The Compensation Committee of LPL Financial Holdings Inc. (the "Company") has adopted Stock Ownership Guidelines to align the interests of its executive officers with the interest of its stockholders and further promote the Company's commitment to sound corporate governance.
Stock Ownership Guidelines for the Company's executive officers are determined based on the average number of options granted to an executive on an annual basis. The guidelines require each executive to maintain minimum holdings of shares of outstanding LPL common stock, par value $.001 per share ("Shares") (which, for purpose of clarity, does not include options, warrants or other rights exercisable for or convertible into Shares) equal to 0.75 times the average of such executive's annual option grants for the immediately preceding five completed calendar years (the "Minimum Holding Requirement"). To the extent an executive does not have a five year history of annual option grants since 2008 or a consecutive five year history of annual option grants, such executive's Minimum Holding Requirements will be based on 0.75 times (i) the average of such executive's five most recent annual option grants occurring in and after 2008 or (ii) if less than five annual option grants have been made to the executive, an average of each annual option grant to such executive occurring in and after 2008. Option grants made to an executive in and after 2008 are referred to in these guidelines as the "Applicable Options" and Shares received upon exercise of such Applicable Options are referred to as the "Restricted Shares."
Unless the executive satisfies the Minimum Holding Requirement (both before and after giving effect to any proposed transfer), the executive must retain, and may not transfer, Restricted Shares, except that:
Except to the limited extent described above, Shares held by an executive that are not Restricted Shares are not subject to the transfer limitations set forth in these guidelines. Such unrestricted Shares include, but are not limited to, Shares issued upon exercise of options granted prior to 2008, restricted stock units granted pursuant to a Company deferred compensation plan and Shares purchased by an executive on the open market.
On the date the guidelines first become applicable to an executive and on January 1 of each subsequent year, the Company will determine each executive's Minimum Holding Requirement and Annual Liquidity Pool based on these guidelines and will notify each executive of such amounts.
Counting Shares Owned
Shares that count toward the satisfaction of the Minimum Holding Requirement include all outstanding Shares held by the executive, including all outstanding Shares issued upon exercise of Applicable Options, but only to the extent that such Shares are:
The Stock Ownership Guidelines may be waived, at the discretion of the Company's Compensation Committee if compliance would create severe hardship or prevent an executive from complying with a court order, as in the case of a divorce settlement. It is expected that these instances will be rare.