Trimble Inc.
TRIMBLE INC. (Form: DEF 14A, Received: 03/23/2017 17:02:40)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant ☒                            Filed by a Party other than the Registrant ☐

Check the appropriate box:

 

   Preliminary Proxy Statement
   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
   Definitive Proxy Statement
   Definitive Additional Materials
   Soliciting Material under Rule 14a-12

Trimble Inc.

(Name of registrant as specified in its charter)

(Name of person(s) filing proxy statement, if other than the registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

 

  (2)  

Aggregate number of securities to which transaction applies:

 

 

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

  (4)  

Proposed maximum aggregate value of transaction:

 

 

  (5)  

Total fee paid:

 

 

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

 

  (2)  

Form, Schedule or Registration Statement No.:

 

 

  (3)  

Filing Party:

 

 

  (4)  

Date Filed:

 

 

 

 

 


TRIMBLE INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

MAY 2, 2017

T O T HE S TOCKHOLDERS :

NOTICE IS HEREBY GIVEN that the annual meeting of stockholders ( “Annual Meeting” ) of Trimble Inc. (the “Company” ) will be held at 945 Stewart Drive, Sunnyvale, California 94085 in the Orion Conference Room, on Tuesday, May 2, 2017, at 5:30 p.m. local time, for the following purposes:

 

  1. To elect directors to serve for the ensuing year and until their successors are elected.

 

  2. To hold an advisory vote on approving the compensation for our Named Executive Officers.

 

  3. To hold an advisory vote on the frequency of holding a vote on approving the compensation for our Named Executive Officers.

 

  4. To ratify the appointment of Ernst & Young LLP as the independent auditor of the Company for the current fiscal year ending December 29, 2017.

 

  5. To approve amendments to the Company’s Amended and Restated 2002 Stock Plan, including to increase the number of shares authorized for issuance by 12,000,000.

 

  6. To approve amendments to the Company’s Amended and Restated Employee Stock Purchase Plan, including to extend the term of the plan.

The foregoing items of business are more fully described in the Proxy Statement accompanying this notice. Only stockholders of record at the close of business on March 6, 2017 will be entitled to notice of and to vote at the Annual Meeting or any adjournment thereof.

All stockholders are cordially invited to attend the Annual Meeting in person. However, to ensure your representation at the meeting, you are urged to vote via the internet or by telephone or, if you requested to receive printed proxy materials, by mailing a proxy, in accordance with the detailed instructions on your proxy card. Any stockholder attending the meeting may vote in person even if such stockholder previously voted via the internet, by telephone or by returning a proxy.

As in prior years, we are using the U.S. Securities and Exchange Commission’s “notice and access” rules that allow companies to furnish proxy materials to their stockholders primarily over the internet. This means most of our stockholders will receive only a notice containing instructions on how to access the proxy materials over the internet and vote online. We believe that this process should expedite stockholders’ receipt of proxy materials, lower the costs of our Annual Meeting, and help reduce the environmental impact of our Annual Meeting.

On approximately March 23, 2017, we mailed to our stockholders (other than those who previously requested electronic or paper delivery) a notice of internet availability of proxy materials ( “Notice” ) containing instructions on how to access our proxy materials, including our proxy statement and our annual report. The Notice also included instructions on how to receive a paper copy of our Annual Meeting materials, including the notice of Annual Meeting, proxy statement and proxy card. If you received your Annual Meeting materials by mail, the notice of Annual Meeting, proxy statement, and proxy card from our Board of Directors were enclosed. If you received your Annual Meeting materials via e-mail, the e-mail contained voting instructions and links to the annual report and the proxy statement on the internet, which are both available at http://investor.trimble.com/annuals.cfm .

 

Sunnyvale, California

March 23, 2017

    

For the Board of Directors,

Ulf J. Johansson

Chairman of the Board


TRIMBLE INC.

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS

May 2, 2017

The enclosed proxy is solicited on behalf of the board of directors ( “Board of Directors” ) of Trimble Inc., a Delaware corporation (the “Company” ), for use at the Company’s annual meeting of stockholders ( “Annual Meeting” ), to be held at 945 Stewart Drive, Sunnyvale, California 94085 in the Orion Conference Room, on Tuesday, May 2, 2017, at 5:30 p.m. local time, and at any adjournment(s) or postponement(s) thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting.

The Company’s principal executive offices are located at 935 Stewart Drive, Sunnyvale, California 94085. The telephone number at that address is (408) 481-8000.

A copy of the Company’s annual report on Form 10-K may be obtained by sending a written request to the Company’s Investor Relations Department at 935 Stewart Drive, Sunnyvale, California 94085. Full copies of the Company’s annual report on Form 10-K for the 2016 fiscal year, and proxy statement, each as filed with the Securities and Exchange Commission ( “SEC” ) are available via the internet at the Company’s web site at http://investor.trimble.com/annuals.cfm .

Stockholders may obtain directions to attend the Annual Meeting by contacting the Company by phone at (408) 481-8000.

General directions to the Annual Meeting are as follows:

From San Francisco:

Take U.S. Route 101 South toward San Jose; take exit 394 for Lawrence Expressway south; turn right on east Duane Ave; turn left at the traffic signal onto Stewart Drive and proceed to 945 Stewart Drive.

From San Jose:

Take U.S. Route 101 North to Lawrence Expressway; take exit 394 for Lawrence Expressway south; turn right on east Duane Ave; turn left at the traffic signal onto Stewart Drive and proceed to 945 Stewart Drive.

INTERNET AVAILABILITY OF PROXY MATERIALS

Under the “notice and access” rules adopted by the SEC, we are furnishing proxy materials to our stockholders primarily via the internet, instead of mailing printed copies of those materials to each stockholder. As a result, on or about March 23, 2017, we mailed our stockholders a notice of internet availability of proxy materials ( “Notice” ) containing instructions on how to access our proxy materials, including our proxy statement and our annual report. The Notice also instructs you on how to access your proxy card to vote through the internet or by telephone. The Notice is not a proxy card and cannot be used to vote your shares.

This process is designed to expedite stockholders’ receipt of proxy materials, lower the cost of the Annual Meeting, and help minimize the environmental impact of the Annual Meeting. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.

 

1


INFORMATION CONCERNING SOLICITATION AND VOTING

Record Date and Shares Outstanding

Stockholders of record at the close of business on March 6, 2017 (the “Record Date” ) are entitled to notice of, and to vote at, the Annual Meeting. At the Record Date, the Company had issued and outstanding 252,752,700 shares of common stock, $0.001 par value ( “Common Stock” ).

Revocability of Proxies

Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its use by delivering to the Company (Attn: Corporate Secretary) a written notice of revocation or a duly executed proxy bearing a later date (including a proxy by telephone or over the internet) or by attending the meeting and voting in person. Attendance at the meeting will not, by itself, revoke a proxy.

Voting

Each share of Common Stock outstanding on the Record Date is entitled to one vote on all matters. An automated system administered by the Company’s agent tabulates the votes.

Abstentions and broker non-votes are each included in the determination of the presence or absence of a quorum at the Annual Meeting. The required quorum is a majority of the shares outstanding on the Record Date. Abstentions and broker non-votes will be taken into account only for purposes of determining whether a quorum is present, and will not be taken into account in determining the outcome of Items 1 - 6.

A “broker non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular item because the nominee does not have discretionary voting power with respect to that item and has not received instructions with respect to that item from the beneficial owner, despite voting on at least one other item for which it does have discretionary authority or for which it has received instructions. If your shares are held by your broker, bank or other agent as your nominee (that is, in “street name”), you will need to obtain a proxy form from the institution that holds your shares and follow the instructions included on that form regarding how to instruct your broker, bank or other agent to vote your shares. If you do not give instructions, under the rules that govern brokers who are record owners of shares that are held in street name for the beneficial owners of the shares, brokers who do not receive voting instructions from their clients have the discretion to vote uninstructed shares on routine matters but have no discretion to vote them on non-routine matters. Items 1 - 3, 5 and 6 are non-routine matters. Item 4 is a routine matter.

A plurality of the votes cast will determine Item 1 (Election of Directors) and the advisory vote for Item 3 (Frequency of Say on Pay Advisory Vote). However, since this is an uncontested election of directors, if any nominee for director in this election receives a greater number of votes “withheld” from such nominee than votes “for”, the nominee for director must tender his or her resignation to our Board of Directors, and within 90 days following the date of the Annual Meeting, the remaining members of our Board of Directors shall, through a process managed by the Nominating and Corporate Governance Committee and excluding the director nominee in question, determine whether to accept such resignation. Items 2, 4, 5 and 6 require the affirmative vote of the holders of the majority of the shares represented and voting at the Annual Meeting in person or by proxy on such item.

 

2


Voting via the Internet or by Telephone

Stockholders may vote by submitting proxies electronically either via the internet or by telephone or, if they request paper copies of the proxy materials, they may complete and submit a paper version of the proxy card. Please note that there are separate arrangements for voting via the internet and by telephone depending on whether shares are registered in the Company’s stock records directly in a stockholder’s name or whether shares are held in the name of a brokerage firm or bank. Detailed electronic voting instructions can be found on the Notice mailed to each stockholder.

In order to allow individual stockholders to vote their shares and to confirm that their instructions have been properly recorded, the internet and telephone voting procedures have been designed to authenticate each stockholder’s identity. Stockholders voting via the internet should be aware that there may be costs associated with electronic access, such as usage charges from internet access providers and telephone companies that will be borne solely by the individual stockholder.

Voting in Person

Registered Stockholders

If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Co., Inc., you are considered to be the registered stockholder with respect to those shares. A Notice for registered stockholders was mailed directly to you by our mailing agent, Broadridge Investor Communications, Inc. Registered stockholders have the right to vote in person at the meeting.

Beneficial Stockholders

If your shares are held in a brokerage account or by another nominee, you are considered to be a beneficial stockholder of those shares. A Notice for beneficial stockholders was forwarded to you together with voting instructions. In order to vote in person at the Annual Meeting, beneficial stockholders must obtain a “legal proxy” from the broker, trustee or nominee that holds their shares. Without a legal proxy, beneficial owners will not be allowed to vote in person at the Annual Meeting.

Solicitation of Proxies

The entire cost of this proxy solicitation will be borne by the Company. The Company has retained the services of Morrow Sodali LLC, 470 West Ave., Stamford, CT 06902, to solicit proxies, for which services the Company has agreed to pay approximately $8,000 as well as a solicitation charge per stockholder in the event individual holders are solicited. In addition, the Company will also reimburse certain out-of-pocket expenses in connection with such proxy solicitation. The Company may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by certain of the Company’s directors, officers, and regular employees, without additional compensation, personally or by telephone, or facsimile.

Deadline for Receipt of Stockholder Proposals for 2018 Annual Meeting

Stockholders are entitled to present proposals for action at future stockholder meetings of the Company if they comply with the requirements of the appropriate proxy rules and regulations promulgated by the SEC.

Proposals of stockholders which are intended to be considered for inclusion in the Company’s proxy statement and form of proxy related to the Company’s 2018 annual meeting of stockholders

 

3


must be received by the Company at its principal executive offices (Attn: Corporate Secretary—Stockholder Proposals, Trimble Inc. at 935 Stewart Drive, Sunnyvale, California 94085) no later than November 23, 2017. Stockholders interested in submitting such a proposal are advised to retain knowledgeable legal counsel with regard to the detailed requirements of the applicable securities laws. The timely submission of a stockholder proposal to the Company does not guarantee that it will be included in the Company’s applicable proxy statement.

In addition, if the Company is not notified at its principal executive offices of a stockholder proposal at least 45 days prior to the one year anniversary of the mailing of the Notice, which will be February 6, 2018, then such proposal shall be deemed “untimely” and, therefore, the proxy holders for the Company’s 2018 annual meeting of stockholders will have the discretionary authority to vote against any such stockholder proposal if it is properly raised at such annual meeting, even though such stockholder proposal is not discussed in the Company’s proxy statement related to that stockholder meeting.

Stockholders who wish to offer proposals at the Annual Meeting will be required to send notice to the Company with information concerning the proposal, the stockholder giving such notice, and any beneficial owner on whose behalf the proposal is made, as specified in the bylaws, which notice in order to be timely must be received by the Company not earlier than January 2, 2018 and not later than February 1, 2018, except if the annual meeting for 2018 is called for a date earlier than April 2, 2018 or later than June 2, 2018, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting for 2018 is mailed or the date the Company announces the date of the annual meeting for 2018, whichever occurs first. Stockholders who wish to nominate one or more candidates for election as a director will be required to send notice to the Company with the information and undertakings concerning the nominee, the stockholder giving such notice, and any beneficial owner on whose behalf the nomination is made, as specified in the bylaws, which notice in order to be timely must be received by the Company not earlier than January 2, 2018 and not later than February 1, 2018, except if the annual meeting for 2018 is called for a date earlier than April 7, 2018 or later than May 27, 2018, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting for 2018 is mailed or the date the Company announces the date of the annual meeting for 2018, whichever occurs first.

The proxy card provided in conjunction with this proxy statement, to be used in connection with the 2017 Annual Meeting, grants the proxy holder discretionary authority to vote on any matter otherwise properly raised at such Annual Meeting.

Note Regarding Reincorporation

The Company changed its name from Trimble Navigation Limited (the “California Predecessor” ) and its state of incorporation from the State of California to the State of Delaware on October 1, 2016. References in this proxy to the Company shall also be deemed to refer to the California Predecessor where appropriate, including for example references to years of service in terms of eligibility under the employee stock purchase plan or for other benefits related to years of service.

 

4


************************************

ITEM 1

ELECTION OF DIRECTORS

Nominees

A board of eight directors is to be elected at the Annual Meeting. The Board of Directors has authorized the nomination at the Annual Meeting of the persons named below as candidates. All nominees currently serve on the Board of Directors, except for Mr. Ekholm, who will not seek election and will be retiring from the Board effective as of the date of the Annual Meeting, May 2, 2017. The Company intends to adopt an amendment to the Company’s bylaws reducing the number of Company directors from nine to eight, which will become effective concurrent with Mr. Ekholm’s retirement.

Each of the directors, except for Mr. Berglund, are independent directors as defined by Rule 5605(a)(2) of the NASDAQ Stock Market ( “NASDAQ” ) Marketplace Rules. Each of the director nominees listed below was elected to be a director at the Company’s 2016 annual meeting of shareholders.

The names of the nominees and certain information about them, as of the Record Date, are set forth below:

 

Name of Nominee   Age     Principal Occupation   Director
Since
 

Steven W. Berglund

    65     President and Chief Executive Officer of the Company     1999  

Merit E. Janow (3)

    58     Dean of the Faculty, School of International and Public Affairs, Columbia University     2008  

Ulf J. Johansson (2) (3)

    71     Business Consultant     1999  

Meaghan Lloyd

    42     Partner and Chief of Staff of Gehry Partners, LLP     2016  

Ronald S. Nersesian (1) (3)

    57     President and Chief Executive Officer, Keysight Technologies     2011  

Mark S. Peek (2)

    59     Co-President, Workday, Inc.     2010  

Nickolas W. Vande Steeg (1) (2)

    74     Venture Capital Investor and Business Consultant     2003  

Kaigham (Ken) Gabriel

    61     President and Chief Executive Officer of The Charles Stark Draper Laboratory     2015  
Retiring Director                    

Börje Ekholm (1)*

    54     President and Chief Executive Officer of Ericsson     2015  
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Member of the Nominating and Corporate Governance Committee
* Mr. Ekholm is not being nominated for election as a director at the Annual Meeting, and will be retiring from the Board of Directors effective May 2, 2017.

Steven W. Berglund has served as president and chief executive officer of Trimble since March 1999. Prior to joining Trimble, Mr. Berglund was president at Spectra Precision, a group within

 

5


Spectra Physics AB. Mr. Berglund’s business experience includes a variety of senior leadership positions with Spectra Physics and manufacturing and planning roles at Varian Associates. He began his career as a process engineer at Eastman Kodak. He attended the University of Oslo and the University of Minnesota where he received a B.S. in chemical engineering. Mr. Berglund received his M.B.A. from the University of Rochester. He is a member of the board of directors of the Silicon Valley Leadership Group and a member of the board of trustees of World Educational Services. He is also a member of the construction sector board and the main board of the Association of Equipment Manufacturers. In December 2013, Mr. Berglund was appointed to the board of directors and compensation committee of Belden Inc., a global provider of end-to-end signal transmission solutions.

Mr. Berglund is qualified to serve as director of the Company because of his intimate knowledge and understanding of the Company’s business and operations, resulting from his service as director, president and chief executive officer of the Company since 1999. In addition, Mr. Berglund brings to the Board of Directors extensive industry experience.

Merit E. Janow was appointed to the Board of Directors in 2008. Professor Janow has been a professor at Columbia University’s School of International and Public Affairs (SIPA) since 1994. She has had a number of leadership positions at the University and became Dean of the Faculty at SIPA in July 2013. Previously, she directed the program in international finance and economic policy. Professor Janow regularly teaches advanced courses in international trade, World Trade Organization (WTO) law, and comparative antitrust at Columbia Law School, and international economic policy and China in the Global Economy at SIPA. She has published numerous articles and several books on international trade and economic matters. Professor Janow has had several periods of public service: she served as one of seven members of the WTO’s Appellate Body from 2003-2007, she served as the Executive Director of an international antitrust advisory committee to the attorney general from 1997-2000, and Deputy Assistant U.S. Trade Representative for Japan and China from 1990-1993. Professor Janow served on the board of directors of the Nasdaq Stock Markets LLC of the Nasdaq OMX Group from 2005-2016. Since 2001, Professor Janow has served on the board of directors of a cluster of the American Funds family comprising the Capital Income Builder (CIB) Fund, the World Growth and Income (WGI) Fund and the New Economy Fund (NEF). In 2007, she joined the board of another fund cluster of the American Funds family, the American Funds Insurance Series (AFIS), the American Fund Target Date Retirement Fund (AFTD) and the Fixed Income (FI) Fund. In June 2014, she joined the board of Mastercard. Professor Janow holds a B.A. in Asian Studies from the University of Michigan and a J.D. from Columbia Law School where she was a Stone Scholar.

Professor Janow is qualified to serve as director of the Company based on her extensive knowledge and experience in international trade and economics, which provide valuable insight to the Company given the global nature of its business. Professor Janow also brings to the Board of Directors significant investment management expertise through her experience serving on the boards of several mutual funds.

Ulf J. Johansson was appointed chairman of the board in 2007, and has served as a director of the Company since December 1999. Dr. Johansson is a Swedish national with a distinguished career in communications technology. Dr. Johansson currently serves on the board of directors of Telefonaktiebolaget LM Ericsson ( “Ericsson” ), a telecommunications company, and as chairman of Acando AB, a management and IT consultancy company. From 2012 until 2016, he was a member of the Governing Board of the European Institute of Innovation and Technology, an EU entity funding advanced technology development in Europe. From 1990 to 2005, Dr. Johansson served as chairman of

 

6


Europolitan Vodafone AB, a GSM mobile telephone operator in Sweden. From 1998 to 2005, Dr. Johansson served on the board of directors of Novo Nordisk A/S, a Danish pharmaceutical/life science company, and from 2005 until 2013, he served as chairman of its majority owners, the Novo Nordisk Foundation and Novo A/S. Dr. Johansson also currently serves on the boards of directors of several privately held companies. During 1998 to 2003 Dr. Johansson served as chairman of the University Board of Royal Institute of Technology in Stockholm and formerly also served as president and chief executive officer of Spectra-Physics AB, and executive vice president at Ericsson Radio Systems AB. Dr. Johansson received a Master of Science in Electrical Engineering, and a Doctor of Technology (Communication Theory) from the Royal Institute of Technology in Sweden.

Dr. Johansson is qualified to serve as director of the Company because of his significant industry knowledge and experience resulting from his service on the boards of several telecommunications companies. In addition, Dr. Johansson has considerable knowledge of the Company’s business and operations, having served as a member of the Board of Directors since 1999.

Meaghan Lloyd was appointed to the Board of Directors in 2016. Ms. Lloyd is the chief of staff and a partner at Gehry Partners, LLP, a full service architectural firm with extensive international experience in the design and construction of academic, museum, theater, performance, and commercial projects. Founded in 1962 in Los Angeles, California, Gehry Partners’ mission is to raise architecture to the level of art, while creating buildings that meet the project’s functional and budgetary needs. She has held this position since 2009. Prior to this, she was a designer working with Frank Gehry in the firm. In addition to her duties at Gehry Partners, she served as chief executive officer of Gehry Technologies, Inc., a cloud-based software and service company for the architectural, engineering and construction sectors, from 2013-2014. Ms. Lloyd received her Bachelor of Science in Architectural Studies from the University of Illinois, Champaign-Urbana and her Masters of Architecture from Yale University. She is a board member of Turnaround Arts California.

Ms. Lloyd is qualified to serve as a director of the Company because she brings a valuable combination of operational and project management expertise, and because of her significant industry knowledge and experience in the areas of architecture, construction and design, from her work with Gehry Partners, LLP.

Ronald S. Nersesian was appointed to the Board of Directors in November 2011. Mr. Nersesian is president and chief executive officer of Keysight Technologies, an electronic measurement company. From November 2012 to September 2013, he served as president and chief operating officer of Agilent Technologies. From November 2011 to November 2012, he served as Agilent Technologies’ executive vice president and chief operating officer. From March 2009 to November 2011, Mr. Nersesian served as president of Agilent’s Electronic Measurement group (EMG), and from February 2005 to March 2009, he served as the vice president and general manager of the Wireless Business Unit of EMG. Mr. Nersesian began his career in 1982 with Computer Sciences Corporation as a systems engineer for satellite communications systems. In 1984, he joined Hewlett-Packard’s New Jersey Division, and from 1987 through 1996 served in various management roles in the division, including marketing manager. In 1996, Mr. Nersesian joined LeCroy Corporation as vice president of worldwide marketing and corporate officer. He subsequently took on other senior management roles, including senior vice president and general manager of the company’s digital storage oscilloscope business. Mr. Nersesian rejoined Agilent in 2002 as vice president and general manager of the company’s Design Validation Division. Mr. Nersesian is also a member of Georgia Tech’s Advisory Board. Mr. Nersesian holds a bachelor’s degree in electrical engineering from Lehigh University and an MBA from New York University, Stern School of Business.

 

7


Mr. Nersesian is qualified to serve as director of the Company because of his strong business operational experience with technology companies and management expertise developed over three decades. This breadth of experience includes his current position as president and chief executive officer of Keysight Technologies. Mr. Nersesian has extensive experience in managing and growing international technology enterprises, which is directly relevant and valuable to the Company.

Mark S. Peek was appointed to the Board of Directors on March 9, 2010. Mr. Peek is the co-president of Workday, Inc., a leading provider of enterprise cloud applications for human resources, financial management and analytics. He has held this position since June 2015. Mr. Peek joined Workday in June 2012 as chief financial officer and served in that capacity until April 2016. From December 2011 to June 2012, Mr. Peek also served on the board of directors of Workday. Prior to joining Workday, Mr. Peek was president, business operations and chief financial officer of VMware, Inc., a provider of business infrastructure virtualization solutions. From April 2007 to January 2011, Mr. Peek served as chief financial officer of VMware, Inc. From 2000 to 2007, Mr. Peek was senior vice president and chief accounting officer at Amazon.com. Prior to joining Amazon.com, Mr. Peek spent 19 years at Deloitte, the last ten years as a partner. Mr. Peek received a B.S. in accounting and international finance from Minnesota State University.

Mr. Peek is qualified to serve as director of the Company because of his strong background and years of experience in accounting and financial management, including his position as chief financial officer at Workday, Inc., as well as his past service as chief financial officer at VMware and chief accounting officer at Amazon.com. In addition, Mr. Peek brings key financial expertise gained through his 19 years of experience at Deloitte.

Nickolas W. Vande Steeg was appointed vice chairman in 2007, and has served as a director of the Company since 2003. Mr. Vande Steeg served as president and chief operating officer of Parker Hannifin Corporation until March 2007, where he began his career in 1971. Mr. Vande Steeg currently is on the board of University College of Azusa Pacific University and serves on the board of directors of Wabtec Corporation, a supplier of products and services to the rail transportation industry. In 2013 Mr. Vande Steeg joined the board of directors of Gardner Denver, Inc. and in 2015 Mr. Vande Steeg joined the board of directors of Pacific Design Technologies, a private company, of which he is also an equity holder. Mr. Vande Steeg began his career at Deere & Company serving as an industrial engineer and industrial relations manager from 1965 to 1970. Mr. Vande Steeg received his B.S. in Industrial Technology from the University of California, Long Beach in 1968 and an M.B.A. from Pepperdine University in Malibu, California in 1985.

Mr. Vande Steeg is qualified to serve as director of the Company because he brings valuable operational and strategic expertise through his experience serving as president and chief operating officer of Parker Hannifin Corporation. In addition, Mr. Vande Steeg has considerable knowledge of the Company’s business and operations resulting from his service as a director of the Company since 2003.

Kaigham (Ken) Gabriel was appointed to the Board of Directors in 2015. Dr. Gabriel is the president and chief executive officer of The Charles Stark Draper Laboratory, an independent not-for-profit research institution that develops innovative technology solutions in the fields of national security, space, biomedical systems and energy. He has held that position since October 2014. Prior to that, Dr. Gabriel served as deputy director of the Advanced Technology and Projects (ATAP) group at Google from 2012 to 2014 and as corporate vice president at Google/Motorola Mobility. From 2009 to

 

8


2012, he was the deputy director, and then acting director, of the Defense Advanced Research Projects Agency (DARPA) in the Department of Defense. Between 2002 and 2009, Dr. Gabriel was the Co-Founder, Chairman and Chief Technology Officer of Akustica, a fabless semiconductor company that commercialized Micro Electro Mechanical Systems audio devices and sensors. Dr. Gabriel holds SM and ScD degrees in Electrical Engineering and Computer Science from the Massachusetts Institute of Technology.

Dr. Gabriel is qualified to serve as director of the Company because of his strong background and experience in management in technology companies, including in his current position as president and chief executive officer of Draper Laboratory. Dr. Gabriel also brings deep technological expertise and knowledge of the industry to the Company.

Börje Ekholm was appointed to the Board of Directors in 2015. Since January 2017, Mr. Ekholm has served as president and chief executive officer of Ericsson. Between May 2015 and January 2017, Mr. Ekholm served as chief executive officer of Patricia Industries, a unit of Investor AB. Mr. Ekholm was president and chief executive officer of Investor AB from September 2005 to May 2015. Mr. Ekholm joined Investor AB in 1992 as an associate in the company’s corporate finance department. From 1995 to 1997, he founded and managed Novare Kapital, an early stage venture capital company owned by Investor AB. From 1997 until August 2005, he was responsible for all Private Equity Investment activities within Investor AB and was also head of Investor Growth Capital, Investor AB’s wholly owned venture capital arm. Mr. Ekholm was a member of Investor AB’s Management Group from 1997 to 2015. Mr. Ekholm is chairman of the board of Nasdaq and the KTH Royal Institute of Technology. Other board assignments include Alibaba Group and Ericsson. He also serves on the board of trustees at Choate Rosemary Hall. Mr. Ekholm has a Master of Business Administration from INSEAD, France and holds a Master of Science in Electrical Engineering from the Royal Institute of Technology in Stockholm.

Vote Required

Directors are currently elected by a plurality of the votes cast by stockholders entitled to vote at the Annual Meeting. Accordingly, the nominees receiving the highest number of “for” votes at the Annual Meeting will be elected as directors. This is an uncontested election of directors because the number of nominees for director does not exceed the number of directors to be elected. Pursuant to our majority voting policy, if any nominee for director in this election receives a greater number of votes “withheld” from such nominee than votes “for”, the nominee for director must tender his or her resignation to our Board of Directors within five days following the certification of the election results. Within 90 days following the date of the Annual Meeting, the remaining members of our Board of Directors shall, through a process managed by the Nominating and Corporate Governance Committee and excluding the director nominee in question, determine whether to accept such resignation. We will then publicly disclose the determination of the Board of Directors. Abstentions and broker non-votes will be counted only for purposes of determining whether a quorum is present, but they will not be taken into account in determining the outcome of the election of directors.

Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the eight nominees named above. If you return your proxy card or otherwise vote but do not make specific voting choices, your shares will be voted “for” the election of all eight director nominees. In the event that any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for a substitute nominee designated by the present Board of Directors to fill the vacancy. As of the date of this proxy statement, the Board of Directors has no

 

9


reason to believe that any nominee will be unable or will decline to serve as a director. The directors elected will hold office until the next Annual Meeting of Stockholders and until their successors are duly elected and qualified.

Recommendation of the Board of Directors:

The Board of Directors recommends that stockholders vote FOR the election of the above-named nominees to the Board of Directors.

 

10


************************************

ITEM 2

ADVISORY VOTE ON APPROVING THE COMPENSATION FOR

OUR NAMED EXECUTIVE OFFICERS

This proposal, commonly known as a “Say on Pay” proposal, provides our stockholders with the opportunity to cast an advisory vote on the compensation of the Company’s Named Executive Officers, as disclosed in this proxy statement. This proposal gives the Company’s stockholders the opportunity to approve, reject, or abstain from voting, with respect to our executive compensation programs and policies and the compensation paid to the Named Executive Officers.

The Say on Pay vote is a non-binding advisory vote on the compensation of the Company’s Named Executive Officers, as described in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation, and the accompanying narrative disclosure. The Say on Pay vote on executive compensation is not a vote on the Company’s general compensation policies, compensation of the Company’s Board of Directors, or the Company’s compensation policies as they relate to risk management.

The Say on Pay vote allows our stockholders to express their opinions regarding the decisions of the Compensation Committee with respect to the 2016 compensation of the Named Executive Officers. Because the Say on Pay vote is advisory in nature, it will not affect any compensation already paid or awarded to any Named Executive Officer, nor modify any terms of our existing compensation plans or awards. In addition, the Say on Pay vote will not be binding on or overrule any decisions by the Board of Directors; it will not create or imply any additional fiduciary duty on the part of the Board of Directors.

The Company is providing its stockholders with the opportunity to cast an advisory Say on Pay vote every year, until the next advisory vote on the frequency of such votes.

At the Company’s 2016 Annual Meeting of Shareholders, approximately 93% of the votes cast were in favor of the Say on Pay vote and our executive compensation program. In reviewing our executive compensation policies and practices since the vote, our Board of Directors and Compensation Committee have been mindful of the level of support that our stockholders expressed for our approach to executive compensation. Following their annual review of our executive compensation philosophy, the Board of Directors and Compensation Committee decided to retain our general approach to executive compensation, while introducing additional performance based elements in our long term equity incentives.

Your advisory vote will serve as an additional tool to help guide the Board of Directors and the Compensation Committee in continuing to improve the alignment of the Company’s executive compensation programs with the interests of the Company and its stockholders. The Compensation Committee and the Board of Directors take into account the outcome of the vote as a part of their considerations in determining future compensation arrangements for our Named Executive Officers.

The Company and the Board of Directors believe that our compensation policies and practices for our Named Executive Officers are aligned with the long term interests of our stockholders because our policies emphasize pay for performance, and our mix of short and long term incentives provide a balance between the Company’s short-term goals and long term performance. As such, the Board of

 

11


Directors recommends a vote “For” the advisory approval of our compensation policies and practices as disclosed in this proxy statement.

Vote Required

Advisory approval of the compensation of our Named Executive Officers requires the affirmative vote of the holders of the majority of the shares represented and voting at the Annual Meeting in person or by proxy on this proposal.

Recommendation of the Board of Directors:

The Company’s Board of Directors recommends a vote FOR the approval of the compensation of our Named Executive Officers, as disclosed in this proxy statement.

 

12


************************************

ITEM 3

ADVISORY VOTE ON THE FREQUENCY OF ADVISORY VOTES

ON COMPENSATION FOR OUR NAMED EXECUTIVE OFFICERS

In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, our stockholders have the opportunity to cast an advisory vote on how often we should include a Say on Pay advisory vote on compensation for our Named Executive Officers, such as the one described in Item 2 above. Your vote on this Item 3 allows you to indicate whether you would prefer that we hold a Say on Pay advisory vote every one, two or three years.

The Board of Directors recommends that a Say on Pay advisory vote should continue to occur every year. The Board of Directors believes an annual Say on Pay advisory vote provides stockholders an opportunity to voice their opinion on an important subject, executive compensation, each year. This annual stockholder engagement will allow the Board of Directors to be most responsive to stockholders as compared to a vote every second or third year. Approximately 90 percent of the companies in the S&P 500 have an annual Say on Pay advisory vote. For these reasons, the Board of Directors recommends that you vote to hold an advisory vote on the frequency of a Say on Pay vote for the compensation of our Named Executive Officers every year.

The proposal in this Item 3 is advisory in nature. As a result, it will not be binding on our Board of Directors, the Compensation Committee, or the Company. However, your advisory vote, and the outcome of the vote on this proposal, will serve as an additional tool to guide the Board of Directors when they determine the frequency of the Say on Pay advisory vote.

Vote Required

A plurality of the votes cast on this proposal will determine our stockholders’ preferred frequency for holding future advisory votes on executive compensation, which means that the option for holding an advisory vote every 1 year, 2 years, or 3 years receiving the greatest number of votes will be considered the preferred frequency of the stockholders.

Recommendation of the Board of Directors

The Board of Directors recommends that you vote to hold an advisory vote on compensation for our Named Executive Officers every year.

 

13


************************************

ITEM 4

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Board of Directors intends to appoint Ernst & Young LLP ( “EY” ) as the Company’s independent auditors, to audit the financial statements of the Company for the current fiscal year ending December 29, 2017. EY has been the Company’s independent auditor since 1986. The Company anticipates that a representative of EY will be present at the Annual Meeting, will have the opportunity to make a statement if he or she desires to do so, and will be available to answer any appropriate questions.

Principal Accounting Fees and Services

Audit Fees and Non-Audit Fees

The following table presents fees billed by EY for professional audit services rendered for the audit of the Company’s annual financial statements for the years ended December 30, 2016 and January 1, 2016, and fees billed by EY for other services rendered during those periods (in thousands).

 

Category   Fiscal Year
Ended
December 30,
2016
    Fiscal Year
Ended
January 1,
2016
 

Audit Fees

  $ 5,401     $ 5,779  

Audit-Related Fees (1)

  $ 25     $ 33  

Tax Fees (2)

               

Tax Compliance

  $ 399     $ 481  

Tax Planning & Tax Advice

  $ 537     $ 304  

Total Tax Fees

  $ 936     $ 785  

All Other Fees (3)

  $ 2     $ 16  
  (1) Represents compliance program assessment, accounting consultation and advisory services performed by the Company’s auditors.
  (2) Represents various tax compliance and filing services with respect to U.S. and international tax matters, as well as tax planning advice related to acquisitions, integration activities and general matters.
  (3) Represents conflict minerals advisory services and subscription to EY’s accounting research tool.

Audit Committee Pre-Approval of Policies and Procedures

The Audit Committee is responsible for appointing, approving the plan for audit and related services and fees, and overseeing the work of the independent auditor. The Audit Committee has established a pre-approval procedure for all audit and permissible non-audit services to be performed by EY. The pre-approval policy requires that requests for services by the independent auditor be submitted to the Company’s chief financial officer ( “CFO” ) for review and approval. Any requests that are approved by the CFO are then aggregated and submitted to the Audit Committee for approval of services at a meeting of the Audit Committee. Requests may be made with respect to either specific services or a type of service for predictable or recurring services. All permissible non-audit services performed by EY were approved by the Audit Committee.

 

14


The Audit Committee has concluded that the provision of the non-audit services listed above is compatible with maintaining EY’s independence.

Vote Required

Ratification of the appointment of EY as the Company’s independent auditor for the current fiscal year ending December 29, 2017, will require the affirmative vote of the holders of a majority of the shares represented and voting at the Annual Meeting either in person or by proxy on this proposal. In the event that such ratification by the stockholders is not obtained, the Audit Committee and the Board of Directors will reconsider such selection.

Recommendation of the Board of Directors:

The Company’s Board of Directors recommends a vote FOR the ratification of the appointment of EY as the independent auditors for the Company for the current fiscal year ending December 29, 2017.

 

15


************************************

ITEM 5

APPROVAL OF AMENDMENTS

TO THE AMENDED AND RESTATED 2002 STOCK PLAN

The Board of Directors is seeking stockholder approval of amendments to the Amended and Restated 2002 Stock Plan ( “2002 Stock Plan” ), including an increase in the number of shares of Common Stock available for issuance thereunder by 12,000,000 shares, for an aggregate of 74,570,248 shares.

The amendments to the 2002 Stock Plan reflect the Company’s philosophy that stock incentives are an important and meaningful component of employee compensation, which enables the Company to attract the best available candidates and to ensure that its experienced and qualified employees, the Company’s most significant asset, are appropriately recognized, rewarded, and are encouraged to stay with the Company and help it grow, thereby increasing stockholder value.

The Board believes that the amendments are in the best interests of the Company, its stockholders, and its employees and, at the Annual Meeting, the stockholders are being asked to approve the amendments to the 2002 Stock Plan, including the increase to the number of shares of Common Stock available for issuance under the 2002 Stock Plan. In the event that such stockholder approval is not obtained, then the amendments to the 2002 Stock Plan other than the proposed share reserve increase will remain in effect.

Material Changes to the 2002 Stock Plan

The following highlights the material changes to the 2002 Stock Plan.

 

   

The 2002 Stock Plan has been amended to increase the number of shares of Common Stock available for the grant of options and awards thereunder by 12,000,000 shares, subject to stockholder approval of this Item 5.

 

   

All options and awards granted under the 2002 Stock Plan may be subject to recoupment under any clawback policies adopted by the Company.

 

   

The 2002 Stock Plan has been amended to impose a limit on the value of awards that may be granted under the 2002 Stock Plan to a non-employee director in a calendar year, up to a maximum grant date fair value of $750,000.

Key Considerations

The 2002 Stock Plan is the Company’s only employee equity plan from which grants are currently made (other than its Employee Stock Purchase Plan), and as of December 30, 2016, we had approximately 6.2 million shares remaining for issuance pursuant to new awards under the 2002 Stock Plan. The number of shares available accounts for the maximum number of shares of common stock that can be issued under the terms of PSU awards that were outstanding as of December 30, 2016. The available reserve of the 2002 Stock Plan would be 7.7 million shares as of December 30, 2016 if calculated by deducting the probable number of shares that will be issued under the terms of outstanding PSU awards.

 

16


In determining the number of additional shares of Common Stock to allocate to the 2002 Stock Plan, the Board considered various factors, including potential dilution, industry plan cost standards, historical grant practices and anticipated equity compensation needs, as well as information and guidelines from proxy advisory firms. The table below summarizes our equity grant practices during the most recent three fiscal years (shares in thousands).

 

Fiscal Year   Basic Weighted
Average Shares
Outstanding
  PSUs and RSUs
Granted (1)
  Stock Options
Granted
  Adjusted Gross
Burn Rate (1)

2016

  250,523   2,134   45   2.15%

2015

  255,757   2,092   123   2.10%

2014

  260,103   1,404   1,467   1.91%
  (1) Adjusted gross burn rate is calculated under the methodology recommended by Institutional Shareholder Services, and counts each RSU and PSU granted as 2.5 shares. PSUs included in the table above the reflect the target number of shares granted during each fiscal year.

In reviewing our historical grant practices, we determined that we have issued approximately 60.9 million shares, net of cancellations, under the 2002 Stock Plan between its inception and December 30, 2016. Excluding the effect of our share counting rules (whereby every share subject to a full value award was counted as 1.69 shares (1.50 between March 2009 through January 2012), we have issued 54.8 million shares since the inception of the 2002 Stock Plan and 7.3 million in the last three fiscal years.

Based on a review of our historical and projected grant practices, we believe that the new shares requested for use under the 2002 Stock Plan will meet the Company’s equity grant needs for approximately 3 years. The 3 year projected duration of the share reserve increase takes into consideration the fungible share counting methodology as well as the maximum number of shares that can be issued under the terms of PSU awards granted under the 2002 Stock Plan. The shares reserved may, however, last for more or less than 3 years depending on currently unknown factors, such as the number of grant recipients, including the Company’s hiring needs, future grant practices, and the Company’s share price.

 

17


Key Data

The following table includes information regarding outstanding equity awards and shares available for future awards under all of our active equity plans (excluding our Employee Stock Purchase Plan) as of December 31, 2016 (shares in thousands):

 

Options Outstanding

  7,643

Weighted Average Exercise Price of Outstanding Options

  $24.60

Weighted Average Remaining Term of Outstanding Options

  2.70

Non-Vested Time and Performance Vesting Restricted Stock Units Outstanding

  4,697

Shares Available for Future Grant (1):

   

2002 Stock Plan (2)

  6,206
  (1) The Company’s 1992 Stock Bonus Plan is still in effect, but has fewer than one thousand shares available; we do not anticipate making grants from the 1992 Stock Bonus Plan in the future.
  (2) The 2002 Stock Plan includes a fungible share counting methodology in which full value awards are debited from the available reserve as 1.69 shares for every one share granted. The available reserve disclosed above deducts the maximum number of shares that can be earned under the terms of outstanding PSU awards. The available reserve would be 7.7 million shares as of December 30, 2016 if calculated by deducting the probable number of shares that will be issued under the terms of outstanding PSU awards.

Key Terms of the 2002 Stock Plan at a Glance

The following is a summary of the key provisions of the 2002 Stock Plan, as amended and restated.

 

 

Plan Term:

 

 

The 2002 Stock Plan, as most recently amended and restated, will become effective on the date the stockholders approve the 2002 Stock Plan and will continue in effect until terminated by the Board.

 

Eligibility:

 

 

Employees, directors and consultants of the Company and employees and consultants of any of the Company’s parent or subsidiary companies may be granted nonstatutory stock options and awards under the 2002 Stock Plan. Incentive stock options may be granted only to the Company’s employees and to employees of any of the Company’s parent or subsidiary companies.

 

Shares Available for Awards:

 

 

The maximum aggregate number of shares that may be awarded or optioned and delivered under the 2002 Stock Plan is 62,570,248 shares, subject to adjustment in the event of certain changes in the capitalization of the Company. If this Item 5 is approved by the stockholders, 18,206,317 million shares will be available for the grant of new options and awards under the 2002 Stock Plan (based on awards granted through December 30, 2016). The

 

18


    2002 Stock Plan includes a fungible share counting methodology in which full value awards are debited from the available reserve as 1.69 shares for every one share granted. The number of shares available, however, assumes the maximum number of shares of common stock that can be issued under the terms of PSU awards that were outstanding as of December 30, 2016. The available reserve under the 2002 Stock Plan would increase by 1.5 million shares as of December 30, 2016 if it were calculated by deducting the probable number of shares that will be issued under the terms of outstanding PSU awards.

 

Award Types:

 

 

(1) Options

 

(2) Stock Appreciation Rights (SARs)

 

(3) Restricted Stock Awards

 

(4) Restricted Stock Units (including performance based awards)

 

(5) Other Stock-Based Awards

 

 

Award Terms:

 

 

Options and stock appreciation rights will have a term of no longer than ten years.

 

ISO Limits:

 

 

No more than the maximum number of shares of Common Stock reserved for issuance may be granted as incentive stock options under the 2002 Stock Plan.

 

162(m) Limits:

 

 

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code” ) requires, among other things, that the maximum number of shares of Common Stock awarded to an individual must be approved by the stockholders in order for the awards granted under the 2002 Stock Plan to be qualified as performance-based compensation that will not be subject to the one million dollar (US$1,000,000) limitation on tax deductibility for compensation paid to certain specified executive officers. Accordingly, the 2002 Stock Plan limits individual awards as follows:

 

(1) no service provider may be granted, in any Company fiscal year, an aggregate amount of options or awards that cover more than 1,200,000 shares of Common Stock;

 

(2) however, in connection with such individual’s initial service with the Company, he or she may be granted an aggregate amount of options or awards that cover up to an additional 1,800,000 shares of Common Stock.

 

Non-Employee Director Limit:

 

 

The grant date fair value of awards that may be granted to any non-employee director during a calendar year may not exceed $750,000.

 

19


 

Not Permitted:

 

 

The following are not permitted under the 2002 Stock Plan:

 

(1) Repricing —Unless approved by the stockholders, the 2002 Stock Plan does not permit repricing or reducing the exercise price of an underwater option or SAR, or exchanging underwater options or SARs for (i) a new option or SAR with a lower exercise price, (ii) a cash payment or (iii) any other award.

 

(2) Automatic Vesting Acceleration Upon Change in Control —The 2002 Stock Plan does not provide for automatic vesting acceleration upon a change in control.

 

(3) Recycling of Shares Subject to Options/RSUs/SARs —The 2002 Stock Plan does not allow shares to be added back to the number of shares available for issuance when (i) shares subject to an option are surrendered in payment of the option exercise price, (ii) shares are surrendered to satisfy any tax withholding obligation with respect to an option, RSU or SAR, (iii) shares are not issued as a result of a net settlement of a RSU or SAR, and (iv) shares are reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of options.

Summary of the 2002 Stock Plan

The essential features of the 2002 Stock Plan are summarized below. This summary does not purport to be a complete description of all the provisions of the 2002 Stock Plan, and is subject to and qualified in its entirety by reference to the complete text of the 2002 Stock Plan, a copy of which is attached to this Proxy Statement as Appendix A .

General

The purpose of the 2002 Stock Plan is to help the Company attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to the Company’s employees, directors and consultants and the employees and consultants of the Company’s parent and subsidiary companies and to promote the success of the Company’s business. Options granted under the 2002 Stock Plan may be either incentive stock options or nonstatutory stock options. In addition, the 2002 Stock Plan allows the granting of restricted stock units, performance-based restricted stock units, restricted stock awards, dividend equivalents, stock appreciation rights, either in connection with an option grant or as stand-alone awards, or other stock-based awards.

Administration

The 2002 Stock Plan may generally be administered by the Board of Directors or a designated committee (the “Administrator” ). A designated committee may be comprised entirely of individuals who meet the qualification referred to in Section 162(m) of the Code or Rule 16b-3 under the U.S. Securities Exchange Act of 1934. Consistent with the terms of the 2002 Stock Plan, the Administrator may make any determinations deemed necessary or advisable for the 2002 Stock Plan. The Administrator’s decisions will be final and binding on all participants under the 2002 Stock Plan.

In order to comply with, or recognize differences in, the laws in other countries in which the Company and its affiliates operate or have eligible service providers, the Administrator has the authority, among other powers, to determine which affiliates will be covered by the Plan, modify the terms and conditions of option and other awards to facilitate compliance with non-US laws, and establish sub-plans for participants outside of the U.S.

 

20


Eligibility

Nonstatutory stock options and stock awards may be granted to the Company’s employees, directors and consultants and to employees and consultants of any of the Company’s parent or subsidiary companies. Incentive stock options may be granted only to the Company’s employees and to employees of any of the Company’s parent or subsidiary companies. The Administrator, in its discretion, but subject to the terms of the 2002 Stock Plan, selects which of the Company’s employees, directors and consultants to whom options or awards may be granted, the time or times at which such options or awards shall be granted, and the exercise or purchase price, number of shares and other terms and conditions subject to each such grant.

As of March 3, 2017, approximately 6,429 persons were in a class of persons eligible to participate in the 2002 Stock Plan.

Shares Issuable under the 2002 Stock Plan

Subject to adjustment upon the occurrence of certain changes in capitalization, the maximum aggregate number of shares that may be awarded or optioned and delivered under the 2002 Stock Plan is 62,570,248 shares. The Board of Directors has amended the 2002 Stock Plan, subject to stockholder approval of this Item 5, to increase the maximum aggregate number of shares that may be issued under the 2002 Stock Plan by 12,000,000 shares to 74,570,248 shares.

Any shares that are subject to options or stock appreciation rights shall be counted against this limit as one (1) share for every one (1) share granted. Any shares that are subject to any Awards other than options or stock appreciation rights or other awards for which awardees pay full value (as determined on the date of the grant) shall be counted against this limit as 1.69.

If an award or option expires, is canceled or forfeited or becomes unexercisable without having been exercised in full or otherwise settled in full, or is settled in cash, the undelivered shares that were subject to the award will become available for future awards or options. Any shares that become available for the grant of awards or options as described in the foregoing sentence will be added back in accordance with the following: (i) if the shares were subject to option or stock appreciation rights, shares will be added back as 1 share for every share subject to the option or stock appreciation right and (ii) if the shares were subject to an award other than an option or stock appreciation right, shares will be added back as 1.69 shares for every share subject to the award.

The following will not be added to the shares authorized for grant: (x) shares subject to an option surrendered in payment of the option exercise price, or to satisfy any tax withholding obligation with respect to an option or stock appreciation right, (y) shares that are not issued as a result of a net settlement of a restricted stock unit or stock appreciation right, and (z) shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of options.

The shares issuable under the 2002 Stock Plan may be authorized, but unissued, or reacquired Common Stock, and all such shares may be granted as options, restricted stock awards, restricted stock units (including performance-based restricted stock units), stock appreciation rights or other stock-based awards.

Terms of Options and Awards

Each option or award under the 2002 Stock Plan is evidenced by an agreement between the Company and the optionee or awardee, as applicable, and is subject to the following terms and conditions, but other specific terms may vary.

 

21


Options/Stock Appreciation Rights. The Administrator may grant options and Stock Appreciation Rights (or SARs) under the 2002 Stock Plan. The Administrator will determine the exercise price, vesting conditions, exercisability period and all other terms subject to the following conditions. A SAR gives an awardee the right to receive a payment, equal to the excess of the fair market value of a specified number of shares on the date the SAR is exercised, over the exercise price of the shares. Awardees may exercise all or a specified portion of the SAR, to the extent then exercisable pursuant to its terms, and to receive from the Company an amount equal to the product of (i) the excess of (A) the fair market value of the shares on the exercise date over (B) the exercise price of the SAR and (ii) the number of shares with respect to which the SAR is exercised, subject to any limitations the Administrator may impose.

Exercise Price of Options/SARs . The Administrator determines the exercise price of options and SARs at the time the options or SARs, as applicable, are granted. The exercise price of options and SARs may not generally be less than 100% of the fair market value of Common Stock on the date such option or SAR, as applicable, is granted. However, the exercise price of an incentive stock option granted to a holder of more than ten percent (10%) of the total combined voting power of all classes of the Company’s shares may not be less than 110% of the fair market value on the date such option is granted. The fair market value of Common Stock is generally determined with reference to the closing sale price for the Common Stock (or the closing bid if no sales were reported) on the date the option is granted. As of March 3, 2017 the fair market value of a share of Common Stock was $31.80.

Exercise of Options/SAR; Form of Consideration . The Administrator determines when options and SARs become vested and exercisable, and may, in its discretion, accelerate the vesting or exercisability of any outstanding option or SAR. The means of payment for shares issued upon exercise of an option is specified in each option agreement. The 2002 Stock Plan permits payment to be made by cash, check, promissory note, other shares of Common Stock (with some restrictions), cashless exercises, reduction in any Company liability the Company may owe to an optionee, shares of Common Stock withheld by the Company that are otherwise issuable in connection with the exercise of the option (with the consent of the Administrator), any other form of consideration permitted by applicable law, or any combination thereof.

Term of Option/SAR . The term of an option or SAR under the 2002 Stock Plan may be no more than ten (10) years from the date of grant. However, in the case of an incentive stock option granted to a holder of more than ten percent (10%) of the total combined voting power of all classes of the Company’s shares, the term of the option may be no more than five (5) years from the date of grant. No option or SAR may be exercised after the expiration of its term.

Termination of Service . If an optionee’s service relationship with the Company terminates for any reason (excluding death or disability), then, unless the Administrator provides otherwise, the optionee may generally exercise the option within three (3) months of such termination to the extent that the option is vested on the date of termination, (but in no event later than the expiration of the term of such option as set forth in the option agreement). If an optionee’s service relationship with the Company terminates due to the optionee’s death or disability or if the optionee dies within thirty (30) days of ceasing to be a service provider, then, unless the Administrator provides otherwise, the optionee or the optionee’s personal representative, estate, or the person who acquires the right to exercise the option by bequest or inheritance, as the case may be, generally may exercise the option, to the extent the option was vested on the date of termination, within twelve (12) months from the date of such termination. Unless otherwise provided in the award agreement, if an awardee’s service

 

22


relationship with the Company is terminated for any reason, all unvested shares covered by the award are forfeited. The terms applicable to a SAR upon the termination of an awardee’s service relationship will be determined by the Administrator and be set forth in the agreement evidencing the SAR.

Restricted Stock Awards. The Administrator may grant restricted stock awards under the 2002 Stock Plan. The Administrator will determine the vesting conditions, the purchase price, if any, and any other restrictions on transferability of the shares subject to restricted stock awards. Unless otherwise provided in the award agreement, awardees will have full voting rights and be entitled to regular cash dividends, if any, with respect to the shares subject to a restricted stock award.

Restricted Stock Units. The Administrator may grant restricted stock units under the 2002 Stock Plan. The Administrator will determine the time or times at which restricted stock units vest, and any other conditions on which vesting will occur. Awardees are entitled to receive restricted stock units without payment of any consideration to the Company, unless otherwise required by applicable law. Unless otherwise provided in the award agreement, awardees will have full voting rights and be entitled to regular cash dividends, if any, with respect to the shares issued pursuant to an award upon the settlement of such awards. At the Company’s option, a restricted stock unit may be settled in shares, cash, or a combination thereof.

Performance-Based Awards . Awards, other than options and SARs, which are granted under the 2002 Stock Plan, may be made subject to performance conditions as well as time-vesting conditions. Such performance conditions may be established and administered in accordance with the requirements of Section 162(m) of the Code for awards intended to qualify as performance-based compensation thereunder. To the extent that performance conditions under the 2002 Stock Plan are applied to awards intended to qualify as performance-based compensation under Section 162(m) of the Code for a given performance period, such performance conditions will utilize one or more objective measurable performance goals as determined by a committee of the Board at the time of grant. The performance criteria that may be used to establish such performance goals include the following: earnings or net earnings (either before or after interest, taxes, depreciation and/or amortization), economic value-added, sales or revenue, income, net income (either before or after taxes), operating earnings, cash flow (including, but not limited to, operating cash flow and free cash flow), cash flow return on capital, return on assets or net assets, return on stockholders’ equity, return on capital, stockholder returns, return on sales, gross or net profit margin, productivity, expense, margins, operating efficiency, customer satisfaction, working capital, earnings per share, price per share, market share, new products, customer penetration, technology and risk management, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group.

Other Awards . The Administrator is authorized under the 2002 Stock Plan to make any other award to an eligible individual that is not inconsistent with the terms of the 2002 Stock Plan and that may involve the issuance of shares or the granting of rights with the value thereof derived from the value of shares.

General Terms Applicable to All Option and Awards

Non-transferability . Incentive stock options granted under the 2002 Stock Plan are not transferable other than by will or the laws of descent and distribution, and may be exercised during the optionee’s lifetime only by the optionee. Other awards granted under the 2002 Stock Plan are also not transferable other than by will or the laws of descent and distribution, and may be exercised during the optionee’s lifetime only by the optionee, unless the Administrator determines otherwise.

 

23


Clawback/Recoupment . All options and awards granted under the 2002 Stock Plan will be subject to recoupment under any clawback policy the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as required by applicable laws, or as deemed necessary or appropriate by the Administrator in view of applicable laws, governance considerations or industry best practices.

Dividend Equivalents. The Administrator may determine at the time of grant whether awards will provide for dividend equivalent rights. Dividend equivalent rights granted with respect to an awards that vest based on achievement of performance goals will either (i) not be paid or credited or (ii) be accumulated and be subject to restrictions and risk of forfeiture to the same extent that the shares underlying the award are subject.

Other Provisions . The option or award agreement may contain other terms, provisions and conditions not inconsistent with the 2002 Stock Plan as may be determined by the Administrator.

Limitations

Code Section 162(m) Limitations . The 2002 Stock Plan provides that no service provider may be granted, in any Company fiscal year, an aggregate amount of options or awards intended to be qualified performance-based compensation that cover more than 1,200,000 shares of Common Stock. Notwithstanding this limit, however, in connection with such individual’s initial service with the Company, he or she may be granted an aggregate amount of options or awards that cover up to an additional 1,800,000 shares of Common Stock. These limits are subject to appropriate adjustments in the case of stock splits, reverse stock splits and the like.

Non-Employee Director Limitations . The grant date fair value of awards granted under the 2002 Stock Plan to a non-employee director during a calendar year shall not exceed $750,000, determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto.

Adjustment Upon Changes in Capitalization

In the event that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Common Stock or other of the Company’s securities, or other change in the Company’s corporate structure affecting the Common Stock or their value occurs, then the Administrator will make proportional adjustments to (i) the number and class or kind of shares that may be delivered under the 2002 Stock Plan, (ii) the number, class or kind, and price of shares covered by each outstanding option or award, and (iii) the numerical limits applicable to individuals. A regular cash dividend that does not affect the shares or the value of the shares will not result in the proportional adjustments described in the foregoing sentence.

In the event of a liquidation or dissolution, any unexercised options and unvested awards will terminate. The Administrator may, in its sole discretion, provide that each optionee shall have the right to exercise all or any part of an option, including shares as to which the option would not otherwise be exercisable. The Administrator may provide that the vesting of an award will accelerate at any time prior to such transaction.

In connection with the merger of the Company with or into another corporation or the Company’s “change in control,” as defined in the 2002 Stock Plan, each outstanding award or option shall be assumed or an equivalent award or option substituted by the successor corporation.

 

24


If the successor corporation refuses to assume the options or awards or to substitute substantially equivalent options or awards, the optionee shall have the right to exercise the option as to all the optioned stock, including shares not otherwise vested or exercisable, and in the case of an award, the Administrator shall provide for the acceleration of the award. In such event, with respect to options, the Administrator shall notify the optionee that the option is fully exercisable for fifteen (15) days from the date of such notice and that the option terminates upon expiration of such period. If, in such a merger or change in control, an award or option is assumed or an equivalent award or option is substituted by such successor corporation, and if during a one-year period after the effective date of such merger or change in control, the optionee’s or awardee’s status as a service provider is terminated for any reason other than the optionee’s or awardee’s voluntary termination of such relationship, then (i) in the case of an option, the optionee shall have the right within three (3) months thereafter to exercise the option as to all of the optioned stock, including shares as to which the option would not otherwise be exercisable, effective as of the date of such termination and (ii) in the case of an award, the award shall be fully vested as of the date of such termination.

Amendment and Termination of the 2002 Stock Plan

The Board of Directors may amend, alter, suspend or terminate the 2002 Stock Plan, or any part thereof, at any time and for any reason. However, the Company will obtain shareholder approval for any amendment to the 2002 Stock Plan to the extent necessary and desirable to comply with applicable laws. Additionally, unless the Company obtains prior shareholder approval, the Administrator may not amend any option or stock appreciation right to reduce its exercise price to below the per share fair market value as of the date the award was granted, or agree to grant options, another award or cash in exchange for participants agreeing to cancel outstanding options or stock appreciation rights at any time when the then-current fair market value of a share is less than the fair market value of a share on the date that the outstanding option or stock appreciation right was granted where the economic effect would be the same as reducing the exercise price of the cancelled option or stock appreciation right. No action by the Board or stockholders may alter or impair any option or award previously granted under the 2002 Stock Plan without the written consent of the optionee or awardee except for amendments made or other actions taken to address potential Code Section 409A violations or where the Administrator determines is required or desirable to facilitate compliance with applicable laws.

The 2002 Stock Plan, as most recently amended and restated to include the changes described in this Item 5, has been adopted by the Board on March 15, 2017, with the proposed share reserve increase subject to approval by the stockholders of the Company within twelve (12) months after such date. No incentive stock options may be granted under the 2002 Stock Plan after the tenth (10 th ) anniversary of the date the amendment and restatement of the 2002 Stock Plan is approved by the Board.

Certain U.S. Federal Income Tax Information

The following is only a summary of the effect of federal income taxation upon the Company and optionees or awardees with respect to the grant and exercise of options or the grant or vesting of awards under the 2002 Stock Plan. It does not purport to be complete, and does not discuss the tax consequences of the employee’s, director’s or consultant’s death or the provisions of the income tax laws of any municipality, state or foreign country in which the employee, director or consultant may reside.

A recipient of an option or stock appreciation right will not have taxable income upon the grant of the option or stock appreciation right. For nonstatutory stock options and stock appreciation rights,

 

25


the recipient will recognize ordinary income upon exercise in an amount equal to the difference between the fair market value of the shares and the exercise price on the date of exercise. Any gain or loss recognized upon any later disposition of the shares generally will be a capital gain or loss.

The acquisition of shares upon exercise of an incentive stock option will not result in any taxable income to the recipient, except, possibly, for purposes of the alternative minimum tax. The gain or loss recognized by the participant on a later sale or other disposition of such shares will either be long-term capital gain or loss or ordinary income, depending upon whether the participant holds the shares for the legally-required period (which is two years from the date of grant and one year from the date of exercise). If the shares are not held for the legally-required period, the recipient will recognize ordinary income equal to the lesser of (i) the difference between the fair market value of the shares on the date of exercise and the exercise price, or (ii) the difference between the sales price and the exercise price. Unless limited by Section 162(m) of the Code, the Company is entitled to a deduction in the same amount as the ordinary income recognized by an optionee.

For restricted stock awards, unless vested or the recipient elects to be taxed at the time of grant, the recipient will not have taxable income upon the grant, but upon vesting will recognize ordinary income equal to the fair market value of the shares at the time of vesting less the amount paid for such shares (if any). Any gain or loss recognized upon any later disposition of the shares generally will be a capital gain or loss.

A recipient of a restricted stock unit is not deemed to receive any taxable income at the time an award of restricted stock units is granted. When vested restricted stock units (and dividend equivalents, if any) are settled and distributed, the recipient will recognize ordinary income equal to the amount of cash and/or the fair market value of shares received less the amount paid for such stock units (if any). Unless limited by Section 162(m) of the Code, the Company will be entitled to a deduction for federal income tax purposes equal to the amount of ordinary income that the recipient is required to recognize.

2002 Stock Plan Benefits

Additional future benefits under the 2002 Stock Plan are not determinable, as grants of options and awards are at the discretion of the Board of Directors and are dependent upon the price of Common Stock in the future.

 

26


As of March 3, 2017 options and awards with respect to the number of shares of Common Stock set forth below in the following table have been granted under the 2002 Stock Plan since its inception to (i) the persons named in the Summary Compensation Table, (ii) all current executive officers as a group, (iii) all current directors who are not executive officers as a group and (iv) all employees (excluding executive officers) as a group.

 

Name and Principal Position  

Number of

Options

Granted

   

Weighted
Average Exercise

Price Per Share

   

Number of

Restricted

Stock
Units
Granted

   

Number of
Performance

Restricted

Stock Units
Granted (1)

 

Steven W. Berglund

Chief Executive Officer

    5,020,250     $ 17.52       554,423       360,470  

Robert Painter, Chief Financial Officer

    200,710     $ 20.88       62,362       37,500  

Francois Delepine, Former Chief Financial Officer (2)

    20,000     $ 27.48       172,092       25,600  

Bryn Fosburgh, Senior Vice President

    1,483,504     $ 16.89       128,850       75,750  

Christopher Gibson, Senior Vice President

    913,000     $ 18.09       109,250       57,350  

Darryl Matthews, Senior Vice President

                43,958       40,500  

All Executive Officers, as a group

    10,072,264     $ 19.99       1,457,567       811,520  

Non-Executive Directors, as a group

    1,089,481     $ 20.08       170,407        

All employees, as a group, including officers who are not executive officers

    33,109,273     $ 14.17       7,713,991       409,875  
(1) Performance restricted stock units include awards based on our total shareholder return compared to the total shareholder return of the component stock of the S&P 500 Index and awards based on our level of operating income and revenue growth. Both vest on performance between 0% and 200% of the units granted. The number shown represents the target level of units granted.
(2) Mr. Delepine left his position as CFO of the Company in February 2016.

All employees (including officers), directors and consultants of the Company are eligible to participate in the 2002 Stock Plan.

Vote Required

The approval of the amendment to the 2002 Stock Plan to increase the number of shares of Common Stock available for grant of options and awards requires the affirmative vote of the holders of a majority of the shares present at the Annual Meeting in person or by proxy and entitled to vote as of the Record Date that are cast on the proposal.

Recommendation of the Board of Directors

The Board of Directors recommends a vote FOR approval of the amendments to the 2002 Stock Plan, including to increase by 12,000,000 the number of shares of Common Stock available for the grant of options and awards.

 

27


************************************

ITEM 6

APPROVAL OF AMENDMENTS

TO THE AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN

The Board is seeking stockholder approval of amendments to the Amended and Restated Employee Stock Purchase Plan ( “Purchase Plan” ), as described below, including the extension of the term of the Purchase Plan. The Board is not seeking, in connection with amendments to the Purchase Plan, to increase the number of shares of Common Stock issuable under the Purchase Plan.

The Company believes that maintaining a competitive employee stock purchase program is an important element in both recruiting and retaining employees in its current employment environment. The Purchase Plan is designed to more closely align the interests of the Company’s employees and stockholders by encouraging employees to invest their own money in the Company’s equity securities. By allowing eligible employees to purchase shares of Common Stock at a discount, the Purchase Plan is intended to encourage employees to become stockholders of the Company, thereby providing them with a direct incentive to contribute to the long-term growth and overall success of the Company. In the event that such stockholder approval is not obtained, then the amendments to the Purchase Plan other than the extension of the term will remain in effect.

The Company believes that the amendment will further the Company’s policy of encouraging employee stock ownership as a means of motivating high levels of employee performance and encouraging employees to stay with the Company and help it grow, thereby increasing stockholder value. The Board believes that the amendments are in the best interests of the Company, its stockholders, and its employees. At the Annual Meeting, the stockholders are being asked to approve the amendments to the Purchase Plan, including the extension of the term of the Purchase Plan.

Material Changes to the Purchase Plan

The following highlights the material changes to the Purchase Plan.

 

   

The term of the Purchase Plan has been extended for ten years, such that the Purchase Plan will expire on March 15, 2027, unless terminated earlier by the Board, subject to stockholder approval of this Item 6.

 

   

The capitalization provision in the Purchase Plan has been revised to clarify the capitalization event that would result in adjustments to the Purchase Plan and purchase rights outstanding under the plan;

 

   

The eligibility provision has been clarified to reflect the circumstances under which employees may be excluded from participation in the Purchase Plan.

Summary of the Purchase Plan Terms

The essential features of the Purchase Plan, including the proposed amendments that are subject to stockholder approval, are summarized below. This summary does not purport to be a complete description of all the provisions of the Purchase Plan, and is subject to and qualified in its entirety to the complete text of the Purchase Plan. A copy of the Purchase Plan is attached to this proxy statement as Appendix B .

 

28


Purpose

The purpose of the Purchase Plan is to provide employees with an opportunity to purchase Common Stock of the Company through accumulated contributions in a manner that qualifies under Section 423 of the Code. The Purchase Plan also authorizes the grant of options under a non-423(b) Plan component, which does not qualify under Section 423(b) of the Code, pursuant to rules, procedures or sub-plans adopted by the Board designed to achieve tax, securities law compliance or other Company objectives.

Administration

The Purchase Plan is administered by the Board or a committee appointed by the Board, referred to as the administrator. The administrator has discretionary authority to construe, interpret and apply the terms of the Purchase Plan, to delegate ministerial duties to any of the Company’s employees, to designate separate offerings under the Purchase Plan, to designate subsidiaries as participating in the Purchase Plan and whether such participation is under the Code Section 423(b) Plan Component or the non-423(b) Plan Component, to determine eligibility, to adjudicate all disputed claims filed under the Purchase Plan and to establish such procedures that it deems necessary or advisable for the administration of the Purchase Plan (including to adopt procedures, sub-plans and appendices to the subscription agreement as are necessary or appropriate to permit the participation in the Purchase Plan by employees who are foreign nationals or employed outside the U.S.

Eligibility

Employees, including officers of the Company, who are treated as employees in the records of the Company or its designated subsidiaries at the time that a subscription agreement is required to be submitted for a given offering period are eligible to participate in the Purchase Plan for that offering period. As of December 30, 2016, there were 7,484 employees of the Company eligible to participate in the Purchase Plan.

The administrator may, at its discretion, establish that an individual will not be eligible if or she: (i) has not completed at least two (2) years of service since his or her last hire date (or such lesser period of time as may be determined by the administrator in its discretion), (ii) customarily works not more than twenty (20) hours per week (or such lesser period of time as may be determined by the administrator in its discretion), (iii) customarily works not more than five (5) months per calendar year (or such lesser period of time as may be determined by the administrator in its discretion), (iv) is a highly compensated employee within the meaning of Section 414(q) of the Code, or (v) is a highly compensated employee within the meaning of Section 414(q) of the Code with compensation above a certain level or is an officer or subject to the disclosure requirements of Section 16(a) of the Exchange Act, provided the exclusion is applied with respect to each offering under the Code Section 423(b) Plan Component in an identical manner to all highly compensated individuals.

An employee of a designated subsidiary who is a citizen or resident of a jurisdiction other than the United States may be excluded from participation in the Purchase Plan or an offering if the participation of such employee is prohibited under the laws of the applicable jurisdiction or if complying with the laws of the applicable jurisdiction would cause the Purchase Plan or a Code Section 423(b) Plan Component to violate Section 423 of the Code. In the case of a non-423(b) Plan Component, employees may be excluded from participation in the Purchase Plan or an offering if the administrator has determined, in its sole discretion, that participation of such employees is not advisable or practicable for any reason.

 

29


No employee may be granted an option to purchase shares under the Code Section 423(b) Plan Component if: (i) immediately after the grant of the option, the employee would own five percent or more of the total combined voting power or value of the stock of the Company or any of its subsidiaries; or (ii) an employee’s right to purchase stock under all employee stock purchase plans of the Company and its subsidiaries accrues at a rate which exceeds $25,000 worth of stock (determined with reference to the fair market value of the Common Stock at the time of grant) in a calendar year in which such option is outstanding (or such other limit, as imposed under Section 423 of the Code or final regulations issued thereunder). Subject to these eligibility criteria, the Purchase Plan permits eligible employees to purchase Common Stock through payroll deductions subject to certain limitations described below. See “Payment of Purchase Price; Contributions; Use of Funds.”

Shares Issuable Under Plan

The maximum number of shares of Common Stock which are available for sale under the Purchase Plan is 39,000,000 shares, subject to adjustment for changes in capitalization of the Company. Such shares of Common Stock may be authorized but unissued Common Stock, treasury shares or Common Stock purchased on the open market. If on a given exercise date, the number of shares with respect to which options are to be exercised exceeds the number of shares then available under the Purchase Plan, the company will make a pro rata allocation of the shares available for purchase in as uniform a manner as will be practicable and equitable. Participants will have no interest or voting rights in shares covered by their options until such options have been exercised.

Offering Periods

The Purchase Plan provides for offering periods lasting six months with a new offering period commencing every six months, on the first trading day in March and the first trading day in September of each year. The administrator may determine different offering periods, provided that no offering period exceeds twenty-seven months. Normally, a participant’s contributions are accumulated throughout an offering period and, at the end of the offering period, shares of Common Stock are purchased with the accumulated contributions. In no event may a participant be permitted to purchase shares of Common Stock on any purchase date with an aggregate fair market value in excess of $12,500.

Purchase Price

The purchase price per share at which shares will be sold in an offering under the Purchase Plan is the lower of (i) 85% of the fair market value of a share of Common Stock on the first trading day of an offering period and (ii) 85% of the fair market value of a share of Common Stock on the last trading day of each offering period, unless the administrator sets a purchase price higher than this amount. The fair market value of the Common Stock on a given date is generally the closing sale price of the Common Stock as reported on the Nasdaq Global Select Market system for such date.

Payment of Purchase Price; Contributions; Use of Funds

The purchase price of the shares is accumulated by payroll deductions, or other forms of contributions, to the extent permitted or required by the administrator) over the offering period. No interest accrues on such contributions, except as may be required by applicable law. The Purchase Plan provides that the aggregate of such contributions during the offering period shall not exceed 10% of the participant’s compensation during any offering period. In addition, no participant may be granted purchase rights to buy more than $25,000 worth of Common Stock (such limit to be determined based on the fair market value of the Common Stock on the date the purchase rights are granted) under the Purchase Plan in any calendar year such rights are outstanding. During an offering period, a participant

 

30


may discontinue his or her participation in the Purchase Plan, and may decrease, but not increase, the rate of contributions in an offering period within limits set by the administrator.

All contributions made for a participant are credited to the participant’s account under the Purchase Plan, are withheld in whole percentages only and are included with the general funds of the Company. The administrator may allow employees to participate in the Purchase Plan via cash contributions instead of payroll deductions if payroll deductions are not permitted under applicable local law, provided that the employees are participating in the component of the Purchase Plan that does not qualify under Section 423(b) of the Code or, if the employees are participating in the Section 423(b) Plan Component, the administrator has determined that cash contributions are permissible.

Funds received by the Company pursuant to exercises under the Purchase Plan are used for general corporate and working capital purposes. The Company has no obligation to segregate such funds, except where applicable laws require such segregation or deposit with an independent third party. Until shares of Common Stock are issued, participants will have only the rights of an unsecured general creditor with respect to such shares.

Delivery

Shares will not be issued with respect to a purchase option unless the exercise of such option and the issuance and delivery of the shares will comply with all applicable laws. With respect to all or part of the shares credited to a participant’s brokerage account, the participant may elect to have such shares be sold at the participant’s expense and cash paid to the participant.

Withdrawal

A participant may terminate his or her participation in the Purchase Plan at any time by giving the Company a written notice of withdrawal. In such event, all of the contributions credited to the participant’s account will be returned, without interest, to such participant. Contributions will not resume unless a new subscription agreement is delivered in connection with a subsequent offering period.

Termination of Employment

Termination of a participant’s employment for any reason, including retirement or death, cancels his or her participation in the Purchase Plan immediately (unless immediately rehired or transferred by the Company or a designated subsidiary). In such event, the contributions credited to the participant’s account but not used to purchase shares will be returned without interest to such participant, his or her designated beneficiaries or the executors or administrators of his or her estate. Nothing in the Purchase Plan interferes with the right of the Company to terminate any employee’s employment at any time.

Adjustments Upon Changes in Capitalization

In the event of any changes in the capitalization of the Company effected without receipt of consideration by the Company, such as a stock split, dividend or other distribution, combination, merger, consolidation, recapitalization, split-off, spin-off, or reclassification of the Common Stock, any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company, or corporate event affecting the Common Stock, then proportionate adjustments will be made by the administrator in the shares subject to purchase, to the extent applicable, and in the price per share under the Purchase Plan. In the event of liquidation or dissolution

 

31


of the Company, the offering periods then in progress will terminate immediately prior to the consummation of such event unless otherwise provided by the administrator.

In the event of a sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, any offering periods then in progress may, in the sole discretion of the administrator, be shortened by the setting of a new exercise date to be held before the Company’s proposed sale or merger. To the extent the offering period is shortened, at least ten days before the new exercise date, the administrator will notify each participant that the exercise date has been changed and that the participant’s option will be automatically exercised on the new exercise date, unless the participant withdraws from the Purchase Plan.

Amendment and Termination

The administrator may at any time and for any reason amend or terminate the Purchase Plan, except that (i) no such termination shall affect options previously granted unless the administrator determines that terminating an offering period is in the best interests of the Company and (ii) no amendment shall make any change to an option granted prior thereto that adversely affects the rights of any participant.

Certain U.S. Federal Income Tax Information

The following information is a brief summary of the effect of U.S. federal income taxation upon the Company and participants with respect to the purchase of shares of the Common Stock under the Purchase Plan. It does not purport to be complete, and does not discuss the tax consequences of the participant’s death or the provisions of the income tax laws of any municipality, state or foreign country in which the participant may reside.

The Purchase Plan, and the right of participants to make purchases thereunder, is intended to qualify under the provisions of Sections 421 and 423 of the Code. However, the Purchase Plan may have sub-plans which do not qualify under Section 423(b) of the Code, and to which the tax treatment described herein does not apply.

Under Sections 421 and 423 of the Code, no income will be taxable to a participant until the shares purchased under the Purchase Plan are sold or otherwise disposed. Upon sale or other disposition of the shares, the participant will generally be subject to tax in an amount that depends upon the holding period.

If the shares are sold or otherwise disposed of more than two years from the beginning of the offering period in which they are purchased and more than one year from the date of the applicable purchase, the participant will recognize ordinary income measured as the lesser of (a) the excess of the fair market value of the shares at the time of such sale or disposition over the purchase price, and (b) an amount equal to 15% of the fair market value of the shares as of the beginning of the offering period in which they are purchased. Any additional gain will be treated as long-term capital gain.

If the shares are sold or otherwise disposed of before the expiration of these holding periods, the participant will recognize ordinary income generally measured as the excess of the fair market value of the shares on the date the shares are purchased over the purchase price. Any additional gain or loss on such sale or disposition will be long-term or short-term capital gain or loss, depending on the holding period.

 

32


The Company generally is not entitled to a deduction for amounts taxed as ordinary income or capital gain to a participant except to the extent of ordinary income recognized by participants upon a sale or disposition of shares prior to the expiration of the holding periods described above.

Future Plan Benefits

Future benefits under the Purchase Plan are not currently determinable, as they will depend on the actual purchase price of our shares of Common Stock in future offerings, the market value of our Common Stock on various future dates, the extent to which eligible employees elect to participate in the Purchase Plan, the amount of contributions eligible employees elect to make under the Purchase Plan and similar factors. However, our named executive officers will be subject to the same purchase restrictions as all other participants.

Past Purchases Under the Purchase Plan

As of March 3, 2017, 28,067,098 shares of Common Stock have been purchased under the Purchase Plan since its inception by each of the following: (i) each executive officer named in the Summary Compensation table; (ii) all executive officers, as a group; (iii) all non-executive directors, as a group; and (iv) all employees (excluding executive officers) as a group. As of March 3, 2017 the fair market value of a share of Common Stock was $31.80.

 

Name and Position (1)  

Aggregate Dollar

Value (2)

   

Aggregate

Number of Units

 

Steven W. Berglund, Chief Executive Officer

  $ 0        

Robert Painter, Chief Financial Officer

  $ 273,759       15,441  

Bryn Fosburgh, Vice President

  $ 648,520       65,470  

Christopher Gibson, Vice President

  $ 376,086       33,368  

Darryl Matthews, Senior Vice President

  $ 0        

All Executive Officers, as a group

  $ 2,658,429       232,119  

All Non-Executive Directors, as a group (1)

  $ 0        

All employees, as a group, including officers who are not executive officers

  $ 337,393,639       27,834,979  
  (1) Other than the chief executive officer, members of the Board are not eligible to participate in the Purchase Plan.
  (2) The amounts shown in this column represent the market price of the shares purchased (as of the purchase dates) multiplied by the number of shares purchased under the Purchase Plan since inception.

Vote Required

Approval of the amendment to the Purchase Plan to extend the term for ten years requires the affirmative vote of the holders of a majority of the shares present at the Annual Meeting in person or by proxy and entitled to vote as of the Record Date that are cast on the proposal.

Recommendation of the Board of Directors

The Company’s Board of Directors recommends a vote FOR approval of the amendments to the Purchase Plan, including to extend the term of of the Purchase Plan.

 

33


BOARD MEETINGS AND COMMITTEES; DIRECTOR INDEPENDENCE

The Board of Directors held 5 meetings during the fiscal year ended December 30, 2016. No director attended fewer than 75% of the aggregate of all the meetings of the Board of Directors and the meetings of the committees, if any, upon which such director also served during the fiscal year ended December 30, 2016. It is the Company’s policy to encourage directors to attend the Annual Meeting. All of the current members of the Board of Directors who were existing directors at the time of the 2016 annual meeting attended the annual meeting.

As a result of its annual review and based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, the Board of Directors has determined that each of the directors, except for Mr. Berglund, are independent directors as defined by Rule 5605(a)(2) of the NASDAQ Marketplace Rules. In making this determination, the Board considered the current and prior relationships of each non-employee director, or any of his or her family members, has with the Company, our senior management and our independent auditors, and all other facts and circumstances deemed relevant in determining their independence.

Stockholder Communications with Directors

The Board of Directors has established a process to receive communications from stockholders. Stockholders of the Company may communicate with one or more of the Company’s directors (including any board committee or group of directors) by mail in care of Board of Directors, Trimble Inc., 935 Stewart Drive, Sunnyvale, California 94085. Such communications should specify the intended recipient or recipients. The Corporate Secretary periodically will forward such communications or provide a summary to the Board of Directors or the relevant members of the Board.

Board Leadership Structure; Oversight and Risk Management

The Company currently separates the positions of chief executive officer and chairman of the Board of Directors. Our chairman of the Board of Directors is responsible for setting the agenda for each meeting of the Board, in consultation with the chief executive officer, and presiding at executive sessions. The chairman of the Board of Directors is also responsible for recommending committee assignments to the Nominating and Corporate Governance Committee. Our chief executive officer is responsible for the day-to-day operations of the Company.

The Board of Directors has overall responsibility for the oversight of risk management for the Company, and it exercises this oversight through committees and regular engagement with the Company’s senior management. The Audit Committee has oversight of the Company’s financial matters, internal controls, financial reporting and internal investigations relating to financial misconduct. The Compensation Committee has oversight of our compensation policies and practices, and our Nominating and Corporate Governance Committee is responsible for the independence and qualification of the board members and the Company’s corporate governance principles. The committees report their activities back to the Board of Directors. In addition, members of the Company’s senior management attend meetings of the Board of Directors to discuss strategic planning and risks and opportunities for the Company’s business areas, in addition to answering any questions that the Board of Directors may raise.

 

34


Audit Committee

The Board of Directors has a separately-designated, standing Audit Committee, established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Audit Committee is governed by a charter, a current copy of which is available on our corporate website at http://investor.trimble.com/corporate-governance.cfm .

The current members of the Audit Committee are directors Johansson, Peek, and Vande Steeg, and director Peek currently serves as the committee chairman. The Audit Committee held 10 meetings during the 2016 fiscal year. The purpose of the Audit Committee is to make such examinations as are necessary to monitor the corporate financial reporting and the internal and external audits of the Company, to provide to the Board of Directors the results of its examinations and recommendations derived therefrom, to outline to the Board of Directors improvements made, or to be made, in internal accounting controls, to nominate independent auditors, and to provide such additional information as the committee may deem necessary to make the Board of Directors aware of significant financial matters which require the Board of Directors’ attention.

All Audit Committee members are independent directors as defined by applicable NASDAQ Marketplace Rules and listing standards.

All members of the Audit Committee are financially sophisticated and are able to read and understand fundamental financial statements, including a balance sheet, income statement and cash flow statement. The Board of Directors has determined that director Peek is a “financial expert” as that term is defined in the rules promulgated by the SEC. Mr. Peek has an extensive accounting and financial management background, which includes holding positions as chief financial officer and chief accounting officer with several leading publicly-traded technology companies, and almost two decades of experience with Deloitte.

Compensation Committee

The Board of Directors has a standing Compensation Committee, comprised of directors Nersesian, Vande Steeg and Ekholm. Director Vande Steeg currently serves as the committee chairman. All Compensation Committee members are independent as defined by applicable NASDAQ Marketplace Rules and listing standards. The Compensation Committee is governed by a charter, a current copy of which is available on our corporate website at http://investor.trimble.com/corporate-governance.cfm . The Compensation Committee held 7 meetings during the 2016 fiscal year. The purpose of the Compensation Committee is to review and make recommendations to the full Board of Directors with respect to all forms of compensation to be paid or provided to the Company’s executive officers. See “Compensation Discussion and Analysis.”

Compensation Committee Interlocks and Insider Participation

None of the Company’s executive officers serve on the board of directors or compensation committee of a company that has an executive officer that serves on our Board of Directors or the Compensation Committee.

Risk Assessment

In setting compensation, our Compensation Committee considers the risks to our stockholders, and the Company as a whole, arising out of our compensation programs. The Company’s management team has assessed the risk profile of our compensation programs. Their review considered risk-determining characteristics of the overall structure and individual components of our Company-wide

 

35


compensation program, including our base salaries, cash incentive plans and equity plans. The management team provided its findings to the Board of Directors for its review and consideration. Following this ongoing assessment, the Board of Directors concurred with management’s conclusions that the Company’s compensation policies were not reasonably likely to have a material adverse effect on the Company. For example:

Balance of Compensation: Across the Company, individual elements of our compensation program include base salaries, incentive compensation, and for certain of our employees, equity-based awards. By providing a mix of different elements of compensation that reward both short-term and long-term performance and that focus on varying performance metrics, the Company’s compensation programs as a whole provide a balanced approach to incentivizing and retaining employees, without placing an inappropriate emphasis on any particular form of compensation.

Objective Company Results and Pre-established Performance Measures Dictate Annual Incentives: Under the Company’s cash incentive plans, payments are subject to the satisfaction of specific annual performance targets established by our Board of Directors. These performance targets are directly and specifically tied to revenue and operating income performance for the Company and/or divisions for the applicable fiscal year. Payments are made based on actual achievement of Company performance goals, and not estimated performance.

Use of Long Term Incentive Compensation: Equity-based long-term incentive compensation that vests over a period of years is a key component of total compensation of our executive employees. This vesting period encourages our executives to focus on sustaining the Company’s long-term performance. These grants are also made annually, so executives always have unvested awards that could decrease significantly in value if our business is not managed for the long-term. In addition, since 2015, a portion of equity awards granted to our executives includes performance-based vesting. These awards, for which vesting is based upon either our total shareholder return relative to the component stocks of the S&P 500 Index, or upon the achievement of specific financial objectives by the Company, further align the compensation of our executives with the long-term interests of our stockholders.

Internal Processes Further Limit Risk: The Company has in place additional processes to limit risk to the Company from our compensation programs. Specifically, payroll programs and financial results upon which incentive compensation payments are based are subject to regular review and audit and our human resources executives meet periodically with our internal audit personnel to review various controls in place with respect to our compensation programs. In addition, the Company engages an external compensation consulting firm for design and review of our compensation programs, as well as external legal counsel to assist with the periodic review of our compensation plans to ensure compliance with applicable laws and regulations.

Nominating and Corporate Governance Committee

The Board of Directors has a standing Nominating and Corporate Governance Committee ( “Nominating and Governance Committee” ), comprised of directors Janow, Johansson and Nersesian. Director Johansson serves as committee chairman. The Nominating and Governance Committee is governed by a charter that is posted on the Company’s website at http://investor.trimble.com/corporate-governance.cfm . The purpose of the Nominating and Governance Committee is to recommend to the Board of Directors individuals qualified to serve as directors of the Company, and on committees, and to advise the Board of Directors with respect to composition, procedures and committees. Additionally,

 

36


the Nominating and Governance Committee develops and recommends to the Board of Directors corporate governance principles applicable to the Company, and oversees the implementation of these principals. The Nominating and Governance Committee met once during the 2016 fiscal year.

The Nominating and Governance Committee will consider director candidates recommended by stockholders. In considering candidates submitted by stockholders, the Nominating and Governance Committee will take into consideration the needs of the Board of Directors and the qualifications of the candidate. To have a candidate be considered by the Nominating and Governance Committee, a stockholder must submit the recommendation in writing and the recommendation must include the following information and otherwise comply with Section 6 of Article II of our Bylaws:

 

   

The name of the stockholder and evidence of the stockholder’s ownership of Company shares, including the number of shares owned and the length of time of ownership, and information regarding all shares of stock of the Company owned by such stockholder’s affiliates or associates;

 

   

The stockholder’s representation that he or she intends to appear in person or by proxy at the Annual Meeting to nominate the persons named in its notice;

 

   

The name, age, business address and residence address of the candidate;

 

   

The principal occupation or employment of the candidate, the candidate’s resume or a listing of his or her qualifications to be a director of the Company, and information regarding all shares of stock of the Company, which are owned by the candidate or his or her affiliates or associates;

 

   

The candidate’s written representation and agreement that, if elected as a director of the Company, such person has not given any commitment or assurance to any person or entity as to how such person would act or vote on any issue or question and will not enter into any undisclosed agreement with any person or entity other than the Company with respect to any director or indirect compensation in connection with service or action as a director of the Company;

 

   

The candidate’s consent to be named as a director if selected by the Nominating and Governance Committee and nominated by the Board of Directors; and

 

   

An undertaking by both the nominating stockholder and the candidate to furnish promptly such other information as the Company may reasonably request.

The stockholder recommendation and information described above must be sent to the Committee Chairman in care of the Corporate Secretary at Trimble Inc., 935 Stewart Drive, Sunnyvale, California 94085 and must be received by the Corporate Secretary not earlier than January 2, 2018 and not later than February 1, 2018, except if the annual meeting for 2018 is called for a date earlier than April 7, 2018 or later than May 27, 2018, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10 th ) day following the day on which notice of the date of the annual meeting for 2018 is mailed or the date the Company announces the date of the annual meeting for 2018, whichever occurs first.

 

37


The Nominating and Governance Committee believes that the minimum qualifications for serving as a director of the Company are that a nominee demonstrate possession of such knowledge, experience, skills, expertise, international background, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, potential conflicts of interest, and diversity so as to enhance the Board of Directors’ ability to manage and direct the affairs and business of the Company, including, when applicable, to enhance the ability of committees of the Board of Directors to fulfill their duties and/or to satisfy any independence requirements imposed by law, regulation or NASDAQ listing requirement.

The Nominating and Governance Committee identifies potential nominees by asking current directors and executive officers to notify the Committee if they become aware of persons, meeting the criteria described above, who have had a change in circumstances that might make them available to serve on the Board of Directors. The Nominating and Governance Committee also, from time to time, may engage firms that specialize in identifying director candidates and pay any corresponding fees for such services. As described above, the Nominating and Governance Committee will also consider candidates recommended by stockholders.

Once a person has been identified by the Nominating and Governance Committee as a potential candidate, the Committee may collect and review publicly available information regarding the candidate to assess whether the candidate should be considered further. If the Nominating and Governance Committee determines that the candidate warrants further consideration, the chairman or another member of the Committee contacts the candidate. Generally, if the person expresses a willingness to be considered and to serve on the Board of Directors, the Nominating and Governance Committee requests information from the candidate, reviews the candidate’s accomplishments and qualifications, including in light of any other candidates that the Nominating and Governance Committee might be considering, and conducts one or more interviews with the candidate. In certain instances, Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate’s accomplishments. The Nominating and Governance Committee’s evaluation process does not vary based on whether or not a candidate is recommended by a stockholder.

 

38


NON-EMPLOYEE DIRECTOR COMPENSATION

Our non-employee directors ( Outside Directors ) receive compensation according to the terms of the Board of Directors Compensation Policy ( Board Compensation Policy ). The description of the Board Compensation Policy below is qualified in its entirety by the text of the Board Compensation Policy, which was filed as exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 11, 2015.

The current Board Compensation Policy was adopted on May 7, 2015. Under the current Board Compensation Policy, each Outside Director receives:

 

   

an annual cash retainer of $60,000, payable on a quarterly basis, for the period starting July 1 and ending June 30 of each year; and

 

   

upon election or re-election at the annual meeting of stockholders, a restricted stock unit award ( RSU ) for that number of shares of the Company’s common stock determined by dividing the target dollar amount of $277,000 by the fair market value of a share of common stock on the date of grant.

In addition, our Outside Directors are reimbursed for local travel expenses or paid a fixed travel allowance based on the distance to the meeting, and reimbursed for other necessary business expenses incurred in the performance of their services as directors of the Company. Our Outside Directors are also eligible to participate in the Company’s Non-Qualified Deferred Compensation Plan.

The RSU grants vest in full after one year. If an Outside Director is appointed or elected to the Board of Directors at a time other than the annual meeting, the initial RSU grant will be pro-rated based upon the number of months of service since the last annual meeting divided by twelve. If an Outside Director resigns or voluntarily terminates service as a member of the Board, any unvested RSU grant shall vest at such time on a pro-rata basis based upon the number of months of service since the last annual meeting of stockholders divided by twelve. The target dollar amount for determining the number of RSU shares may be revised based upon appropriate compensation benchmarks presented to and approved by the Compensation Committee and the Board of Directors

 

39


Non-Employee Director Compensation Table

Except as noted below, the table below shows the compensation earned by each of the Outside Directors in the fiscal year ending December 30, 2016.

 

Director Compensation for the 2016 Fiscal Year (1)  
Name   Fees Earned or
Paid in Cash
(2)
    Stock
Awards
(3)
    Total  

Börje Ekholm

  $ 60,000     $ 276,990     $ 336,990  

Kaigham Gabriel

  $ 60,000     $ 276,990     $ 336,990  

Merit E. Janow

  $ 60,000     $ 276,990     $ 336,990  

Ulf J. Johansson

  $ 60,000     $ 276,990     $ 336,990  

Meaghan Lloyd

  $ 45,000     $ 276,990     $ 321,990  

Ronald S. Nersesian

  $ 60,000     $ 276,990     $ 336,990  

Mark S. Peek

  $ 60,000     $ 276,990     $ 336,990  

Nickolas W. Vande Steeg

  $ 60,000     $ 276,990     $ 336,990  
  (1) Mr. Berglund, the Company’s president and chief executive officer, receives no additional compensation for his service on the Board of Directors. Mr. Berglund’s compensation for service as president and chief executive officer is reported in the Summary Compensation Table and described in the Compensation Discussion and Analysis.
  (2) For each Outside Director, the fees shown in this column represent a cash retainer, paid quarterly.
  (3) Each Outside Director in the table was granted 11,717 RSUs of the Company’s common stock in connection with such director’s re-election or initial election at the 2016 annual meeting of shareholders, in accordance with the current Board Compensation Policy. The amounts in these columns represent the grant date fair value of the restricted stock unit awards, calculated pursuant to FASB ASC Topic 718. The grant date fair value for the time-based RSUs is estimated using the closing price of our common stock on the date of grant.

 

40


The following table shows the number of shares of the Company’s common stock subject to outstanding and unexercised option awards and the number of shares subject to outstanding RSUs held by each of the Outside Directors as of December 30, 2016.

 

Director   Number of Shares
Subject to Outstanding
Options  as of 12/30/2016
    Number of Shares
Subject to Outstanding
RSUs as of 12/30/2016
 

Börje Ekholm

    -       11,717  

Kaigham Gabriel

    -       11,717  

Merit E. Janow

    143,334       11,717  

Ulf J. Johansson

    210,000       11,717  

Meaghan Lloyd

    -       11,717  

Ronald S. Nersesian

    110,000       11,717  

Mark S. Peek

    89,481       11,717  

Nickolas W. Vande Steeg

    110,000       11,717  

Non-Employee Director Stock Ownership Guidelines

In February 2013, we adopted a policy that requires each Outside Director to own a minimum number of shares of the Company’s common stock equal to a value of $200,000 to help align the personal interests of the directors with the interests of stockholders. The shares counted toward the ownership guidelines include shares owned directly and indirectly, provided there is an economic interest in the shares. These ownership levels must be attained within five years from the date the guidelines were adopted. New directors have five years from appointment to meet the minimum stock ownership level. Six of the non-employee directors have met the ownership requirement. Messrs. Ekholm and Gabriel, who were elected as new directors in 2015, have until 2020 to achieve the required ownership requirement, and Ms. Lloyd, who was elected as a new director in 2016, has until 2021 to achieve the required ownership requirement.

 

41


EXECUTIVE COMPENSATION

The executive compensation section of the proxy statement contains information about the Company’s compensation policies and practices, and the application of those policies and practices with respect to our Named Executive Officers. Under the SEC rules, the Company’s “Named Executive Officers” are the Company’s chief executive officer, chief financial officer, and the three other executive officers who received the highest amounts of compensation during the 2016 fiscal year. The following is a brief description of each part of our Executive Compensation section:

Compensation Discussion and Analysis. This section describes the elements of the Company’s compensation policies and the application of those policies to our Named Executive Officers.

Compensation Committee Report. This section contains a report of the Compensation Committee of our Board of Directors regarding the Compensation Discussion and Analysis section of the proxy statement.

Executive Compensation Tables. This section describes the amounts or values and types of compensation earned by our Named Executive Officers.

Post-Employment Compensation. This section describes certain benefits and payments that our Named Executive Officers would be eligible for in the event of a change in control event, upon death, or, in the case of our Non-Qualified Deferred Compensation Plan, payments that a Named Executive Officer may receive following termination of employment.

Compensation Discussion and Analysis

This Compensation Discussion and Analysis describes the compensation program for our Named Executive Officers. During fiscal 2016, these individuals were:

 

   

Steven W. Berglund, our President and Chief Executive Officer (our “CEO” );

 

   

Robert Painter, our Chief Financial Officer (our “CFO” )*;

 

   

Bryn A. Fosburgh , our Senior Vice President;

 

   

Christopher W. Gibson , our Senior Vice President; and

 

   

Darryl Matthews , our Senior Vice President.

 

  * Mr. Painter was appointed CFO on February 1, 2016. Prior to that, Francois Delepine was the CFO of the Company.

This Compensation Discussion and Analysis describes the material elements of our executive compensation program during fiscal 2016. It also provides an overview of our executive compensation philosophy and objectives. Finally, it analyzes how and why the Compensation Committee arrived at the specific compensation decisions for our executive officers, including the Named Executive Officers, for fiscal 2016, including the key factors that the Compensation Committee considered in determining their compensation.

 

42


Executive Summary

Fiscal 2016 Business Performance

Trimble is a leading provider of technology solutions that enable professionals and field mobile workers to improve or transform their work processes. Trimble solutions are used across a range of industries including agriculture, architecture, civil engineering, survey and land administration, construction, geospatial, government, natural resources, transportation and utilities. Representative Trimble customers include engineering and construction firms, surveying companies, farmers and agricultural companies, enterprise firms with large-scale fleets, energy, mining and utility companies, and state, federal and municipal governments.

Trimble focuses on integrating its broad technological and application capabilities to create solutions that transform how work is done within the industries we serve. Our products are sold based on return on investment and provide benefits such as lower operational costs, higher productivity, improved quality, enhanced safety and regulatory compliance, and reduced environmental impact. The integration of sensors, software, connectivity, and information in our portfolio gives us the unique ability to provide an information model and management tools specific to the customer’s workflow.

In 2016, the Company’s total revenue increased by $71.8 million, or 3%, to $2.36 billion from $2.29 billion in fiscal 2015. Overall revenue growth reflected strong performance in our transportation business, civil engineering & construction businesses outside North America, and second half organic growth in agriculture; which was partially offset by continued challenges in our geospatial business and relative weakness in North America construction. Second half results represented the best financial results of any six-month period since the first half of 2014, with all reporting segments generating year over year organic revenue growth and margin expansion.

GAAP operating income was $181.0 million, up 17 percent as compared to fiscal 2015. GAAP operating margin was 7.7 percent of revenue as compared to 6.7 percent of revenue in fiscal 2015. Non-GAAP operating income of $405.5 million was up 4 percent as compared to fiscal 2015, and non-GAAP operating margin was 17.2 percent of revenue as compared to 17.0 percent of revenue in fiscal 2015. *

GAAP net income was $132.4 million, up 9 percent as compared to fiscal 2015. Diluted GAAP earnings per share were $0.52 as compared to diluted GAAP earnings per share of $0.47 in fiscal 2015. Non-GAAP net income of $302.4 million was up 4 percent as compared to fiscal 2015. Diluted non-GAAP earnings per share were $1.19 as compared to diluted non-GAAP earnings per share of $1.13 in fiscal 2015. *

During fiscal 2016, Trimble repurchased approximately 4.9 million shares of its common stock for $119.5 million. Approximately $130 million remains under the current share repurchase authorization.

Management of the Company responded to market conditions with financial discipline, cost control and an increased focus on the Company’s core businesses, while at the same time continuing to

 

*

A detailed reconciliation of the Company’s GAAP financial measures to each of the non-GAAP financial measures described is included in the Company’s Annual Report on Form 10-K filed on February 24, 2017 under the section titled “Reconciliation of GAAP to Non-GAAP Financial Measures.”

 

43


invest in growth initiatives. Compensation paid to our Named Executive Officers for 2016 reflects the Company’s overall financial performance, and the fact that the Company did not fully meet its revenue and operating income targets.

Fiscal 2016 Executive Compensation Highlights

Based on our overall operating environment and these results, the following key compensation actions were taken with respect to the Named Executive Officers for fiscal 2016:

 

   

Salary Increases for non-CEO Named Executive Officers— The Compensation Committee approved annual salary increases of 3% for each of the Named Executive Officers other than our CEO, whose salary was not changed, and our CFO, whose salary was increased in connection with his promotion to CFO on February 1, 2016.

 

   

Short-Term Cash Bonuses— Their cash bonuses earned for 2016 ranged from 22% to 53% of their target cash bonus opportunities. Our CEO earned a cash bonus of $334,000, equal to 31% of his target award. Target incentive opportunities for the 2016 fiscal year continued to be 125% of the annual base salary for our CEO, and 80% of the respective base salaries for each of our other Named Executive Officers.

 

   

Introduced a New Performance-Based Long-Term Incentive Vehicle- The long-term compensation mix for fiscal 2016 was modified to include two different forms of performance stock unit (“ PSU ”) grants, which together comprise approximately 75% of the potential long-term incentive value delivered to our Named Executive Officers. The remaining 25% of potential long-term incentive value was granted in the form of time vesting restricted stock units ( “RSU” ). As in 2015, a portion of the PSUs will be earned, if at all, based on our total shareholder return ( “TSR” ) compared to the total shareholder return of the component stocks of the S&P 500 Index. Performance will be measured over one-, two- and three-year performance periods. In 2016, Named Executive Officers were also granted PSUs that will be earned, if at all, based on operating income and revenue performance as of the end of fiscal 2018.

 

   

Long-Term Incentive Compensation— We g ranted long-term incentive compensation opportunities in the form of time-based RSU awards that may be settled for shares of our common stock, and PSU awards that also may be settled for shares of our common stock subject to achievement of specified performance objectives, in amounts ranging from target levels of approximately $1.2 million to $2.1 million for Named Executive Officers other than our CEO and a target level of approximately $6.5 million for our CEO. Approximately 74% of the target long-term incentive value awarded to our CEO was awarded in the form of PSUs.

Pay-for-Performance Discussion

We believe our executive compensation program is reasonable, competitive, and appropriately balances the goals of attracting, motivating, rewarding, and retaining our executive officers with the goal of aligning executive officers’ interests with those of our stockholders. To ensure our executive officers’ interests are aligned with those of our stockholders and to motivate and reward individual initiative and effort, a substantial portion of their target annual total direct compensation opportunity is “at-risk” and will vary above or below target levels commensurate with our performance.

 

44


In fiscal 2015, to strengthen the connection between our performance and the compensation of our executive officers, we introduced PSU awards for shares of our common stock into our executive compensation program, thereby replacing options to purchase shares of our common stock as one of the forms of equity used to deliver long-term incentive compensation opportunities. We believe that PSU awards serve the desired performance orientation of our executive compensation program by appropriately rewarding our executive officers for delivering financial results that meet or exceed our long-term strategic objectives. In addition to the PSU awards tied to relative TSR performance first granted in 2015, we have continued to grant TSR-based PSUs in fiscal 2016 and also introduced a new form of PSU award as part of our long-term incentive program, which vests based on operating income and revenue performance.

The combination of our cash bonus plan and our other performance-based incentive compensation opportunities represented a majority of the target total direct compensation opportunities of our executive officers, including our CEO and the other Named Executive Officers.

 

LOGO

(1) Mr. Delepine is excluded as his employment terminated during the fiscal year, and Mr. Painter is excluded because a portion of his compensation for fiscal 2016 relates to service prior to his appointment as our CFO and an executive officer of the Company.

We believe that this design provides balanced incentives for our executive officers to drive financial performance and long-term growth. To ensure that we remain faithful to our compensation philosophy, the Compensation Committee regularly evaluates the relationship between the reported values of the equity awards granted to our executive officers, the amount of compensation realizable (and, ultimately, realized) from such awards in subsequent years, and our total shareholder return over this period.

Shareholder Advisory Vote on Executive Compensation

At our 2016 annual meeting of shareholders, we conducted a non-binding shareholder advisory vote on the compensation of our named executive officers (commonly known as a “Say-on-Pay” vote). Our shareholders approved the Say-on-Pay proposal with approximately 93% of the votes cast in favor of the proposal. We believe that this result demonstrates that our stockholders are generally supportive of our executive compensation program.

As the Compensation Committee has reviewed our executive compensation policies and practices since that vote, it has been mindful of the level of support our stockholders have expressed for our approach to executive compensation. As a result, following our annual review of our executive

 

45


compensation philosophy, the Compensation Committee decided to retain our general approach to executive compensation, while introducing new performance based elements in our long term equity incentives.

We value the opinions of our stockholders and will continue to consider the outcome of future Say-on-Pay votes, as well as feedback received throughout the year, when making compensation decisions for our executive officers.

With regard to the separate non-binding shareholder advisory vote on the frequency of future non-binding stockholder advisory votes on the compensation of our named executive officers (commonly known as a “Say-When-on-Pay” vote) conducted at our 2011 annual meeting of shareholders, our shareholders cast the highest number of votes for voting on an annual basis, compared to every two or three years. In light of this result and other factors considered, our Board of Directors determined that we should continue to hold annual Say-on-Pay votes and have recommended that stockholders approve such annual frequency, as described in Item 3, our Say-When-on-Pay vote.

Executive Compensation Policies and Practices

We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices. The Compensation Committee evaluates our executive compensation program on a regular basis to ensure that it is consistent with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for executive talent. The following policies and practices were in effect during fiscal 2016:

 

   

Independent Compensation Committee . The Compensation Committee is comprised solely of independent directors.

 

   

Independent Compensation Committee Advisor . The Compensation Committee engaged its own compensation consultant to assist with its fiscal 2016 compensation reviews. This consultant performed no consulting or other services for the Company in 2016.

 

   

Annual Executive Compensation Review . The Compensation Committee conducts an annual review and approval of our compensation strategy, including a review and determination of our compensation peer group used for comparative purposes and a review of our compensation-related risk profile to ensure that our compensation programs do not encourage excessive or inappropriate risk-taking and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on us.

 

   

Executive Compensation Policies and Practices . Our compensation philosophy and related corporate governance policies and practices are complemented by several specific compensation practices that are designed to align our executive compensation with long-term shareholder interests, including the following:

 

   

Compensation At-Risk . Our executive compensation program is designed so that a significant portion of compensation is “at risk” based on Company performance, as well as short-term cash and long-term equity incentives to align the interests of our executive officers and stockholders;

 

   

No Executive Retirement Plans . In fiscal 2016, we did not offer pension arrangements or retirement plans or arrangements to our executive officers that are

 

46


 

different from or in addition to those offered to our other employees. In February 2017, we introduced the Trimble Age & Service Equity Vesting Program for certain eligible executive officers. See “Post-Employment Compensation” below;

 

   

Limited Perquisites . We provide limited perquisites or other personal benefits to our executive officers;

 

   

No Tax Reimbursements . We do not provide any tax reimbursement payments (including “gross-ups”) on any perquisites or other personal benefits, other than related to standard relocation benefits;

 

   

No Special Health or Welfare Benefits . Our executive officers participate in broad-based company-sponsored health and welfare benefits programs on the same basis as our other full-time, salaried employees;

 

   

No Post-Employment Tax Reimbursements . We do not provide any tax reimbursement payments (including “gross-ups”) on any severance or change-in-control payments or benefits;

 

   

Stock Ownership Policy. We maintain a stock ownership policy that requires our CEO to maintain a minimum ownership level of our common stock; and

 

   

Policy Prohibiting Hedging of our Equity Securities . We prohibit our executive officers, directors, and other employees from hedging our securities.

Executive Compensation Philosophy and Program Design

Compensation Philosophy

Our executive compensation program is guided by our overarching philosophy of paying for demonstrable performance. Consistent with this philosophy, we have designed our executive compensation program to achieve the following primary objectives:

 

   

Establish compensation opportunities that are competitive, reward performance, and maintain internal equity;

 

   

Attract, motivate, and retain highly talented executive officers by providing compensation opportunities that are competitive and reward for performance; and

 

   

Align the interests of our executive officers with the interests of our stockholders by creating long-term shareholder value.

Our current practice is to combine a mixture of compensation elements that balance achievement of our short-term goals with our long-term performance. We provide short-term incentive compensation opportunities in the form of an annual cash bonus plan, which focuses on our yearly operating results, and we provide long-term incentive compensation opportunities in the form of equity awards, including:

 

   

PSU awards that are earned only if we deliver meaningful results over a multi-year period relative to the performance of the S&P 500 over that same time period;

 

47


   

PSU awards that are earned only if we achieve targeted levels of operating income and revenue growth through the end of fiscal 2018; and

 

   

RSU awards that derive additional value from increases in our share price over time and that are subject to multi-year vesting requirements.

We do not have a specific policy on the percentage allocation between short-term and long-term compensation elements.

We also believe that the compensation of our CEO should be primarily influenced by our overall financial performance and total shareholder return. The Compensation Committee endeavors to set the compensation of our CEO within a range of compensation provided to similarly-situated chief executive officers of the companies in our compensation peer group, as adjusted by its consideration of the particular factors influencing our performance.

Governance of Executive Compensation Program

Role of the Compensation Committee

The Compensation Committee has overall responsibility for overseeing our compensation and benefits policies generally, and overseeing and evaluating the compensation plans, policies, and practices applicable to our CEO as well as our other executive officers. The Compensation Committee makes recommendations to our full Board of Directors regarding the compensation of our CEO and our other executive officers, including the other Named Executive Officers, and our full Board of Directors (with the exception of our CEO) makes all final decisions regarding his compensation and the compensation of our other executive officers. The Compensation Committee retains a compensation consultant (described below under “Role of the Compensation Consultant”) to provide support to the Committee in its review and assessment of our executive compensation program.

The Compensation Committee reviews the base salary levels, cash bonus opportunities, and long-term incentive compensation opportunities of our executive officers, including our CEO and the other Named Executive Officers, each fiscal year at the beginning of the year, or more frequently as warranted. Adjustments are generally effective in May of each fiscal year.

The Compensation Committee does not establish specific targets for the total direct compensation opportunities of our executive officers, including our CEO and the other Named Executive Officers. When selecting and setting the amount of each compensation element, the Compensation Committee considers the following factors:

 

   

the Company’s performance against the financial and operational objectives established by the Compensation Committee and our Board of Directors;

 

   

each individual executive officer’s skills, experience, and qualifications relative to other similarly-situated executives at the companies in our compensation peer group;

 

   

the scope of each executive officer’s role compared to other similarly-situated executives at the companies in our compensation peer group;

 

   

the performance of each individual executive officer, based on a subjective assessment of his or her contributions to our overall performance, ability to lead his or her business unit or function, and work as part of a team, all of which reflect our core values;

 

48


   

compensation parity among our executive officers;

 

   

our financial performance relative to our peers; and

 

   

the compensation practices of our compensation peer group and the positioning of each executive officer’s compensation in a ranking of peer company compensation levels.

These factors provide the framework for compensation decision-making and final decisions regarding the compensation opportunity for each executive officer. No single factor is determinative in setting pay levels, nor was the impact of any factor on the determination of pay levels quantifiable.

Role of Chief Executive Officer

In discharging its responsibilities, the Compensation Committee works with members of our management, including our CEO. Our management assists the Compensation Committee by providing information on corporate and individual performance, market compensation data, and management’s perspective on compensation matters. The Compensation Committee solicits and reviews our CEO’s recommendations and proposals with respect to adjustments to annual cash compensation, long-term incentive compensation opportunities, program structures, and other compensation-related matters for our executive officers (other than with respect to his own compensation). The Compensation Committee reviews and discusses these recommendations and proposals with our CEO and considers them as one factor in determining and approving the compensation for our Named Executive Officers (other than our CEO) and other executive officers. Our CEO recuses himself from all discussions and recommendations regarding his own compensation.

Role of Compensation Consultant

The Compensation Committee engages an independent compensation consultant to assist it by providing information, analysis, and other advice relating to our executive compensation program and the decisions resulting from its annual executive compensation review.

For fiscal 2016, the Compensation Committee engaged Compensia, Inc., a national compensation consulting firm ( Compensia ), as its compensation consultant to advise on executive compensation matters, including competitive market pay practices for senior executives, and with the data analysis and selection of the compensation peer group. For fiscal 2016, the scope of Compensia’s engagement included:

 

   

the review and analysis of the compensation for our executive officers, including our CEO and the other Named Executive Officers;

 

   

supporting the design and implementation of changes to the executive long term incentive strategy;

 

   

reviewing and providing input on the Compensation Discussion and Analysis section of our proxy statement for our 2016 Annual Meeting of Stockholders;

 

   

providing analysis of market practice and support in the consideration and finalization of changes to the change-in-control and severance arrangements applicable to our Named Executive Officers;

 

   

the research, development, and review of our compensation peer group; and

 

   

support on other ad hoc matters throughout the year.

 

49


The terms of Compensia’s engagement include reporting directly to the Compensation Committee and to the Compensation Committee chairman. Compensia also coordinates with our management for data collection and job matching for our executive officers.

In fiscal 2016, Compensia did not provide any other services to the Company. The Compensation Committee has evaluated Compensia’s independence pursuant to the listing standards of the NASDAQ and the relevant SEC rules and has determined that no conflict of interest has arisen as a result of the work performed by Compensia.

Competitive Positioning

For purposes of comparing our executive compensation against the competitive market, the Compensation Committee reviews and considers the compensation levels and practices of a group of peer companies. This compensation peer group consists of technology companies that are similar to us in terms of revenue, market capitalization, geographical location, and number of employees. In developing the compensation peer group for fiscal 2016, the following criteria were observed in identifying comparable companies:

 

   

similar industry and competitive market for talent;

 

   

within a range of 0.5x to 2.0x of our revenue; and

 

   

within a range of 0.3x to 3.0x of our market capitalization.

The Compensation Committee reviews our compensation peer group at least annually and makes adjustments to its composition if warranted, taking into account changes in both our business and the businesses of the companies in the peer group.

 

50


At the beginning of fiscal 2016, the Compensation Committee used the following compensation peer group to assist with the determination of compensation for our executive officers. The Compensation Committee approved this peer group in November 2015 following a review that included input from the Compensation Committee’s independent consultant. The information in the table below is based on financial data from S&P’s Research Insight and reflects financial data available at that the time the peer group companies were selected.

 

Peer Company   Last Four
Quarters
Revenue
(in millions)  1
    Market
Capitalization
(in millions)  2
    1-Year
Revenue
Growth  1
    Fiscal Year
End
Headcount  3
 

ARRIS Group

  $ 5,144     $ 3,797       5     6,660  

Autodesk

  $ 2,539     $ 10,403       7     8,823  

Brocade Communications

  $ 2,239     $ 4,264       2     4,161  

CA Technologies

  $ 4,170     $ 11,875       -5     11,600  

Cadence Design Systems

  $ 1,651     $ 5,807       10     6,100  

Citrix Systems

  $ 3,168     $ 10,792       4     10,081  

FLIR Systems

  $ 1,547     $ 3,967       5     2,741  

Juniper Networks

  $ 4,517     $ 9,727       -7     8,806  

Keysight Technologies

  $ 2,868     $ 5,381       0     9,600  

Motorola Solutions

  $ 5,850     $ 13,384       -2     15,000  

Nuance Communications

  $ 1,929     $ 5,053       2     14,000  

PTC

  $ 1,309     $ 3,685       -2     6,444  

Roper Technologies

  $ 3,592     $ 15,979       4     10,137  

Synopsys

  $ 2,194     $ 7,221       8     9,436  

Teledyne Technologies

  $ 2,366     $ 3,381       1     9,800  

Zebra Technologies

  $ 2,883     $ 4,202       156     6,800  

75th Percentile

  $ 3,736     $ 10,500       5     10,095  

Median

  $ 2,703     $ 5,594       3     9,129  

25th Percentile

  $ 2,128     $ 4,143       -1     6,606  

Trimble

  $ 2,317     $ 4,773       -4     8,217  
(1) Based on the most recent information publicly available as of October 2015. In most cases, including for the Company, this represents trailing four quarter performance as of the June 2015 quarter end.
(2) Market capitalization reflects the 30-day average stock price for each company as of August 31, 2015.
(3) Headcount information based on the most recent fiscal year end for each company prior to October 2015.

The Compensation Committee uses data drawn from our compensation peer group, as well as data from the Radford Global Technology executive compensation survey to evaluate the competitive market when determining the total direct compensation packages for our executive officers, including base salary, target cash bonus opportunities, and long-term incentive compensation. Radford provides compensation market intelligence, and is widely used within the technology industry. In addition, subsets of the Radford Global Technology executive compensation survey were incorporated into the competitive assessment prepared by the Compensation Committee’s compensation consultant and used by the Compensation Committee to evaluate the compensation of our executive officers, including our

 

51


CEO and the other Named Executive Officers. Specifically, the Compensation Committee received a custom output of survey results reflecting only companies from our compensation peer group in addition to survey results tailored solely based on revenue.

The executive compensation survey data supplements the compensation peer group data and provides additional information for the Named Executive Officers and other vice president positions for which there is less public comparable data available.

Individual Compensation Elements

In fiscal 2016, the principal elements of our executive compensation program, and the purposes for each element, are summarized in the table below.

 

Element   Form of Compensation   Purpose
Base Salary   Cash   Designed to attract and retain highly talented executives by providing pay opportunities that are competitive in the market and reward performance
Short Term Cash Bonus Opportunities   Cash   Designed to motivate our executives to achieve business goals and provide financial incentives when the Company and business areas meet or exceed annual goals and targets established under the incentive plan

Long Term Incentives

(Equity Awards)

  Performance stock unit awards and restricted stock unit awards   Designed to align the interests of our executives with the interests of our stockholders by motivating our executives to achieve long term shareholder value

Base Salary

Base salary represents the fixed portion of the compensation of our executive officers, including our CEO and the other Named Executive Officers, and is an important element of compensation intended to attract and retain highly-talented individuals.

Using the competitive market data provided by its independent compensation consultant, the Compensation Committee reviews and adjusts the base salaries for each of our executive officers, including our CEO and each of the other Named Executive Officers, as part of its annual executive compensation review. In addition, the base salaries of our executive officers may be adjusted by the Compensation Committee in the event of a promotion or significant change in responsibilities.

Generally, the Compensation Committee sets base salaries with reference to the competitive range of the market median of our compensation peer group and applicable executive compensation survey data. Although we set base salaries within a competitive range of the market median, the actual positioning will also be based on the Compensation Committee’s assessment of the factors described above.

In May 2016, consistent with the recommendation of management, the Board of Directors and the Compensation Committee determined to increase the base salaries of our Named Executive

 

52


Officers other than our CEO. In making this decision, they considered our performance and percentile rankings compared to the companies in the compensation peer group, the current risks and challenges facing us, as well as the individual qualifications, skills, and past performance of the executive officers.

The base salaries of our CEO and the other Named Executive Officers, excluding Mr. Delepine and Mr. Painter, for fiscal 2016 that were established in May 2016 are as follows:

 

Named Executive Officer   Fiscal 2015 Base Salary
Rate (1)
  Fiscal 2016 Base Salary
Rate (1)
  Percentage  Adjustment

Mr. Berglund

  $860,000   $860,000   0%

Mr. Fosburgh

  $425,000   $437,750   3%

Mr. Gibson

  $425,000   $437,750   3%

Mr. Matthews

  $390,000   $401,700   3%
(1) Reflects the annual salary rate approved by the Compensation Committee. Annual changes to base salaries, if any, are generally effective in May of each fiscal year. Mr. Delepine is excluded from the table as his employment terminated prior to the salary review in May 2016.

Separate from the May 2016 salary adjustments affecting the Named Executive Officers above, the Board of Directors and Compensation Committee approved an increase in the base salary of Mr. Painter from $275,000 to $375,000 effective as of February 1, 2016. This increase was made upon his promotion to CFO. When finalizing this salary rate, they considered Mr. Painter’s level of experience and individual performance as well as market data from our compensation peer group. Mr. Painter’s salary was not changed in May 2016.

The salaries paid to our CEO and the other Named Executive Officers in fiscal 2016 are set forth in the “Summary Compensation Table” below.

Short-Term Cash Bonuses

We use a short-term cash bonus plan to motivate our executive officers and other participants to achieve our annual and quarterly business goals. In fiscal 2016, our Board of Directors adopted the Annual Management Incentive Plan for fiscal 2016 (the “2016 MIP” ) to provide financial incentives for the Company as a whole and our individual business sectors and divisions to meet or exceed the annual goals and targets established under our fiscal 2016 annual operating plan. Senior-level managers, our executive officers, including our CEO and the other Named Executive Officers, and certain other individual employees were eligible to participate, upon approval by our CEO, or by our Board of Directors with respect to our CEO, in the 2016 MIP.

Target Cash Bonus Opportunities

Cash bonuses under the 2016 MIP were based upon an eligible percentage of each participant’s base salary within a range of target incentive opportunities. The target cash bonus opportunities for our executive officers, including the Named Executive Officers (other than our CEO) are recommended by our CEO to the Compensation Committee, and approved by our Board of Directors. The target cash bonus opportunity for our CEO is recommended by the Compensation Committee and approved by the independent members of our Board of Directors. For fiscal 2016, the target cash bonus opportunities for our executive officers, including our CEO and the other Named Executive Officers, were maintained at their fiscal 2015 levels. Specifically, the target incentive opportunities for the 2016 fiscal year were as follows: for our CEO, 125% of his annual base salary; and for Messrs. Painter, Fosburgh, Gibson and Matthews, 80% of each of their respective annual base salaries. Potential cash bonuses for

 

53


our executive officers, including our CEO and the other Named Executive Officers, under the 2016 MIP could range from zero to 300% of their target cash bonus opportunity.

Bonus Plan Performance Measure

For purposes of the 2016 MIP, our Board of Directors selected operating income as the corporate performance measure. For this purpose, “operating income” is determined as follows: (i) with respect to a sector or division, operating income for that sector or division; and (ii) with respect to the Company as a whole, operating income for the Company adjusted for restructuring costs, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture costs associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence, integration costs, and litigation expenses. A sector is a grouping of divisions within the Company. Because of these adjustments, the 2016 MIP used a non-GAAP measure of operating income. References to operating income in the context of the 2016 MIP targets refer to this non-GAAP measure, unless otherwise noted.

Bonus Plan Formula

In the case of our CEO and the other Named Executive Officers, actual payments under the 2016 MIP were dependent on our actual operating income results relative to the operating income goals established for him. For our CEO and CFO, as well as for Mr. Gibson, payments under the 2016 MIP were dependent upon achievement of pre-established operating income goals for the Company as a whole. For Messrs. Fosburgh and Matthews, 2016 MIP payments were dependent upon the achievement of the pre-established revenue and operating income goals for the Company as a whole and for their respective business sectors, each constituting 50% of their respective target bonus amounts. Operating income goals were established for the Company and for each business sector for each quarter and for the full fiscal year.

Each Named Executive Officer was eligible to receive approximately 15% of his target cash bonus opportunity for each quarter if quarterly operating income goals were achieved, and was eligible to receive his full target cash bonus opportunity if full year revenue and operating income goals were achieved. The target cash bonus opportunities based on quarterly and annual performance operated independently. For example, it was possible for a Named Executive Officer to achieve the quarterly goals for operating income and receive quarterly payments, but not achieve an annual goal for revenue and operating income. Similarly, it was possible for a Named Executive Officer to receive an annual bonus amount if full year revenue and operating income goals were achieved, even if not all prior quarterly operating income goals had been achieved. The amount of any quarterly cash bonus payments based on the achievement of quarterly goals are deducted from the annual bonus amount, if any.

At the end of the year, an annual bonus amount for each executive was determined based on full year operating income and revenue results, and, in the cases of Messrs. Fosburgh and Matthews, on the annual operating income and revenue results of their respective business sectors. Additionally, threshold levels of revenue and operating income for the Company and for the sectors applicable to each Named Executive Officer must be met in order for any bonus to be paid based upon annual results. The amount of this annual bonus amount can vary from 0% to 300% of each Named Executive Officer’s bonus target for the full fiscal year, calculated on a sliding scale, as described below.

Named Executive Officers were required to remain continuously employed through a payment date to be entitled to a payment for the applicable period.

 

54


The following table sets forth the 2016 MIP operating income goals and the operating income results applicable to the bonus payment for each of the Named Executive Officers (in millions).

 

    Q1     Q2     Q3     Q4     2016     Annual
Thresholds
 
      Target     Actual     Target     Actual     Target     Actual     Target     Actual     Target     Actual     Achieved? (1)  

Corporate

  $ 89     $ 89     $ 115     $ 99     $ 119     $ 111     $ 117     $ 107     $ 440     $ 406       Y  

Sector (Fosburgh)

  $ 34     $ 27     $ 54     $ 48     $ 58     $ 51     $ 49     $ 38     $ 195     $ 164       Y  

Sector (Matthews)

  $ 39     $ 38     $ 33     $ 29     $ 27     $ 25     $ 24     $ 28     $ 123     $ 120       Y  
(1) Payment of the annual portion of the bonus is contingent upon achievement of threshold revenue and operating income levels for the full fiscal year.

The relationship between the minimum operating income threshold, target and maximum performance, and the bonus earned under the annual portion of the MIP is detailed in the table below. The formula provides for payments based upon partial achievement of operating income goals above the minimum threshold shown below on a linear interpolated basis between 0 and 100% achievement of operating income goals, and on an upward sloping linear interpolated basis between 100 and 300% achievement of operating income goals.

 

       Operating Income Goals (in millions)
Incentive Payout as a % of
Target
   Company    Sector
(Fosburgh)
   Sector
(Mathews)
0%    $390    $160    $111
100%    $440    $195    $123
200%    $480    $220    $136
300%    $520    $255    $154

Bonus Payments

The actual cash bonus payments earned by our CEO and the other Named Executive Officers under the 2016 MIP ranged from 22% to 53% of their target cash bonus opportunities. The following table sets forth the target cash bonus opportunities, weighting of corporate and sector operating income goals, the actual achievement level relative to these target levels, and the actual cash bonus payment for fiscal 2016 for the Named Executive Officers for fiscal 2016:

 

       Target Bonus      Bonus Weighting     % Achievement     Actual Bonus  
Named Executive
Officer
   % of
Base
    Value
($K)
     Corporate     Sector     Corporate     Sector     % of
Target
Bonus
    Earned
Value
($K)
 

Steven W. Berglund

     125   $ 1,075        100         31     N/A       31   $  334  

Robert Painter

     80   $ 292        100         31     N/A       31   $ 91  

Francois Delepine

     N/A       N/A        N/A       N/A       N/A       N/A       N/A       N/A  

Bryn Fosburgh

     80   $ 347        50     50     31     12     22   $ 75  

Christopher Gibson

     80   $ 347        100         31     N/A       31   $ 108  

Darryl Matthews

     80   $ 318        50     50     31     74     53   $ 167  

 

55


The cash bonus payments made to our CEO and the other Named Executive Officers for fiscal 2016 are set forth in the “Summary Compensation Table” below.

Change to Fiscal 2017 Short-Term Cash Bonus

In January 2017, the Compensation Committee approved a change to the performance measurement for the Management Incentive Plan payable based on 2017 performance. Specifically, for our Chief Executive Officer and other Named Executive Officers, payouts under the 2017 MIP will be based on our financial performance for the full fiscal year, and there will no longer be a portion of the bonus target tied to quarterly performance. Other elements of the MIP are consistent with the plan design in prior years, including the use of operating income and revenue as the financial metrics that determine the amount earned. The Compensation Committee made this change based on a review of market practice and to ensure alignment of the program with the overall compensation philosophy and goals of its short term incentive program.

Long-Term Incentive Compensation

The Compensation Committee and the Board of Directors view long-term incentive compensation in the form of equity awards as an important component of our executive compensation program. The realized value of these equity awards bears a direct relationship to our stock price, and, therefore, these awards are an incentive for our executive officers to create value for our stockholders. Equity awards also help us retain qualified executive officers in a competitive market.

Long-term incentive compensation opportunities in the form of equity awards are granted by our Board of Directors, based on the recommendations of the Compensation Committee. The amount and forms of such equity awards are determined by the Compensation Committee after considering factors such as individual performance, future potential, ability to influence our long term growth and profitability, and importance to our success. The amounts of the equity awards are also intended to provide competitively-sized awards and resulting target total direct compensation opportunities within a competitive range of the market median relative to our compensation peer group and Radford survey data for similar roles and positions for each of our executive officers, taking into consideration business results, internal equity, experience, and individual performance.

In May 2016, the Compensation Committee determined that the equity awards to be granted to our executive officers should be in the form of PSU awards and time-based RSU awards for shares of our common stock. Named Executive Officers received equity grants with two different approaches to performance measurement. A portion of the performance shares granted, which comprised approximately 50% of the total long-term incentive value awarded, feature vesting based on our TSR relative to the components of the S&P 500 Index. The remaining performance shares granted, which comprised approximately 25% of the total long-term incentive value awarded, will vest to the extent that we achieve targeted levels of revenue and operating income growth as of the end of our fiscal 2018. The remaining 25% of the long-term incentive value granted to our executives was delivered in the form of time vesting RSUs. Additional details regarding the terms of the long- term incentives granted to our Named Executive Officers are provided below.

PSU Awards (based on total shareholder return)

The PSU awards based on our total shareholder return ( “TSR” ) that are granted to our executive officers are designed to link executive compensation with increased stockholder value. The actual number of shares of our common stock for which these PSU awards may be settled varies based on our TSR relative to the total shareholder return of the components of the S&P 500 Index during

 

56


one-, two- and three-year performance periods, beginning on May 30, 2016 (the “Performance Periods” ). The total number of shares earned for the three Performance Periods will vest at the end of the three-year period.

The Compensation Committee selected the S&P 500 Index as the most appropriate reference from which to evaluate our performance because it represents a reliable indicator of the general economy and reflects the unique and diverse nature of our operations. The design of the relative TSR PSUs granted in 2016 includes two changes from the shares awarded in 2015:

 

  1. The averaging period used to measure TSR for Trimble and for the components of benchmark was increased from 30 to 60 days. The Compensation Committee approved this change based on a determination that changes in the average share price for a shorter time horizon can be impacted by volatility of broader market, which can undermine the intention of measuring and rewarding for long term shareholder value creation.

 

  2. The award was divided into equally weighted tranches with one-, two- and three-year measurement periods. The relative TSR PSUs granted to our Named Executive Officers in fiscal 2015 measured performance during a single three-year performance period. The Compensation Committee approved this change in order to ensure that the award measures incremental performance during the three-year vesting time horizon with a reduced emphasis on our stock price at a single point in time.

For purposes of the PSU awards, the payout range based on our TSR relative to the S&P 500 Index over the Performance Periods is as follows:

 

Relative TSR Compared to Percentile Ranking across

S&P 500 Member Companies

  

Payout Percentage of Target.

(# of shares)

Maximum: 80 th percentile or above

   200%

Target: 50 th percentile

   100%

Threshold: 25 th percentile

   50%

Below threshold

   0%

For purposes of these PSU awards, TSR for the Company and the components of the S&P 500 Index are based on the 60-trading day average stock price through the final day of the Performance Period and the 60-trading day average stock price prior to the commencement of the Performance Period, including the reinvestment of dividends where applicable to S&P 500 Index components.

PSU Awards (based on financial performance)

In 2016, the Compensation Committee approved the grant of PSUs with vesting tied to our revenue and non-GAAP operating income performance during fiscal 2018. The number of shares earned will vary from 0% to 200% of the target number of units granted to each Named Executive Officer, and earned shares will vest at the end of the performance measurement period. The levels of performance required to earn the target number of PSUs was approved by the Compensation Committee at the time of the grant, and are viewed as achievable but also challenging. In addition, the revenue and non-GAAP operating income performance levels required to earn any payout under the terms of the PSUs was established at a level that represents strong growth and improvement relative to our actual fiscal 2015 results. The decision to tie vesting of the PSUs to our revenue growth and operating income performance is aligned with our long-term strategic plan and reflects our focus on profitable growth as a key driver of stockholder value. The PSUs also include threshold levels of performance below which no shares will be earned.

 

57


The Compensation Committee’s decision to introduce a PSU award with vesting tied to our financial performance is intended to reward for strong performance in operating measures that are key to stockholder value creation, to complement our short-term incentive program by providing for measurement of revenue and operating income performance over a multi-year time horizon, and to motivate our leadership team to focus on key elements of our long-term strategic plan.

RSU Awards

The RSU awards granted to our executive officers in November and December 2016 vest in equal annual installments over the three-year period, with the first installment vesting on the first anniversary of the date of grant, contingent upon an executive officer remaining continuously employed by us through each applicable vesting date. Upon vesting, the RSU awards may be settled by issuing the number of shares of our common stock, or by a cash payment equal to the fair market value of the shares on the vesting date, or a combination of shares and cash, at the discretion of the Company.

The equity awards granted to our CEO and the other Named Executive Officers in fiscal 2016 are set forth in the “Summary Compensation Table” and the “Grants of Plan-Based Awards” table below.

Fiscal 2016 Long-Term Equity Awards

In 2016, grants were made to our Named Executive Officers in May, June, November and December. The May and June equity awards were granted following completion of an updated competitive market analysis by the Compensation Committee’s compensation consultant. At that time, the Compensation Committee, following receipt of award recommendations by our CEO, reviewed this analysis, as well as both Company and individual performance, and recommended to our Board of Directors equity awards at levels intended to ensure that our executive officers’ target total direct compensation for the year was both market competitive and an appropriate reflection of their performance.

During 2016, the Compensation Committee recommended, and our Board of Directors approved, the following equity awards for our CEO and the other Named Executive Officers. In February, the Compensation Committee recommended, and our Board of Directors approved, 45,000 stock options and 30,000 RSU equity awards for Mr. Painter in connection with his promotion to CFO in February 2016.

Mr. Delepine, who ceased to be CFO of the Company in February 2016, did not receive new equity grants in 2016 and is not included in the table below.

 

Named Executive Officer   Stock Option
Awards (# of
shares)
    Restricted
Stock Unit
Awards (#
of shares)
    Performance
Stock Unit
Awards (# of
shares)
    Aggregate Grant
Date Fair Value
of Equity
Awards ($)
 

Mr. Berglund

            61,700       185,100     $ 6,506,882  

Mr. Painter

    45,000       39,375       37,500     $ 2,082,451  

Mr. Fosburgh

            17,000       43,800     $ 1,643,102  

Mr. Gibson

            11,000       33,000     $ 1,184,810  

Mr. Matthews

            11,000       33,000     $ 1,160,060  

 

58


Welfare and Health Benefits

Our executive officers, including our CEO and the other Named Executive Officers, are eligible to receive the same employee benefits that are generally available to all our full-time employees, subject to the satisfaction of certain eligibility requirements. These benefits include health and welfare, benefits generally available to all U.S. employees. In addition, employees, including our executive officers, are eligible to participate in our Section 401(k) retirement plan. Participants in the Section 401(k) plan in general may receive up to $2,500 per year in matching Company contributions.

In structuring these benefits, we provide an aggregate level of benefits that are comparable to those provided by similar companies. Certain of the Named Executive Officers participate in our Non-Qualified Deferred Compensation Plan, further discussed below under “Post-Employment Compensation.” In addition, we pay the life insurance premiums on behalf of our CEO and the other Named Executive Officers, as part of our general death benefits for full time employees.

Perquisites and Other Personal Benefits

Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide significant perquisites or other personal benefits to our executive officers, including our CEO and the other Named Executive Officers, except as generally made available to our employees, or in situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment and retention purposes. During fiscal 2016, neither our CEO nor any of the other Named Executive Officers received perquisites or other personal benefits that were, in the aggregate, $10,000 or more for each individual, except for contributions made by the Company on behalf of Mr. Gibson to the Company’s Deferred Compensation Plan, as described below.

In the future, we may provide perquisites or other personal benefits in limited circumstances, such as those described in the preceding paragraph. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the Compensation Committee.

Employment Arrangements

We have entered into a written employment agreement with our CEO and have written employment offer letters with each of our other executive officers, including the other Named Executive Officers. In filling each of our executive positions, we recognized the need to develop competitive compensation packages to attract qualified candidates in a dynamic labor market. At the same time, in formulating these compensation packages, we were sensitive to the need to integrate new executive officers into the executive compensation structure that we were seeking to develop, balancing both competitive and internal equity considerations. Each of these arrangements provides for “at will” employment.

In the case of our CEO and CFO, their employment arrangements also provide for certain payments and benefits in the event of certain qualifying terminations of employment regardless of whether a change in control of the Company has occurred. These post-employment compensation terms are discussed in greater detail in the “Post-Employment Compensation” section below.

In connection with Mr. Gibson’s relocation to the United States, the Company entered into a letter of assignment dated June 11, 2008, as amended December 20, 2009, under which the Company

 

59


agreed to repatriate Mr. Gibson to England at the Company’s expense in the event of Mr. Gibson’s termination of employment by the Company (other than for gross misconduct) at any time or, in the event of Mr. Gibson’s retirement from the Company after 2016. The letter of assignment does not provide for a tax “gross-up” obligation by the Company in the event that any additional taxes become payable by Mr. Gibson under these arrangements. Additionally, the Company agreed to contribute 5% of Mr. Gibson’s annual base salary and MIP earnings to the Company’s Deferred Compensation Plan on Mr. Gibson’s behalf, contingent on Mr. Gibson contributing matching funds.

Post-Employment Arrangements

We have entered into change in control severance agreements (the “Severance Agreements” ) with each of our executive officers including our CEO and the other Named Executive Officers. We believe that having in place reasonable and competitive post-employment compensation arrangements are essential to attracting and retaining highly-qualified executive officers. The Severance Agreements are designed to provide reasonable compensation to executive officers who leave the Company under certain circumstances to facilitate their transition to new employment. Further, in some instances we seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring a departing executive officer to sign a separation and release agreement acceptable to us as a condition to receiving post-employment compensation payments or benefits.

On February 2, 2017, as recommended by the Compensation Committee, the Board of Directors approved amended and restated change in control and severance agreements with our CEO, CFO and other Named Executive Officers, as well as certain other executive officers. When approving the amended agreements, the Compensation Committee considered an analysis of market practice among the companies in our compensation peer group as well as input from the Compensation Committee’s independent consultant. The terms of these agreements are described in greater detail below under “Post-Employment Compensation.”

The Compensation Committee does not consider the specific amounts payable under the Severance Agreements when establishing annual compensation. We do believe, however, that these arrangements are necessary to offer compensation packages that are competitive.

We believe that these arrangements are designed to align the interests of our executive officers and our stockholders when considering our long-term future. The primary purpose of these arrangements is to keep our most senior executive officers focused on pursuing all corporate transaction activity that is in the best interests of our stockholders regardless of whether those transactions may result in their own job loss. Reasonable post-acquisition payments and benefits should serve the interests of both the executive officer and our stockholders.

For detailed descriptions of the employment arrangements and post-employment arrangements we maintain with our Named Executive Officers referenced above for the 2016 fiscal year, as well as an estimate of the potential payments and benefits payable under these arrangements, see “Post-Employment Compensation” below.

Compensation for our Former Chief Financial Officer

On February 1, 2016, Mr. Delepine left his role as Chief Financial Officer. In connection with his termination of employment, we entered into a settlement and release agreement with him. The terms of this arrangement are described below under “Post-Employment Compensation—Separation of Mr. Delepine, CFO”.

 

60


Other Compensation Policies and Practices

Equity Awards Grant Policy

Our Board of Directors may grant equity awards while the directors are in possession of material, non-public information. Due to the fact that our Board of Directors’ regular meetings are timed to coincide with the preparation of our quarterly financial results, equity awards have and will be granted shortly before an earnings release. The Compensation Committee or our Board of Directors may also grant equity awards at a special meeting, or by unanimous written consent, in special circumstances, such as to facilitate the hiring of a key executive officer.

All equity awards are granted to our executive officers pursuant to the Company’s 2002 Stock Plan. Options to purchase shares of our common stock are granted with an exercise price equal to the fair market value of our common stock on the date of grant.

Stock Ownership Policy

We maintain a stock ownership policy for our chief executive officer and the non-employee members of our Board of Directors to further align their respective interests with the interests of our stockholders, and to further promote our commitment to sound corporate governance. This policy requires our chief executive officer to own a minimum number of shares of our common stock equal to a value of five times his or her annualized base salary. The non-employee members of our Board of Directors are required to own a minimum number of shares of our common stock shares equal to a value of $200,000.

The number of shares necessary to meet the minimum ownership level may be accumulated during the first five years following adoption of the guidelines or, if later, during the first five years after becoming chief executive officer or a member of our Board of Directors, as applicable. The shares of our common stock counted toward the ownership guidelines include shares owned directly and indirectly, provided there is an economic interest in the shares. For our CEO, this ownership level must be attained within five years from the date the policy was adopted. Mr. Berglund has achieved his required ownership level.

Policy Prohibiting Hedging

We have a policy that prohibits all hedging or monetization transactions, which could result in a director, officer or employee to continue to own the covered securities at issue, but without the full risks and rewards of ownership. If that were to occur, the director, officer or employee may no longer have the same objectives as the Company’s other stockholders. The Company considers it improper and inappropriate for its employees, including its Named Executive Officers, to engage in such transactions, and has expressly prohibited such activity under its Insider Trading Policy.

Tax and Accounting Considerations

Deductibility of Executive Compensation

Generally, Section 162(m) of the Code disallows public companies a tax deduction for federal income tax purposes of remuneration in excess of $1 million paid to their chief executive officer and each of the three other most highly-compensated executive officers (other than the chief executive officer and chief financial officer) whose compensation is required to be disclosed to our stockholders under the Exchange Act in any taxable year. Remuneration in excess of $1 million may only be deducted if it is “performance-based compensation” within the meaning of Section 162(m) or qualifies for one of the other exemptions from the deductibility limit. In making compensation decisions, the

 

61


Compensation Committee considers the potential effects of Section 162(m) on the compensation paid to our CEO and the other Named Executive Officers.

Where reasonably practicable, the Compensation Committee seeks to qualify the performance-based incentive compensation paid or awarded to our CEO and the other Named Executive Officers for the “performance-based compensation” exemption from the deductibility limit of Section 162(m). As such, in approving the amount and form of compensation for the Named Executive Officers, the Compensation Committee considers all elements of our cost of providing such compensation, including the potential impact of Section 162(m). To maintain flexibility in compensating the Named Executive Officers in a manner designed to promote varying corporate goals, however, the Compensation Committee has not adopted a policy that all compensation payable to our CEO and the other Named Executive Officers that is subject to Section 162(m) must be deductible for federal income tax purposes. From time to time, the Compensation Committee may, in its judgment, approve compensation for our CEO and the other Named Executive Officers that does not comply with an exemption from the deductibility limit when it believes that such compensation is in the best interests of the Company and our stockholders.

Accounting for Stock-Based Compensation

We follow the Financial Accounting Standard Board’s Accounting Standards Codification Topic 718 (“FASB ASC Topic 718” ) for our stock-based compensation awards. FASB ASC Topic 718 requires us to measure the compensation expense for all share-based payment awards made to our employees and members of our Board of Directors, including options to purchase shares of our common stock and other stock awards, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the executive compensation tables required by the federal securities laws, even though the recipient of the awards may never realize any value from their awards.

Compensation Committee Report

The information contained in this Compensation Committee Report shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that it is specifically incorporated by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with the Company’s management, and, based on this review and discussion, has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement.

Submitted by the Compensation Committee of the Company’s Board of Directors,

 

Börje Ekholm,  Member    Ronald S. Nersesian,  Member    Nickolas W. Vande Steeg, Chairman
Compensation Committee    Compensation Committee    Compensation Committee

Also submitted by the Company’s Board of Directors other than with respect to the Tax and Accounting Treatment section of the Compensation Discussion and Analysis,

 

Steven W. Berglund    Kaigham (Ken) Gabriel    Merit E. Janow    Ulf J. Johansson    Meaghan Lloyd    Mark S. Peek

 

62


Executive Compensation Tables

This section includes the executive compensation tables required by Item 402 of Regulation S-K, promulgated under the Securities Act of 1933, as amended.

Summary Compensation Table

The following table sets forth the compensation information for the 2016, 2015 and 2014 fiscal years, respectively, by: (i) all persons who served as the Company’s chief executive officer during the last completed fiscal year; (ii) all persons who served as the Company’s chief financial officer during the last completed fiscal year; and (iii) the three other most highly compensated executive officers of the Company serving at the end of the last completed fiscal year.

 

SUMMARY COMPENSATION TABLE  
Name and Principal Position   Year     Salary (1)     Stock
Awards (2)
    Option
Awards (3)
   

Non-Equity

Incentive

Plan Comp-

ensation (1)(4)

                 All Other
            Comp-
            ensation
    Total  

Steven W. Berglund

President & Chief

Executive Officer

   

2016

2015

2014

 

 

 

  $

$

$

860,000

860,000

838,308

 

 

 

  $

$

$

6,506,882

7,721,770

3,149,687

 

 

 

 

 

$

-

2,754,808

 

 

  $

$

$

333,901

173,654

306,231

 

 

 

   

-

-

-

 

 

 

  $

$

$

7,700,783

8,755,424

7,049,034

 

 

 

Robert Painter (7)

Chief Financial Officer

    2016     $ 365,428     $ 1,811,101     $ 271,350     $ 90,803     $ 3,000 (5)    $ 2,541,682  

Francois Delepine (8)

Former Chief Financial Officer

   

2016

2015

2014

 

 

 

  $

$

$

91,538

425,000

416,827

 

 

 

   

$

$

-

1,387,950

5,028,350

 

 

 

 

 

 

$

 

 

160,800

 

 

 

 

 

$

$

 

54,923

98,077

 

 

 

  $

$

$

2,657,357

2,500

2,500

(4)(5)(9) 

(5) 

(5) 

  $

$

$

2,748,895

1,870,373

5,706,554

 

 

 

Bryn A. Fosburgh

Senior Vice President

   

2016

\2015

2014

 

 

 

  $

$

$

433,287

425,000

414,853

 

 

 

  $

$

$

1,643,102

1,714,813

628,168

 

 

 

  $ 549,945     $

$

$

74,728

27,462

204,070

 

 

 

  $

$

$

3,000

2,500

2,500

(5) 

(5) 

(5) 

  $

$

$

2,154,117

2,169,775

1,799,536

 

 

 

Christopher Gibson

Senior Vice President

   

2016

2015

2014

 

 

 

  $

$

$

433,287

425,000

402,151

 

 

 

  $

$

$

1,184,810

1,328,263

566,690

 

 

 

  $ 494,490     $

$

$

107,665

27,462

121,120

 

 

 

  $

$

$

22,364

21,356

1,641

(6) 

(6) 

(6) 

  $

$

$

1,726,462

1,802,081

1,586,092

 

 

 

Darryl Matthews (7)

Senior Vice President

    2016     $ 397,605     $ 1,160,060       -     $ 167,321     $ 3,000 (5)    $ 1,727,986  
(1) The amounts shown are for actual amounts paid in each fiscal year. These may differ from the annual base salaries that are established for such year, which are typically set in May. The amounts shown in the columns for Salary and Non-Equity Incentive Plan Compensation may include amounts earned in the applicable year but deferred at the election of the Named Executive Officer pursuant to the Company’s Non-Qualified Deferred Compensation Plan.
(2) The amounts in these columns represent the grant date fair value of restricted stock unit awards for the year in which the RSUs were granted. The fair value of performance-based restricted stock units with vesting tied to our total shareholder return are valued as of the grant date using a Monte Carlo simulation and the fair value is greater that the value of Trimble’s share price at the date of grant. The fair value of our service-based and other performance-based restricted stock units is determined using the closing price of our common stock on the date of grant and the total expense associated with the performance-based awards is based upon the probable achievement of the underlying revenue and operating income performance goals as of the grant date. Assuming the highest level of performance is achieved under the applicable performance conditions, the maximum possible value of these performance-based RSUs, using the grant date fair value is $17.3 million. The fair value of the restricted stock awards was calculated pursuant to FASB ASC Topic 718 and does not necessarily represent actual value that may be realized. For a description of the assumptions used in determining the values described in this column, please refer to “Note 13: Employee Stock Benefit Plans” of the Company’s Annual Report on Form 10-K filed on February 24, 2017.

 

63


(3) The amounts in this column represent the grant date fair value of stock options for the year in which the stock option was granted. The fair value was calculated pursuant to FASB ASC Topic 718, using the binomial valuation model. For a description of the assumptions used in determining the values, please refer to “Note 13: Employee Stock Benefit Plans” of the Company’s Annual Report on Form 10-K filed on February 24, 2017. These amounts do not necessarily represent actual value that may be realized.
(4) The amounts shown consist of cash bonuses earned under the Management Incentive Plan for 2016.
(5) The amount represents the Company matching contributions under the Company’s 401(k) plan for the periods in which they accrued. All full-time employees are eligible to participate in the Company’s 401(k) plan.
(6) The amount represents the Company’s contributions to the Non-Qualified Deferred Compensation Plan on Mr. Gibson’s behalf pursuant to the letter of assignment between the Company and Mr. Gibson dated June 11, 2008, as amended on December 20, 2009.
(7) Messrs. Painter and Matthews became named executive officers in 2016 and therefore only fiscal 2016 compensation is provided.
(8) Mr. Delepine left his position as CFO on February 1, 2016 and terminated his employment with the Company in March 2016.
(9) In connection with Mr. Delepine’s termination of employment, the Company entered into a severance agreement with Mr. Delepine, providing for certain compensation. Specifically, under the terms of the severance agreement, Mr. Delepine received a lump sum payment in the amount of his then-current base salary and target bonus for 2016 (80% of his then current base salary), in addition to amounts equal to COBRA premiums for him and his dependents for 12 months and accelerated vesting of 61,086 restricted stock units. Mr. Delepine continued to provide services to the Company through June 8, 2016 as a consultant under a consultant letter agreement and received $200,000 for such services in the form of two cash installment payments and additional vesting of 2,944 restricted stock units.

 

64


Grants of Plan-Based Awards

The table below lists the stock option grants, and restricted stock unit awards, and estimated future MIP target incentive opportunities, for each of the Named Executive Officers during the fiscal year ended December 30, 2016.

 

Grants Of Plan-Based Awards For The 2016 Fiscal Year (1)

Name

 

Award Type

 

Grant Date

 

Estimated Future Payouts Under
Non-Equity Incentive  Plan

Awards (1)

   

Estimated Possible Payout
Under Equity Incentive Plan

Awards

   

All Other
Stock
Awards:
Number
of Shares
of Stocks
or Units
(#)

   

All Other
Option
Awards:
Number of
Securities
Underlying
Options (#)

 

Exercise
or Base
Price of
Option
Awards
($/
Share)

 

Grant Date
FairValue
of Stock
and Option
Awards (2)

      Threshold   Target     Maximum     Threshold   Target     Maximum          

Steven W. Berglund

  Cash Incentive           $ 1,075,000     $ 3,225,000                                          
    PSU Award   5/3/2016 (3)                       61,700     123,400       246,800                     $3,342,906
    PSU Award   6/29/2016 (4)                       30,850     61,700       123,400                     $1,489,438
    RSU Award   11/10/2016 (5)                                           $ 61,700             $1,674,538

Robert Painter

  Cash Incentive           $ 292,342     $ 877,027                                          
    PSU Award   5/3/2016 (3)                       12,375     24,750       49,500                     $670,478
    PSU Award   6/29/2016 (4)                       6,375     12,750       25,500                     $307,785
    RSU Award   11/10/2016 (5)                                           $ 9,375             $254,438
    RSU Award   2/1/2016 (5)                                           $ 30,000             $578,400
    Stock Option   2/1/2016 (6)                                                   45,000   $19.28   $271,350

Francois Delepine (7)

  Cash Incentive           $ -     $ -                                         -
    PSU Award                           0     -       -                     -
    PSU Award                                 -       -                     -
    RSU Award                                 -       -                     -

Bryn Fosburgh

  Cash Incentive           $ 346,630     $ 1,039,890                                          
    PSU Award   5/3/2016 (3)                       14,600     29,200       58,400                     $791,028
    PSU Award   6/29/2016 (4)                       7,300     14,600       29,200                     $352,444
    RSU Award   12/9/2016 (5)                                             17,000             $499,630

Christopher Gibson

  Cash Incentive           $ 346,630     $ 1,039,890                                          
    PSU Award   5/3/2016 (3)                       11,000     22,000       44000                     $595,980
    PSU Award   6/29/2016 (4)                       5,500     11000       22000                     $265,540
    RSU Award   12/9/2016 (5)                                             11,000             $323,290

Darryl Matthews

  Cash Incentive           $ 318,084       954,252                                          
    PSU Award   5/3/2016(3)                       11,000     22,000       44,000                     $595,980
    PSU Award   6/29/2016 (4)                       5,500     11,000       22,000                     $265,540
    RSU Award   11/10/2016 (5)                                             11,000             $298,540
(1) The annual target cash incentive opportunities under the MIP for the 2016 fiscal year were as follows: Mr. Berglund, 125% of his annual base salary; and Messrs. Painter, Fosburgh, Gibson and Matthews, 80% of each of their respective annual base salaries.
(2) The fair value of performance-based restricted stock units with vesting tied to our total shareholder return are valued as of the grant date using a Monte Carlo simulation and the fair value is greater that the value of Trimble’s share price at the date of grant. The fair value of our service-based and other performance-based restricted stock units is determined using the closing price of our common stock on the date of grant and the total expense associated with the performance-based awards is based upon the probable achievement of the underlying revenue and operating income performance goals as of the grant date. Assuming the highest level of performance is achieved under the applicable performance conditions, the maximum possible value of these performance-based RSUs, using the grant date fair value is $17.3 million. The fair value of stock options are valued as of the grant date using the binomial valuation model. The fair values were calculated in accordance with FASB ASC 718. For a description of the assumptions used in determining the values described in these columns, please refer to “Note 13: Employee Stock Benefit Plans” of the Company’s Annual Report on Form 10-K filed on February 24, 2017. These amounts do not necessarily represent actual value that may be realized.

 

65


(3) The PSUs granted on May 3, 2016 are scheduled to vest on May 30, 2019, with an annual scoring window on May 30, 2017, May 30, 2018 and May 30, 2019, subject to each officer’s continued employment with the Company through the vesting date and satisfaction of performance conditions for the performance period beginning on May 30, 2016 and ending on May 30, 2019. As described under “Compensation Discussion and Analysis”, in each case, between 0% and 200% of the target number of PSUs vest depending on the Company’s relative TSR of its common stock as compared to the TSR of the other companies included in the S&P 500 Index over the performance period, with 100% of the target PSUs vesting if the Company’s TSR is at the 50th percentile.
(4) The PSUs granted on June 29, 2016 are scheduled to vest on December 28, 2018, subject to each officer’s continued employment with the Company through the vesting date and satisfaction of performance conditions for the performance period as of the end of December 28, 2018. As described under “Compensation Discussion and Analysis”, in each case, between 0% and 200% of the target number of PSUs vest depending on the Company’s revenue and operating income percentage performance.
(5) These time-based RSU grants vests 1/3 on each anniversary of the grant date such that the RSUs become fully vested three years from the date of grant, subject to each officer’s continued employment with the Company through such anniversary date. Upon vesting, the RSUs may be settled by issuing the number of shares shown in the table, or by making a cash payment equal to the fair market value of the shares on the vesting date, or a combination of shares and cash, at the discretion of the Company.
(6) The exercise price of the stock options granted to Mr. Painter in connection with his promotion to CFO on February 1, 2016 was equal to the closing price of the Company’s Common Stock on the date of grant.
(7) Mr. Delepine left his position as CFO of the Company in February 2016. He did not receive any cash incentive awards under the MIP or new equity award grants in fiscal 2016.

 

66


Outstanding Equity Awards at Fiscal Year-End

The table below shows the stock options and stock awards outstanding for each of the Named Executive Officers as of the fiscal year ended December 30, 2016.

 

OUTSTANDING EQUITY AWARDS  
Name   Grant Date     Option Awards     Stock Awards  
    Number of
securities
underlying
unexercised
options
exercisable
(#)
    Number of
securities
underlying
unexercised
options
unexercisable
(#)
    Option
exercise
price
    Option
expiration
date
    Number of
shares or
units of
stock that
have not
vested
(#)
   

Market
value

of shares
or units of
stock that
have not
vested (9)

    Equity Incentive plan
awards: number of
unearned shares,
units or other rights
that have not vested
(#) (10)
   

Equity Incentive plan
awards: market or
payout value of
unearned shares,
units or other rights
that have not

vested (9)

 

Steven W. Berglund

    5/3/2011 (1)      200,000       -     $     21.53       5/3/2018                                  
      10/28/2011 (1)      400,000       -     $ 20.64       10/28/2018            
      5/1/2012 (1)      229,166       20,834     $ 26.98       5/1/2019            
      10/29/2012 (1)      166,666       33,334     $ 23.53       10/29/2019            
      5/7/2013 (2)      149,312       17,363     $ 28.08       5/7/2020            
      10/29/2013 (2)(3)      170,208       44,792     $ 28.2       10/29/2020            
      5/9/2014 (2)(3)      83,037       45,538     $ 35.02       5/9/2021       42,858     $ 1,292,169        
      11/6/2014 (2)(3)      93,750       86,250     $ 27.48       11/6/2021       60,000     $ 1,809,000        
      7/8/2015 (4)                  100,000     $ 3,015,000  
      11/6/2015 (5)                  75,370     $ 2,272,406  
      11/6/2015 (8)              63,269     $ 1,907,560        
      5/3/2016 (6)                  123,400     $ 3,720,510  
      6/29/2016 (7)                  61,700     $ 1,860,255  
      11/10/2016 (8)                                      61,700     $ 1,860,255                  

Robert Painter

    4/27/2010 (1)      5,000       -     $ 15.4       4/27/2017            
      10/26/2010 (1)      10,000       $ 18.1       10/26/2017            
      5/3/2011 (1)      8,000       $ 21.53       5/3/2018            
      10/28/2011 (1)      10,000       $ 20.64       10/28/2018            
      5/1/2012 (1)      7,334       666     $ 26.98       5/1/2019            
      10/29/2012 (1)      5,000       1,000     $ 23.53       10/29/2019            
      5/7/2013 (2)      4,747       553     $ 28.08       5/7/2020            
      10/29/2013 (2)      4,750       1,250     $ 28.2       10/29/2020            
      5/9/2014 (2)(3)      2,260       1,240     $ 35.02       5/9/2021       1,167     $ 35,185        
      11/6/2014 (2)(3)      2,734       2,516     $ 27.48       11/6/2021       1,750     $ 52,763        
      5/7/2015 (2)(3)      -       2,660     $ 25.29       5/7/2022       1,770     $ 53,366        
      11/6/2015 (3)              5,000     $ 150,750        
      2/1/2016 (8)      -       45,000     $ 19.28       2/1/2023       30,000     $ 904,500        
      5/3/2016 (6)                  24,750     $ 746,213  
      6/29/2016 (7)                  12,750     $ 384,413  
      11/10/2016 (8)                                      9,375     $ 282,656                  

Francois Delepine

                                                                       

Bryn A. Fosburgh

    5/1/2012 (1)      45,834       4,166     $ 26.98       5/1/2019            
      10/29/2012 (1)      1,332       6,668     $ 23.53       10/29/2019            
      5/7/2013 (2)      26,875       3,125     $ 28.08       5/7/2020            
      10/29/2013 (2)      31,666       8,334     $ 28.2       10/29/2020            
      5/9/2014 (2)(3)      11,947       6,553     $ 35.02       5/9/2021       6,167     $ 185,935        
      11/6/2014 (2)(3)      23,437       21,563     $ 27.48       11/6/2021       15,000     $ 452,250        
      7/8/2015 (4)                  23,900     $ 720,585  
      11/6/2015 (5)                  8,050     $ 242,708  
      11/6/2015 (6)              21,407     $ 645,421        
      5/3/2016 (6)                  29,200     $ 880,380  
      6/29/2016 (7)                  14,600     $ 440,190  
      12/9/2016 (8)                                      17,000     $ 512,550                  

Christopher Gibson

    10/26/2010 (1)      80,000       $ 18.1       10/26/2017            
      5/3/2011 (1)      50,000       $ 21.53       5/3/2018            
      10/28/2011 (1)      80,000       $ 20.64       10/28/2018            
      5/1/2012 (1)      45,834       4,166     $ 26.98       5/1/2019            
      10/29/2012 (1)      33,332       6,668     $ 23.53       10/29/2019            
      5/7/2013