UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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LPL Financial Holdings Inc. |
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March 22, 2021
Dear Fellow Stockholders:
It is my pleasure to invite you to attend the 2021 Annual Meeting of Stockholders (the Annual Meeting) of LPL Financial Holdings Inc. The meeting will be held on Wednesday, May 5, 2021, at 10:30 a.m., Eastern Time, and holders of record of our common stock as of March 8, 2021 are entitled to notice of and to vote at the Annual Meeting. The Notice of Annual Meeting of Stockholders and the proxy statement that follow describe the business to be conducted at the meeting.
In light of continuing public health and safety precautions related to COVID-19, we will hold the Annual Meeting virtually through the internet. Stockholders of record will be able to access and attend the live annual meeting webcast at www.virtualshareholdermeeting.com/LPLA2021. To gain access to the meeting, stockholders will be required to enter the 16-digit control number provided on the proxy card, voting instruction form or notice regarding the availability of proxy materials that have been distributed to our stockholders of record as of March 8, 2021. Stockholders will have the same rights and opportunities to participate in the virtual meeting as they would have at an in-person meeting. The virtual meeting website will contain participation instructions.
Consistent with our focus on sustainability, we are pleased to take advantage of the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their stockholders through the internet. We believe this approach allows us to reduce the environmental impact of the Annual Meeting while expediting your receipt of these materials and lowering our costs of delivery. If you would like us to send you printed copies of our proxy statement and accompanying materials, we will be happy to do so upon your request at no charge. For more information, please refer to the Notice Regarding the Availability of Proxy Materials that we mailed to holders of record on or about March 22, 2021.
YOUR VOTE IS VERY IMPORTANT. PLEASE SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
Please vote your shares promptly to ensure they are represented at the Annual Meeting. You may submit your proxy through the internet or by telephone, as described in the following materials, or if you request printed copies of these materials, by completing and signing the proxy card and returning it in the envelope provided. If you decide to attend the virtual Annual Meeting and wish to change your proxy, you may do so automatically by voting at the meeting.
Please refer to page 1 of the accompanying proxy statement for further information concerning attendance.
On behalf of the Board of Directors, I thank you for your continued support of LPL Financial Holdings Inc.
Sincerely, |
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James S. Putnam Chair |
Notice of Annual Meeting of Stockholders
Time and Date | 10:30 a.m., Eastern Time, on Wednesday, May 5, 2021 | |
Items of Business | (1) Elect the nine nominees named in the proxy statement to the Board of Directors of LPL Financial Holdings Inc. (the Company);
(2) Ratify the appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as the Companys independent registered public accounting firm for the fiscal year ending December 31, 2021;
(3) Approve, in an advisory vote, the compensation paid to the Companys named executive officers;
(4) Approve the LPL Financial Holdings Inc. 2021 Omnibus Equity Incentive Plan;
(5) Approve the LPL Financial Holdings Inc. 2021 Employee Stock Purchase Plan; and
(6) Consider and act upon any other business properly coming before the 2021 annual meeting of stockholders (the Annual Meeting) and at any adjournment or postponement thereof. | |
Location | www.virtualshareholdermeeting.com/LPLA2021 | |
Record Date | Stockholders of record as of 5:00 p.m., Eastern Time, on March 8, 2021 (the Record Date) will be entitled to vote at the Annual Meeting and any postponements or adjournments thereof. |
Information relating to the matters to be considered and voted on at the Annual Meeting is set forth in the proxy statement accompanying this Notice.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SUBMIT YOUR PROXY BY FOLLOWING THE INSTRUCTIONS SET FORTH IN THE FOLLOWING MATERIALS. YOU MAY VOTE YOUR SHARES AND SUBMIT A PROXY THROUGH THE INTERNET OR BY TELEPHONE AS DESCRIBED HEREIN OR, IF YOU REQUESTED PRINTED COPIES OF THESE MATERIALS, BY SIGNING AND RETURNING A PROXY CARD.
By Order of the Board of Directors, |
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Gregory M. Woods Secretary |
Boston, Massachusetts
March 22, 2021
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 5, 2021: THE PROXY STATEMENT, THE PROXY CARD, AND LPL FINANCIAL HOLDINGS INC.S 2020 ANNUAL REPORT ON FORM 10-K ARE AVAILABLE AT WWW.LPL.COM. ADDITIONALLY, IN ACCORDANCE WITH SECURITIES AND EXCHANGE COMMISSION RULES, YOU MAY ACCESS THESE MATERIALS ON THE WEBSITE INDICATED IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS.
Proxy Statement Summary
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.
2021 Annual Meeting of Stockholders
Time and Date | 10:30 a.m., Eastern Time, on Wednesday, May 5, 2021 | |
Location | www.virtualshareholdermeeting.com/LPLA2021 | |
Record Date | 5:00 p.m., Eastern Time, on March 8, 2021 | |
Voting | Stockholders as of the Record Date are entitled to one vote per share on each matter to be voted upon at the Annual Meeting. | |
Entry | We invite all stockholders to attend the Annual Meeting. To gain access to the meeting, stockholders will be required to enter the 16-digit control number provided on the proxy card, voting instruction form or notice regarding the availability of proxy materials that have been distributed to our stockholders of record as of March 8, 2021. |
Voting Proposals
Proposal | Board Recommendation |
Page Reference | ||
Proposal 1: Election of Directors |
FOR all nominees | 7 | ||
Proposal 2: Ratification of the Appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as Our Independent Registered Public Accounting Firm |
FOR | 63 | ||
Proposal 3: Approval, in an Advisory Vote, of the Compensation Paid to Our Named Executive Officers |
FOR | 66 | ||
Proposal 4: Approval of Our 2021 Omnibus Equity Incentive Plan |
FOR | 68 | ||
Proposal 5: Approval of Our 2021 Employee Stock Purchase Plan |
FOR | 75 |
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Table of Contents |
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General Information |
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Items of Business to be Voted upon at the Annual Meeting |
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◾ To elect each of the nine nominees named in this proxy statement to the Board of Directors of the Company (the Board of Directors or the Board) for a term to end at our annual meeting of stockholders in 2022; |
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◾ To ratify the appointment of Deloitte & Touche LLP by the audit committee of the Board of Directors (the Audit Committee) as our independent registered public accounting firm for the fiscal year ending December 31, 2021; |
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◾ To approve, in an advisory vote, the compensation paid to the Companys named executive officers; |
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◾ To approve the LPL Financial Holdings Inc. 2021 Omnibus Equity Incentive Plan; |
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◾ To approve the LPL Financial Holdings Inc. 2021 Employee Stock Purchase Plan; and |
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◾ To consider and act upon any other business properly coming before the Annual Meeting and at any adjournment or postponement thereof. |
2 | 2021 Proxy Statement |
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General Information |
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Manner of Voting
If you are a holder of record of our Common Stock as of the Record Date, you may vote in one of the following ways:
2021 Proxy Statement |
3 |
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General Information |
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Voting Requirements
Proposal OneElection of Directors |
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Our bylaws provide that a nominee for director will be elected if the number of votes properly cast for such nominees election exceeds the number of votes properly cast against such nominees election; however, if the number of persons properly nominated for election to the Board of Directors exceeds the number of directors to be elected, the directors will be elected by the plurality of the votes properly cast. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the election of directors.
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Proposal TwoRatification of Appointment of Deloitte & Touche LLP |
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The proposal to ratify the appointment of Deloitte & Touche LLP will be determined by a majority of the votes cast on the matter affirmatively or negatively in person or by proxy at the Annual Meeting. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the proposal.
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Proposal ThreeApproval, in an Advisory Vote, of the Compensation Paid to the Companys Named Executive Officers |
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Because the proposal to approve, on an advisory basis, the compensation awarded to named executive officers for the fiscal year ended December 31, 2020 is a non-binding, advisory vote, there is no required vote that would constitute approval. Although the vote is advisory and non-binding in nature, the compensation and human resources committee (the Compensation Committee) will consider the outcome of the vote when considering future named executive officer compensation arrangements. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the proposal.
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Proposal FourApproval of the LPL Financial Holdings Inc. 2021 Omnibus Equity Compensation Plan |
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The proposal to approve the LPL Financial Holdings Inc. 2021 Omnibus Equity Compensation Plan will be determined by a majority of the votes cast on the matter affirmatively or negatively in person or by proxy at the Annual Meeting. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the proposal.
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Proposal FiveApproval of the LPL Financial Holdings Inc. 2021 Employee Stock Purchase Plan |
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The proposal to approve the LPL Financial Holdings Inc. 2021 Employee Stock Purchase Plan will be determined by a majority of the votes cast on the matter affirmatively or negatively in person or by proxy at the Annual Meeting. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the proposal.
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4 | 2021 Proxy Statement |
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General Information |
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2021 Proxy Statement |
5 |
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General Information About Corporate Governance and the Board of Directors |
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General Information About Corporate Governance and the Board of Directors
We believe that good corporate governance is important to ensure that we are managed for the long-term benefit of our stakeholders. In support of that philosophy, we have adopted many leading corporate governance practices, including those summarized below and elsewhere in this proxy statement.
BOARD PRACTICES | ||||||
Independence | A majority of our directors must be independent. All of our director nominees other than our chief executive officer are independent, and all of the Board committees are composed exclusively of independent directors. |
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Non-executive Chair | We currently separate the offices of chair of the Board and chief executive officer of the Company. The current chair of our Board, James S. Putnam, is an independent director. |
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Director Diversity | Our goal is a balanced and diverse Board, with members who bring a diversity of skills, expertise, experiences, perspectives, tenures and personal characteristics, including with respect to age, race, gender and ethnicity. |
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Board Refreshment | Our Boards composition represents a balanced approach to director tenure, allowing the Board to benefit from the experience of longer-serving directors as well as fresh perspectives from newer directors. The nominating and governance committee of the Board (the Nominating and Governance Committee) has developed a skills matrix to inform director searches and succession planning. |
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Director Overboarding | Any director who is not serving as chief executive officer of a public company is expected to serve on no more than four public company boards (including our Board), and any director serving as chief executive officer of a public company is expected to serve on no more than three public company boards (including the board of his or her own company). |
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Committee Membership | The Board appoints members of its committees on an annual basis, with the Nominating and Governance Committee reviewing and recommending committee membership based in part on the need to ensure a succession plan for each committee chair. |
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Board Self-evaluations | The Board conducts an annual evaluation of its performance, operations, size and composition, with the Nominating and Governance Committee overseeing the evaluation process, which also encompasses the Boards committees. |
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Strategy Oversight | The Board holds an annual two-day session focused on the Companys long-term strategy, which informs the Boards oversight and work plan for the following year. |
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Executive Succession Planning | The Compensation Committee conducts regular reviews of executive talent, development and succession planning, and our Board reviews the succession plans for the chief executive officer position annually. |
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STOCKHOLDER RIGHTS | ||||||
Annual Election of Directors | All directors are elected annually, which reinforces our Boards accountability to our stockholders. |
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Majority Voting Standard for Director Elections |
Our bylaws require that directors be elected under a majority voting standard in uncontested elections. Any director who does not receive more votes for his or her election than votes against must tender his or her resignation and, if our Board accepts the resignation, step down from our Board. |
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Single Voting Class | Our Common Stock is the only class of voting shares outstanding. |
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COMPENSATION PRACTICES | ||||||
Follow Leading Practices | See Compensation Discussion and AnalysisCompensation Governance. |
6 | 2021 Proxy Statement |
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Proposal 1: Election of Directors |
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The charts below reflect the diversity of our Board based on the self-identified characteristics of our director nominees, including Mr. Arnold. We have also included diversity statistics that would be required by the new listing rules proposed by Nasdaq in December 2020, which our Nominating and Governance Committee have discussed. The new listing rules, which remain pending with the SEC as of the date of this proxy statement, seek to require all companies listed on Nasdaqs U.S. exchange to publicly disclose consistent, transparent diversity statistics regarding their board of directors through a uniform disclosure matrix.
One-third of our director nominees are women, which places our Board among the top in our industry in gender diversity.
Gender Diversity | Racial and Ethnic Diversity | |
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The following diversity statistics are reported in the standardized disclosure matrix that was proposed by Nasdaq in December 2020:
Board Diversity Matrix (As of March 22, 2021)
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Board Size: |
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Total Number of Directors |
9 | |||||||||||
Gender: |
Female | Male | Non-Binary | Gender Undisclosed | ||||||||
Number of Directors Based on Gender Identity |
3 | 6 | - | - | ||||||||
Number of Directors Who Identify in Any of the Categories Below: |
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African American or Black |
- | 1 | - | - | ||||||||
Alaskan Native or American Indian |
- | - | - | - | ||||||||
Asian |
- | - | - | - | ||||||||
Hispanic or Latinx |
- | - | - | - | ||||||||
Native Hawaiian or Pacific Islander |
- | - | - | - | ||||||||
White |
3 | 5 | - | - | ||||||||
Two or More Races or Ethnicities |
- | - | - | - | ||||||||
LGBTQ+ |
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Demographic Background Undisclosed |
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8 | 2021 Proxy Statement |
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Proposal 1: Election of Directors |
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Director Qualifications and Experience
The Board believes that the director nominees possess experience, skills and qualifications that are complementary and, together, cover the spectrum of areas that impact the Companys current and evolving business circumstances. The Board believes that the combination of backgrounds, skills and experiences will result in a Board that continues to be well-equipped to exercise oversight responsibilities on behalf of the Companys stakeholders.
The table below provides a summary of the skills and qualifications of each director nominee:
Dan Arnold |
Edward Bernard |
Paulett Eberhart |
William Glavin Jr. |
Allison Mnookin |
Anne Mulcahy |
James Putnam |
Richard Schifter |
Corey Thomas | ||||||||||
CEO Experience |
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Digital Technology Experience |
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Mergers & Acquisitions |
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Corporate Governance |
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Financial Literacy |
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Human Resources |
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Risk Management |
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Entrepreneurial Experience |
2021 Proxy Statement |
9 |
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Proposal 1: Election of Directors |
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Board of Director Nominees
The name, age and a description of the business experience, principal occupation, and past employment and directorships of each of the nominees during at least the last five years are set forth below. In addition, we have summarized the particular experience, qualifications, attributes and skills that led the Board of Directors, including our Nominating and Governance Committee, to determine that each nominee should serve as a director.
Dan H. Arnold |
BACKGROUND
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Age 56
Director Since 2017 |
Mr. Arnold has served as our chief executive officer and a director since January 2017. Mr. Arnold has served as our president since March 2015, with responsibility for our primary client-facing functions and long-term strategy for growth. Mr. Arnold served as our chief financial officer from June 2012 to March 2015 and was responsible for formulating financial policy, leading our capital management efforts, and ensuring the effectiveness of the organizations financial functions. Prior to 2012, he was managing director, head of strategy, with responsibility for long-term strategic planning for the firm, product and platform development, and strategic investments, including acquisitions. He has also served as divisional president of our Institution Services. Mr. Arnold joined the Company in January 2007 following our acquisition of UVEST Financial Services Group, Inc. (UVEST), a broker-dealer and investment adviser that provided services to banks, credit unions, and other financial institutions. Prior to joining us, Mr. Arnold worked at UVEST for 13 years, serving most recently as president and chief operating officer. Mr. Arnold earned a B.S. in electrical engineering from Auburn University and holds an M.B.A. in finance from Georgia State University.
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QUALIFICATIONS
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Mr. Arnolds pertinent qualifications include his unique perspective and insights into our operations as our current president and chief executive officer, including knowledge of our business relationships, competitive and financial positioning, senior leadership, and strategic opportunities and challenges; operating, business and management experience as the chief financial officer, president, and now chief executive officer of a public company; and expertise in the financial industry and in particular brokerage and investment advisory services, including service as a director of the American Securities Association since April 2019 and past service as a director of the Securities Industry and Financial Markets Association from April 2015 to July 2018.
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OTHER PUBLIC COMPANY BOARDS
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Current None |
Past 5 Years Optimum Fund Trust |
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10 | 2021 Proxy Statement |
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Proposal 1: Election of Directors |
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Edward C. Bernard | BACKGROUND
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Age 65
Director Since 2020
Independent
Committee:
Audit Committee |
Mr. Bernard served as the vice chair of the board of directors of T. Rowe Price Group, Inc. (TRP), a global investment management firm, from 2007 to April 2019. Mr. Bernard served as a vice president of TRP from 1989 to December 2018 and as a member of the management committee of TRP from 2000 to December 2018. He oversaw TRPs marketing, distribution, client service, information technology and communications activities from 2006 until December 2018. He also served as chair of the board of all sponsored TRP mutual funds and trusts during that period and as president and/or chair of T. Rowe Price Investment Services, a registered broker/dealer, from 1996 to 2018. Mr. Bernard served as a director of TRP from 1999 to April 2019 and currently serves as a director of UTI Asset Management Company of India. He previously served as chair of the board of governors, and as a member of the executive committee, of the Investment Company Institute, the national trade association for the mutual fund industry. Mr. Bernard received his B.A. from Brown University and an M.B.A. from New York University.
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QUALIFICATIONS
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Mr. Bernards pertinent qualifications include expertise in the wealth management industry, gained through his 30 years of experience in investment management and leadership roles as a member of the board of governors the Investment Company Institute; his high level of operating, management and strategic planning experience, gained through his executive positions and roles as vice chair of the board of directors of TRP and chair of all sponsored TRP mutual funds and trusts; and his deep understanding of financial product distribution, compliance requirements and the perspectives of advisors and their retail clients, including with respect to the use of technology, product and analytics as a competitive differentiator.
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OTHER PUBLIC COMPANY BOARDS
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Current UTI Asset Management Company (India) |
Past 5 Years T. Rowe Price Group, Inc. |
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2021 Proxy Statement |
11 |
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Proposal 1: Election of Directors |
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H. Paulett Eberhart | BACKGROUND
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Age 67
Director Since 2014
Independent
Committees:
Audit Committee (Chair)
Compensation Committee |
Ms. Eberhart currently serves as chair and chief executive officer of HMS Ventures, a privately-held business involved with technology services and the acquisition and management of real estate. From 2011 through 2014, she served as president and chief executive officer of CDI Corp. (CDI), a provider of engineering and information technology outsourcing and professional staffing services that was then a public company. Ms. Eberhart also served as chair and chief executive officer of HMS Ventures from January 2009 until January 2011. She served as president and chief executive officer of Invensys Process Systems, Inc. (Invensys), a process automation company, from January 2007 to January 2009. From 1978 to 2004, she was an employee of Electronic Data Systems Corporation (EDS), an information technology and business process outsourcing company that was subsequently acquired by the Hewlett-Packard Company, and held roles of increasing responsibility over time, including senior level financial and operating roles at the company, including as president of Americas of EDS from 2003 until March 2004 and senior vice president of EDS and president of Solutions Consulting from 2002 to 2003. She is a Certified Public Accountant and received her B.S. from Bowling Green State University.
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QUALIFICATIONS
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Ms. Eberharts pertinent qualifications include her wealth of managerial and executive experience, gained through her leadership as the chief executive officer of CDI, formerly an NYSE-listed public company, and Invensys, as well as her numerous years of service as an executive officer of EDS, including president of Americas; financial and accounting expertise gained through various other operating and financial positions during her 26 years at EDS; strong knowledge of the intersection of technology, data and finance industries; and knowledge and experience gained through her leadership and service on the boards of other public companies, including as lead director and chair of the governance and risk committee of the board of directors of Anadarko Petroleum Corporation.
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OTHER PUBLIC COMPANY BOARDS
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Current Valero Corporation Fluor Corporation |
Past 5 Years Anadarko Petroleum Corporation Cameron International Corporation Ciber Corporation |
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12 | 2021 Proxy Statement |
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Proposal 1: Election of Directors |
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William F. Glavin Jr. | BACKGROUND
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Age 62
Director Since 2017
Independent
Committees:
Audit Committee
Nominating and Governance Committee |
Mr. Glavin served as chair of OppenheimerFunds, Inc., a global asset management firm (OppenheimerFunds), from 2009 until 2015, as chief executive officer from 2009 until 2014, and as president from 2009 until 2013. OppenheimerFunds was a majority owned subsidiary of MassMutual Financial Group (MassMutual), a mutual life insurance company, at which Mr. Glavin held several senior executive positions prior to joining OppenheimerFunds. He served as co-chief operating officer of MassMutual from 2007 to 2008, executive vice president, U.S. Insurance Group of MassMutual from 2006 to 2008, president and chief executive officer of Babson Capital Management LLC (Babson), an asset management firm and subsidiary of MassMutual, from 2005 until 2006 and chief operating officer of Babson from 2003 to 2005. Prior to joining MassMutual, Mr. Glavin was president and chief operating officer of Scudder Investments, an asset management firm, from 2000 to 2003. OppenheimerFunds was acquired by Invesco Ltd. (Invesco) in 2019, and Mr. Glavin was designated to serve as a director of Invesco pursuant to a shareholder agreement between MassMutual and Invesco. Mr. Glavin received his B.A. in Economics and Accounting from the College of the Holy Cross.
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QUALIFICATIONS
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Mr. Glavins pertinent qualifications include his experience over the course of a 25-year career in the financial services industry, including as a chief executive officer and chief operating officer; extensive experience in strategic planning and talent management, in part based on his success in leading Oppenheimer through a period of significant market turbulence; a deep understanding of financial product distribution, compliance and operations, including technology demands in the financial services industry; and experience overseeing broker-dealers, including MassMutuals broker-dealer MML Investor Services, LLC.
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OTHER PUBLIC COMPANY BOARDS
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Current Invesco Ltd. |
Past 5 Years None |
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2021 Proxy Statement |
13 |
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Proposal 1: Election of Directors |
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Allison H. Mnookin | BACKGROUND
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Age 50
Director Since 2018
Independent
Committees:
Compensation Committee
Nominating and Governance Committee |
Ms. Mnookin has served since July 2017 as a senior lecturer of business administration in the technology and operations management unit at the Harvard Business School. From April 2016 to November 2016, Ms. Mnookin served as the chief executive officer of QuickBase, Inc. (QuickBase), a provider of online application software which was spun-off by Intuit, Inc., a business and financial software company, in 2016. Ms. Mnookin was an employee of Intuit from 1998 to 2016 and held roles of increasing responsibility over time, including vice president and general manager of Intuits QuickBase business from July 2010 to March 2016. She previously served as a director of Quartz Holding Company, the holding company of QuickBase, from November 2016 until its sale in April 2019, and as a director of Fleetmatics Group PLC, a SaaS fleet management provider, from March 2014 until its sale in November 2016. Ms. Mnookin received her A.B. with honors from Harvard College and her M.B.A. from the Harvard Business School.
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QUALIFICATIONS
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Ms. Mnookins pertinent qualifications include her 20-year career in the technology industry, including executive leadership of high-growth cloud and business software companies, as well as service as a director of Bill.com Holdings, Inc., a public company that provides cloud-based software to simplify and automate back-office financial transactions for small- and mid-sized businesses. These experiences, including general management in Intuits small business division where she was responsible for leading a portfolio of Intuits business products, shaped her understanding of how businesses have transformed their technologies to increase strategic advantage.
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OTHER PUBLIC COMPANY BOARDS
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Current Bill.com Holdings, Inc. |
Past 5 Years Fleetmatics Group PLC |
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14 | 2021 Proxy Statement |
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Proposal 1: Election of Directors |
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Anne M. Mulcahy | BACKGROUND
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Age 68
Director Since 2013
Independent
Committees:
Compensation Committee (Chair)
Nominating and Governance Committee |
Ms. Mulcahy served as chair of the board of trustees of Save The Children Federation, Inc., a non-profit organization dedicated to creating lasting change in the lives of children throughout the world, from March 2010 to February 2017. She continues to serve as a trustee of Save the Children. She previously served as chair of the board of Xerox Corporation (Xerox), a global business services and document technology provider, from January 2002 to May 2010, and chief executive officer of Xerox from August 2001 to July 2009. Prior to serving as a chief executive officer, Ms. Mulcahy was president and chief operating officer of Xerox. Ms. Mulcahy received a B.A. from Marymount College of Fordham University.
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QUALIFICATIONS
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Ms. Mulcahys pertinent qualifications include her extensive experience in all areas of business management and strategic execution as she led Xerox through a transformational turnaround; valuable insights into organizational and operational management issues, including business innovation, financial management and talent development; and leadership roles in other public companies, including as lead independent director of Johnson & Johnson, which provide the Board with additional expertise in the area of organizational effectiveness.
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OTHER PUBLIC COMPANY BOARDS
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Current Graham Holdings Company Johnson & Johnson Williams-Sonoma, Inc. |
Past 5 Years Target Corporation |
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James S. Putnam | BACKGROUND
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Age 66
Director Since 2005
Independent
Chair of the Board
Committee:
Compensation Committee |
Mr. Putnam has served as chair of the Board of Directors since March 2017, and he served as our lead director from June 2016 until March 2017. He was employed by LPL Financial from 1983 to 2005 and served as its managing director of national sales from 1987 to 2005. In that role, he was responsible for the recruitment, retention and management of LPL Financial advisors, as well as branch development, marketing and all product sales. Mr. Putnam also previously served as the chief executive officer of Global Portfolio Advisors (GPA), formerly a global brokerage clearing services provider that sold substantially all of its operations in 2014. GPA was under common ownership with LPL Financial until 2005, and Mr. Putnam served as chief executive officer of GPA from 2004 until 2014. He began his securities career as a retail representative with Dean Witter Reynolds in 1979. Mr. Putnam received a B.A. from Western Illinois University.
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QUALIFICATIONS
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Mr. Putnams pertinent qualifications include his unique historical perspective and insights into our operations as our former managing director of national sales; operating, business and management experience as the chief executive officer at GPA; and expertise in the financial industry and deep familiarity with our advisors.
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OTHER PUBLIC COMPANY BOARDS
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Current None |
Past 5 Years None |
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2021 Proxy Statement |
15 |
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Proposal 1: Election of Directors |
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Richard P. Schifter |
BACKGROUND
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Age 68
Director Since 2005
Independent
Committee:
Nominating and Governance Committee (Chair)
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Mr. Schifter is a senior advisor of TPG, a leading global private investment firm. He was a partner at TPG from 1994 through 2013. Prior to joining TPG, Mr. Schifter was a partner at the law firm of Arnold & Porter in Washington, D.C., where he specialized in bankruptcy law and corporate restructuring. He joined Arnold & Porter in 1979 and was a partner from 1986 through 1994. Mr. Schifter currently serves on the board of advisors of the University of Pennsylvania Law School. Mr. Schifter received a B.A. with distinction from George Washington University and a J.D. cum laude from the University of Pennsylvania Law School.
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QUALIFICATIONS
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Mr. Schifters pertinent qualifications include his high level of financial literacy gained through his investment experience as a TPG partner; experience on other company boards and board committees; and nearly 15 years of experience as a corporate attorney with an internationally-recognized law firm.
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OTHER PUBLIC COMPANY BOARDS
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Current Avianca Holdings SA ProSight Global, Inc. EnLink Midstream, LLC |
Past 5 Years American Airlines Group Caesars Entertainment Corporation EverBank Financial Corporation |
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Corey E. Thomas |
BACKGROUND
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Age 45
Director Since 2019
Independent
Committee:
Audit Committee
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Mr. Thomas serves as the chair of the board and chief executive officer of Rapid7, Inc. (Rapid7), a public company that provides analytics for security and information technology operations. Mr. Thomas has been chief executive officer and a director since October 2012. From November 2008 to September 2012, Mr. Thomas held various other roles at Rapid7, including serving as chief operating officer. He also currently serves on the board of directors of Blue Cross Blue Shield of Massachusetts, nonprofit private health insurance company, and the Federal Reserve Bank of Boston. Mr. Thomas received a B.E. in electrical engineering and computer science from Vanderbilt University and an M.B.A. from the Harvard Business School.
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QUALIFICATIONS
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Mr. Thomas pertinent qualifications include his general management experience, including his top-level perspective on strategy and organization management as the chief executive officer of a public company; strategic insights with regard to information technology, cybersecurity and global sales and marketing gained through his career in the technology industry; an entrepreneurial mindset focused on solving the needs of clients ranging widely in size and industry; and experience leading operations involving multiple product delivery models, including his past role as a chief operating officer.
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OTHER PUBLIC COMPANY BOARDS
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Current Rapid7, Inc. |
Past 5 Years None |
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In the vote on the election of the director nominees, stockholders may:
◾ | Vote FOR any of the nominees; |
◾ | Vote AGAINST any of the nominees; or |
◾ | ABSTAIN from voting as to any of the nominees. |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE ABOVE-NAMED NOMINEES AS A DIRECTOR.
16 | 2021 Proxy Statement |
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Information Regarding Board and Committee Structure |
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Corporate Governance Highlights | ||||
We have implemented several important measures that are designed to promote long-term stakeholder value: |
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◾ Our Board consists of a single class of directors elected on an annual basis who may be removed with or without cause. Accordingly, our stockholders are able to register their views on the performance of all directors on an annual basis, enhancing the accountability of our Board to our stockholders. |
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◾ We currently separate the offices of the chair of the Board and chief executive officer of the Company, although the Board maintains the flexibility to select the chair of the Board and its leadership structure based on the criteria that it deems to be in the best interests of the Company and its stakeholders. |
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◾ Our bylaws provide for a majority voting standard in uncontested director elections. We also have adopted a director resignation policy in our Corporate Governance Guidelines pursuant to which a director who does not receive support from holders of a majority of shares voted in an uncontested election must tender his or her resignation and, if our Board accepts the resignation, step down from our Board. This makes director elections more meaningful for our stockholders and promotes accountability. |
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◾ To facilitate Board refreshment, we have adopted a director retirement policy in our Corporate Governance Guidelines pursuant to which any director who reaches the age of 75 while serving as a director will retire from the Board effective as of the end of his or her then current term. |
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◾ We seek an advisory vote on the compensation of our named executive officers annually, which underscores the careful consideration we give to our stockholders views on our compensation practices. |
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◾ We have established a compensation clawback policy that enables the Company to recoup cash and equity incentive compensation from executive officers in the event of certain financial restatements. |
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◾ Our executive officers are subject to equity ownership guidelines that set minimum ownership requirements based on a multiple of annual base salary, which aligns the interests of senior management with the interests of our stockholders. |
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◾ We have also adopted equity ownership guidelines for directors, which set minimum ownership requirements based on a multiple of the cash portion of the annual base retainer then in effect. |
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◾ Our Insider Trading Policy prohibits our executives and directors from pledging and hedging our Common Stock, in order to further the alignment between stockholders and our executives that our equity awards are designed to create. |
18 | 2021 Proxy Statement |
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Information Regarding Board and Committee Structure |
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2021 Proxy Statement |
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Information Regarding Board and Committee Structure |
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20 | 2021 Proxy Statement |
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Information Regarding Board and Committee Structure |
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Our Material ESG Topics
Below are the ESG topics that we believe are most significant to our stakeholders and to our ability to create long-term value
Important to LPL
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Very important to LPL
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Most important to LPL
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Environment |
Energy Efficiency
Greenhouse Gas
Renewable Energy
Waste and Water
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Climate Risk
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Reduction of Paper Use
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Social |
Local Employment
Human Rights and Supply
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Developing Financial
Employee Compensation
Employee Well-being
Training and Professional
Employee Volunteering
Corporate Giving
Service Affordability
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Attracting and Retaining
Advisor Diversity, Equity
Employee Diversity, Equity
Employee Engagement
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Governance |
Preventing Anti-
Executive Compensation
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Sustainable Investing
Board Diversity
Legal and Regulatory
Corporate Governance and
Business Ethics
Consumer and Advisor
Cybersecurity
Data Privacy and
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2021 Proxy Statement |
21 |
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Information Regarding Board and Committee Structure |
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22 | 2021 Proxy Statement |
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Information Regarding Board and Committee Structure |
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The table below reflects the composition of the Boards three standing committees as of March 22, 2021:
Audit Committee
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Nominating and Governance Committee
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Compensation Committee
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Edward Bernard
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H. Paulett Eberhart
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William F. Glavin, Jr. |
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Allison H. Mnookin |
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Anne M. Mulcahy |
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James S. Putnam |
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Richard P. Schifter |
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Corey E. Thomas
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Member |
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Chair |
Chair of the Board |
2021 Proxy Statement |
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Information Regarding Board and Committee Structure |
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24 | 2021 Proxy Statement |
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Information Regarding Board and Committee Structure |
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2021 Proxy Statement |
25 |
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Information Regarding Board and Committee Structure |
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26 | 2021 Proxy Statement |
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Information Regarding Board and Committee Structure |
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2021 Proxy Statement |
27 |
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Board of Director Compensation |
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The following table sets forth the compensation received by each non-employee director for service on the Board for the fiscal year ended December 31, 2020. In addition to the payments disclosed in the table below, our directors were reimbursed for out-of-pocket expenses incurred in connection with their attendance at Board and committee meetings.
(1) | The amounts shown in this column represent the aggregate grant date fair value of restricted stock awards granted to our non-employee directors in 2020. The aggregate grant date fair value of the restricted stock awards, as determined under the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, was determined by multiplying the number of shares underlying the award by $64.74, which was the closing price per share of our Common Stock on the grant date. For information regarding the number of shares of restricted stock held by each non-employee director as of December 31, 2020, see the table in footnote 2 below. The amounts shown in this column do not include the value of any fully vested shares of Common Stock that certain of our non-employee directors elected to receive in lieu of the cash portion of the annual service retainer. In accordance with SEC rules, such amounts are shown in the column Fees Earned or Paid in Cash. |
(2) | The following table shows the aggregate number of shares of restricted stock held by each of our non-employee directors as of December 31, 2020. All restricted stock awards reported in the table below will vest in full on May 4, 2021. |
Name
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Restricted (#)
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Edward C. Bernard |
2,780 | |
H. Paulett Eberhart |
2,780 | |
William F. Glavin, Jr. |
2,780 | |
Allison Mnookin |
2,780 | |
Anne M. Mulcahy |
2,780 | |
James S. Putnam |
2,780 | |
Richard P. Schifter |
2,780 | |
Corey E. Thomas |
2,780 |
(3) | This amount includes Mr. Bernards prorated retainer for service on the Audit Committee following his appointment on May 6, 2020. |
(4) | This amount includes the value of fully vested shares of Common Stock that the director elected to receive in lieu of the cash portion of the directors annual service retainer. The aggregate grant date fair value of these shares, as determined under FASB ASC Topic 718, was determined by multiplying the number of shares underlying the award by $64.74, which was the closing price per share of our Common Stock on the grant date. Each of Messrs. Bernard, Glavin, Schifter and Thomas delivered a written deferral election under the Deferred Plan pursuant to which the director elected to defer receipt of the fully vested shares of Common Stock in lieu of the cash portion of the annual service retainer. |
(5) | Each of Messrs. Bernard, Glavin, Schifter and Thomas, and Mses. Eberhart and Mnookin delivered a written deferral election under the Deferred Plan pursuant to which the director elected to defer receipt of the equity portion of his or her annual service retainer. |
(6) | Mr. Riepe served as a director until May 6, 2020. This amount includes the prorated portion of his retainer for service during 2020 on the Audit Committee. |
2021 Proxy Statement |
29 |
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Compensation Discussion and Analysis |
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Compensation Discussion and Analysis
Executive Summary
This Compensation Discussion and Analysis (CD&A) describes the actions taken by the Compensation Committee with respect to 2020 compensation for our executive officers, including our named executive officers (NEOs). Under SEC rules, our NEOs for 2020 were:
Executive
|
Title
| |
Dan H. Arnold |
President and Chief Executive Officer | |
Matthew J. Audette |
Chief Financial Officer | |
Scott Seese |
Managing Director, Chief Information Officer | |
Dayton Semerjian |
Managing Director, Chief Customer Care Officer | |
Richard Steinmeier |
Managing Director, Divisional President, Business Development |
Summary of 2020 Corporate Performance
The following summary of the Companys corporate performance is intended to provide additional context for the Compensation Committees evaluation of the Companys performance in 2020 for compensation-related purposes. As discussed below, the Compensation Committee established a bonus pool funding framework in January of 2020 that assigned equal weighting to achievement of the Companys financial performance targets and its pre-established 2020 corporate goals. The Compensation Committee did not adjust either the Companys financial performance target or any of its corporate goals in 2020 as a result of the COVID-19 pandemic.
Adjusted EBITDA was the primary metric used in the bonus pool funding framework to evaluate the Companys financial performance in 2020, because the Compensation Committee believes that it is a useful metric in understanding the Companys earnings from operations. The Compensation Committee also considered the Companys gross profit and expense management results, and their effect on the Companys Adjusted EBITDA results, in determining bonus payouts. EBITDA, Adjusted EBITDA, gross profit and core G&A are non-GAAP financial measures that are described under Non-GAAP Financial Measures in Appendix A.
Under the bonus pool funding framework, the Compensation Committee assessed the achievement of the following four corporate goals for 2020, which were approved by the Board of Directors at the beginning of the year along with underlying key performance metrics and program deliverables:
| Drive growth and expand our addressable market (the Growth Goal); |
| Develop an industry-leading client care experience (the Service Goal); |
| Help our advisors run successful businesses (the Support Goal); and |
| Improve execution and infrastructure (the Execution Goal). |
In the context of a volatile operating environment, the Company delivered solid financial results in 2020. The Companys gross profit of $2.1 billion in 2020 decreased 3% from $2.2 billion in 2019, primarily as a result of lower short-term interest rates in response to the COVID-19 pandemic. This macroeconomic challenge was partially offset by the Companys core business results for 2020, which included a record level of organic net new assets. Core general and administrative expense (core G&A) was $925 million, within the Companys target range for 2020 and an increase of 6.5% year-over-year as the Company maintained its focus on expense discipline while increasing investments to drive additional growth. The decrease in gross profit and increase in investments in 2020 resulted in Adjusted EBITDA of $946 million, a decrease of 12% year-over-year and below the Companys 2020 performance target for purposes of the annual bonus plan. The Companys solid financial performance in 2020, despite market volatility, was reflected in share price appreciation of 13% over the 12-month period. For additional discussion and analysis of the Companys 2020 financial performance, please refer to the Annual Report.
30 | 2021 Proxy Statement |
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Compensation Discussion and Analysis |
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As further discussed below, the Compensation Committee determined that the Company performed well against its four 2020 corporate goals, particularly in the context of the pandemic. The Companys total advisory and brokerage assets ended the year at a new high of $903 billion, a year-over-year increase of 18%, which was driven by continued organic growth and equity market appreciation. The Companys total organic net new assets for 2020 were $56 billion, translating to a 7% annualized growth rate compared to 5% in 2019. The year-over-year increase was driven by recruited assets of $40.9 billion, compared to $35.0 billion in 2019, and improved asset retention year-over-year. The Companys advisors continued to shift their business mix from brokerage to advisory solutions, and increase their use of both the Companys corporate advisory and centrally managed platforms, which benefit the Companys gross profit return on assets over time. In addition, the Company made progress in its multi-year efforts to expand its addressable markets through new affiliation models and to transform its service model into a client care model. The Companys net promoter scores increased by 15 points year-over-year as it focused on delivering differentiated service and support for its advisors through expanded capabilities and LPL Business Solutions. Finally, the Company executed well against its acquisition strategy, completing three transactions in 2020, and with respect to the operational challenges resulting from the pandemic, including with regard to employee health and safety, service quality and continuity, and technology systems performance and resiliency. In short, the Companys performance in 2020 enhanced the overall appeal of its model and value proposition for advisors and their clients, which we believe will drive long-term growth and shareholder value.
After taking into account the Companys overall performance against financial and non-financial goals for 2020, the Compensation Committee determined that the 2020 bonus pool would be funded above target level, and the annual cash bonus awards to our NEOs (as well to our other executives and employees) would generally be paid at target, or above target level for high performing employees, including our NEOs. This approach is consistent with our compensation philosophy and past practice.
2021 Proxy Statement |
31 |
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Compensation Discussion and Analysis |
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32 | 2021 Proxy Statement |
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Compensation Discussion and Analysis |
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Compensation Philosophy |
Under the oversight of the Compensation Committee, our executive compensation program rewards sustained positive financial and operating performance. Our executive compensation program is designed to align our executives compensation to the performance of the Company while avoiding practices that may create unwarranted risk. |
The design and operation of our executive compensation program reflect the following basic objectives: |
◾ aligning the interests of our executive officers with the interests of our Company and its stakeholders; |
◾ linking our executive officers compensation to the achievement of both short-term and long-term strategic and operational goals; and |
◾ attracting, motivating and retaining highly qualified executive officers who are passionate about the mission of our Company. |
We seek to achieve these objectives through the following guiding compensation principles: |
◾ paying compensation that is competitive with that offered for similar positions within our peer companies; |
◾ striking an appropriate balance between current and long-term compensation as well as cash and equity compensation; |
◾ linking short-term and long-term total compensation largely to objective and, to the extent possible, quantifiable performance measures; |
◾ rewarding Company and business unit performance, as well as individual performance and potential; and |
◾ using equity-based compensation for a significant portion of total compensation. |
Compensation Governance |
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In order to implement our compensation philosophy, and to promote strong governance and alignment with stockholder interests, we do the following: |
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✓ | maintain a pay mix that is weighted more heavily on variable, performance-based compensation than fixed compensation; |
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✓ | maintain stock ownership guidelines for executives; |
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✓ | maintain a compensation claw-back policy that enables the Company to recoup cash and equity incentive compensation from executive officers in the event of certain financial restatements; |
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✓ | retain an independent compensation consultant engaged by, and reporting directly to, the Compensation Committee; |
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✓ | benchmark executive compensation against peers with which we compete for talent; |
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✓ | conduct annual risk assessments of our executive compensation policies and practices; |
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✓ | hold an annual stockholder say on pay vote; and |
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✓ | hold Compensation Committee executive sessions without management present. |
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In addition, we do not do the following: |
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✘ | re-price stock options without stockholder approval; |
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✘ | permit hedging transactions or short sales by executives; |
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✘ | permit pledging or holding company stock in a margin account by executives; |
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✘ | enter into individual employment agreements; or |
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✘ | provide excise tax gross-ups to executives. |
We have designed our compensation practices to align with competitive market practices, strengthen the alignment between compensation paid and Company performance, and provide greater transparency for our employees and investors. These practices are discussed below.
2021 Proxy Statement |
33 |
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Compensation Discussion and Analysis |
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Base Salary
34 | 2021 Proxy Statement |
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Compensation Discussion and Analysis |
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35 |
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Compensation Discussion and Analysis |
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36 | 2021 Proxy Statement |
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Compensation Discussion and Analysis |
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2020 Goals and Performance Evaluation
At the beginning of 2020, our Board determined, with the input of the Companys chief executive officer, the corporate goals for the year, including the Adjusted EBITDA target and corporate goals described above. In evaluating incentive compensation at the end of the year, the Compensation Committee considered the level of achievement of the Companys financial and non-financial performance goals.
The Compensation Committee determined that the Company generally performed well against its 2020 corporate goals based on the achievements listed below.
2020 Corporate Goals | Performance Commentary | |
Drive growth and expand our addressable market | Exceeds Target. Organic net new assets of $56 billion represented a 7% growth rate, compared to 5% in 2019. Recruited assets of $40.9 billion exceeded our 2020 performance target and our prior annual record of $35 billion in 2019. In addition, the Company scaled its Strategic Wealth Services affiliation model, with five practices joining in 2020, and launched its new independent employee advisor model. It also entered into agreements to support BMO Harris Financial Advisors and M&T Securities, Inc. in 2021 through the Companys Institution Services platform and to acquire the wealth management business of Waddell & Reed Financial, Inc. | |
Develop an industry-leading client care experience | Exceeds Target. The Company made progress on this multi-year initiative, as reflected in a more than 15-point improvement in its net promoter score year-over-year, which exceeded the 2020 performance target, and an improvement of more than 60 points in the past three years. The Company delivered improvements to the functionality of its ClientWorks platform, including additional integrated advisor workflows and capabilities to enable digital practice management, and progressed the implementation of its client care platform through the launch of omni-channel service capabilities with skills-based routing. | |
Help our advisors run successful businesses | Meets Target. The Company supported advisors with new capabilities and a resilient technology platform as they pivoted their practices to a remote work environment. It also broadened and commercialized its LPL Business Solutions offerings, finishing 2020 with approximately 1,400 monthly subscriptions, which was more than double the level of year-end 2019. The Companys production retention rate was 97.7% for 2020, exceeding its 2020 performance goal, and an increase from 96.5% last year. | |
Improve execution and infrastructure | Partially Meets Target. The Company deployed capital to drive organic growth, including approximately $160 million in technology-related investments, implemented SEC Regulation Best Interest and completed three acquisitions. A 78.6% overall favorability score in the annual employee engagement survey exceeded the Companys 2020 performance target and validated its employee-focused initiatives during the pandemic and subsequent social justice events. However, the Companys operating margin, business-generated cash flows and relative total shareholder return were below 2020 performance targets. |
As we look forward to 2021, the Board has recommitted our management team to goal categories that are generally consistent with those adopted in 2020, although the Company has transitioned to a new goal-setting framework composed of objectives, priority initiatives and key results that are based on the Companys strategy.
2021 Proxy Statement |
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Compensation Discussion and Analysis |
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The table and chart below show the target annual cash bonus award opportunity established for each of our NEOs at the beginning of 2020, as well as the actual cash bonus awarded to each of our NEOs for 2020, as determined by the Compensation Committee:
NEO
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Target Award
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Target Award
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Cash Bonus
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Cash Bonus
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Cash Bonus
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Dan H. Arnold |
$ | 1,912,500 | 225 | % | $ | 2,199,375 | 259 | % | 115 | % | ||||||||||||||
Matthew J. Audette |
$ | 1,050,000 | 175 | % | $ | 1,192,000 | 199 | % | 114 | % | ||||||||||||||
Scott Seese |
$ | 800,000 | 160 | % | $ | 882,000 | 176 | % | 110 | % | ||||||||||||||
Dayton Semerjian |
$ | 800,000 | 160 | % | $ | 922,000 | 184 | % | 115 | % | ||||||||||||||
Richard Steinmeier |
$ | 800,000 | 160 | % | $ | 982,000 | 196 | % | 123 | % |
38 | 2021 Proxy Statement |
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Compensation Discussion and Analysis |
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Annual Cash Bonus Awards
($ in thousands)
2021 Proxy Statement |
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Compensation Discussion and Analysis |
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The table and chart below show the target LTI award established for each of our NEOs for 2020, as well as the actual LTI award granted to our NEOs in February 2021 for 2020 performance, as determined by the Compensation Committee:
Executive | 2020 Annual Base Salary |
LTI Target % of Base Salary |
LTI Target $ | LTI $ Granted(1) |
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Dan H. Arnold |
$ | 850,000 | 588% | $ | 5,000,000 | $ | 6,000,000 | |||||||
Matthew J. Audette |
$ | 600,000 | 175% | $ | 1,050,000 | $ | 1,150,000 | |||||||
Scott Seese |
$ | 500,000 | 180% | $ | 900,000 | $ | 900,000 | |||||||
Dayton Semerjian |
$ | 500,000 | 160% | $ | 800,000 | $ | 875,000 | |||||||
Richard Steinmeier |
$ | 500,000 | 200% | $ | 1,000,000 | $ | 1,300,000 |
(1) | These LTI awards were granted on February 25, 2021 for services provided during fiscal year 2020. Mr. Arnold received 70% of his LTI award as PSUs and 30% as RSUs. The remaining NEOs received 60% of their awards as PSUs and 40% as RSUs. PSUs are eligible to become earned and vested based on the achievement of performance criteria over a three-year period, as described above. RSUs are scheduled to vest in equal annual installments over a three-year period. |
40 | 2021 Proxy Statement |
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Compensation Discussion and Analysis |
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Long-Term Incentive Awards
($ in thousands)
2021 Proxy Statement |
41 |
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Compensation Discussion and Analysis |
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NEO Compensation Mix
($ in thousands)
42 | 2021 Proxy Statement |
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Compensation Discussion and Analysis |
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Compensation Discussion and Analysis |
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44 | 2021 Proxy Statement |
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Compensation Discussion and Analysis |
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Report of the Compensation and Human Resources Committee of the Board of Directors |
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Report of the Compensation and Human Resources Committee of the Board of Directors
The following independent directors, who constitute the Compensation Committee, have reviewed the Compensation Discussion and Analysis with our management and recommended that it be included in this proxy statement.
Anne M. Mulcahy, Chair
H. Paulett Eberhart
Allison H. Mnookin
James S. Putnam
March 22, 2021
46 | 2021 Proxy Statement |
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Compensation of Named Executive Officers |
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Compensation of Named Executive Officers
Summary Compensation Table
The following table sets forth information for our NEOs concerning the total compensation for the years ended December 31, 2020, 2019 and 2018, as applicable to such NEO:
Name and Principal Position |
Year | Salary ($) |
Bonus ($) |
Stock Awards ($)(1) |
Option Awards ($)(1) |
Non-Equity Incentive Plan Compensation ($)(2) |
All Other Compensation ($)(3) |
Total ($) |
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Dan H. Arnold President and Chief Executive Officer |
2020 | 850,000 | | 4,171,168 | | 2,199,375 | 36,170 | 7,256,713 | ||||||||||||||||||||||||||||||||||
2019 | 842,308 | (4) | | 2,616,773 | 1,679,993 | 2,486,250 | 44,630 | 7,669,954 | ||||||||||||||||||||||||||||||||||
2018 | 800,000 | | 2,328,641 | 1,539,982 | 2,430,000 | 29,728 | 7,128,351 | |||||||||||||||||||||||||||||||||||
Matthew J. Audette Chief Financial Officer |
2020 | 600,000 | | 1,005,422 | | 1,192,000 | 27,611 | 2,825,033 | ||||||||||||||||||||||||||||||||||
2019 | 600,000 | | 977,792 | 314,980 | 1,400,000 | 32,155 | 3,324,927 | |||||||||||||||||||||||||||||||||||
2018 | 600,000 | | 959,950 | 314,997 | 1,420,000 | 26,207 | 3,321,154 | |||||||||||||||||||||||||||||||||||
Scott Seese Managing Director, Chief Information Officer |
2020 | 500,000 | | 933,305 | | 882,000 | 35,175 | 2,350,480 | ||||||||||||||||||||||||||||||||||
2019 | 500,000 | | 931,203 | 299,992 | 1,024,000 | 22,748 | 2,777,943 | |||||||||||||||||||||||||||||||||||
2018 | 500,000 | | 777,065 | 254,990 | 1,120,000 | 250,676 | 2,902,731 | |||||||||||||||||||||||||||||||||||
Dayton Semerjian(5) Managing Director, Chief Customer Care Officer |
2020 | 500,000 | | 788,991 | | 922,000 | 102,496 | 2,313,487 | ||||||||||||||||||||||||||||||||||
2019 | 407,692 | (6) | | 794,714 | (7) | | 975,000 | 228,785 | 2,406,191 | |||||||||||||||||||||||||||||||||
Richard Steinmeier(8) Managing Director, Divisional President |
2020 | 493,716 | (9) | | 883,689 | | 982,000 | 80,841 | 2,440,246 | |||||||||||||||||||||||||||||||||
2019 | 450,000 | | 557,281 | 179,546 | 780,000 | 253,359 | 2,220,186 | |||||||||||||||||||||||||||||||||||
2018 | 173,836 | (10) | 500,000 | (11 | ) | 1,869,879 | (12) | | 265,000 | (13) | 234,643 | 3,043,358 |
(1) | Represents the aggregate grant date fair value of PSUs, RSUs and stock options, in each case computed in accordance with FASB ASC Topic 718 and, in the case of PSUs, based on the probable outcome of the performance conditions associated with such awards on the grant date. The aggregate grant date fair value of RSUs was determined using the closing price of our Common Stock on the grant date. The aggregate grant date fair value of stock option awards was determined using the Black-Scholes model. The underlying valuation assumptions for PSUs and stock option awards are further disclosed in Note 16, Share-Based Compensation, to our consolidated financial statements filed with our annual report on Form 10-K for the year ended December 31, 2020, Note 16, Share-Based Compensation, to our consolidated financial statements filed with our annual report on Form 10-K for the year ended December 31, 2019 and Note 15, Share-Based Compensation, to our consolidated financial statements filed with our annual report on Form 10-K for the year ended December 31, 2018. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The table below shows the grant date fair value of PSU awards granted in 2020, 2019 and 2018 assuming target and maximum levels of performance are achieved (amounts under the Stock Awards column represent the aggregate grant date fair value of PSUs based on the probable outcome of performance conditions, which for each of 2020, 2019 and 2018 assumed target level of performance was achieved). |
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2020 | 2019 | 2018 | ||||||||||||||||||||||
Name | Target ($) | Maximum ($) | Target ($) | Maximum ($) | Target ($) | Maximum ($) | ||||||||||||||||||
Dan H. Arnold |
2,968,063 | 5,936,127 | 2,616,773 | 5,233,545 | 2,328,641 | 4,657,281 | ||||||||||||||||||
Matthew J. Audette |
616,627 | 1,233,254 | 654,193 | 1,308,386 | 635,050 | 1,270,100 | ||||||||||||||||||
Scott Seese |
572,382 | 1,144,764 | 623,036 | 1,246,071 | 514,093 | 1,028,185 | ||||||||||||||||||
Dayton Semerjian |
483,893 | 967,786 | | | | | ||||||||||||||||||
Richard Steinmeier |
541,953 | 1,083,906 | 372,863 | 745,725 | | |
(2) | Represents the dollar value of annual cash bonus awards earned by each NEO under our cash bonus plan for the relevant year (the Bonus Plan). |
(3) | See All Other Compensation table below for additional information. |
(4) | Mr. Arnold received an increase in base salary from $800,000 to $850,000 on February 17, 2019. |
(5) | Mr. Semerjian joined the Company on February 28, 2019. |
(6) | Mr. Semerjians base salary for 2019 of $500,000 was prorated based on commencement of his employment on February 28, 2019. |
(7) | Includes a sign-on grant of 10,772 RSUs in connection with Mr. Semerjians commencement of employment. |
(8) | Mr. Steinmeier joined the Company on August 13, 2018. |
(9) | Mr. Steinmeier received an increase in base salary from $450,000 to $500,000 on February 16, 2020. |
(10) | Mr. Steinmeiers base salary for 2018 of $450,000 was prorated based on commencement of his employment on August 13, 2018. |
(11) | Represents a signing bonus paid in connection with Mr. Steinmeiers commencement of employment. |
(12) | Includes a sign-on grant of 30,143 RSUs in connection with Mr. Steinmeiers commencement of employment. |
(13) | Mr. Steinmeiers bonus for 2018 was prorated based on commencement of his employment on August 13, 2018. |
All Other Compensation
The following table sets forth information for our NEOs concerning All Other Compensation in the table above for the years ended December 31, 2020, 2019 and 2018, as applicable to such NEO:
Name | Year |
Taxable ($) |
Taxable and Related ($) |
Reimbursement for Financial Planning Services($)(1) |
Executive ($)(2) |
401(k) ($) |
Other ($)(3) |
Total ($) |
||||||||||||||||||||||||||||||||
Dan H. Arnold |
2020 | | | 15,000 | 4,070 | 17,100 | | 36,170 | ||||||||||||||||||||||||||||||||
2019 | 8,760 | (4) | | 15,000 | 4,070 | 16,800 | | 44,630 | ||||||||||||||||||||||||||||||||
2018 | | | 15,000 | | 14,300 | 428 | 29,728 | |||||||||||||||||||||||||||||||||
Matthew J. Audette |
2020 | | | 9,800 | 3,186 | 14,625 | | 27,611 | ||||||||||||||||||||||||||||||||
2019 | | | 13,400 | 4,070 | 14,250 | 434 | 32,154 | |||||||||||||||||||||||||||||||||
2018 | | | 13,325 | | 12,025 | 857 | 26,207 | |||||||||||||||||||||||||||||||||
Scott Seese |
2020 | | | 15,000 | 3,075 | 17,100 | | 35,175 | ||||||||||||||||||||||||||||||||
2019 | | | 2,438 | 3,075 | 16,800 | 434 | 22,747 | |||||||||||||||||||||||||||||||||
2018 | | 249,814 | (5) | | | | 862 | 250,676 | ||||||||||||||||||||||||||||||||
Dayton Semerjian |
2020 | | 66,326 | (6) | 15,000 | 4,070 | 17,100 | | 102,496 | |||||||||||||||||||||||||||||||
2019 | 6,511 | (7) | 208,701 | (8) | | 3,186 | 9,952 | 434 | 228,784 | |||||||||||||||||||||||||||||||
Richard Steinmeier |
2020 | | 49,584 | (9) | 13,488 | 3,145 | 14,625 | | 80,842 | |||||||||||||||||||||||||||||||
2019 | 3,345 | (10) | 232,307 | (11) | | 4,070 | 13,082 | 555 | 253,359 | |||||||||||||||||||||||||||||||
2018 | | 233,786 | (12) | | | | 857 | 234,643 |
(1) | Consists of taxable reimbursements received under the Companys executive financial services policy. |
(2) | Includes membership expenses for a health and wellness program and related tax gross-up payments, which in 2020 totaled $1,870 for each of Messrs. Arnold and Semerjian, $986 for Mr. Audette, $1,425 for Mr. Seese and $945 for Mr. Steinmeier, and which in 2019 totaled $1,870 for each of Messrs. Arnold, Audette and Steinmeier, $1,425 for Mr. Seese and $986 for Mr. Semerjian. |
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(3) | Consists of the value of a year-end gift received by the NEO at the Companys expense and, in 2019, related tax gross-up payments in the amount of $134 for each of Messrs. Audette, Seese and Semerjian and $255 for Mr. Steinmeier. |
(4) | Includes $4,025 in tax gross-up payments for hotel, air travel and conference expenses related to the attendance in 2019 of Mr. Arnold and his spouse at a conference hosted by the Company for its top-producing financial advisors. |
(5) | Includes tax gross-up payments of $109,814 made to Mr. Seese in 2018 related to relocation expenses. |
(6) | Includes tax gross-up payments of $30,630 made to Mr. Semerjian in 2020 related to relocation expenses. |
(7) | Includes $2,015 in tax gross-up payments for hotel, air travel and conference expenses related to the attendance in 2019 of Mr. Semerjian and his spouse at a conference hosted by the Company for its top-producing financial advisors. |
(8) | Includes tax gross-up payments of $65,457 made to Mr. Semerjian in 2019 related to relocation expenses. |
(9) | Includes tax gross-up payments of $24,584 made to Mr. Steinmeier in 2020 related to relocation expenses. |
(10) | Includes $1,537 in tax gross-up payments for hotel, air travel and conference expenses related to the attendance in 2019 of Mr. Steinmeier and his spouse at a conference hosted by the Company for its top-producing financial advisors. |
(11) | Includes tax gross-up payments of $82,307 made to Mr. Steinmeier in 2019 related to relocation expenses. |
(12) | Includes tax gross-up payments of $72,356 made to Mr. Steinmeier in 2018 related to relocation expenses. |
2020 Grants of Plan-Based Awards
The following table provides additional information about non-equity and equity-based awards granted to our NEOs during the year ended December 31, 2020:
Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) |
Estimated Future Payouts Under Equity Incentive Plan Awards(2) |
All Other Stock Awards: Shares of Stock or Units (#)(3) |
Grant Date Fair Value of Stock ($)(4) |
|||||||||||||||||||||||||||||||
Threshold ($) |
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#) |
Maximum (#) |
|||||||||||||||||||||||||||||||
Dan H. Arnold |
1,912,500 | |||||||||||||||||||||||||||||||||||
2/25/2020 | 14,547 | 1,203,105 | ||||||||||||||||||||||||||||||||||
2/25/2020 | 16,972 | 33,944 | 67,888 | 2,968,063 | ||||||||||||||||||||||||||||||||
Matthew J. Audette |
1,050,000 | |||||||||||||||||||||||||||||||||||
2/25/2020 | 4,701 | 388,795 | ||||||||||||||||||||||||||||||||||
2/25/2020 | 3,526 | 7,052 | 14,104 | 616,627 | ||||||||||||||||||||||||||||||||
Scott Seese |
800,000 | |||||||||||||||||||||||||||||||||||
2/25/2020 | 4,364 | 360,923 | ||||||||||||||||||||||||||||||||||
2/25/2020 | 3,273 | 6,546 | 13,092 | 572,382 | ||||||||||||||||||||||||||||||||
Dayton Semerjian |
800,000 | |||||||||||||||||||||||||||||||||||
2/25/2020 | 3,689 | 305,098 | ||||||||||||||||||||||||||||||||||
2/25/2020 | 2,767 | 5,534 | 11,068 | 483,893 | ||||||||||||||||||||||||||||||||
Richard Steinmeier |
800,000 | |||||||||||||||||||||||||||||||||||
2/25/2020 | 4,132 | 341,736 | ||||||||||||||||||||||||||||||||||
2/25/2020 |
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3,099 | 6,198 | 12,396 |
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541,953 |
(1) | Represents potential target payouts under awards pursuant to the Bonus Plan. |
(2) | Represents the number of threshold, target and maximum potential future payouts under the PSUs awarded under our 2010 Plan. PSUs are eligible to become earned PSUs based on the Companys TSR relative to the TSR of the Comparator Group (as defined above) over the Performance Period (as defined above). The number of PSUs that is earned is determined based on the Companys relative ranking between the 25th and the 80th percentile of the Comparator Groups TSR results. Amounts in the threshold column (50% of the target award) reflect the number of PSUs that would be earned if threshold performance were achieved (a TSR percentile rank at 25%); amounts in the target column (100% of the target award) reflect the number of PSUs that would be earned if target performance were achieved (a TSR percentile rank at 50%); and amounts in the maximum column (200% of the target award) reflect the number of PSUs that would be earned if maximum performance were achieved (a TSR percentile rank at or above 80%). The number of PSUs earned between threshold, target and maximum performance levels is interpolated on a straight-line basis. No PSUs will be earned if performance is below the threshold level. The number of earned PSUs is capped at 100% of the target award if the Companys TSR is negative during the Performance Period. Earned PSUs become vested on the later of the third anniversary of the grant date and the date on which the Compensation Committee determines the level of achievement of the performance criteria associated with the award and the number of PSUs that have become earned under the award agreement. |
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(3) | Represents the number of RSUs awarded under our 2010 Plan. RSUs are scheduled to vest over a three-year period in equal tranches, with the first tranche scheduled to vest on the first anniversary of the grant date. |
(4) | Represents the grant date fair value of PSUs and RSUs, in each case computed in accordance with FASB ASC Topic 718, and in the case of PSUs, based on the probable outcome of the performance conditions associated with such awards on the grant date. The aggregate grant date fair value of RSUs was determined using the closing price of the Common Stock on the grant date. See Note (1) to the Summary Compensation Table above. |
Outstanding Equity Awards at December 31, 2020
The following table sets forth information with respect to unexercised stock option awards, unvested RSUs and unearned PSUs as of December 31, 2020.
Option Awards |
Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Underlying 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 ($)(1) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares That Have Not Vested ($)(2) |
||||||||||||||||||||||||||||||||||||||||
Dan H. Arnold |
15,594 | | (3) | $ | 54.81 | 2/24/2024 | | $ | | | $ | | ||||||||||||||||||||||||||||||||||||
78,031 | | (4) | $ | 19.85 | 2/25/2026 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
123,131 | | (5) | $ | 39.48 | 3/13/2027 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
51,738 | 25,868 | (6) | $ | 65.50 | 2/23/2028 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
22,940 | 45,880 | (7) | $ | 77.53 | 2/25/2029 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
| | $ | | 25,873 | (8) | $ | 2,696,484 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | 14,547 | (9) | $ | 1,516,088 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | 50,170 | (10) | $ | 5,228,717 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | | $ | | 45,856 | (11 | ) | $ | 4,779,112 | |||||||||||||||||||||||||||||||||||||
| | $ | | | $ | | 33,944 | (11 | ) | $ | 3,537,644 | |||||||||||||||||||||||||||||||||||||
Matthew J. Audette |
17,605 | | (12) | $ | 42.60 | 10/30/2025 | | $ | | | $ | | ||||||||||||||||||||||||||||||||||||
94,110 | | (4) | $ | 19.85 | 2/25/2026 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
27,704 | (5) | $ | 39.48 | 3/13/2027 | | $ | | | $ | | ||||||||||||||||||||||||||||||||||||||
10,584 | 5,290 | (6) | $ | 65.50 | 2/23/2028 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
4,301 | 8,602 | (7) | $ | 77.53 | 2/25/2029 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||||
| | $ | | 1,709 | (6) | $ | 178,112 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | 2,866 | (7) | $ | 298,695 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | 4,701 | (9) | $ | 489,938 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | 13,682 | (10) | $ | 1,425,938 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | | $ | | 11,464 | (11 | ) | $ | 1,194,778 | |||||||||||||||||||||||||||||||||||||
| | $ | | | $ | | 7,052 | (11 | ) | $ | 734,959 | |||||||||||||||||||||||||||||||||||||
Scott Seese |
8,568 | 4,282 | (6 | ) | $ | 65.50 | 2/23/2028 | | $ | | | $ | | |||||||||||||||||||||||||||||||||||
4,097 | 8,192 | (7 | ) | $ | 77.53 | 2/25/2029 | | $ | | | $ | | ||||||||||||||||||||||||||||||||||||
| | $ | | 1,383 | (6) | $ | 144,136 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | 2,729 | (7) | $ | 284,416 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | 4,364 | (9) | $ | 454,816 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | 11,076 | (10) | $ | 1,154,341 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | | $ | | 10,918 | (11 | ) | $ | 1,137,874 | |||||||||||||||||||||||||||||||||||||
| | $ | | | $ | | 6,546 | (11 | ) | $ | 682,224 | |||||||||||||||||||||||||||||||||||||
Dayton Semerjian |
| | $ | | 5,386 | (13) | $ | 561,329 | | $ | | |||||||||||||||||||||||||||||||||||||
| | $ | | 3,689 | (9) | $ | 384,468 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | 5,534 | (11 | ) | $ | 576,753 |
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Option Awards |
Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Underlying 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 or Payout Value of Unearned Shares That Have Not Vested ($)(2) |
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Richard Steinmeier |
2,452 | 4,903 | (7) | $ | 77.53 | 2/25/2029 | | $ | | | $ | | ||||||||||||||||||||||||||||||||||||
| | $ | | 15,072 | (14) | $ | 1,570,804 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | 1,633 | (7) | $ | 170,191 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | 4,132 | (9) | $ | 430,637 | | $ | | ||||||||||||||||||||||||||||||||||||||
| | $ | | | $ | | 6,534 | (11) | $ | 680,973 | ||||||||||||||||||||||||||||||||||||||
| | $ | | | $ | | 6,198 | (11) | $ | 645,956 |
(1) | Amounts were determined by multiplying the number of RSUs by a price per share of our Common Stock of $104.22, the closing price per share of our Common Stock on December 31, 2020, the last business day of 2020. |
(2) | Amounts were determined by multiplying the number of PSUs that would be earned at maximum performance levels by a price per share of our Common Stock of $104.22, the closing price per share of our Common Stock on December 31, 2020, the last business day of 2020. |
(3) | These awards vested over a three-year period in equal tranches and became fully vested on February 24, 2017. |
(4) | These awards vested over a three-year period in equal tranches and became fully vested on February 25, 2019. |
(5) | These awards vested over a three-year period in equal tranches and became fully vested on March 13, 2020. |
(6) | These awards vest over a three-year period in equal tranches, with the first tranche having vested on the first anniversary of the grant date, the second tranche having vested on the second anniversary of the grant date and the third tranche scheduled to vest on the third anniversary of the grant date. |
(7) | These awards vest over a three-year period in equal tranches, with the first tranche having vested on the first anniversary of the grant date, and the second and third tranches scheduled to vest on the second and third anniversaries of the grant date, respectively. |
(8) | These awards vest over a five-year period in three equal tranches beginning the third anniversary of the grant date. One tranche of the award vested on the third anniversary of the grant date, and the second and third tranches are scheduled to vest on the fourth and fifth anniversaries of the grant date, respectively. |
(9) | These awards vest over a three-year period in equal tranches, with the first tranche scheduled to vest on the first anniversary of the grant date and each subsequent tranche scheduled to vest on each subsequent anniversary of the grant date. |
(10) | Amounts represent PSUs that were earned with respect to the Performance Period ended on December 31, 2020 and that vested on February 23, 2021, the third anniversary of the grant date. The number of earned PSUs was 200% of the target award, as discussed under Compensation Discussion and Analysis Long-Term Equity Incentive Awards Payout of 2018 PSUs. |
(11) | Amounts represent PSUs and assume achievement of performance at maximum levels. PSUs are eligible to become earned PSUs based on the Companys TSR relative to the TSR of the Comparator Group over the Performance Period. The number of PSUs that is earned is determined based on the Companys relative ranking between the 25th and 80th percentiles of the Comparator Groups TSR results, and can range from 50% of the target award (if the Companys TSR is at or above the 25th percentile of the Comparator Groups TSR results) to a maximum of 200% of the target award (if the Companys TSR is at or greater than the 80th percentile of the Comparator Groups TSR results). The number of PSUs earned between threshold and maximum performance levels is interpolated on a straight-line basis. The number of earned PSUs is capped at 100% of the target award if the Companys TSR is negative during the Performance Period. Earned PSUs become vested on the later of the third anniversary of the grant date and the date on which the Compensation Committee determines achievement of the performance criteria associated with the award and the number of PSUs that have become earned under the award agreement. |
(12) | These awards vested over a three-year period in equal tranches and became fully vested on October 30, 2018. |
(13) | These awards vest over a two-year period in equal tranches, with the first tranche vesting on the first anniversary of the grant date and the second tranche scheduled to vest on the second anniversary of the grant date. |
(14) | These awards vest over a four-year period in equal tranches. One tranche of the award vested on the first anniversary of the grant date, one tranche of the award vested on the second anniversary of the grant date and the third and fourth tranches are scheduled to vest on the third and fourth anniversaries of the grant date, respectively. |
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2020 Option Exercises and Stock Vested
The following table sets forth the options exercised and stock vested during the year ended December 31, 2020:
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) |
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Dan H. Arnold |
20,000 | $ | 1,317,030 | (3) | 12,936 | $ | 1,229,567 | (13) | ||||||||||||
1,999 | $ | 61,009 | (4) | 70,368 | $ | 4,205,192 | (14) | |||||||||||||
12,753 | $ | 506,760 | (5) | | $ | | ||||||||||||||
400 | $ | 15,799 | (6) | | $ | | ||||||||||||||
200 | $ | 6,103 | (7) | | $ | | ||||||||||||||
756 | $ | 30,147 | (8) | | $ | | ||||||||||||||
200 | $ | 6,107 | (9) | | $ | | ||||||||||||||
800 | $ | 31,936 | (10) | | $ | | ||||||||||||||
2,239 | $ | 67,595 | (11) | | $ | | ||||||||||||||
10,653 | $ | 420,261 | (12) | | $ | | ||||||||||||||
Matthew J. Audette |
| $ | | 1,711 | $ | 162,305 | (15) | |||||||||||||
| $ | | 1,433 | $ | 121,060 | (16) | ||||||||||||||
| $ | | 21,110 | $ | 1,261,534 | (14) | ||||||||||||||
| $ | | 2,638 | $ | 157,647 | (17) | ||||||||||||||
Scott Seese |
| $ | | 1,385 | $ | 131,381 | (15) | |||||||||||||
| $ | | 1,365 | $ | 115,315 | (16) | ||||||||||||||
Dayton Semerjian |
| $ | | 5,386 | $ | 428,079 | (18) | |||||||||||||
Richard Steinmeier |
| $ | | 817 | $ | 69,020 | (16) | |||||||||||||
| $ | | 7,536 | $ | 631,215 | (19) |
(1) | For purposes of calculating the value realized on the exercise of option awards, we use the market price of our Common Stock at the time the option was exercised. |
(2) | For purposes of calculating the value realized on the vesting of stock awards, we use the closing price of our Common Stock on the vesting date. |
(3) | These options were granted on February 25, 2016 with an exercise price of $19.85 per share and were exercised on June 9, 2020, on which date our Common Stock was trading at $85.70 per share. |
(4) | These options were granted February 24, 2014 with an exercise price of $54.81 per share and were exercised on August 11, 2020, on which date our Common Stock was trading at $85.33 per share. |
(5) | These options were granted on March 6, 2015 with an exercise price of $45.55 per share and were exercised on August 11, 2020, on which date our Common Stock was trading at $85.29 per share. |
(6) | These options were granted on March 6, 2015 with an exercise price of $45.55 per share and were exercised on August 13, 2020, on which date our Common Stock was trading at $85.05 per share. |
(7) | These options were granted on February 24, 2014 with an exercise price of $54.81 per share and were exercised on September 3, 2020, on which date our Common Stock was trading at $85.33 per share. |
(8) | These options were granted on March 6, 2015 with an exercise price of $45.55 per share and were exercised on September 3, 2020, on which date our Common Stock was trading at $85.43 per share. |
(9) | These options were granted on February 24, 2014 with an exercise price of $54.81 per share and were exercised on September 4, 2020, on which date our Common Stock was trading at $85.34 per share. |
(10) | These options were granted on March 6, 2015 with an exercise price of $45.55 per share and were exercised on September 4, 2020, on which date our Common Stock was trading at $85.47 per share. |
(11) | These options were granted on February 24, 2014 with an exercise price of $54.81 per share and were exercised on November 9, 2020, on which date our Common Stock was trading at $85.00 per share. |
52 | 2021 Proxy Statement |
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|
Compensation of Named Executive Officers |
|
(12) | These options were granted on March 6, 2015 with an exercise price of $45.55 per share and were exercised on November 9, 2020, on which date our Common Stock was trading at $85.00 per share. |
(13) | These RSUs vested on February 13, 2020, on which date the closing price of our Common Stock was $95.05 per share. |
(14) | These PSUs vested on March 13, 2020, on which date the closing price of our Common Stock was $59.76 per share. |
(15) | These RSUs vested on February 23, 2020, on which date the most recent closing price of our Common Stock, as of February 21, 2020, was $94.86 per share. |
(16) | These RSUs vested on February 25, 2020, on which date the closing price of our Common Stock was $84.48 per share. |
(17) | These RSUs vested on March 13, 2020, on which date the closing price of our Common Stock was $59.76 per share. |
(18) | These RSUs vested on February 28, 2020, on which date the closing price of our Common Stock was $79.48 per share. |
(19) | These RSUs vested on September 7, 2020, on which date the most recent closing price of our Common Stock, as of September 4, 2020, was $83.76 per share. |
Nonqualified Deferred Compensation for the Year Ended December 31, 2020
The Deferred Compensation Plan allows certain highly compensated or management employees to defer up to 100% of their current compensation, which includes for this purpose base salary, service bonus, performance-based compensation, and commissions. Distributions of deferred amounts may be made only upon a qualifying distribution event, which, depending on the individuals election, may be a separation from service, disability (as defined in the Deferred Compensation Plan), death, a change-in-control event (as defined in the Deferred Compensation Plan), an unforeseeable emergency, or a specified date, or may be the earliest of one or more of these events. At the time an election is made to defer compensation under the Deferred Compensation Plan, participants may choose, with respect to each potential qualifying distribution event, to receive amounts in either a lump sum or in equal annual installments over a number of years (but not to exceed five years). Deferred amounts are credited with an investment return determined as if the amounts were invested in one or more investment funds made available by the Deferred Compensation Plan and selected by a participant.
The following table sets forth information relating to nonqualified deferred compensation for each NEO for the year ended December 31, 2020:
Name | Executive Contributions in Last Fiscal Year ($)(1) |
Registrant Contributions in Last Fiscal Year ($) |
Aggregate Earnings in Last Fiscal Year ($)(2) |
Aggregate Withdrawals/ Distributions ($) |
Aggregate Balance at Last Fiscal Year End ($)(3) |
|||||||||||||||
Dan H. Arnold (4) |
52,000 | | 597,353 | | 5,567,108 | |||||||||||||||
Matthew J. Audette (4) |
100,000 | | 41,339 | | 141,239 | |||||||||||||||
Scott Seese |
| | | | | |||||||||||||||
Dayton Semerjian |
| | | | | |||||||||||||||
Richard Steinmeier |
| | | | |
(1) | Amounts in this column are also reported in the Summary Compensation Table above for 2020 under Salary. |
(2) | Amounts in this column do not constitute above-market or preferential earnings and therefore are not reported as compensation in the Summary Compensation Table above. |
(3) | Amounts in this column, excluding earnings, were previously reported in the Summary Compensation Table for the years in which Mr. Arnold was an NEO. |
(4) | Amounts included herein relate to Messrs. Arnold and Audettes participation in the Deferred Compensation Plan. |
2021 Proxy Statement |
53 |
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Compensation of Named Executive Officers |
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Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2020
Set forth below the table is a description of certain post-employment arrangements with our NEOs, including the severance benefits and change-in-control benefits to which they would have been entitled under the Executive Severance Plan as of December 31, 2020, if a termination of employment and/or a change-in-control had occurred on such date. Amounts reported for the accelerated vesting of stock options, RSUs and PSUs are based on a price per share of our Common Stock of $104.22, the closing price per share of our Common Stock on December 31, 2020, the last business day of 2020.
Named Executive Officer |
Benefit | Without Cause or For Good Reason ($) |
Disability, Death, Retirement ($) |
Double-Trigger Change-in- Control ($)(1) |
||||||||||||||||||||||
Dan H. Arnold |
Severance | 850,000 | (2) | | 1,275,000 | (3) | ||||||||||||||||||||
Bonus | 2,199,375 | (4) | | 3,299,063 | (5) | |||||||||||||||||||||
Accelerated Vesting of Stock Options | 2,226,146 | (6) | 2,226,146 | (7) | 2,226,146 | (8) | ||||||||||||||||||||
Accelerated Vesting of RSUs | 4,212,572 | (9) | 4,212,572 | (10) | 4,212,572 | (11) | ||||||||||||||||||||
Accelerated Vesting of PSUs | 5,389,489 | (12) | 5,389,489 | (13) | 5,389,489 | (14) | ||||||||||||||||||||
Group Benefit Continuation | 20,636 | (15) | | 30,954 | (16) | |||||||||||||||||||||
Total | $ | 14,898,218 | $ | 11,828,207 | $ | 16,433,224 | ||||||||||||||||||||
Matthew J. Audette |
Severance | 600,000 | (2) | | 900,000 | (3) | ||||||||||||||||||||
Bonus | 1,192,000 | (4) | | 1,788,000 | (5) | |||||||||||||||||||||
Accelerated Vesting of Stock Options | 319,622 | (6) | 434,416 | (7) | 434,416 | (8) | ||||||||||||||||||||
Accelerated Vesting of RSUs | 490,772 | (9) | 966,745 | (10) | 966,745 | (11) | ||||||||||||||||||||
Accelerated Vesting of PSUs | 1,356,736 | (12) | 1,356,736 | (13) | 1,356,736 | (14) | ||||||||||||||||||||
Group Benefit Continuation | 20,636 | (15) | | 30,954 | (16) | |||||||||||||||||||||
Total | $ | 3,979,766 | $ | 2,757,897 | $ | 5,476,851 | ||||||||||||||||||||
Scott Seese |
Severance | 500,000 | (2) | | 750,000 | (3) | ||||||||||||||||||||
Bonus | 882,000 | (4) | | 1,323,000 | (5) | |||||||||||||||||||||
Accelerated Vesting of Stock Options | 275,148 | (6) | 384,444 | (7) | 384,444 | (8) | ||||||||||||||||||||
Accelerated Vesting of RSUs | 437,932 | (9) | 883,369 | (10) | 883,369 | (11) | ||||||||||||||||||||
Accelerated Vesting of PSUs | 1,184,252 | (12) | 1,184,252 | (13) | 1,184,252 | (14) | ||||||||||||||||||||
Group Benefit Continuation | 20,636 | (15) | | 30,954 | (16) | |||||||||||||||||||||
Total | $ | 3,299,968 | $ | 2,452,065 | $ | 4,556,019 | ||||||||||||||||||||
Dayton Semerjian |
Severance | 500,000 | (2) | | 750,000 | (3) | ||||||||||||||||||||
Bonus | 922,000 | (4) | | 1,383,000 | (5) | |||||||||||||||||||||
Accelerated Vesting of Stock Options | | | | |||||||||||||||||||||||
Accelerated Vesting of RSUs | 689,415 | (9) | 945,797 | (10) | 945,797 | (11) | ||||||||||||||||||||
Accelerated Vesting of PSUs | 192,599 | (12) | 192,599 | (13) | 192,599 | (14) | ||||||||||||||||||||
Group Benefit Continuation | 20,621 | (15) | | 30,932 | (16) | |||||||||||||||||||||
Total | $ | 2,324,635 | $ | 1,138,396 | $ | 3,302,328 | ||||||||||||||||||||
Richard Steinmeier |
Severance | 500,000 | (2) | | 750,000 | (3) | ||||||||||||||||||||
Bonus | 982,000 | (4) | | 1,473,000 | (5) | |||||||||||||||||||||
Accelerated Vesting of Stock Options | 65,444 | (6) | 130,861 | (7) | 130,861 | (8) | ||||||||||||||||||||
Accelerated Vesting of RSUs | 1,013,956 | (9) | 2,171,632 | (10) | 2,171,632 | (11) | ||||||||||||||||||||
Accelerated Vesting of PSUs | 442,622 | (12) | 442,622 | (13) | 442,622 | (14) | ||||||||||||||||||||
Group Benefit Continuation | 10,423 | (15) | | 15,635 | (16) | |||||||||||||||||||||
Total | $ | 3,014,445 | $ | 2,745,115 | $ | 4,983,750 |
54 | 2021 Proxy Statement |
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Compensation of Named Executive Officers |
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(1) | Our Executive Severance Plan provides enhanced severance benefits on a double trigger basis in the event of a termination of employment by the Company without cause or a termination by the executive for good reason, in each case, within 12 months following a change-in-control. All amounts reported in this column assume both that a change-in-control occurred on December 31, 2020 and that the NEOs employment was terminated by the Company without cause or by the executive for good reason on December 31, 2020. |
(2) | Represents continued payment under our Executive Severance Plan of the NEOs base salary in effect on the separation date for 12 months. |
(3) | Represents continued payment under our Executive Severance Plan of the NEOs base salary in effect on the separation date for 18 months. |
(4) | Represents payment under our Executive Severance Plan of an amount equal to the bonus paid (or payable) to the NEO for the most recently completed calendar year. |
(5) | Represents payment under our Executive Severance Plan of an amount equal to 150% of the target bonus amount for the calendar year in which the NEOs employment is terminated. |
(6) | Represents the value of the unvested portion of any outstanding stock options scheduled to vest based solely on the passage of time within 12 months following separation, the vesting of which would have been accelerated under our Executive Severance Plan. In the case of retirement-eligible NEOs, this represents the value of all outstanding unvested stock options, the vesting of which would have been accelerated under the Executive Severance Plan. |
(7) | Represents the value of the unvested portion all outstanding stock options, the vesting of which would have been accelerated upon termination of employment due to death or disability under the terms of the NEOs stock option agreements. |
(8) | Represents the value of the unvested portion of all outstanding stock options, the vesting of which would have been accelerated under the Executive Severance Plan. |
(9) | Represents the value of shares of Common Stock in respect of the unvested portion of any outstanding RSUs scheduled to vest based solely on the passage of time within 12 months following a termination of employment, the vesting of which would have been accelerated under our Executive Severance Plan. In the case of retirement-eligible NEOs, this represents the value of all outstanding unvested RSUs, the vesting of which would have been accelerated under the terms of the NEOs RSU agreements. |
(10) | Represents the value of shares of Common Stock in respect of all outstanding unvested RSUs, the vesting of which would have been accelerated upon a termination of employment due to death (and, for RSUs granted subsequent to February 23, 2017, upon a termination of employment due to death or disability) under the terms of the NEOs RSU agreements. |
(11) | Represents the value of shares of Common Stock in respect of all outstanding unvested RSUs, the vesting of which would have been accelerated under our Executive Severance Plan. |
(12) | Represents the value of unvested PSUs assuming the target number of shares of Common Stock in respect of such PSUs became earned and vested on December 31, 2020, with such amount prorated based on the number of days the NEO was employed during the Performance Period. Under our Executive Severance Plan, upon a qualifying termination of employment by the Company without cause or a termination by the executive for good reason, other than in connection with a change-in-control, the actual number of shares of Common Stock that will be earned and vested in respect of outstanding unvested PSUs, if any, depend on actual performance measured at the end of the Performance Period, prorated based on the number of days the NEO was employed during the Performance Period. |
(13) | Represents the value of unvested PSUs assuming the target number of shares of Common Stock in respect of such PSUs became earned and vested on December 31, 2020, with such amount prorated based on the number of days that the executive was employed during the Performance Period. Under the NEOs PSU agreements, upon termination of employment due to death, disability or retirement, the actual number of shares of Common Stock that will be earned and vested in respect of outstanding unvested PSUs, if any, depends on actual performance measured at the end of the Performance Period, prorated based on the number of days that the NEO was employed during the Performance Period. |
(14) | Represents the value of unvested PSUs assuming the target number of shares of Common Stock in respect of such PSUs became earned and vested on December 31, 2020, prorated based on the number of days that the NEO was employed during the Performance Period. |
(15) | Represents payments under our Executive Severance Plan of an amount equal to 100% of the employer portion of premiums for continued health and dental plan participation under COBRA for the NEO and his qualified beneficiaries for a 12-month period. |
(16) | Represents payments under our Executive Severance Plan of an amount equal to 100% of the employer portion of premiums for continued health and dental plan participation under COBRA for the NEO and his qualified beneficiaries for an 18-month period. |
2021 Proxy Statement |
55 |
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Compensation of Named Executive Officers |
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56 | 2021 Proxy Statement |
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Compensation of Named Executive Officers |
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2021 Proxy Statement |
57 |
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Compensation of Named Executive Officers |
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58 | 2021 Proxy Statement |
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Compensation of Named Executive Officers |
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2021 Proxy Statement |
59 |
|
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Security Ownership of Certain Beneficial Owners and Management |
|
Security Ownership of Certain Beneficial Owners and Management
Name of Beneficial Owner
|
Directly or
|
Right to
|
Other
|
Total Amount
|
Percentage of
|
|||||||||||||||||
5% Stockholders
|
||||||||||||||||||||||
|
Janus Henderson Group PLC (2)
|
|
|
|
|
|
|
|
|
|
|
8,118,279
|
|
|
10.2%
|
| ||||||
|
The Vanguard Group, Inc. (3)
|
|
|
|
|
|
|
|
|
|
|
7,694,510
|
|
|
9.6%
|
| ||||||
|
Wellington Management Group LLP (4)
|
|
|
|
|
|
|
|
|
|
|
5,751,941
|
|
|
7.2%
|
| ||||||
Officers and Directors |
||||||||||||||||||||||
Dan H. Arnold
|
|
166,637
|
|
|
340,242
|
|
|
|
|
|
506,879
|
(5)
|
|
*
|
| |||||||
Matthew J. Audette
|
|
4,059
|
|
|
163,895
|
|
|
|
|
|
167,954
|
|
|
*
|
| |||||||
Scott Seese
|
|
18,372
|
|
|
21,044
|
|
|
|
|
|
39,416
|
|
|
*
|
| |||||||
Dayton Semerjian
|
|
7,782
|
|
|
|
|
|
|
|
|
7,782
|
|
|
*
|
| |||||||
Richard Steinmeier
|
|
|
|
|
4,904
|
|
|
|
|
|
4,904
|
|
|
*
|
| |||||||
Edward C. Bernard
|
|
40,971
|
(6)
|
|
4,249
|
|
|
|
|
|
45,220
|
|
|
*
|
| |||||||
H. Paulett Eberhart
|
|
14,771
|
|
|
5,353
|
|
|
|
|
|
20,124
|
|
|
*
|
| |||||||
William F. Glavin, Jr.
|
|
0
|
|
|
16,751
|
|
|
|
|
|
16,751
|
|
|
*
|
| |||||||
Allison H. Mnookin
|
|
4,205
|
|
|
2,803
|
|
|
|
|
|
7,008
|
|
|
*
|
| |||||||
Anne M. Mulcahy
|
|
30,162
|
|
|
|
|
|
|
|
|
30,162
|
|
|
*
|
| |||||||
James S. Putnam
|
|
120,450
|
(7)
|
|
10,970
|
|
|
|
|
|
131,420
|
|
|
*
|
| |||||||
Richard P. Schifter
|
|
26,911
|
|
|
22,290
|
|
|
|
|
|
49,201
|
|
|
*
|
| |||||||
Corey E. Thomas
|
|
0
|
|
|
7,457
|
|
|
|
|
|
7,457
|
|
|
*
|
| |||||||
All current directors and executive officers as a group |
526,142 | 1,033,290 |
|
|
|
1,559,432 | (8) | 1.9% |
* Less than 1%
(1) | Consists of Common Stock which the named individual or group has the right to acquire within 60 days of March 8, 2021 through (i) the exercise of vested or vesting stock options, (ii) vesting RSUs or (iii) vested or vesting deferred stock units granted under our Non-Employee Director Deferred Compensation Plan. |
60 | 2021 Proxy Statement |
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|
Security Ownership of Certain Beneficial Owners and Management |
|
(2) | Consists of shares of Common Stock held by Janus Henderson Group PLC (Janus Henderson). Janus Henderson has an indirect 97% ownership stake in Intech Investment Management LLC (Intech) and a 100% ownership stake in Janus Capital Management LLC (JCM), Perkins Investment Management LLC, Henderson Global Investors Limited and Janus Henderson Investors Australia Institutional Funds Management Limited (each an Asset Manager and collectively the Asset Managers). Due to the above ownership structure, holdings for the Asset Managers are aggregated. Each Asset Manager is an investment adviser registered or authorized in its relevant jurisdiction and each furnishes investment advice to various fund, individual and/or institutional clients (collectively, Managed Portfolios). As a result of its role as investment adviser or sub-adviser to the Managed Portfolios, JCM may be deemed to be the beneficial owner of 8,078,134 shares of Common Stock held by such Managed Portfolios. However, JCM does not have the right to receive any dividends from, or the proceeds from the sale of, the securities held in the Managed Portfolios and disclaims any ownership associated with such rights. As a result of its role as investment adviser or sub-adviser to the Managed Portfolios, Intech may be deemed to be the beneficial owner of 40,145 shares of Common Stock held by such Managed Portfolios. However, Intech does not have the right to receive any dividends from, or the proceeds from the sale of, the securities held in the Managed Portfolios and disclaims any ownership associated with such rights. The interest of Janus Henderson Enterprise Fund, an investment company registered under the Investment Company Act of 1940, amounted to 4,111,220 shares of Common Stock. This information is based on a Schedule 13G/A filed by Janus Henderson on February 11, 2021 with the SEC. The address of Janus Henderson is 201 Bishopsgate EC2M 3AE, United Kingdom. |
(3) | Consists of shares of Common Stock held by The Vanguard Group, Inc. Vanguard Asset Management, Limited, Vanguard Fiduciary Trust Company, Vanguard Global Advisors, LLC, Vanguard Group (Ireland) Limited, Vanguard Investments Australia Ltd, Vanguard Investments Canada Inc., Vanguard Investments Hong Kong Limited, and Vanguard Investments UK, Limited, all subsidiaries of The Vanguard Group, Inc., are collectively the beneficial owner of 5% or greater of the outstanding shares of Common Stock. This information is based on a Schedule 13G/A filed by The Vanguard Group, Inc. on February 10, 2021 with the SEC. The address of The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern, PA 19355. |
(4) | Consists of shares of Common Stock held by Wellington Management Group LLP, as parent holding company of certain holding companies and the Wellington Investment Advisers, as defined in the Schedule 13G filed by Wellington Management Group LLP on February 4, 2021 with the SEC (the Wellington Schedule 13G). Such shares are owned of record by clients of the Wellington Investment Advisers. Wellington Investment Advisors Holdings LLP controls directly, or indirectly through Wellington Management Global Holdings, Ltd., the Wellington Investment Advisers. Wellington Investment Advisors Holdings LLP is owned by Wellington Group Holdings LLP. Wellington Group Holdings LLP is owned by Wellington Management Group LLP. This information is based the Wellington Schedule 13G. The address of the Wellington Management Group LLP is 280 Congress Street, Boston, MA 02210. |
(5) | Amount excludes 22,940 shares of Common Stock issuable upon the exercise of options that would vest immediately upon Mr. Arnolds retirement pursuant to the terms of the applicable option agreements. |
(6) | Consists of (i) 5,000 shares of Common Stock held directly and (ii) 35,971 shares of Common Stock held indirectly through a trust for which Mr. Bernard is a trustee and disclaims beneficial ownership. |
(7) | Mr. Putnam holds 114,161 shares of Common Stock through James S. Putnam TTEE for Putnam Family Trust Dated 1699 Separate Property Trust. |
(8) | Amount excludes 24,885 shares of Common Stock issuable upon the exercise of options that would vest immediately upon the retirement of our retirement eligible executive officers pursuant to the terms of the applicable option agreements. |
2021 Proxy Statement |
61 |
|
|
Proposal 2: Ratification of the Appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as Our Independent Registered Public Accounting Firm |
|
Proposal 2: Ratification of the Appointment of Deloitte & Touche LLP
by the Audit Committee of the Board of Directors as
Our Independent Registered Public Accounting Firm
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
Fees Paid to Independent Registered Public Accounting Firm
Aggregate fees for professional services rendered by Deloitte as of and for the years ended December 31, 2020 and 2019 were as follows:
Type of Services
|
2020
|
2019
|
||||||||||
Audit Fees (1) |
$ | 3,785,900 | $ | 3,597,000 | ||||||||
Audit Related Fees (2) |
395,000 | 295,000 | ||||||||||
Tax Fees (3) |
133,000 | 209,500 | ||||||||||
Total |
$ | 4,313,900 | $ | 4,101,500 | ||||||||
(1) | These fees include services performed in connection with the audit of our annual consolidated financial statements included in our annual reports on Form 10-K; the review of our interim condensed consolidated financial statements as included in our quarterly reports on Form 10-Q; and services that are normally provided by Deloitte in connection with statutory and regulatory filings or engagements. The 2020 and 2019 columns include amounts billed in 2021 and 2020, respectively, related to 2020 and 2019 audit fees, respectively. |
(2) | These fees are for services provided such as accounting consultations and any other audit and attestation services. The fees include amounts incurred by the Company and paid to Deloitte for services in connection with our financial intermediary compliance and controls assessment and attest report. |
(3) | These fees include all services performed for non-audit related tax advice, planning, and compliance services. The fees include amounts incurred by the Company and paid to Deloitte for tax compliance and advisory services. |
Pre-Approval Policies and Procedures
2021 Proxy Statement |
63 |
|
|
Proposal 2: Ratification of the Appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as Our Independent Registered Public Accounting Firm |
|
64 | 2021 Proxy Statement |
|
|
Report of the Audit Committee of the Board of Directors |
|
Report of the Audit Committee of the Board of Directors
The Audit Committee of the Board of Directors (the Audit Committee) is comprised of the four directors named below. Each member of the Audit Committee is an independent director (as independence is defined in the listing standards of the Nasdaq Global Select Market and Rule 10A-3 under the Exchange Act with respect to membership on audit committees).
The Audit Committee has adopted a written charter, which has been approved by the Board of Directors. The Audit Committee has reviewed and discussed the Companys audited consolidated financial statements with management, which has primary responsibility for the consolidated financial statements, and with the Companys independent registered public accounting firm. The Companys independent registered public accounting firm is responsible for expressing opinions on the conformity of the Companys audited consolidated financial statements with generally accepted accounting principles and on the Companys internal controls over financial reporting. The Audit Committee has discussed with the Companys independent registered public accounting firm, which was Deloitte & Touche LLP and the member firms of Deloitte Touche Tohmatsu (collectively referred to as Deloitte) for 2020 and 2019, the matters that are required to be discussed by applicable standards of the Public Company Accounting Oversight Board (PCAOB), including Auditing Standard 1301, Communications with Audit Committees, as adopted by the PCAOB, as well as Rule 2-07 of Regulation S-X of the SEC-- Communication with Audit Committees. Deloitte has also provided to the Audit Committee their communication required by PCAOB Ethics and Independence Rule 3526, Communications with Audit Committees Concerning Independence, and the Audit Committee discussed with Deloitte the firms independence. The Audit Committee also considered and determined the provision by Deloitte of non-audit related services in 2020, which consisted of tax advisory services, is compatible with the independence standard. Based on the foregoing review and discussions, the Audit Committee recommended to the Board of Directors that the consolidated financial statements audited by Deloitte for 2019 and 2018 be included in the Companys Annual Report on Form 10-K for 2020, and the Committee has appointed Deloitte as the Companys independent registered public accounting firm for 2021.
H. Paulett Eberhart, Chair Edward C. Bernard William F. Glavin, Jr. Corey E. Thomas |
March 22, 2021 |
2021 Proxy Statement |
65 |
|
|
Proposal 3: Approval, in an Advisory Vote, of the Compensation Paid to Our Named Executive Officers |
|
Proposal 3: Approval, in an Advisory Vote, of the Compensation Paid to Our Named Executive Officers
The Compensation Discussion and Analysis beginning on page 30 of this proxy statement describes our executive compensation program and the compensation decisions that the Compensation Committee and Board of Directors made in 2020 with respect to the compensation of our NEOs. The Board of Directors is asking stockholders to cast a non-binding, advisory vote FOR the following resolution:
RESOLVED, that the compensation paid to the Companys named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.
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As we describe in the Compensation Discussion and Analysis, our NEO compensation is designed to closely align the interests of our NEOs with those of our stockholders on both a short-term and long-term basis, and to attract and retain key executives critical to our success.
We urge stockholders to read the Compensation Discussion and Analysis beginning on page 30 of this proxy statement and to review the 2020 Summary Compensation table and related compensation tables and discussion, appearing on pages 47 through 55, which provide detailed information on the Companys compensation policies and practices. We believe stockholders should focus on the following areas when reviewing our NEO compensation:
Pay for Performance |
Annual Cash Bonus Opportunities. We provide annual cash bonus awards in order to tie a significant portion of the overall cash compensation of each of our NEOs to the achievement of annually established, key short-term corporate objectives and financial goals of the Company, as well as individual performance goals. At the beginning of 2020, the Compensation Committee established a bonus funding framework based on an objective financial performance target and the collective achievement of the Companys four corporate goals for 2020. Neither the 2020 financial performance target nor any of the corporate goals was subsequently adjusted in connection with the COVID-19 pandemic. Each NEOs individual target award amount was set by the Compensation Committee by reference to market compensation for comparable positions within our peer group as well as the nature of the NEOs role and responsibilities. By emphasizing executives contributions to the Companys overall performance rather than focusing only on their individual business or function, we believe that these cash bonuses provided a significant incentive to our NEOs to work towards achieving our overall Company objectives. |
Long-Term Incentives. The purposes of our long-term equity incentive program are to promote achievement of corporate goals that drive long-term stockholder value, to align the interests of our executive officers and other key employees with our stakeholders and to retain key executives. We provide stock-based, long-term compensation to our NEOs through equity awards under our stockholder-approved equity plans. We believe this long-term incentive compensation, which includes performance share units keyed to our total shareholder return relative to a predetermined comparator group over a three-year performance period, motivates our NEOs to sustain longer-term financial operational performance and rewards them when such efforts lead to increases in stockholder value. |
Alignment with Long-Term Stockholder Interests |
Our executive compensation is weighted towards variable, at-risk pay in the form of annual and long-term incentives, with a large portion of executive compensation tied to long-term performance. In addition, we have adopted: |
Equity Ownership Guidelines. We focus our executives on long-term stockholder value by requiring that all executive officers own a significant amount of our equity.
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Proposal 3: Approval, in an Advisory Vote, of the Compensation Paid to Our Named Executive Officers |
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Performance-Based LTI Vehicles. In 2020, equity grants to our chief executive officer consisted of 70% PSUs and 30% RSUs (by grant date value), and equity grants to our other NEOs consisted of 60% PSUs and 40% RSUs. We believe that this blended approach aligned with our pay-for-performance principles and provided appropriate incentives for long-term stockholder value creation while also serving as a retention tool for the Company. The use of PSUs put appropriate focus on long-term alignment and pay relative both to market peers and stockholder returns. |
Recoupment Policy. We have adopted a recoupment policy that permits the Compensation Committee, in the event of a restatement of the Companys financial statements due to material noncompliance with financial reporting requirements under the securities laws, to review the annual cash bonuses, performance-based compensation and time-based equity and equity-based awards awarded or paid to executive officers during the three-year period preceding the announcement by the Company of its obligation to restate its financial statements. If the amount of the annual cash bonuses or performance-based compensation received would have been lower had the level of achievement of applicable financial performance goals been calculated based on such restated financial results, the Compensation Committee may seek reimbursement from any of the covered executives in the amount of the excess compensation awarded or paid. |
Anti-Hedging and Anti-Pledging Policy. We believe that hedging transactions may permit executives to own Company securities obtained through our executive compensation program or otherwise without the full risks and rewards of ownership. When that occurs, an executive may no longer have the same objectives as the Companys other stockholders. As a result, we have adopted a policy, included within our Insider Trading Policy and applicable to all employees, officers, directors and consultants of the Company, which prohibits short sales, hedging or engaging in monetization transactions, including through the use of puts and call options, collars, exchange funds, prepaid variable forwards, and equity swaps. The policy also prohibits holding Company securities in a margin account or pledging Company securities as collateral for a loan, because a margin or foreclosure sale may occur when an executive is aware of material nonpublic information or otherwise not permitted to trade.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
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Proposal 4: Approval of the 2021 Omnibus Equity Incentive Plan |
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Number of shares(1) | As a percentage of Common Stock outstanding (as of March 8, 2021) |
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Outstanding stock options under the 2010 Plan (2) |
1,748,191 | 2.2 | % | |||||
Outstanding RSUs and PSUs under the 2010 Plan (3) |
1,337,054 | 1.7 | % | |||||
Other full value awards outstanding under the 2010 Plan (restricted stock) |
5,560 | <0.1 | % | |||||
Total shares subject to outstanding awards under the 2010 Plan (3) |
3,090,805 | 3.9 | % | |||||
Total shares available for future issuance under the 2010 Plan (3)(4) |
2,063,392 | 2.6 | % | |||||
Total shares proposed to be available for issuance under the 2021 Plan (3)(5) |
12,600,000 | 15.8 | % | |||||
Total shares subject to existing equity awards, available for future issuance and proposed to be available for issuance |
17,754,197 | 22.2 | % |
(1) | Determined without regard to any fungible share ratio. |
(2) | No stock appreciation rights were outstanding as of March 8, 2021. The weighted average exercise price of stock options outstanding as of March 8, 2021 was $48.12. The weighted average remaining term of stock options outstanding as of March 8, 2021 was 5.28 years. |
(3) | PSUs measured at maximum performance level payout of 200%. |
(4) | Excluding shares of our Common Stock subject to existing awards that may become available again for grant under the 2010 Plan. If the 2021 Plan is approved by the stockholders, any shares of our Common Stock available for issuance under the 2010 Plan as of the date of the stockholder approval will become available for grant under the 2021 Plan, as described below under Authorized Shares. |
(5) | Share counting provisions, including adjustments to the number of shares of our Common Stock available under the 2021 Plan and recycling of shares issued or available under the 2010 Plan, are described below under Authorized Shares and Adjustments. |
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Proposal 4: Approval of the 2021 Omnibus Equity Incentive Plan |
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Summary of the 2021 Plan
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Proposal 4: Approval of the 2021 Omnibus Equity Incentive Plan |
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Proposal 4: Approval of the 2021 Omnibus Equity Incentive Plan |
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Proposal 4: Approval of the 2021 Omnibus Equity Incentive Plan |
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Proposal 4: Approval of the 2021 Omnibus Equity Incentive Plan |
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Name and Position | Number of Stock Options |
Number of Restricted Stock Units / Restricted Stock / Unrestricted Stock |
Number of Performance-Based Restricted Stock Units(1) | |||
Dan H. Arnold, President and Chief Executive Officer |
| 14,547 | 67,888 | |||
Matthew J. Audette, Chief Financial Officer |
| 4,701 | 14,104 | |||
Scott Seese, Managing Director, Chief Information Officer |
| 4,364 | 13,092 | |||
Dayton Semerjian, Managing Director, Chief Customer Care Officer |
| 3,689 | 11,068 | |||
Richard Steinmeier, Managing Director, Divisional President, Business Development |
| 4,132 | 12,396 | |||
Executive Group |
| 44,347 | 157,290 | |||
Non-Executive Director Group |
| 33,112 | 0 | |||
Non-Executive Officer Employee Group |
| 257,104 | 93,970 |
(1) | Assumes issuance at maximum performance level payout of 200%. |
Required Vote
Approval of the 2021 Plan requires the affirmative vote of the holders of a majority of the shares of Common Stock cast affirmatively or negatively in person or by proxy. Abstentions and broker non-votes will not be counted as shares voting on such matter and accordingly will have no effect on the approval of this Proposal 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
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Proposal 5: Approval of the 2021 Employee Stock Purchase Plan |
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Proposal 5: Approval of the 2021 Employee Stock Purchase Plan |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
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Other Information |
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Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, including the financial statements and financial statement schedules, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available on our website at www.lpl.com or on the website maintained by the SEC at www.sec.gov. Printed copies of these materials are available free of charge (except for the costs of duplication and mailing in the case of exhibits to such documents) to stockholders who request them in writing from our corporate secretary at LPL Financial Holdings Inc., 75 State Street, 22nd Floor, Boston Massachusetts 02109, or by calling our offices at (617) 423-3644, extension 4574. Information on our website or hyperlinked to it is not incorporated by reference into this proxy statement.
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Appendix A: Non-GAAP Measures |
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Set forth below is a reconciliation of Core G&A to the Companys total operating expenses for the twelve months ended December 31, 2020 (in thousands):
Core G&A |
$ 925,107 | |||
Regulatory charges |
29,373 | |||
Promotional |
208,250 | |||
Employee share-based compensation |
31,650 | |||
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Total G&A |
1,194,380 | |||
Commissions and advisory |
3,697,147 | |||
Depreciation & amortization |
109,732 | |||
Amortization of intangible assets |
67,358 | |||
Brokerage, clearing and exchange |
71,185 | |||
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Total operating expense |
$ 5,139,802 |
Set forth below is a reconciliation of the Companys net income to EBITDA and Adjusted EBITDA for the twelve months ended December 31, 2020, 2019 and 2018 (in thousands):
2020 | 2019 | 2018 | ||||||||||||||||||
Net income |
$ | 472,640 | $ | 559,880 | $ | 439,459 | ||||||||||||||
Non-operating interest expense and other |
105,765 | 130,001 | 125,023 | |||||||||||||||||
Provision for income taxes |
153,433 | 181,955 | 153,178 | |||||||||||||||||
Loss on extinguishment of debt (1) |
| 3,156 | | |||||||||||||||||
Depreciation and amortization |
109,732 | 95,779 | 87,656 | |||||||||||||||||
Amortization of intangible assets |
67,358 | 65,334 | 60,252 | |||||||||||||||||
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EBITDA |
908,928 | 1,036,105 | 865,568 | |||||||||||||||||
Employee share-based compensation expense (2) |
31,650 | 29,872 | 23,108 | |||||||||||||||||
Other (3) |
5,716 | 3,133 | | |||||||||||||||||
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Adjusted EBITDA |
$ | 946,294 | $ | 1,069,110 | $ | 888,676 |
(1) | Represents expenses incurred resulting from the early extinguishment and repayment of amounts outstanding on our prior senior secured credit facilities, including the accelerated recognition of unamortized debt issuance costs that had no future economic benefit, as well as various other charges incurred in connection with the repayment under prior senior secured credit facilities and the establishment of new or amended senior secured credit facilities. |
(2) | Represents share-based compensation expenses for equity awards granted to employees, officers, and directors. Such awards are measured based on the grant-date fair value and recognized over the requisite service period of the individual awards, which generally equals the vesting period. |
(3) | Represents acquisition and integration costs resulting from acquisitions. |
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LPL FINANCIAL HOLDINGS INC.
2021 OMNIBUS EQUITY INCENTIVE PLAN
1. | DEFINED TERMS |
Exhibit A, which is incorporated by reference, defines certain terms used in the Plan and includes certain operational rules related to those terms.
2. | PURPOSE |
The Plan has been established to advance the interests of the Company by providing for the grant to Participants of Stock and Stock-based Awards.
3. | ADMINISTRATION |
The Plan will be administered by the Administrator. The Administrator has discretionary authority, subject only to the express provisions of the Plan, to administer and interpret the Plan and any Awards; to determine eligibility for and grant Awards; to determine, modify or waive the terms and conditions of any Award; to determine the form of settlement of Awards (whether in cash, shares of Stock, Awards or other property); to prescribe forms, rules and procedures relating to the Plan and Awards; and to otherwise do all things necessary or desirable to carry out the purposes of the Plan or any Award. Determinations of the Administrator made with respect to the Plan or any Award are conclusive and bind all persons.
4. | LIMITS ON AWARDS UNDER THE PLAN |
(a) Number of Shares. Subject to adjustment as provided in Section 7(b), the number of shares of Stock that may be issued in satisfaction of Awards under the Plan is (i) 12,600,000 shares of Stock, plus (ii) (x) the number of shares of Stock available for issuance under the Prior Plan as of the Date of Adoption and (y) the number of shares of Stock underlying awards under the Prior Plan that on or after the Date of Adoption expire or terminate or are surrendered or cancelled without the delivery of shares of Stock, are forfeited to, or repurchased by, the Company, or otherwise become available again for grant under the Prior Plan, in each case, in accordance with its terms (in the case of this clause (ii), which will not exceed 5,154,197 shares in the aggregate) (collectively, the Share Pool). Up to 12,600,000 of the shares of Stock from the Share Pool may be issued in satisfaction of ISOs, but nothing in this Section 4(a) will be construed as requiring that any, or any fixed number of, ISOs be granted under the Plan. For purposes of the Share Pool, (i) each share of Stock subject to a Stock Option or SAR shall count as one (1) share and each share of Stock subject to any other Award shall count as three (3) shares. Further, for purposes of this Section 4(a), the number of shares of Stock issued in satisfaction of Awards will be determined (i) by reducing the Share Pool by the number of shares of Stock withheld by the Company in payment of the exercise price or purchase price of a Stock Option or SAR or in satisfaction of tax withholding requirements with respect to an Award; (ii) by reducing the Share Pool by the full number of shares covered by a SAR any portion of which is settled in Stock (and not only the number of shares of Stock delivered in settlement); and (iii) by increasing the Share Pool by any shares of Stock underlying any portion of an Award that is settled in cash or that expires or that is cancelled, becomes unexercisable, terminates or is forfeited to or repurchased by the Company without the issuance of Stock (or retention, in the case of Restricted Stock or Unrestricted Stock). For the avoidance of doubt, the Share Pool will not be increased by any shares of Stock delivered under the Plan that are subsequently repurchased using proceeds directly attributable to Stock Option exercises. The limits set forth in this Section 4(a) will be construed to comply with the requirements of Section 422, to the extent applicable.
(b) Substitute Awards. The Administrator may grant Substitute Awards under the Plan. To the extent consistent with the requirements of Section 422 and the regulations thereunder and other applicable legal requirements (including applicable stock exchange requirements), shares of Stock issued in respect of Substitute Awards will be in addition to and will not reduce the Share Pool. Notwithstanding the foregoing or anything in Section 4(a) to the contrary, if any Substitute Award is settled in cash or expires, becomes unexercisable, terminates or is forfeited to or repurchased by the Company without the issuance (or retention, in the case of Restricted Stock or Unrestricted Stock) of Stock, the shares of Stock previously subject to such Award will not
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increase the Share Pool or otherwise be available for future issuance under the Plan. The Administrator will determine the extent to which the terms and conditions of the Plan apply to Substitute Awards, if at all, provided, however, that Substitute Awards will not be subject to the limits described in Section 4(d).
(c) Type of Shares. Stock issued by the Company under the Plan may be authorized but unissued Stock or previously issued Stock acquired by the Company. No fractional shares of Stock will be issued under the Plan.
(d) Limits on Awards.
(1) Individual Limits. The following additional limits apply to Awards of the specified type granted to any person in any calendar year:
(A) Stock Options: 1,000,000 shares of Stock;
(B) SARs: 1,000,000 shares of Stock; and
(C) Awards other than Stock Options and SARs: 500,000 shares of Stock;
except that, for the calendar year in which any person commences Employment, each of the foregoing limits will be multiplied by two (2).
In applying the foregoing limits, (i) all Awards of the specified type granted to the same person in the same calendar year are aggregated and made subject to one limit; (ii) the limits applicable to Stock Options and SARs refer to the number of shares of Stock underlying those Awards; and (iii) the share limit under clause (C) refers to the maximum number of shares of Stock that may be issued, or the value of which may be paid in cash or other property, under Awards of the type specified in clause (C), assuming maximum payout levels.
(2) Director Limits. In addition to the foregoing limits, the aggregate value of all compensation granted or paid to any Director with respect to any calendar year, including Awards granted under the Plan and cash fees or other compensation paid by the Company to such Director outside of the Plan, in each case, for his or her services as a Director during such calendar year, may not exceed $1,400,000 (or $2,000,000 for the calendar year the Director is first elected or appointed to the Board), calculating the value of any Awards based on the grant date fair value in accordance with the Accounting Rules and assuming maximum payout levels. For the avoidance of doubt, the limitation in this Section 4(d)(2) will not apply to any compensation granted or paid to a Director for his or her services to the Company or a subsidiary other than as a Director, including, without limitation, as a consultant or advisor to the Company or a subsidiary.
5. | ELIGIBILITY AND PARTICIPATION |
The Administrator will select Participants from among Employees, Directors, registered representatives and investment advisor representatives of, and consultants and advisors to, the Company and its subsidiaries; provided, however, that, subject to such express exceptions, if any, as the Administrator may establish, eligibility shall be further limited to those persons as to whom the use of a Form S-8 registration statement is permissible. Eligibility for ISOs is limited to individuals described in the first sentence of this Section 5 who are employees of the Company or of a parent corporation or subsidiary corporation of the Company as those terms are defined in Section 424 of the Code. Eligibility for Stock Options, other than ISOs, and SARs is limited to individuals described in the first sentence of this Section 5 who are providing direct services on the date of grant of the Award to the Company or to a subsidiary of the Company that would be described in the first sentence of Section 1.409A-1(b)(5)(iii)(E) of the Treasury Regulations.
6. | RULES APPLICABLE TO AWARDS |
(a) All Awards.
(1) Award Provisions. The Administrator will determine the terms and conditions of all Awards, subject to the limitations provided herein. No term of an Award will provide for automatic reload grants of additional Awards upon exercise of an Option or SAR or otherwise as a term of an Award. By accepting (or, under such rules as the Administrator may prescribe, being deemed to have accepted) an Award, the Participant will be deemed to
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have agreed to the terms and conditions of the Award and the Plan. Notwithstanding any provision of the Plan to the contrary, Substitute Awards may contain terms and conditions that are inconsistent with the terms and conditions specified herein, as determined by the Administrator.
(2) Term of Plan. No Awards may be made after ten (10) years from the Date of Adoption, but previously granted Awards may continue beyond that date in accordance with their terms.
(3) Transferability. Neither ISOs nor, except as the Administrator otherwise expressly provides in accordance with the third sentence of this Section 6(a)(3), other Awards may be transferred other than by will or by the laws of descent and distribution. During a Participants lifetime, ISOs and, except as the Administrator otherwise expressly provides in accordance with the third sentence of this Section 6(a)(3), SARs and NSOs may be exercised only by the Participant (for the avoidance of doubt, including by the Participants legal representative or by automatic exercise pursuant to the terms of the Award). The Administrator may permit the gratuitous transfer (i.e., transfer not for value) of Awards other than ISOs, subject to applicable securities and other laws and such terms and conditions as the Administrator may determine.
(4) Vesting; Exercisability. The Administrator will determine the time or times at which an Award vests or becomes exercisable and the terms and conditions on which a Stock Option or SAR remains exercisable. The Administrator may at any time accelerate the vesting and/or exercisability of an Award (or any portion thereof), regardless of any adverse or potentially adverse tax or other consequences resulting from such acceleration. Unless the Administrator expressly provides otherwise, however, the following rules will apply if a Participants Employment ceases:
(A) Except as provided in (B) and (C) below, immediately upon the cessation of the Participants Employment each Stock Option and SAR (or portion thereof) that is then held by the Participant or by the Participants permitted transferees, if any, will cease to be exercisable and will terminate, and each other Award that is then held by the Participant or by the Participants permitted transferees, if any, to the extent not then vested, will be forfeited.
(B) Subject to (C), (D) and (E) below, each vested and unexercised Stock Option and SAR (or portion thereof) held by the Participant or the Participants permitted transferees, if any, immediately prior to the cessation of the Participants Employment, to the extent then exercisable, will remain exercisable for the lesser of (i) a period of ninety (90) days following such cessation of Employment or (ii) the period ending on the latest date on which such Stock Option or SAR could have been exercised without regard to this Section 6(a)(4), and will thereupon immediately terminate.
(C) Subject to (D) and (E) below, each vested and unexercised Stock Option and SAR (or portion thereof) held by a Participant or the Participants permitted transferees, if any, immediately prior to the cessation of the Participants Employment due to his or her death or Disability, to the extent then exercisable, will remain exercisable for the lesser of (i) the one-year period ending on the first anniversary of such cessation of employment or (ii) the period ending on the latest date on which such Stock Option or SAR could have been exercised without regard to this Section 6(a)(4), and will thereupon immediately terminate.
(D) Subject to (E) below, each vested and unexercised Stock Option and SAR (or portion thereof) held by a Participant or the Participants permitted transferees, if any, immediately prior to the cessation of the Participants Employment due to his or her Retirement, to the extent then exercisable (for the avoidance of doubt, after giving effect to any accelerated vesting upon Retirement) will remain exercisable for the lesser of (i) the two-year period ending on the second anniversary of such cessation of Employment or (ii) the period ending on the latest date on which such Stock Option or SAR could have been exercised without regard to this Section 6(a)(4), and will thereupon terminate;
(E) All Awards (whether or not vested or exercisable) held by a Participant or the Participants permitted transferees, if any, immediately prior to the cessation of the Participants Employment will immediately terminate upon such cessation of Employment if the termination is for Cause or occurs in circumstances that in the determination of the Administrator would have constituted grounds for the Participants Employment to be terminated for Cause (in each case, without regard to the lapsing of any required notice or cure periods in connection therewith).
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(5) Additional Restrictions. Notwithstanding anything to the contrary herein, all Stock Options and SARs will terminate immediately in the event the Participant breaches any non-competition, non-solicitation, no-hire, non-disparagement, confidentiality, invention assignment or other restrictive covenant by which he or she is bound, or if the Participant engages in Competitive Activity within twelve (12) months following the cessation of the Participants Employment, in all cases, as determined by the Administrator.
(6) Recovery of Compensation. Without limiting any provision of the Plan, the Administrator may provide in any case that any outstanding Award (whether or not vested or exercisable), the proceeds from the exercise or disposition of any Award or Stock acquired under any Award and any other amounts received in respect of any Award or Stock acquired under any Award will be subject to forfeiture and disgorgement to the Company, with interest and other related earnings, if the Participant to whom the Award was granted is not in compliance with any provision of the Plan or any applicable Award or any non-competition, non-solicitation, no-hire, non-disparagement, confidentiality, invention assignment or other restrictive covenant by which he or she is bound or if the Participant engages in Competitive Activity. Each Award will be subject to any policy of the Company or any of its subsidiaries that relates to trading on non-public information and permitted transactions with respect to shares of Stock, including limitations on hedging and pledging and stock ownership requirements. In addition, each Award will be subject to any policy of the Company or any of its subsidiaries that provides for forfeiture, disgorgement or clawback with respect to incentive compensation that includes Awards under the Plan and will be further subject to forfeiture and disgorgement to the extent required by law or applicable stock exchange listing standards, including, without limitation, Section 10D of the Exchange Act. Each Participant, by accepting or being deemed to have accepted an Award under the Plan, agrees (or will be deemed to have agreed) to the terms of this Section 6(a)(6) and to any clawback, recoupment or similar policy of the Company or any of its subsidiaries, and further agrees (or will be deemed to have agreed) to cooperate fully with the Administrator, and to cause any and all permitted transferees of the Participant to cooperate fully with the Administrator, to effectuate any forfeiture or disgorgement described in this Section 6(a)(6). Neither the Administrator nor the Company nor any other person, other than the Participant and his or her permitted transferees, if any, will be responsible for any adverse tax or other consequences to a Participant or his or her permitted transferees, if any, that may arise in connection with this Section 6(a)(6).
(7) Taxes. The grant of an Award and the issuance, delivery, vesting and retention of Stock, cash or other property under an Award are conditioned upon the full satisfaction by the Participant of all tax and other withholding requirements with respect to the Award. The Administrator will prescribe such rules for the withholding of taxes and other amounts with respect to any Award as it deems necessary. Without limitation to the foregoing, the Company or any parent or subsidiary of the Company will have the authority and the right to deduct or withhold (by any means set forth herein or in an Award agreement), or require a Participant to remit to the Company, or to a parent or subsidiary of the Company, an amount sufficient to satisfy all U.S. and non-U.S. federal, state and local income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to participation in the Plan and any Award hereunder and legally applicable to the Participant and required by law to be withheld (including any amount deemed by the Company, in its discretion, to be an appropriate charge to the Participant even if legally applicable to the Company or any parent or subsidiary of the Company). The Administrator, in its sole discretion, may hold back shares of Stock from an Award or permit a Participant to tender previously owned shares of Stock in satisfaction of tax or other withholding requirements (but not in excess of the maximum withholding amount consistent with the Award being subject to equity accounting treatment under the Accounting Rules). Any amounts withheld pursuant to this Section 6(a)(7) will be treated as though such amounts had been made directly to the Participant. In addition, the Company may, to the extent permitted by law, deduct any such tax and other withholding amounts from any payment of any kind otherwise due to a Participant from the Company or any parent or subsidiary of the Company.
(8) Dividend Equivalents. The Administrator may provide for the payment of amounts (on terms and subject to such restrictions and conditions established by the Administrator) in lieu of cash dividends or other cash distributions with respect to Stock subject to an Award whether or not the holder of such Award is otherwise entitled to share in the actual dividend or distribution in respect of such Award; provided, however, that (i) dividends or dividend equivalents relating to any Award (other than an Award of Restricted Stock) that, at the dividend payment date, remains subject to a risk of forfeiture (whether service-based or performance-based) will be subject to the same risk of forfeiture as applies to the underlying Award and (ii) no dividends or dividend equivalents will be
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payable with respect to unvested Options or SARs. Any entitlement to dividend equivalents or similar entitlements will be established and administered either consistent with an exemption from, or in compliance with, the applicable requirements of Section 409A.
(9) Rights Limited. Nothing in the Plan or any Award will be construed as giving any person the right to be granted an Award or to continued employment or service with the Company or any of its subsidiaries, or any rights as a stockholder except as to shares of Stock actually issued under the Plan. The loss of existing or potential profit in any Award will not constitute an element of damages in the event of a termination of a Participants Employment for any reason, even if the termination is in violation of an obligation of the Company or any of its subsidiaries to the Participant.
(10) Coordination with Other Plans. Shares of Stock and/or Awards under the Plan may be issued or granted in tandem with, or in satisfaction of or substitution for, other Awards under the Plan or awards made under other compensatory plans or programs of the Company or any of its subsidiaries. For example, but without limiting the generality of the foregoing, awards under other compensatory plans or programs of the Company or any of its subsidiaries may be settled in Stock (including, without limitation, Unrestricted Stock) under the Plan if the Administrator so determines, in which case the shares delivered will be treated as awarded under the Plan (and will reduce the Share Pool in accordance with the rules set forth in Section 4).
(11) Section 409A.
(A) Without limiting the generality of Section 11(b), each Award will contain such terms as the Administrator determines and will be construed and administered, such that the Award either qualifies for an exemption from the requirements of Section 409A or satisfies such requirements.
(B) Notwithstanding anything to the contrary in the Plan or any Award agreement, the Administrator may unilaterally amend, modify or terminate the Plan or any outstanding Award, including, without limitation, changing the form of the Award, if the Administrator determines that such amendment, modification or termination is necessary or advisable to avoid the imposition of an additional tax, interest or penalty under Section 409A.
(C) If a Participant is determined on the date of the Participants termination of Employment to be a specified employee within the meaning of that term under Section 409A(a)(2)(B) of the Code, then, with regard to any payment that is considered nonqualified deferred compensation under Section 409A, to the extent applicable, payable on account of a separation from service, such payment will be made or provided on the date that is the earlier of (i) the first business day following the expiration of the six- (6) month period measured from the date of such separation from service; and (ii) the date of the Participants death (the Delay Period). Upon the expiration of the Delay Period, all payments delayed pursuant to this Section 6(a)(11)(C) (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such delay) will be paid, without interest, on the first business day following the expiration of the Delay Period in a lump sum and any remaining payments due under the Award will be paid in accordance with the normal payment dates specified for them in the applicable Award agreement.
(D) For purposes of Section 409A, each payment made under the Plan or any Award will be treated as a separate payment.
(E) With regard to any payment considered to be nonqualified deferred compensation under Section 409A, to the extent applicable, that is payable upon a change in control of the Company or other similar event, to the extent required to avoid the imposition of any additional tax, interest or penalty under Section 409A, no amount will be payable unless such change in control constitutes a change in control event within the meaning of Section 1.409A-3(i)(5) of the Treasury Regulations.
(b) Stock Options and SARs.
(1) Time and Manner of Exercise. Unless the Administrator expressly provides otherwise, no Stock Option or SAR will be deemed to have been exercised until the Administrator receives a notice of exercise in a form acceptable to the Administrator that is signed by the appropriate person and accompanied by any payment required
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under the Award. The Administrator may limit or restrict the exercisability of any Stock Option or SAR in its discretion, including in connection with any Covered Transaction. Any attempt to exercise a Stock Option or SAR by any person other than the Participant will not be given effect unless the Administrator has received such evidence as it may require that the person exercising the Award has the right to do so.
(2) Exercise Price. The exercise price (or the base value from which appreciation is to be measured) per share of each Award requiring exercise must be no less than one hundred percent (100%) (in the case of an ISO granted to a ten percent (10%) stockholder within the meaning of Section 422(b)(6) of the Code, one hundred ten percent (110%)) of the Fair Market Value of a share of Stock, determined as of the date of grant of the Award, or such higher amount as the Administrator may determine in connection with the grant.
(3) Payment of Exercise Price. Where the exercise of an Award (or portion thereof) is to be accompanied by a payment, payment of the exercise price must be made by cash or check acceptable to the Administrator or, if so permitted by the Administrator and if legally permissible, (i) through the delivery of previously acquired unrestricted shares of Stock, or the withholding of unrestricted shares of Stock otherwise issuable upon exercise, in either case, that have a Fair Market Value equal to the exercise price; (ii) through a broker-assisted cashless exercise program acceptable to the Administrator; (iii) by other means acceptable to the Administrator; or (iv) by any combination of the foregoing permissible forms of payment. The delivery of previously acquired shares in payment of the exercise price under clause (i) above may be accomplished either by actual delivery or by constructive delivery through attestation of ownership, subject to such rules as the Administrator may prescribe.
(4) Maximum Term. The maximum term of Stock Options and SARs must not exceed ten (10) years from the date of grant (or five (5) years from the date of grant in the case of an ISO granted to a ten percent (10%) stockholder described in Section 6(b)(2)).
(5) No Repricing. Except in connection with a corporate transaction involving the Company (which term includes, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination or exchange of shares) or as otherwise contemplated by Section 7, the Company may not, without obtaining stockholder approval in accordance with the applicable requirements of the Nasdaq Stock Market, (i) amend the terms of outstanding Stock Options or SARs to reduce the exercise price or base value of such Stock Options or SARs; (ii) cancel outstanding Stock Options or SARs in exchange for Stock Options or SARs with an exercise price or base value that is less than the exercise price or base value of the original Stock Options or SARs; or (iii) cancel outstanding Stock Options or SARs that have an exercise price or base value greater than the Fair Market Value of a share of Stock on the date of such cancellation in exchange for cash or other consideration.
7. | EFFECT OF CERTAIN TRANSACTIONS |
(a) Covered Transactions. Except as otherwise expressly provided in an Award or other agreement or in the Companys Executive Severance Plan (or other similar plan), the following provisions will apply in the event of a Covered Transaction:
(1) Provisions that Apply in the Event of a Covered Transaction that Constitutes a Change of Control.
(A) Assumption or Substitution of Awards. Upon the consummation of a Covered Transaction that constitutes a Change of Control, this paragraph shall apply solely to the extent that then outstanding Awards (Replaced Awards) are assumed, continued or substituted (Replacement Award) by the acquiror or survivor or an affiliate of the acquiror or survivor under such Covered Transaction in accordance with the terms of this subclause (A). With respect to each unvested Replaced Award (or portion thereof) that is outstanding as of the consummation of the Covered Transaction that is eligible to vest based on performance, the Administrator will determine the extent to which the applicable performance vesting conditions have been achieved as of the consummation of the Covered Transaction (or the end of the applicable performance period, if earlier) and the Replaced Award (or portion thereof), to the extent earned based on performance, will thereafter be eligible to vest solely based on continued Employment over the remaining term of the applicable
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service or performance period, as applicable. Each unvested Replaced Award that is outstanding as of the consummation of the Covered Transaction that is eligible to vest solely based on continued Employment will vest based on continued Employment over the service period. In order for a Replaced Award to be treated as having been assumed, continued or substituted under this subclause (A), the Replacement Award shall reflect the foregoing provisions and shall meet the following conditions: (i) it is of the same type as the Replaced Award (or, if it is of a different type as the Replaced Award (such as a deferred cash equivalent award), the Administrator, as constituted immediately prior to the Covered Transaction, finds such type acceptable); (ii) it has a value at least equal to the value of the Replaced Award; (iii) it relates to publicly traded equity securities listed on a U.S. national securities exchange of the acquiror or survivor or an affiliate of the acquiror or survivor in the Covered Transaction, except in the case of a Replacement Award granted in the form of a deferred cash equivalent award; (iv) its terms and conditions are not less favorable than the terms and conditions of the Replaced Award, as determined by the Administrator, as constituted immediately prior to the Covered Transaction, in its sole discretion; and (v) it provides that upon the termination of Employment without Cause of a holder of the Replacement Award within eighteen (18) months following the consummation of the Covered Transaction, such Replacement Award shall immediately vest and, in the case of a Replacement Award that is not in the form of a stock option or stock appreciation right, shall be settled within thirty (30) days of such termination of Employment and, in the case of a Replacement Award that is in the form of a stock option or stock appreciation right, shall remain exercisable for the remaining term of such Replacement Award. Notwithstanding the foregoing, with respect to any Replaced Award that is considered deferred compensation subject to Section 409A, settlement of such Replacement Award shall be made pursuant to the schedule applicable to the Replaced Award if necessary to comply with Section 409A.
(B) Acceleration of Awards that are not Replacement Awards. Each unvested Award that is outstanding as of the consummation of a Covered Transaction that constitutes a Change of Control that is not assumed, continued or substituted in a manner that complies with Section 7(a)(1)(A) will immediately vest in full upon the consummation of the Covered Transaction and, without limiting the Administrators authority under subclause (C) below to provide a vested cash payment with respect to such vested Awards, on a basis that allows the Participant holding such Award to participate in the Covered Transaction.
(C) Cash-Out of Awards. Subject to Section 7(a)(1)(E), in connection with the consummation a Covered Transaction that constitutes a Change of Control, the Administrator may provide for a cash payment (a cash-out), with respect to some or all Awards that are not assumed, continued or substituted for as described in Section 7(a)(1)(A) above or any portion thereof (including only the vested portion thereof), equal in the case of each applicable Award or portion thereof to the excess, if any, of (i) the fair market value of a share of Stock multiplied by the number of shares of Stock subject to the Award or such portion, minus (ii) the aggregate exercise or purchase price, if any, of such Award or such portion (or, in the case of a SAR, the aggregate base value above which appreciation is measured), in each case, on such payment and other terms and subject to such conditions (which need not be the same as the terms and conditions applicable to holders of Stock generally ) as the Administrator determines, including that any amounts paid in respect of such Award in connection with the Covered Transaction be placed in escrow or otherwise made subject to such restrictions as the Administrator deems appropriate. For the avoidance of doubt, if the per share exercise or purchase price (or base value) of an Award or portion thereof is equal to or greater than the fair market value of a share of Stock, such Award or portion may be cancelled with no payment due hereunder or otherwise in respect thereof.
(D) Termination of Awards. Except as the Administrator may otherwise determine, each Award will automatically terminate (and in the case of outstanding shares of Restricted Stock, will automatically be forfeited) immediately upon the consummation of a Covered Transaction that constitutes a Change of Control, other than (i) any Award that is assumed, continued or substituted for pursuant to Section 7(a)(1)(A) and (ii) any Award that by its terms, or as a result of action taken by the Administrator, continues following the Covered Transaction.
(E) Additional Limitations. Any cash delivered pursuant to Section 7(a)(1)(C) with respect to an Award may, in the discretion of the Administrator, contain such limitations or restrictions, if any, as the Administrator deems appropriate, including to reflect any performance or other vesting conditions to which the Award was subject and that did not lapse (and were not satisfied) in connection with the Covered Transaction. For purposes of the immediately preceding sentence, a cash-out under Section 7(a)(1)(C) will not, in and of itself, be treated as the lapsing (or satisfaction) of a performance or other vesting condition. In the case of
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Restricted Stock that does not vest and is not forfeited in connection with the Covered Transaction, the Administrator may require that any amounts delivered, exchanged or otherwise paid in respect of such Stock in connection with the Covered Transaction be placed in escrow or otherwise made subject to such restrictions as the Administrator deems appropriate to carry out the intent of the Plan.
(2) Provisions that Apply in the Event of a Covered Transaction that Does Not Constitute a Change of Control. Upon the consummation of a Covered Transaction that does not constitute a Change of Control, the Administrator will determine the treatment of each Award (or portion thereof) that is outstanding as of the consummation of the Covered Transaction, which may include, but is not limited to: (i) the assumption or continuation of some or all outstanding Awards or any portion thereof, or the grant of new awards in substitution therefor by any acquiror or survivor or affiliate of the acquiror or survivor, to the extent applicable, in the Covered Transaction; (ii) that each unvested Award or portion thereof that is outstanding as of the consummation of a Covered Transaction that is not so assumed, continued or substituted for will immediately vest in full upon the consummation of the Covered Transaction; or (iii) payment (a cash-out) with respect to some or all Awards or portions thereof (including only the vested portion thereof) that are not so assumed, continued or substituted for, equal in the case of each applicable Award or portion thereof to the excess, if any, of (A) the fair market value of a share of Stock multiplied by the number of shares of Stock subject to the Award or such portion, minus (B) the aggregate exercise or purchase price, if any, of such Award or such portion (or, in the case of a SAR, the aggregate base value above which appreciation is measured), in each case, on such payment and other terms and subject to such conditions (which need not be the same as the terms and conditions applicable to holders of Stock generally) as the Administrator determines, including that any amounts paid in respect of such Award in connection with the Covered Transaction be placed in escrow or otherwise made subject to such restrictions as the Administrator deems appropriate (provided, for the avoidance of doubt, that such Award or portion may be cancelled with no payment due hereunder or otherwise in respect thereof if the per share exercise or purchase price (or base value) of an Award or portion thereof is equal to or greater than the fair market value of a share of Stock).
(3) Uniform Treatment. For the avoidance of doubt, the Administrator need not treat Participants or Awards (or portions thereof) in a uniform manner, and may treat different Participants and/or Awards differently, in connection with a Covered Transaction.
(b) Changes in and Distributions with Respect to Stock.
(1) Basic Adjustment Provisions. In the event of a stock dividend, stock split or combination of shares (including a reverse stock split), recapitalization or other change in the Companys capital structure that constitutes an equity restructuring within the meaning of the Accounting Rules, the Administrator will make appropriate adjustments to the Share Pool, the maximum number of shares of Stock that may be delivered in satisfaction of ISOs under the Plan, the individual limits described in Section 4(d), the number and kind of shares of stock or securities underlying Awards then outstanding or subsequently granted, any exercise or purchase prices (or base values) relating to Awards and any other provision of Awards affected by such change.
(2) Certain Other Adjustments. The Administrator may also make adjustments of the type described in Section 7(b)(1) to take into account distributions to stockholders other than those provided for in Sections 7(a) and 7(b)(1), or any other event, if the Administrator determines that adjustments are appropriate to avoid distortion in the operation of the Plan or any Award.
(3) Continuing Application of Plan Terms. References in the Plan to shares of Stock will be construed to include any stock or securities resulting from an adjustment pursuant to this Section 7.
8. | LEGAL CONDITIONS ON DELIVERY OF STOCK |
The Company will not be obligated to issue any shares of Stock pursuant to the Plan or to remove any restriction from shares of Stock previously issued under the Plan until: (i) the Company is satisfied that all legal matters in connection with the issuance of such shares have been addressed and resolved; (ii) if the outstanding Stock is at the time of issuance listed on any stock exchange or national market system, the shares to be issued have been listed or authorized to be listed on such exchange or system upon official notice of issuance; and (iii) all
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conditions of the Award have been satisfied or waived. The Company may require, as a condition to the exercise of an Award or the issuance of shares of Stock under an Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of U.S. federal securities laws or any applicable state or non-U.S. securities law. Any Stock issued under the Plan will be evidenced in such manner as the Administrator determines appropriate, including book-entry registration or delivery of stock certificates. In the event that the Administrator determines that stock certificates will be issued in connection with Stock issued under the Plan, the Administrator may require that such certificates bear an appropriate legend reflecting any restriction on transfer applicable to such Stock, and the Company may hold the certificates pending the lapse of the applicable restrictions.
9. | AMENDMENT AND TERMINATION |
The Administrator may at any time or times amend the Plan or any outstanding Award for any purpose which may at the time be permitted by applicable law, and may at any time terminate the Plan as to any future grants of Awards; provided that, except as otherwise expressly provided in the Plan or the applicable Award, the Administrator may not, without the Participants consent, alter the terms of an Award so as to materially and adversely affect the Participants rights under the Award, unless the Administrator expressly reserved the right to do so in the Plan or at the time the applicable Award was granted. Any amendments to the Plan will be conditioned upon stockholder approval only to the extent, if any, such approval is required by applicable law (including the Code) or stock exchange requirements, as determined by the Administrator. For the avoidance of doubt, without prejudice to the Administrators rights hereunder, no adjustment to any Award pursuant to the terms of Section 7 or Section 12 will be treated as an amendment to such Award requiring a Participants consent.
10. | OTHER COMPENSATION ARRANGEMENTS |
The existence of the Plan or the grant of any Award will not affect the right of the Company or any of its subsidiaries to grant any person bonuses or other compensation in addition to Awards under the Plan.
11. | MISCELLANEOUS |
(a) Waiver of Jury Trial. By accepting or being deemed to have accepted an Award under the Plan, each Participant waives (or will be deemed to have waived), to the maximum extent permitted under applicable law, any right to a trial by jury in any action, proceeding or counterclaim concerning any rights under the Plan or any Award, or under any amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in connection therewith, and agrees (or will be deemed to have agreed) that any such action, proceedings or counterclaim will be tried before a court and not before a jury. By accepting or being deemed to have accepted an Award under the Plan, each Participant certifies that no officer, representative, or attorney of the Company has represented, expressly or otherwise, that the Company would not, in the event of any action, proceeding, or counterclaim, seek to enforce the foregoing waivers. Notwithstanding anything to the contrary in the Plan, nothing herein is to be construed as limiting the ability of the Company and a Participant to agree to submit any dispute arising under the terms of the Plan or any Award to binding arbitration or as limiting the ability of the Company to require any individual to agree to submit such disputes to binding arbitration as a condition of receiving an Award hereunder.
(b) Limitation of Liability. Notwithstanding anything to the contrary in the Plan or any Award, neither the Company, nor any of its subsidiaries, nor the Administrator, nor any person acting on behalf of the Company, any of its subsidiaries, or the Administrator, will be liable to any Participant, to any permitted transferee, to the estate or beneficiary of any Participant or any permitted transferee, or to any other person by reason of any acceleration of income, any additional tax, or any penalty, interest or other liability asserted by reason of the failure of an Award to satisfy the requirements of Section 422 or Section 409A or by reason of Section 4999 of the Code, or otherwise asserted with respect to any Award.
(c) Unfunded Plan. The Companys obligations under the Plan are unfunded, and no Participant will have any right to specific assets of the Company in respect of any Award. Participants will be general unsecured creditors of the Company with respect to any amounts due or payable under the Plan.
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12. | RULES FOR PARTICIPANTS IN CERTAIN JURISDICTIONS |
The Administrator may at any time and from time to time (including before or after an Award is granted) establish, adopt or revise any rules and regulations as it may deem necessary or advisable for purposes of satisfying applicable blue sky, securities, tax or other laws of various jurisdictions, including by establishing one or more sub-plans, supplements or appendices under the Plan or any Award agreement setting forth (i) such limitations on the Administrators discretion under the Plan and (ii) such additional or different terms and conditions, in each case, as the Administrator deems necessary or desirable. Any such sub-plan, supplement, appendix, rule or regulation will be deemed to be part of the Plan but will apply only to Participants within the applicable jurisdiction (as determined by the Administrator); provided, however, that no sub-plan, supplement, appendix, rule or regulation established pursuant to this provision will increase the Share Pool.
13. | GOVERNING LAW |
(a) Certain Requirements of Corporate Law. Awards and shares of Stock will be granted, issued and administered consistent with the requirements of applicable Delaware law relating to the issuance of stock and the consideration to be received therefor, and with the applicable requirements of the stock exchanges or other trading systems on which the Stock is listed or entered for trading, in each case, as determined by the Administrator.
(b) Other Matters. Except as otherwise provided by the express terms of an Award agreement or under a sub-plan described in Section 12, the domestic substantive laws of the State of Delaware govern the provisions of the Plan and of Awards under the Plan and all claims or disputes arising out of or based upon the Plan or any Award under the Plan or relating to the subject matter hereof or thereof, without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.
(c) Jurisdiction. By accepting (or being deemed to have accepted) an Award, each Participant agrees or will be deemed to have agreed to (i) submit irrevocably and unconditionally to the jurisdiction of the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon the Plan or any Award; (ii) not commence any suit, action or other proceeding arising out of or based upon the Plan or any Award, except in the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware; and (iii) waive, and not assert, by way of motion as a defense or otherwise, in any such suit, action or proceeding, any claim that he or she is not subject personally to the jurisdiction of the above-named courts that his or her property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that the Plan or any Award or the subject matter thereof may not be enforced in or by such court.
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Exhibit A
DEFINITION OF TERMS
The following terms, when used in the Plan, have the meanings and are subject to the provisions set forth below:
Accounting Rules: Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor provision.
Administrator: The Compensation Committee, except with respect to such matters that are not delegated to the Compensation Committee by the Board (whether pursuant to committee charter or otherwise). The Compensation Committee (or the Board, with respect to such matters over which it retains authority under the Plan or otherwise) may delegate (i) to one or more of its members (or one or more other members of the Board) such of its duties, powers and responsibilities as it may determine; (ii) to one or more officers of the Company the power to grant Awards to the extent permitted by applicable law; and (iii) to such Employees or other persons as it determines such ministerial tasks as it deems appropriate. For purposes of the Plan, the term Administrator will include the Board, the Compensation Committee, and the person or persons delegated authority under the Plan to the extent of such delegation, as applicable.
Award: Any or a combination of the following:
(i) | Stock Options. |
(ii) | SARs. |
(iii) | Restricted Stock. |
(iv) | Unrestricted Stock. |
(v) | Stock Units, including Restricted Stock Units. |
(vi) | Performance Awards. |
(vii) | Awards (other than Awards described in (i) through (vi) above) that are convertible into or otherwise based on Stock. |
Board: The board of directors of the Company.
Cause: In the case of any Participant who is party to an employment, change of control, severance-benefit or other agreement with the Company or any of its subsidiaries that contains a definition of Cause (or a correlative term), the definition set forth in such agreement applies with respect to such Participant for purposes of the Plan for so long as such agreement is in effect. In every other case, Cause means, as determined by the Administrator, a termination by the Company or an affiliate of the Participants Employment or a termination by the Participant of the Participants Employment, in either case, following the occurrence of any of the following events: (i) the Participants willful and continued failure to perform, or gross negligence or willful misconduct in the performance of, his or her material duties with respect to the Company or an affiliate which, if curable, continues beyond ten (10) business days after a written demand for substantial performance is delivered to the Participant by the Company (provided that the Company will not be required to provide any such notice or opportunity to cure with respect to any subsequent similar or related conduct); (ii) the Participants commission of a crime constituting a felony under the laws of the United States or any state thereof or involving moral turpitude; (iii) the Participants committing or engaging in any act of fraud, embezzlement, theft or other act of dishonesty that causes material injury, monetarily or otherwise, to the Company or an affiliate; (iv) the Participants breach of any non-competition, non-solicitation, no-hire, non-disparagement, confidentiality, invention assignment or other restrictive covenant by which he or she is bound, or engaging in Competitive Activity; (v) the Participants material breach of any other provision of any written agreement by and between the Participant and the Company or any of its subsidiaries; (vi) the Participants violation of the code of conduct of the Company or its subsidiaries or any policy of the Company or its subsidiaries, or of any statutory or common law duty of loyalty to the Company or its subsidiaries; or (vii) other conduct that could reasonably be expected to be harmful to the business, interests or reputation of the Company.
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Change of Control: the consummation of (i) any transaction or series of related transactions, whether or not the Company is a party thereto, after giving effect to which in excess of fifty percent (50%) of the Companys voting power is owned directly, or indirectly through one or more entities, by any person and its affiliates or associates (as such terms are defined in the Exchange Act) or any group (as defined in the Exchange Act) other than, in each case, the Company or an Affiliate of the Company immediately following the Date of Adoption or (ii) a sale or other disposition of all or substantially all of the consolidated assets of the Company; provided that, notwithstanding the foregoing, a Change of Control will not be deemed to occur as a result of any such transaction following which the individuals or entities who were beneficial owners of the outstanding securities entitled to vote generally in the election of directors of the Company immediately prior to such transaction beneficially own, directly or indirectly, fifty percent (50%) or more of the outstanding securities entitled to vote generally in the election of directors of the resulting, surviving or acquiring corporation in such transaction. For purposes of this definition, Affiliates means, with respect to any person or entity, all persons and entities directly or indirectly controlling, controlled by or under common control with such person or entity, where control may be by management authority, contract or equity interest.
Code: The U.S. Internal Revenue Code of 1986, as from time to time amended and in effect, or any successor statute as from time to time in effect.
Company: LPL Financial Holdings Inc., a Delaware corporation.
Compensation Committee: The Compensation and Human Resources Committee of the Board.
Competitive Activity: Engaging, directly or indirectly, alone or as principal, agent, employee, employer, consultant, investor, partner or manager, or providing advisory or other services to, or owning any stock or any other ownership interest in, or making any financial investment in any business (or entity) that engages in any business in which the Company and its subsidiaries are engaged, or that provides any material products and/or services that the Company or its subsidiaries were actively developing or designing (provided that where such Competitive Activity occurs following termination of Employment, the Competitive Activity shall be determined at the date of termination); provided, however, that the foregoing shall not restrict the Participant from owning less than two percent (2%) of the outstanding securities of any class of securities listed on a national exchange or inter-dealer quotation system.
Covered Transaction: Any of (i) a consolidation, merger or similar transaction or series of related transactions, including a sale or other disposition of stock, in which the Company is not the surviving corporation or which results in the acquisition of all or substantially all of the Companys then outstanding common stock by a single person or entity or by a group of persons and/or entities acting in concert; (ii) a sale or transfer of all or substantially all the Companys assets; or (iii) a dissolution or liquidation of the Company. Where a Covered Transaction involves a tender offer that is reasonably expected to be followed by a merger described in clause (i) (as determined by the Administrator), the Covered Transaction will be deemed to have occurred upon consummation of the tender offer.
Date of Adoption: The date the Plan was approved by the Companys stockholders.
Director: A member of the Board who is not an Employee.
Disability: In the case of any Participant who is party to an employment, change of control, severance-benefit or other agreement with the Company or any of its subsidiaries that contains a definition of Disability (or a correlative term), the definition set forth in such agreement applies with respect to such Participant for purposes of the Plan for so long as such agreement is in effect. In every other case, Disability means a physical or mental incapacity or disability of the Participant that renders the Participant unable to substantially perform all of his or her duties and responsibilities to the Company and its affiliates (with or without any reasonable accommodation) (i) for one hundred twenty (120) days in any twelve- (12) month period or (ii) for a period of ninety (90) successive days in any twelve- (12) month period. If any question arises as to whether the Participant has a Disability, then at the request of the Administrator the Participant shall submit to a medical examination by a qualified third-party health care provider selected by the Administrator to whom the Participant or his or her duly appointed guardian, if any, has no reasonable objection to determine whether the Participant has a Disability and such determination shall be
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conclusive of the issue for the purposes of the Plan. If such question shall arise and the Participant shall fail to submit to such medical examination, the Administrators determination of the issue shall be conclusive of the issue for the purposes of the Plan.
Employee: Any person who is employed by the Company or any of its subsidiaries.
Employment: A Participants employment or other service relationship with the Company or any of its subsidiaries. Employment will be deemed to continue, unless the Administrator otherwise determines, so long as the Participant is employed by, or otherwise is providing services in a capacity described in Section 5 to, the Company or any of its subsidiaries. If a Participants employment or other service relationship is with any subsidiary of the Company and that entity ceases to be a subsidiary of the Company, the Participants Employment will be deemed to have terminated when the entity ceases to be a subsidiary of the Company unless the Participant transfers Employment to the Company or one of its remaining subsidiaries. Notwithstanding the foregoing, in construing the provisions of any Award relating to the payment of nonqualified deferred compensation (subject to Section 409A) upon a termination or cessation of Employment, references to termination or cessation of employment, separation from service, retirement or similar or correlative terms will be construed to require a separation from service (as that term is defined in Section 1.409A-1(h) of the Treasury Regulations, after giving effect to the presumptions contained therein) from the Company and from all other corporations and trades or businesses, if any, that would be treated as a single service recipient with the Company under Section 1.409A-1(h)(3) of the Treasury Regulations. The Company may, but need not, elect in writing, subject to the applicable limitations under Section 409A, any of the special elective rules prescribed in Section 1.409A-1(h) of the Treasury Regulations for purposes of determining whether a separation from service has occurred. Any such written election will be deemed a part of the Plan.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Fair Market Value: As of a particular date, (i) the closing price for a share of Stock reported on the Nasdaq Stock Market (or any other national securities exchange on which the Stock is then listed) for that date or, if no closing price is reported for that date, the closing price on the immediately preceding date on which a closing price was reported or (ii) in the event that the Stock is not traded on a national securities exchange, the fair market value of a share of Stock determined by the Administrator consistent with the rules of Section 422 and Section 409A to the extent applicable.
ISO: A Stock Option intended to be an incentive stock option within the meaning of Section 422. Each Stock Option granted pursuant to the Plan will be treated as providing by its terms that it is to be an NSO unless, as of the date of grant, it is expressly designated as an ISO in the Award agreement evidencing such Stock Option.
NSO: A Stock Option that is not intended to be an incentive stock option within the meaning of Section 422.
Participant: A person who is granted an Award under the Plan.
Performance Award: An Award subject to performance vesting conditions, which may include Performance Criteria.
Performance Criteria: Specified criteria, other than the mere continuation of Employment or the mere passage of time, the satisfaction of which is a condition for the grant, exercisability, vesting or full enjoyment of an Award. A Performance Criterion and any targets with respect thereto need not be based upon an increase, a positive or improved result or avoidance of loss and may be applied to a Participant individually, or to a business unit or division of the Company or to the Company as a whole. A Performance Criterion also may be based on individual performance and/or subjective performance criteria. The Administrator may provide that one or more of the Performance Criteria applicable to an Award will be adjusted in a manner to reflect events (for example, but without limitation, acquisitions or dispositions) occurring during the performance period that affect the applicable Performance Criterion or Criteria.
Plan: The LPL Financial Holdings Inc. 2021 Omnibus Equity Incentive Plan, as from time to time amended and in effect.
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Prior Plan: The LPL Financial Holdings Inc. Amended and Restated 2010 Omnibus Equity Incentive Plan, as amended and restated.
Restricted Stock: Stock subject to restrictions requiring that it be forfeited, redelivered or offered for sale to the Company if specified performance or other vesting conditions are not satisfied.
Restricted Stock Unit: A Stock Unit that is, or as to which the issuance of Stock or delivery of cash in lieu of Stock is, subject to the satisfaction of specified performance or other vesting conditions.
Retirement: Unless otherwise defined in a Participants Award agreement, termination of Employment other than for Cause following (i) attainment of age sixty-five (65) and completion of five (5) years of continuous service with the Company or (ii) attainment of age fifty-five (55) and completion of ten (10) years of continuous service with the Company.
SAR: A right entitling the holder upon exercise to receive an amount (payable in cash or in shares of Stock of equivalent value) equal to the excess of the Fair Market Value of the shares of Stock subject to the right over the base value from which appreciation under the SAR is to be measured.
Section 409A: Section 409A of the Code and the regulations thereunder.
Section 422: Section 422 of the Code and the regulations thereunder.
Stock: Common stock of the Company, par value $0.001 per share.
Stock Option: An option entitling the holder to acquire shares of Stock upon payment of the exercise price.
Stock Unit: An unfunded and unsecured promise, denominated in shares of Stock, to issue Stock or deliver cash measured by the value of Stock in the future.
Substitute Award: An Award issued under the Plan in substitution for one or more equity awards of an acquired company that are converted, replaced or adjusted in connection with the acquisition.
Unrestricted Stock: Stock not subject to any restrictions under the terms of the Award.
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LPL FINANCIAL HOLDINGS INC.
2021 EMPLOYEE STOCK PURCHASE PLAN
1. | Defined Terms |
Exhibit A, which is incorporated by reference, defines the terms used in the Plan and sets forth certain operational rules related to those terms.
2. | Purpose of Plan |
The Plan is intended to enable Eligible Employees to use payroll deductions to purchase shares of Stock in offerings under the Plan, and thereby acquire an interest in the Company. The Plan is intended to qualify as an employee stock purchase plan under Section 423 and to be exempt from the application and requirements of Section 409A of the Code, and is to be construed accordingly.
3. | Options to Purchase Stock |
Subject to adjustment pursuant to Section 16 of the Plan, the maximum aggregate number of shares of Stock available for purchase pursuant to the exercise of Options granted under the Plan will be 2,800,000 shares (the Share Pool). The shares of Stock to be delivered upon exercise of Options under the Plan may be either shares of authorized but unissued Stock, treasury Stock, Stock acquired in an open-market transaction or previously issued Stock acquired by the Company. If any Option granted under the Plan expires or terminates for any reason without having been exercised in full or ceases for any reason to be exercisable in whole or in part, the unpurchased shares of Stock subject to such Option will not reduce the Share Pool and will again be available for purchase under the Plan. If, on a Purchase Date, the total number of shares of Stock that would otherwise be subject to Options granted under the Plan exceeds the number of shares then available in the Share Pool, the Administrator shall make a pro rata allocation of the shares remaining available for purchase under the Plan in as uniform a manner as is practicable and as it determines to be equitable. In such event, the Administrator shall notify each Participant of such reduction and of the effect on the Participants Options and may reduce the rate of a Participants payroll deductions, if necessary.
4. | Eligibility |
(a) Eligibility Requirements. Subject to Section 13 of the Plan, and the exceptions and limitations set forth in Section 4(b), Section 4(c) Section 4(d), and Section 6 of the Plan, or as may be provided elsewhere in the Plan or in any sub-plan contemplated by Section 23, each Employee who is employed by the Company as of the first day of an applicable Enrollment Period will be an Eligible Employee.
(b) Five Percent Shareholders. No Employee may be granted an Option under the Plan if, immediately after the Option is granted, the Employee would own (or pursuant to Section 424(d) of the Code would be deemed to own) stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of its Parent or Subsidiaries, if any.
(c) Officers. No Employee may be granted an Option under the Plan if such Employee is subject to the disclosure requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended, in accordance with Section 1.423-2(e)(ii) of the Treasury Regulations.
(d) Additional Requirements. The Administrator may, for Offering Periods that have not yet commenced, establish additional or other eligibility requirements, or amend the eligibility requirements set forth in Section 4(a) above, in each case, consistent with the requirements of Section 423.
5. | Offering Periods |
The Plan will generally be implemented by a series of separate offerings referred to as Offering Periods. Unless otherwise determined by the Administrator, the Offering Periods will be successive periods of approximately
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three (3) months and will commence on the first day of the payroll period occurring on or near February 10, May 19, August 11 and November 3 of each year; provided, that the initial Offering Period under the Plan may commence on some other date, as the Administrator may specify. The first payroll date to occur following the end of each Offering Period will be a Purchase Date. The Administrator may change the Purchase Date, the commencement date, the ending date and the duration of each Offering Period, in each case, to the extent permitted by Section 423; provided, however, that no Option may be exercised after twenty-seven (27) months from its grant date.
6. | Option Grant |
Subject to the requirements and limitations set forth in Sections 4 and 10 of the Plan and the Maximum Share Limit, on the first day of an Offering Period, each Participant will automatically be granted an Option to purchase shares of Stock on the Purchase Date; provided, however, that no Participant will be granted an Option under the Plan that permits the Participants right to purchase shares of Stock under the Plan and under all other employee stock purchase plans of the Company and its Parent and Subsidiaries, if any, to accrue at a rate that exceeds $25,000 in Fair Market Value (or such other maximum as may be prescribed from time to time by the Code) for each calendar year during which any Option granted to such Participant is outstanding at any time, as determined in accordance with Section 423(b)(8) of the Code.
7. | Method of Participation |
(a) Payroll Deduction and Participation Authorization. Preceding each Offering Period there will be an Enrollment Period specified by the Administrator, during which each Eligible Employee may elect to participate in the Plan by executing and delivering to the Administrator a payroll deduction and participation authorization form by the last day of the Enrollment Period in accordance with the procedures prescribed by, and in a form acceptable to, the Administrator and, in so doing, the Eligible Employee will thereby become a Participant as of the first day of such Offering Period. Such an Eligible Employee will remain a Participant with respect to subsequent Offering Periods until his or her participation in the Plan is terminated as provided herein. The Administrator may change the duration and timing of Enrollment Periods in its discretion.
(b) Changes to Payroll Deduction Authorization for Subsequent Offering Periods. A Participants payroll deduction authorization will remain in effect for subsequent Offering Periods unless the Participant files a new authorization with the Administrator during a subsequent Enrollment Period (or such other time as specified by the Administrator) or the Participants Option is cancelled pursuant to Section 13 or Section 14 of the Plan.
(c) Changes to Payroll Deduction Authorization for Current Offering Period. A Participant may, at any time up to fifteen (15) days prior to the applicable Purchase Date, reduce his or her withholding rate for future payroll periods during an ongoing Offering Period by filing a new payroll deduction authorization with the Administrator, which will become effective, to the extent administratively practicable, for the subsequent payroll period following receipt of such payroll deduction authorization by the Administrator. A Participant may terminate his or her payroll deduction authorization by canceling his or her Option in accordance with Section 13 of the Plan.
(d) Payroll Deduction Amount. Each payroll deduction authorization will authorize payroll deductions as a specific dollar amount, within a range specified by the Administrator prior to the applicable Offering Period, of the Participants Eligible Compensation per payroll period.
(e) Payroll Deduction Account. All payroll deductions made pursuant to this Section 7 will be credited to the Participants Account. Amounts credited to a Participants Account will not be required to be set aside in trust or otherwise segregated from the Companys general assets.
8. | Method of Payment |
A Participant must pay for shares of Stock purchased under the Plan with accumulated payroll deductions credited to the Participants Account.
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9. | Purchase Price |
The Purchase Price of shares of Stock issued pursuant to the exercise of an Option on each Purchase Date will be eighty-five percent (85%) (or such greater percentage specified by the Administrator to the extent permitted under Section 423) of the lesser of (i) the Fair Market Value of a share of Stock on the date on which the Option was granted pursuant to Section 6 of the Plan (i.e., the first day of the Offering Period) and (ii) the Fair Market Value of a share of Stock on the date on which the Option is deemed exercised pursuant to Section 10 of the Plan (i.e., the Purchase Date).
10. | Exercise of Options |
(a) Purchase of Shares. Subject to the limitations set forth in Section 6 of the Plan and this Section 10, with respect to each Offering Period, on the applicable Purchase Date, each Participant will be deemed to have exercised his or her Option and the accumulated payroll deductions in the Participants Account will be applied to purchase the greatest number of shares of Stock that can be purchased with such Account balance at the applicable Purchase Price (which may include a fractional share); provided, however, that no more than one hundred (100) shares of Stock may be purchased by a Participant on any Purchase Date, or such other number as the Administrator may prescribe in accordance with Section 423 (the Maximum Share Limit). As soon as practicable thereafter, shares of Stock so purchased will be placed, in book-entry form, into a record keeping account in the name of the Participant.
(b) Return of Account Balance. Any accumulated amount of payroll deductions in a Participants Account for an Offering Period that are not used for the purchase of shares of Stock, whether because of the Participants withdrawal from participation in an Offering Period or for any other reason, will be returned to the Participant (or his or her designated beneficiary or legal representative, as applicable), without interest, as soon as administratively practicable after such withdrawal or other event, as applicable. If the Participants accumulated payroll deductions on the Purchase Date of an Offering Period would otherwise enable the Participant to purchase shares of Stock in excess of the Maximum Share Limit or the maximum Fair Market Value set forth in Section 6 of the Plan, the excess of the amount of the accumulated payroll deductions over the aggregate Purchase Price of the shares of Stock actually purchased will be returned to the Participant, without interest, as soon as administratively practicable after such Purchase Date.
11. | Interest |
No interest will accrue or be payable on any amount held in the Account of any Participant.
12. | Taxes |
Payroll deductions will be made on an after-tax basis. The Administrator will have the right to make such provision as it deems necessary for, and may condition the exercise of an Option on, the satisfaction of its obligations to withhold federal, state, local income or other taxes incurred by reason of the purchase or disposition of shares of Stock under the Plan. In the Administrators discretion and subject to applicable law, such tax obligations may be satisfied in whole or in part by delivery of shares of Stock to the Company, including shares of Stock purchased under the Plan, valued at Fair Market Value, but not in excess of the maximum withholding amount consistent with the award being subject to equity accounting treatment under the Accounting Rules. The Administrator may, to the extent permitted by law, deduct any tax obligations from any payment of any kind due to the Participant.
13. | Cancellation and Withdrawal |
A Participant who has been granted an Option under the Plan may cancel all (but not less than all) of such Option and terminate his or her participation in the Plan by notice to the Administrator in accordance with the procedures prescribed by, and in a form acceptable to, the Administrator. To be effective with respect to an upcoming Purchase Date, such cancellation notice must be delivered not later than fifteen (15) calendar days prior to such Purchase Date (or such other time as specified by the Administrator). Upon such termination and
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cancellation, the balance in the Participants Account will be returned to the Participant, without interest, as soon as administratively practicable thereafter. For the avoidance of doubt, a Participant who reduces his or her withholding rate for a future Offering Period to zero pursuant to Section 7 of the Plan will be deemed to have terminated his or her payroll deduction authorization and canceled his or her participation in the Plan as to such Offering Period and all future Offering Periods, unless the Participant delivers a new payroll deduction authorization for a subsequent Offering Period in accordance with the rules of Section 7 of the Plan.
14. | Termination of Employment; Death of Participant |
Upon the termination of a Participants employment with the Company or a Designated Subsidiary, as applicable, for any reason (including the death of a Participant during an Offering Period prior to an Purchase Date) or in the event the Participant ceases to qualify as an Eligible Employee, the Participant will cease to be a Participant, any Option held by the Participant under the Plan will be canceled, the balance in the Participants Account will be returned to the Participant (or his or her estate or designated beneficiary in the event of the Participants death), without interest, as soon as administratively practicable thereafter, and the Participant will have no further rights under the Plan.
15. | Equal Rights; Participants Rights Not Transferable |
All Participants granted Options in an offering under the Plan will have the same rights and privileges, consistent with the requirements set forth in Section 423. Any Option granted under the Plan will be exercisable during the Participants lifetime only by him or her and may not be sold, pledged, assigned, or transferred in any manner. In the event any Participant violates or attempts to violate the terms of this Section 15, as determined by the Administrator in its sole discretion, any Options granted to the Participant under the Plan may be terminated by the Company and, upon the return to the Participant of the balance of his or her Account, without interest, all of the Participants rights under the Plan will terminate.
16. | Change in Capitalization; Corporate Transaction |
(a) Change in Capitalization. In the event of a stock dividend, stock split or combination of shares (including a reverse stock split), recapitalization or other change in the Companys capital structure that constitutes an equity restructuring within the meaning of the Accounting Rules, the Administrator shall make appropriate adjustments to the aggregate number and type of shares of stock available under the Plan, the number and type of shares of stock granted under any outstanding Options, the maximum number and type of shares of stock purchasable under any outstanding Option, and/or the Purchase Price under any outstanding Option, in any case, in a manner that complies with Section 423.
(b) Corporate Transaction. In the event of a sale of all or substantially all of the Stock or a sale of all or substantially all of the assets of the Company, or a merger or similar transaction in which the Company is not the surviving corporation or that results in the acquisition of the Company by another person, the Administrator may, in its discretion, (i) if the Company is merged with or acquired by another corporation, provide that each outstanding Option will be assumed or exchanged for a substitute Option granted by the acquiror or successor corporation or by a parent or subsidiary of the acquiror or successor corporation; (ii) cancel each outstanding Option and return the balances in Participants Accounts to the Participants; and/or (iii) pursuant to Section 18 of the Plan, terminate the Offering Period on or before the date of the proposed sale, merger or similar transaction.
17. | Administration |
The Plan will be administered by the Administrator. The Administrator has discretionary authority, subject only to the express provisions of the Plan, to administer and interpret the Plan; to determine eligibility under the Plan; to prescribe forms, rules and procedures relating to the Plan; and to otherwise do all things necessary or desirable to carry out the purposes of the Plan. Determinations of the Administrator made with respect to the Plan are conclusive and bind all persons.
The Administrator may specify the manner in which the Company and/or Employees are to provide notices and forms under the Plan, and may require that such notices and forms be submitted electronically.
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18. | Amendment and Termination of Plan |
(a) Amendment. The Administrator reserves the right at any time or times to amend the Plan to any extent and in any manner it may deem advisable; provided, however, that any amendment that would be treated as the adoption of a new plan for purposes of Section 423 will have no force or effect unless approved by the shareholders of the Company within twelve (12) months before or after its adoption.
(b) Termination. The Administrator reserves the right at any time or times to suspend or terminate the Plan. In connection therewith, the Administrator may provide, in its sole discretion, either that outstanding Options will be exercisable on the Purchase Date for the applicable Offering Period or on such earlier date as the Administrator may specify (in which case such earlier date will be treated as the Purchase Date for the applicable Offering Period), or that the balance of each Participants Account will be returned to the Participant, without interest.
19. | Approvals |
Shareholder approval of the Plan will be obtained prior to the date that is twelve (12) months after the date of Board approval. In the event that the Plan has not been approved by the shareholders of the Company prior to February 11, 2022, all Options to purchase shares of Stock under the Plan will be cancelled and become null and void.
Notwithstanding anything herein to the contrary, the obligation of the Company to issue and deliver shares of Stock under the Plan will be subject to the approval required of any governmental authority in connection with the authorization, issuance, sale or transfer of such shares of Stock and to any requirements of any national securities exchange applicable thereto, and to compliance by the Company with other applicable legal requirements in effect from time to time.
20. | Participants Rights as Shareholders and Employees |
A Participant will have no rights or privileges as a shareholder of the Company and will not receive any dividends in respect of any shares of Stock covered by an Option granted hereunder until such Option has been exercised, full payment has been made for such shares, and the shares have been issued to the Participant.
Nothing contained in the provisions of the Plan will be construed as giving to any Employee the right to be retained in the employ of the Company or any Designated Subsidiary or as interfering with the right of the Company or any Designated Subsidiary to discharge, promote, demote or otherwise re-assign any Employee from one position to another within the Company or any Designated Subsidiary at any time.
21. | Restrictions on Transfer; Information Regarding Disqualifying Dispositions. |
(a) Restrictions on Transfer. All shares of Stock purchased under the Plan will be subject to a restriction prohibiting the transfer of such shares of Stock from the account where such shares of Stock are initially held until such shares are sold through the Plans custodian and record keeper. Shares of Stock purchased under the Plan may, in the discretion of the Administrator, be subject to additional restrictions prohibiting the transfer, sale, pledge or alienation of such shares of Stock by a Participant, other than by will or by the laws of descent and distribution, for such period following such purchase as may be determined by the Administrator.
(b) Disqualifying Dispositions. By electing to participate in the Plan, each Participant agrees to provide such information about any transfer of Stock acquired under the Plan that occurs within two (2) years after the first day of the Offering Period in which such Stock was acquired and within one (1) year after the day such Stock was purchased as may be requested by the Company or any Designated Subsidiary in order to assist it in complying with applicable tax laws.
22. | Miscellaneous |
(a) Waiver of Jury Trial. By electing to participate in the Plan, each Participant waives (or will be deemed to have waived), to the maximum extent permitted under applicable law, any right to a trial by jury in any action,
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proceeding or counterclaim concerning any rights under the Plan or with respect to any Option, or under any amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in connection therewith, and agrees (or will be deemed to have agreed) that any such action, proceedings or counterclaim will be tried before a court and not before a jury. By electing to participate in the Plan, each Participant certifies that no officer, representative, or attorney of the Company has represented, expressly or otherwise, that the Company would not, in the event of any action, proceeding or counterclaim, seek to enforce the foregoing waivers. Notwithstanding anything to the contrary in the Plan, nothing herein is to be construed as limiting the ability of the Company and a Participant to agree to submit any dispute arising under the terms of the Plan or in respect of any Option to binding arbitration or as limiting the ability of the Company to require any individual to agree to submit such disputes to binding arbitration as a condition of receiving an Option hereunder.
(b) Limitation of Liability. Notwithstanding anything to the contrary in the Plan, neither the Company, nor any of its subsidiaries, nor the Administrator, nor any person acting on behalf of the Company, any of its subsidiaries, or the Administrator, will be liable to any Participant, to any permitted transferee, to the estate or beneficiary of any Participant or any permitted transferee, or to any other person by reason of any acceleration of income, any additional tax, or any penalty, interest or other liability asserted by reason of the failure of the Plan or any Option to satisfy the requirements of Section 423, or otherwise asserted with respect to the Plan or any Option.
(c) Unfunded Plan. The Companys obligations under the Plan are unfunded, and no Participant will have any right to specific assets of the Company in respect of any Option. Participants will be general unsecured creditors of the Company with respect to any amounts due or payable under the Plan.
23. | Establishment of Sub-Plans |
Notwithstanding the foregoing or any provision of the Plan to the contrary, consistent with the requirements of Section 423, the Administrator may, in its sole discretion, amend the terms of the Plan, or an offering and/or provide for separate offerings under the Plan in order to, among other things, reflect the impact of local law outside of the United States as applied to one or more Eligible Employees of a Designated Subsidiary and may, where appropriate, establish one or more sub-plans to reflect such amended provisions.
24. | Governing Law |
(a) Certain Requirements of Corporate Law. Options and shares of Stock will be granted, issued and administered consistent with the requirements of applicable Delaware law relating to the issuance of stock and the consideration to be received therefor, and with the applicable requirements of the stock exchanges or other trading systems on which the Stock is listed or entered for trading, in each case as determined by the Administrator.
(b) Other Matters. Except as otherwise provided by the express terms of a sub-plan described in Section 23 or as provided in Section 24(a), the domestic substantive laws of the State of Delaware govern the provisions of the Plan and of Options under the Plan and all claims or disputes arising out of or based upon the Plan or any Option or relating to the subject matter hereof or thereof without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.
(c) Jurisdiction. By electing to participate in the Plan, each Participant agrees or will be deemed to have agreed to (i) submit irrevocably and unconditionally to the jurisdiction of the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon the Plan or any Option; (ii) not commence any suit, action or other proceeding arising out of or based upon the Plan or any Option, except in the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware; and (iii) waive, and not assert, by way of motion as a defense or otherwise, in any such suit, action or proceeding, any claim that he or she is not subject personally to the jurisdiction of the above-named courts that his or her property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that the Plan or any Option or the subject matter thereof may not be enforced in or by such court.
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25. | Effective Date and Term |
The Plan will become effective upon adoption of the Plan by the Board and no rights will be granted hereunder after the earliest to occur of (i) the Plans termination by the Company; (ii) the issuance of all shares of Stock available for issuance under the Plan; and (iii) the day before the ten- (10) year anniversary of the date the Board approves the Plan.
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Exhibit A
DEFINED TERMS
The following terms, when used in the Plan, have the meanings and are subject to the provisions set forth below:
401(k) Plan: A savings plan qualifying under Section 401(k) of the Code that is sponsored by the Company or one of its Subsidiaries for the benefit of its employees.
Account: A notional payroll deduction account maintained in the Participants name on the books of the Company.
Accounting Rules: Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor provision.
Administrator: The Compensation and Human Resources Committee of the Board, except that such Committee may delegate its authority under the Plan to a sub-committee comprised of one or more of its members, to members of the Board, or to officers or employees of the Company to the extent permitted by applicable law. In each case, references herein to the Administrator refer, as applicable, to such persons or groups so delegated to the extent of such delegation.
Board: The Board of Directors of the Company.
Code: The U.S. Internal Revenue Code of 1986, as from time to time amended and in effect, or any successor statute as from time to time in effect, including any applicable regulations and guidance thereunder.
Company: LPL Financial Holdings Inc., a Delaware corporation.
Designated Subsidiary: A Subsidiary of the Company that has been designated by the Board or the Compensation and Human Resources Committee of the Board from time to time as eligible to participate in the Plan. A list of Designated Subsidiaries as of the date the Plan has been approved by the Board is set forth on Annex A. For the avoidance of doubt, any Subsidiary of the Company, whether or not a Subsidiary on the Effective Date, shall be eligible to be designated as a Designated Subsidiary hereunder.
Effective Date: The date set forth in Section 25 of the Plan.
Eligible Compensation: Regular base salary, regular base wages and overtime payments (excluding, for the avoidance of doubt, any bonus, commission or sales incentive payments or long-term or equity-based incentive payments or awards). Eligible Compensation will not be reduced by any income or employment tax withholdings or any contributions by the Employee to a 401(k) Plan or a plan under Section 125 of the Code, but will be reduced by any contributions made on the Employees behalf by the Company or any Subsidiary to any deferred compensation plan or welfare benefit program now or hereafter established.
Eligible Employee: Any Employee who meets the eligibility requirements set forth in Section 4 of the Plan.
Employee: Any person who is employed by the Company or a Designated Subsidiary. For the avoidance of doubt, independent contractors and consultants are not Employees.
Enrollment Period: An enrollment period established in accordance with Section 7(a) of the Plan.
Fair Market Value:
(i) If the Stock is readily traded on an established national exchange or trading system (including the Nasdaq Stock Market), the closing price of a share of Stock as reported by the principal exchange on which
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such Stock is traded; provided, however, that if such day is not a trading day, Fair Market Value will mean the reported closing price of a share of Stock for the immediately preceding day that is a trading day.
(ii) If the Stock is not traded on an established national exchange or trading system, the average of the bid and ask prices for shares Stock where the bid and ask prices are quoted.
(iii) If the Stock cannot be valued pursuant to clauses (i) or (ii), the value as determined in good faith by the Board in its sole discretion.
Maximum Share Limit: The meaning set forth in Section 10 of the Plan.
Offering Period: An offering period established in accordance with Section 5 of the Plan.
Option: An option granted pursuant to the Plan entitling the holder to acquire shares of Stock upon payment of the Purchase Price per share of Stock.
Parent: A parent corporation as defined in Section 424(e) of the Code.
Participant: An Eligible Employee who elects to participate in an Offering Period under the Plan.
Plan: The LPL Financial Holdings Inc. 2021 Employee Stock Purchase Plan, as from time to time amended and in effect.
Purchase Date: The date set forth in Section 5 of the Plan or otherwise designated by the Administrator with respect to a particular Offering Period on which a Participant will be deemed to have exercised the Option granted to him or her for such Offering Period.
Purchase Price: The price per share of Stock with respect to an Offering Period determined in accordance with Section 9 of the Plan.
Section 423: Section 423 of the Code and the regulations thereunder.
Stock: Common stock of the Company, par value $0.001 per share.
Subsidiary: A subsidiary corporation as defined in Section 424(f) of the Code.
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Annex A
DESIGNATED SUSIDIARIES
Allen & Company of Florida, LLC
LPL Employee Services, LLC
LPL Financial LLC
The Private Trust Company, N.A.
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VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information until 11:59 p.m. Eastern Time on May 4, 2021. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/LPLA2021 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions until 11:59 p.m. Eastern Time on May 4, 2021. 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. LPL FINANCIAL HOLDINGS INC. 75 STATE STREET, 22ND FLOOR BOSTON, MASSACHUSETTS 02109, UNITED STATES D36206-P52058 LPL FINANCIAL HOLDINGS INC. The Board of Directors recommends you vote FOR each of the nominees listed in Proposal 1 and FOR Proposals 2, 3, 4 and 5. 1. Elect the nine nominees named in the proxy statement to the Board of Directors. For Against Abstain Nominees: 1a. Dan H. Arnold For Against Abstain 2. Ratify the appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as the Companys independent registered public accounting firm for the fiscal year ending December 31, 2021. 1b. Edward C. Bernard 1c. H. Paulett Eberhart 1d. William F. Glavin, Jr. 3. Approve, in an advisory vote, the compensation paid to the Companys named executive officers. 4. Approve the LPL Financial Holdings Inc. 2021 Omnibus Equity Incentive Plan. 1e. Allison H. Mnookin 5. Approve the LPL Financial Holdings Inc. 2021 Employee Stock Purchase Plan. 1f. Anne M. Mulcahy 1g. James S. Putnam NOTE: Such other business as may properly come before the meeting or any adjournment thereof will be voted on by the proxy holders in their discretion. 1h. Richard P. Schifter 1i. Corey E. Thomas Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:The Notice and Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com. D36207-P52058 LPL Financial Holdings Inc. Notice of 2021 Annual Meeting of Stockholders Proxy Solicited by the Board of Directors for the 2021 Annual Meeting of Stockholders May 5, 2021 www.virtualshareholdermeeting.com/LPLA2021 Matthew J. Audette and Gregory M. Woods, and each of them with power to act without the other and with power of substitution (the Proxies), are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the 2021 Annual Meeting of Stockholders (the Annual Meeting) ofLPL Financial Holdings Inc. (the Company) to be held on May 5, 2021 or at any postponement or adjournment thereof. Shares represented by this proxy will be voted as directed by the stockholder. If no such directions are indicated, the Proxies will have authority to vote FOR all nominees in Proposal 1 and FOR Proposals 2, 3, 4 and 5. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Annual Meeting. (Items to be voted appear on reverse side)