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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other
than the Registrant
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CHECK THE APPROPRIATE BOX:
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Preliminary Proxy Statement
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Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under Rule
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Lumentum Holdings 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):
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No fee
required.
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Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
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Title of each class of securities to which transaction
applies:
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Aggregate number of securities to which transaction applies:
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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):
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4)
Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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Fee paid previously with
preliminary materials:
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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.
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1)
Amount previously paid:
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2)
Form, Schedule or Registration Statement No.:
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Filing Party:
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4) Date
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Table of Contents
2016 PROXY STATEMENT
AND FISCAL
2016 ANNUAL REPORT
Table of Contents
LUMENTUM
HOLDINGS INC.
400 NORTH MCCARTHY
BOULEVARD
MILPITAS, CALIFORNIA 95035
September 19, 2016
Dear Lumentum Stockholders:
We are pleased and excited to invite you
to the first Annual Meeting of stockholders of Lumentum Holdings Inc. on
Friday, November 4, 2016 at 8:30
a.m.
(Pacific Time) which will be a virtual
meeting of stockholders, conducted via the Internet.
Just over a year ago we became an
independent publicly-traded company through the distribution by JDS Uniphase
Corporation to its stockholders of 80.1% of our outstanding common stock. In the
separation, we brought with us deep customer relationships and advanced
technology based on over 30 years of innovation history. We have been and
continue to be focused on enabling our customers to win in their markets. We
drive the speed and scale of networking, advanced manufacturing, and more
recently cloud applications. Over the past year, we have seen the market for our
products strengthen, as network operators around the world are in the middle of,
or are planning, significant upgrades to their networks. Additionally, our laser
customers are gaining traction with their products that incorporate our
subsystems and technology. We continue to invest in next-generation products and
technologies to position ourselves for success now, and in the future.
Our virtual Annual Meeting can be accessed
by visiting www.virtualshareholdermeeting.com/LITE, where you will be able to
listen to the meeting live, submit questions and vote online. We believe that a
virtual stockholder meeting provides greater access to those who may want to
attend and therefore have chosen this method for our Annual Meeting over an
in-person meeting.
Details regarding how to attend the Annual
Meeting online and the business to be conducted at the Annual Meeting are more
fully described in the accompanying Notice of Annual Meeting and Proxy
Statement.
We are pleased to provide access to our
proxy materials over the Internet under the U.S. Securities and Exchange
Commissions notice and access rules.
Your vote is important and we hope you
will vote as soon as possible, regardless of whether you plan to attend the
meeting. You may vote by proxy over the Internet or by telephone, or, if you
received paper copies of the proxy materials by mail, you may also vote by mail
by following the instructions on the proxy card or voting instruction
card.
Thank you for your ongoing support of and
interest in Lumentum.
Sincerely,
Martin A. Kaplan
Chairman of the Board
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Alan S. Lowe
President
and Chief Executive Officer
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LUMENTUM
HOLDINGS INC.
400 NORTH MCCARTHY BLVD.
MILPITAS,
CALIFORNIA 95035
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held at 8:30 a.m. Pacific Time on
Friday, November 4, 2016
Dear Stockholders of Lumentum Holdings
Inc.:
The 2016 Annual Meeting of stockholders
(the Annual Meeting) of Lumentum Holdings Inc., a Delaware corporation, will
be held virtually on
Friday, November 4, 2016
at 8:30 a.m.
Pacific Time.
The virtual Annual
Meeting can be accessed by visiting www.virtualshareholdermeeting.com/LITE,
where you will be able to listen to the meeting live, submit questions and vote
online.
We are holding the meeting for the
following purposes, as more fully described in the accompanying proxy
statement:
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To elect six directors, all of
whom are currently serving on our board of directors, to serve until our
2017 Annual Meeting of stockholders and until their successors are duly
elected and qualified;
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To approve the Executive Officer
Performance-Based Incentive Plan;
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To approve the amendment and
restatement of our 2015 Equity Incentive Plan; and
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To ratify the appointment of
PricewaterhouseCoopers LLP as our independent registered public accounting
firm for our fiscal year ending July 1, 2017.
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In addition, stockholders may be asked to
consider and vote upon such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Our board of directors has fixed the close
of business on September 12, 2016 as the record date for the Annual Meeting.
Only stockholders of record on September 12, 2016 are entitled to notice of and
to vote at the virtual Annual Meeting and any adjournments thereof.
YOUR VOTE IS IMPORTANT.
Whether or not you plan to virtually attend the Annual
Meeting, please cast your vote as soon as possible by Internet or telephone. If
you received a paper copy of the proxy materials by mail, you may submit your
proxy card in the postage-prepaid envelope provided. Your vote by written proxy
will ensure your representation at the Annual Meeting regardless of whether you
attend the virtual meeting or not. If you attend the virtual Annual Meeting, you
may revoke your proxy and vote via the virtual meeting website. If you hold your
shares through an account with a brokerage firm, bank or other nominee, please
follow the instructions you receive from your account manager to vote your
shares.
We thank you for your support and we hope
you are able to attend our virtual Annual Meeting.
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By order of the Board of
Directors,
Alan S. Lowe
President and Chief Executive
Officer
Milpitas, California
September 19,
2016
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LUMENTUM
HOLDINGS INC.
PROXY
STATEMENT FOR 2016 ANNUAL MEETING OF STOCKHOLDERS
To Be Held Virtually at 8:30 a.m.
Pacific Time on Friday, November 4, 2016
The accompanying proxy is solicited on
behalf of the board of directors of Lumentum Holdings Inc. (Lumentum or the
Company) for use at the Lumentum 2016 Annual Meeting of Stockholders (Annual
Meeting) to be held virtually on November 4, 2016 at 8:30 a.m. (Pacific Time),
and any adjournment or postponement of the Annual Meeting. The virtual Annual
Meeting can be accessed by visiting www.virtualshareholdermeeting.com/LITE,
where you will be able to listen to the meeting live, submit questions and vote
online.
The Notice of Internet Availability of
Proxy Materials and this proxy statement for the Annual Meeting (Proxy
Statement) and the accompanying form of proxy were first distributed and made
available on the Internet to stockholders on or about September 21, 2016.
Lumentums annual report on Form 10-K for the fiscal year ended July 2, 2016
filed on September 2, 2016 (Annual Report) will be available with this Proxy
Statement by following the instructions in the Notice of Internet Availability
of Proxy Materials.
INTERNET
AVAILABILITY OF PROXY MATERIALS
In accordance with U.S. Securities and
Exchange Commission (SEC) rules, we are using the Internet as our primary
means of furnishing proxy materials to stockholders. Consequently, most
stockholders will not receive paper copies of our proxy materials. We will
instead send these stockholders a Notice of Internet Availability of Proxy
Materials with instructions for accessing the proxy materials, including our
Proxy Statement and Annual Report, and voting via the
Internet. The Notice of Internet Availability of Proxy Materials also provides
information on how stockholders may obtain paper copies of our proxy materials
if they so choose. We believe this rule makes the proxy distribution process
more efficient and less costly and helps conserve natural resources.
GENERAL
INFORMATION ABOUT THE ANNUAL MEETING
The information provided in the question
and answer format below is for your convenience only and is merely a summary of
the information contained in this Proxy Statement. You should read this entire
Proxy Statement carefully. Information contained on, or that can be accessed
through, our website is not intended to be incorporated by reference into this
Proxy Statement and references to our website address in this Proxy Statement
are inactive textual references only.
What matters am I voting on?
You will be voting on:
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the election of six directors, all of whom
are currently serving on our board of directors, to serve until our 2017
Annual Meeting of stockholders and until their successors are duly elected
and qualified;
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approval of the Lumentum Executive Officer
Performance-Based Incentive Plan;
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approval of the amendment and restatement
of our 2015 Equity Incentive Plan;
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ratification of the appointment of
PricewaterhouseCoopers LLP as our independent registered public accounting
firm for our fiscal year ending July 1, 2017;
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any other business as may properly come
before the Annual Meeting.
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How does the board of directors recommend I
vote on these proposals?
Our board of directors recommends a vote:
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FOR the election of Martin
A. Kaplan, Harold L. Covert, Penelope A. Herscher, Samuel F. Thomas, Brian
J. Lillie and Alan S. Lowe;
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FOR the approval of the
Lumentum Executive Officer Performance-Based Incentive
Plan;
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FOR the approval of the
amendment and restatement of our 2015 Equity Incentive Plan;
and
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FOR the
ratification of the appointment of PricewaterhouseCoopers LLP as our
independent registered public accounting firm for our fiscal year ending
July 1, 2017.
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Who is entitled to vote?
Holders of our common stock as of the
close of business on September 12, 2016, the record date, may vote at the Annual
Meeting. As of the record date, there were 60,090,203 shares of our common stock
outstanding. In deciding all matters at the Annual Meeting, each stockholder
will be entitled to one vote for each share of our common stock held by them on
the record date. We do not have cumulative voting rights for the election of
directors.
Stockholder of Record: Shares
Registered in Your Name
. If, on the record
date, your shares were registered directly in your name with our transfer agent,
ComputerShare Investor Services, LLC, then you are considered the stockholder of
record with respect to those shares. As a stockholder of record, you may vote at
the virtual Annual Meeting or vote by telephone, by Internet, or by filling out
and returning the proxy card.
Beneficial Owner: Shares Registered in
the Name of a Broker or Nominee
. If, on the
record date, your shares were held on your behalf in a stock brokerage account
or by a bank or other nominee, then you are considered the beneficial owner of
those shares held in street name. Accordingly, the Notice of Internet
Availability, Proxy Statement and any accompanying documents have been provided
to your broker or nominee, who in turn provided the materials to you. As the
beneficial owner, you have the right to direct your broker or nominee how to
vote your shares by using the voting instruction card or by following their
instructions for voting on the Internet or by telephone.
How many votes are needed for approval of each
proposal?
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Proposal No. 1
: Each director must be elected by the affirmative vote
of a majority of the votes cast with respect to that director. This means
that the number of votes cast for a director must exceed the number of
votes cast against that director, with abstentions and broker non-votes
not counted as votes cast as either for or against such directors
election.
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Proposal No.
2
: The approval of the Executive Officer
Performance-Based Incentive Plan requires the affirmative vote of a
majority of the shares of our common stock present in person or by proxy
at the Annual Meeting and entitled to vote thereon. As a result,
abstentions will have the same effect as votes against the proposal.
Brokers non-votes will have no effect on the outcome of this
vote.
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Proposal No.
3
: The approval of the amendment and
restatement of the 2015 Equity Incentive Plan requires the affirmative
vote of a majority of the shares of our common stock present in person or
by proxy at the Annual Meeting and entitled to vote thereon. As a result,
abstentions will have the same effect as votes against the proposal.
Brokers non-votes will have no effect on the outcome of this
vote.
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Proposal No. 4
: The ratification of the appointment of
PricewaterhouseCoopers LLP requires the affirmative vote of a majority of
the shares of our common stock present in person or by proxy at the Annual
Meeting and entitled to vote thereon. As a result, abstentions will have
the same effect as votes against the proposal. Brokers will have
discretion to vote on this proposal.
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What is a quorum?
A quorum is the minimum number of shares
required to be present at the Annual Meeting for the Annual Meeting to be
properly held under our amended and restated bylaws and Delaware law. The
presence, in person or by proxy, of a majority of all issued and outstanding
shares of our common stock entitled to vote at the Annual Meeting will
constitute a quorum at the Annual Meeting. Abstentions, withhold votes and
broker non-votes are counted as shares present and entitled to vote for purposes
of determining a quorum.
How do I vote?
If you are a stockholder of record, there
are four ways to vote:
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vote via the virtual meeting
website – any stockholder can attend the virtual Annual Meeting
by visiting www.virtualshareholdermeeting.com/LITE, where stockholders may
vote and submit questions during the meeting. The Annual Meeting starts at
8:30 a.m. (Pacific Time) on November 4, 2016. Please have your 16-digit
control number to join the Annual Meeting. Instructions on how to attend
and participate via the Internet, including how to demonstrate proof of
stock ownership, are posted at
www.proxyvote.com;
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by
Internet at http://www.proxyvote.com, 24 hours a day, seven days a week,
until 11:59 p.m. on November 3, 2016 (have your proxy card in hand when
you visit the website);
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by toll-free
telephone at 1-800-690-6903 (have your proxy card in hand when you call);
or
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by completing and mailing your
proxy card (if you received printed proxy
materials).
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Proxy cards submitted by mail must be
received by November 3, 2016 to be voted at the Annual Meeting. Please note that
the Internet and telephone voting facilities will close at 11:59 p.m. (Eastern
Time) on November 3, 2016. Submitting your proxy, whether via Internet, by
telephone or by mail, will not affect your right to vote in person should you
decide to attend the virtual Annual Meeting. If you are not the stockholder of
record, please refer to the voting instructions provided by your nominee to
direct your nominee on how to vote your shares. You may either vote FOR all of
the nominees to the board of directors, or you may withhold your vote from all
nominees or any nominee you specify. For Proposals 2, 3 and 4, you may vote
FOR or AGAINST or ABSTAIN from voting. Your vote is important. Whether or
not you plan to attend the virtual Annual Meeting, we urge you to vote by proxy
to ensure that your vote is counted.
All proxies will be voted in accordance
with the instructions specified on the proxy card. If you sign a physical proxy
card and return it without instructions as to how your shares should be voted on
a particular proposal at the Annual Meeting, your shares will be voted in
accordance with the recommendations of our board of directors stated in this
proxy.
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Can I change my vote?
Yes. If you are a stockholder of record,
you can change your vote or revoke your proxy any time before the Annual Meeting
by:
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entering a new vote by Internet or
by telephone;
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returning a later-dated proxy
card;
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delivering to the Secretary of
Lumentum Holdings Inc., by any means, a written notice stating that the
proxy is revoked; or
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attending and voting at the virtual
Annual Meeting (although attendance at the virtual Annual Meeting will
not, by itself, revoke a proxy).
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If you are a street name stockholder, your
broker, bank or other nominee can provide you with instructions on how to change
your vote.
How can I attend the Annual Meeting?
You are entitled to participate in the
virtual Annual Meeting if you were a holder of Lumentum shares as of the record
date of September 12, 2016. You will be able to attend online and submit your
questions during the meeting by visiting www.virtualshareholdermeeting.com/LITE.
You also will be able to vote your shares electronically at the virtual Annual
Meeting. To participate, you will need the 16-digit control number included on
your notice of Internet availability of the proxy materials, on your proxy card
or on the instructions that accompanied the proxy materials.
What is the effect of giving a proxy?
Proxies are solicited by and on behalf of
our board of directors. Alan Lowe, Aaron Tachibana and Judy Hamel have been
designated as proxies by our board of directors. When proxies are properly
dated, executed and returned, the shares represented by such proxies will be
voted at the Annual Meeting in accordance with the instructions of the
stockholder. If no specific instructions are given, however, the shares will be
voted in accordance with the recommendations of our board of directors as
described above. If any matters not described in this Proxy Statement are
properly presented at the Annual Meeting, the proxy holders will use their own
judgment to determine how to vote the shares. If the Annual Meeting is
adjourned, the proxy holders can vote the shares on the new Annual Meeting date
as well, unless you have properly revoked your proxy instructions, as described
above.
Why did I receive a Notice of Internet
Availability of Proxy Materials instead of a full set of proxy materials?
In accordance with the rules of the SEC,
we have elected to furnish our proxy materials, including this Proxy Statement
and our annual report, primarily via the Internet. As a result, we are mailing
to many of our stockholders a notice of the Internet availability of the proxy
materials. All stockholders receiving the notice will have the ability to access
the proxy materials over the Internet and request to receive a paper copy of the
proxy materials by mail. Instructions on how to access the proxy materials over
the Internet or to request a paper copy may be found in the Notice of Internet
Availability of the proxy materials. In addition, the notice contains
instructions on how you may request access to proxy materials in printed form by
mail or electronically on an ongoing basis.
How are proxies solicited for the Annual
Meeting?
Our board of directors is soliciting
proxies for use at the Annual Meeting. All expenses associated with this
solicitation will be borne by us. We will reimburse brokers or other nominees
for reasonable expenses that they incur in sending our proxy materials to you if
a broker or other nominee holds shares of our common stock on your behalf. In
addition to using the Internet, our directors, officers and employees may
solicit proxies in person and by mailings, telephone, facsimile, or electronic
transmission, for which they will not receive any additional
compensation.
How may my brokerage firm or other
intermediary vote my shares if I fail to provide timely directions?
Brokerage firms and other intermediaries
holding shares of our common stock in street name for customers are generally
required to vote such shares in the manner directed by their customers. In the
absence of timely directions, your broker will have discretion to vote your
shares on our sole routine matter: the proposal to ratify the appointment of
PricewaterhouseCoopers LLP. Your broker will not have discretion to vote on the
election of directors, approval of the Lumentum Executive Officer
Performance-Based Incentive Plan and approval of the Amended and Restated 2015
Equity Incentive Plan, which are non-routine matter absent direction from you.
Where can I find the voting results of the
Annual Meeting?
We will announce preliminary voting
results at the Annual Meeting. We will also disclose voting results on a Current
Report on Form 8-K that we will file with the SEC within four business days
after the Annual Meeting. If final voting results are not available to us in
time to file a Current Report on Form 8-K within four business days after the
Annual Meeting, we will file a Current Report on Form 8-K to publish preliminary
results and will provide the final results in an amendment to this Current
Report on Form 8-K as soon as they become available.
I share an address with another stockholder,
and we received only one paper copy of the proxy materials. How may I obtain an
additional copy of the proxy materials?
We have adopted a procedure called
householding, which the SEC has approved. Under this procedure, we deliver a
single copy of the Notice and, if applicable, our proxy materials to multiple
stockholders who share the same address unless we
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have received contrary instructions from
one or more of the stockholders. This procedure reduces our printing costs,
mailing costs, and fees. Stockholders who participate in householding will
continue to be able to access and receive separate proxy cards. Upon written or
oral request, we will deliver promptly a separate copy of the Notice and, if
applicable, our proxy materials to any stockholder at a shared address to which
we delivered a single copy of any of these materials. To receive a separate
copy, or, if a stockholder is receiving multiple copies, to request that we only
send a single copy of the Notice and, if applicable, our proxy materials, such
stockholder may contact us at the following address:
Lumentum Holdings Inc.
Attention: Investor Relations
400 North McCarthy
Blvd.
Milpitas, California 95035
Stockholders who beneficially own shares
of our common stock held in street name may contact their brokerage firm, bank,
broker-dealer or other similar organization to request information about
householding.
What is the deadline to propose actions for
consideration at next years Annual Meeting of stockholders or to nominate
individuals to serve as directors?
Stockholder Proposals
Stockholders may present proper proposals
for inclusion in our proxy statement and for consideration at the next Annual
Meeting of stockholders by submitting their proposals in writing to our
Secretary in a timely manner. For a stockholder proposal to be considered for
inclusion in our proxy statement for our 2017 Annual Meeting of stockholders,
our Secretary must receive the written proposal at our principal executive
offices not later than May 9, 2017. In addition, stockholder proposals must
comply with the requirements of Rule 14a-8 regarding the inclusion of
stockholder proposals in company-sponsored proxy materials. Stockholder
proposals should be addressed to:
Lumentum Holdings Inc.
Attention: Secretary
400 North McCarthy Blvd.
Milpitas,
California 95035
Our amended and restated bylaws also
establish an advance notice procedure for stockholders who wish to present a
proposal before an Annual Meeting of stockholders but do not intend for the
proposal to be included in our proxy statement. Our amended and restated bylaws
provide that the only business that may be conducted at an Annual Meeting is
business that is (i) specified in our proxy materials with respect to such
meeting, (ii) otherwise properly brought before the Annual Meeting by or at the
direction of our board of directors, or (iii) properly brought before the Annual
Meeting by a stockholder of record entitled to vote at the Annual Meeting who
has delivered timely written notice to our Secretary, which notice must contain
the information specified in our amended and restated bylaws. To be timely for
our 2017 Annual Meeting of stockholders, our Secretary must receive the written
notice at our principal executive offices:
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not earlier than August 6, 2017;
and
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not later than the close of business
on September 5, 2017.
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In the event that we hold our 2017 Annual
Meeting of stockholders more than 30 days before or more than 60 days after the
one-year anniversary of the Annual Meeting, then notice of a stockholder
proposal that is not intended to be included in our proxy statement must be
received later than the close of business on the later of the following two
dates:
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the 90th day prior to such Annual
Meeting; or
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the 10th day following the day on
which public announcement of the date of such Annual Meeting is first
made.
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If a stockholder who has notified us of
his, her or its intention to present a proposal at an Annual Meeting does not
appear to present his, her or its proposal at such Annual Meeting, we are not
required to present the proposal for a vote at such Annual Meeting.
Nomination of Director
Candidates
You may propose director candidates for
consideration by our nominating and corporate governance committee. Any such
recommendations should include the nominees name and qualifications for
membership on our board of directors and should be directed to our Secretary at
the address set forth above. For additional information regarding stockholder
recommendations for director candidates, see Corporate GovernanceGovernance
Committee.
In addition, our amended and restated
bylaws permit stockholders to nominate directors for election at an Annual
Meeting of stockholders. To nominate a director, the stockholder must provide
the information required by our amended and restated bylaws. In addition, the
stockholder must give timely notice to our Secretary in accordance with our
amended and restated bylaws, which, in general, require that the notice be
received by our Secretary within the time period described above under
Stockholder Proposals for stockholder proposals that are not intended to be
included in a proxy statement.
Availability of Bylaws
A copy of our amended and restated bylaws
may be obtained by accessing our public filings on the SECs website at
www.sec.gov. You may also contact our Secretary at our principal executive
offices for a copy of the relevant bylaw provisions regarding the requirements
for making stockholder proposals and nominating director candidates.
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CORPORATE GOVERNANCE
Our business affairs are managed under the
direction of our board of directors, which is currently composed of six members.
Five of our directors are independent within the meaning of the listing
standards of the NASDAQ Stock Market.
DIRECTOR
INDEPENDENCE
Our board of directors consists of six
members. Our board of directors consists of a majority of independent directors
and committees of our board of directors consist solely of independent
directors, as required by NASDAQ listing standards. Our board of directors has
determined that the following directors are independent under the NASDAQ listing
standards: Martin A. Kaplan, Harold L. Covert, Penelope A. Herscher, Brian J.
Lillie and Samuel F. Thomas.
BOARD
LEADERSHIP STRUCTURE
Our board of directors has determined that
it is in the best interests of the Company to maintain the board chairperson and
chief executive officer positions separately. The board believes that having an
outside, independent director serve as chairperson is the most appropriate
leadership structure, as this enhances its independent oversight of management
and the Companys strategic planning, reinforces the board of directors ability
to exercise its independent judgment to represent stockholder interests, and
strengthens the objectivity and integrity of the board. Moreover, we believe an
independent chairperson can more effectively lead the board in objectively
evaluating the performance of management, including the chief executive officer,
and guide it through appropriate board governance processes.
BOARD
OVERSIGHT OF RISK
We take a comprehensive approach to risk
management. We believe risk can arise in every decision and action taken by the
Company, whether strategic or operational. We therefore seek to include risk
management principles in all of our management processes and in the
responsibilities of our employees at every level. Our comprehensive approach is
reflected in the reporting processes by which our management provides timely and
comprehensive information to the board of directors to support the board of
directors role in oversight, approval and decision-making.
Management is responsible for the
day-to-day supervision of risks the Company faces, while the board of directors,
as a whole and through its committees, has the ultimate responsibility for the
oversight of risk management. Senior management attends board of directors
meetings, provides presentations on operations including significant risks, and
is available to address any questions or concerns raised by the board of
directors. Additionally, our committees assist the board of directors in
fulfilling its oversight responsibilities in certain areas. Generally, the
committee with subject matter expertise in a particular area is responsible for
overseeing the management of risk in that area. For example, the Audit Committee
coordinates the board of directors oversight of the Companys internal controls
over financial reporting and disclosure controls and procedures. Management
regularly reports to the Audit Committee on these areas. Additionally, the
Compensation Committee assists the board of directors in fulfilling its
oversight responsibilities with respect to the management of risks arising from
our compensation policies and programs as well as succession planning for senior
executives. The Governance Committee assists the board of directors in
fulfilling its oversight responsibilities with respect to the management of
risks associated with board organization, membership and structure, and
corporate governance topics. When any of the committees receives a report
related to material risk oversight, the chairman of the relevant committee
reports on the discussion to the full board of directors.
COMPENSATION PROGRAM RISK ASSESSMENT
Consistent with SEC disclosure
requirements, in fiscal year 2016 a team composed of senior members of our human
resources, finance and legal departments and our compensation consultant, Semler
Brossy, inventoried and reviewed elements of our compensation policies and
practices. This team then reviewed these policies and practices with Companys
management in an effort to assess whether any of our policies or practices
create risks that are reasonably likely to have a material adverse effect on the
Company. This assessment included a review of the primary design features of the
Companys compensation policies and practices, the process for determining
executive and employee compensation and consideration of features of our
compensation program that help to mitigate risk. Management reviewed and
discussed the results of this assessment with the Compensation Committee, which
consulted with Semler Brossy. Based on this review, we believe that our
compensation policies and practices, individually and in the aggregate, do not
create risks that are reasonably likely to have a material adverse effect on the
Company.
11
Table of Contents
Corporate
Governance
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BOARD
COMMITTEES AND MEETINGS
During fiscal year 2016, the board of
directors held seven (7) meetings. The board of directors has three committees:
an Audit Committee, Compensation Committee, and Governance Committee. The
members of the committees during fiscal year 2016 are identified
below.
Each director attended at least 75% of the
aggregate of all meetings of the board of directors and any committees on which
he or she served during fiscal year 2016 after becoming a member of the board of
directors or after being appointed to a particular committee. The Company
encourages, but does not require, its board of directors members to attend the
Annual Meeting. We anticipate that all directors will attend the 2016 Annual
Meeting.
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AUDIT
COMMITTEE
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Members:
Meetings:
|
Harold L. Covert (Chair)
Martin
A. Kaplan
Brian J. Lillie
8
|
The Audit Committee is responsible
for assisting the full board of directors in fulfilling its oversight
responsibilities relative to:
●
the Companys financial statements;
●
financial reporting practices;
●
systems of internal accounting and financial control;
●
internal audit function;
●
annual independent audits of the Companys financial statements;
and
●
such legal and ethics programs as may established from time to time
by the board of directors.
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The Audit Committee is empowered to
investigate any matter brought to its attention with full access to all
books, records, facilities, and personnel of the Company and may retain
external consultants at its sole discretion. In addition, the Audit
Committee considers whether the Companys independent auditors provision
of non-audit services is compatible with maintaining the independence of
the independent auditors. The board of directors has determined that all
members of the Audit Committee are independent as defined in the
applicable rules and regulations of the SEC and NASDAQ. The board of
directors has further determined that Harold L. Covert is an Audit
Committee financial expert as defined by Item 401(h) of Regulation S-K of
the Securities Exchange Act of 1934, as amended (the Exchange Act). A
copy of the Audit Committee charter can be viewed at the Companys website
at
www.lumentum.com
.
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COMPENSATION
COMMITTEE
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Members:
Meetings:
|
Penelope A. Herscher
(Chair)
Samuel F. Thomas
Harold L. Covert
6
|
The Compensation Committee is
responsible for:
●
ensuring that the Company adopts and maintains responsible and
responsive compensation programs for its employees, officers and directors
consistent with the long-range interests of stockholders; and
●
the administration of the Companys employee stock purchase plans
and equity incentive plans.
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The chair of the Compensation
Committee reports on the Compensation Committees actions and
recommendations at board of directors meetings. In addition, the
Compensation Committee has the authority to engage the services of outside
advisors, experts and others to provide assistance as needed. During
fiscal year 2016, the Compensation Committee engaged Semler Brossy, a
national compensation consulting firm, to assist with the Committees
analysis and review of the compensation of our executive officers. Semler
Brossy attends all Compensation Committee meetings, works directly with
the Committee Chair and Committee members, and sends all invoices,
including descriptions of services rendered, to the Committee Chair for
review and payment approval. Semler Brossy performed no work for the
Company that was not in support of the Committees charter nor authorized
by the Committee Chair during fiscal year 2016. All members of the
Compensation Committee are independent as that term is defined in the
applicable NASDAQ rules and regulations. A copy of the Compensation
Committee charter can be viewed at the Companys website at
www.lumentum.com
. Additional information on the Compensation
Committees processes and procedures for consideration of executive
compensation are addressed in the section entitled Executive Compensation
Compensation Practices.
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12
2016 Proxy Statement
Table of Contents
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Corporate
Governance
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GOVERNANCE
COMMITTEE
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Members:
Meetings:
|
Martin A. Kaplan (Chair)
Penelope
A. Herscher
Brian J. Lillie
3
|
The Governance Committee:
●
serves as the Companys nominating committee;
●
reviews current trends and practices in corporate governance;
and
●
recommends to the board of directors the adoption of governance
programs.
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As provided in the charter of the
Governance Committee, nominations for director may be made by the
Governance Committee or by a stockholder of record entitled to vote. The
Governance Committee will consider and make recommendations to the board
of directors regarding any stockholder recommendations for candidates to
serve on the board of directors. Stockholders wishing to recommend
candidates for consideration by the Governance Committee may do so by
writing to the Companys Corporate Secretary at 400 North McCarthy
Boulevard, Milpitas, California 95035 providing the candidates name,
biographical data and qualifications, a document indicating the
candidates willingness to act if elected, and evidence of the nominating
stockholders ownership of Companys stock not less than 60 days nor more
than 90 days prior to the first anniversary of the date of the preceding
years Annual Meeting to assure time for meaningful consideration by the
Governance Committee. Our amended and restated bylaws specify in greater
detail the requirements as to the form and content of the stockholders
notice. We recommend that any stockholder wishing to nominate a director
review a copy of our amended and restated bylaws which may be obtained by
accessing our public filings on the SECs website at
www.sec.gov
. There
are no differences in the manner in which the Governance Committee
evaluates nominees for director based on whether the nominee is
recommended by a stockholder. All members of the Governance Committee are
independent as that term is defined in the applicable NASDAQ rules and
regulations.
In reviewing potential candidates
for the board of directors, the Governance Committee considers the
individuals experience in the Companys industry, the general business or
other experience of the candidate, the needs of the Company for an
additional or replacement director, the personality of the candidate,
diversity, the candidates interest in the business of the Company, as
well as numerous other subjective criteria. Of greatest importance is the
individuals integrity, willingness to be involved and ability to bring to
the Company experience and knowledge in areas that are most beneficial to
the Company. It is the Governance Committees goal to nominate candidates
with diverse backgrounds and capabilities, to reflect the diverse nature
of the Companys stakeholders (security holders, employees, customers and
suppliers), while emphasizing core excellence in areas pertinent to the
Companys long term business and strategic objectives. The Governance
Committee intends to continue to evaluate candidates for election to the
board of directors on the basis of the foregoing criteria. While we do not
have a formal written policy regarding consideration of diversity in
identifying candidates, as discussed above, diversity is one of the
numerous criteria that the Governance Committee considers when reviewing
potential candidates. A detailed description of the criteria used by the
Governance Committee in evaluating potential candidates may be found in
the charter of the Governance Committee.
The Governance Committee operates
under a written charter setting forth the functions and responsibilities
of the committee. A copy of the charter can be viewed at the Companys
website at
www.lumentum.com
.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
None of the members of our Compensation
Committee is or has been an officer or employee of the Company. None of our
executive officers currently serves, or in the past year has served, as a member
of the board of directors or Compensation Committee (or other board committee
performing equivalent functions) of any entity that has one or more of its
executive officers serving on our board of directors or Compensation
Committee.
13
Table of Contents
Corporate
Governance
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COMMUNICATIONS WITH THE BOARD OF
DIRECTORS
Interested parties wishing to communicate
with our board of directors or with an individual member or members of our board
of directors may do so by writing to our board of directors or to the particular
member or members of our board of directors, and mailing the correspondence to
our General Counsel at Lumentum Holdings Inc., 400 North McCarthy Boulevard,
Milpitas, California 95035. Each communication should set forth (i) the name and
address of the stockholder, as it appears on our books, and if the shares of our
common stock are held by a nominee, the name and address of the beneficial owner
of such shares, and (ii) the number of shares of our common stock that are owned
of record by the record holder and beneficially by the beneficial
owner.
Our General Counsel, in consultation with
appropriate members of our board of directors as necessary, will review all
incoming communications and, if appropriate, all such communications will be
forwarded to the appropriate member or members of our board of directors, or if
none is specified, to the Chairman of our board of directors.
CORPORATE GOVERNANCE GUIDELINES AND
CODE OF BUSINESS CONDUCT
Our board of directors has adopted
Corporate Governance Guidelines that address items such as the qualifications
and responsibilities of our directors and director candidates and corporate
governance policies and standards applicable to us in general. In addition, our
board of directors has adopted a Code of Business Conduct that applies to all of
our employees, officers and directors, including our Chief Executive Officer,
Chief Financial Officer, and other executive and senior financial officers. The
full text of our Corporate Governance Guidelines and our Code of Business
Conduct is posted on the Investors page under the Corporate Governance portion
of our website at
www.lumentum.com
. We will post
amendments to our Code of Business Conduct or waivers of our Code of Business
Conduct for directors and executive officers on the same website.
RISK MANAGEMENT
Risk is inherent with every business, and
we face a number of risks, including strategic, financial, business and
operational, legal and compliance, and reputational. We have designed and
implemented processes to manage risk in our operations. Management is
responsible for the day-to-day management of risks the Company faces, while our
board of directors, as a whole and assisted by its committees, has
responsibility for the oversight of risk management. In its risk oversight role,
our board of directors has the responsibility to satisfy itself that the risk
management processes designed and implemented by management are appropriate and
functioning as designed.
Our board of directors believes that open
communication between management and our board of directors is essential for
effective risk management and oversight. Our board of directors meets with our
Chief Executive Officer and other members of the senior management team at
quarterly meetings of our board of directors, where, among other topics, they
discuss strategy and risks facing the Company, as well at such other times as
they deemed appropriate.
While our board of directors is ultimately
responsible for risk oversight, our board committees assist our board of
directors in fulfilling its oversight responsibilities in certain areas of risk.
Our Audit Committee assists our board of directors in fulfilling its oversight
responsibilities with respect to risk management in the areas of internal
control over financial reporting and disclosure controls and procedures, legal
and regulatory compliance, and discusses with management and the independent
auditor guidelines and policies with respect to risk assessment and risk
management. Our Audit Committee also reviews our major financial risk exposures
and the steps management has taken to monitor and control these exposures. Our
Audit Committee also monitors certain key risks on a regular basis throughout
the fiscal year, such as risk associated with internal control over financial
reporting, liquidity risk and cybersecurity risk. Our Governance Committee
assists our board of directors in fulfilling its oversight responsibilities with
respect to the management of risk associated with board organization, membership
and structure, and corporate governance. Our Compensation Committee assesses
risks created by the incentives inherent in our compensation policies. Finally,
our full board of directors reviews strategic and operational risk in the
context of reports from the management team, receives reports on all significant
committee activities at each regular meeting, and evaluates the risks inherent
in significant transactions.
14
2016 Proxy Statement
Table of Contents
PROPOSAL
NO. 1 ELECTION OF DIRECTORS
Six directors have been nominated by our
board of directors for election at the Annual Meeting, each to serve a one-year
term until the 2017 Annual Meeting of Stockholders and until their successors
are elected and qualified. All of the nominees are currently members of the
board of directors. All of the director nominees are independent under the
listing standards of the NASDAQ Stock Market except for Mr. Lowe.
Each of our current directors joined the
Company in August 2015 in connection with the Separation. Ms. Herscher and
Messrs. Covert and Kaplan were members of JDS Uniphase Corporations (now named
Viavi Solutions Inc. and referred to herein as Viavi) board of directors and
resigned at the time of the Separation and joined Lumentums board of directors.
Messrs. Thomas and Lillie were recommended by the Nominating and Governance
Committee of JDS Uniphase Corporation prior to the Separation and joined the
Lumentum board of directors upon the completion of the Separation.
Each director will be elected by the
affirmative vote of a majority of the votes cast, meaning that the numbers of
votes cast FOR a director nominee exceeds the number of votes cast AGAINST
that nominee.
We have no reason to believe that the
nominees named below will be unable or unwilling to serve as a director if
elected.
DIRECTOR
NOMINEES
The Governance Committee selects nominees
from a broad base of potential candidates and seeks qualified candidates with
diverse backgrounds and experience, who possess the highest ethical and
professional character and will exercise sound business judgment. The Nominating
and Governance Committee seeks people who are accomplished in their respective
fields and have superior credentials. A candidate must have an employment and
professional record which demonstrates, in the committees judgement, that the
candidate has sufficient and relevant experience and background, taking into
account positions held and industries, markets and geographical locations
served.
Our Governance Committee and the Board
have evaluated each of the director nominees. Based on this evaluation, the
Governance Committee and the board of directors have concluded that it is in the
best interest of Lumentum and its stockholders for each of the proposed director
nominees listed below to continue to serve as a director of Lumentum. The
nominees individual biographies below contain information about their
experience, qualifications and skills that led our board of directors to
nominate them.
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MARTIN A.
KAPLAN
|
|
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Age 78
Director Since August 2015
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Experience:
Mr. Kaplan is chairman of the board
of Superconductor Technologies and was a member of the board of directors
of Viavi until the completion of the Separation. Mr. Kaplan is also a
member of the board of directors of Sentinels of Freedom Scholarship
Foundation which assists severely wounded veterans transition to civilian
life. From May 1998 until his retirement in May 2000 after 40 years in the
technology industry, Mr. Kaplan was executive vice president of Pacific
Telesis Group, Inc., parent of Pacific Bell, a telecommunications company,
responsible for integration following the merger of SBC Communications,
Inc. (SBC), a telecommunications company, and Pacific Telesis Group,
Inc., followed by the same role for other SBC mergers. Mr. Kaplan holds a
Bachelor of Science degree in Engineering from California Institute of
Technology.
Committee
Membership:
Audit and Governance
(Chair)
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Qualifications:
|
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●
|
extensive business leadership
|
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●
|
operational and technical experience in the telecommunications
industry, including substantial experience in mergers and acquisitions
|
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●
|
valuable corporate governance experience from service on the boards
and committees of public and private companies
|
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15
Table of Contents
Proposal
No. 1
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HAROLD L.
COVERT
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Age 69
Director Since August 2015
|
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Experience:
Mr. Covert is currently chief
financial officer of Harmonic, Inc., a provider of video delivery
infrastructure solutions, which he joined in October 2015. From 2014 to
2015, Mr. Covert was an independent business consultant, and from 2011 to
2014, he served as executive vice president and chief financial officer of
Lumos Networks Corporation, a fiber-based service provider. From 2010 to
2011, Mr. Covert was an independent business consultant. From 2007 to
2010, Mr. Covert was president, chief financial officer and chief
operating officer of Silicon Image, Inc., a provider of semiconductors for
storage, distribution and presentation of high-definition content. Mr.
Covert was a member of the board of directors of Harmonic, Inc. from July
2007 to October 2015. Within the past five years he was also a member of
the board of directors of Viavi until the completion of the Separation,
and Solta Medical, Inc., which was acquired in 2014. Mr. Covert holds a
Bachelor of Science degree in Business Administration from Lake Erie
College and a Masters degree in Business Administration from Cleveland
State University and is also a Certified Public Accountant.
Committee Membership:
Audit (Chair) and
Compensation
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Qualifications:
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●
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significant experience and service in leadership roles
in finance and accounting
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●
|
in-depth financial knowledge obtained through
service as chief financial officer of seven publicly traded technology
companies
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●
|
valuable insight and experience from serving on the board of public
companies
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PENELOPE A.
HERSCHER
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Age 56
Director Since August 2015
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Experience:
Ms. Herscher was the president and
chief executive officer of FirstRain, Inc., an enterprise software
company, from 2004 through 2015. From 2002 to 2003, Ms. Herscher held the
position of executive vice president and chief marketing officer at
Cadence Design Systems, Inc., an electronic design automation software
company. From 1996 to 2002, Ms. Herscher was president and chief executive
officer of Simplex Solutions, which was acquired by Cadence in 2002. Ms.
Herscher serves on the board of directors of Rambus Inc., FirstRain, Inc.
and Savonix, Inc. Ms. Herscher was also a member of the board of directors
of Viavi until the completion of the Separation. Ms. Herscher holds a MA
degree in Mathematics and a BA HONS degree with honors in Mathematics from
Cambridge University in England, and attended the Stanford Executive
Program in 1991.
Committee Membership:
Compensation (Chair) and
Governance
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Qualifications:
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●
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experience as chief executive officer of several technology
companies
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●
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extensive marketing and technical background
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●
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valuable insight and experience from serving on the board and
committees of public companies, including prior service as chair of
Compensation Committee at Viavi
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16
2016 Proxy Statement
Table of Contents
|
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Proposal No.
1
|
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SAMUEL F.
THOMAS
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Age 65
Director Since August 2015
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Experience:
Mr. Thomas is chairman of the board,
chief executive officer and president of Chart Industries, Inc., an
engineered cryogenic equipment manufacturer serving the natural gas and
industrial gas industries, which he joined in 2003. From 1998 to 2003, Mr.
Thomas was executive vice president of Global Consumables at ESAB Holdings
Ltd., a provider of welding consumables and equipment. Mr. Thomas holds a
Bachelor of Science degree in Mechanical Engineering from Rensselaer
Polytechnic Institute.
Committee Membership:
Compensation
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Qualifications:
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●
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strong
leadership and business experience in manufacturing, sales and marketing
and operations
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●
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significant international experience gained over a 39-year career
with Chart Industries, ESAB Holdings Ltd. and T&N Plc.
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BRIAN J.
LILLIE
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Age 52
Director Since August 2015
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Experience:
Mr. Lillie is the chief customer
officer (CCO) and executive vice president of Technical Services of
Equinix, Inc., a global provider of data center and internet exchange
services. As CCO, Mr. Lillie directly leads the Global Customer Success
Organization, which includes Global Customer Care, Global Customer
Experience, Global Customer Process, and Global Technology Services,
including IT and Interconnection Product Engineering. Previous to this
assignment, for the past eight years, Mr. Lillie served as global CIO for
Equinix. Prior to joining Equinix, Mr. Lillie held several executive-level
roles at VeriSign, Inc., a provider of intelligent infrastructure
services, including vice president of global information systems and vice
president of global sales operations. Mr. Lillie holds a Master of Science
degree in Management from Stanford Universitys Graduate School of
Business, a Master of Science degree in Telecommunications Management from
Golden Gate University and a Bachelor of Science degree in Mathematics
from Montana State University.
Committee Membership:
Audit and Nominating and Governance
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Qualifications:
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●
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extensive executive-level experience in the technology industry and
specifically in the data center markets
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ALAN S.
LOWE
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Age 54
Director Since August 2015
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Experience:
Mr. Lowe has served as Lumentums
president and chief executive officer since July 2015. Prior to joining
Lumentum, Mr. Lowe was employed by Viavi. Mr. Lowe joined Viavi in
September 2007 as senior vice president of the Lasers business, and became
executive vice president and president of Viavis CCOP business in October
2008. Prior to joining Viavi, Mr. Lowe was senior vice president, Customer
Solutions Group at Asyst Technologies, Inc. a leader in automating
semiconductor and flat panel display fabs. From 2000 to 2003, he was
president and chief executive officer of Read-Rite Corporation
(Read-Rite), a manufacturer of thin-film recording heads for disk and
tape drives. From 1989 to 2000, Mr. Lowe served in roles of increasing
responsibility at Read-Rite, including president and chief operating
officer, and senior vice president of customer business units. Mr. Lowe
holds Bachelor of Arts degrees in computer science and business economics
from the University of California, Santa Barbara and completed the
Stanford Executive Program in 1994.
Committee Membership:
None
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Qualifications:
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●
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extensive business, management, and leadership skills from his
roles at Viavi, Asyst Technologies and Read-Rite
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●
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broad
and deep experience with Lumentum and its businesses
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THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE ELECTION TO THE BOARD OF EACH OF THE
NOMINEES NAMES ABOVE.
|
17
Table of Contents
DIRECTOR
COMPENSATION
In August 2015, our board of directors,
upon the recommendation of our Compensation Committee, adopted our Director
Compensation Plan for the compensation of our non-employee directors (Outside
Directors). Our Outside Directors will receive
compensation in the form of equity granted under the terms of our 2015
Equity Incentive Plan (the 2015 Plan) and cash, as described below:
EQUITY
AWARDS
Initial Award
. Each Outside Director is granted an initial award restricted
stock units (RSUs) with a grant date fair value equal to $200,000 (the
Initial RSU Award). These awards will be granted on the date of the first
meeting of our board of directors or Compensation Committee occurring on or
after the date on which the individual first became an Outside Director. The
Initial RSU Award will vest in three annual installments from the commencement
of the individuals service as an Outside Director, subject to continued service
as a director through the applicable vesting date. If a directors status
changes from an employee director to an Outside Director, he or she will not
receive an Initial RSU Award. Pursuant to the 2015 Plan, in August 2015, each
Outside Director was granted an Initial RSU Award.
Annual Awards
. On the date of each Annual Meeting of our stockholders, each
Outside Director who has served on our board of directors for at least the
preceding six months will be granted
an award of
RSUs with a grant date fair value equal to $175,000 (the Annual RSU Award).
The Annual RSU Award will vest upon the earlier of (i) the day prior to the next
years Annual Meeting of stockholders or (ii) one year from grant, subject to
continued service as a director through the applicable vesting date. As we did
not hold an Annual Meeting during fiscal year 2016, we granted an Annual RSU
Award to each of our Outside Directors in December 2015.
Severance Provisions for Equity
Awards
. Upon retirement of an Outside
Director, all unvested RSUs will automatically vest in full. The treatment of
unvested RSUs held by an Outside Director upon a change in control will be
determined by the terms of the 2015 Plan.
CASH
COMPENSATION
Annual Fee
. Each Outside Director will receive an annual cash retainer of $85,000
for serving on our board of directors (the Annual Fee), paid quarterly. In
addition to the Annual Fee, the non-employee board chair will be entitled to an
additional cash retainer of $60,000.
Committee Service
. The chairpersons of the three standing committees of our
board of directors will be entitled to the following annual cash retainers, paid
quarterly:
Board Committee
|
Chairperson Fee
($)
|
Audit Committee
|
25,000
|
Compensation Committee
|
20,000
|
Governance Committee
|
15,000
|
18
2016 Proxy
Statement
Table of Contents
|
|
Director
Compensation
|
OUTSIDE DIRECTOR
COMPENSATION FOR FISCAL YEAR 2016
The following table provides information
regarding the total compensation that was granted to each of our non-management
directors in fiscal year 2016.
Name
|
|
Fees Earned
or Paid in
Cash
($)
(1)
|
|
Stock
Awards
($) (2)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
Martin A. Kaplan
|
|
160,000
|
|
399,839
|
|
|
|
|
|
|
|
|
|
559,839
|
Penelope A. Herscher
|
|
105,000
|
|
399,839
|
|
|
|
|
|
|
|
|
|
504,839
|
Harold L. Covert
|
|
110,000
|
|
399,839
|
|
|
|
|
|
|
|
|
|
509,839
|
Samuel F. Thomas
|
|
85,000
|
|
399,839
|
|
|
|
|
|
|
|
|
|
484,839
|
Brian
J. Lillie
|
|
85,000
|
|
399,839
|
|
|
|
|
|
|
|
|
|
484,839
|
(1)
|
The amount reported represents
the fees earned for service on our board of directors and committees of
our board of directors pursuant to and effective as of the adoption of our
Director Compensation Plan in August 2015.
|
|
(2)
|
The amounts shown in this column
are the grant date fair value in the period presented as determined in
accordance with FASB ASC Topic 718. Such grant-date fair value does not
take into account any estimated forfeitures related to service-vesting
conditions. The assumptions used to calculate these amounts are set forth
under Note 13, Stock-Based Compensation in our Annual Report on Form
10-K for the fiscal year ended July 2, 2016.
|
Directors who are also our employees
receive no additional compensation for their service as directors. During fiscal
year 2016, Mr. Lowe was an employee. See Executive Compensation for additional
information about his compensation.
19
Table of Contents
PROPOSAL NO. 2 APPROVAL
OF EXECUTIVE
OFFICER PERFORMANCE-BASED INCENTIVE PLAN
We are seeking approval of the Executive
Officer Performance-Based Incentive Plan (the Incentive Plan). If approved by
our stockholders, the Incentive Plan would permit us to receive a full federal
income tax deduction for compensation (if any) paid under the Incentive Plan
that qualifies as performance-based compensation under Section 162(m) of the
Internal Revenue Code, or Section 162(m). Our board of directors approved the
Incentive Plan in August 2016, subject to stockholder approval at the 2016
Annual Meeting. Our board of directors recommends that stockholders vote for
this proposal at the 2016 Annual Meeting.
Stockholder approval is not required for
us to be able to offer bonuses or other cash incentives to its employees.
However, under Section 162(m), we may not receive a federal income tax deduction
for compensation (including bonuses) paid to the Companys chief executive
officer or any of the three other most highly compensated executive officers
(other than our chief financial officer) to the extent that any of these persons
receives total compensation of more than $1 million in any one year.
Notwithstanding that general rule, if the compensation
qualifies as performance-based under Section 162(m), we may be eligible
to receive a full federal income tax deduction for the compensation, even if
total compensation to an affected employee otherwise is more than $1 million
during a single year. The Incentive Plan allows us the opportunity to choose to
pay cash incentive compensation that is intended to be performance-based and
therefore potentially fully tax deductible on our federal income tax return
under current law. In order for the potential cash compensation to qualify as
performance-based, the plan under which the compensation is paid must (among
other things) be approved by stockholders. Therefore, we are asking stockholders
to approve the Incentive Plan at the 2016 Annual Meeting.
If our stockholders do not approve the
Incentive Plan, we will not use the Incentive Plan and it will be terminated
including fiscal 2017 bonus opportunities that previously were granted under the
Incentive Plan subject to stockholder approval of the Incentive Plan. However,
if that happens, we may choose to pay bonuses or other incentives outside of the
Incentive Plan, which payments (if any) may not qualify for tax deductibility to
us.
SUMMARY
OF THE INCENTIVE PLAN
The following paragraphs summarize the
principal features of the Incentive Plan and its operation. The summary is
qualified in its entirety by the Incentive Plan set forth in Appendix
A.
The purpose of the Incentive Plan is to
motivate key executives to perform to the best of their abilities and to achieve
the Companys objectives. The Incentive Plan accomplishes this by paying awards
only after the achievement of the specified goals.
Eligibility to
Participate
|
The Incentive Plan will be administered by
our Compensation Committee or such other committee designated by our board of
directors consistent with the requirements of Section 162(m). Our Compensation
Committee selects which of our employees (and employees of our affiliates) will
be eligible to receive awards under the Incentive Plan. The actual number of
employees who
will be eligible to receive an
award during any particular year cannot be determined in advance because our
Compensation Committee has discretion to select the participants. For the 2017
fiscal year, 12 executives have been selected as participants in the Incentive
Plan.
Target Awards and Performance
Goals
|
Each performance period, our Compensation
Committee assigns each participant a target award and the performance goal or
goals that must be achieved before an award actually will be paid to the
participant. The participants target award is expressed as a percentage of his
or her base salary. The performance goals require the achievement of objectives
for one or more of the following measures: share price, earnings per share,
total stockholder return, operating margin, gross margin, return on equity,
return on assets, return on investment, operating income, net operating income,
pre-tax profit, net income, cash flow, revenue, expenses, earnings before any
one or more of
share-based compensation expense,
interest, taxes, depreciation and amortization, economic value added, market
share, personal management objectives, product development, completion of an
identified special project, completion of a joint venture or other corporate
transaction, and other measures of performance selected by the Incentive Plans
administrator. The performance goals may differ from participant to participant
and from award to award, may be used alone or in combination, may be used to
measure our performance as a whole or the performance of one of our business
units, and may be measured relative to a peer group or index.
20
2016 Proxy
Statement
Table of Contents
|
|
Proposal No.
2
|
After the performance period ends, our
Compensation Committee certifies in writing the extent to which the
pre-established performance goals actually were achieved or exceeded. The actual
award that is payable to a participant is determined using a pre-established
formula that increases or decreases the participants target award based on the
level of actual performance attained. However, the Incentive Plan limits actual
awards to a maximum of $2,500,000 per participant for all performance periods
ending during any fiscal year, even if the formula otherwise indicates a larger
award. If there are multiple performance periods ending in the same fiscal year,
the aggregate amount paid with respect to all performance periods occurring
within that fiscal year cannot exceed the maximum specified in the previous
sentence.
Our Compensation Committee has discretion
to reduce or eliminate (but not to increase) the actual award of any participant
and to determine whether a participant will receive an actual award in the event
the participants employment with us terminates before the payment date of the
actual award. However, under certain circumstances, our Compensation Committee
has discretion to pay out all or part of an award if a participant terminates
employment or in the event of a change of control of the Company.
The Incentive Plan provides that our
Compensation Committee may require a participant to forfeit, return or reimburse
to us all or a portion of any actual award paid under the Incentive Plan in
accordance with any then effective Company compensation clawback or recovery
policy as amended from time to time.
Administration, Amendment and
Termination
|
Our Compensation Committee administers the
Incentive Plan. Members of our Compensation Committee must qualify as outside
directors under Section 162(m). Subject to the terms of Incentive Plan, our
Compensation Committee has sole discretion to: (i) determine which participants
shall be granted awards, (ii) prescribe the terms and conditions of awards,
(iii) interpret the Incentive Plan and the awards, (iv) adopt such procedures
and subplans as are necessary or appropriate to permit participation in the
Incentive Plan by participants, (v) adopt rules for the administration,
interpretation and application of the Incentive Plan as are consistent
therewith, and (vi) interpret, amend or revoke any such rules.
Our board of directors or our Compensation
Committee may amend, alter, suspend or terminate the Incentive Plan. The
amendment, alteration, suspension or termination of the Incentive Plan will not,
unless mutually agreed otherwise in a signed writing between the participant and
our Compensation Committee, materially impair the rights of any participant,
except that our Compensation Committee may amend the terms of any awards if such
amendment is done in a manner permitted under the Incentive Plan, to avoid
additional tax or income recognition under Section 409A of the Code, to comply
with applicable laws, or as necessary to ensure compliance with the requirements
of Section 162(m). Our Compensation Committee, in its sole determination,
determines whether an amendment, alteration, suspension, or termination
materially impairs the rights of any participant.
Federal Income Tax
Consequences
|
The Incentive Plan is intended to permit
the payment of bonuses that qualify as performance-based compensation under
Section 162(m). Under Section 162(m), the Company may not receive a federal
income tax deduction for compensation paid to our chief executive officer or any
of our other three most highly compensated executive officers (other than our
chief financial officer) to the extent that any of these persons receives more
than $1,000,000 in any one year. However, performance-based compensation that
qualifies under Section 162(m) is exempt from this $1,000,000 limitation. The
Incentive Plan allows us the opportunity to choose to pay incentive compensation
that
is intended to be performance-based and
therefore potentially fully tax deductible on our federal income tax return
(subject to future changes in tax laws and other circumstances). We also may
choose to pay other or additional compensation outside of the Incentive Plan
that is not intended to qualify as performance-based compensation (and that,
therefore, may not be tax deductible for us). For example, base salaries do not
qualify as performance-based compensation and any bonuses paid outside of the
Incentive Plan likely would not qualify as performance-based
compensation.
Awards to be Granted to Certain Individuals and
Groups
|
Awards (if any) under the Incentive Plan
are determined based on actual future performance. As a result, future actual
awards cannot now be determined.
For fiscal 2017, our Compensation
Committee has established a 12-month performance period under the Incentive
Plan. Under this performance period, our Compensation Committee determined that
an aggregate bonus pool will be created for participants if we achieve positive
operating income. Each participant will
be
assigned a percentage of the aggregate pool (if any) that is created by this
formula. If our Compensation Committee determines that our operating income for
the 2017 performance period is not positive, no awards will be paid under the
Incentive Plan for fiscal 2017. If our Compensation Committee determines that
our operating income for the 2017 performance period is positive, then a bonus
pool will fund. Further, if our stockholders do not approve the Incentive Plan,
the Incentive Plan will be
21
Table of Contents
Proposal
No. 2
|
|
|
terminated, along with any fiscal 2017
bonus opportunities previously granted thereunder subject to the approval of the
stockholders of the Incentive Plan.
If the Incentive Plan is approved by our
stockholders, then, for fiscal 2017 Incentive Plan participants, (other than Mr.
Reinhardt), the funding of the bonus pool will be reduced (but not increased)
based on two components. First, the funding of the bonus pool as it relates to
these participants assigned bonus opportunities will be reduced based on our
achievement of the following strategic goals: first-half fiscal 2017 operating
income (weighted 40%), second-half fiscal 2017 operating income (weighted 40%),
and annual fiscal 2017 revenue (weighted 20%). The bonus pool as it relates to
these participants assigned bonus opportunities generally will fund with
respect to any strategic goal based on a linear interpolation between threshold
performance (50% funding) and maximum performance (240% funding), with the
exception of the flat range around target to help provide some flexibility.
Second, our Compensation Committee also has reserved the right to increase or
decrease the bonus pool as it relates to these participants assigned bonus
opportunities by up to 20%, as adjusted by the achievement of our strategic
performance goals during the 2017 performance period, based on our Compensation
Committees subjective assessment with managements input of certain operation
measures in our business during fiscal 2017. For Mr. Reinhardt, the funding as
it relates to his assigned bonus opportunity in fiscal 2017 will be reduced (but
not increased) based on our achievement under the same bonus scheme as other
participants described above (weighted approximately 58%) and revenue (weighted
approximately 42%).
Each of these participants will become
eligible to potentially receive an award that is up to the award indicated by
his or her percentage of the actual pool created. In no event will the actual
pool be more than the pool created if we achieve positive operating
income.
The following table sets forth the target
bonuses for the 2017 performance period for the persons and groups shown below,
based on each participants base salary. The target bonus is the amount that our
Compensation Committee currently expects to pay the participant assuming exactly
one hundred percent (100%) achievement of the applicable secondary performance
goals for the 2017 performance period, no discretionary adjustments by our
Compensation Committee, and that the bonus pool created from positive operating
income is sufficient to pay the total of all target bonuses. There is no
guarantee that the amounts shown below actually will be paid nor that any
amounts at all will be paid for the 2017 performance period. Actual awards (if
any) under the Incentive Plan for fiscal 2017 may be higher or lower than the
award set forth below, depending on the level of actual performance attained
against target levels set with respect to the strategic goals, any discretionary
adjustments made by our Compensation Committee, the participants actual base
salary and the size of the pool created (if any). For the 2017 performance
period, Mr. Lowe (our Chief Executive Officer) has a maximum award of 24.1% of
the pool and other participants have an aggregate maximum award of 75.9% of the
pool, with no other participants maximum award exceeding 12% of the pool. Our
executive officers are eligible to receive awards under the Incentive Plan and
therefore, our executive officers have an interest in this proposal.
Named Executive Officer
|
|
Target Award
($) (1)
|
Alan Lowe
|
|
700,000
|
Aaron Tachibana
|
|
280,000
|
Vincent Retort
|
|
344,000
|
All
current executive officers as a group (2)
|
|
1,797,000
|
All employees who participate in our
Executive Officer Performance-Based Incentive Plan, annual Cash Incentive
or other annual performance bonus programs in fiscal 2017
|
|
21,372,050
|
(1)
|
Target Awards are calculated
based on base salary to be effective October 16, 2016.
|
|
(2)
|
Consists of 5 executive officers
who were selected by our Compensation Committee as participants under the
Incentive Plan for our 2017 fiscal year.
|
VOTE REQUIRED
The approval of the Incentive Plan
requires the affirmative vote of a majority of the voting power of the shares
present or represented by proxy at the Annual Meeting at which a quorum is
present and entitled to vote thereon. Abstentions will have the effect of a vote
AGAINST the proposal and broker non-votes will have no effect.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE APPROVAL OF THE EXECUTIVE
OFFICER
PERFORMANCE-BASED INCENTIVE
PLAN.
|
22
2016
Proxy Statement
Table of Contents
PROPOSAL
NO. 3 APPROVAL OF THE AMENDED AND RESTATED 2015 EQUITY INCENTIVE
PLAN
We are seeking stockholder approval to
amend our 2015 Equity Incentive Plan (the 2015 Plan) to (1) increase the
number of shares of our Common Stock reserved for issuance under the plan by an
additional 3,000,000 shares and (2) approve the material terms of the 2015 Plan
to give us the ability to deduct for U.S. federal income tax purposes the
compensation recognized by certain of our executive officers in connection with
awards granted thereunder.
Our board of directors approved the
amended and restated 2015 Plan in August 2016, subject to stockholder approval
at the 2016 Annual Meeting. Our board of directors has determined that it is in
our best interests and the best interests of our stockholders to approve this
proposal. Our board of directors recommends that stockholders vote for this
proposal at the 2016 Annual Meeting.
If stockholders approve this proposal, the
amended and restated 2015 Plan will become effective as of the date of
stockholder approval. If stockholders do not approve this proposal, (i) our
ability to attract and retain the individuals
necessary to drive our performance and increase long term stockholder value will
be limited, as our 2015 Plan will continue to be administered in its current
form the amendment and share increase will not take effect and (ii) we may not
be able to take a full federal income tax deduction for the compensation under
Section 162(m) for the compensation we pay to our covered employees.
Our executive officers and directors are
eligible to receive equity awards under the 2015 Plan and therefore have an
interest in this proposal. The remainder of this discussion, when referring to
the 2015 Plan, refers to the amended and restated 2015 Plan as if this proposal
is approved by our stockholders, unless otherwise specified or the context
otherwise references the 2015 Plan prior to amendment and
restatement.
REASONS
FOR VOTING FOR THIS PROPOSAL
Long-Term Equity is a Key Component of our Compensation
Objective
|
Our overall compensation objective is to
compensate our personnel in a manner that attracts and retains the highly
talented employees necessary to manage and staff a high-growth business in an
innovative and competitive industry. Our employees are our most valuable asset,
and we strive to provide them with compensation packages that are competitive,
that reward personal and company performance, and help meet our retention needs.
Equity awards, whose value depends on our stock performance, and which require
continued service over time before any value can be realized, help achieve these
objectives and are a key element of our
compensation program. Equity awards also reinforce employees incentives to
manage our business as owners, aligning employees interests with those of our
stockholders. We believe we must continue to use equity compensation on a broad
basis to help attract, retain and motivate employees to continue to grow our
business, develop new products and ultimately increase stockholder value. As of
August 26, 2016, approximately 1,529 of our regular, full-time employees held
outstanding equity awards.
Requested Share Reserve Increase is
Reasonable
|
On June 23, 2015, we adopted, and the
board of directors of JDS Uniphase Corporation (JDSU and, now, Viavi Solutions
Inc.) approved, the 2015 Plan under which 8,500,000 shares of our Common Stock
were authorized for issuance. In connection with our separation from JDSU on
July 31, 2015, outstanding JDSU equity-based awards held by service providers
continuing in service after the separation were converted into equity-based
awards under the 2015 Plan reducing the number of shares remaining available for
grant under the 2015 Plan. As of immediately following our separation from JDSU,
2,100,901 shares
of our Common Stock were
reserved pursuant to outstanding equity-based awards under the 2015 Plan that
were converted from JDSU equity-based awards.
When we initially adopted the 2015 Plan,
we believed the shares of our Common Stock reserved for issuance under the 2015
Plan would be sufficient to enable us to grant equity awards until 2017. This
estimate was based on forecasts that took into account our anticipated rate of
growth in hiring, the number of shares needed for assumed JDSU awards, an
estimated range of our stock price over time, and our anticipated forfeiture and
overhang rates.
23
Table of Contents
Proposal
No. 3
|
|
|
Our board of directors believes that
additional shares are necessary to meet our anticipated equity compensation
needs for approximately the next three years from the Annual Meeting. Our board
of directors considered the following when determining the increase in the
number of shares of Common Stock reserved for issuance under the amended and
restated 2015 Plan:
●
|
Number of Shares Remaining under the
2015 Plan. As of August 26, 2016, the number of shares of our Common Stock
that remained available for issuance under the 2015 Plan was 5,187,360
plus any shares of our Common Stock subject to outstanding equity awards
granted under our 2015 Plan that return to the 2015 Plan under its
existing terms. As of the same date, the outstanding equity awards under
the 2015 Plan covered a total of 2,163,154 shares of our Common Stock,
which consists of (i) 121,700 shares subject to outstanding options, with
a weighted average exercise price of $21.47, and a weighted term of 1.58
years and (ii) 2,041,454 shares subject to outstanding awards of full
value awards.
|
●
|
Overhang. As of August 26, 2016,
2,163,154 shares of our Common Stock were subject to outstanding equity
awards under our 2015 Plan and 5,187,360 shares of our Common Stock were
available for future awards under our 2015 Plan. This represents
approximately 12.6% of the outstanding Shares as of August 26, 2016, which
is lower than the approximately 15% median overhang among our peer
group.
|
●
|
Historical Grant Practices. Our
board of directors considered the number of equity awards that we granted
last year. In fiscal year 2016, we granted equity awards covering
1,981,366 shares of our Common Stock. This resulted in an annual burn-rate
of 3.3%, which is slightly above the approximately 2.6% median three-year
annual burn-rate among our peer group. Annual burn-rate measures the total
shares granted over the total number of shares outstanding during a given
year.
|
●
|
Proxy Advisory Firm Guidelines. To
assist in its assessment of the appropriate number of shares to seek to
add to the 2015 Plan, our board of directors also considered proxy
advisory firm guidelines.
|
The 2015 Plan Requires Additional Shares to Meet our
Forecasted Needs
|
We currently forecast granting equity
awards representing approximately 7,200,000 shares over the next four years, or
approximately 12% of our shares of Common Stock that are outstanding as of
August 26, 2016. We also anticipate share forfeitures and cancellations of
approximately 975,000 shares over this period based on our historic
rates.
If our expectation for forfeitures is
accurate, our net grants (grants less forfeitures and cancellations) over the
next four-year period would be approximately 6,225,000 shares, or approximately
10.4% of our Common Stock outstanding as of August 26, 2016. As described above,
the 2015 Plan has 5,187,360 shares of Common Stock available for grant as of
August 26, 2016. We believe additional shares should be reserved for issuance
under our 2015 Plan to meet our estimated near-term equity compensation
needs.
If stockholders do not approve the amended
and restated 2015 Plan, the 2015 Plan will continue without this amendment. In
that case, the shares reserved for issuance under the 2015 Plan
may be insufficient to achieve our incentive, recruiting and
retention objectives during fiscal year 2017 and each fiscal year thereafter
while the 2015 Plan remains in effect. If the shares available for issuance
under the 2015 Plan run out, the 2015 Plans goals of recruiting, retaining and
motivating talented employees will be more difficult to meet. We do not believe
increasing cash compensation to make up for any shortfall in equity compensation
would be practical or advisable, because we believe that a combination of equity
awards and cash compensation provide a more effective compensation strategy than
cash alone for attracting, retaining and motivating our employees long-term and
aligning employees and stockholders interests. In addition, any significant
increase in cash compensation in lieu of equity awards could substantially
increase our operating expenses and reduce our cash flow from operations, which
could adversely affect our business results and could adversely affect our
business strategy, including using cash flow for strategic acquisitions,
research and development of innovative new products, and improvements in the
quality and performance of existing products.
Ability to Fully Deduct Certain Performance-based Awards for
Federal Income Tax Purposes
|
Approval of the material terms of the 2015
Plan will give us the ability to grant awards that qualify as performance-based
compensation under Section 162(m) of the Code, or Section 162(m).
Under Section 162(m), we may not receive a
federal income tax deduction for compensation paid to our chief executive
officer or any of the three other most highly compensated executive officers
(other than our chief financial officer) to the extent that any of these
employees receives total compensation of more than $1,000,000 in any one year.
We refer to these individuals as our covered employees. However, if the
compensation qualifies as performance-based under Section 162(m), we may be
eligible to receive a full federal income tax deduction for the compensation,
even if total compensation to a covered employee otherwise is more than
$1,000,000 during a single year. To enable
compensation in connection with stock options, stock appreciation rights
and certain restricted stock grants, restricted stock units, performance shares
and performance units awarded under the amended and restated 2015 Plan to
qualify as performance-based within the meaning of Section 162(m),
stockholders are being asked to approve the material terms of the 2015 Plan,
including the eligibility requirements for participating in the 2015 Plan, the
performance measures upon which specific performance goals applicable to certain
awards would be based, the limits on the number of shares or compensation that
could be paid to participants in any fiscal year, and the other material terms
of the awards described below. Notwithstanding the foregoing, we retain the
ability to grant equity awards under the amended and restated 2015 Plan that do
not qualify as performance-based compensation within the meaning of Section
162(m).
24
2016 Proxy Statement
Table of Contents
|
|
Proposal No.
3
|
The 2015 Plan Includes Compensation and Governance Best
Practices
|
The 2015 Plan includes provisions that are
considered best practice for compensation and corporate governance purposes.
These provisions protect our stockholders interests, as follows:
●
|
Administration. The 2015 Plan is
administered by the Compensation Committee, which consists entirely of
independent non-employee directors.
|
●
|
Share Counting Provisions. Shares of
our Common Stock that actually are issued under the 2015 Plan generally
will not be available for future issuance under the 2015 Plan, except that
if unvested shares of Common Stock are forfeited or repurchased by us for
an amount not greater than their original purchase price, those shares
shall become available for future grant under the 2015 Plan. However,
shares that are tendered by holders or withheld by us to pay the exercise
price of an award or to satisfy tax withholding obligations related to an
award will not be available for future
awards.
|
●
|
Repricing or Exchange Programs are
Not Allowed. The 2015 Plan does not permit outstanding awards to be
repriced or exchanged for other awards without the approval of the
majority of stockholders.
|
●
|
Annual Limits on Awards to
Non-Employee Directors. The 2015 Plan sets reasonable, annual limits as to
the awards that non-employee directors may receive during each fiscal
year.
|
●
|
Minimum Vesting Requirements. In
general, awards vesting on the basis of an individuals continuous service
with us will vest in full no earlier than the 1-year anniversary of the
grant date although up to 5% of the shares reserved in the 2015 Plan may
be granted without this minimum vesting
requirement.
|
●
|
No Single-Trigger Vesting
Acceleration upon a Corporate Transaction. The 2015 Plan provides that
only in the event an award is not assumed or replaced will vesting
accelerate on a Corporate Transaction.
|
●
|
Limited Transferability. Awards
under the 2015 Plan generally may not be sold, assigned, transferred,
pledged, or otherwise encumbered, unless otherwise approved by the
administrator.
|
●
|
No Tax Gross-ups. The 2015 Plan does
not provide for any tax gross-ups.
|
●
|
Forfeiture Events. The 2015 Plan
provides the flexibility for the administrator to subject awards to
forfeiture or recoupment provisions. It also requires certain individuals
who are subject to automatic forfeiture under Section 304 of the
Sarbanes-Oxley Act of 2002 to reimburse us if we are required to prepare
an accounting restatement under circumstances described in the 2015
Plan.
|
Our executive officers and directors have
an interest in the approval of the 2015 Plan because they are eligible to
receive equity awards under the 2015 Plan.
SUMMARY
OF THE 2015 EQUITY INCENTIVE PLAN
The following is a summary of the
operation and principal features of the 2015 Plan. However, this summary is not
a complete description of all of the provisions of the 2015 Plan
and is qualified in its entirety by the specific language of
the 2015 Plan. A copy of the 2015 Plan is provided as Appendix B to this proxy
statement.
The purpose of the 2015 Plan is to provide
incentives to attract, retain, and motivate eligible persons whose present and
potential contributions are important to our success by offering them an
opportunity to participate in our future performance. These
incentives are provided through the granting of stock options,
stock appreciation rights, dividend equivalent rights, restricted stock awards,
restricted stock units, performance units, and performance shares.
There are currently 8,500,000 shares of
Common Stock reserved under the 2015 Plan. The stockholders are now being asked
to approve an additional 3,000,000 shares to become available for future
issuance under the 2015 Plan to increase the total number of shares of our
Common Stock reserved for issuance under the amended and restated 2015 Plan to
11,500,000. As of August 26, 2016, approximately 5,187,360 shares remained
available for grant under the 2015 Plan.
Each share subject to an award under the
2015 Plan counts against the numerical limits of the 2015 Plan as one share for
every one share subject thereto.
Shares that actually are issued under the
2015 Plan will not be returned to the 2015 Plan and will not be available for
future issuance of the 2015 Plan, except that if unvested shares are forfeited
or repurchased by us for an amount not greater than their original purchase
price, such shares will become available for future grant under the 2015 Plan.
For stock options and stock appreciation rights, the gross number of shares
subject to the award will cease to be available under the 2015 Plan, whether or
not the award is net settled for a lesser number of shares, or if the shares are
utilized to exercise an award. If shares are withheld to pay any tax withholding
obligations applicable to an award, then the gross number of shares subject to
the award will cease to be available under the 2015 Plan.
25
Table of Contents
Proposal
No. 3
|
|
|
ADMINISTRATION OF THE 2015 PLAN
Our board of directors, or a committee
appointed by the board of directors, administers our 2015 Plan. In the case of
awards intended to qualify as performance-based compensation within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
Code), the committee will consist of two or more outside directors within
the meaning of Section 162(m) of the Code. The administrator has the power to
select the employees, directors, and consultants to whom awards may be granted,
to determine whether and to what extent awards are granted, to determine whether
an award granted to a covered employee (as defined in the 2015 Plan) will be
intended to result in performance-based compensation and the applicable
performance criteria, performance period, and performance award formula, to
approve forms of award agreements for use under the 2015 Plan, to determine the
terms and conditions of awards granted under the 2015 Plan, to amend the terms
of any
outstanding awards granted under the 2015
Plan (provided that any amendment that would have a materially adverse effect on
the grantees rights under an outstanding award will not be made without the
grantees written consent), to construe and interpret the terms of the 2015 Plan
and awards, to establish additional terms, conditions, rules or procedures to
accommodate the rules or laws of applicable non-U.S. jurisdictions, and to take
other action, not inconsistent with the terms of the 2015 Plan, as the
administrator deems appropriate.
The administrator may only institute an
exchange program whereby the exercise prices of outstanding awards may be
reduced or outstanding options or stock appreciation rights may be surrendered
or cancelled in exchange for awards with a lower exercise price, full value
awards, or payments in cash if we obtain an affirmative vote of holders of the
majority of its stockholders.
All types of awards may be granted to our
employees, and non-employee directors and employees of our parent or subsidiary
corporations. Incentive stock options may be granted only to employees who, as
of the time of grant, are employees of ours or any parent or subsidiary
corporation of ours. As of August 26, 2016, we had approximately 1,860 employees
(including five executive officers) and five non-employee directors.
Except with respect to 5% of the maximum
number of shares issuable under the Plan, no award that vests on the basis of an
individuals continuous service with us will vest earlier than one year
following the date of grant; provided, however, that vesting of an award may be
accelerated upon the death, disability, or involuntary termination of the
service of the grantee, or in connection with a corporate transaction, as
defined in the 2015 Plan.
Stock options may be granted under our
2015 Plan. Each option is evidenced by an award agreement that specifies the
exercise price, the term of the option, forms of consideration for exercise, and
such other terms and conditions as the administrator determines, subject to the
terms of the 2015 Plan. The exercise price of options granted under our 2015
Plan must be at least equal to the fair market value of our common stock on the
date of grant, except in special, limited circumstances as set forth in the 2015
Plan. The maximum term of an option will be specified in an award agreement,
provided the term of an option will be no more than 8 years. However, with
respect to any participant who owns more than 10% of the voting power of all
classes of our outstanding stock, the term must not exceed five years and the
per share exercise price must equal at least 110% of the fair market value of a
Share on the grant date. Generally, the fair market value of our common stock is
the closing sales price on the relevant date as quoted on the NASDAQ stock
market.
Options will be exercisable at such times
and under such conditions as determined by the administrator and as set forth in
the applicable award agreement. An option is deemed exercised when we receive
notice of exercise and full payment of the Shares to be exercised, together with
applicable tax withholdings. No option granted to an employee who is a
non-exempt employee for the purposes of the Fair Labor Standards Act of 1938, as
amended (the FLSA) will be first exercisable until at least 6 months following
the date of grant of such option.
After termination of an employee, director
or consultant, he or she may exercise his or her option for the period of time
stated in the option agreement. Generally, if termination is due to death or
disability, the option will remain exercisable for twelve months. In all other
cases, the option will generally remain exercisable for 90 days. However, an
option may not be exercised later than the expiration of its term.
Stock Appreciation Rights
|
Stock appreciation rights may be granted
under our 2015 Plan. Stock appreciation rights allow the recipient to receive
the appreciation in the fair market value of our common stock between the
exercise date and the date of grant. Each stock appreciation right is evidenced
by an award agreement that specifies the exercise price, the term of the award
(which may not exceed 8 years), and other terms and conditions as determined by
the administrator, subject to the terms of the 2015 Plan and provided that no
stock appreciation right granted to an employee who is a non-exempt employee for
the purposes of the FLSA will
be first
exercisable until at least 6 months following the date of grant of such SAR. The
per share exercise price for the shares to be issued pursuant to the exercise of
a stock appreciation right will be no less than 100% of the fair market value
per share on the date of grant. Stock appreciation rights will be exercisable at
such times and under such conditions as determined by the administrator and set
forth in the applicable award agreement. At the discretion of the administrator,
the payment upon exercise of stock appreciation right may be paid in cash or
with Shares, or a combination of both.
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Proposal No.
3
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Dividend Equivalent
Rights
|
Dividend equivalent rights may be granted
under our 2015 Plan. Dividend equivalent rights allow the recipient to receive
compensation or a credit to the recipients account measured by cash dividends
paid with respect to shares of Common
Stock. Each
dividend equivalent right is evidenced by an award agreement that specifies
terms and conditions as determined by the administrator, subject to the terms of
the 2015 Plan.
Restricted stock may be granted under our
2015 Plan. Restricted stock awards are grants of shares that are subject to
various restrictions, including restrictions on transferability and forfeiture
provisions. Each restricted stock award granted will be evidenced by an award
agreement specifying the number of shares subject to the award, any period of
restriction, and other terms and conditions of the award, as determined by the
administrator, subject to the terms of the 2015 Plan.
Restricted stock awards may (but are not
required to) be subject to vesting conditions, as the administrator specifies,
and the Shares acquired may not be transferred by the participant until the
vesting conditions (if any) are satisfied. The administrator,
in its sole discretion, may accelerate the time at which any
restrictions will lapse or be removed. Recipients of restricted stock awards
generally will have voting rights and rights to dividends and other
distributions with respect to such Shares upon grant without regard to vesting,
unless the administrator provides otherwise. Such dividends and other
distributions, if any, will be subject to the same restrictions as the shares of
restricted stock on which they were paid. Shares of restricted stock that do not
vest for any reason will be forfeited by the recipient and will revert to us.
Unless otherwise determined by the administrator, a participant will forfeit any
shares of restricted stock as to which the restrictions have not lapsed prior to
the participants termination of service.
Restricted stock units may be granted
under our 2015 Plan. Each restricted stock unit granted is a bookkeeping entry
representing an amount equal to the fair market value of one share. Each
restricted stock unit award will be evidenced by an award agreement that
specifies the number of restricted stock units subject to the award, any vesting
criteria (which may include accomplishing specified performance criteria or
continued service to us), form of payout, and other terms and conditions of the
award, as determined by the administrator,
subject to the terms of the 2015 Plan. Restricted stock units result in a
payment to a participant if any performance goals or other vesting criteria are
achieved or the awards otherwise vest. The administrator, in its sole
discretion, may accelerate the time at which any restrictions will lapse or be
removed. The administrator determines in its sole discretion whether an award
will be settled in stock, cash, or a combination of both.
Performance Units and Performance
Shares
|
Performance units and performance shares
may be granted under our 2015 Plan. Performance units and performance shares are
awards that will result in a payment to a participant if performance criteria
established by the administrator are achieved or the awards otherwise vest. Each
award of performance units or performance shares will be evidenced by an award
agreement specifying the number of units or shares (as applicable), any vesting
conditions, the performance period, and other terms and conditions of the award,
as determined by the administrator, subject to the terms and conditions of the
2015 Plan. Each performance unit will have an initial dollar value established
by the administrator prior to the date of grant. Each performance share will
have an initial value equal to the fair market value of a
share on the date of grant. The administrator will establish
any performance criteria or other vesting criteria (which may include continued
service) in its discretion, which, depending on the extent to which they are
met, will determine the number and/or the value of performance units and
performance shares to be paid out. After the grant of performance units or
performance shares, the administrator, in its sole discretion, may reduce or
waive any performance objectives or other vesting provisions for such
performance units or performance shares. The administrator, in its sole
discretion, may pay earned performance units or performance shares in the form
of cash, in Shares, or in some combination of both.
The administrator in its discretion may
make performance criteria applicable to any award granted in its discretion,
including but not limited to one or more of the performance criteria listed
below. If the administrator desires that an award of restricted stock,
restricted stock units, performance shares or performance units under the 2015
Plan qualify as performance-based compensation under Section 162(m), then the
award may be made subject to the attainment of performance goal(s) relating to
one or more
business criteria within the meaning
of Section 162(m) and may provide for a targeted level or levels of achievement
using one or more of the following measures: share price, earnings per share,
total stockholder return, operating margin, gross margin, return on equity,
return on assets, return on investment, operating income, net operating income,
pre-tax profit, net income, cash flow, revenue, expenses, earnings before any
one or more of share-based compensation expense, interest, taxes, depreciation
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Proposal
No. 3
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|
|
and amortization, economic value added,
market share, personal management objectives, product development, completion of
an identified special project, completion of a joint venture or other corporate
transaction, and other measures of performance selected by the administrator of
the 2015 Plan.
The performance criteria may differ from
participant to participant and from award to award. Any criteria used may be
measured (as applicable), in absolute value, an increase or decrease in a value,
or as a value determined relative to an index, budget or other standard selected
by the administrator of the 2015 Plan. Prior to the latest date that would meet
the requirements under Section 162(m), the administrator will determine whether
any significant elements or items will be included or excluded from the
calculation of performance goals with respect to any award recipient.
Notwithstanding any other terms of the
2015 Plan, if an award granted to a participant is intended to qualify as
performance-based compensation under Section 162(m), then in determining the
amounts earned by a participant, the administrator may reduce or eliminate (but
not increase) some or all of the value of an award that otherwise would be paid
based on a certain level of performance to take into account additional factors
that the administrator deems relevant to the assessment of individual or
corporate performance for the performance period. A participant may receive
payment under such an award only if the performance goals for the performance
period are achieved (unless otherwise permitted by Section 162(m) and determined
by the administrator).
The maximum number of shares with respect
to which awards may be granted to any individual in any fiscal year is 1,000,000
shares. The maximum dollar amount that may become payable to any individual in
any fiscal year under awards denominated in U.S. dollars (including performance
unit awards) is $20,000,000.
However, in
connection with an individuals commencement of service or first promotion in
any fiscal year, an individual may be granted awards for an additional 1,000,000
shares or U.S. dollar denominated awards providing for payment in any fiscal
year of up to an additional $20,000,000.
Non-Employee Director Award
Limits
|
Our 2015 Plan provides that all
non-employee directors will be eligible to receive all types of awards (except
for incentive stock options) under the 2015 Plan. However, in any fiscal year, a
non-employee director may be granted equity awards with an aggregate grant date
fair value of no more than $500,000.
Non-Transferability of
Awards
|
Unless the administrator provides
otherwise, our 2015 Plan generally does not allow for the transfer of awards,
and only the recipient of an award may exercise an award during his or her
lifetime.
In the event of any change in the shares
effected without receipt of consideration by us, whether through merger,
consolidation, reorganization, reincorporation, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, split-up,
split-off, spin-off, combination of shares, exchange of shares, or similar
change in our capital structure, or in the event of payment of a dividend or
distribution to the our stockholders in a form other than our Common Stock
(excepting regular, periodic cash
dividends) that
has a material effect on the fair market value of shares, appropriate and
proportionate adjustments will be made in the number and kind of shares subject
to the 2015 Plan and to any outstanding awards, the maximum number of shares
with respect to which awards may be granted individual in any fiscal year of
ours, and in the exercise or purchase price per share under any outstanding
award in order to prevent dilution or enlargement of rights under the 2015
Plan.
Our 2015 Plan provides that in the event
of a corporate transaction, as defined in the 2015 Plan, all outstanding awards
will terminate unless they are assumed in connection with the corporate
transaction. If a portion of an award is neither assumed nor replaced by the
successor entity, such portion of the award
will
become fully vested and exercisable and be released from any repurchase or
forfeiture rights (other than repurchase rights exercisable at fair market
value), immediately prior to the effective date of such corporate
transaction.
Our 2015 Plan provides the flexibility for
the administrator to subject awards to forfeiture or recoupment provisions. It
also requires any participant who is one of the individuals subject to
automatic forfeiture under Section 304 of the
Sarbanes-Oxley Act of 2002 to reimburse us if we are required to prepare an
accounting restatement due to the material noncompliance, as
28
2016 Proxy Statement
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Proposal No.
3
|
a result of misconduct, with any financial
reporting requirement under the securities laws, for (i) the amount of any
payment in settlement of an award received by such participant during the
12-month period following the first public issuance or filing with
the SEC (whichever first occurred) of the financial document
embodying such financial reporting requirement, and (ii) any profits realized by
such participant from the sale of securities of our Common Stock during such
12-month period.
Plan Amendment;
Termination
|
Our board of directors may amend, suspend,
or terminate the 2015 Plan at any time, provided that no suspension or
termination of the 2015 Plan will adversely affect any rights under awards
already granted under the Plan and no amendment will be made
without the approval of our stockholders if such approval is
required by applicable laws or would change the powers of the 2015 Plans
administrator.
U.S.
FEDERAL INCOME TAX CONSEQUENCES
The following paragraphs are a summary of
the general federal income tax consequences to U.S. taxpayers and us of awards
granted under the 2015 Plan. Tax consequences for any particular individual may
be different.
A participant recognizes no taxable income
as the result of the grant or exercise of an incentive stock option qualifying
under Section 422 of the Internal Revenue Code (unless the participant is
subject to the alternative minimum tax). If the participant exercises the option
and then later sells or otherwise disposes of the shares more than two years
after the grant date and more than one year after the exercise date, the
difference between the sale price and the exercise price will be taxed as
capital gain or
loss. If the participant
exercises the option and then later sells or otherwise disposes of the shares
before the end of the two- or one-year holding periods described above (a
disqualifying disposition), he or she generally will have ordinary income at
the time of the sale equal to the fair market value of the shares on the
exercise date (or the sale price, if less) minus the exercise price of the
option.
Nonstatutory Stock
Options
|
A participant generally recognizes no
taxable income on the date of grant of a nonstatutory stock option with an
exercise price equal to the fair market value of the underlying stock on the
date of grant. Upon the exercise of a nonstatutory stock option, the participant
generally will recognize ordinary income equal to the excess of the fair market
value of the shares on the exercise date over the exercise price of the option.
If the participant
is an employee, such ordinary
income generally is subject to withholding of income and employment taxes. Upon
the sale of stock acquired by the exercise of a nonstatutory stock option, any
subsequent gain or loss, generally based on the difference between the sale
price and the fair market value on the exercise date, will be taxed as capital
gain or loss.
Stock Appreciation Rights
|
A participant generally recognizes no
taxable income on the date of grant of a stock appreciation right with an
exercise price equal to the fair market value of the underlying stock on the
date of grant. Upon exercise of the stock appreciation right, the participant
generally will be required to include as ordinary income an amount equal to the
sum of the amount of any cash received and the fair market value of any shares
received upon the exercise. If the participant is
an employee, such ordinary income generally is subject to withholding of income
and employment taxes. Any additional gain or loss recognized upon any later
disposition of the shares would be treated as long-term or short-term capital
gain or loss, depending on the holding period.
Dividend equivalents will generally be
subject to tax as dividends as if they were paid on the vesting date of the
underlying award.
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Proposal
No. 3
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|
|
Restricted Stock, Restricted Stock Units, Performance Awards
and Performance Shares
|
A participant generally will not have
taxable income at the time an award of restricted stock, restricted stock units,
performance shares, or performance units is granted. Instead, he or she will
recognize ordinary income in the first taxable year in which his or her interest
in the shares underlying the award becomes either (i) freely transferable, or
(ii) no longer subject to substantial risk of forfeiture. If the participant is
an employee, such ordinary income generally is subject to withholding of income
and employment taxes. However, the recipient of a restricted stock award may
elect to recognize income at the time he or she receives the award in an amount
equal to the fair market value of the shares underlying the award (less any cash
paid for the shares) on the date the award is granted.
Section 409A of the Code (Section 409A)
provides certain new requirements for non-qualified deferred compensation
arrangements with respect to an individuals deferral and distribution elections
and permissible distribution events. Awards granted under the 2015 Plan with a
deferral feature will be subject to the requirements of Section 409A. If an
award is subject to and fails to satisfy the requirements of Section 409A, the
recipient of that award may recognize ordinary income on the amounts deferred
under the award, to the extent vested, which may be prior to when the
compensation is actually or constructively received. Also, if an award that is
subject to Section 409A fails to comply with Section 409As provisions, Section
409A imposes an additional 20% tax on compensation recognized as ordinary
income, as well as interest on such deferred compensation.
Tax Effects for the
Company
|
We generally will be entitled to a tax
deduction in connection with an award under the 2015 Plan in an amount equal to
the ordinary income realized by a participant and at the time the participant
recognizes such income (for example, the exercise of a nonqualified stock
option). However, special rules limit the deductibility of compensation paid to
our covered employees. Under Section 162(m), the annual compensation paid to any
of these specified executives will be deductible only to the extent that it does
not exceed $1,000,000. However, we can preserve the deductibility of certain
compensation in excess of $1,000,000 if the conditions of Section 162(m) are
met. These conditions include (among others) stockholder approval of the 2015
Plan and its material terms, setting limits on the number of awards that any
individual may receive and for awards other than stock options and stock
appreciation rights, and establishing performance criteria that must be met
before the award actually will vest or be paid. The amended and restated 2015
Plan has been designed to permit (but not require) the administrator to grant
awards that are intended to qualify as performance-based for purposes of
satisfying the conditions of Section 162(m).
THE FOREGOING IS ONLY A SUMMARY
OF THE TAX EFFECT OF FEDERAL INCOME TAXATION UPON PARTICIPANTS AND THE
COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF AWARDS UNDER THE 2015
PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF A SERVICE PROVIDERS DEATH OR THE PROVISIONS OF THE INCOME
TAX LAWS OF ANY MUNICIPALITY, STATE, OR NON-U.S. COUNTRY IN WHICH THE
SERVICE PROVIDER MAY RESIDE.
|
SUMMARY
Our board of directors believes that it is
in the best interests of us and our stockholders to continue to provide
employees, consultants, and directors with the opportunity to acquire an
ownership interest in us through the grant of equity awards under the amended
and restated 2015 Plan and thereby encourage them to remain in our service and
more closely align their interests with those of our stockholders.
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Proposal No.
3
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NUMBER
OF AWARDS GRANTED TO EMPLOYEES AND NON-EMPLOYEE DIRECTORS
The number of awards that an employee, or
director may receive under the 2015 Plan is in the discretion of the
administrator and therefore cannot be determined in advance. The following table
sets forth: the aggregate number of restricted stock units granted under the
2015 Plan during fiscal year 2016 to each of our named executive officers;
executive officers, as a group; directors who are not executive officers, as a
group; and all employees who are not executive officers, as a group.
Name of Individual or Identity of
Group and Principal Position
|
Number
of
Shares
Underlying
Options
Granted
(#)
|
|
Weighted
Average
Exercise
Price
Per
Share
($)
|
|
Number of
Restricted
Stock
Units
Granted (#)
|
|
Dollar Value
of
Award(s)
($) (1)
|
Alan Lowe,
|
|
|
|
|
|
|
|
President and Chief
Executive Officer (2)
|
|
|
|
|
189,561
|
|
3,853,775
|
Aaron Tachibana,
|
|
|
|
|
|
|
|
Chief Financial
Officer
|
|
|
|
|
48,744
|
|
990,966
|
Vincent Retort,
|
|
|
|
|
|
|
|
Executive Vice President,
Chief Operations Officer
|
|
|
|
|
39,389
|
|
800,778
|
All
current executive officers as a group
|
|
|
|
|
331,853
|
|
6,746,571
|
All
non-employee directors as a group
|
|
|
|
|
98,580
|
|
1,999,197
|
All other employees (including all current
officers who are
|
|
|
|
|
|
|
|
not
executive officers (as a group)
|
|
|
|
|
1,550,933
|
|
31,646,553
|
(1)
|
Reflects the aggregate grant date
fair value of awards computed in accordance with FASB ASC Topic
718.
|
(2)
|
Mr. Lowes grants include 36,927
performance RSUs, none of which were vested at the end of fiscal year
2016. The vesting criteria are described below under Executive
Compensation Elements of Our Compensation Program Equity Incentive
Awards.
|
VOTE
REQUIRED
The approval of the amended and restated
2015 Plan requires the affirmative vote of a majority of the voting power of the
shares present or represented by proxy at the Annual Meeting at which a quorum
is present and entitled to vote thereon. Abstentions will have the effect of a
vote AGAINST the proposal and broker non-votes will have no effect.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDED
AND RESTATED 2015
EQUITY INCENTIVE PLAN.
|
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Table of Contents
PROPOSAL
NO. 4 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Our Audit Committee has re-appointed
PricewaterhouseCoopers LLP (PwC), an independent registered public accounting
firm, to audit our consolidated financial statements for our fiscal year ending
July 1, 2017. Although ratification by stockholders is not required by law, our
Audit Committee is submitting the appointment of PwC to our stockholders because
we value our stockholders views on our independent registered public accounting
firm and as a matter of good corporate governance. In the event that PwC is not
ratified by our stockholders, the Audit Committee will review its future
selection of PwC as our independent registered public accounting
firm.
PwC audited Lumentums financial
statements for fiscal year 2016. Representatives of PwC are expected to be
present at the virtual Annual Meeting, in which case they will be given an
opportunity to make a statement at the Annual Meeting if they desire to do so,
and will be available to respond to appropriate questions.
FEES
PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table presents fees for
professional audit services and other services rendered to our company by PwC
for our fiscal years ended June 27, 2015 and July 2, 2016.
|
Fiscal 2016
($)
|
|
Fiscal 2015
($) (1)
|
Audit Fees (2)
|
1,217,820
|
|
5,442,605
|
Audit-Related Fees (3)
|
200,000
|
|
|
Tax
Fees (4)
|
195,000
|
|
501,758
|
All
Other Fees (5)
|
|
|
100,165
|
Total
|
1,612,820
|
|
6,044,555
|
(1)
|
The fiscal 2015 amounts are fees
for professional audit services rendered to Viavi by PwC for the year
ended June 27, 2015, and fees billed for other services rendered to Viavi
by PwC, for that period. Prior to the Separation, Viavi paid all audit,
audit-related, tax and other fees of PwC.
|
(2)
|
Audit Fees include fees related
to professional services rendered in connection with the audit of
Lumentums annual financial statements, the audit of internal control over
financial reporting in accordance with Section 404 of the Sarbanes-Oxley
Act of 2002, reviews of financial statements included in Lumentums
Quarterly Reports on Form 10-Q, and audit services provided in connection
with other statutory and regulatory filings.
|
(3)
|
Audit-Related Fees include fees
related to services rendered in connection with the
Separation.
|
(4)
|
Tax Fees for Fiscal 2016 include
fees for professional services rendered in connection with transfer
pricing tax consulting, compliance and planning services and other tax
consulting.
|
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Proxy Statement
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Proposal No.
4
|
AUDITOR
INDEPENDENCE
In our fiscal year ended July 2, 2016,
there were no other professional services provided by PwC, other than those
listed above, that would have required our Audit Committee to consider their
compatibility with maintaining the independence of PwC.
AUDIT
COMMITTEE POLICY ON PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee has established a
policy governing our use of the services of our independent registered public
accounting firm. Under the policy, our Audit Committee is required to
pre-approve all audit and non-audit services performed by our independent
registered public accounting firm in order to ensure that the provision of such
services does not impair the public accountants independence. All fees paid to
PwC for our fiscal year ended July 2, 2016 were pre-approved by our Audit
Committee.
VOTE
REQUIRED
The ratification of the appointment of PwC
requires the affirmative vote of a majority of the shares of our common stock
present in person or by proxy at the Annual Meeting and entitled to vote
thereon. Abstentions will have the effect of a vote AGAINST the proposal and
broker non-votes will have no effect.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF
PRICEWATERHOUSECOOPERS LLP.
|
33
Table of Contents
REPORT
OF THE AUDIT COMMITTEE
The Audit Committee is a committee of the
board of directors comprised solely of independent directors as required by the
listing standards of the NASDAQ Stock Exchange and rules and regulations of the
SEC. The Audit Committee operates under a written charter approved by the board
of directors, which is available on our website at
www.lumentum.com
. The composition of
the Audit Committee, the attributes of its members and the responsibilities of
the Audit Committee, as reflected in its charter, are intended to be in
accordance with applicable requirements for corporate audit committees. The
Audit Committee reviews and assesses the adequacy of its charter and the Audit
Committees performance on an annual basis.
With respect to the Companys financial
reporting process, the management of the Company is responsible for (1)
establishing and maintaining internal controls and (2) preparing the Companys
consolidated financial statements. Our independent registered public accounting
firm, PricewaterhouseCoopers LLP (PwC), is responsible for auditing these
financial statements. It is the responsibility of the Audit Committee to oversee
these activities. It is not the responsibility of the Audit Committee to prepare
our financial statements. These are the fundamental responsibilities of
management. In the performance of its oversight function, the Audit Committee
has:
●
|
reviewed and discussed the audited
financial statements with management and PwC;
|
●
|
discussed with PwC the matters
required to be discussed by the statement on Auditing Standards No. 16, as
amended (AICPA, Professional Standards, Vol. 1. AU section 380), and as
adopted by the Public Company Accounting Oversight Board in Rule 3200T;
and
|
●
|
received the written disclosures and
the letter from PwC required by applicable requirements of the Public
Company Accounting Oversight Board regarding the independent accountants
communications with the Audit Committee concerning independence, and has
discussed with PwC its independence.
|
Based on the Audit Committees review and
discussions with management and PwC, the Audit Committee recommended to the
board of directors that the audited financial statements be included in the
Companys Annual Report on Form 10-K for the fiscal year ended July 2, 2016 for
filing with the Securities and Exchange Commission.
Respectfully submitted by the members of
the Audit Committee of the board of directors:
Harold L. Covert (Chair)
Martin A.
Kaplan
Brian J. Lillie
This report of the Audit Committee is
required by the Securities and Exchange Commission (SEC) and, in accordance
with the SECs rules, will not be deemed to be part of or incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended
(Securities Act), or under the Securities Exchange Act of 1934, as amended
(Exchange Act), except to the extent that we specifically incorporate this
information by reference, and will not otherwise be deemed soliciting material
or filed under either the Securities Act or the Exchange Act.
34
2016
Proxy Statement
Table of Contents
EXECUTIVE OFFICERS
The following table sets forth information
regarding individuals who serve as our executive officers. The position titles
refer to each executive officers title at Lumentum as of September 19, 2016.
Our executive officers are elected by our board of directors to hold office
until their successors are elected and qualified.
Name
|
Age
|
|
Position
|
Alan Lowe
|
54
|
|
President and Chief Executive Officer
|
Aaron Tachibana
|
56
|
|
Chief Financial Officer
|
Vincent Retort
|
62
|
|
Chief Operations Officer and Executive Vice
President
|
Jason Reinhardt
|
42
|
|
Executive Vice President, Global Sales and Product Line
Management
|
Judy Hamel
|
50
|
|
General Counsel and
Secretary
|
For Mr. Lowes biography, see Director
Nominees.
Aaron Tachibana
has served as Lumentums chief financial officer since July
2015. Prior to joining Lumentum, Mr. Tachibana was employed by Viavi. Mr.
Tachibana joined Viavi in November 2013 as vice president of finance and
corporate controller. Prior to joining Viavi, Mr. Tachibana served as chief
financial officer at Pericom Semiconductor Corp., a supplier of performance
connectivity and timing solutions, from March 2010 to October 2013 where he led
finance and human resources. From 1992 to 2010, he held executive and senior
management positions with Asyst Technologies, Inc., Allied Telesis, Inc.,
TapCast Inc. and TeraStor Corporation. Mr. Tachibana holds a Bachelor of Science
degree in Business Administration and Finance from San Jose State
University.
Vincent Retort
has served as Lumentums chief operations officer and
executive vice president since February 2016, and was previously our senior vice
president, research and development from July 2015 through February 2016. Prior
to joining Lumentum, Mr. Retort was employed by Viavi. Mr. Retort joined Viavi
in 2008 as vice president of research & development, CCOP, and became senior
vice president of research & development of CCOP in 2011. From 2004 to 2008,
Mr. Retort was vice president of product engineering, reliability and quality at
NeoPhotonics Corporation, a designer and manufacturer of photonic integrated
circuit based modules and subsystems. From 2002 to 2004, Mr. Retort served as
senior director of development engineering, magnetic recording performance at
Seagate Technologies PLC, an international manufacturer and distributor of
computer disk drives. From 2000 to 2002, Mr. Retort served as vice president of
product engineering at Lightwave Microsystems Corporation, a communications
equipment company. Mr. Retort holds a Masters of Science degree in Biological
Sciences from Stanford University and a Bachelor of Arts degree in Biology from
West Virginia University.
Jason Reinhardt
has served as Lumentums executive vice president, global
sales and product line management, since February 2016, and was previously our
senior vice president, sales from July 2015 through February 2016. Prior to
joining Lumentum, Mr. Reinhardt was employed by Viavi. Mr. Reinhardt joined
Viavi in May 2008 as Director of Sales for North America. He was subsequently
promoted to Senior Director of North America Sales, VP and Senior VP of Global
Sales, holding that position from August 2010 until January 2014, after which he
focused on charitable humanitarian work while holding a part-time business
development position. Mr. Reinhardt returned to a full-time role in June 2015,
serving as Viavis Senior VP of Global Sales. Before joining Viavi, Mr.
Reinhardt served as Deputy Country Director of HOPE worldwide Afghanistan,
Senior Director of North America Sales at Avanex Corporation and Account Manager
and Production Engineer at Corning Incorporated. He also served as an officer in
the United States Air Force prior to those roles. Mr. Reinhardt holds a Bachelor
of Science degree in Electrical Engineering from Montana State University, and a
Master of Business Administration degree from Babson Colleges Franklin W. Olin
Graduate School of Business.
Judy Hamel
has served as Lumentums general counsel and secretary since
July 2015. Prior to joining Lumentum, Ms. Hamel was employed by Viavi. Ms. Hamel
joined Viavi in August 2012 as senior corporate counsel. Prior to joining Viavi,
from September 2006 to August 2012, Ms. Hamel served as vice president legal
affairs at Cortina Systems, Inc., a global communications supplier of port
connectivity solutions to the networking and telecommunications sector.
Previously, Ms. Hamel worked as a corporate associate at Silicon Valley law
firms Cooley Godward LLP and Wilson Sonsini Goodrich and Rosati PC. Ms. Hamel
holds a Juris Doctor degree from Santa Clara University School of Law, a Masters
degree in Business Administration from San Jose State University and a Bachelor
of Science degree in Economics and Finance from Southern New Hampshire
University.
35
Table of Contents
EXECUTIVE COMPENSATION
DISCUSSION OF EXECUTIVE COMPENSATION PROGRAM
This discussion of our executive
compensation program is designed to provide our stockholders with an
understanding of our compensation program in effect for our named executive
officers (NEOs) who consisted of the following executive officers for fiscal
year 2016:
●
|
Alan Lowe, our President and Chief
Executive Officer
|
●
|
Aaron Tachibana, our Chief Financial
Officer
|
●
|
Vincent Retort, our Chief Operations
Officer and Executive Vice President
|
On August 1, 2015, we became an
independent publicly-traded company through the distribution by JDS Uniphase
Corporation (JDSU) to its stockholders of 80.1% of our outstanding common
stock (the Separation). Each JDSU stockholder of record as of the close of
business on July 27, 2015 received one share of Lumentum common stock for every
five shares of JDSU common stock held on the record date. JDSU was renamed Viavi
Solutions Inc. (Viavi) and at the time of distribution, retained ownership of
19.9% of Lumentums outstanding shares. Compensation awarded following the
Separation was approved by Lumentums Compensation Committee post spin-off, and
compensation awarded prior to the Separation was approved by Viavis
Compensation Committee.
FISCAL
YEAR 2016 BUSINESS PERFORMANCE
Lumentum posted strong results in its
first year as an independent publiclytraded company. Highlights of Lumentums
financial performance in fiscal year 2016, its first year as a public company,
together with comparable measures during fiscal year 2015, are set forth
below:
|
Fiscal Year 2016
($ in
millions)
|
|
Fiscal Year 2015
($ in
millions)
|
|
Change
|
Net Revenue
|
$903.0
|
|
|
$837.1
|
|
|
7.9%
|
Gross Margin
|
30.7
|
%
|
|
30.8
|
%
|
|
(10) bps
|
Adjusted Gross Margin (1)
|
33.0
|
%
|
|
32.5
|
%
|
|
50 bps
|
Operating Margin
|
1.3
|
%
|
|
(2.8
|
)%
|
|
410 bps
|
Adjusted Operating Margin (1)
|
9.2
|
%
|
|
5.4
|
%
|
|
380
bps
|
(1)
|
A reconciliation of these
non-GAAP measures to the most comparable financial measures calculated and
presented in accordance with GAAP and a discussion of our use of these
non-GAAP measures is included in Appendix C.
|
Adjusted Gross Margin and Adjusted
Operating Margin are non-GAAP measures that Lumentum discloses to provide
additional information about the operating results of the Company.
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:
●
|
Total compensation should attract,
motivate and retain the talent necessary to achieve our business
objectives in order to increase long-term value and drive stockholder
returns.
|
●
|
Superior executive talent is
motivated and retained through a strong pay for performance compensation
system that provides the opportunity to earn above-average compensation in
return for achieving business and financial
success.
|
●
|
Our compensation practices continue
to evolve to align compensation with recognized best practices and to
address current market realities.
|
36
2016
Proxy Statement
Table of
Contents
|
|
Executive
Compensation
|
●
|
Pay for Performance: 83% of our
CEOs and 71% of our other NEOs fiscal year 2016 target compensation was
subject to Lumentums financial and/or share price
performance
|
●
|
Emphasize Long-Term Company
Performance: Over 50% of our NEOs fiscal year 2016 target compensation is
in the form of equity that vests over three
years
|
●
|
Maintain Stock Ownership Guidelines:
3x salary for our CEO and 1x for other NEOs
|
●
|
Maintain a Clawback Policy: Provides
for the recapture of awards in the event of a restatement caused by
fraudulent or illegal conduct
|
●
|
Require Double-Trigger for equity
acceleration upon a change in control
|
●
|
Employ an independent chairman of
the board
|
●
|
Engage an independent
advisor
|
●
|
No excessive perquisites awarded to
Executive Officers
|
●
|
No tax gross-ups upon a change in
control
|
●
|
No hedging or pledging of Lumentum
securities by employees or
directors
|
COMPENSATION PRACTICES
In fiscal year 2016, our CEO and Senior
Vice President of Human Resources presented to the Compensation Committee
performance reviews and compensation recommendations for our NEOs other than our
CEO. Our management team conferred with Semler Brossy to prepare NEO
compensation recommendations
for the Compensation
Committees consideration. Additionally, Semler Brossy prepared materials for
the Compensation Committee on CEO compensation. The Compensation Committee
reviewed and approved CEO compensation and the CEO was not present for these
discussions.
PEER
GROUP
The Compensation Committee reviews the
compensation practices at similarly situated companies for purposes of helping
it to determine whether the total compensation opportunity available to our NEOs
is appropriate and competitive. These peer group
companies for fiscal year 2016 (the Industry Peer Group), together with
the characteristics that the Compensation Committee believes makes them an
appropriate basis for comparison to Lumentum. The primary uses of these peer
groups are set forth below:
Characteristics: Companies similar
in revenue, size, and business operations to Lumentum
|
|
Ciena
Coherent
Comverse
Finisar
FLIR
Systems
Infinera
IPG
Photonics
Newport
Oclaro
Qorvo
Viavi
Xilinx
|
|
|
|
Primary Uses:
|
|
|
|
|
●
|
Performance and pay
relationship
|
|
●
|
NEO compensation
levels
|
|
●
|
Annual and long-term incentive plan
design
|
|
●
|
Independent director
compensation
|
|
●
|
Equity plan and share
usage
|
|
●
|
Change in control and
severance
|
|
●
|
Benefits and
perquisites
|
|
37
Table of
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Executive
Compensation
|
|
|
Characteristics: Similarly-sized
recent technology companies that were spun out of a larger
organization
|
|
CDK
Global
Comverse
Covisint
Keysight Technologies
Kimball
Electronics
Knowles
Rightside Group
SAIC
|
|
|
|
Primary Uses:
|
|
|
|
|
●
|
Conversion practices of outstanding
equity awards
|
|
●
|
One-time pay actions related to the
spin
|
|
●
|
Change in control and
severance
|
|
●
|
Disclosure practices
|
|
The Spin-Off group is not expected to be
used by the Compensation Committee with respect to compensation of NEOs in
future periods.
ELEMENTS
OF OUR FISCAL YEAR 2016 COMPENSATION PROGRAM
In fiscal year 2016, compensation that we
provided to our NEOs primarily consisted of salary, annual cash incentive, and
equity awards. In addition to those compensation elements that are
expected to be awarded to our NEOs on a recurring basis, we
also awarded Mr. Lowe and Mr. Tachibana one-time equity awards in connection
with the Separation.
Base salary represents the fixed portion
of our NEOs compensation and is intended to attract and retain highly talented
individuals. In determining base compensation levels,
our Compensation Committee analyzed base salary information for similar
positions and titles at companies in the Industry Peer Group.
|
|
Fiscal Year
2016
($) (1)
|
|
Fiscal Year
2015
($) (1)
|
Alan Lowe
|
|
625,000
|
|
562,000
|
Aaron Tachibana
|
|
365,000
|
|
292,000
|
Vincent Retort (2)
|
|
415,000
|
|
345,000
|
(1)
|
Amounts in this table reflect annualized base salaries. Actual
salaries paid during these periods are described below under the section
titled Summary Compensation Table. For fiscal year 2016, the base
salary increases were effective August 1, 2015.
|
|
|
(2)
|
Mr. Retorts base
salary was $375,000 at the start of fiscal year 2016 and was increased to
$415,000 upon his promotion to Chief Operations Officer, Executive Vice
President, in February 2016.
|
38
2016 Proxy Statement
Table of
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|
|
Executive
Compensation
|
ANNUAL
CASH INCENTIVE PLAN
We operate an annual cash incentive plan
(CIP), which is intended to reward our NEOs for achieving annual financial
goals.
In fiscal year 2016, the Compensation
Committee approved consolidated revenue and adjusted operating income as the
performance measures for determining cash incentive amounts for our NEOs in
fiscal year 2016 because the Compensation Committee believes that these
performance measures represent the most critical measures of success of Lumentum
in first year following the Separation. 80% of the cash incentive amount is
measured on adjusted operating income and 20% is measured on revenue.
The Compensation Committee considered each
NEOs role at Lumentum and external competitive market data from both the
Industry Peer Group and survey data to determine individual incentive targets.
In fiscal year 2016, our operating income was 9.4% and our consolidated revenue
was $903 million, resulting in our cash incentive plan funding at 95.6% of
target. Total individual cash incentive plan payouts for our NEOs were as
follows:
|
|
Fiscal Year
2016
CIP Target
|
|
Fiscal Year
2016
CIP Payouts
|
|
|
Target
($)
|
|
% of
Salary
(%)
|
|
Payout
($)
|
|
% of
Salary
(%)
|
Alan Lowe
|
|
625,000
|
|
100
|
|
597,775
|
|
95.6
|
Aaron Tachibana
|
|
219,000
|
|
60
|
|
209,460
|
|
57.4
|
Vincent Retort (1)
|
|
290,500
|
|
70
|
|
251,699
|
|
60.7
|
(1)
|
Mr. Retorts target bonus percentage for the first half of fiscal
year 2016 was 60% on a base salary of $375,000, and increased to the
amounts in the table above upon his promotion to Chief Operations Officer,
Executive Vice President, in February 2016.
|
FY
2016 Cash Incentive Plan Measures
During fiscal year 2015, Viavi utilized a
single cash incentive program for the majority of its employees globally, known
as the Variable Pay Plan (VPP). Under the VPP, incentive bonuses were
determined based on a quarterly operating income metric,
and paid semi-annually. Our NEOs were included among the participants in
the VPP, and amounts paid to our NEOs under the VPP with respect to fiscal year
2015 are set forth below under Summary Compensation Table.
39
Table of
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Executive
Compensation
|
|
|
We use equity awards to deliver long-term
incentive compensation opportunities to our NEOs and to address special
situations as they may arise from time to time, such as promotions and retention
arrangements. Our equity incentive awards are intended align the interests of
our NEOs with those of our stockholders. Equity awards are generally subject to
vesting
restrictions to encourage ownership and
retention of equity interests in Lumentum. To determine annual equity awards for
our NEOs, the Compensation Committee reviews each executives role, performance,
and current competitive market information from both the Industry Peer Group and
survey data.
In fiscal year 2016, equity awards to our
NEOs consisted of annual equity awards and, in the cases of Mr. Lowe and Mr.
Tachibana, special one-time equity awards. All equity awards granted to our NEOs
in fiscal year 2016 are outlined in the table below.
Annual equity awards for fiscal year 2016
consisted of restricted stock units (RSUs) that vest ratably over three years.
Each RSU represents a right to receive one share of common stock upon vesting.
The Compensation Committee determined that RSUs
were the best vehicle to create stability during our first year as an
independent public company in light of the uncertainty regarding our stock
price. Annual equity awards granted to our NEOs with respect to fiscal year 2016
are set forth in the table below.
In addition to the annual equity awards
described above, Mr. Lowe and Mr. Tachibana received the following special
one-time equity awards in fiscal year 2016.
●
|
Mr. Lowe was awarded a one-time
grant of 73,854 RSUs in recognition of his promotion to CEO in connection
with the spin-off. 50% of the award vests ratably over three years and 50%
vests over three years based on the achievement of certain performance
measures (the performance-based component). 100% of the
performance-based component was eligible to vest if Lumentum achieved
organic revenue growth at a target set by the Compensation Committee in
fiscal year 2016. Lumentum did not achieve this organic revenue growth
target in fiscal year 2016. If the performance-based component was not
eligible to vest in fiscal year 2016, then 50% of the performance-based
component is eligible to vest if Lumentum achieves organic revenue growth
at a target set by the Compensation Committee in fiscal year
2017.
|
●
|
Mr. Tachibana was awarded a one-time
grant of 19,202 RSUs in recognition of his promotion to our Chief
Financial Officer in connection with the Separation. This award vests
ratably over three years.
|
These awards are not intended to be a part
of Mr. Lowe and Mr. Tachibanas ongoing compensation.
|
|
Annual Equity
|
|
One-Time Equity
|
|
|
Number
of RSUs
|
|
Target Value
of
RSUs
($)
|
|
Number
of
RSUs
|
|
Target Value
of
RSUs
($)
|
Alan Lowe
|
|
115,707
|
|
2,350,000
|
|
73,854
|
(1)
|
|
1,500,000
|
Aaron Tachibana
|
|
29,542
|
|
600,000
|
|
19,202
|
|
|
390,000
|
Vincent Retort
|
|
39,389
|
|
800,000
|
|
|
|
|
|
(1)
|
Consists of 36,927 RSUs with time-based vesting and 36,927 RSUs
with performance-based vesting, as discussed above. 50% of the RSUs with
performance-based vesting, or 18,463 shares, are not eligible to vest as
the performance target for fiscal year 2016 was not
met.
|
40
2016 Proxy Statement
Table of
Contents
|
|
Executive
Compensation
|
During fiscal year 2015, Viavi granted
RSUs subject to market-based vesting terms (MSUs) to our NEOs.
These MSUs vest over a three or four year
period, as applicable, with the number of units actually earned on each vesting
date determined by comparing Viavis total stockholder return (TSR)
for the relevant period to the TSR of the
component companies of the NASDAQ Telecommunications Index (the Index) on a
straight-line scale from 0% to 150% as described in the following
table.
Relative Performance
|
|
Percent of Target
Award
Vesting
(%)
|
Viavi TSR below 25th percentile
|
|
|
Viavi TSR at 25th percentile
|
|
50
|
Viavi TSR at 50th percentile
|
|
100
|
Viavi TSR at or above 75th percentile
|
|
150
|
TSR is initially calculated for a baseline
period, which, for grants made in fiscal year 2015 was July 15, 2014 through
September 15, 2014 (the Initial Measurement Period). Vesting is then
determined by comparing the TSR during each of the next three July 15 through
September 15 measurement periods against the Initial Measurement Period. The
target number of units subject to MSU awards held by Mr. Lowe and Mr. Retort are
shown in the Outstanding Equity Awards At Fiscal-Year End Table.
In connection with the Separation, the
2015 measurement period, as well as the vesting and performance goals applicable
to the remaining Lumentum MSU awards, were adjusted by the Compensation
Committee of our board of directors. See Treatment of Equity Awards at
Separation.
EMPLOYMENT AGREEMENT WITH MR. LOWE
In August 2015, Lumentum entered into an
employment agreement with Alan Lowe. The employment agreement has an initial
term of three years and will automatically renew for successive one year terms
unless any party provides written notice of non-renewal at least 90 days prior
to the end of the term. The employment agreement generally provided Mr. Lowe an
annual base salary, an annual target bonus, and equity awards. The agreement
makes Mr. Lowe eligible to participate
in the
employee benefit plans maintained by Lumentum or Lumentum Operations LLC
(LLC), its subsidiary, and generally applicable to the senior executives of
the LLC. The employment agreement also provides Mr. Lowe lump sum cash payments
and vesting acceleration of outstanding Lumentum equity awards under certain
terminations of his employment. For additional information concerning Mr. Lowes
change of control benefits, see Payments Upon a Termination or Change of
Control.
SHARE
OWNERSHIP GUIDELINES
Our share ownership guidelines require all
executive officers and directors maintain a significant equity investment in
Lumentum based upon a multiple of his or her base salary.
Title
|
|
Ownership Requirement
|
CEO
|
|
3x
base salary
|
All
Other Executive Officers
|
|
1x
base salary
|
Directors
|
|
3x
annual cash retainer
|
Shares owned outright and unvested and
vested restricted stock and restricted stock units count toward the ownership
requirements. These ownership levels must be attained within five years from the
date of initial election or appointment to the board of directors, in the case
of non-employee directors, or
within five years
following the appointment of executive officers. At the time the Compensation
Committee reviewed the policy in January 2016, all executive officers were in
compliance or on track to achieve compliance with the guidelines.
In August 2016, the Compensation Committee
approved a clawback policy that allows Lumentum to recover cash incentive plan
awards and performance-based equity awards that are earned based on financial
results, if those results are restated
within
three years of being earned as a result of fraudulent or illegal conduct. The
policy covers our executive officers. The board of directors has discretion to
determine whether or not to pursue recovery.
41
Table of
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Executive
Compensation
|
|
|
SUMMARY
COMPENSATION TABLE
Lumentum is an emerging growth company,
as defined in the Jumpstart Our Business Startups Act. This classification
requires more limited disclosure of executive compensation than are applicable
to larger public companies. To promote transparency about the executive pay
programs and alignment with performance, we have provided more information than
is required about our NEO compensation in this narrative to the Summary
Compensation Table.
The following table provides certain
summary information concerning the compensation awarded to, earned by or paid to
each of our NEOs for the fiscal years ended June 27, 2015 and July 2, 2016.
Name and Principal
Position
|
|
Year
|
|
Salary
($) (1)
|
|
Stock Award
($)
(2)(3)
|
|
Non-Equity
Incentive
Plan
Compensation
($) (4)
|
|
All
Other
Compensation
($) (5)
|
|
Total
($)
|
Alan Lowe
|
|
|
|
|
|
|
|
|
|
|
|
|
President and Chief Executive
Officer
|
|
2016
|
|
652,577
|
|
3,853,775
|
|
597,775
|
|
7,678
|
|
5,111,805
|
President, CCOP,
JDS Uniphase
|
|
2015
|
|
562,000
|
|
1,195,001
|
|
205,135
|
|
4,000
|
|
1,966,136
|
Aaron Tachibana
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Financial
Officer
|
|
2016
|
|
362,138
|
|
990,966
|
|
209,460
|
|
6,738
|
|
1,569,303
|
Corporate
Controller, JDS Uniphase
|
|
2015
|
|
284,123
|
|
233,520
|
|
48,468
|
|
9,236
|
|
575,347
|
Vincent Retort
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Operations Officer and
Executive Vice President
|
|
2016
|
|
406,442
|
|
800,778
|
|
254,499
|
|
7,446
|
|
1,469,166
|
Vice President,
R&D, JDS Uniphase
|
|
2015
|
|
338,077
|
|
677,565
|
|
86,641
|
|
4,000
|
|
1,106,283
|
(1)
|
Actual salary earned during fiscal year 2016 or fiscal year 2015,
as applicable.
|
|
|
(2)
|
Amounts shown do not
reflect compensation actually received by the NEO. Instead, the amounts
shown are the grant date fair value in the period presented as determined
pursuant to stock-based compensation accounting rule FASB ASC Topic 718,
excluding the effect of estimated forfeitures. The assumptions used to
calculate these amounts are set forth under Note 13. Stock Based
Compensation in our Annual Report on Form 10-K for the fiscal year ended
July 2, 2016. As required by SEC rules, the amounts shown exclude the
impact of estimated forfeitures related to service-based vesting
conditions.
|
|
|
(3)
|
The grant date fair
value of Mr. Lowes MSUs reflected in the table above includes 18,463
shares with a value of $375,353 that will not vest because the Company
failed to meet the applicable performance metrics with respect to the
fiscal year 2016. See Market Stock Units for further information about
the MSUs.
|
|
|
(4)
|
Non-Equity Incentive
Plan Compensation for fiscal year 2015 was paid pursuant to the JDSU
Variable Pay Plan and for fiscal year 2016 was paid pursuant to the
Lumentum Cash Incentive Plan. See -Annual Cash Incentive Plan for an
additional discussion.
|
|
|
(5)
|
All amounts represent
401(k) matching contributions by Viavi or Lumentum, as
applicable.
|
42
2016 Proxy Statement
Table of
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|
|
Executive
Compensation
|
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
The following table provides information
regarding outstanding equity awards and applicable market values at the end of
fiscal year 2016.
All references in the following table to
stock options and RSUs granted by Viavi prior to the Separation relate to awards
in respect of Viavi common shares. In connection with the
Separation, these stock options and restricted stock units
were converted into Lumentum stock options and restricted stock units, subject
to the adjustments described below under -Treatment of Equity Awards at
Separation.
|
|
Option
Awards
|
|
Stock
Awards
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number
of Shares
or Units
of
Stock That
Have
Not
Vested
(#)
|
|
Market
Value
of Shares
or Units
of
Stock That
Have
Not
Vested
($) (1)
|
|
Equity
Incentive
Plan Awards:
Number
of
Unearned
Shares,
Units
or Other Rights
That Have
Not
Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value
of Unearned
Shares,
Units
or Other Rights
That Have
Not
Vested
($) (1)
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Alan Lowe
|
|
20,016 (2)
|
|
|
|
10.76
|
|
8/15/2017
|
|
|
|
|
|
|
|
|
|
|
10,008 (2)
|
|
|
|
10.76
|
|
8/15/2017
|
|
|
|
|
|
|
|
|
|
|
19,788 (2)
|
|
|
|
18.82
|
|
8/15/2018
|
|
|
|
|
|
|
|
|
|
|
39,577 (2)
|
|
|
|
18.82
|
|
8/15/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,918 (3)
|
|
258,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,196 (4)
|
|
430,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,927 (5)
|
|
873,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
152,634 (6)
|
|
3,609,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,743 (6)
|
|
64,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,428 (6)
|
|
270,272
|
Aaron Tachibana
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,918 (6)
|
|
258,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,799 (6)
|
|
113,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,542 (6)
|
|
698,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,202 (6)
|
|
454,127
|
Vince Retort
|
|
24,565 (2)
|
|
|
|
18.82
|
|
8/15/2018
|
|
|
|
|
|
|
|
|
|
|
10,235 (2)
|
|
|
|
45.89
|
|
2/15/2019
|
|
|
|
|
|
|
|
|
|
|
20,471 (2)
|
|
|
|
45.89
|
|
2/15/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,549 (3)
|
|
107,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,316 (4)
|
|
243,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,389 (6)
|
|
931,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,143 (6)
|
|
27,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,477 (6)
|
|
153,181
|
(1)
|
Amounts reflecting market value of RSUs are based on the price of
$23.65 per share, which was the closing price of our common stock as
reported on NASDAQ on July 1, 2016.
|
|
|
(2)
|
Fully vested stock
option.
|
|
|
(3)
|
MSUs that vest based
upon the Companys performance in fiscal year 2016 relative to a revenue
target set by the Compensation Committee. The actual number of shares that
vest range from 0% to 150% of the target amount for each vesting
tranche.
|
43
Table of Contents
Executive
Compensation
|
|
|
(4)
|
MSUs that vest in two annual
tranches based upon the Companys performance in fiscal year 2016 relative
to a revenue target set by the Compensation Committee. The actual number
of shares that vest range from 0% to 150% of the target amount for each
vesting tranche.
|
|
|
(5)
|
Performance based stock units
which vest 1/3 of the awarded units on the first, second and third
anniversaries of the grant date based upon the Companys performance in
fiscal year 2016 relative to a revenue target set by the Compensation
Committee. If the target for fiscal year 2016 is not met, then 50% of the
awarded units would vest on the second and third anniversaries of the
grant date based upon the Companys performance in fiscal year 2017
relative to a revenue growth target set by the Compensation Committee.
50%, or 18,463 RSUs, did not vest as the performance targets for fiscal
year 2016 was not met.
|
|
(6)
|
Time-based RSUs that vest 1/3 of
the awarded units on the first anniversary of the grant date and the
remainder of the units in equal quarterly installments for two years
thereafter.
|
Each of the options and other equity
awards granted prior to the Separation and reflected in the above table were
issued under the JDSU 2003 Equity Incentive Plan and converted to the Lumentum
2015 Equity Incentive Plan (the 2015 Plan).
PAYMENTS
UPON A TERMINATION OR CHANGE OF CONTROL
CEO Change of Control
Benefits
|
If Mr. Lowes employment is terminated
without cause or Mr. Lowe resigns for good reason, or Mr. Lowes employment
terminates due to his death or disability, and such termination of employment
occurs during a period beginning on a potential change in control date and
ending on the date that is 18 months following the consummation of a change in
control (the Coverage Period), Mr. Lowe will receive (subject to Mr. Lowe
signing and not revoking a release of claims with Lumentum and the LLC that
become effective in accordance with the agreement): (i) a lump sum cash payment
equal to 200% of his base salary for the year in which his employment is
terminated plus 200% of his target annual bonus for the year in which his
employment was terminated, (ii) vesting acceleration of 100% of any of Mr.
Lowes outstanding Lumentum equity awards (effective the later of the date of
termination or the date of the consummation of the change in control), and (iii)
a lump sum cash payment equal to 24 multiplied by the monthly health insurance
continuation
premiums for the health, dental, and
vision insurance options in which Mr. Lowe and his eligible dependents are
enrolled on the termination date.
If Mr. Lowes employment is terminated
without cause or Mr. Lowe resigns for good reason, in either case, outside
the Coverage Period, Mr. Lowe will receive (subject to Mr. Lowe signing and not
revoking a release of claims with Lumentum and the LLC that become effective in
accordance with the agreement): (i) a lump sum cash payment equal to 150% of his
base salary for the year in which his employment is terminated, (ii)
acceleration of any of Mr. Lowes outstanding Lumentum equity awards such that
Mr. Lowe will be vested in the number of Lumentum equity awards that Mr. Lowe
would have been vested in had Mr. Lowe remained continuously employed for an
additional 12 months, and (iii) a lump sum cash payment equal to 12 multiplied
by the monthly health insurance continuation premiums for the health, dental,
and vision insurance options in which Mr. Lowe and his eligible dependents are
enrolled on the termination date.
2015 Change in Control Benefits
Plan
|
In April 2015, the board of directors of
Viavi approved the Lumentum 2015 Change in Control Benefits Plan (the Lumentum
CIC Plan), which was amended by the Lumentum Compensation Committee in August
2015. Pursuant to the plan, eligible executives, including the NEOs (except for
the CEO), will receive cash payments and accelerated vesting of options,
restricted stock units and other securities under the following circumstances.
In the event an eligible executives employment is terminated without cause
(as defined in the Lumentum CIC Plan) or the eligible executive resigns for
good reason (as defined in the Lumentum CIC Plan), in either case, occurring
outside the date beginning on the public announcement of an intent to consummate
a change in control of Lumentum and ending 12 months following the consummation
of the change in control, the eligible executive will be entitled to receive
(subject to the executive signing and not revoking a release of claims that
become effective in accordance with the Lumentum CIC Plan) (i) accelerated
vesting of any unvested Lumentum equity awards held at the time of termination
as to the number of shares that otherwise would vest over the nine-month period
following the
termination date, (ii) a lump sum
payment (less applicable tax and other withholdings) equal to nine months of
base salary, and (iii) reimbursement of COBRA premiums for the lesser of 9
months or the maximum allowable COBRA period.
In the event of a qualifying termination,
each of the eligible executives will be entitled to receive (i) accelerated
vesting in full of any unvested equity awards held at the time of termination
(including accelerated vesting of any performance-based awards at 100% of the
target achievement level), (ii) a lump sum payment (less applicable tax and
other withholdings) equal to two years base salary, and (iii) reimbursement of
COBRA premiums for the lesser of 12 months or the maximum allowable COBRA
period. A qualifying termination under the Lumentum CIC Plan is (i) any
involuntary termination without cause or resignation for good reason during the
period beginning upon the public announcement of an intent to consummate a
change in control of Lumentum and ending 12 months following the consummation of
the change in control, or (ii) any termination due to disability or death
occurring within 12 months following a change in control of Lumentum.
44
2016 Proxy Statement
Table of Contents
|
|
Executive
Compensation
|
A change in control of Lumentum includes
the acquisition by any person of more than 50% of the fair market value or
voting power of outstanding Lumentum voting stock, a merger of Lumentum unless
the Lumentum stockholders retain more than 50% of the voting power of the
securities of the surviving entity and the Lumentum directors constitute a
majority of the surviving entitys board of directors, or sale of substantially
all of the assets of Lumentum.
Eligible executives are those employed in
the United States or Canada who are (a) at the level of Senior Vice President or
above and who (i) hold one or more of the following positions or their
functional equivalents: Chief Financial Officer, Chief Administrative Officer,
Chief Legal Officer, Chief Information Officer, Chief Marketing Officer, Chief
Research & Development
Officer, Chief
Operations Officer, Global Sales Officer and the senior executive responsible
for Human Resources, or (ii) are designated in writing by the Chief Executive
Officer as being an eligible executive, subject to subsequent review and
ratification by the Compensation Committee at its discretion, or (b) are at the
level of Vice President or above and who hold the position of VP Laser Product
Line Management, VP Optical Communications Product Line Management, VP Datacom
Product Line Management, VP Strategy and Corporate Development, or VP General
Counsel.
The Lumentum CIC Plan is administered by
the Compensation Committee of our board of directors. It will terminate on June
30, 2018 if no change in control of Lumentum has occurred by that
date.
Treatment of Equity Awards at
Separation
|
At the time of the Separation, Viavi had
outstanding equity awards relating to its common stock in the form of stock
options, RSUs and MSUs under its Amended and Restated 2003 Equity Incentive Plan
and 2005 Acquisition Equity Incentive Plan (the JDSU Equity Plans). The JDSU
Equity Plans require adjustments to Viavi equity awards outstanding at the time
of the Separation in the event of certain transactions, including the
distribution of our common stock in connection with the Separation.
Generally, Viavi equity awards held by our
employees, including our named executive officers, immediately prior to the
Separation were converted into awards for shares of our common stock under the
2015 Plan described below, with specific adjustments to these awards to reflect
the Separation depending on the type of award. The following discussion
describes the treatment of Viavi equity awards held by our employees, including
our named executive officers. This treatment became effective as of the
distribution date of shares of our common stock to Viavi stockholders in
connection with the Separation (the distribution date).
Service-Vesting Stock
Options
|
Viavi options that vest based solely on
their holders service and that were outstanding on the distribution date and
held by our employees were converted into Lumentum options, without any changes
to the original terms of the Viavi options, other than
appropriate adjustments to the number of shares of our common stock
subject to each Lumentum option and to the exercise price payable per share in
order to preserve the economic value of the Viavi options immediately prior to
the Separation.
Stock Options with Market
Conditions
|
Certain outstanding Viavi options held by
our employees prior to the Separation were scheduled to vest based upon the
holders continued service with Viavi but would not become exercisable until
Viavis common stock price exceeds a stated threshold for 30 consecutive trading
days. These options were adjusted in the same manner described for service-vesting
options, except that, for purposes of determining whether the share price
requirement is satisfied during the 30 days following the distribution date, our
share price (as adjusted to reflect the distribution) was combined with the
Viavi share price.
Viavi RSUs held by our employees on the
distribution date were converted into RSUs for shares of our common stock,
without any changes to the original terms of the Viavi RSUs, other than
appropriate adjustments to the number of shares of our
common stock subject to the Lumentum RSU awards in order to preserve the
economic value of these awards immediately prior to the Separation.
Viavi MSU awards held by our employees
prior to the Separation were scheduled to vest based upon their holders
continued service and the relative Viavi TSR in comparison to the TSR range of
the companies included in the Index during a specified measurement period. Viavi
MSU awards held by our employees on the distribution date were converted into
Lumentum awards in
the same manner described for
Viavi MSUs. In connection with the Separation, the 2015 measurement period, as
well as the vesting and performance goals applicable to the remaining Lumentum
MSU awards were adjusted by the Compensation Committee as shown in the table
below.
45
Table of Contents
Executive
Compensation
|
|
|
Original Viavi MSU Award
|
|
Vesting Terms of Converted Lumentum MSU
Award
|
2012 Viavi MSU Award
|
|
The number of Lumentum MSUs that vested was based on Viavi’s TSR relative to the performance
of those companies in the Index measured over a 60-day period ending on July 31, 2015, with a
vesting date of September 25, 2015. 81.2% of the awarded units vested based on the performance
measurement.
|
2013 Viavi MSU Award
|
|
For 50% of the unvested Viavi MSUs: the number of corresponding Lumentum MSUs that vested was
based on Viavi’s TSR relative to the performance of those companies in the Index measured over
a 60-day period ending on July 31, 2015, with a vesting date of September 25, 2015. 66.6% of the
awarded units vested for this tranche based on the performance measurement.
For the remaining 50% of unvested Viavi MSUs:
the number of corresponding Lumentum awards that vest will be based on
Lumentums performance in fiscal year 2016 relative to a revenue target
set by the Compensation Committee, with the holder being eligible to earn
up to 150% of the target amount based on certain levels of achievement in
excess of the revenue target, with a vesting date of September 25, 2016.
|
2014 Viavi MSU Award
|
|
For 1/3 of the unvested Viavi MSUs: the number of corresponding Lumentum MSUs that vested
was based on Viavi’s TSR relative to the performance of those companies in the Index measured
over a 60-day period ending on July 31, 2015, with a vesting date of September 25, 2015. 122.6%
of the awarded units vested on September 25, 2015 for this tranche based on the performance
measurement.
For the remaining 2/3 of the unvested Viavi MSUs: the number of corresponding Lumentum awards that vest will be based on Lumentum’s performance in fiscal year 2016 relative to a revenue target set by the Compensation Committee, with the holder being eligible to earn up to 150% of the target amount based on certain levels of achievement in excess of the revenue target. The vesting dates will be September 25, 2016 (50% of any earned Lumentum awards) and September 25, 2017 (50% of any
earned Lumentum awards).
|
Continued Service-Vesting
|
The service-vesting requirements in effect
for each Viavi award held by our employees prior to the Separation remained
unchanged in connection with the Separation from Viavi and are measured in terms
of both service prior to the Separation and continued service with Lumentum
after the Separation.
EQUITY
COMPENSATION PLAN INFORMATION
The following table sets forth information
about shares of Lumentums common stock that may be issued under Lumentums
equity compensation plans, including compensation plans that were not approved
by Lumentums stockholders. Information in the table is as of July 2,
2016.
Plan Category
|
|
(a) Number of Securities
to be Issued
Upon
Exercise of Outstanding
Options, Warrants
and
Rights
|
|
(b) Weighted-average
Exercise Price of
Outstanding
Options,
Warrants and Rights
($) (1)
|
|
(c) Number of Securities
Remaining Available
for
Future Issuance Under
Equity Compensation
Plans (excluding
securities
reflected in column (a))
|
Equity compensation plans approved
by security
holders
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security
holders (2)
|
|
2,874,352
|
(3)
|
|
17.83
|
|
4,999,630
|
Total
|
|
2,874,352
|
|
|
17.83
|
|
4,999,630
|
(1)
|
The weighted average exercise price is calculated based solely on
the exercise prices of the outstanding options and does not reflect the
shares that will be issued upon the vesting of outstanding awards of RSUs,
which have no exercise price.
|
|
(2)
|
Includes the 2015 Equity
Incentive Plan.
|
|
(3)
|
This number includes 2,874,352
shares subject to outstanding awards granted under our 2015 Equity
Incentive Plan, of which 284,537 shares were subject to outstanding
options and 2,589,815 shares were subject to outstanding RSU
awards.
|
46
2016 Proxy Statement
Table of Contents
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table reports the number of
shares of our common stock beneficially owned as of August 26, 2016, by (i) all
persons who are known to us to be beneficial owners of five percent or more of
our common stock, (ii) each of our directors and named executive officers, and
(iii) all of our directors and executive officers as a group. We have determined
beneficial ownership in accordance with the rules of the SEC and the information
is not necessarily indicative of beneficial ownership for any other purpose.
Unless otherwise indicated below, to our knowledge, the persons and entities
named in the table have sole voting and sole investment power with respect to
all shares that they beneficially own, subject to community property laws where
applicable. In computing the number of shares of our common stock
beneficially owned by a person and the percentage ownership of
that person, we deemed outstanding shares of our common stock subject to options
or restricted stock units held by that person that are currently exercisable or
exercisable within 60 days of August 26, 2016. We did not deem these shares
outstanding, however, for the purpose of computing the percentage ownership of
any other person. We have based percentage ownership of our common stock on
60,082,117 shares of our common stock outstanding as of August 26, 2016. Unless
otherwise indicated, the address of each beneficial owner listed on the table
below is c/o Lumentum Holdings Inc., 400 North McCarthy Boulevard, Milpitas,
California, 95035.
Name and Address of Beneficial Owner
|
Number of Shares
Beneficially Owned
|
5% or more Stockholders
|
Number
|
|
Percentage
|
Viavi Solutions Inc. (1)
|
5,042,855
|
|
8.4%
|
Capital Research Global Investors (2)
|
6,441,454
|
|
10.7%
|
BlackRock Inc. (3)
|
5,114,474
|
|
8.5%
|
The
Vanguard Group (4)
|
3,423,855
|
|
5.7%
|
T.
Rowe Price Associates, Inc. (5)
|
3,122,521
|
|
5.2%
|
Directors and Named Executive Officers
|
|
|
|
Alan S. Lowe (6)
|
183,928
|
|
*
|
Harold L. Covert
|
9,841
|
|
*
|
Penelope A. Herscher
|
15,205
|
|
*
|
Martin A. Kaplan
|
20,187
|
|
*
|
Samuel F. Thomas
|
3,283
|
|
*
|
Brian J. Lillie
|
3,283
|
|
*
|
Aaron Tachibana (7)
|
42,089
|
|
*
|
Vincent Retort (8)
|
105,034
|
|
*
|
All
directors and executive officers as a group (10 persons) (9)
|
456,733
|
|
*
|
*
|
Indicates ownership of less than 1% of our common
stock.
|
|
(1)
|
Includes 11,692,855 shares retained by Viavi
in connection with the Separation less 6,650,000 shares sold through
August 26, 2016. The address for Viavi is 430 N. McCarthy Boulevard,
Milpitas, CA 95035.
|
|
(2)
|
Based solely on a Schedule 13G/A filing made
by Capital Research Global Investors on July 8, 2016, reporting sole
voting and dispositive power over the shares in its capacity as an
investment advisor. The address for Capital Research Global Investors is
333 South Hope Street, 55th Floor, Los Angeles, CA 90071.
|
|
(3)
|
Based solely on a Schedule 13G filing made
by BlackRock Inc. on January 28, 2016, reporting sole voting power over
4,583,733 shares and sole dispositive power over 5,114,474 shares. The
address for BlackRock Inc. is 55 East 52nd Street, New York, NY
10022.
|
|
(4)
|
Based solely on a Schedule 13G filing made
by The Vanguard Group on February 10, 2016, reporting sole voting power
over 34,445 shares, shared voting power over 1,160 shares, sole
dispositive power over 3,391,670 shares, and shared dispositive power over
32,185 shares in its capacity as an investment advisor. Vanguard Fiduciary
Trust Company (VFTC), a wholly-owned subsidiary of The Vanguard Group,
Inc., is the beneficial owner of 31,025 shares as a result of its serving
as investment manager of collective trust accounts. Vanguard Investments
Australia, Ltd. (VIA), a wholly-owned subsidiary of The Vanguard Group,
Inc., is the beneficial owner of 4,580 shares as a result of its serving
as investment manager of Australian investment offerings. The address for
The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.
|
|
(5)
|
Based solely on a Schedule 13G filing made
by Price T. Rowe Associates, Inc. on February 12, 2016, reporting sole
voting power over 4868,093 shares and sole dispositive power over
3,122,521 shares in its capacity as an investment advisor. The address for
T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, Maryland
21202.
|
47
Table of Contents
Security
Ownership
|
|
|
(6)
|
Includes (i) 20,016 RSUs which
vest within 60 days of August 26, 2016, and (ii) 139,370 shares of
restricted stock which vest ratably over three years.
|
|
(7)
|
Includes 28,250 shares of
restricted stock which vest ratably over three years.
|
|
(8)
|
Includes (i) 30,706 shares
subject to stock options currently exercisable or exercisable within 60
days of August 26, 2016, (ii) 9,707 RSUs which vest within 60 days of
August 26, 2016, (iii) 64,034 shares of restricted stock which vest
ratably over three years.
|
|
(9)
|
Includes (i) 30,706 shares
subject to stock options currently exercisable or exercisable within 60
days of August 26, 2016, (ii) 36,636 RSUs which vest within 60 days of
August 26, 2016, (iii) 231,654 shares of restricted stock which vest
ratably over three years.
|
48
2016 Proxy
Statement
Table of Contents
RELATED
PERSON TRANSACTIONS
We describe below transactions and series
of similar transactions, since the beginning of our last fiscal year, to which
we were or are to be a participant, in which:
●
|
the amounts involved exceeded or will exceed
$120,000; and
|
●
|
any of our directors, nominees for director, executive officers or
holders of more than 5% of our outstanding capital stock, or any immediate
family member of, or person sharing the household with, any of these individuals
or entities, had or will have a direct or indirect material interest.
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Other than as described below, there has
not been, nor is there any currently proposed, transactions or series of similar
transactions to which we have been or will be a party.
AGREEMENTS WITH VIAVI
On July 31, 2015, we entered into a
separation agreement with Viavi as well as various other ancillary agreements in
order to effect the Separation and provide a framework for our relationship with
Viavi after the Separation, including a contribution agreement, a membership
interest transfer agreement, a supply agreement, a tax matters agreement, an
employee matters agreement, an escrow agreement, an intellectual property
matters agreement, stockholders and registration rights agreement, and the
local transfer documents executed in connection with the Separation. These
agreements provide for the allocation between us and Viavi of Viavis assets,
employees, liabilities and obligations (including its investments, property and employee benefits and
tax-related assets and liabilities) attributable to periods prior to, at and
after Separation and will govern certain relationships between us and Viavi
after the Separation. Additionally, we entered into a securities purchase
agreement with Viavi and Amada relating to the sale of Lumentum Inc.s Series A
Preferred Stock by Viavi to Amada. Certain agreements were filed as exhibits to
this Amendment No.1 for the fiscal year ended June 27, 2015.
The following summaries of each of the
agreements listed above are qualified in their entireties by reference to these
agreements, which are incorporated by reference into this Amendment
No.1.
THE
CONTRIBUTION AGREEMENT
Transfer of Assets and Assumption of
Liabilities
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On July 31, 2015, we entered into a
contribution agreement with Viavi, which identifies the assets transferred, the
liabilities assumed and the contracts assigned to each of Lumentum and Viavi,
and it provides for when and how these transfers, assumptions and assignments
will occur. In particular, the contribution agreement provides that, among other
things, subject to the terms and conditions contained therein:
●
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all assets primarily
used by our business, which are referred to as Lumentum Assets, are
transferred to us, including, among others:
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●
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manufacturing facilities
located in San Jose, California and Bloomfield, Connecticut;
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●
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R&D facilities primarily
located in the United States, Canada, China and
Switzerland;
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●
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contracts (or
portions thereof) related to our business;
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●
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intellectual property related to our
business;
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●
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rights and assets expressly allocated to us pursuant
to the terms of the separation agreement or certain other agreements
entered into in connection with the Separation; and
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●
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other assets that are included
in our pro forma balance sheet.
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●
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certain liabilities primarily
related to our business or the Lumentum Assets, which are referred to as
the Lumentum Liabilities, were also transferred;
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●
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all of the
assets and liabilities (including whether accrued, contingent or
otherwise) other than the Lumentum Assets and the Lumentum Liabilities
(such assets and liabilities referred to as the JDSU Assets and the
JDSU Liabilities, respectively) were retained by or transferred to
Viavi; and
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●
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certain
contingent liabilities, unless specifically attributable to either us or
Viavi, will be allocated between the two parties according to a formula to
be agreed upon by the two parties.
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Except as expressly set forth in the
contribution agreement or any ancillary agreement, neither we nor Viavi make any
representation or warranty as to the assets, business or liabilities transferred
or assumed as part of the contribution, as to any approvals or notifications
required in connection with the transfers, as to the value of or the freedom
from any security interests of any of the assets transferred, as to the absence
of any defenses or right of setoff or freedom from counterclaim with respect to
any claim or other asset of either our subsidiaries or Viavi or as to the legal
sufficiency of any assignment, document or instrument delivered to convey title
to any asset or thing of value to be transferred in connection with the
Separation. All assets are transferred on an as is, where is basis and the
respective transferees will bear
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the economic and legal risks that any
conveyance will prove to be insufficient to vest in the transferee good title,
free and clear of all security interests, and that any necessary approvals or
notifications are not obtained or made or that any requirements of laws or
judgments are not complied with.
Information in this Proxy Statement with
respect to the assets and liabilities of the parties distributed in connection
with the Separation is presented based on the allocation of such assets and
liabilities pursuant to the separation agreement and the ancillary agreements,
unless the context otherwise requires. The contribution agreement provides that,
in the event that the transfer or assignment of certain
assets and liabilities to Lumentum Operations LLC or Viavi, as applicable, does
not occur prior to the contribution, then until such assets or liabilities are
able to be transferred or assigned, Lumentum Operations LLC or Viavi, as
applicable, will hold such assets on behalf and for the benefit of the other
party and will pay, perform and discharge such liabilities in the ordinary
course of business, provided that the other party will advance or reimburse
Lumentum Operations LLC or Viavi, as applicable, for any payments made in
connection with the maintenance of such assets or the performance and discharge
of such liabilities.
THE
MEMBERSHIP INTEREST TRANSFER AGREEMENT
On July 31, 2015, Viavi and Lumentum Inc.
entered into a membership interest transfer agreement which provided that Viavi
would transfer all of the membership interests in Lumentum Operations LLC, which
holds what was historically Viavis CCOP
business
assets and associated liabilities, to Lumentum Inc. in exchange for all of the
issued and outstanding common stock, Series A Preferred Stock (which Viavi
subsequently sold to Amada) and Series B Preferred Stock of Lumentum
Inc.
THE
SEPARATION AND DISTRIBUTION AGREEMENT
Contribution of Operating Subsidiary Common Stock and Series
B Preferred Stock
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On July 31, 2015, we entered into a
separation agreement with Viavi that provided that Viavi would contribute all of
the issued and outstanding common stock and Series B Preferred Stock of Lumentum
Inc., which holds all of the membership interests
in Lumentum Operations LLC, which in turn holds what was historically
Viavis CCOP business assets and associated liabilities, to us.
The separation agreement provided that
Viavi make a cash contribution to Lumentum in an amount equal to $137.6
million.
The separation agreement also governs the
rights and obligations of the parties regarding the distribution. On July 31,
2015, after giving effect to Viavis retention of 19.9% of our common stock,
Viavi distributed to its stockholders that held shares of Viavi
common stock as of July 27, 2015 the remaining 80.1% of the
issued and outstanding shares of our common stock on a pro rata basis. Viavi
stockholders received cash in lieu of any fractional shares of our common
stock.
Conditions to the
Distribution
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The separation agreement provides that the
distribution was subject to satisfaction (or waiver by Viavi) of certain
conditions. Viavi had the sole and absolute discretion to determine (and
change) the terms of, and to determine whether to
proceed with, the distribution and to determine the record date for the
distribution, the distribution date and the distribution ratio.
Termination of Arrangements and Agreements between us and
Viavi
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The separation agreement provides that all
agreements, arrangements, commitments or understandings as to which there are no
third parties and that are between us, on the one hand, and Viavi, on the other
hand, as of July 31, 2015, were terminated as of the distribution, except for
the separation agreement
and the ancillary
agreements, certain shared contracts and other arrangements specified in the
separation agreement. The separation agreement also provides that at or prior to
July 31, 2015, all bank and brokerage accounts owned by us were de-linked from
the Viavi accounts.
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The contribution agreement provides that
we and our affiliates will release and discharge Viavi and its affiliates from
all liabilities to the extent existing or arising from any acts and events
occurring or failing to occur, and all conditions existing, prior to the
effective time of the contribution, including in connection with the
implementation of the contribution, except as expressly set forth in the
contribution agreement. The separation agreement provides that Viavi and its
affiliates will release and discharge us and our affiliates from all liabilities
to the extent existing or arising from any acts and events occurring or failing
to occur, and all conditions existing, prior to the effective time of the
contribution, including in connection with the
implementation of the contribution, except as expressly set forth in the
contribution agreement.
These releases do not extend to
obligations or liabilities under any agreements between the parties that remain
in effect following the contribution, which agreements include, but are not
limited to, the contribution agreement, the supply agreement, the tax matters
agreement, the employee matters agreement, the intellectual property matters
agreement, the escrow agreement and the local transfer documents executed in
connection with the Separation.
In the contribution agreement, we agree to
indemnify, defend and hold harmless Viavi, each of its affiliates and each of
their respective directors, officers and employees, from and against all
liabilities relating to, arising out of or resulting from:
●
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any Lumentum
Liabilities;
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the failure of on our part to pay,
perform or otherwise promptly discharge any Lumentum Liabilities or
Lumentum contracts, in accordance with their respective terms, whether
prior to or after the effective time of the
distribution;
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any guarantee, indemnification
obligation, surety bond or other credit support agreement, arrangement,
commitment or understanding by Viavi for our benefit, unless related to a
JDSU Liability;
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●
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any breach by us of the contribution
agreement or any of the ancillary agreements or any action by us in
contravention of our amended and restated certificate of incorporation or
amended and restated bylaws; and
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any untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading, with respect to all information
contained in the registration statement of which the information statement
dated as of July 16, 2015 related to the Separation forms a part (the
Information Statement), the Information Statement (as amended or
supplemented) or any other disclosure document that describes the
Separation, the contribution or the distribution or primarily relates to
the transactions contemplated by the contribution agreement, other than
any such statement or omission specifically relating to the JDSU Assets,
the JDSU Liabilities or Viavi or its subsidiaries (other than us and our
subsidiaries).
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Viavi agrees to indemnify, defend and hold
us harmless, along with each of our affiliates and all respective directors,
officers and employees from and against all liabilities relating to, arising out
of or resulting from:
●
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the JDSU
Liabilities;
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●
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the failure of Viavi or any of its
subsidiaries, other than us, to pay, perform or otherwise promptly
discharge any of the JDSU Liabilities, in accordance with their respective
terms, whether prior to or after the effective time of the
distribution;
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●
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any guarantee, indemnification
obligation, surety bond or other credit support agreement, arrangement,
commitment or understanding by us for the benefit of Viavi, unless related
to a Lumentum Liability;
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any breach by Viavi or any of its
subsidiaries, other than us, of the contribution agreement or any of the
ancillary agreements; and
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any untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading, with respect to information
contained in the registration statement of which the Information Statement
forms a part, the Information Statement (as amended or supplemented) or
any other disclosure document that describes the Separation or the
distribution or primarily relates to the transactions contemplated by the
contribution agreement, but only to the extent specifically relating to
the JDSU Assets, the JDSU Liabilities or Viavi or its subsidiaries (other
than us and our subsidiaries).
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The contribution agreement also
establishes procedures with respect to claims subject to indemnification and
related matters. Indemnification with respect to taxes will be governed solely
by the tax matters agreement. Neither partys indemnification obligations are
subject to maximum loss clauses.
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OTHER RELATIONSHIPS AND RELATED PERSONS
TRANSACTIONS
Jeff von Richter, an employee of Lumentum
since 2015 as a Supply Chain Manager, is the brother-in-law of Alan Lowe, our
president and chief executive officer. For the fiscal year ended July 2, 2016,
Mr. von Richters total compensation, including salary, bonus, 401(k) matching
and the amount of stock-based
compensation
expense determined pursuant to accounting rule FASB ASC Topic 718, excluding the
effect of estimated forfeitures, was approximately $199,000. Mr. von Richter
will also be eligible to participate in employee benefit plans generally
available to our employees.
POLICIES AND PROCEDURES FOR RELATED
PARTY TRANSACTIONS
Our Audit Committee has the primary
responsibility for reviewing and approving or ratifying related party
transactions. We have a formal written policy providing that a related party
transaction is any transaction between us and an executive officer, director,
nominee for director, beneficial owner of more than 5% of any class of our
capital stock, or any member of the immediate family of any of the foregoing
persons, in which such party has a direct or indirect material interest and the
aggregate amount involved exceeds $120,000. In reviewing any related party
transaction, our Audit Committee is to consider the relevant facts and
circumstances available to our Audit Committee, including, whether the
transaction is on terms no less favorable than terms generally available to an
unaffiliated third party under the same or similar circumstances, and the extent
of the related partys interest in the transaction. Our Audit Committee has
determined
that certain transactions will be
deemed to be pre-approved by our Audit Committee, including certain executive
officer and director compensation, transactions with another company at which a
related partys only relationship is as a non-executive employee, director or
beneficial owner of less than 10% of that companys shares and the aggregate
amount involved does not exceed the greater of $200,000 or 2% of the companys
total revenues, transactions where a related partys interest arises solely from
the ownership of our common stock and all holders of our common stock received
the same benefit on a pro rata basis, and transactions available to all
employees generally. If advance approval of a transaction is not feasible, the
chair of our Audit Committee may approve the transaction and the transaction may
be ratified by our Audit Committee in accordance with our formal written
policy.
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting
Compliance
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Section 16(a) of the Exchange Act requires
that our executive officers and directors, and persons who own more than 10% of
our common stock, file reports of ownership and changes of ownership with the
SEC. Such directors, executive officers and 10% stockholders are required by SEC
regulation to furnish us with copies of all Section 16(a) forms they
file.
SEC regulations require us to identify in
this proxy statement anyone who filed a required report late during the most
recent fiscal year. Based on our review of forms we received, or written
representations from reporting persons stating
that they were not required to file these forms, we believe that during our
fiscal year ended July 2, 2016, all Section 16(a) filing requirements were
satisfied on a timely basis with the exception of a Form 4 for Judy Hamel, our
secretary and general counsel, which was due on September 15, 2015 but was filed
on September 18, 2015 due to an administrative error.
Fiscal Year 2016 Annual Report and SEC
Filings
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Our financial statements for our fiscal
year ended July 2, 2016 are included in our Annual Report on Form 10-K, which we
will make available to stockholders at the same time as this Proxy Statement.
This Proxy Statement and our annual report are posted on our website at
www.lumentum.com
and are available from the SEC at its website at
www.sec.gov
. You may also
obtain a copy of our annual report without charge by sending a written request
to Lumentum Holdings Inc., Attention: Investor Relations, 400 North McCarthy
Blvd, Milpitas, California 95035.
* * *
The board of directors does not know of
any other matters to be presented at the Annual Meeting. If any additional
matters are properly presented at the Annual Meeting, the persons named in
the enclosed proxy card will have discretion to
vote the shares of our common stock they represent in accordance with their own
judgment on such matters.
It is important that your shares of our
common stock be represented at the Annual Meeting, regardless of the number of
shares that you hold. You are, therefore, urged to vote by telephone or by using
the Internet as instructed on the enclosed proxy card or execute and return, at
your earliest convenience, the enclosed proxy card in the envelope that has also
been provided.
THE BOARD OF DIRECTORS
Milpitas, California
September 19,
2016
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APPENDIX A
LUMENTUM HOLDINGS, INC.
EXECUTIVE OFFICER
PERFORMANCE-BASED
INCENTIVE PLAN
SECTION 1
BACKGROUND, PURPOSE AND DURATION
1.1
Effective Date
. The Plan will
become effective upon ratification by an affirmative vote of the holders of a
majority of the Shares that are present in person or by proxy and entitled to
vote at the 2016 Annual Meeting of Stockholders of the Company.
1.2
Purpose of the Plan
. The Plan
is intended to increase shareholder value and the success of the Company by
motivating key executives (1)
to perform to the best of their abilities, and (2)
to achieve the Companys
objectives. The Plans goals are to be achieved by providing such executives
with incentive awards based on the achievement of goals relating to the
performance of the Company. The Plan is intended to permit the payment of
bonuses that qualify as performance-based compensation under Section 162(m) of
the Code.
SECTION 2
DEFINITIONS
The following words and phrases shall have
the following meanings unless a different meaning is plainly required by the
context:
2.1
Actual Award
means as to any
Performance Period, the actual award (if any) payable to a Participant for the
Performance Period. Each Actual Award is determined by the Payout Formula for
the Performance Period, subject to the Committees authority under Section 3.6
to eliminate or reduce the award otherwise determined by the Payout Formula. For
purposes of applying the Maximum Award limitation, the Actual Award will be
deemed to have been determined on the last day of the applicable Performance
Period, so that if there are multiple Performance Periods ending in a particular
Fiscal Year, in no event may the Actual Awards with respect to all such
Performance Periods in the aggregate exceed the Maximum Award.
2.2
Affiliate
means any
corporation or other entity (including, but not limited to, partnerships and
joint ventures) controlled by the Company.
2.3
Base Salary
means as to any
Performance Period, unless the Committee provides otherwise when establishing
the Target Award, the Participants annualized salary rate on the last day of
the Performance Period. Such Base Salary shall be before both (a)
deductions for taxes or
benefits, and (b)
deferrals of compensation pursuant to Company-sponsored plans. For
avoidance of doubt, Base Salary does not include performance-based cash
incentives, commissions, equity compensation, incentive or other
compensation.
2.4
Board
means the Board of
Directors of the Company.
2.5
Change of Control
means
(a) The acquisition by any person (or
related group of persons), whether by tender or exchange offer made directly to
the Companys stockholders, open market purchases or any other transaction or
series of transactions, of stock of the Company that, together with stock of the
Company held by such person or group, constitutes more than 50% of the total
fair market value or total voting power of the then outstanding stock of Company
entitled to vote generally in the election of the members of Board;
(b) a merger or consolidation in which the
Company is not the surviving entity, except for a transaction in which both (i)
securities representing more than 50% of the total combined voting power of the
surviving entity are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934), directly or indirectly,
immediately after such merger or consolidation by persons who beneficially owned
Company common stock immediately prior to such merger or consolidation and (ii)
the members of Board immediately prior to the transaction (the
Existing
Board
) constitute a majority of the Board of the surviving entity or its
parent entity immediately after such merger or consolidation;
(c) any reverse merger in which Company is
the surviving entity but in which either (i) persons who beneficially owned,
directly or indirectly, Company common stock immediately prior to such reverse
merger do not retain immediately after such reverse merger direct or indirect
beneficial ownership of securities representing more than 50% of the total
combined voting power of Companys outstanding securities or (ii) the members of
the Existing Board do not constitute a majority of the Boards parent entity
immediately after such reverse merger; or
(d) the sale, transfer or other
disposition of all or substantially all of the assets of Company (other than a
sale, transfer or other disposition to one or more subsidiaries of
Company).
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Notwithstanding the foregoing, to the
extent that any amount constituting nonqualified deferred compensation within
the meaning of Section 409A of the Code (including any applicable final,
proposed or temporary regulations and other administrative guidance promulgated
thereunder) would become payable under this Plan by reason of a Change of
Control, such amount shall become payable only if the event constituting a
Change of Control would also constitute a change in ownership or effective
control of Company or a change in the ownership of a substantial portion of the
assets of Company within the meaning of Section 409A of the Code.
2.6
Code
means the Internal
Revenue Code of 1986, as amended. Reference to a specific section of the Code or
regulation thereunder shall include such section or regulation, any valid
regulation promulgated thereunder, and any comparable provision of any future
legislation or regulation amending, supplementing or superseding such section or
regulation.
2.7
Committee
means the
Compensation Committee of the Board, or such other committee as may be
designated by the Board to administer the Plan.
2.8
Company
means Lumentum
Holdings, Inc., a Delaware corporation, or any successor thereto.
2.9
Determination Date
means the
latest possible date that will not jeopardize a Target Award or Actual Awards
qualification as performance-based compensation under Section 162(m) of the
Code.
2.10
Disability
means a permanent
and total disability determined in accordance with uniform and nondiscriminatory
standards adopted by the Committee from time to time.
2.11
Employee
means any employee
of the Company or of an Affiliate, whether such employee is so employed at the
time the Plan is adopted or becomes so employed subsequent to the adoption of
the Plan.
2.12
Fiscal Year
means the fiscal
year of the Company.
2.13
Maximum Award
means as to
any Participant for all Performance Periods ending during a Fiscal Year,
$2,500,000.
2.14
Participant
means as to any
Performance Period, an Employee who has been selected by the Committee for
participation in the Plan for that Performance Period.
2.15
Payout Formula
means as to
any Performance Period, the formula or payout matrix established by the
Committee pursuant to Section
3.4 in order to determine the Actual Awards (if any) to be
paid to Participants. The formula or matrix may differ from Participant to
Participant.
2.16
Performance Goals
means the
goal(s) (or combined goal(s)) determined by the Committee (in its discretion) to
be applicable to a Participant for a Target Award for a Performance Period. As
determined by the Committee, the Performance Goals for any Target Award
applicable to a Participant may provide for a targeted level or levels of
achievement using one or more of the following measures: share price, earnings
per share, total stockholder return, operating margin, gross margin, return on
equity, return on assets, return on investment, operating income, net operating
income, pre-tax profit, net income, cash flow, revenue, expenses, earnings
before any one or more of share-based compensation expense, interest, taxes,
depreciation and amortization, economic value added, market share, personal
management objectives, product development, completion of an identified special
project, completion of a joint venture or other corporate transaction, and other
measures of performance selected by the Committee. The Performance Goals may
differ from Participant to Participant and from award to award. Any criteria
used may be (A)
measured in absolute terms, (B)
measured in terms of growth, (C)
compared to another company or
companies, (D)
measured against the market as a whole and/or according to applicable
market indices, (E)
measured against the performance of the Company as a whole or a segment
of the Company and/or (F)
measured on a pre-tax or post-tax basis (if applicable). Further, any
Performance Goals may be used to measure the performance of the Company as a
whole or a business unit or other segment of the Company, or one or more product
lines or specific markets and may be measured relative to a peer group or index.
Prior to the Determination Date, the Committee will determine whether any
significant element(s)
will be included in or excluded from the calculation of any Performance
Goal with respect to any Participant. In all other respects, Performance Goals
will be calculated in accordance with the Companys financial statements,
generally accepted accounting principles (
GAAP
), or under a methodology
(including non-GAAP adjustments) established by the Committee prior to the
Determination Date and which is consistently applied with respect to a
Performance Goal in the relevant Performance Period. In addition, the Committee
will adjust any performance criteria, Performance Goal or other feature of an
Actual or Target Award that relates to or is wholly or partially based on the
number of, or the value of, any stock of the Company, to reflect any stock
dividend or split, repurchase, recapitalization, combination, or exchange of
shares or other similar changes in such stock.
2.17
Performance Period
means any
Fiscal Year or such other period as determined by the Committee in its sole
discretion.
2.18
Plan
means the Lumentum
Holdings, Inc. Executive Officer Performance-Based Incentive Plan, as amended
and restated, as set forth in this instrument and as hereafter amended from time
to time.
2.19
Target Award
means the
target award payable under the Plan to a Participant for the Performance Period,
expressed as a percentage of his or her Base Salary, as determined by the
Committee in accordance with Section
3.3.
2.20
Termination of Employment
means a cessation of the employee-employer relationship between an Employee and
the Company or an Affiliate for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability,
retirement, or the disaffiliation of an Affiliate, but excluding any such
termination where there is a simultaneous reemployment by the Company or an
Affiliate.
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SECTION 3
SELECTION OF PARTICIPANTS AND DETERMINATION OF
AWARDS
3.1
Selection of Participants
. The
Committee, in its sole discretion, shall select the Employees who shall be
Participants for any Performance Period. Participation in the Plan is in the
sole discretion of the Committee, and on a Performance Period by Performance
Period basis. Accordingly, an Employee who is a Participant for a given
Performance Period in no way is guaranteed or assured of being selected for
participation in any subsequent Performance Period.
3.2
Determination of Performance
Goals
. The Committee, in its sole discretion, shall establish the
Performance Goals for each Participant for each Performance Period. Such
Performance Goals shall be set forth in writing.
3.3
Determination of Target
Awards
.
(a) The Committee, in its sole discretion,
shall establish a Target Award for each Participant. Each Participants Target
Award shall be determined by the Committee in its sole discretion, and each
Target Award shall be set forth in writing. The Committee, in its discretion,
may adjust any Performance Goal (or actual performance versus the Performance
Goal) for the effects of charges for restructurings, discontinued operations,
extraordinary items and all items of gain, loss or expense determined to be
extraordinary or unusual in nature or related to the disposal of a segment of a
business or related to a change in accounting principle, asset write-downs,
litigation, claims, judgments or settlements, the effect of changes in tax law
or other such laws or provisions affecting reported results, accruals for
reorganization and restructuring programs, provided that any such adjustment is
intended not to jeopardize the qualification of an Actual Award as
performance-based compensation under Section 162(m) of the Code.
(b) If a Performance Goal is based on, or
calculated with respect to, the Companys common stock (such as increases in
earnings per share, book value per share or other similar measures), then, if
any corporate transaction occurs involving the Company (including, without
limitation, any subdivision or combination or exchange of the outstanding shares
of common stock, stock dividend, stock split, spin-off, split-off,
recapitalization, capital reorganization, liquidation, reclassification of
shares of common stock, merger, consolidation, extraordinary cash distribution,
redemption, stock issuance, or sale, lease or transfer of substantially all of
the assets of the Company), the Compensation Committee shall make or provide for
such adjustments in such Performance Goal as the Compensation Committee may in
good faith determine to be equitably required to prevent dilution or enlargement
of any increase or decrease in the rights of Participants.
3.4
Determination of Payout Formula or
Formulae
. On or prior to the Determination Date, the Committee, in its sole
discretion, shall establish a Payout Formula or Formulae for purposes of
determining the Actual Award (if any) payable to each Participant. Each Payout
Formula shall (a)
be in writing, (b)
be based on a comparison of actual performance to the Performance Goals,
(c)
provide for
the payment of a Participants Target Award if the Performance Goals for the
Performance Period are achieved, and (d)
provide for an Actual Award greater than or less
than the Participants Target Award, depending upon the extent to which actual
performance exceeds or falls below the Performance Goals. Notwithstanding the
preceding, in no event shall a Participants Actual Award for any Fiscal Year
exceed the Maximum Award.
3.5
Date for Determinations
. The
Committee shall make all determinations under Sections 3.1 through 3.4 on or
before the Determination Date.
3.6
Determination of Actual Awards
.
After the end of each Performance Period, the Committee shall certify in writing
the extent to which the Performance Goals applicable to each Participant for the
Performance Period were achieved or exceeded. The Actual Award for each
Participant shall be determined by applying the Payout Formula to the level of
actual performance that has been certified by the Committee. Notwithstanding any
contrary provision of the Plan, the Committee, in its sole discretion, may
(a)
eliminate or
reduce the Actual Award payable to any Participant below that which otherwise
would be payable under the Payout Formula, and (b)
determine what Actual Award, if any, will
be paid in the event of a Termination of Employment as the result of a
Participants death or Disability or upon a Change of Control or in the event of
a Termination of Employment following a Change of Control prior to the end of
the Performance Period, and (c)
determine what Actual Award, if any, will be paid in the event
of a Termination of Employment other than as the result of a Participants death
or Disability prior to a Change of Control and prior to the end of the
Performance Period to the extent an Actual Award would have otherwise been
achieved had the Participant remained employed through the end of the
Performance Period.
SECTION 4
PAYMENT OF
AWARDS
4.1
Right to Receive Payment
. Each
Actual Award that may become payable under the Plan shall be paid solely from
the general assets of the Company. Nothing in this Plan shall be construed to
create a trust or to establish or evidence any Participants claim of any right
to payment of an Actual Award other than as an unsecured general creditor with
respect to any payment to which he or she may be entitled.
4.2
Timing of Payment
. Payment of
each Actual Award shall be made as soon as practical following the determination and certification of the Actual Award as set forth in Section 3.6, but in no
event later than the fifteenth day of the third month of the Fiscal Year
following the date the Participants Actual Award has been earned and is no
longer subject to a substantial risk of forfeiture; provided that the Committee
may permit Participants to elect to defer payment of their Actual Awards in a
manner satisfying the requirements of Section 409A of the Code.
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4.3
Form of Payment
. Each Actual
Award shall be paid in cash (or its equivalent) in a single lump sum unless
otherwise deferred in accordance with Section 4.2.
4.4
Compensation Recovery Policy
.
The Committee, in its sole discretion, may require Participant to forfeit,
return or reimburse to the Company all or a portion of any Actual Award received
in accordance with any then-effective Company compensation clawback or recovery
policy, as may be established or amended from time to time. Any such policy
generally shall be intended to apply substantially equally to all officers of
the Company, except as the Committee (or the Board or a committee of the Board,
as determined by the Board), in its discretion, determines is reasonably
necessary or appropriate to comply with applicable laws.
SECTION
5
ADMINISTRATION
5.1
Committee is the Administrator
.
The Plan shall be administered by the Committee. The Committee shall consist of
not less than two (2) members of the Board. The members of the Committee shall
be appointed from time to time by, and serve at the pleasure of, the Board. Each
member of the Committee shall qualify as an outside director under Section
162(m) of the Code. If it is later determined that one or more members of the
Committee do not so qualify, actions taken by the Committee prior to such
determination shall be valid despite such failure to qualify.
5.2
Committee Authority
. It shall
be the duty of the Committee to administer the Plan in accordance with the
Plans provisions. The Committee shall have all powers and discretion necessary
or appropriate to administer the Plan and to control its operation, including,
but not limited to, the power to (a)
determine which Employees shall be granted awards,
(b)
prescribe the
terms and conditions of awards, (c)
interpret the Plan and the awards, (d)
adopt such procedures and subplans as are
necessary or appropriate to permit participation in the Plan by Employees,
(e)
adopt rules
for the administration, interpretation and application of the Plan as are
consistent therewith, and (f)
interpret, amend or revoke any such rules.
5.3
Decisions Binding
. All
determinations and decisions made by the Committee, the Board, and any delegate
of the Committee pursuant to the provisions of the Plan shall be final,
conclusive, and binding on all persons, and shall be given the maximum deference
permitted by law.
5.4
Delegation by the Committee
.
The Committee, in its sole discretion and on such terms and conditions as it may
provide, may delegate all or part of its authority and powers under the Plan to
one or more directors and/or officers of the Company to the extent that the
delegation would not jeopardize the qualification of an Actual Award as
performance-based compensation under Section 162(m) of the Code.
SECTION 6
GENERAL
PROVISIONS
6.1
Tax Withholding
. The Company
shall withhold all applicable taxes from any Actual Award, including any
federal, state and local taxes (including, but not limited to, the Participant
employment tax obligations).
6.2
Section 409A of the Code
. It is
intended that all bonuses payable under this Plan will be exempt from the
requirements of Section 409A of the Code pursuant to the short-term deferral
exemption or, in the alternative, will comply with the requirements of Section
409A of the Code so that none of the payments and benefits to be provided under
this Plan will be subject to the additional tax imposed under Section 409A of
the Code, and any ambiguities or ambiguous terms herein shall be interpreted to
so comply or be exempt. Each payment and benefit payable under this Plan is
intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2)
of the Treasury Regulations. The Company may, in good faith and without the
consent of any Participant, make any amendments to this Plan and take such
reasonable actions which it deems necessary, appropriate or desirable to avoid
imposition of any additional tax or income recognition under Section 409A of the
Code prior to actual payment to the Participant. However, unless explicitly
determined otherwise in writing by the Committee, in no event will the Company
or any Affiliate pay or reimburse any Participant for any taxes or other costs
that may be imposed on the Participant as a result of Section 409A of the Code
or any other section of the Code or other tax rule or regulation.
6.3
No Effect on Employment
.
Nothing in the Plan shall interfere with or limit in any way the right of the
Company or an Affiliate, as applicable, to terminate any Participants
employment or service at any time, with or without cause. For purposes of the
Plan, transfer of employment of a Participant between the Company and any one of
its Affiliates (or between Affiliates) shall not be deemed a Termination of
Employment. Employment with the Company and its Affiliates is on an at-will
basis only. The Company expressly reserves the right, which may be exercised at
any time and without regard to when during and after a Performance Period such
exercise occurs, to terminate any individuals employment with or without cause,
and to treat him or her without regard to the effect which such treatment might
have upon him or her as a Participant.
6.4
Participation
. No Employee
shall have the right to be selected to receive an award under this Plan, or,
having been so selected, to be selected to receive a future award.
6.5
Indemnification
. Each person
who is or shall have been a member of the Committee, or of the Board, shall be
indemnified and held harmless by the Company against and from (a) any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, action, suit, or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any action taken or failure to act under the Plan or any award, and
(b) from any and
all amounts paid by him or her in settlement thereof, with the Companys
approval, or paid by him or her in satisfaction of any judgment
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in any such claim, action, suit, or
proceeding against him or her, provided he or she shall give the Company an
opportunity, at its own expense, to handle and defend the same before he or she
undertakes to handle and defend it on his or her own behalf. The foregoing right
of indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled under the Companys Certificate of
Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under
any power that the Company may have to indemnify them or hold them
harmless.
6.6
Successors
. All obligations of
the Company and any Affiliate under the Plan, with respect to awards granted
hereunder, shall be binding on any successor to the Company and/or such
Affiliate, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially
all of the business or assets of the Company or such Affiliate.
6.7
Beneficiary Designations
. If
permitted by the Committee, a Participant under the Plan may name a beneficiary
or beneficiaries to whom any vested but unpaid award shall be paid in the event
of the Participants death. Each such designation shall revoke all prior
designations by the Participant and shall be effective only if given in a form
and manner acceptable to the Committee. In the absence of any such designation,
any vested benefits remaining unpaid at the Participants death shall be paid to
the Participants estate.
6.8
Nontransferability of Awards
.
No award granted under the Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will, by the laws of descent
and distribution, or to the limited extent provided in Section 6.6. All rights
with respect to an award granted to a Participant shall be available during his
or her lifetime only to the Participant.
SECTION 7
AMENDMENT, SUSPENSION, TERMINATION
7.1 Amendment and Termination. The Board
or Compensation Committee of the Board may amend, alter, suspend or terminate
the Plan.
7.2
Stockholder Approval
. The
Company will obtain stockholder approval of any Plan amendment to the extent
necessary or desirable to comply with applicable laws.
7.3
Consent of Participants Generally
Required
. Subject to Section 0, no amendment, alteration, suspension or
termination of the Plan or an award under it will materially impair the rights
of any Participant, unless mutually agreed otherwise between the Participant and
the Compensation Committee, which agreement must be in writing and signed by the
Participant and the Company. Termination of the Plan will not affect the
Compensation Committees ability to exercise the powers granted to it regarding
awards established under the Plan prior to such termination.
7.4
Exceptions to Consent
Requirement
.
(a) A Participants rights will not be
deemed to have been impaired by any amendment, alteration, suspension or
termination if the Compensation Committee, in its sole discretion, determines
that the amendment, alteration, suspension or termination does not materially
impair the Participants rights, and
(b) Subject to any limitations of
applicable laws, the Compensation Committee may amend the terms of any awards
under the Plan without the affected Participants consent even if it does
materially impair the Participants right if such amendment is done:
(i) in a manner permitted under the
Plan;
(ii) to avoid imposition of any additional
tax or income recognition under Section 409A of the Code prior to actual payment
to the Participant;
(iii) to comply with other applicable
laws; or
(iv) as necessary based on rulings or
guidance issued to ensure compliance with the requirements of Section 162(m) of
the Code.
SECTION 8
LEGAL
CONSTRUCTION
8.1
Gender and Number
. Except where
otherwise indicated by the context, any masculine term used herein also shall
include the feminine; the plural shall include the singular and the singular
shall include the plural.
8.2
Severability
. In the event any
provision of the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the Plan, and
the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.
8.3
Requirements of Law
. The
granting of awards under the Plan shall be subject to all applicable laws, rules
and regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
8.4
Governing Law
. The Plan and all
awards shall be construed in accordance with and governed by the laws of the
State of California, but without regard to its conflict of law
provisions.
8.5
Captions
. Captions are provided
herein for convenience only, and shall not serve as a basis for interpretation
or construction of the Plan.
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APPENDIX
B
LUMENTUM
HOLDINGS INC.
2015 EQUITY INCENTIVE PLAN
(As Amended and Restated ____________,
2016)
1.
Establishment and Purpose of the
Plan
. The Lumentum Holdings Inc. Amended and Restated 2015 Equity Incentive
Plan was originally adopted effective as of June
23, 2015, the date of its approval by JDS
Uniphase Corporation, the sole stockholder of the Company (the
Effective
Date
). The purpose of the Plan is to provide incentives to attract, retain
and motivate eligible persons whose present and potential contributions are
important to the success of the Company by offering them an opportunity to
participate in the Companys future performance.
2.
Definitions
. As used herein, the
following definitions shall apply:
(a)
Administrator
means the Board
or any of the Committees appointed to administer the Plan.
(b)
Affiliate
and
Associate
shall have the respective meanings ascribed to such terms in
Rule
12b-2
promulgated under the Exchange Act.
(c)
Applicable Laws
means the
legal requirements relating to the Plan and the Awards under applicable
provisions of federal securities laws, state corporate and securities laws, the
Code, the rules of any applicable stock exchange or national market system, and
the rules of any non-U.S. jurisdiction applicable to Awards granted to residents
therein.
(d)
Assumed
means that pursuant
to a Corporate Transaction either (i)
the Award is expressly affirmed by the Company or
(ii)
the
contractual obligations represented by the Award are expressly assumed (and not
simply by operation of law) by the successor entity or its Parent in connection
with the Corporate Transaction with appropriate adjustments to the number and
type of securities of the successor entity or its Parent subject to the Award
and the exercise or purchase price thereof which preserves the compensation
element of the Award existing at the time of the Corporate Transaction as
determined in accordance with the instruments evidencing the agreement to assume
the Award.
(e)
Award
means the grant of an
Option, SAR, Dividend Equivalent Right, Restricted Stock, Restricted Stock Unit,
Performance Unit, Performance Share, or other right or benefit under the
Plan.
(f)
Award Agreement
means the
written agreement evidencing the grant of an Award executed by the Company and
the Grantee, including any amendments thereto.
(g)
Board
means the Board of
Directors of the Company.
(h)
Cause
means, with respect to
the termination by the Company or a Related Entity of the Grantees Continuous
Active Service, that such termination is for Cause as such term is expressly
defined in a then-effective written agreement between the Grantee and the
Company or such Related Entity, or in the absence of such then-effective written
agreement and definition, is based on, in the determination of the
Administrator, the Grantees: (i)
performance of any act or failure to perform any act in bad
faith and to the detriment of the Company or a Related Entity; (ii)
dishonesty, intentional
misconduct, material violation of any applicable Company or Related Entity
policy, or material breach of any agreement with the Company or a Related
Entity; or (iii)
commission of a crime involving dishonesty, breach of trust, or physical
or emotional harm to any person.
(i)
Change in Control
means a
change in ownership or control of the Company effected through either of the
following transactions:
(i) the direct or indirect acquisition by
any person or related group of persons (other than an acquisition from or by the
Company or by a Company-sponsored employee benefit plan or by a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Company) of beneficial ownership (within the meaning of
Rule
13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%)
of the total combined voting
power of the Companys outstanding securities pursuant to a tender or exchange
offer made directly to the Companys stockholders which a majority of the
Continuing Directors who are not Affiliates or Associates of the offeror do not
recommend such stockholders accept, or
(ii) a change in the composition of the
Board over a period of thirty-six (36)
months or less such that a majority of the Board
members (rounded up to the next whole number) ceases, by reason of one or more
contested elections for Board membership, to be comprised of individuals who are
Continuing Directors.
(j)
Code
means the Internal
Revenue Code of 1986, as amended, and any applicable regulations promulgated
thereunder.
(k)
Committee
means any committee
composed of members of the Board appointed by the Board to administer the
Plan.
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(l)
Common Stock
means the common
stock of the Company.
(m)
Company
means Lumentum
Holdings, Inc., a Delaware corporation.
(n)
Consultant
means any person
(other than an Employee or a Director, solely with respect to rendering services
in such persons capacity as a Director) who is engaged by the Company or any
Related Entity to render consulting or advisory services to the Company or such
Related Entity.
(o)
Continuing Directors
means
members of the Board who either (i)
have been Board members continuously for a period of at least
thirty-six (36)
months or (ii)
have been Board members for less than thirty-six (36)
months and were elected or
nominated for election as Board members by at least a majority of the Board
members described in clause (i)
who were still in office at the time such election or
nomination was approved by the Board.
(p)
Continuous Active Service
means that the provision of services to the Company or a Related Entity in any
capacity of Employee, Director or Consultant is not interrupted or terminated.
In jurisdictions requiring notice in advance of an effective termination as an
Employee, Director or Consultant, Continuous Active Service shall be deemed
terminated upon the actual cessation of providing services to the Company or a
Related Entity notwithstanding any required notice period that must be fulfilled
before a termination as an Employee, Director or Consultant can be effective
under Applicable Laws. Continuous Active Service shall not be considered
interrupted in the case of (i)
any approved leave of absence, (ii)
transfers among the Company, any Related
Entity, or any successor, in any capacity of Employee, Director or Consultant,
or (iii)
any
change in status as long as the individual remains in the service of the Company
or a Related Entity in any capacity of Employee, Director or Consultant (except
as otherwise provided in the Award Agreement). An approved leave of absence
shall include sick leave, military leave, or any other authorized personal
leave. For purposes of each Incentive Stock Option granted under the Plan, if
such leave exceeds ninety (90)
days, and reemployment upon expiration of such leave is not
guaranteed by statute or contract, then the Incentive Stock Option shall be
treated as a Non-Qualified Stock Option on the day three (3)
months and one (1)
day following the expiration
of such ninety (90)
day period.
(q)
Corporate Transaction
means
any of the following transactions:
(i) a merger or consolidation in which the
Company is not the surviving entity, except for a transaction the principal
purpose of which is to change the state in which the Company is incorporated;
(ii) the sale, transfer or other
disposition of all or substantially all of the assets of the Company;
(iii) the complete liquidation or
dissolution of the Company;
(iv) any reverse merger or series of
related transactions culminating in a reverse merger (including, but not limited
to, a tender offer followed by a reverse merger) in which the Company is the
surviving entity but in which securities possessing more than forty percent
(40%)
of the total
combined voting power of the Companys outstanding securities are transferred to
a person or persons different from those who held such securities immediately
prior to such merger or the initial transaction culminating in such merger but
excluding any such transaction or series of related transactions that the
Administrator determines shall not be a Corporate Transaction; or
(v) acquisition in a single or series of
related transactions by any person or related group of persons (other than the
Company or by a Company-sponsored employee benefit plan) of beneficial ownership
(within the meaning of Rule
13d-3 of the Exchange Act) of securities possessing more than
fifty percent (50%)
of the total combined voting power of the Companys outstanding
securities but excluding any such transaction or series of related transactions
that the Administrator determines shall not be a Corporate
Transaction.
(r)
Covered Employee
means an
Employee who is a covered employee under Section
162(m)(3) of the Code.
(s)
Director
means a member of
the Board or the board of directors of any Related Entity.
(t)
Disability
means a disability
as defined under the long-term disability policy of the Company or the Related
Entity to which the Grantee provides services regardless of whether the Grantee
is covered by such policy. If the Company or the Related Entity to which the
Grantee provides service does not have a long-term disability plan in place,
Disability means that a Grantee is unable to carry out the responsibilities
and functions of the position held by the Grantee by reason of any medically
determinable physical or mental impairment for a period of not less than ninety
(90)
consecutive
days. A Grantee will not be considered to have incurred a Disability unless he
or she furnishes proof of such impairment sufficient to satisfy the
Administrator in its discretion. Notwithstanding the foregoing,
Section
409A
Deferred Compensation payable pursuant to the Plan on account of the Disability
of a Grantee shall be paid only if and when such Grantee has become disabled
within the meaning of Section
409A.
(u)
Dividend Equivalent Right
means a right entitling the Grantee to compensation or to a credit for the
account of such Grantee measured by cash dividends paid with respect to Common
Stock.
(v)
Employee
means any person,
including an Officer or Director, who is in the employ of the Company or any
Related Entity, subject to the control and direction of the Company or any
Related Entity as to both the work to be performed and the manner and method of
performance. The payment of a directors fee by the Company or a Related Entity
shall not be sufficient to constitute employment by the Company. The Company
shall determine in good faith and in the exercise of its discretion whether an
individual has become or has ceased to be an Employee and the effective date of
such individuals employment or termination of employment,
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as the case may be. For purposes of an
individuals rights, if any, under the terms of the Plan as of the time of the
Companys determination of whether or not the individual is an Employee, all
such determinations by the Company shall be final, binding and conclusive as to
such rights, if any, notwithstanding that the Company or any court of law or
governmental agency subsequently makes a contrary determination as to such
individuals status as an Employee.
(w)
Exchange Act
means the
Securities Exchange Act of 1934, as amended.
(x)
Fair Market Value
means, as
of any date, the value of one share of Common Stock determined as
follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system, its Fair Market Value
shall be the closing sale price of a Share as quoted on such exchange or system
on the date of determination (or, if no closing sale price was reported on that
date, on the last trading date such closing sale price was reported), as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable;
(ii) If the Common Stock is regularly
quoted on an automated quotation system (including the OTC Bulletin Board) or by
a recognized securities dealer, but selling prices are not reported, the Fair
Market Value of a Share shall be the mean between the high bid and low asked
prices for the Common Stock on the date of determination (or, if no such prices
were reported on that date, on the last date such prices were reported), as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable, provided that, if applicable, the Fair Market Value of a Share
shall be determined in a manner that complies with Section
409A; or
(iii) In the absence of an established
market for the Common Stock of the type described in (i)
and (ii), above, the Fair Market Value
thereof shall be determined by the Administrator in good faith.
(y)
Full Value Award
means the
grant of Restricted Stock, Restricted Stock Units, Performance Units or
Performance Shares under the Plan with a per share or unit purchase price lower
than 100% of Fair Market Value on the date of grant.
(z)
Grantee
means an Employee,
Director or Consultant who receives an Award under the Plan.
(aa)
Immediate Family
means any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, any person sharing the Grantees household (other than a tenant
or employee), a trust in which these persons (or the Grantee) have more than
fifty percent (50%)
of the beneficial interest, a foundation in which these persons (or the
Grantee) control the management of assets, and any other entity in which these
persons (or the Grantee) own more than fifty percent (50%)
of the voting
interests.
(bb)
Incentive Stock Option
means
an Option intended to qualify, and which does qualify, as an incentive stock
option within the meaning of Section
422 of the Code.
(cc)
Non-Qualified Stock Option
means an Option not intended to qualify, or which does not qualify, as an
Incentive Stock Option.
(dd)
JDS Uniphase Corporation
Separation
means the spin-off of the Company from JDS Uniphase Corporation
pursuant to that certain Separation and Distribution Agreement between the
Company and JDS Uniphase Corporation.
(ee)
Officer
means a person who
is an officer of the Company or a Related Entity within the meaning of
Section
16 of the
Exchange Act and the rules and regulations promulgated thereunder.
(ff)
Option
means an option to
purchase Shares pursuant to an Award Agreement granted under the
Plan.
(gg)
Parent
means a parent
corporation, whether now or hereafter existing, as defined in
Section
424(e) of
the Code.
(hh)
Performance Award Formula
means a formula or table established
by the Administrator which provides the method of determining the compensation
payable pursuant to an Award based on one or more levels of attainment of
specified Performance Criteria measured as of the end of the applicable
Performance Period. A Performance Award Formula may include a minimum, maximum,
target level and intermediate levels of Performance Criteria, with the final
value of an Award determined by applying the Performance Award Formula to the
specified Performance Criteria level attained during the applicable Performance
Period. A target level of performance may be stated as an absolute value, an
increase or decrease in a value, or as a value determined relative to an index,
budget or other standard selected by the Administrator.
(ii)
Performance-Based
Compensation
means compensation qualifying as performance-based
compensation under Section
162(m) of the Code.
(jj)
Performance Criteria
means
any one of, or combination of, the following: (i)
share price, (ii)
earnings per share, (iii)
total stockholder return,
(iv)
operating
margin, (v)
gross
margin, (vi)
return on equity, (vii)
return on assets, (viii)
return on investment, (ix)
operating income, (x)
net operating income,
(xi)
pre-tax
profit, (xii)
net
income, (xiii)
cash flow, (xiv)
revenue, (xv)
expenses, (xvi)
earnings before any one or more of share-based compensation expense,
interest, taxes, depreciation and amortization, (xvii)
economic value added, (xviii)
market share,
(xix)
personal
management objectives, (xx)
product development, (xxi)
completion of an identified special project,
(xxii)
completion
of a joint venture or other corporate transaction, and (xxiii)
other measures of performance
selected by the Administrator. Performance Criteria shall be calculated in
accordance with the Companys financial statements, or, if such measures are not
reported in the Companys financial statements, they shall be calculated in
accordance with
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generally accepted accounting principles,
a method used generally in the Companys industry, or in accordance with a
methodology established by the Administrator prior to the grant of the
applicable Award. As specified by the Administrator, Performance Criteria may be
calculated with respect to the Company and each Subsidiary consolidated
therewith for financial reporting purposes, one or more Subsidiaries or such
division or other business unit of any of them selected by the Administrator.
Performance Criteria may be measured relative to a peer group or index, as
specified by the Administrator. Unless otherwise determined by the Administrator
prior to the grant of the applicable Award, the Performance Criteria shall be
calculated excluding the effect (whether positive or negative) on the
Performance Criteria of any change in accounting standards or any extraordinary,
unusual or nonrecurring item, as determined by the Administrator, occurring
after the establishment of the Performance Criteria applicable to the Award.
Each such adjustment, if any, shall be made solely for the purpose of providing
a consistent basis from period to period for the calculation of Performance
Criteria in order to prevent the dilution or enlargement of the Grantees rights
with respect to an Award.
(kk)
Performance Period
means any
Fiscal Year of the Company or such other period as determined by the
Administrator in its sole discretion.
(ll)
Performance Shares
means
Shares or an Award denominated in Shares which may be earned in whole or in part
upon attainment of Performance Criteria established by the
Administrator.
(mm)
Performance Units
means an
Award which may be earned in whole or in part based upon attainment of
Performance Criteria established by the Administrator and which may be settled
for cash, Shares or other securities or a combination of cash, Shares or other
securities as established by the Administrator.
(nn)
Plan
means this 2015 Equity
Incentive Plan, as may be amended from time to time.
(oo)
Related Entity
means any
Parent or Subsidiary of the Company and any business, corporation, partnership,
limited liability company or other entity in which the Company or a Parent or a
Subsidiary of the Company holds a substantial ownership interest, directly or
indirectly.
(pp)
Replaced
means that pursuant
to a Corporate Transaction the Award is replaced with a comparable stock award
or a cash incentive program of the Company, the successor entity (if applicable)
or Parent of either of them which preserves the compensation element of such
Award existing at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same (or a more favorable) vesting
schedule applicable to such Award. The determination of Award comparability
shall be made by the Administrator and its determination shall be final, binding
and conclusive.
(qq)
Restricted Stock
means
Shares issued under the Plan to the Grantee for such consideration, if any, and
subject to such restrictions on transfer, rights of first refusal, repurchase
provisions, forfeiture provisions, and other terms and conditions as established
by the Administrator.
(rr)
Restricted Stock Unit
means
a grant of a right to receive in cash or stock, as established by the
Administrator, the market value of one Share.
(ss)
Rule
16b-3
means
Rule
16b-3
promulgated under the Exchange Act or any successor thereto.
(tt)
SAR
means a stock
appreciation right entitling the Grantee to Shares or cash compensation, as
established by the Administrator, measured by appreciation in the value of
Common Stock.
(uu)
Section
409A
means
Section
409A of
the Code.
(vv)
Section
409A Deferred
Compensation
means compensation provided pursuant to an Award that
constitutes nonqualified deferred compensation within the meaning of
Section
409A.
(ww)
Share
means a share of the
Common Stock.
(xx)
Subsidiary
means a
subsidiary corporation, whether now or hereafter existing, as defined in
Section
424(f) of
the Code.
3.
Shares Subject to the
Plan
.
(a)
Maximum Number of Shares
Issuable
. Subject to the provisions of Section
10 below, the maximum aggregate number of
Shares which may be issued pursuant to all Awards (including Incentive Stock
Options) is eleven million five hundred thousand (11,500,000)
Shares. The Shares to be
issued pursuant to Awards may be authorized, but unissued, or reacquired Common
Stock.
(b)
Share Counting
. Any Shares
subject to an Award will be counted against the numerical limits of this
Section
3 as one
(1)
Share for
every Share subject thereto. Any Shares covered by an Award (or portion of an
Award) which is forfeited, canceled or expires (whether voluntarily or
involuntarily) or settled in cash shall be deemed not to have been issued for
purposes of determining the maximum aggregate number of Shares which may be
issued under the Plan. Shares that actually have been issued under the Plan
pursuant to an Award shall not be returned to the Plan and shall not become
available for future issuance under the Plan, except that if unvested Shares are
forfeited, or repurchased by the Company for an amount not greater than their
original purchase price, such Shares shall become available for future grant
under the Plan. With respect to Options and SARs, the gross number of Shares
subject to the Award will cease to be available under the Plan (whether or not
the Award is net settled for a lesser number of Shares, or if Shares are
utilized to exercise such an Award). In addition, if Shares are withheld to pay
any withholding taxes applicable to an Award, then the gross number of Shares
subject to such Award will cease to be available under the Plan.
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(c)
Assumption or Replacement of
Awards
. The Administrator may, without affecting the number of Shares
reserved or available for issuance hereunder, authorize the issuance or
assumption of benefits under this Plan in connection with any merger,
consolidation, acquisition of property or stock, or reorganization upon such
terms and conditions as it may deem appropriate, subject to compliance with
Section
409A and
any other applicable provisions of the Code; provided, however, that Shares
subject to Awards issued or assumed pursuant to the Plan with respect to awards
for shares of the common stock of JDS Uniphase Corporation in connection with
the JDS Uniphase Corporation Separation shall reduce the aggregate number of
Shares remaining available for issuance pursuant to the Plan set forth in
Section
3(a).
4.
Administration of the
Plan
.
(a)
Plan Administrator
.
(i)
Authority of Administrator
. The
Plan shall be administered by the Administrator. All questions of interpretation
of the Plan, of any Award Agreement or of any other form of agreement or other
document employed by the Company in the administration of the Plan or of any
Award shall be determined by the Administrator, and such determinations shall be
final, binding and conclusive upon all persons having an interest in the Plan or
such Award, unless fraudulent or made in bad faith. Any and all actions,
decisions and determinations taken or made by the Administrator in the exercise
of its discretion pursuant to the Plan or Award Agreement or other agreement
thereunder (other than determining questions of interpretation pursuant to the
preceding sentence) shall be final, binding and conclusive upon all persons
having an interest therein. All expenses incurred in connection with the
administration of the Plan shall be paid by the Company.
(ii)
Administration with Respect to
Directors and Officers
. With respect to grants of Awards to Directors or
Employees who are also Officers or Directors of the Company, the Plan shall be
administered by (A)
the Board or (B)
a Committee designated by the Board, which Committee shall be constituted
in such a manner as to satisfy the Applicable Laws and to permit such grants and
related transactions under the Plan to be exempt from Section
16(b) of the Exchange Act in
accordance with Rule
16b-3. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board.
(iii)
Administration With Respect to
Consultants and Other Employees
. With respect to grants of Awards to
Employees or Consultants who are neither Directors nor Officers of the Company,
the Plan shall be administered by (A)
the Board or (B)
a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy the Applicable
Laws. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. The Board may authorize one or
more Officers to grant such Awards and may limit such authority as the Board
determines from time to time.
(iv)
Administration With Respect to
Covered Employees
. Notwithstanding the foregoing, grants of Awards intended
to qualify as Performance-Based Compensation to any Covered Employee or other
Employee reasonably expected to become a Covered Employee shall be made only by
a Committee (or subcommittee of a Committee) which is comprised solely of two or
more Directors eligible to serve on a committee making Awards qualifying as
Performance-Based Compensation. In the case of such Awards, references to the
Administrator or to a Committee shall be deemed to be references to such
Committee or subcommittee. Unless otherwise permitted in compliance with the
requirements under Section
162(m) of the Code with respect to each Award intended to
result in the payment of Performance-Based Compensation, the Administrator shall
establish in writing the Performance Criteria and Performance Award Formula no
later than the earlier of (A)
the date ninety (90)
days after the commencement of the applicable
Performance Period or (B)
the date on which 25% of the Performance Period has elapsed, and, in any
event, at a time when the outcome of the Performance Criteria remains
substantially uncertain. Once established, the Performance Criteria and
Performance Award Formula applicable to an Award intended to result in the
payment of Performance-Based Compensation to a Covered Employee shall not be
changed. Following the completion of the Performance Period applicable to such
Award, the Administrator shall certify in writing the extent to which the
applicable Performance Criteria have been attained and the resulting final value
of the Award earned by the Grantee and to be paid upon its settlement in
accordance with the applicable Performance Award Formula. Notwithstanding the
foregoing, the Administrator shall have the discretion, on the basis of such
criteria as may be established by the Administrator, to reduce some or all of
the value of an Award that would otherwise be paid to a Covered Employee upon
its settlement notwithstanding the attainment of any Performance Criteria and
the resulting value of the Award determined in accordance with the Performance
Award Formula; provided, however, that no such reduction may result in an
increase in the amount payable upon settlement of another Grantees Award that
is intended to result in Performance-Based Compensation.
(v)
Administration Errors
. In the
event an Award is granted in a manner inconsistent with the provisions of this
subsection (a), such Award shall be presumptively valid as of its grant date to
the extent permitted by the Applicable Laws.
(b)
Powers of the Administrator
.
Subject to Applicable Laws and the provisions of the Plan (including any other
powers given to the Administrator hereunder), and except as otherwise provided
by the Board, the Administrator shall have the authority, in its discretion:
(i) to select the Employees, Directors and
Consultants to whom Awards may be granted from time to time hereunder;
(ii) to
determine whether and to what extent Awards are granted hereunder;
(iii) to
determine the number of Shares or the amount of other consideration to be
covered by each Award granted hereunder;
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(iv) to determine whether an Award granted
to a Covered Employee shall be intended to result in Performance-Based
Compensation and the applicable Performance Criteria, Performance Period and
Performance Award Formula;
(v) to approve forms of Award Agreements for use
under the Plan;
(vi) to determine the terms and conditions of any Award granted
hereunder;
(vii) to amend the terms of any outstanding Award granted under the
Plan, provided that any amendment that would have a materially adverse effect
the Grantees rights under an outstanding Award shall not be made without the
Grantees written consent;
(viii) to construe and interpret the terms of the
Plan and Awards, including without limitation, any notice of award or Award
Agreement, granted pursuant to the Plan;
(ix) to establish additional terms,
conditions, rules or procedures to accommodate the rules or laws of applicable
non-U.S. jurisdictions and to afford Grantees favorable treatment under such
rules or laws; provided, however, that no Award shall be granted under any such
additional terms, conditions, rules or procedures with terms or conditions which
are inconsistent with the provisions of the Plan; and
(x) to take such other
action, not inconsistent with the terms of the Plan, as the Administrator deems
appropriate.
(c)
Option or SAR Repricing
.
Without the affirmative vote of holders of a majority of the shares of Common
Stock cast in person or by proxy at a meeting of the stockholders of the Company
at which a quorum representing a majority of all outstanding shares of Common
Stock is present or represented by proxy, the Administrator shall not approve a
program providing for either (i)
the cancellation of outstanding Options or SARs having
exercise prices per share greater than the then Fair Market Value of a Share
(
Underwater Awards
) and the grant in substitution therefore of new Options or
SARs having a lower exercise price, Full Value Awards or payments in cash, or
(ii)
the amendment
of outstanding Underwater Awards to reduce the exercise price thereof. This
Section
4(c) shall
not be construed to apply to (i)
issuing or assuming a stock option in a transaction to which
Section
424(a)
applies, within the meaning of Section
424 of the Code, (ii)
adjustments pursuant to the assumption of
or substitution for an Option or SAR in a manner that would comply with
Section
409A, or
(iii)
an
adjustment pursuant to Section
10.
(d)
Indemnification
. In addition to
such other rights of indemnification as they may have as members of the Board or
as Officers or Employees of the Company or a Related Entity, members of the
Board and any Officers or Employees of the Company or a Related Entity to whom
authority to act for the Board, the Administrator or the Company is delegated
shall be defended and indemnified by the Company to the extent permitted by law
on an after-tax basis against all reasonable expenses, including attorneys
fees, actually and necessarily incurred in connection with the defense of any
claim, investigation, action, suit or proceeding, or in connection with any
appeal therein, to which they or any of them may be a party by reason of any
action taken or failure to act under or in connection with the Plan, or any
Award granted hereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by the Company) or paid by them in
satisfaction of a judgment in any such claim, investigation, action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such claim, investigation, action, suit or proceeding that such person is liable
for gross negligence, bad faith or intentional misconduct; provided, however,
that within thirty (30)
days after the institution of such claim, investigation, action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at the Companys expense to handle and defend the same.
5.
Eligibility
.
(a)
Persons Eligible for Awards
.
Awards other than Incentive Stock Options may be granted to Employees, Directors
and Consultants. Incentive Stock Options may be granted only to Employees of the
Company or a Parent or a Subsidiary of the Company. Awards may be granted to
such Employees, Directors or Consultants who are residing in non-U.S.
jurisdictions as the Administrator may determine from time to time.
(b)
Participation in the Plan
.
Awards are granted solely at the discretion of the Administrator. Eligibility to
be granted an Award shall not entitle any person to be granted an Award, or,
having been granted an Award, to be granted an additional Award. An Employee,
Director or Consultant who has been granted an Award may, if otherwise eligible,
be granted additional Awards.
6.
Terms and Conditions of
Awards
.
(a)
Type of Awards
. The
Administrator is authorized under the Plan to award any type of arrangement to
an Employee, Director or Consultant that is not inconsistent with the provisions
of the Plan and that by its terms involves or might involve the issuance of
(i)
Shares,
(ii)
cash or
(iii)
an Option, a
SAR, or similar right with a fixed or variable price related to the Fair Market
Value of the Shares and with an exercise or conversion privilege related to the
passage of time, the occurrence of one or more events, or the satisfaction of
Performance Criteria or other conditions. Such awards include, without
limitation, Options, SARs, Restricted Stock, Restricted Stock Units, Dividend
Equivalent Rights, Performance Units or Performance Shares, and an Award may
consist of one such security or benefit, or two (2)
or more of them in any combination or
alternative.
(b)
Designation of Award
. Each
Award shall be designated in the Award Agreement. In the case of an Option, the
Option shall be designated as either an Incentive Stock Option or a
Non-Qualified Stock Option. However, notwithstanding such designation, to the
extent that the aggregate Fair Market Value of Shares subject to Options
designated as Incentive Stock Options which become
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exercisable for the first time by a
Grantee during any calendar year (under all plans of the Company or any Parent
or Subsidiary of the Company) exceeds $100,000, such excess Options, to the
extent of the Shares covered thereby in excess of the foregoing limitation,
shall be treated as Non-Qualified Stock Options. For this purpose, Incentive
Stock Options shall be taken into account in the order in which they were
granted, and the Fair Market Value of the Shares shall be determined as of the
grant date of the relevant Option.
(c)
Conditions of Award
. Subject to
the terms of the Plan, the Administrator shall determine the provisions, terms,
and conditions of each Award including, but not limited to, the Award vesting
schedule, repurchase provisions, rights of first refusal, forfeiture provisions,
form of payment (cash, Shares, or other consideration) upon settlement of the
Award, payment contingencies, and satisfaction of any Performance Criteria
established by the Administrator. Partial achievement of any specified
Performance Criteria may result in a payment or vesting corresponding to the
degree of achievement as specified in the Award Agreement.
(d)
Acquisitions and Other
Transactions
. The Administrator may issue Awards under the Plan in
settlement, assumption or substitution for, outstanding awards or obligations to
grant future awards in connection with the Company or a Related Entity acquiring
another entity, an interest in another entity or an additional interest in a
Related Entity whether by merger, stock purchase, asset purchase or other form
of transaction.
(e)
Deferral of Award Payment
.
Consistent with the requirements of Section
409A, if applicable, and other Applicable Laws,
the Administrator may establish one or more programs under the Plan to permit
selected Grantees the opportunity to elect to defer receipt of consideration
upon exercise of an Award, satisfaction of Performance Criteria, or other event
that absent the election would entitle the Grantee to payment or receipt of
Shares or other consideration under an Award. The Administrator may establish
the election procedures, the timing of such elections, the mechanisms for
payments of, and accrual of interest or other earnings, if any, on amounts,
Shares or other consideration so deferred, and such other terms, conditions,
rules and procedures that the Administrator deems advisable for the
administration of any such deferral program.
(f)
Separate Programs
. The
Administrator may establish one or more separate programs under the Plan for the
purpose of issuing particular forms of Awards to one or more classes of Grantees
on such terms and conditions as determined by the Administrator from time to
time.
(g)
Individual Limitations on
Awards
.
(i)
Section
162(m) Award Limits
. The
maximum number of Shares with respect to which Awards may be granted to any
Grantee in any fiscal year of the Company shall be 1,000,000 Shares. The maximum
dollar amount that may become payable to any Grantee in any fiscal year of the
Company under Performance Unit Awards or other Awards denominated in U.S.
dollars shall be $20,000,000. In connection with a Grantees (i)
commencement of Continuous
Active Service or (ii)
first promotion in any fiscal year of the Company, a Grantee may be
granted Awards for up to an additional 1,000,000 Shares or U.S. dollar
denominated Awards providing for payment in any fiscal year of the Company of up
to an additional $20,000,000, which shall not count against the limits set forth
in the preceding sentences of this subsection (g). The foregoing limitations
shall be adjusted proportionately in connection with any change in the Companys
capitalization pursuant to Section
10, below. To the extent required by Section
162(m) of the Code or the
regulations thereunder, in applying the foregoing limitations with respect to a
Grantee, if any Awards are canceled, the canceled Awards shall continue to count
against the maximum number of Shares or dollar amount with respect to which
Awards may be granted to the Grantee. For this purpose, the repricing of an
Option (or in the case of a SAR, the base amount on which the stock appreciation
is calculated is reduced to reflect a reduction in the Fair Market Value of the
Common Stock) shall be treated as the cancellation of the existing Option or SAR
and the grant of a new Option or SAR. If the vesting or receipt of Shares under
the Award is deferred to a later date, any amount (whether denominated in Shares
or cash) paid in addition to the original number of Shares subject to the Award
will not be treated as an increase in the number of Shares subject to the Award
if the additional amount is based either on a reasonable rate of interest or on
one or more predetermined actual investments such that the amount payable by the
Company at the later date will be based on the actual rate of return of a
specific investment (including any decrease as well as any increase in the value
of an investment).
(ii)
Nonemployee Director Award
Limits
. No Director who is not also an Employee shall be granted within any
fiscal year of the Company one or more Awards pursuant to the Plan which in the
aggregate are for more than a number of Shares determined by dividing $500,000
by the Fair Market Value of a Share determined on the last trading day
immediately preceding the date on which the applicable Award is granted to such
Director.
(iii)
Minimum Vesting
. Except with
respect to five percent (5%)
of the maximum number of Shares issuable under the Plan
pursuant to Section
3(a), no Award which vests on the basis of the Grantees Continuous
Active Service shall vest earlier than one year following the date of grant of
such Award; provided, however, that such limitation shall not preclude the
acceleration of vesting of such Award upon the death, disability, or involuntary
termination of Service of the Grantee or in connection with a Corporate
Transaction, as determined by the Administrator in its discretion.
(h)
Early Exercise
. The Award
Agreement may, but need not, include a provision whereby the Grantee may elect
at any time while an Employee, Director or Consultant to exercise any part or
all of the Award prior to full vesting of the Award. Any unvested Shares
received pursuant to such exercise may be subject to a repurchase right in favor
of the Company or a Related Entity or to any other restriction the Administrator
determines to be appropriate.
(i)
Term of Award
. The term of each
Award shall be the term stated in the Award Agreement, provided, however, that
the term of an Option or SAR shall be no more than eight (8)
years from the date of grant
thereof. However, in the case of an Incentive Stock Option granted to a Grantee
who, at the time the Option is granted, owns stock representing more than ten
percent (10%)
of
the
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voting power of all classes of stock of
the Company or any Parent or Subsidiary of the Company, the term of the
Incentive Stock Option shall be five (5)
years from the date of grant thereof or such
shorter term as may be provided in the Award Agreement. Subject to the
foregoing, unless otherwise specified by the Administrator in the grant of an
Option or SAR, each Option and SAR shall terminate eight (8)
years after the date of grant
of such Award, unless earlier terminated in accordance with its
provisions.
(j)
Transferability of Awards
. Incentive
Stock Options may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent and
distribution and may be exercised, during the lifetime of the Grantee, only by
the Grantee. Other Awards shall be transferable by will and by the laws of
descent and distribution, and during the lifetime of the Grantee, by gift or
pursuant to a domestic relations order to members of the Grantees Immediate
Family to the extent and in the manner determined by the Administrator.
Notwithstanding the foregoing but subject to Applicable Laws and local
procedures, the Grantee may designate a beneficiary of the Grantees Award in
the event of the Grantees death on a beneficiary designation form provided by
the Administrator.
(k)
Time of Granting Awards
. The date of
grant of an Award shall for all purposes be the date on which the Administrator
makes the determination to grant such Award, or such later date as is determined
by the Administrator.
7.
Award Exercise or Purchase Price,
Consideration and Taxes
.
(a)
Exercise or Purchase Price
. The
exercise or purchase price, if any, for an Award shall be as follows:
(i) In the
case of an Incentive Stock Option:
(A) granted to an Employee who, at the
time of the grant of such Incentive Stock Option owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary of the Company, the per Share exercise price shall be not less
than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or
(B) granted to any Employee other than an Employee described in the preceding
paragraph, the per Share exercise price shall be not less than one hundred
percent (100%) of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Non-Qualified Stock
Option, the per Share exercise price shall be not less than one hundred percent
(100%)
of the Fair
Market Value per Share on the date of grant.
(iii) In the case of a SAR, the base
amount on which the stock appreciation is calculated shall be not less than one
hundred percent (100%)
of the Fair Market Value per Share on the date of grant.
(iv) In the case of other Awards, such
price as is determined by the Administrator.
(v) Notwithstanding the foregoing
provisions of this Section
7(a), in the case of an Award issued pursuant to
Section
6(d)
above, the exercise or purchase price for the Award shall be determined in
accordance with the provisions of the relevant instrument evidencing the
agreement to issue such Award.
(b)
Consideration
. Subject to Applicable
Laws, the consideration to be paid for the Shares to be issued upon exercise or
purchase of an Award including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). In addition to any other types of
consideration the Administrator may determine, the Administrator is authorized
to accept as consideration for Shares issued under the Plan the following,
provided that the portion of the consideration equal to the par value of the
Shares must be paid in cash or other legal consideration permitted by the
Delaware General Corporation Law:
(i) cash;
(ii) check;
(iii) surrender of
Shares or delivery of a properly executed form of attestation of ownership of
Shares as the Administrator may require which have a Fair Market Value on the
date of surrender or attestation equal to the aggregate exercise price of the
Shares as to which said Award shall be exercised, provided, however, that Shares
acquired under the Plan or any other equity compensation plan or agreement of
the Company must have been held by the Grantee for such period, if any, as
required by the Company to avoid adverse accounting treatment;
(iv) with respect
to Options, by delivery of a properly executed exercise notice followed by a
procedure pursuant to which (A)
the Company will reduce the number of Shares otherwise
issuable to the Grantee upon the exercise of the Option by the largest whole
number of shares having a Fair Market Value that does not exceed the aggregate
exercise price for the Shares with respect to which the Option is exercised, and
(B)
the Grantee
shall pay to the Company in cash the remaining balance of such aggregate
exercise price not satisfied by such reduction in the number of whole Shares to
be issued;
(v) with respect to Options, payment through a broker-dealer sale and
remittance procedure pursuant to which the Grantee (A)
shall provide written instructions to a
Company designated brokerage firm to effect the immediate sale of some or all of
the purchased Shares and remit to the Company sufficient funds to cover the
aggregate exercise price payable for the purchased Shares and (B)
shall provide written
directives to the Company to deliver the certificates for the purchased Shares
directly to such brokerage firm in order to complete the sale transaction;
or
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(vi) any combination of the foregoing
methods of payment.
(c)
Taxes
.
(i)
Tax Withholding in General
. No Shares
shall be delivered under the Plan to any Grantee or other person until such
Grantee or other person has made arrangements acceptable to the Administrator
for the satisfaction of any non-U.S., federal, state, or local income and
employment tax (including social insurance) withholding obligations, including,
without limitation, obligations incident to the receipt of Shares or the
disqualifying disposition of Shares received on exercise of an Incentive Stock
Option. Upon exercise of an Award the Company or Related Entity employing the
Grantee shall withhold or collect from Grantee an amount sufficient to satisfy
such tax obligations.
(ii)
Withholding in or Directed Sale of
Shares
. The Company shall have the right, but not the obligation, to deduct from
the Shares issuable to a Grantee upon the exercise or settlement of an Award, or
to accept from the Grantee the tender of, a number of whole Shares having a Fair
Market Value, as determined by the Company, equal to all or any part of the tax
withholding obligations of the Company or Related Entity employing the Grantee.
The Fair Market Value of any Shares withheld or tendered to satisfy any such tax
withholding obligations shall not exceed the amount determined by the applicable
minimum statutory withholding rates. The Company may require a Grantee to direct
a broker, upon the vesting, exercise or settlement of an Award, to sell a
portion of the Shares subject to the Award determined by the Company in its
discretion to be sufficient to cover the tax withholding obligations of the
Company or Related Entity employing the Grantee and to remit an amount equal to
such tax withholding obligations to such employer in cash.
8.
Exercise of Award
.
(a)
Procedure for Exercise
.
(i) Any Award granted hereunder shall be
exercisable at such times and under such conditions as determined by the
Administrator under the terms of the Plan and specified in the Award Agreement;
provided however, that no Option or SAR granted to an Employee who is a
non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as
amended, shall be first exercisable until at least six (6)
months following the date of
grant of such Option or SAR (except in the event of such Employees death,
disability or retirement, upon a Corporate Transaction, or as otherwise
permitted by the Worker Economic Opportunity Act).
(ii) An Award shall be deemed to be
exercised when written notice of such exercise has been given to the Company in
accordance with the terms of the Award by the person entitled to exercise the
Award and full payment for the Shares with respect to which the Award is
exercised, including, to the extent selected, use of the broker-dealer sale and
remittance procedure to pay the purchase price as provided in
Section
7(b)(v).
(b)
Exercise of Award Following
Termination of Continuous Active Service
.
(i) An Award may not be exercised after
the termination date of such Award set forth in the Award Agreement and may be
exercised following the termination of a Grantees Continuous Active Service
only to the extent provided in the Award Agreement.
(ii) Where the Award Agreement permits a
Grantee to exercise an Award following the termination of the Grantees
Continuous Active Service for a specified period, the Award shall terminate to
the extent not exercised on the last day of the specified period or the last day
of the original term of the Award, whichever occurs first.
(iii) Any Award designated as an Incentive
Stock Option to the extent not exercised within the time permitted by law for
the exercise of Incentive Stock Options following the termination of a Grantees
Continuous Active Service shall convert automatically to a Non-Qualified Stock
Option and thereafter shall be exercisable as such to the extent exercisable by
its terms for the period specified in the Award Agreement.
9.
Conditions Upon Issuance of
Shares
.
(a) Shares shall not be issued pursuant to
the exercise of an Award unless the exercise of such Award and the issuance and
delivery of such Shares pursuant thereto shall comply with all Applicable Laws,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
(b) As a condition to the exercise of an
Award, the Company may require the person exercising such Award to represent and
warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required by any Applicable Laws.
10.
Adjustments Upon Changes in
Capitalization
. Subject to any required action by the stockholders of the
Company and the requirements of Sections
409A and 424 of the Code to the extent
applicable, in the event of any change in the Common Stock effected without
receipt of consideration by the Company, whether through merger, consolidation,
reorganization, reincorporation, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, split-up, split-off, spin-off,
combination of shares, exchange of shares, or similar change in the capital
structure of the Company, or in the event of payment of a dividend or
distribution to the stockholders of the Company in a form other than Common
Stock (excepting regular, periodic cash dividends) that has a material effect on
the Fair Market Value of Shares, appropriate and proportionate adjustments shall
be made in the number and kind of shares subject to the Plan and to any
outstanding Awards, the maximum number of Shares with respect to which Awards
may be
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Appendix
B
|
granted to any Grantee in any fiscal year
of the Company set forth in Section
6(g)(i), and in the exercise or purchase price per Share under
any outstanding Award in order to prevent dilution or enlargement of Grantees
rights under the Plan. For purposes of the foregoing, conversion of any
convertible securities of the Company shall not be treated as effected without
receipt of consideration by the Company. Any fractional share resulting from an
adjustment pursuant to this Section
shall be rounded down to the nearest whole number and the
exercise or purchase price per share shall be rounded up to the nearest whole
cent. The Administrator in its discretion, may also make such adjustments in the
terms of any Award to reflect, or related to, such changes in the capital
structure of the Company or distributions as it deems appropriate, including
modification of Performance Criteria, Performance Award Formulas and Performance
Periods. The adjustments determined by the Administrator pursuant to this
Section
shall be
final, binding and conclusive.
11.
Corporate Transactions
.
(a)
Termination of Award to Extent Not
Assumed in Corporate Transaction
. Effective upon the consummation of a Corporate
Transaction, all outstanding Awards under the Plan shall terminate. However, all
such Awards shall not terminate to the extent they are Assumed in connection
with the Corporate Transaction.
(b)
Acceleration of Award Upon Corporate
Transaction
. Except as provided otherwise in an individual Award Agreement, in
the event of a Corporate Transaction, for the portion of each Award that is
neither Assumed nor Replaced, such portion of the Award shall automatically
become fully vested and exercisable and be released from any repurchase or
forfeiture rights (other than repurchase rights exercisable at fair market
value) for all of the Shares at the time represented by such portion of the
Award, immediately prior to the specified effective date of such Corporate
Transaction.
(c)
Effect of Acceleration on Incentive
Stock Options
. Any Incentive Stock Option the exercisability of which is
accelerated under this Section
11 in connection with a Corporate Transaction shall remain
exercisable as an Incentive Stock Option under the Code only to the extent the
$100,000 dollar limitation of Section
422(d) of the Code is not exceeded. To the extent
such dollar limitation is exceeded, the excess Options shall be treated as
Non-Qualified Stock Options.
12.
Compliance with Section 409A
. The Plan and all Awards
granted hereunder are intended to comply with, or otherwise be exempt from,
Section
409A. The
Plan and all Awards granted under the Plan shall be administered, interpreted,
and construed in a manner consistent with Section
409A, as determined by the Administrator in good
faith, to the extent necessary to avoid the imposition of additional taxes under
Section
409A(a)(1)(B) of the Code. It is intended that any election, payment or
benefit which is made or provided pursuant to or in connection with any Award
that may result in Section
409A Deferred Compensation shall comply in all respects with
the applicable requirements of Section
409A. In connection with effecting such
compliance with Section
409A, the following shall apply:
(a) Notwithstanding anything to the
contrary in the Plan, to the extent required to avoid tax penalties under
Section
409A,
amounts that would otherwise be payable and benefits that would otherwise be
provided pursuant to the Plan on account of, and during the six (6)
month period immediately
following, the Grantees termination of Continuous Active Service shall instead
be paid on the first payroll date after the six-month anniversary of the
Grantees separation from service within the meaning of Section
409A (or the Grantees death,
if earlier).
(b) Neither any Grantee nor the Company
shall take any action to accelerate or delay the payment of any amount or
benefits under an Award in any manner which would not be in compliance with
Section
409A.
(c) Notwithstanding anything to the
contrary in the Plan or any Award Agreement, to the extent that any
Section
409A
Deferred Compensation would become payable under the Plan by reason of a
Corporate Transaction, such amount shall become payable only if the event
constituting the Corporate Transaction would also constitute a change in
ownership or effective control of the Company or a change in the ownership of a
substantial portion of the assets of the Company within the meaning of
Section
409A. Any
Award which would result in the payment of Section
409A Deferred Compensation and which
would vest and otherwise become payable upon a Corporate Transaction as a result
of the failure of the Award to be Assumed or Replaced in accordance with
Section
11(b)
shall vest to the extent provided by such Award but shall be converted
automatically at the effective time of such Corporate Transaction into a right
to receive, in cash on the date or dates such Award would have been settled in
accordance with its then existing settlement schedule, an amount or amounts
equal in the aggregate to an amount which preserves the compensation element of
the Award at the time of the Corporate Transaction.
(d) Should any provision of the Plan, any
Award Agreement, or any other agreement or arrangement contemplated by the Plan
be found not to comply with, or otherwise be exempt from, the provisions of
Section
409A, such
provision shall be modified and given effect (retroactively if necessary), in
the sole discretion of the Administrator, and without the consent of the holder
of the Award, in such manner as the Administrator determines to be necessary or
appropriate to comply with, or to effectuate an exemption from,
Section
409A.
(e) Notwithstanding the foregoing, neither
the Company nor the Administrator shall have any obligation to take any action
to prevent the assessment of any tax or penalty on any Grantee under
Section
409A and
neither the Company nor the Administrator will have any liability to any Grantee
for such tax or penalty.
13.
Term of Plan
. The Plan shall continue
in effect for a term of ten (10)
years from the Effective Date, unless sooner terminated.
Subject to Applicable Laws, Awards may be granted under the Plan upon its
becoming effective.
67
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Appendix
B
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|
14.
Amendment, Suspension or Termination
of the Plan
.
(a) The Board may at any time amend,
suspend or terminate the Plan; provided, however, that no such amendment shall
be made without the approval of the Companys stockholders to the extent such
approval is required by Applicable Laws, or if such amendment would change any
of the provisions of Section
4(b)(vii) or this Section
14(a). Notwithstanding any other provision of the
Plan to the contrary, the Board may, in its sole and absolute discretion and
without the consent of any participant, amend the Plan or any Award Agreement,
to take effect retroactively or otherwise, as it deems necessary or advisable
for the purpose of conforming the Plan or such Award Agreement to any present or
future law, regulation or rule applicable to the Plan, including, but not
limited to, Section
409A.
(b) No Award may be granted during any
suspension of the Plan or after termination of the Plan.
(c) No suspension or termination of the
Plan (including termination of the Plan under Section
13, above) shall adversely affect any
rights under Awards already granted to a Grantee.
15.
Reservation of Shares
.
(a) The Company, during the term of the
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
(b) The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Companys counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
16.
Rights as a Stockholder
.
(a) A Grantee shall have no rights as a
stockholder with respect to any Shares covered by an Award until the date of the
issuance of such Shares (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such Shares are issued, except as provided
in Section
10 or
another provision of the Plan.
(b) Except as provided in any Award
Agreement, during any period in which Shares acquired pursuant to an Award
remain subject to vesting conditions, the Grantee shall have all of the rights
of a stockholder of the Company holding shares of Common Stock, including the
right to vote such Shares and to receive all dividends and other distributions
paid with respect to such Shares; provided, however, that if so determined by
the Administrator and provided by the Award Agreement, such dividends and
distributions shall be subject to the same vesting conditions as the Shares
subject to the Award with respect to which such dividends or distributions were
paid, and otherwise shall be paid no later than the end of the calendar year in
which such dividends or distributions are paid to stockholders (or, if later,
the 15th day of the third month following the date such dividends or
distributions are paid to stockholders). In the event of a dividend or
distribution paid in shares of Common Stock or other property or any other
adjustment made upon a change in the capital structure of the Company as
described in Section
10, any and all new, substituted or additional securities or other
property (other than regular, periodic cash dividends) to which Grantee is
entitled by reason of the Grantees Award shall be immediately subject to the
same vesting conditions as the Shares subject to the Award with respect to which
such dividends or distributions were paid or adjustments were made.
17.
Delivery of Title to Shares
. Subject to any
governing rules or regulations, the Company shall issue or cause to be issued
the Shares acquired pursuant to an Award and shall deliver such Shares to or for
the benefit of the Grantee by means of one or more of the following:
(a)
by delivering
to the Grantee evidence of book entry shares of Common Stock credited to the
account of the Grantee, (b)
by depositing such Shares for the benefit of the Grantee with
any broker with which the Grantee has an account relationship, or
(c)
by delivering
such Shares to the Grantee in certificate form.
18.
Fractional Shares
. The Company shall
not be required to issue fractional shares upon the exercise or settlement of
any Award.
19.
No Effect on Terms of Employment/Consulting Relationship
. The
Plan shall not confer upon any Grantee any right with respect to the Grantees
Continuous Active Service, nor shall it interfere in any way with his or her
right or the right of the Company or any Related Entity to terminate the
Grantees Continuous Active Service at any time, with or without Cause, and with
or without notice. The ability of the Company or any Related Entity to terminate
the employment of a Grantee who is employed at will is in no way affected by its
determination that the Grantees Continuous Active Service has been terminated
for Cause for the purposes of this Plan.
20.
No Effect on Retirement and Other
Benefit Plans
. Except as specifically provided in a retirement or other benefit
plan of the Company or a Related Entity, Awards shall not be deemed compensation
for purposes of computing benefits or contributions under any retirement plan of
the Company or a Related Entity, and shall not affect any benefits under any
other benefit plan of any kind or any benefit plan subsequently instituted under
which the availability or amount of benefits is related to level of
compensation. The Plan is not a Retirement Plan or Welfare Plan under the
Employee Retirement Income Security Act of 1974, as amended.
21.
Forfeiture Events
.
(a) The Administrator may specify in an
Award Agreement that the Grantees rights, payments, and benefits with respect
to an Award shall be subject to reduction, cancellation, forfeiture, or
recoupment upon the occurrence of specified events, in addition to any otherwise
applicable vesting or performance conditions of an Award. Such events may
include, but shall not be limited to, termination of Continuous Active Service
for Cause or any act by a Grantee, whether before or after termination of
Continuous Active
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Appendix
B
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Service, that would constitute Cause for
termination of Continuous Active Service, or any accounting restatement due to
material noncompliance of the Company with any financial reporting requirements
of securities laws as a result of which, and to the extent that, such reduction,
cancellation, forfeiture, or recoupment is required by applicable securities
laws, including, without limitation, Section
954 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act.
(b) If the Company is required to prepare
an accounting restatement due to the material noncompliance of the Company, as a
result of misconduct, with any financial reporting requirement under the
securities laws, any Grantee who knowingly or through gross negligence engaged
in the misconduct, or who knowingly or through gross negligence failed to
prevent the misconduct, and any Grantee who is one of the individuals subject to
automatic forfeiture under Section
304 of the Sarbanes-Oxley Act of 2002, shall reimburse the
Company for (i)
the amount of any payment in settlement of an Award received by such
Grantee during the twelve- (12-) month period following the first public
issuance or filing with the United States Securities and Exchange Commission
(whichever first occurred) of the financial document embodying such financial
reporting requirement, and (ii)
any profits realized by such Grantee from the sale of
securities of the Company during such twelve- (12-) month period.
22.
No Constraint on Corporate Action
.
Nothing in this Plan shall be construed to: (a)
limit, impair, or otherwise affect the Companys
or a Related Entitys right or power to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell, or transfer all or any part of its
business or assets; or (b)
limit the right or power of the Company or a Related Entity to
take any action which such entity deems to be necessary or
appropriate.
23.
Unfunded Obligation
. Grantees shall
have the status of general unsecured creditors of the Company. Any amounts
payable to Grantees pursuant to the Plan shall be unfunded and unsecured
obligations for all purposes, including, without limitation, Title
I of the Employee Retirement
Income Security Act of 1974, as amended. Neither the Company nor any Related
Entity shall be required to segregate any monies from its general funds, or to
create any trusts, or establish any special accounts with respect to such
obligations. The Company shall retain at all times beneficial ownership of any
investments, including trust investments, which the Company may make to fulfill
its payment obligations hereunder. Any investments or the creation or
maintenance of any trust or any Grantee account shall not create or constitute a
trust or fiduciary relationship between the Administrator, the Company or any
Related Entity and a Grantee, or otherwise create any vested or beneficial
interest in any Grantee or the Grantees creditors in any assets of the Company
or a Related Entity. The Grantees shall have no claim against the Company or any
Related Entity for any changes in the value of any assets that may be invested
or reinvested by the Company with respect to the Plan.
24.
Choice of Law
. Except to the extent
governed by applicable federal law, the validity, interpretation, construction
and performance of the Plan and each Award Agreement shall be governed by the
laws of the State of California, without regard to its conflict of law
rules.
69
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APPENDIX C
RECONCILIATION OF GAAP AND NON-GAAP
FINANCIAL
MEASURES
Lumentum provides investors with gross
margin and operating margin on a non-GAAP basis. Lumentum believes this non-GAAP
financial information provides additional insight into the Companys on-going
performance and has therefore chosen to provide this information to investors
for a more consistent basis of comparison and to help them evaluate the results
of the Companys ongoing operations and enable more meaningful period to period
comparisons. Specifically, the Company believes that providing this information
allows investors to better understand the Companys financial performance and,
importantly, to evaluate the efficacy of the methodology and information used by
management to evaluate and measure such operating performance. However, these
measures may be different from non-GAAP measures used by other companies,
limiting their usefulness for comparison purposes. The non-GAAP financial
measures used in this Proxy Statement should not be considered in isolation from
measures of financial performance prepared in accordance with GAAP. Investors
are cautioned that there are material limitations associated with the use of
non-GAAP financial measures as an analytical tool. In particular, many of the
adjustments to our GAAP financial measures reflect the exclusion of items that
are recurring and will be reflected in our financial results for the foreseeable
future.
Non-GAAP gross margin and non-GAAP
operating margin exclude (i) workforce related charges such as severance,
retention bonuses and employee relocation costs related to formal restructuring
plans, (ii) costs for facilities not required for ongoing operations, and costs
related to the relocation of certain equipment from these facilities and/or
contract manufacturer facilities, (iii) stock-based compensation, (iv)
amortization of intangibles, and (v) other non-recurring charges comprising
mainly of one-time provision for excess and obsolete inventory, acquisition,
integration, litigation and other costs and contingencies unrelated to current
and future operations including post-separation activities such as small site
consolidations, reorganizations, insourcing or outsourcing of activities,
severance related costs and transition related costs for the separation from
Viavi. Management does not believe that these items are reflective of the
Companys underlying operating performance. The presentation of these and other
similar items in Lumentums non-GAAP financial results should not be interpreted
as implying that these items are non-recurring, infrequent or
unusual.
A quantitative reconciliation between GAAP
and non-GAAP financial data with respect to historical periods is included in
the table below.
Table of
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|
|
Appendix C
|
LUMENTUM HOLDINGS INC.
RECONCILIATION OF GAAP
MEASURES TO NON-GAAP MEASURES
(in
millions, except per share data)
(unaudited)
|
|
Twelve Months Ended
|
|
|
July 2, 2016
|
|
June 27, 2015
|
Gross profit
on GAAP basis
|
|
$
|
277.3
|
|
|
$
|
257.9
|
|
Stock-based
compensation
|
|
|
6.1
|
|
|
|
5.1
|
|
Other charges related to
non-recurring activities (a)
|
|
|
7.2
|
|
|
|
1.6
|
|
Amortization of acquired
developed technologies
|
|
|
6.8
|
|
|
|
7.6
|
|
Restructuring and related
charges
|
|
|
0.3
|
|
|
|
|
|
Gross profit
on non-GAAP basis
|
|
$
|
297.7
|
|
|
$
|
272.2
|
|
|
Research and
development on GAAP basis
|
|
$
|
141.1
|
|
|
$
|
140.8
|
|
Stock-based
compensation
|
|
|
(9.0
|
)
|
|
|
(7.4
|
)
|
Other charges related to
non-recurring activities (a)
|
|
|
(0.7
|
)
|
|
|
(0.2
|
)
|
Research and
development on non-GAAP basis
|
|
$
|
131.4
|
|
|
$
|
133.2
|
|
|
Selling,
general and administrative on GAAP basis
|
|
$
|
117.3
|
|
|
$
|
128.9
|
|
Stock-based
compensation
|
|
|
(11.8
|
)
|
|
|
(14.7
|
)
|
Other charges related to
non-recurring activities (a)
|
|
|
(21.9
|
)
|
|
|
(19.8
|
)
|
Amortization of
intangibles
|
|
|
(0.4
|
)
|
|
|
(0.4
|
)
|
Selling,
general and administrative on non-GAAP basis
|
|
$
|
83.2
|
|
|
$
|
94.0
|
|
|
Income (loss)
from operations on GAAP basis
|
|
$
|
11.5
|
|
|
$
|
(23.4
|
)
|
Stock-based
compensation
|
|
|
26.9
|
|
|
|
27.2
|
|
Other charges related to
non-recurring activities (a)
|
|
|
29.8
|
|
|
|
21.6
|
|
Amortization of
intangibles
|
|
|
7.2
|
|
|
|
8.0
|
|
Restructuring and related
charges
|
|
|
7.7
|
|
|
|
11.6
|
|
Income (loss)
from operations on non-GAAP basis
|
|
$
|
83.1
|
|
|
$
|
45.0
|
|
|
Income (loss)
before income taxes on GAAP basis
|
|
$
|
9.7
|
|
|
$
|
(24.5
|
)
|
Stock-based
compensation
|
|
|
26.9
|
|
|
|
27.2
|
|
Other charges related to
non-recurring activities (a)
|
|
|
29.8
|
|
|
|
21.6
|
|
Amortization of
intangibles
|
|
|
7.2
|
|
|
|
8.0
|
|
Restructuring and related
charges
|
|
|
7.7
|
|
|
|
11.6
|
|
Unrealized (gain) loss on
derivative liability
|
|
|
0.6
|
|
|
|
|
|
Income (loss)
before income taxes on non-GAAP basis
|
|
$
|
81.9
|
|
|
$
|
43.9
|
|
|
Provision for
income taxes on GAAP basis
|
|
$
|
0.4
|
|
|
$
|
(21.1
|
)
|
Non-cash income tax
(benefit) expense
|
|
|
2.6
|
|
|
|
19.1
|
|
Provision
(benefit) for income taxes on non-GAAP basis
|
|
$
|
3.0
|
|
|
$
|
(2.0
|
)
|
|
Net income
(loss) on GAAP basis
|
|
$
|
9.3
|
|
|
$
|
(3.4
|
)
|
Stock-based
compensation
|
|
|
26.9
|
|
|
|
27.2
|
|
Other charges related to
non-recurring activities (a)
|
|
|
29.8
|
|
|
|
21.6
|
|
Amortization of
intangibles
|
|
|
7.2
|
|
|
|
8.0
|
|
Restructuring and related
charges
|
|
|
7.7
|
|
|
|
11.6
|
|
Unrealized (gain) loss on
derivative liability
|
|
|
0.6
|
|
|
|
|
|
Non-cash income tax
(benefit) expense
|
|
|
(2.6
|
)
|
|
|
(19.1
|
)
|
Net income on
non-GAAP basis
|
|
$
|
78.9
|
|
|
$
|
45.9
|
|
|
Net income
per share on non-GAAP basis
|
|
$
|
1.29
|
|
|
$
|
0.78
|
|
|
Shares used
in per share calculation - diluted on GAAP and non-GAAP
basis
|
|
|
61.2
|
|
|
|
58.8
|
|
(a)
|
Other
charges related to non-recurring activities for the twelve months ended
July
2, 2016
include provision for excess and obsolete inventory relating to certain 3D
sensing products, acquisition, integration, litigation and other costs and
contingencies unrelated to current and future operations including
post-separation activities such as small site consolidations,
reorganizations, insourcing or outsourcing of activities, severance
related costs and transition related costs for the separation from
Viavi.
|
71
Table of Contents
LUMENTUM HOLDINGS INC.
400 NORTH MCCARTHY BLVD.
MILPITAS, CA
95035
VOTE BY
INTERNET
Before The Meeting
- Go to
www.proxyvote.com
Use the Internet to transmit your
voting instructions and for electronic delivery of information up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you access the web site and follow the instructions to
obtain your records and to create an electronic voting instruction
form.
During The Meeting
- Go to
www.virtualshareholdermeeting.com/LITE
You may attend the Meeting via the
Internet and vote during the Meeting. Have the information that is printed in
the box marked by the arrow available and follow the instructions.
VOTE BY PHONE -
1-800-690-6903
Use any touch-tone
telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting date. Have your proxy card in hand
when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
E13879-P82081
|
KEEP THIS PORTION FOR YOUR
RECORDS
|
|
DETACH AND
RETURN THIS PORTION ONLY
|
THIS PROXY CARD IS
VALID ONLY WHEN SIGNED AND DATED.
|
LUMENTUM HOLDINGS INC.
|
|
|
|
|
|
|
|
|
|
|
The Board of Directors
recommends you vote FOR the following:
|
|
|
|
|
|
|
|
|
1. Election of
Directors
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
|
For
|
|
Against
|
|
Abstain
|
|
|
|
|
|
|
|
|
|
|
1a.
|
Martin A. Kaplan
|
|
☐
|
|
☐
|
|
☐
|
|
|
|
|
|
|
|
|
|
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1b.
|
Harold L. Covert
|
|
☐
|
|
☐
|
|
☐
|
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1c.
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Penelope A. Herscher
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☐
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☐
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☐
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1d.
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Samuel F. Thomas
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☐
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☐
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☐
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1e.
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Brian J. Lillie
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☐
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☐
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☐
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1f.
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Alan S. Lowe
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☐
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☐
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☐
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The Board of Directors
recommends you vote FOR proposals 2, 3 and 4.
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2.
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To approve the Executive
Officer Performance-Based Incentive Plan
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☐
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☐
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☐
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For
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Against
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Abstain
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3.
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To approve the Amended and
Restated 2015 Equity Incentive Plan
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☐
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☐
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☐
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4.
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To ratify the appointment of
PricewaterhouseCoopers LLP as our independent registered public accounting
firm for the fiscal year ending July 1, 2017
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☐
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☐
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☐
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NOTE:
In their discretion, the proxies are
authorized to vote on such other business as may properly come before the
meeting or any adjournment thereof.
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Please sign exactly as your
name(s) appear(s) hereon. When signing as attorney, executor,
administrator, or other fiduciary, please give full title as such. Joint
owners should each sign personally. All holders must sign. If a
corporation or partnership, please sign in full corporate or partnership
name by authorized officer.
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Signature [PLEASE SIGN
WITHIN BOX]
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Date
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Signature (Joint
Owners)
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Date
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Table of Contents
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available
at www.proxyvote.com.
LUMENTUM HOLDINGS
INC.
Annual Meeting of Stockholders
November 4, 2016 8:30
AM
This proxy is solicited by the
Board of Directors
The stockholder(s) hereby
appoint(s) Alan Lowe, Aaron Tachibana and Judy Hamel, or any of them, as
proxies, each with the power to appoint his/her substitute, and hereby
authorize(s) them to represent and to vote, as designated on the reverse
side of this ballot, all of the shares of Common stock of LUMENTUM
HOLDINGS INC. that the stockholder(s) is/are entitled to vote at the
Annual Meeting of Stockholders which will be a virtual only meeting
conducted via the Internet, to be held at 8:30 AM, PDT on November 4,
2016, at www.virtualshareholdermeeting.com/LITE, and any adjournment or
postponement thereof.
This proxy, when properly
executed, will be voted in the manner directed herein. If no such
direction is made, this proxy will be voted in accordance with the Board
of Directors' recommendations.
Continued and to be
signed on reverse side
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