to any option or stock appreciation right, will not be available for subsequent Awards under the 2016 Plan.
Source of Shares. Common stock issued under the 2016 Plan may come from authorized but unissued shares of our common stock or from treasury shares.
Stock Options. The Committee may grant nonqualified stock options or incentive stock options to purchase shares of our common stock. The Committee will determine the number and exercise price of the options, and the time or times that the options become exercisable, provided that the option exercise price may not be less than the fair market value of a share of common stock on the date of grant. The term of an option will also be determined by the Committee, but may not exceed ten years. No dividends or dividend equivalents will be granted alone or in conjunction with any stock option Award.
The option exercise price may be paid in cash; by check; in shares of common stock; through a “cashless” exercise arrangement with a broker; or in any other manner authorized by the Committee. Incentive stock options will be subject to certain additional requirements necessary in order to qualify as incentive stock options under Section 422 of the Code.
Stock Appreciation Rights. A stock appreciation right may be granted by the Committee in its discretion. The Committee may grant freestanding stock appreciation rights, tandem stock appreciation rights or any combination of these forms of stock appreciation rights. The grant price for each stock appreciation right shall be determined by the Committee and shall be specified in the Award agreement, but in no event shall the grant price be less than the fair market value of a share of our common stock on the date the stock appreciation right is granted. The grant price of tandem stock appreciation rights shall be equal to the option price of the related option. The term of the stock appreciation right shall be determined by the Committee and specified in the Award agreement which relates to the stock appreciation right, but may not exceed ten years. Outstanding stock appreciation rights may be exercised on whatever terms and conditions the Committee imposes. Tandem stock appreciation rights may be exercised for all or part of the shares subject to the related option on the surrender of the right to exercise equivalent portions of the related option. A tandem stock appreciation right may be exercised only with respect to the shares for which the related option is unexercisable. With respect to a tandem stock appreciation right granted in connection with an incentive stock option:
the tandem stock appreciation right will expire no later than the expiration of the underlying incentive stock option;
the value of the payout with respect to the tandem stock appreciation right will be for no more than 100 percent of the difference between the option price of the underlying incentive stock option and the fair market value of the shares subject to the underlying incentive stock option at the time the tandem stock appreciation right is exercised; and
the tandem stock appreciation right may be exercised only when the fair market value of the shares subject to the incentive stock option exceeds the option price of the incentive stock option.
No dividends or dividend equivalents will be granted alone or in conjunction with an Award of stock appreciation rights.
On the exercise of a stock appreciation right, a participant will be entitled to receive payment in an amount determined by multiplying:
the difference between the fair market value of a share of common stock on the date of exercise and the grant price; by
the number of shares with respect to which the stock appreciation right is exercised.
In the discretion of the Committee, the payment of the stock appreciation right exercised may be in cash, shares of equivalent value (based on the fair market value on the date of exercise of a stock appreciation right), in some combination thereof or in any other form approved by the Committee.
Restricted Stock. Shares of common stock may be granted by the Committee to an eligible employee or non-employee director and made subject to restrictions on sale, pledge or other transfer for a certain period (the restricted period). All shares of restricted stock will be subject to such restrictions as the Committee may provide in an Award agreement with the Participant, including provisions obligating the Participant to forfeit or resell the shares to us in the event of termination of employment or service or if specified performance goals or targets are not met. A Participant’s rights with respect to such shares shall be subject to the restrictions provided in the Award agreement and the 2016 Plan. To the extent an Award of restricted stock is intended to qualify as performance-based compensation under Section 162(m), it must be granted subject to the attainment of performance goals and meet the additional requirements imposed by Section 162(m). The Committee may also determine whether a Participant will be entitled to receive the value equivalent of any dividends paid during the performance period. However, a Participant will only be entitled to receive an amount in respect of dividends paid on restricted stock that include performance-based goals to the extent the restricted stock has been earned by achievement of the corresponding performance criteria.
Restricted Stock Units. A restricted stock unit represents the right to receive from us, on the respective scheduled vesting or payment date for such restricted stock unit, one or more shares of common stock. An Award of restricted stock units may be subject to the attainment of specified performance goals or targets, forfeitability provisions and such other terms and conditions as the Committee may determine, subject to the provisions of the 2016 Plan. To the extent an Award of restricted stock units is intended to qualify as performance-based compensation under Section 162(m), it must be granted subject to the attainment of performance goals and meet the additional requirements imposed by Section 162(m). The Committee may also determine whether a Participant will be entitled to receive the value equivalent of any dividends paid during the performance period. However, a Participant will only be entitled to receive an amount in respect of dividends paid on shares underlying restricted stock units that include performance-based goals to the extent the restricted stock units have been earned by achievement of the corresponding performance criteria.
Performance Shares, Performance Units and Cash-Based Awards. Performance shares, performance units and cash-based Awards may be granted in such amounts and subject to such terms and conditions as determined by the Committee at the time of grant and as set forth in the Award agreement. The Committee will set performance goals, which, depending on the extent to which they are met, will determine the number and/or value of the performance shares/units and cash-based Awards that will be paid out to the Participant and whether a Participant will be entitled to receive the value equivalent of any dividends paid during the performance period. However, a Participant will only be entitled to receive an amount in respect of dividends paid on shares to the extent the underlying performance shares or performance units have been earned by achievement of the corresponding performance criteria.
Participants will receive payment of the value of performance shares/units earned after the end of the performance period. Payment of performance shares/units and cash-based Awards will be made in shares, cash or a combination thereof that have an aggregate fair market value equal to the value of the earned performance shares/units and cash-based Awards at the close of the applicable performance period as the Committee determines. Shares may be granted subject to any restrictions deemed appropriate by the Committee.
Other Stock-Based Awards. The 2016 Plan also authorizes the Committee to grant Participants Awards of common stock and other Awards that are denominated in, payable in, valued in whole or in part by reference to, or are otherwise based on the value of, or the appreciation in value of, shares of our common stock (other stock-based Awards). The Committee has discretion to determine the Participants to whom other stock-based Awards are to be made, the times at which such Awards are to be made, the sizes of such Awards, the form of payment, and all other conditions of such Awards, including any restrictions, deferral periods or performance requirements. The Committee may also determine whether a Participant will be entitled to receive the value equivalent of any dividends paid during the performance period. However, a Participant will only be entitled to receive an amount in respect of dividends paid on shares underlying stock-based Awards that include performance-based goals to the extent the stock-based Awards have been earned by achievement of the corresponding performance criteria.
Performance-Based Compensation. Awards may be granted to employees who are “covered employees” under Section 162(m) that are intended to be “performance-based compensation” so as to preserve the tax deductibility of the Awards for federal income tax purposes. These performance-based Awards may be either equity or cash Awards, or a combination of both. Holders are only entitled to receive payment for a Section 162(m) performance-based Award for any given performance period to the extent that pre-established performance goals set by the Committee are satisfied. These pre-established performance goals must be based on one or more of the following performance criteria:
net earnings or net income (before or after taxes);
earnings per share;
net operating profit;
operating income;
operating income per share;
return measures (including, but not limited to, return on assets, return on capital, return on invested capital, and return on equity, sales or revenue);
cash flow (including, but not limited to, operating cash flow, free cash flow, free cash flow margin, and cash flow return on capital or investments);
earnings before or after taxes, interest, depreciation, and/or amortization and impairment of intangible assets;
gross or operating margins;
share price (including, but not limited to, growth measures and total stockholder return);
margins;
operating efficiency;
customer satisfaction;
employee satisfaction;
working capital targets;
revenue or sales growth or growth in backlog;
growth of assets;
productivity ratios;
expense targets;
measures of health, safety or environment (including, but not limited to, total recordable incident rate);
market share;
credit quality (including, but not limited to, days sales outstanding);
economic value added;
price earnings ratio;
improvements in capital structure; and
compliance with laws, regulations and policies.
With respect to particular performance-based Awards, the Committee is permitted to make certain equitable and objectively determinable adjustments to the performance goals; provided, that any Awards that are intended to qualify as “performance-based compensation” must be made in accordance with the requirements of Section 162(m). Upon certification of achievement of the performance goals for a particular performance period set forth in an Award that is intended to qualify as “performance-based compensation,” the Committee may reduce or eliminate, but not increase, the amount specified in the original Award.
Minimum Vesting Requirements. Awards under the 2016 Plan are subject to a one-year minimum vesting or forfeiture restriction period. This one-year minimum vesting or forfeiture restriction period does not apply to the grant of any such Awards with respect to an aggregate number of shares that does not exceed 5% of the total shares available for issuance under the 2016 Plan.
Recapitalization Adjustments. In the event of any “equity restructuring” event (such as a stock dividend, stock split, reverse stock split or similar event) with respect to our common stock, the number of shares of common stock with respect which Awards may be granted, the number of shares subject to outstanding Awards, the exercise price with respect to outstanding Awards and the individual grant limits with respect to share-denominated Awards shall be equitably adjusted to reflect such event.
Change of Control. Unless the applicable Award agreement provides otherwise or an Award is replaced or continued by the successor in connection with a “change of control” (as defined in the 2016 Plan), upon a change of control (i) Awards solely dependent on the satisfaction of a service obligation shall become fully vested and (ii) Awards dependent in any part on the satisfaction of performance objectives shall vest with performance determined based on actual performance achieved as of the date of the change of control or on a pro-rated basis based on target performance.
Unusual Transactions or Events; Change of Control. In the event of any distribution, recapitalization, reorganization, merger, spin-off, combination, repurchase, exchange of securities, or other corporate transaction or event or any other unusual or nonrecurring transactions or events (including without limitation a “change of control” as defined in the 2016 Plan), or of changes in applicable laws, regulations or accounting principles, the Committee may provide, in general, for:
the termination of an Award, with or without exchange for a cash payment or other rights or property of substantially equivalent value;
the acceleration of vesting, exercisability or payment with respect to all or any portion of an Award;
the issuance of substitute Awards by the successor or survivor entity; or
other adjustments in the terms of an Award.
Discontinuance or Amendment of the 2016 Plan; No Repricing. Our Board or the Compensation Committee may amend, modify, suspend or terminate the 2016 Plan in whole or in part at any time, but no amendment may materially diminish any of the rights of a Participant under any Awards previously granted without his or her consent. In addition:
without the prior approval of our stockholders, options and stock appreciation rights issued under the 2016 Plan will not be repriced, replaced or regranted through cancellation, whether in exchange for cash or another type of Award, by lowering the exercise price of a previously granted option or the grant price of a previously granted stock appreciation right or by replacing a previously granted option or stock appreciation right with a new option with a lower option price or a new stock appreciation right with a lower grant price; and
to the extent necessary under any applicable law, regulation or exchange requirement, no amendment shall be effective unless approved by our stockholders in accordance with applicable law, regulation or exchange requirement.
Tax Withholding. We may withhold from any payments or stock issuances under the 2016 Plan, or collect as a condition of payment, any taxes required by law to be withheld. Subject to the Committee’s right to approve, any Award recipient may, but is not required to, satisfy his or her withholding tax obligation by electing to deliver currently owned shares of our common stock or to have us withhold, from the shares the Participant would otherwise receive, shares of our common stock, in each case having a value equal to the minimum amount required to be withheld (or such other amount that will not cause adverse accounting consequences for the Company and is permitted under applicable withholding rules promulgated by the Internal Revenue Service or other applicable governmental entity).
Clawback Policy.The 2016 Plan will be subject to any written clawback policy we adopt, which policy may subject a Participant’s Awards and other rights and benefits under the 2016 Plan to reduction, cancellation, forfeiture or recoupment if certain events or wrongful conduct specified in the policy occur.
U.S. Federal Income Tax Consequences
The Company believes that under present U.S. federal income tax laws the following are the U.S. federal income tax consequences generally arising with respect to Awards under the 2016 Plan. The following summary does not purport to be a complete description of all applicable rules, and these rules (including those summarized below) are subject to change. The summary does not address the effects of any state or local or non-U.S. tax laws that may be applicable.
Nonqualified Stock Options
In general, no taxable income is realized by a Participant upon the grant of a nonqualified stock option. Rather, at the time of exercise of the nonqualified stock option, the Participant will be treated as receiving compensation (taxable as ordinary income and subject to withholding and employment taxes) in an amount equal to the fair market value of a share of our common stock at such time, less the exercise price paid. The Participant’s basis in the common stock for purposes of determining gain or loss
on a subsequent sale or disposition of such shares generally will be the fair market value of our common stock on the date the Participant exercises such option. Any subsequent gain or loss generally will be taxable as a capital gain or loss. We generally should be entitled to a federal income tax deduction at the time and for the same amount as the Participant recognizes ordinary income.
Incentive Stock Options
In general, no taxable income is realized by a Participant upon the grant of an incentive stock option. Additionally, if the applicable employment-related requirements are met, the Participant will not recognize taxable income at the time of exercise. However, the excess of the fair market value of our common stock received over the option purchase price is an item of tax preference income potentially subject to the alternative minimum tax. If any of the requirements for incentive stock options under the Code are not met, the incentive stock option will be treated as a nonqualified stock option and the tax consequences described above for nonqualified stock options will apply. Once an incentive stock option has been exercised by a Participant, if the stock acquired upon exercise is held for a minimum of two years from the date of grant and one year from the date of exercise, the gain or loss (in an amount equal to the difference between the fair market value on the date of sale and the exercise price) upon disposition of the stock will be treated as a long-term capital gain or loss, and we will not be entitled to any deduction. If the holding period requirements are not met, the excess of the fair market value of the stock on the date of exercise over the exercise price (less any diminution in value of the stock after exercise) will be treated as compensation (taxed as ordinary income and subject to withholding and employment taxes) and we will be entitled to a deduction to the extent of the amount so included in the income of the holder. Appreciation in the stock subsequent to the exercise date will be taxed as long-term or short-term capital gain, depending on whether the stock was held for more than one year after the exercise date.
Stock Appreciation Rights
A Participant who is granted a SAR generally will not recognize ordinary income upon receipt of the SAR. Rather, at the time of exercise of such SAR, the Participant will recognize ordinary income for income tax purposes in an amount equal to the value of any cash received and the fair market value on the date of exercise of any shares received. We generally will be entitled to a tax deduction at such time and in the same amount, if any, that the Participant recognizes ordinary income. The Participant’s tax basis in any shares received upon exercise of a SAR will be the fair market value of the shares on the date of exercise, and if the shares are later sold or exchanged, then the difference between the amount received upon such sale or exchange and the fair market value of such shares on the date of exercise will generally be taxable as long-term or short-term capital gain or loss (if the shares are a capital asset of the Participant) depending upon the length of time such shares were held by the Participant.
Restricted Stock
A Participant generally will not be taxed upon the grant of restricted stock, but rather will recognize ordinary income in an amount equal to the fair market value of the shares at the time the shares are no longer subject to a “substantial risk of forfeiture” (within the meaning of the Code). We generally will be entitled to a deduction at the time when, and in the amount that, the Participant recognizes ordinary income on account of the lapse of the restrictions. A Participant’s tax basis in the shares will equal their fair market value at the time the restrictions lapse, and the Participant’s holding period for capital gains purposes will begin at that time. Any cash dividends paid on the restricted stock before the restrictions lapse will be taxable to the Participant as additional compensation (and not as dividend income). Under Section 83(b) of the Code, a Participant may elect to recognize ordinary income at the time the restricted stock is awarded in an amount equal to the fair market value at that time, notwithstanding the fact that such restricted stock is subject to restrictions and a substantial risk of forfeiture. If such an election is made, no additional taxable income will be recognized by such Participant at the time the restrictions lapse, the Participant will have a tax basis in the shares equal to their fair market value on the date of the Award, and the Participant’s holding period for capital gains purposes will begin at that time. We generally will be entitled to a tax deduction at the time when, and to the extent that, ordinary income is recognized by such Participant. A Participant who makes an election under Section 83(b) and then forfeits the stock is not entitled to deduct any amount as a result of the forfeiture notwithstanding that the Participant included the fair market value of the stock in income at the time of the election.
Restricted Stock Units
In general, the grant of restricted stock units will not result in income for the Participant or in a tax deduction for us. Upon the settlement of such an Award in cash or shares, the Participant will recognize ordinary income equal to the aggregate value of the payment received, and we generally will be entitled to a tax deduction at the same time and in the same amount.
Other Awards
With respect to other Awards granted under the 2016 Plan, including cash-based Awards and other stock-based Awards, generally when the Participant receives payment with respect to an Award, the amount of cash and/or the fair market value of any shares or other property received will be ordinary income to the Participant, and we generally will be entitled to a tax deduction at the same time and in the same amount.
Code Section 162(m)
Section 162(m) of the Code denies a deduction to any publicly held corporation for compensation paid to covered employees in a taxable year to the extent that compensation to such covered employee exceeds $1,000,000. Qualified “performance-based compensation” is disregarded for purposes of the deduction limitation. The 2016 Plan has been designed to meet the “qualified performance-based compensation” requirements of Section 162(m) of the Code, but it is possible that compensation attributable to Awards under the 2016 Plan (when combined with all other types of compensation received by a covered employee from us or because of other factors) may not comply with all of the requirements of Section 162(m) of the Code, thereby preventing us from taking a deduction.
Golden Parachute Payments
If, on a change of control of our Company, the exercisability or vesting of an Award is accelerated, any excess on the date of the change of control of the fair market value of the shares or cash issued under accelerated Awards over the purchase price of such shares, if any, may be characterized as “parachute payments” (within the meaning of Section 280G of the Code) if the sum of such amounts and any other such contingent payments received by the employee equals or exceeds an amount equal to three times the “base amount” for such employee. The base amount generally is the average of the annual compensation of such employee for the five years ending before the year in which such change in ownership or control occurs. An “excess parachute payment,” with respect to any employee, is the excess of the parachute payments to such person, in the aggregate, over and above such person’s base amount. If the amounts received by an employee upon a change-in-control are characterized as parachute payments, such employee will be subject to a 20 percent excise tax on the excess parachute payment and we will be denied any deduction with respect to such excess parachute payment.
New Plan Benefits
The types and amounts of benefits that will be awarded under the 2016 Plan are not currently determinable. Awards granted under the 2016 Plan are within the discretion of the Committee, and the Committee has not determined future Awards or who might receive them. Information on equity-based awards and cash-based awards recently granted under the Prior Plan to each of our named executive officers is provided under the headings “Summary Compensation Table” and “Grants of Plan-Based Awards During Fiscal Year 2016.” The closing price for the Common Stock on the NASDAQ Global Select Market on August 31, 2016, was $18.49 per share.
Vote Required
Approval of this proposal requires approval by holders of a majority of the shares represented in person or by proxy and entitled to vote at the Annual Meeting. Abstentions will be treated as votes against this proposal. If you are a street name stockholder and you do not provide your brokerage firm with voting instructions, your brokerage firm may not cast votes with respect to the shares that you beneficially own. These broker non-votes will have no effect on the vote.
The Board of Directors unanimously recommends that you vote “FOR” approval of the 2016 Plan and the material terms thereof.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table provides information concerning the Company’s common stock that may be issued upon the exercise of options, warrants and rights under our existing equity compensation plans as of June 30, 2016. | | | | | | | | | | | | | Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) | | Weighted-average exercise price of outstanding options, warrants and rights (2) | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | | | | (a) | | (b) | | (c) | | Equity compensation plans approved by stockholders | | 914,058 |
| | $ | 10.19 |
| | 1,249,780 |
| | Equity compensation plans not approved by stockholders | | — |
| | N/A |
| | — |
| | Total | | 914,058 |
| | $ | 10.19 |
| | 1,249,780 |
| (3) |
2017. | | | | | | | | | | | | | Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) | | | Weighted-average exercise price of outstanding options, warrants and rights (2) | | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | | | | | (a | ) | | | (b | ) | | | (c | ) | Equity compensation plans approved by stockholders | | | 1,092,603 | | | $ | 10.19 | | | | 1,716,934 | | Equity compensation plans not approved by stockholders | | | — | | | | N/A | | | | — | | | | | | | | | | | | | | | Total | | | 1,092,603 | | | $ | 10.19 | | | | 1,716,934 | (3) | | | | | | | | | | | | | |
| | (1) | Includes 458,022605,580 RSUs and 333,973389,773 performance units, which have no exercise price. The amount included assumes that target level performance is achieved under outstanding performance units for which performance has not yet been determined. Also includes 122,06397,250 share options with an exercise price of $10.19. |
| | (2) | Excludes the shares issuable upon the vesting of RSUs and performance units for which there is no weighted-average price. |
| | (3) | Represents the total number of shares available for issuance under the Matrix Service Company 20122016 Stock and Incentive Compensation Plan. Of the 1,249,7801,716,934 shares available for issuance, all may be awarded as stock options, stock appreciation rights, restricted stock, restricted stock units,RSUs, performance shares or performance units. |
PROPOSALS OF STOCKHOLDERS A proposal of a stockholder intended to be presented at the next annual meetingCompany’s 2018 Annual Meeting of stockholdersStockholders must be received at the Company’s principal executive offices no later than June 9, 2017,May 18, 2018, if the proposal is to be considered for inclusion pursuant to Rule14a-8 promulgated under the Securities Exchange Act of 1934, as amended (“Rule14a-8”), in the Company’s proxy statement and proxy card for such meeting. In accordance with the Company’s Bylaws, any stockholder who intends to present a proposal at the Company’s 20172018 Annual Meeting of Stockholders and has not sought inclusion of the proposal in the Company’s proxy statement and accompanying proxy pursuant to Rule14a-8, must provide the Secretary of the Company with notice of such proposal in order for such proposal to be properly brought before the meeting, no later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year'syear’s annual meeting; provided, however, that in the event that the date of such annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder must be delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the close of business on the 10th day following the day on which public announcement of the date of such meeting is first made by the Company.
OTHER MATTERS Matters That May Come Before the Annual Meeting The Board of Directors knows of no matters other than those described in this proxy statement which will be brought before the Annual Meeting for a vote of the stockholders. If, however, any other matter requiring a vote of stockholders arises, the persons named in the accompanying proxy card will vote thereon in accordance with their best judgment. The enclosed proxy card confers discretionary authority to take action with respect to any additional matters that may come before the meeting. Availability of Form10-K A copy of the Company’s Annual Report on Form10-K for the fiscal year ended June 30, 2016 (without exhibits2017 is first being mailed to stockholders on or documents incorporatedabout September 26, 2017 and accompanies this proxy statement. In addition, a copy of the Company’s Annual Report on Form10-K for the fiscal year ended June 30, 2017 may be found by reference) including any financialvisiting the Company’s website atmatrixservicecompany.com. Householding of Proxy Materials The SEC has adopted rules that permit companies and intermediaries (such as banks and brokers) to satisfy the delivery requirements for proxy statements and schedulesannual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and exhibits thereto,cost savings for companies. A number of banks and brokers with account holders who are Company stockholders may be obtained without charge by“householding” the Company’s proxy materials and annual report. A single proxy statement and annual report will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your bank or broker that it will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and annual report, please notify your bank or broker, or direct your written request to Kevin S. Cavanah, Vice President Finance, Matrix Service Company, 5100 East Skelly Drive, Suite 500, Tulsa, Oklahoma, 74135, Attention: Secretary, Kevin S. Cavanah, or by visitingtelephone at (918)838-8822 and the “Investors Relations” sectionCompany will deliver a separate copy of the Company’s websiteannual report or proxy statement upon request. Stockholders who currently receive multiple copies of the proxy statement and annual report at matrixservicecompany.com. their address and would like to request “householding” of their communications should contact their bank or broker.Forward-Looking Statements Certain statements contained in this Proxy Statement are not based on historical fact and are forward-looking statements within the meaning of federal securities laws and regulations. These statements are based on management’s current expectations, assumptions, estimates and observations of future events and include any statements that do not directly relate to any historical or current fact; actual results may differ materially due in part to the risk factors set forth in Item 1A of the 2017 Form10-K. These forward-looking statements can be identified by the use of words “believes,” “intends,” “expects,” “anticipates,” “projects,” “estimates,” “predicts” and similar expressions. These forward-looking statements include, among others, such things as: the impact to our business of crude oil and other commodity prices; amounts and nature of future revenues and margins from each of our segments; and trends in the industries we serve. These statements are based on certain assumptions and analyses we made in light of our experience and our historical trends, current conditions and expected future developments as well as other factors we believe are appropriate. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties which could cause actual results to differ materially from our expectations, including: economic, market or business conditions in general and in the oil, gas, power, iron and steel and mining industries in particular; reduced creditworthiness of our customer base and the higher risk ofnon-payment of receivables due to low prevailing crude oil and other commodity prices; the inherently uncertain outcome of current and future litigation; the adequacy of our reserves for contingencies; changes in laws or regulations; and other factors, many of which are beyond our control. Consequently, all of the forward-looking statements made in this proxy statement are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences or effects on our business operations. We assume no obligation to update publicly, except as required by law, any such forward-looking statements, whether as a result of new information, future events or otherwise. Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be Held on November 11, 2016 October 31, 2017Stockholders may view this proxy statement, our form ofthe enclosed proxy card and our 20162017 Annual Report to Stockholders over the Internet by accessing our website at matrixservicecompany.com. Information on our website does not constitute a part of this proxy statement. | | | By Order of the Board, of Directors, | | Kevin S. Cavanah |
October 7, 2016
September 15, 2017 Tulsa, Oklahoma VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of
APPENDIX A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
information up until 11:59 P.M. Eastern Time the day before thecut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. MATRIX SERVICE COMPANY
FIRST: The name 5100 EAST SKELLY DRIVE ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS SUITE 500 If you would like to reduce the costs incurred by our company in mailing proxy TULSA, OK 74135 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 thecut-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: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. For Withhold For All To withhold authority to vote for any All All Except individual nominee(s), mark “For All Except” and write the number(s) of the Corporation is Matrix Service Company.
SECOND: The address of its registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 65 million, consisting of 5 million shares of Preferred Stock, par value $.01 per share (hereinafter called "Preferred Stock") and 60 million shares of Common Stock, par value $.01 per share (hereinafter called "Common Stock").
The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized to provide forrecommends you vote FOR nominee(s) on the issuanceline below. the following: 0 0 0 1. Election of shares of Preferred Stock in series, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof.Directors Nominees 01 Martha Z. Carnes 02 John D. Chandler 03 John W. Gibson 04 John R. Hewitt 05 Tom E. Maxwell 06 James H. Miller 07 Jim W. Mogg The authority of the Board of Directors with respectrecommends you vote FOR proposals 2 and 3. For Against Abstain 2. To ratify the engagement of Deloitte & Touche LLP as the Company’s independent registered public accounting 0 0 0firm for fiscal 2018. 3. To conduct an advisory vote on executive compensation. 0 0 0 The Board of Directors recommends you vote 1 YEAR on the following proposal: 1 year 2 years 3 years Abstain 4. To conduct an advisory vote regarding the frequency for which stockholders will have an advisory vote to 0 0 0 0 approve the compensation paid to certain executive officers. NOTE: At their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any postponements of adjournments thereof. 17 Yes No . 1 . 0 . Please indicate if you plan to attend this meeting 0 0 R1 1 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 series shall include, but not be limited to, determinationsign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or 0000344534 partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of any or allProxy Materials for the Annual Meeting: The Notice & Proxy Statement and Annual Report are available at www.proxyvote.com MATRIX SERVICE COMPANY Annual Meeting of the following:
| | (a) | The designation of the series, which may be by distinguishing number, letter or title; |
| | (b) | The number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the creation of the series) increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares then outstanding); |
| | (c) | Whether dividends, if any, shall be cumulative or noncumulative, the dividend rate of the series and the dates at which dividends, if any, shall be payable; |
(d) The redemption rights and price or prices, if any, for shares of the series;
| | (e) | The terms and amount of any sinking fund provided for the purchase or redemption of shares of the series; |
| | (f) | The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation; |
| | (g) | Whether the shares of the series shall be convertible into or exchangeable for shares of any other class or series of shares, or any other security, of the Corporation or any other security, of the Corporation or any other corporation, and, if so, the conversion price or prices or rate or rates of exchange, any adjustments thereof, the date or dates as of which such shares shall be convertible and all other terms and conditions upon which such conversion or exchange may be made; |
| | (h) | Restrictions on the issuance of shares of the same series or of any other class or series and the right, if any, to subscribe for or purchase any securities of the corporation or any other corporation; |
| | (i) | The voting rights, if any, of the holders of such series; and |
| | (j) | Any other relative, participating, optional or other special powers, preferences, rights, qualifications, limitations or restrictions thereof; |
All as determined from time to timeStockholders October 31, 2017 2:00 PM Central Time This proxy is solicited by the Board of Directors The stockholder(s) hereby appoint(s) Kevin S. Cavanah and stated inJohn R. Hewitt, or either of them, as proxies, each with the resolutions providing forpower to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the issuancereverse side of such preferred stock (a "Preferred Stock Designation").
The holdersthis ballot, all of the shares of Common Stock shall be entitled to one vote for each such share upon all questions presented toof MATRIX SERVICE COMPANY that the stockholders. Except as may be provided in this Certificate of Incorporation or by the Board of Directors in a Preferred Stock Designation, the Common Stock shall have the exclusive right to vote for the election of Directors and for all other purposes, and holders of Preferred Stock shall not be entitled to receive notice of any meeting of stockholders at which they stockholder(s) is/are not entitled to vote or consent.
Preferred Stock that is redeemed, purchased or retired byat the Corporation shall assume the statusAnnual Meeting of authorized but unissued Preferred Stock and may thereafter, subject to the provisions of any resolutions of the Board of Directors providing for the issuance of any particular series of Preferred Stock, be reissued in the same manner as authorized but unissued Preferred Stock.
The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable laws.
FIFTH: The Board of Directors is hereby authorized to create and issue rights (the "Rights") entitling the holders thereof to purchase from the Corporation shares of capital stock or other securities. The times at which and the terms upon which the rights areStockholder(s) to be issuedheld at 2:00 PM Central Time on October 31, 2017 at 5100 East Skelly Drive, Tulsa, Oklahoma 74135, and any adjournment or postponement thereof. This proxy, when properly executed, will be determined by the Board of Directors and set forth in the contracts or instruments that evidence the Rights. The authority of the Board of Directors with respect to the Rights shall include, but not be limited to, determination of the following:
| | (a) | The initial purchase price per share of the capital stock or other securities of the Corporation to be purchased upon exercise of the Rights; |
| | (b) | Provisions relating to the times at which and the circumstances under which the Rights may be exercised or sold or otherwise transferred, either together with or separately from, any other securities of the Corporation; |
| | (c) | Provisions that adjust the number or exercise price of the Rights or amount or nature of the securities or other property receivable upon exercise of the Rights in the event of a combination, split or recapitalization of any capital stock of the Corporation, a change in ownership of the Corporation's securities or a reorganization, merger, consolidation, sale of assets or other occurrence relating to the Corporation or any capital stock of the Corporation, and provisions restricting the ability of the Corporation to enter into any such transaction absent an assumption by the other party or parties thereto of the obligations of the Corporation under such Rights; |
| | (d) | Provisions that deny the holder of a specified percentage of the outstanding securities of the Corporation the right to exercise the Rights and/or cause the Rights held by such holder to become void; |
(e) Provisions that permit the Corporation to redeem the Rights; and
(f) The appointment of a Rights Agent with respect to the Rights;
and such other provisions relating to the Rights as may be determined by the Board of Directors.
SIXTH: Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional Directors under specific circumstances:
| | (a) | Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing of such stockholders; |
| | (b) | Special meetings of the stockholders of the Corporation may be called only by the Chairman of the Board of Directors and shall be called within 10 days after receipt of the written request of the Board of Directors, pursuant to a resolution approved by a majority of the members of the Board of Directors; and |
| | (c) | The business permitted to be conducted at any special meeting of the stockholders is limited to the business brought before the meeting by the Chairman or by the Secretary at the request of a majority of the members of the Board of Directors. |
SEVENTH: Section 1. Number, Election and Terms of Directors.
Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional Directors under specified circumstances, the number of Directors of the Corporation shall be fixed by the Bylaws of the Corporation and may be increased or decreased from time to time in such a manner as may be prescribed by the Bylaws, but in no case shall the number be less than 3 nor more than 15. Election of directors need not be by written ballot unless the Bylaws so provide.
Section 2. Stockholder Nomination of Director Candidates.
Advance notice of stockholder nominations for the election of Directors and advance notice of business to be brought by stockholders before an annual meeting shall be givenvoted in the manner provided in the Bylaws of the Corporation.
Section 3. Newly Created Directorships and Vacancies.
Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional Directors under specified circumstances, newly created directorships resulting from any increase in the number of Directors and any vacancy on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shalldirected herein. If no such direction is made, this proxy will be filled solely by the affirmative vote of a majority of the remaining Directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining Director. Any Director electedvoted in accordance with the preceding sentence shall hold office for the remainder of the full term of the Board of DirectorsDirectors’ recommendations. Continued and until such Director's successor shall have been elected and qualified. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of an incumbent Director.
Section 4. Removal of Directors.
Subject to the rights of the holders of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation to elect additional Directors under specified circumstances, any Director may be removed from officeonly forwith or without cause by the stockholders in the manner provided in this Section 4 of Article SEVENTH. At any annual meeting of the stockholders of the Corporation or at any special meeting of the stockholders of the Corporation, the notice of which shall state that the removal of a Director or Directors is among the purposes of the meeting, the affirmative vote of the holders of at least 66% percenta majority of the combined voting power of the outstanding shares of Voting Stock (as defined below), voting together as a single class, may remove such Director or Directorsfor cause.
For the purpose of this Article SEVENTH, "Voting Stock" shall mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of Directors. In any vote required by or provided for in this Article SEVENTH, each share of Voting Stock shall have the number of votes granted to it generally in the election of Directors.
EIGHTH: Cumulative voting shall not be allowed in the election of directors.
NINTH: The Board of Directors shall have power to enact, alter, amend and repeal the Bylaws of the Corporation in any manner not inconsistent with the laws of the State of Delaware and this Certificate of Incorporation, as it may deem best for the management of the Corporation.
TENTH: Directors of the Corporation shall have no personal liability to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except that the liability of such Directors shall not be eliminated or limited (i) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the Director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is subsequently amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a Director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended.
ELEVENTH: The Corporation shall, to the full extent permitted by Section 145 of Title 8 of the General Corporation Law of the State of Delaware, as amended from time to time, indemnify all persons whom it may indemnify pursuant thereto.
TWELFTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation Law of the State of Delaware or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the General Corporation law of the State of Delaware, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as such court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement, such compromise or arrangement and such reorganization shall, if sanctioned by the court to which the said application has been made, be bindingsigned on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.
THIRTEENTH: Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of at least 66⅔ percent of the combined voting power of all shares of the Corporation entitled to vote generally in the election of Directors, voting together as a single class, shall be required to amend, repeal, or adopt any provision inconsistent with Article FIFTH, SIXTH, SEVENTH or THIRTEENTH.
FOURTEENTH: The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon a stockholder herein are granted subject to this reservation.
APPENDIX B
Matrix Service Company
2016 Stock and Incentive Compensation Plan
Effective as of November 11, 2016
| | | | | Table of Contents | | | | | Article 1 | | Establishment, Purpose, and Duration | B-4 | 1.1 | | Establishment of this Plan | B-4 | 1.2 | | Purpose of this Plan | B-4 | 1.3 | | Duration of this Plan | B-4 | 1.4 | | Successor Plan | B-4 | Article 2 | | Definitions | B-4 | Article 3 | | Administration | B-7 | 3.1 | | General | B-7 | 3.2 | | Authority of the Committee | B-7 | 3.3 | | Delegation | B-8 | Article 4 | | Shares Subject to this Plan and Maximum Awards | B-8 | 4.1 | | Number of Shares Available for Awards | B-8 | 4.2 | | Anti-dilution Adjustments | B-9 | 4.3 | | Code Section 409A | B-9 | Article 5 | | Eligibility and Participation | B-9 | 5.1 | | Eligibility | B-9 | 5.2 | | Actual Participation | B-9 | Article 6 | | Stock Options | B-10 | 6.1 | | Grant of Options | B-10 | 6.2 | | Award Agreement | B-10 | 6.3 | | Option Price | B-10 | 6.4 | | Duration of Options | B-10 | 6.5 | | Exercise of Options | B-10 | 6.6 | | Payment | B-10 | 6.7 | | Restrictions on Share Transferability | B-10 | 6.8 | | Termination of Employment | B-10 | 6.9 | | Nontransferability of Options | B-11 | 6.10 | | Notification of Disqualifying Disposition | B-11 | 6.11 | | $100,000 Annual Limit on ISOs | B-11 | 6.12 | | Dividends and Dividend Equivalents | B-11 | Article 7 | | Stock Appreciation Rights | B-11 | 7.1 | | Grant of SARs | B-11 | 7.2 | | SAR Agreement | B-11 | 7.3 | | Term of SAR | B-11 | 7.4 | | Exercise of Freestanding SARs | B-11 | 7.5 | | Exercise of Tandem SARs | B-11 | 7.6 | | Payment of SAR Amount | B-12 | 7.7 | | Termination of Employment | B-12 | 7.8 | | Nontransferability of SARs | B-12 | 7.9 | | Other Restrictions | B-12 | 7.10 | | Dividends and Dividend Equivalents | B-12 | Article 8 | | Restricted Stock and Restricted Stock Units | B-12 | 8.1 | | Grant of Restricted Stock or Restricted Stock Units | B-12 | 8.2 | | Restricted Stock or Restricted Stock Unit Agreement | B-12 | 8.3 | | Nontransferability of Restricted Stock and Restricted Stock Units | B-13 | 8.4 | | Other Restrictions | B-13 | 8.5 | | Certificate Legend | B-13 | 8.6 | | Voting Rights | B-13 | 8.7 | | Dividends and Other Distributions | B-13 | 8.8 | | Termination of Employment | B-13 | 8.9 | | Payment in Consideration of Restricted Stock Units | B-14 | Article 9 | | Performance Shares and Performance Units | B-14 | 9.1 | | Grant of Performance Shares and Performance Units | B-14 | 9.2 | | Value of Performance Shares and Performance Units | B-14 | 9.3 | | Earning of Performance Shares and Performance Units | B-14 | 9.4 | | Form and Timing of Payment of Performance Shares and Performance Units | B-14 | 9.5 | | Termination of Employment | B-14 | 9.6 | | Nontransferability of Performance Shares and Performance Units | B-14 |
| | | | | Table of Contents (cont.) | | | | | Article 10 | | Cash-Based Awards and Stock-Based Awards | B-14 | 10.1 | | Grant of Cash-Based Awards | B-14 | 10.2 | | Value of Cash-Based Awards | B-15 | 10.3 | | Payment in Consideration of Cash-Based Awards | B-15 | 10.4 | | Form and Timing of Payment of Cash-Based Awards | B-15 | 10.5 | | Stock-Based Awards | B-15 | 10.6 | | Termination of Employment | B-15 | 10.7 | | Nontransferability of Cash-Based Awards and Stock-Based Awards | B-15 | 10.8 | | Dividends and Other Distributions | B-15 | Article 11 | | Performance Measures | B-16 | Article 12 | | Beneficiary Designation | B-17 | Article 13 | | Rights of Employees | B-17 | 13.1 | | Employment | B-17 | 13.2 | | Participation | B-17 | 13.3 | | Rights as a Stockholder | B-17 | Article 14 | | Change of Control; Unusual Transactions or Events | B-18 | 14.1 | | Change of Control | B-18 | 14.2 | | Unusual Transactions or Events | B-18 | Article 15 | | Amendment, Modification, Suspension, and Termination | B-19 | 15.1 | | Amendment, Modification, Suspension, and Termination | B-19 | 15.2 | | Awards Previously Granted | B-19 | Article 16 | | Withholding | B-20 | Article 17 | | Successors | B-20 | Article 18 | | General Provisions | B-20 | 18.1 | | Forfeiture Events | B-20 | 18.2 | | Legend | B-20 | 18.3 | | Delivery of Title | B-20 | 18.4 | | Investment Representations | B-21 | 18.5 | | Employees Based Outside of the United States | B-21 | 18.6 | | Uncertified Shares | B-21 | 18.7 | | Unfunded Plan | B-21 | 18.8 | | No Fractional Shares | B-21 | 18.9 | | Other Compensation and Benefit Plans | B-21 | 18.10 | | No Constraint on Corporate Action | B-21 | 18.11 | | Six-Month Delay for Specified Employees | B-22 | 18.12 | | Separation from Service | B-22 | 18.13 | | Section 457A | B-22 | 18.14 | | Compliance with Code Section 409A | B-22 | 18.15 | | Minimum Vesting | B-22 | Article 19 | | Legal Construction | B-22 | 19.1 | | Gender and Number | B-22 | 19.2 | | Severability | B-22 | 19.3 | | Requirements of Law | B-22 | 19.4 | | Governing Law | B-23 |
Matrix Service Company
2016 Stock and Incentive Compensation Plan
Article 1.
Establishment, Purpose, and Duration
1.1Establishment of this Plan. Matrix Service Company, a Delaware corporation (the “Company”), establishes an incentive compensation plan to be known as the 2016 Stock and Incentive Compensation Plan (this “Plan”), as set forth in this document.
This Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, and Stock-Based Awards.
This Plan shall become effective, if approved by the Board and stockholders, on November 17, 2016 (the “Effective Date”) and shall remain in effect as provided in Section 1.3 of this document.
1.2Purpose of this Plan. The purpose of this Plan is to promote the success and enhance the value of the Company and Affiliates by linking the personal interests of the Participants to those of the Company’s stockholders, and by providing Participants with an incentive for outstanding performance.
This Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Participants on whose judgment, interest, and special effort the successful conduct of its operations are largely dependent.
1.3Duration of this Plan. This Plan shall commence as of the Effective Date and shall remain in effect, subject to the right of the Committee or the Board to amend or terminate this Plan at any time under Article 15, until all Shares subject to this Plan have been purchased or acquired according to this Plan’s provisions.
1.4Successor Plan. This Plan shall serve as the successor to the Matrix Service Company 2012 Stock and Incentive Compensation Plan, as amended (the “Prior Plan”), and no further grants shall be made under the Prior Plan from and after the Effective Date of this Plan.
Article 2.
Definitions
Whenever used in this Plan, the following terms shall have the meaning set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.
“Affiliate” shall have the meaning given to that term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, with reference to the Company, and shall also include any corporation, partnership, joint venture, limited liability company, or other entity in which the Company owns, directly or indirectly, at least fifty percent (50%) of the total combined Voting Power of such corporation or of the capital interest or profits interest of such partnership or other entity.
“Award” means, individually or collectively, a grant under this Plan of NQSOs, ISOs, SARs, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, or Stock-Based Awards, in each case subject to the terms of this Plan.
“Award Agreement” means either (a) a written agreement entered into by the Company or an Affiliate and a Participant setting forth the terms and provisions applicable to Awards granted under this Plan, or (b) a written statement issued by the Company or an Affiliate to a Participant describing the terms and provisions of such Award.
“Beneficial Owner” or “Beneficial Ownership” shall have the meaning given to that term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
“Board” or “Board of Directors” means the Board of Directors of the Company.
“Cash-Based Award” means an Award granted under Article 10, the value of which is denominated in cash as determined by the Committee and which is not any other form of Award described in this Plan.
“Change of Control” unless otherwise specified in the Award Agreement, means the occurrence of any of the following events:
(a)any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total Voting Power of all the then outstanding Voting Securities;
(b)any Person purchases or otherwise acquires under a tender offer, securities of the Company representing more than fifty percent (50%) of the total Voting Power of all the then outstanding Voting Securities;
(c)during any one (1) year period, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors of the Company then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved (but excluding, for purposes of this definition, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board) cease for any reason to constitute a majority of the members of the Board of Directors;
(d)the consummation of a merger, consolidation, recapitalization or reorganization of the Company, other than a merger, consolidation, recapitalization or reorganization which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent, either by remaining outstanding or by being converted into Voting Securities of the surviving entity (or if the surviving entity is a subsidiary of another entity, then of the parent entity of such surviving entity), more than fifty percent (50%) of the total Voting Power represented by the Voting Securities of the surviving entity (or parent entity) outstanding immediately after such merger, consolidation, recapitalization or reorganization; or
(e)the stockholders approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of related transactions) of all or substantially all of the Company’s assets to any Person.
If required for compliance with Section 409A of the Code, in no event will a Change of Control be deemed to have occurred if such transaction is not also a “change in the ownership or effective control of” the Company or “a change in the ownership of a substantial portion of the assets of” the Company as determined under Treasury Regulation Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder). The Committee may, in its sole discretion and without a Participant’s consent, amend the definition of “Change of Control” to conform to the definition of “Change of Control” under Section 409A of the Code, and the regulations thereunder.
“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
“Committee” means the Compensation Committee of the Board of Directors, or any other duly authorized committee of the Board appointed by the Board to administer this Plan. To the extent applicable or necessary to qualify an Award for favorable treatment under the Code or Exchange Act, the Committee shall have at least two members, each of whom shall be (a) a Non-Employee Director, (b) an Outside Director, and (c) an “independent director” within the meaning of the listing requirements of any exchange on which the Company is listed.
“Company” means Matrix Service Company, a Delaware corporation, and any successor thereto as provided in Article 17.
“Employee” means any employee of the Company or an Affiliate. Directors who are not otherwise employed by the Company or an Affiliate shall not be considered Employees under this Plan. For greater clarity, and without limiting the generality of the foregoing, individuals described in the first sentence of this definition who are foreign nationals or are employed outside of the United States, or both, are Employees and may be granted Awards on the terms and conditions set forth in this Plan, or on such other terms and conditions as may, in the judgment of the Committee, be necessary or desirable to further the purposes of this Plan.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
“Fair Market Value” or “FMV” means, as of any given date, a price that is based on the closing sales price of a Share on the principal stock exchange on which the Shares are traded or, if there is no such sale for such date, then on the last previous day on which a sale was reported. If Shares are not traded on an established stock exchange, FMV shall be determined by the Committee based on objective criteria.
“Fiscal Year” means the year commencing on July 1 and ending June 30 or other time period as approved by the Board.
“Freestanding SAR” means an SAR that is not a Tandem SAR, as described in Article 7.
“Grant Price” means the price against which the amount payable is determined on exercise of a SAR.
“Incentive Stock Option” or “ISO” means an Option to purchase Shares granted under Article 6 and that is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code, or any successor provision.
“Insider” shall mean an individual who is, on the relevant date, subject to the reporting requirements of Section 16 of the Exchange Act, as determined by the Board.
“Non-Employee Director” means a person defined in Rule 16b-3(b)(3) under the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission.
“Nonqualified Stock Option” or “NQSO” means an Option to purchase Shares, granted under Article 6, which is not intended to be an Incentive Stock Option or that otherwise does not meet such requirements.
“Option” means the conditional right to purchase Shares at a stated Option Price for a specified period of time in the form of an Incentive Stock Option or a Nonqualified Stock Option subject to the terms of this Plan.
“Option Price” means the price at which a Share may be purchased by a Participant under an Option, as determined by the Committee.
“Outside Director” means a member of the Board who is an “outside director” within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder.
“Participant” means an Employee or a Non-Employee Director who has been selected to receive an Award, or who has an outstanding Award granted under this Plan.
“Performance-Based Compensation” means compensation under an Award that is granted in order to provide remuneration solely on account of the attainment of one or more Performance Goals under circumstances that satisfy the requirements of Section 162(m) of the Code.
“Performance Goal” means a performance criterion selected by the Committee for a given Award for purposes of Article 11 based on one or more of the Performance Measures.
“Performance Measures” means measures as described in Article 11, the attainment of one or more of which shall, as determined by the Committee, determine the vesting, payability, or value of an Award to an Insider that are designated to qualify as Performance-Based Compensation.
“Performance Period” means the period of time during which the assigned performance criteria must be met in order to determine the degree of payout and/or vesting with respect to an Award.
“Performance Share” means an Award granted under Article 9 and subject to the terms of this Plan, denominated in Shares, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.
“Performance Unit” means an Award granted under Article 9 and subject to the terms of this Plan, denominated in units, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.
“Period of Restriction” means the period when an Award of Restricted Stock or Restricted Stock Units is subject to forfeiture based on the passage of time, the achievement of performance criteria, and/or on the occurrence of other events as determined by the Committee, in its discretion.
“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof; provided, however, that “Person” shall not include (a) the Company or any Affiliate, (b) any employee benefit plan (including an employee stock ownership plan) sponsored by the Company or any Affiliate, or (c) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of Shares.
“Prior Plan” shall mean the Matrix Service Company 2012 Stock and Incentive Compensation Plan, as amended.
“Restricted Stock” means an Award of Shares subject to a Period of Restriction, granted under Article 8 and subject to the terms of this Plan.
“Restricted Stock Unit” means an Award denominated in units subject to a Period of Restriction, granted under Article 8 and subject to the terms of this Plan.
“Shares” means the shares of common stock of the Company, $0.01 par value per Share.
“Stock Appreciation Right” or “SAR” means the conditional right to receive the difference between the FMV of a Share on the date of exercise over the Grant Price, under the terms of Article 7 and subject to the terms of this Plan.
“Stock-Based Award” means an equity-based or equity-related Award granted under Article 10 and subject to the terms of this Plan, and not otherwise described by the terms of this Plan.
“Tandem SAR” means a SAR that the Committee specifies is granted in connection with a related Option under Article 7 and subject to the terms of this Plan, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be cancelled). Regardless of whether an Option is granted coincident with a SAR, a SAR is not a Tandem SAR unless so specified by the Committee at time of grant.
“Voting Power” shall mean that number of Voting Securities as shall enable the holders thereof to cast all the votes which could be cast in an annual election of directors of a company.
“Voting Securities” shall mean all securities entitling the holders thereof to vote in an annual election of directors of a company.
Article 3.
Administration
3.1General. The Committee shall be responsible for administering this Plan. The Committee may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an Employee, and the Committee, the Company, and its officers and directors shall be entitled to rely on the advice, opinions, or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee shall be final, conclusive, and binding on the Participants, the Company, and all other interested parties. Any and all powers, authorizations and discretions granted by this Plan to the Committee shall likewise be exercisable at any time by the Board.
3.2Authority of the Committee. The Committee shall have full and exclusive discretionary power to interpret the terms and the intent of this Plan and any Award Agreement or other agreement ancillary to or in connection with this Plan, to determine eligibility for Awards, and to adopt such rules, regulations, and guidelines for administering this Plan as the Committee may deem necessary or proper. Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions, including the terms and conditions set forth in Award Agreements, extending the term or period of exercisability of any Award, accelerating the time or times at which any Award becomes vested, unrestricted or may be exercised, waiving any terms or conditions applicable to any Award and, subject to Article 15, adopting modifications and amendments, or subplans to this Plan (as described in Section 18.5) or any Award Agreement, including, without limitation, any that are necessary or appropriate to comply with the laws or compensation practices of the countries and other jurisdictions in which the Company and Affiliates operate.
3.3Delegation. The Committee may delegate to one or more of its members or to one or more officers of the Company or Affiliates, any of its duties or powers as it may deem advisable; provided, however, that the Committee may not delegate any of its non-administrative powers (a) to any such officer for Awards granted to an Employee who is considered to be an Insider or (b) with respect to Awards intended to be Performance-Based Compensation; and provided further, that the member(s) or officer(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted under the authority delegated under this Section 3.3. Subject to the terms of the previous sentence, the Committee may delegate to any individual(s) such administrative duties or powers as it may deem advisable.
Article 4.
Shares Subject to this Plan and Maximum Awards
4.1Number of Shares Available for Awards.
(a)BASIC LIMITATION. The Shares available for issuance under this Plan may be authorized and unissued Shares or treasury Shares. Subject to adjustment as provided in Section 4.2, the maximum number of Shares available for issuance to Participants under this Plan shall be the sum of the following: (such total number of Shares, including such adjustment and remaining Shares, the “Total Share Authorization”):
(i)One million eight hundred thousand (1,800,000) Shares, plus
(ii)The number of any Shares subject to options granted under the Prior Plan and outstanding as of the Effective Date which expire, or for any reason are cancelled or terminated, after the Effective Date without being exercised, plus
(iii)The number of any Shares subject to awards (other than options) granted under the Prior Plan that were outstanding and unvested on the Effective Date that are forfeited, terminated, cancelled or otherwise reacquired by the Company after the Effective Date without having become vested or that are exchanged by a Participant or withheld by the Company or an Affiliate after the Effective Date to satisfy the tax withholding obligations related to the award.
(b)SHARE COUNT. The total number of Shares subject to SARs that are exercised and settled in Shares, and the total number of Shares subject to Options that are exercised, shall be counted in full against the number of Shares available for issuance under this Plan, regardless of the number of Shares actually issued upon settlement of the SARs or Options. If Awards are settled in cash, the Shares that would have been delivered had there been no cash settlement shall not be counted against the Shares available for issuance under this Plan. Except as provided in the next sentence, Shares that are subject to Awards that are forfeited, are terminated, fail to vest or for any other reason are not paid or delivered, shall again become available for Awards under this Plan. Shares that are exchanged by a Participant or withheld by the Company as full or partial payment in connection with any Option or SAR, as well as any Shares exchanged by a Participant or withheld by the Company or an Affiliate to satisfy the tax withholding obligations related to any Option or SAR, shall not be available for subsequent Awards under this Plan. Shares that are exchanged by a Participant or withheld by the Company as full or partial payment in connection with any Award other than an Option or SAR, as well as any Shares exchanged by a Participant or withheld by the Company or an Affiliate to satisfy the tax withholding obligations related to any Award other than an Option or SAR, shall be available for subsequent Awards under this Plan.
(c)SHARE LIMITS. The maximum aggregate number of Shares that may be granted in the form of Nonqualified Stock Options shall be equal to the Total Share Authorization. The maximum aggregate number of Shares that may be granted in the form of Incentive Stock Options shall be one million eight hundred thousand (1,800,000). No individual who is a Non-Employee Director will be granted Awards covering more than one hundred thousand (100,000) Shares in the aggregate during any Fiscal Year, provided that in any event the grant date fair value of Awards granted to a Non-Employee Director shall not exceed $400,000 in the aggregate during any Fiscal Year.
Unless and until the Committee determines that an Award to an Insider shall not be designed to qualify as Performance-Based Compensation, the following limits, subject to adjustment as provided in Section 4.2 (“Award Limits”), shall apply to grants of Awards to Insiders under this Plan:
(i)OPTIONS AND SARS: The maximum aggregate number of Shares that may be granted in the form of Options or Stock Appreciation Rights, under any Awards granted in any one Fiscal Year to any one Participant, shall be four hundred thousand (400,000).
(ii)RESTRICTED STOCK/RESTRICTED STOCK UNITS: The maximum aggregate grant with respect to Awards of Restricted Stock/Restricted Stock Units granted in any one Fiscal Year to any one Participant shall be four hundred thousand (400,000).
(iii)PERFORMANCE SHARES/PERFORMANCE UNITS: The maximum aggregate Awards of Performance Shares or Performance Units that a Participant may receive in any one Fiscal Year shall be four hundred thousand (400,000) Shares.
(iv)CASH-BASED AWARDS: The maximum aggregate amount awarded or credited with respect to Cash-Based Awards to any one Participant in any one Fiscal Year may not exceed five million dollars ($5,000,000).
(v)STOCK-BASED AWARDS: The maximum aggregate grant with respect to Awards of Stock-Based Awards in any one Fiscal Year to any one Participant shall be four hundred thousand (400,000).
(d)RESERVATION OF SHARES; NO FRACTIONAL SHARES. The Company shall at all times reserve a number of Shares sufficient to cover the Company’s obligations and contingent obligations to deliver Shares with respect to Awards then outstanding under this Plan (exclusive of (i) any Awards payable in cash and (ii) any dividend equivalent obligations to the extent the Company has the right to settle such rights in cash). No fractional Shares shall be delivered under this Plan. The Committee may pay cash in lieu of any fractional Shares in settlements of Awards under this Plan.
4.2Anti-dilution Adjustments. With respect to any “equity restructuring” event (such as a stock dividend, stock split, reverse stock split or similar event with respect to Shares) that could result in an additional compensation expense to the Company pursuant to the provisions of the Financial Accounting Standards Board, Accounting Standards Codification, Topic 718-Stock Compensation, as the same may be amended or superseded from time to time (“sideASC Topic 718”), if adjustments to Awards with respect to such event were discretionary, the Committee shall equitably adjust the number and type of Shares (or other securities or property) covered by each outstanding Award and the terms and conditions, including the exercise price and Performance Goals (if any), of such Award to equitably reflect such restructuring event. With respect to any other similar event that would not result in an ASC Topic 718 accounting charge if the adjustment to Awards with respect to such event were subject to discretionary action, the Committee shall have complete discretion to adjust Awards in such manner as it deems appropriate with respect to such other event. In the event the Committee makes any adjustment pursuant to the foregoing provisions of this Section 4.2, the Committee shall make a corresponding and proportionate adjustment to the maximum number and the type of Shares (or other securities or property) with respect to which Awards may be granted under this Plan after such event as provided in Section 4.1 and the individual participant annual grant limits with respect to Awards (other than dollar-denominated Awards) as provided in Section 4.1. Any such adjustments pursuant to this Section 4.2 shall be evidenced by written addendums to this Plan and Award Agreements prepared by the Company and, with respect to Options, shall be in accordance with the Code and Code regulations concerning Incentive Stock Options.
4.3Code Section 409A. All Awards granted and compensation payable under this Plan are intended to satisfy or be exempt from the requirements of Code Section 409A and regulations or other authority under Code Section 409A, and therefore not provide for any deferral of compensation that fails to satisfy the requirements of Code Section 409A. To the extent any provision of this Plan or actions of the Committee would expose any compensation payable to a Participant hereunder to adverse tax consequences under Code Section 409A, such provision or action shall be prohibited, if necessary, or limited to the extent necessary to preclude any such adverse tax consequence.
Article 5.
Eligibility and Participation
5.1Eligibility. Individuals eligible to participate in this Plan include all Employees and Non-Employee Directors.
5.2Actual Participation. Subject to the provisions of this Plan, the Committee may from time to time, select from all eligible Employees and Non-Employee Directors, those to whom Awards shall be granted and shall determine in its sole discretion, the nature, terms, and amount of each Award.
Article 6.
Stock Options
6.1Grant of Options. Subject to the terms and provisions of this Plan, Options may be granted to Participants in such number, and on such terms, and at any time and from time to time as shall be determined by the Committee. Despite the foregoing, no ISOs may be granted more than ten (10) years after the earlier of (a) adoption of this Plan by the Board, and (b) the Effective Date.
6.2Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, the conditions on which an Option shall become vested and exercisable, and any such other provisions as the Committee shall determine. The Award Agreement also shall specify whether the Option is intended to be an ISO or a NQSO.
6.3Option Price. The Option Price for each grant of an Option under this Plan shall be determined by the Committee and shall be specified in the Award Agreement, but in no event shall the Option Price be less than the FMV of a Share on the date of grant.
6.4Duration of Options. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, no Option shall be exercisable later than the tenth (10th) anniversary of the date of its grant.
6.5Exercise of Options. Options granted under this Article 6 shall be exercisable at such times and on the occurrence of such events, and be subject to such restrictions and conditions, as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant.
6.6Payment. Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.
The Option Price on exercise of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate FMV at the time of exercise equal to the total Option Price; (c) by a combination of (a) and (b); (d) subject to such requirements as may be imposed by the Committee, through the delivery of irrevocable instructions to a broker to sell Shares obtained upon the exercise of the Option and to deliver promptly to the Company an amount out of the proceeds of such sale equal to the aggregate Option Price for the Shares being purchased; or (e) by any other method approved or accepted by the Committee in its sole discretion subject to such rules and regulations as the Committee may establish.
Subject to Section 6.7 and any governing rules or regulations, as soon as practicable after receipt of a notification of exercise and full payment (including satisfaction of any applicable tax withholding requirements), the Committee shall cause to be delivered to the Participant Share certificates or evidence of book entry Shares in an appropriate amount based on the number of Shares purchased under the Option(s), net of any Shares sold in a broker assisted transaction to satisfy the purchase price for the Shares being purchased and net of any Shares withheld to satisfy tax withholding obligations. Unless otherwise determined or accepted by the Committee, all payments in cash shall be paid in United States dollars.
6.7Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired under the exercise of an Option granted under this Plan as it may deem advisable, including, without limitation, requiring the Participant to hold the Shares acquired under exercise for a specified period of time, or restrictions under applicable laws or under the requirements of any stock exchange or market on which such Shares are listed and/or traded.
6.8Termination of Employment. Each Participant’s Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s employment with the Company or Affiliates. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued under this Article 6, and may reflect distinctions based on the reasons for termination.
6.9Nontransferability of Options.
(a) INCENTIVE STOCK OPTIONS. No ISO granted under this Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a Participant under this Article 6 shall be exercisable during his or her lifetime only by such Participant.
(b) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a Participant’s Award Agreement at the time of grant, or thereafter by the Committee, NQSOs granted under this Article 6 may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, by the laws of descent and distribution, pursuant to a qualified domestic relations order (as defined under Section 414(p) of the Code) or to a trust of which the Participant is and remains the sole beneficiary for his lifetime. Further, except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, all NQSOs granted to a Participant under this Article 6 shall be exercisable during the Participant’s lifetime only by such Participant or, in the case of NQSOs transferred pursuant to a qualified domestic relations order, a Participant’s former spouse.
6.10Notification of Disqualifying Disposition. The Participant will notify the Company on the disposition of Shares issued under the exercise of an ISO. The Company will use such information to determine whether a disqualifying disposition as described in Section 421(b) of the Code has occurred.
6.11$100,000 Annual Limit on ISOs. Notwithstanding any contrary provision in this Plan, to the extent that the aggregate Fair Market Value (determined as of the time the ISO is granted) of the Shares with respect to which ISOs are exercisable for the first time by any Participant during any single calendar year (under this Plan and any other stock option plans of the Company and Affiliates) exceeds the sum of $100,000, such ISO shall automatically be deemed to be a Nonqualified Stock Option, but only to the extent in excess of the $100,000 limit, and not an ISO. In such event, all other terms and provisions of such Option grant shall remain unchanged. This paragraph shall be applied by taking ISOs into account in the order in which they were granted and shall be construed in accordance with Section 422(d) of the Code.
6.12Dividends and Dividend Equivalents. In no event shall dividends or dividend equivalents be granted alone or in conjunction with any Option under this Plan.
Article 7.
Stock Appreciation Rights
7.1Grant of SARs. Subject to the terms and conditions of this Plan, SARs may be granted to Participants at any time and from time to time and on such terms as shall be determined by the Committee. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SARs.
The SAR Grant Price for each grant of a Freestanding SAR shall be determined by the Committee and shall be specified in the Award Agreement, but in no event shall the Grant Price be less than FMV of a Share on the date of grant. The Grant Price of Tandem SARs shall be equal to the Option Price of the related Option.
7.2SAR Agreement. Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, and any such other provisions as the Committee shall determine.
7.3Term of SAR. The term of a SAR granted under this Plan shall be determined by the Committee, in its sole discretion, and specified in the SAR Award Agreement; provided, however, no SAR shall be exercisable later than the tenth (10th) anniversary of the date of its grant.
7.4Exercise of Freestanding SARs. Freestanding SARs may be exercised on whatever terms and conditions the Committee, in its sole discretion, imposes.
7.5Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option on the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable.
Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (a) the Tandem SAR will expire no later than the expiration of the underlying ISO; (b) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Option Price of the underlying ISO and the FMV of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (c) the Tandem SAR may be exercised only when the FMV of the Shares subject to the ISO exceeds the Option Price of the ISO.
7.6Payment of SAR Amount. On the exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:
(a) The difference between the FMV of a Share on the date of exercise over the Grant Price; by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment on SAR exercise may be in cash, Shares of equivalent value (based on the FMV on the date of exercise of the SAR), in some combination thereof, or in any other form approved by the Committee at its sole discretion. The Committee’s determination regarding the form of SAR payout shall be set forth in the Award Agreement pertaining to the grant of the SAR or reserved for later determination by the Committee.
7.7Termination of Employment. Each Award Agreement shall set forth provisions relating to the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant’s employment with the Company or Affiliates. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all SARs issued under this Plan, and may reflect distinctions based on the reasons for termination.
7.8Nontransferability of SARs. Except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, a SAR granted under this Plan may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, by the laws of descent and distribution or, only in the case of SARs that are in tandem with NQSOs, pursuant to a qualified domestic relations order (as defined under Section 414(p) of the Code). Further, except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, all SARs granted to a Participant under this Plan shall be exercisable during his or her lifetime only by such Participant or, in the case of SARs in tandem with NQSOs transferred pursuant to a qualified domestic relations order, a Participant’s former spouse.
7.9Other Restrictions. Without limiting the generality of any other provision of this Plan, the Committee may impose such other conditions and/or restrictions on any Shares received on exercise of a SAR granted under this Plan as it may deem advisable. This includes, but is not limited to, requiring the Participant to hold the Shares received on exercise of a SAR for a specified period of time.
7.10Dividends and Dividend Equivalents. In no event shall dividends or dividend equivalents be granted alone or in conjunction with any SAR under this Plan.
Article 8.
Restricted Stock and Restricted Stock Units
8.1Grant of Restricted Stock or Restricted Stock Units. Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts and on such terms as the Committee shall determine.
8.2Restricted Stock or Restricted Stock Unit Agreement. Each Restricted Stock and/or Restricted Stock Unit grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, and any such other provisions as the Committee shall determine.
8.3Nontransferability of Restricted Stock and Restricted Stock Units. Except as otherwise provided in this Plan or the Award Agreement, the Shares of Restricted Stock and/or Restricted Stock Units granted may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction specified in the Award Agreement (and in the case of Restricted Stock Units until the date of delivery or other payment), or on earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Award Agreement at the time of grant or thereafter by the Committee. All rights with respect to the Restricted Stock and/or Restricted Stock Units granted to a Participant under this Plan shall be available during his or her lifetime only to such Participant, except as otherwise provided in the Award Agreement at the time of grant or thereafter by the Committee.
8.4Other Restrictions. The Committee shall impose, in the Award Agreement at the time of grant or anytime thereafter, such other conditions and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units granted under this Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock or each Restricted Stock Unit, restrictions based on the achievement of specific performance criteria, time-based restrictions on vesting following the attainment of the performance criteria, time-based restrictions, restrictions under applicable laws or under the requirements of any stock exchange or market on which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company on vesting of such Restricted Stock or Restricted Stock Units.
To the extent deemed appropriate by the Committee and subject to Section 18.6, the Company may retain the certificates representing Shares of Restricted Stock, or Shares delivered in consideration of Restricted Stock Units, in the Company’s possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse.
Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse, and Restricted Stock Units shall be paid in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion, shall determine.
8.5Certificate Legend. In addition to any legends placed on certificates under Section 8.4, each certificate representing Shares of Restricted Stock granted under this Plan may bear a legend such as the following:
The sale or other transfer of the Shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Matrix Service Company 2016 Stock and Incentive Compensation Plan, and in the associated Award Agreement. A copy of this Plan and such Award Agreement may be obtained from Matrix Service Company.
8.6Voting Rights. To the extent provided by the Committee in the Award Agreement, Participants holding Shares of Restricted Stock may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.
8.7Dividends and Other Distributions. During the Period of Restriction, Participants holding Shares of Restricted Stock or Restricted Stock Units may, if the Committee so determines and provides in the Participant’s Award Agreement, be credited with dividends paid with respect to the underlying Shares or dividend equivalents while they are so held in a manner determined by the Committee in its sole discretion; provided, however, that a Participant shall only be entitled to receive an amount in respect of dividends or dividend equivalents paid on Restricted Stock or Restricted Stock Units that are subject to performance criteria to the extent the underlying Restricted Stock/Restricted Stock Units have been earned by achievement of the corresponding performance criteria. The Committee may apply any restrictions to the dividends or dividend equivalents that the Committee deems appropriate, including any restrictions or conditions on the payment of dividends or dividend equivalents to Insiders which are designed to qualify the payments as Performance-Based Compensation. The Committee, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, Shares, Restricted Stock, or Restricted Stock Units.
8.8Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right or obligation to retain Restricted Stock and/or Restricted Stock Units following termination of the Participant’s employment with the Company or Affiliates. These provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Shares of Restricted Stock or Restricted Stock Units issued under this Plan, and may reflect distinctions based on the reasons for termination.
8.9Payment in Consideration of Restricted Stock Units. When and if Restricted Stock Units become payable, a Participant having received the grant of such units shall be entitled to receive payment from the Company in cash, Shares of equivalent value (based on the FMV), in some combination thereof, or in any other form determined by the Committee at its sole discretion. The Committee’s determination regarding the form of payout shall be set forth in the Award Agreement pertaining to the grant of the Restricted Stock Unit or reserved for later determination by the Committee.
Article 9.
Performance Shares and Performance Units
9.1Grant of Performance Shares and Performance Units. Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Performance Shares and/or Performance Units to Participants in such amounts and on such terms as the Committee shall determine.
9.2Value of Performance Shares and Performance Units. Each Performance Share shall have an initial value equal to the FMV of a Share on the date of grant. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant which shall in no event be less than the FMV of a Share. The Committee shall set performance criteria for a Performance Period in its sole discretion which, depending on the extent to which they are met, will determine, in the manner determined by the Committee and documented in the Award Agreement the value and/or number of Performance Shares or Performance Units that will be paid to the Participant and whether a Participant shall be entitled to receive the value equivalent to any dividends paid during the Performance Period on the number of Shares that equals the Performance Shares or Performance Units granted to a Participant; provided, however, that a Participant shall only be entitled to receive an amount in respect of dividends paid on Shares to the extent the underlying Performance Shares/Performance Units have been earned by achievement of the corresponding performance criteria.
9.3Earning of Performance Shares and Performance Units. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Shares/Performance Units shall be entitled to receive payout on the value and number of Performance Shares/Performance Units determined as a function of the extent to which the corresponding performance criteria have been achieved. Nothwithstanding the foregoing, the Company has the ability to require the Participant to hold the Shares received under such Award for a specified period of time.
9.4Form and Timing of Payment of Performance Shares and Performance Units. Payment of earned Performance Shares/Performance Units shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Performance Shares/Performance Units in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Shares/Performance Units at the close of the applicable Performance Period or as soon as practicable after the end of the Performance Period. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award or reserved for later determination.
9.5Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Performance Shares/Performance Units following termination of the Participant’s employment with the Company or an Affiliate. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards of Performance Shares/Performance Units issued under this Plan, and may reflect distinctions based on the reasons for termination.
9.6Nontransferability of Performance Shares and Performance Units. Except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, Performance Shares/Performance Units may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, by the laws of descent and distribution or pursuant to a qualified domestic relations order (as defined under Section 414(p) of the Code).
Article 10.
Cash-Based Awards and Stock-Based Awards
10.1Grant of Cash-Based Awards. Subject to the terms and provisions of this Plan, the Committee, at any time and from time and time, may grant Cash-Based Awards to Participants in such amounts and on such terms as the Committee may determine.
10.2Value of Cash-Based Awards. Each Cash-Based Award shall have a value as may be determined by the Committee. For each Cash-Based Award, the Committee may establish performance criteria in its discretion. If the Committee exercises its discretion to establish such performance criteria, the number and/or value of Cash-Based Awards that will be paid out to the Participant will be determined, in the manner determined by the Committee, to the extent to which the performance criteria are met.
10.3Payment in Consideration of Cash-Based Awards. Subject to the terms of this Plan, the holder of a Cash-Based Award shall be entitled to receive payout on the value of a Cash-Based Award determined as a function of the extent to which the corresponding performance criteria, if any, have been achieved.
10.4Form and Timing of Payment of Cash-Based Awards. Payment of earned Cash-Based Awards shall be as determined by the Committee. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Cash-Based Awards in the form of cash or in Shares (or in a combination thereof) that have an aggregate FMV equal to the value of the earned Cash-Based Awards (the applicable date regarding which aggregate FMV shall be determined by the Committee). Such Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form and timing of payment of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award or reserved for later determination by the Committee.
10.5Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions including, but not limited to being subject to performance criteria, or in satisfaction of such obligations, as the Committee shall determine. Such Awards may entail the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
10.6Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to receive Cash-Based Awards and Stock-Based Awards following termination of the Participant’s employment with the Company or Affiliates. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the applicable Award Agreement, need not be uniform among all Awards of Cash-Based Awards and Stock-Based Awards issued under this Plan, and may reflect distinctions based on the reasons for termination.
10.7Nontransferability of Cash-Based Awards and Stock-Based Awards. Except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, Cash-Based Awards and Stock-Based Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, by the laws of descent and distribution or pursuant to a qualified domestic relations order (as defined under Section 414(p) of the Code).
10.8Dividends and Other Distributions. During the Period of Restriction, Participants holding Stock-Based Awards may, if the Committee so determines and provides in the Participant’s Award Agreement, be credited with dividends paid with respect to the underlying Shares or dividend equivalents while they are so held in a manner determined by the Committee in its sole discretion; provided, however, that a Participant shall only be entitled to receive an amount in respect of dividends or dividend equivalents paid on Stock-Based Awards that are subject to performance criteria to the extent the Shares underlying the Stock-Based Award have been earned by achievement of the corresponding performance criteria. The Committee may apply any restrictions to the dividends or dividend equivalents that the Committee deems appropriate. The Committee, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, Shares, Restricted Stock or Restricted Stock Units.
Article 11.
Performance Measures
Notwithstanding any other terms of this Plan, the vesting, payment, or value (as determined by the Committee) of each Award other than an Option or SAR that, at the time of grant, the Committee intends to be Performance-Based Compensation to an Insider shall be determined by the attainment of one or more Performance Goals as determined by the Committee in conformity with Section 162(m) of the Code. The Committee shall specify in writing, by resolution or otherwise, the Participants eligible to receive such an Award (which may be expressed in terms of a class of individuals) and the Performance Goal(s) applicable to such Awards within ninety (90) days after the commencement of the period to which the Performance Goal(s) relate(s) or such earlier time as required to comply with Section 162(m) of the Code. No such Award shall be payable unless the Committee certifies in writing, by resolution or otherwise, that the Performance Goal(s) applicable to the Award were satisfied. In no case may the Committee increase the value of an Award of Performance-Based Compensation above the maximum value determined under the performance formula by the attainment of the applicable Performance Goal(s), but the Committee may retain the discretion to reduce the value below such maximum.
Unless and until the Committee proposes for stockholder vote and the stockholders approve a change in the general Performance Measures set forth in this Article 11, the Performance Goal(s) on which the payment or vesting of an Award to an Insider that is intended to qualify as Performance-Based Compensation shall be limited to the following Performance Measures:
(a) Net earnings or net income (before or after taxes);
(b) Earnings per share;
(c) Net operating profit;
(d) Operating income;
(e) Operating income per share;
| | (f) | Return measures (including, but not limited to, return on assets, return on capital, return on invested capital and return on equity, sales or revenue); |
| | (g) | Cash flow (including, but not limited to, operating cash flow, free cash flow, free cash flow margin and cash flow return on capital or investments); |
| | (h) | Earnings before or after taxes, interest, depreciation, and/or amortization and impairment of intangible assets; |
(i) Gross or operating margins;
(j) Share price (including, but not limited to, growth measures and total stockholder return);
(k) Margins;
(l) Operating efficiency;
(m) Customer satisfaction;
(n) Employee satisfaction;
(o) Working capital targets;
(p) Revenue or sales growth or growth in backlog;
(q) Growth of assets;
(r) Productivity ratios;
(s) Expense targets;
| | (t) | Measures of health, safety or environment (including, but not limited to, total recordable incident rate); |
(u) Market share;
(v) Credit quality (including, but not limited to, days sales outstanding);
(w) Economic value added;
(x) Price earnings ratio;
(y) Improvements in capital structure; and
(z) Compliance with laws, regulations and policies.
Any Performance Measure(s) may be used to measure the performance of the Company and/or Affiliate as a whole or any business unit of the Company and/or Affiliate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate. In the Award Agreement, the Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goal(s).
The Committee may provide in any Award Agreement that any evaluation of attainment of a Performance Goal may include or exclude any of the following events that occurs during the relevant period: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) any reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in applicable accounting standards and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year; (f) acquisitions or divestitures; and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Insiders, they shall be prescribed in a form that meets the requirements of Section 162(m) of the Code for deductibility for federal income tax purposes.
In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Measures without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining stockholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards to Insiders that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m).
Article 12.
Beneficiary Designation
A Participant’s “beneficiary” is the person or persons entitled to receive payments or other benefits or exercise rights that are available under this Plan in the event of the Participant’s death. A Participant may designate a beneficiary or change a previous beneficiary designation at such times prescribed by the Committee by using forms and following procedures approved or accepted by the Committee for that purpose. If no beneficiary designated by the Participant is eligible to receive payments or other benefits or exercise rights that are available under this Plan at the Participant’s death the beneficiary shall be the Participant’s estate.
Despite the above, the Committee may in its discretion, after notifying the affected Participants, modify the foregoing requirements, institute additional requirements for beneficiary designations, or suspend the existing beneficiary designations of living Participants or the process of determining beneficiaries under this Article 12, or both, in favor of another method of determining beneficiaries.
Article 13.
Rights of Employees
13.1Employment. Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company or an Affiliate to terminate any Participant’s employment or other service relationship at any time, nor confer on any Participant any right to continue in the capacity in which he or she is employed or otherwise serves the Company or an Affiliate.
Neither an Award nor any benefits arising under this Plan shall constitute part of an employment contract with the Company or an Affiliate and, accordingly, subject to the terms of this Plan, this Plan may be terminated or modified at any time in the sole and exclusive discretion of the Committee without giving rise to liability on the part of the Company or an Affiliate for severance payments or otherwise except as provided in this Plan.
For purposes of this Plan, unless otherwise provided by the Committee, transfer of employment of a Participant between the Company and an Affiliate or among Affiliates, shall not be deemed a termination of employment. The Committee may stipulate in a Participant’s Award Agreement or otherwise the conditions under which a transfer of employment to an entity that is spun-off from the Company or an Affiliate, if any, shall not be deemed a termination of employment for purposes of an Award.
13.2Participation. No Employee shall have the right to be selected to receive an Award. No Employee, having been selected to receive an Award, shall have the right to be selected to receive a future Award or (if selected to receive such a future Award) the right to receive such a future Award on terms and conditions identical or in proportion in any way to any prior Award.
13.3Rights as a Stockholder. Except to the extent otherwise provided in an Award Agreement, a Participant shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.
Article 14.
Change of Control; Unusual Transactions or Events
14.1Change of Control. Unless otherwise provided for in an Award Agreement and subject to Section 4.2, upon a Change of Control, all then-outstanding Awards shall vest in accordance with subsection (a) below, except to the extent that another Award meeting the requirements of subsection (b) below (a “Replacement Award”) is provided to the Participant to replace such Award (the “Replaced Award”).
(a) Change of Control Vesting. Upon a Change of Control, a Participant's then-outstanding Awards that are not vested and (i) as to which vesting depends solely on the satisfaction of a Period of Restriction service obligation by the Participant to the Company or any Affiliate shall become fully vested; or (ii) as to which vesting depends upon the satisfaction of one or more Period of Restriction performance criteria shall immediately vest and all performance objectives shall be calculated based on either, as determined by the Committee in its sole discretion, (A) actual performance against the stated performance objectives as of the date of the Change of Control or (B) deemed target performance pro-rated based on the number of days elapsed in the applicable performance period until the date of the Change of Control.
(b) Replacement Awards. An Award shall meet the conditions of this subsection (b) (and hence qualify as a Replacement Award) if: (i) it is of the same type as the Replaced Award (or, it is of a different type than the Replaced Award, provided that the Committee, as constituted immediately prior to the Change of Control, finds such type acceptable); (ii) it has an intrinsic value at least equal to the value of the Replaced Award; (iii) it relates to publicly traded equity securities of the Company or its successor in the Change of Control or another entity that is affiliated with the Company or its successor following the Change of Control; (iv) if the Award replaces an ISO, it is made in accordance with Section 424(h) of the Code; (v) its terms and conditions comply with the terms of this subsection (b) set forth below; and (vi) its other terms and conditions are not less favorable to the Participant than the terms and conditions of the Replaced Award (including the provisions that would apply in the event of a subsequent Change of Control). Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of the Replaced Award if the requirements of the preceding sentence are satisfied. The determination of whether the conditions of this subsection (b) are satisfied shall be made by the Committee, as constituted immediately before the Change of Control, in its sole discretion. Without limiting the generality of the foregoing, the Committee may determine the value of Awards and Replacement Awards that are Options or SARs by reference to either their intrinsic value or their fair value. Upon an involuntary termination of service of a Participant occurring at any time following the Change of Control, other than for cause, all Replacement Awards held by the Participant (A) as to which vesting depends solely on the satisfaction of a Period of Restriction service obligation by the Participant to the Company or any Affiliate shall become fully vested; or (B) as to which vesting depends upon the satisfaction of one or more Period of Restriction performance criteria shall immediately vest and all performance objectives shall be calculated based on either, as determined by the Committee in its sole discretion, (1) actual performance against the stated performance objectives as of the date of the Change of Control or (2) deemed target performance pro-rated based on the number of days elapsed in the applicable Period of Restriction until the date of the Participant’s involuntary termination of service.
14.2Unusual Transactions or Events. In the event of any distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, reorganization, merger, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other corporate transaction or event or any unusual or nonrecurring transactions or events (including without limitation a Change of Control) affecting the Company, any Affiliate of the Company, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations or accounting principles, and whenever the Committee determines that action is appropriate in order to prevent the dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan or with respect to any Award under this Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles, the Committee, in its sole discretion and on such terms and conditions as it deems appropriate, may take any one or more of the following actions (unless the discretion to take such action would cause an Award to an Insider to not qualify as “performance-based compensation” under Section 162(m) of the Code if intended to so qualify or cause any Award granted or compensation payable hereunder to fail to satisfy the requirements of Code Section 409A and result in adverse consequences to a Participant).
(a) To provide for either (i) the termination of any such Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of such transaction or event the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment) or (ii) the replacement of such Award with other rights or property of substantially equivalent value selected by the Committee in its sole discretion;
(b) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;
(c) To make adjustments in the number and type of Shares (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding Awards and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards and Awards which may be granted in the future, provided that, with respect to outstanding Awards such adjustments shall result in substantially equivalent value to the affected Participants; and
(d) To provide that such Award shall be exercisable (within such period of time as the Committee may specify, for example, but not by way of limitation, in connection with a Change of Control, the Committee may specify that unexercised, vested Options or SARs terminate upon consummation of the Change of Control), or payable or fully vested with respect to all Shares covered thereby, notwithstanding anything to the contrary in this Plan or the applicable Award Agreement.
Notwithstanding the foregoing, with respect to an above event that is an “equity restructuring” event that would be subject to a compensation expense pursuant to ASC Topic 718, the provisions in Section 4.2 shall control to the extent they are in conflict with the discretionary provisions of this Article 14.
Article 15.
Amendment, Modification, Suspension, and Termination
15.1Amendment, Modification,Suspension, and Termination. The Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate this Plan in whole or in part; provided however, that:
(a) Without the prior approval of the Company’s stockholders and except as provided in Section 4.2, Options and SARs issued under this Plan will not be repriced, replaced or regranted (i) through cancellation, whether in exchange for cash or another type of award, (ii) by lowering the Option Price of a previously granted Option or the Grant Price of a previously granted SAR or (iii) by replacing a previously granted Option or SAR with a new Option with a lower Option Price or a new SAR with a lower Grant Price.
(b) To the extent necessary under any applicable law, regulation or exchange requirement, no amendment shall be effective unless approved by the stockholders of the Company in accordance with applicable law, regulation, or exchange requirement.
15.2Awards Previously Granted. Despite any other provision of this Plan to the contrary, no termination, amendment, suspension, or modification of this Plan shall adversely affect in any material way any Award previously granted under this Plan, without the written consent of the Participant holding such Award.
Article 16.
Withholding
Each Participant shall, no later than the date as of which the value of an Award first becomes includible in the gross income of such Participant for purposes of applicable taxes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, the minimum amount of any such applicable taxes required by law to be withheld with respect to the Award (or such other amount that will not cause adverse accounting consequences for the Company and is permitted under applicable withholding rules promulgated by the Internal Revenue Service or other applicable governmental entity). The obligations of the Company under this Plan shall be conditional on the making of such payments or arrangements, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Participant. Whenever cash is to be paid pursuant to an Award, the Company shall have the right to deduct therefrom an amount sufficient to satisfy the applicable withholding tax requirements related thereto. Whenever Shares are to be delivered pursuant to an Award, the Company shall have the right to require the Participant to remit to the Company in cash an amount sufficient to satisfy the related taxes to be withheld and applied to the tax obligations; provided, however, that, with the approval of the Committee, a Participant may satisfy the foregoing requirement by either (a) electing to have the Company withhold from delivery of Shares or other property, as applicable, or (b) by delivering already owned unrestricted Shares, in each case, having a value equal to the applicable taxes to be withheld and applied to the tax obligations (with any fractional share amounts resulting therefrom settled in cash). Such withheld or already owned and unrestricted Shares shall be valued at their FMV. Such an election may be made with respect to all or any portion of the Shares to be delivered pursuant to an award. The Company may also use any other method of obtaining the necessary payment or proceeds, as permitted by law, to satisfy its withholding obligation with respect to any Award.
Article 17.
Successors
Any obligations of the Company or an Affiliate under this Plan with respect to Awards granted under this Plan, shall be binding on any successor to the Company or Affiliate, respectively, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company or Affiliate, as applicable.
Article 18.
General Provisions
18.1Forfeiture Events. Without limiting in any way the generality of the Committee’s power to specify any terms and conditions of an Award consistent with law, and for greater clarity, the Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment on the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events shall include, but shall not be limited to, failure to accept the terms of the Award Agreement, termination of employment under certain or all circumstances, violation of material Company and Affiliate policies, breach of noncompetition, confidentiality, nonsolicitation, noninterference, corporate property protection, or other obligation (by agreement or otherwise) that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company and Affiliates.
This Plan is subject to any written clawback policies the Company, with the approval of the Board, may adopt. Any such policy may subject a Participant’s rights and benefits under this Plan to reduction, cancellation, forfeiture or recoupment if certain specified events or wrongful conduct occur, including but not limited to an accounting restatement due to the Company’s material non-compliance with financial reporting regulations or other events or wrongful conduct specified in any such clawback policy.
18.2Legend. The certificates for Shares may include any legend that the Committee deems appropriate to reflect any restrictions on transfer of such Shares.
18.3Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under this Plan before:
(a) Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and
(b) Completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable.
18.4Investment Representations. The Committee may require each Participant, as a condition to the receipt of Shares under an Award under this Plan, to represent and warrant in good faith and in writing that the Participant is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.
18.5Employees Based Outside of the United States. Without limiting in any way the generality of the Committee’s powers under this Plan, including, but not limited to, the power to specify any terms and conditions of an Award consistent with law, in order to comply with the laws in other countries in which the Company or an Affiliate operates or has Employees, the Committee, in its sole discretion, shall have the power and authority, notwithstanding any provision of this Plan to the contrary, to:
(a) Determine which Affiliates shall be covered by this Plan;
(b) Determine which Employees outside the United States are eligible to participate in this Plan;
(c) Modify the terms and conditions of any Award granted to Employees outside the United States to comply with applicable foreign laws;
(d) Establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable. Any subplans and modifications to Plan terms and procedures established under this Section 18.5 by the Committee shall be attached to this Plan document as appendices; and
(e) Take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals.
Despite the above, the Committee may not take any actions under this Plan and no Awards shall be granted that would violate the Exchange Act, the Code, any securities law, or governing statute or any other applicable law.
18.6Uncertificated Shares. To the extent that this Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis to the extent not prohibited by applicable law or the rules of any stock exchange.
18.7Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company or an Affiliate may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan, and no action taken under its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company or an Affiliate and any Participant, beneficiary, legal representative, or any other person. Awards shall be general, unsecured obligations of the Company, except that if an Affiliate signs an Award Agreement instead of the Company, the Award shall be a general, unsecured obligation of the Affiliate and not an obligation of the Company. To the extent that any individual acquires a right to receive payments from the Company or an Affiliate, such right shall be no greater than the right of an unsecured general creditor of the Company or Affiliate, as applicable. All payments to be made under this Plan shall be paid from the general funds of the Company or Affiliate, as applicable, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in this Plan. This Plan is not intended to be subject to ERISA.
18.8No Fractional Shares. No fractional Shares shall be issued or delivered under this Plan or any Award Agreement. In such an instance, unless the Committee determines otherwise, fractional Shares and any rights thereto shall be forfeited or otherwise eliminated.
18.9Other Compensation and Benefit Plans. Nothing in this Plan shall be construed to limit the right of the Company or an Affiliate to establish other compensation or benefit plans, programs, policies, or arrangements. Except as may be otherwise specifically stated in any other benefit plan, policy, program, or arrangement, no Award shall be treated as compensation for purposes of calculating a Participant’s rights under any such other plan, policy, program, or arrangement.
18.10No Constraint on Corporate Action. Nothing in this Plan shall be construed (a) to limit, impair or otherwise affect the Company’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets, or (b) to limit the right or power of the Company or an Affiliate to take any action which such entity deems to be necessary or appropriate.
18.11Six-Month Delay for Specified Employees. Notwithstanding any provision in this Plan to the contrary, if the payment of any benefit herein would be subject to additional taxes and interest under Code Section 409A because the timing of such payment is not delayed as provided in Code Section 409A for a “specified employee” (within the meaning of Code Section 409A), then if a Participant is a “specified employee,” any such payment that the Participant would otherwise be entitled to receive during the first six months following a “separation from service” (as defined in Code Section 409A) shall be accumulated and paid or provided, as applicable, within ten (10) days after the date that is six months following such separation from service, or such earlier date upon which such amount can be paid or provided under Code Section 409A without being subject to such additional taxes and interest imposed pursuant to Code Section 409A and related provisions of the Code.
18.12Separation from Service. A termination of employment shall not be deemed to have occurred for purposes of any provision of this Plan or any Award Agreement providing for the payment of any amounts or benefits that are considered nonqualified deferred compensation under Code Section 409A upon or following a termination of employment, unless such termination is also a “separation from service” within the meaning of Code Section 409A and the payment thereof prior to a “separation from service” would violate Code Section 409A. For purposes of any such provision of this Plan or any Award Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment,” or like terms shall mean “separation from service.”
18.13Section 457A. The Company intends that any Awards be structured in compliance with, or to satisfy an exemption from, Section 457A of the Code (“Section 457A”) and all regulations, guidance, compliance programs and other interpretative authority thereunder, such that there are no adverse tax consequences, interest or penalties as a result of the Awards. Notwithstanding the Company’s intention, in the event any Award is subject to Section 457A, the Committee may, in its sole discretion and without a Participant’s prior consent, amend this Plan and/or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and actions with retroactive effect) as are necessary or appropriate to (a) exempt this Plan and/or any Award from the application of Section 457A, (b) preserve the intended tax treatment of any such Award, or (c) comply with the requirements of Section 457A, including without limitation any such regulations, guidance, compliance programs and other interpretative authority that may be issued after the date of the grant.
18.14Compliance with Code Section 409A. It is intended that the Awards granted under this Plan shall be exempt from, or in compliance with, Code Section 409A. This Plan is intended to comply with Code Section 409A only if and to the extent applicable. In this respect, any ambiguous provision will be construed in a manner that is compliant with or exempt from the application of Code Section 409A. To the extent that an Award, issuance and/or payment is subject to Section 409A, it shall be awarded, issued and paid in a manner that will comply with Section 409A, as determined by the Committee.
If any provision of this Plan (or of any Award) would cause a Participant to incur any additional tax or interest under Code Section 409A and accompanying Treasury regulations and other authoritative guidance thereunder, the Company shall, after consulting with the Participant, reform such provision to comply with Code Section 409A to the extent permitted under Code Section 409A; provided, however, the Company agrees to maintain, to the maximum extent practicable, the original intent and economic benefit to the Participant of the applicable provision without violating the provisions of Code Section 409A.
18.15Minimum Vesting. No Award shall become vested and exercisable sooner than one (1) year after the date of the grant; provided, however, the Committee shall have discretion to provide for the earlier vesting and exercisability of such Award in the event of retirement, death or disability of the Participant, involuntary termination of the Participant not for cause or a Change of Control; and, provided, further, an Award or Awards for up to an aggregate maximum of five percent (5%) of the Total Share Authorization may be granted without regard to the minimum one-year vesting.
Article 19.
Legal Construction
19.1Gender And Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.
19.2Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
19.3Requirements of Law. The granting of Awards and the issuance of Shares under this Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. The Company or an Affiliate shall receive the consideration required by law for the issuance of Awards under this Plan.
The inability of the Company or an Affiliate to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s or the Affiliate’s counsel to be necessary to the lawful issuance and sale of any Shares under this Plan, shall relieve the Company or Affiliate of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
19.4Governing Law. This Plan and each Award Agreement shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.
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