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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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36-4316614
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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One Edwards Way, Irvine, California
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92614
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(Address of principal executive offices)
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(Zip Code)
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(949) 250-2500
(Registrant's telephone number, including area code)
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Large accelerated filer
ý
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller
reporting company)
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Smaller Reporting Company
o
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Page
Number
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March 31,
2016 |
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December 31,
2015 |
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ASSETS
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|
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Current assets
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|
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Cash and cash equivalents
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$
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501.4
|
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$
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718.4
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Short-term investments (Note 3)
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450.4
|
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506.3
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|
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Accounts and other receivables, net of allowances of $7.2 and $6.8, respectively
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388.5
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344.1
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|
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Inventories (Note 2)
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356.6
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339.9
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|
||
Prepaid expenses
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48.8
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45.1
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|
||
Other current assets
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73.6
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94.1
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Total current assets
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1,819.3
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2,047.9
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Long-term accounts receivable, net of allowances of $6.5 and $6.3, respectively
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5.8
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3.6
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|
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Long-term investments (Note 3)
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369.2
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379.9
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|
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Property, plant, and equipment, net
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497.3
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482.5
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Goodwill
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630.9
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628.3
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Other intangible assets, net
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203.7
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205.4
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Deferred income taxes
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196.5
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180.5
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Other assets
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131.1
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131.2
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Total assets
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$
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3,853.8
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$
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4,059.3
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LIABILITIES AND STOCKHOLDERS' EQUITY
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|
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Current liabilities
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|
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Accounts payable and accrued liabilities (Note 2)
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$
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458.3
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$
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476.2
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Long-term debt
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602.2
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599.9
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|
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Other long-term liabilities
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494.0
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480.1
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Commitments and contingencies (Note 8)
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|
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Stockholders' equity
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Preferred stock, $.01 par value, authorized 50.0 shares, no shares outstanding
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—
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—
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Common stock, $1.00 par value, 350.0 shares authorized, 239.8 and 239.1 shares issued, and 211.9 and 215.4 shares outstanding, respectively
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239.8
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239.1
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Additional paid-in capital
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933.4
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946.8
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Retained earnings
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3,479.8
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3,336.8
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Accumulated other comprehensive loss
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(172.6
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)
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(182.6
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)
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Treasury stock, at cost, 27.9 and 23.7 shares, respectively
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(2,181.1
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)
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(1,837.0
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)
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Total stockholders' equity
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2,299.3
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2,503.1
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Total liabilities and stockholders' equity
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$
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3,853.8
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$
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4,059.3
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Three Months Ended
March 31, |
||||||
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2016
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2015
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Net sales
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$
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697.3
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$
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590.3
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Cost of sales
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180.3
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136.0
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|
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Gross profit
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517.0
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454.3
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Selling, general, and administrative expenses
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212.7
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202.5
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Research and development expenses
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102.4
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86.4
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Intellectual property litigation expenses
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12.2
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0.3
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|
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Interest expense, net
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2.4
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2.4
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Other expense, net
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4.0
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0.2
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Income before provision for income taxes
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183.3
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162.5
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Provision for income taxes
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40.3
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39.1
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Net income
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$
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143.0
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$
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123.4
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Share information
(Note 10)
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Earnings per share:
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Basic
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$
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0.67
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$
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0.57
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Diluted
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$
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0.66
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$
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0.56
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Weighted-average number of common shares outstanding:
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Basic
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213.1
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215.5
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Diluted
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217.8
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220.6
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Three Months Ended
March 31, |
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2016
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2015
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Net income
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$
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143.0
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$
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123.4
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Other comprehensive income (loss), net of tax (Note 9):
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Foreign currency translation adjustments
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27.6
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(64.7
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)
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Unrealized (loss) gain on cash flow hedges
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(19.6
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)
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17.2
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Unrealized gain on available-for-sale investments
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1.7
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0.3
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Reclassification of net realized investment loss to earnings
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0.3
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0.2
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Other comprehensive income (loss)
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10.0
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(47.0
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)
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Comprehensive income
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$
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153.0
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$
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76.4
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Three Months Ended
March 31, |
||||||
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2016
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2015
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Cash flows from operating activities
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Net income
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$
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143.0
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$
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123.4
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization
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15.9
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16.0
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Stock-based compensation (Note 6)
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14.3
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13.6
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Excess tax benefit from stock plans
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(11.1
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)
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(9.8
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)
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Gain on investments
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(0.3
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)
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(1.1
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)
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Deferred income taxes
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0.2
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4.1
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Other
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0.7
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(0.2
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)
|
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Changes in operating assets and liabilities:
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|
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Accounts and other receivables, net
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(32.2
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)
|
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(36.5
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)
|
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Inventories
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(4.6
|
)
|
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(18.9
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)
|
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Accounts payable and accrued liabilities
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(47.6
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)
|
|
(59.1
|
)
|
||
Income taxes
|
24.8
|
|
|
26.6
|
|
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Prepaid expenses and other current assets
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(3.6
|
)
|
|
8.5
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|
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Other
|
7.6
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6.7
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|
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Net cash provided by operating activities
|
107.1
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73.3
|
|
||
Cash flows from investing activities
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|
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|
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Capital expenditures
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(27.7
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)
|
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(20.8
|
)
|
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Purchases of held-to-maturity investments (Note 3)
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(152.5
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)
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(422.0
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)
|
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Proceeds from held-to-maturity investments (Note 3)
|
255.0
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|
|
330.9
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|
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Purchases of available-for sale investments (Note 3)
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(73.4
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)
|
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(84.6
|
)
|
||
Proceeds from available-for-sale investments (Note 3)
|
47.7
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|
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18.3
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|
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Investments in trading securities, net
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(4.0
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)
|
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(2.0
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)
|
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Investments in unconsolidated affiliates, net (Note 3)
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(2.0
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)
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(0.4
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)
|
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Other
|
4.2
|
|
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0.3
|
|
||
Net cash provided by (used in) investing activities
|
47.3
|
|
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(180.3
|
)
|
||
Cash flows from financing activities
|
|
|
|
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|
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Proceeds from issuance of debt
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9.7
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|
|
7.4
|
|
||
Payments on debt and capital lease obligations
|
(9.5
|
)
|
|
(8.2
|
)
|
||
Purchases of treasury stock (Note 7)
|
(344.1
|
)
|
|
(101.0
|
)
|
||
Excess tax benefit from stock plans
|
11.1
|
|
|
9.8
|
|
||
Proceeds from stock plans
|
19.5
|
|
|
23.5
|
|
||
Equity forward contract related to accelerated share repurchase agreement (Note 7)
|
(57.5
|
)
|
|
—
|
|
||
Other
|
1.7
|
|
|
(3.4
|
)
|
||
Net cash used in financing activities
|
(369.1
|
)
|
|
(71.9
|
)
|
||
Effect of currency exchange rate changes on cash and cash equivalents
|
(2.3
|
)
|
|
(17.9
|
)
|
||
Net decrease in cash and cash equivalents
|
(217.0
|
)
|
|
(196.8
|
)
|
||
Cash and cash equivalents at beginning of period
|
718.4
|
|
|
653.8
|
|
||
Cash and cash equivalents at end of period
|
$
|
501.4
|
|
|
$
|
457.0
|
|
Supplemental disclosures:
|
|
|
|
|
|
||
Non-cash investing and financing transactions:
|
|
|
|
|
|
||
Capital expenditures accruals
|
$
|
16.4
|
|
|
$
|
6.6
|
|
|
March 31, 2016
|
|
December 31, 2015
|
||||
Inventories
|
|
|
|
||||
Raw materials
|
$
|
61.3
|
|
|
$
|
63.8
|
|
Work in process
|
80.7
|
|
|
64.1
|
|
||
Finished products
|
214.6
|
|
|
212.0
|
|
||
|
$
|
356.6
|
|
|
$
|
339.9
|
|
|
March 31, 2016
|
|
December 31, 2015
|
||||
Accounts payable and accrued liabilities
|
|
|
|
|
|
||
Accounts payable
|
$
|
78.6
|
|
|
$
|
63.9
|
|
Employee compensation and withholdings
|
131.8
|
|
|
209.4
|
|
||
Research and development accruals
|
35.5
|
|
|
38.6
|
|
||
Property, payroll, and other taxes
|
34.8
|
|
|
34.5
|
|
||
Fair value of derivatives
|
33.3
|
|
|
4.2
|
|
||
Accrued rebates
|
24.5
|
|
|
23.9
|
|
||
Litigation reserves
|
14.2
|
|
|
5.6
|
|
||
Severance and realignment reserves
|
12.4
|
|
|
19.1
|
|
||
Taxes payable
|
7.5
|
|
|
14.5
|
|
||
Other accrued liabilities
|
85.7
|
|
|
62.5
|
|
||
|
$
|
458.3
|
|
|
$
|
476.2
|
|
|
March 31, 2016
|
|
December 31, 2015
|
||||||||||||||||||||||||||||
Held-to-maturity
|
Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Fair Value
|
|
Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
Fair Value
|
|||||||||||||||||
Bank time deposits
|
$
|
348.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
348.3
|
|
|
$
|
440.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
440.1
|
|
U.S. government and agency securities
|
29.4
|
|
|
0.1
|
|
|
(0.1
|
)
|
|
29.4
|
|
|
32.5
|
|
|
—
|
|
|
(0.2
|
)
|
|
32.3
|
|
||||||||
Asset-backed securities
|
1.1
|
|
|
—
|
|
|
—
|
|
|
1.1
|
|
|
1.2
|
|
|
—
|
|
|
—
|
|
|
1.2
|
|
||||||||
Corporate debt securities
|
15.2
|
|
|
—
|
|
|
—
|
|
|
15.2
|
|
|
16.4
|
|
|
—
|
|
|
—
|
|
|
16.4
|
|
||||||||
Municipal securities
|
4.4
|
|
|
—
|
|
|
—
|
|
|
4.4
|
|
|
5.2
|
|
|
—
|
|
|
—
|
|
|
5.2
|
|
||||||||
Total
|
$
|
398.4
|
|
|
$
|
0.1
|
|
|
$
|
(0.1
|
)
|
|
$
|
398.4
|
|
|
$
|
495.4
|
|
|
$
|
—
|
|
|
$
|
(0.2
|
)
|
|
$
|
495.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Commercial paper
|
$
|
31.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31.0
|
|
|
$
|
28.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28.1
|
|
U.S. government and agency securities
|
52.9
|
|
|
0.3
|
|
|
—
|
|
|
53.2
|
|
|
38.7
|
|
|
—
|
|
|
(0.2
|
)
|
|
38.5
|
|
||||||||
Asset-backed securities
|
54.2
|
|
|
0.1
|
|
|
—
|
|
|
54.3
|
|
|
62.8
|
|
|
—
|
|
|
(0.2
|
)
|
|
62.6
|
|
||||||||
Corporate debt securities
|
247.0
|
|
|
0.8
|
|
|
(0.7
|
)
|
|
247.1
|
|
|
230.0
|
|
|
—
|
|
|
(1.3
|
)
|
|
228.7
|
|
||||||||
Municipal securities
|
4.7
|
|
|
—
|
|
|
—
|
|
|
4.7
|
|
|
4.7
|
|
|
—
|
|
|
—
|
|
|
4.7
|
|
||||||||
Total
|
$
|
389.8
|
|
|
$
|
1.2
|
|
|
$
|
(0.7
|
)
|
|
$
|
390.3
|
|
|
$
|
364.3
|
|
|
$
|
—
|
|
|
$
|
(1.7
|
)
|
|
$
|
362.6
|
|
|
Held-to-Maturity
|
|
Available-for-Sale
|
||||||||||||
|
Cost
|
|
Fair Value
|
|
Cost
|
|
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Due in 1 year or less
|
$
|
384.1
|
|
|
$
|
384.1
|
|
|
$
|
66.3
|
|
|
$
|
66.3
|
|
Due after 1 year through 5 years
|
2.9
|
|
|
2.9
|
|
|
270.0
|
|
|
270.4
|
|
||||
Instruments not due at a single maturity date
|
11.4
|
|
|
11.4
|
|
|
53.5
|
|
|
53.6
|
|
||||
|
$
|
398.4
|
|
|
$
|
398.4
|
|
|
$
|
389.8
|
|
|
$
|
390.3
|
|
|
March 31,
2016 |
|
December 31,
2015 |
||||
|
(in millions)
|
||||||
Available-for-sale investments
|
|
|
|
|
|
||
Cost
|
$
|
—
|
|
|
$
|
—
|
|
Unrealized gains
|
0.2
|
|
|
0.2
|
|
||
Fair value of available-for-sale investments
|
0.2
|
|
|
0.2
|
|
||
Equity method investments
|
|
|
|
|
|
||
Cost
|
10.9
|
|
|
10.9
|
|
||
Equity in losses
|
(4.0
|
)
|
|
(4.2
|
)
|
||
Carrying value of equity method investments
|
6.9
|
|
|
6.7
|
|
||
Cost method investments
|
|
|
|
|
|
||
Carrying value of cost method investments
|
23.8
|
|
|
21.3
|
|
||
Total investments in unconsolidated affiliates
|
$
|
30.9
|
|
|
$
|
28.2
|
|
March 31, 2016
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents
|
$
|
14.8
|
|
|
$
|
12.9
|
|
|
$
|
—
|
|
|
$
|
27.7
|
|
Available-for-sale investments:
|
|
|
|
|
|
|
|
|
|||||||
Corporate debt securities
|
—
|
|
|
247.1
|
|
|
—
|
|
|
247.1
|
|
||||
Asset-backed securities
|
—
|
|
|
54.3
|
|
|
—
|
|
|
54.3
|
|
||||
U.S. government and agency securities
|
28.0
|
|
|
25.2
|
|
|
—
|
|
|
53.2
|
|
||||
Commercial paper
|
—
|
|
|
31.0
|
|
|
—
|
|
|
31.0
|
|
||||
Municipal securities
|
—
|
|
|
4.7
|
|
|
—
|
|
|
4.7
|
|
||||
Equity investments in unconsolidated affiliates
|
0.2
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
||||
Investments held for deferred compensation plans
|
39.1
|
|
|
—
|
|
|
—
|
|
|
39.1
|
|
||||
Derivatives
|
—
|
|
|
14.9
|
|
|
—
|
|
|
14.9
|
|
||||
|
$
|
82.1
|
|
|
$
|
390.1
|
|
|
$
|
—
|
|
|
$
|
472.2
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivatives
|
$
|
—
|
|
|
$
|
33.3
|
|
|
$
|
—
|
|
|
$
|
33.3
|
|
Deferred compensation plans
|
39.3
|
|
|
—
|
|
|
—
|
|
|
39.3
|
|
||||
Contingent consideration obligation
|
—
|
|
|
—
|
|
|
31.1
|
|
|
31.1
|
|
||||
|
$
|
39.3
|
|
|
$
|
33.3
|
|
|
$
|
31.1
|
|
|
$
|
103.7
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
||||
Assets
|
|
|
|
|
|
|
|
|
|||||||
Cash equivalents
|
$
|
3.5
|
|
|
$
|
8.5
|
|
|
$
|
—
|
|
|
$
|
12.0
|
|
Available-for-sale investments:
|
|
|
|
|
|
|
|
||||||||
Corporate debt securities
|
—
|
|
|
228.7
|
|
|
—
|
|
|
228.7
|
|
||||
Asset-backed securities
|
—
|
|
|
62.6
|
|
|
—
|
|
|
62.6
|
|
||||
U.S. government and agency securities
|
9.6
|
|
|
28.9
|
|
|
—
|
|
|
38.5
|
|
||||
Commercial paper
|
—
|
|
|
28.1
|
|
|
—
|
|
|
28.1
|
|
||||
Municipal securities
|
—
|
|
|
4.7
|
|
|
—
|
|
|
4.7
|
|
||||
Equity investments in unconsolidated affiliates
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
||||
Investments held for deferred compensation plans
|
35.3
|
|
|
—
|
|
|
—
|
|
|
35.3
|
|
||||
Derivatives
|
—
|
|
|
23.3
|
|
|
—
|
|
|
23.3
|
|
||||
|
$
|
48.5
|
|
|
$
|
384.8
|
|
|
$
|
—
|
|
|
$
|
433.3
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivatives
|
$
|
—
|
|
|
$
|
4.2
|
|
|
$
|
—
|
|
|
$
|
4.2
|
|
Deferred compensation plans
|
35.5
|
|
|
—
|
|
|
—
|
|
|
35.5
|
|
||||
Contingent consideration obligation
|
—
|
|
|
—
|
|
|
30.5
|
|
|
30.5
|
|
||||
|
$
|
35.5
|
|
|
$
|
4.2
|
|
|
$
|
30.5
|
|
|
$
|
70.2
|
|
Balance at December 31, 2015
|
|
$
|
30.5
|
|
Changes in fair value (recorded in "
Research and Development Expenses
")
|
|
0.6
|
|
|
Balance at March 31, 2016
|
|
$
|
31.1
|
|
|
Notional Amount
|
||||||
|
March 31, 2016
|
|
December 31, 2015
|
||||
|
(in millions)
|
||||||
Foreign currency forward exchange contracts
|
$
|
1,350.6
|
|
|
$
|
1,061.6
|
|
Interest rate swap agreements
|
300.0
|
|
|
300.0
|
|
|
|
|
|
Fair Value
|
||||||
Derivatives designated as hedging instruments
|
|
Balance Sheet
Location
|
|
March 31, 2016
|
|
December 31, 2015
|
||||
Assets
|
|
|
|
|
|
|
|
|
||
Foreign currency contracts
|
|
Other current assets
|
|
$
|
3.9
|
|
|
$
|
15.0
|
|
Interest rate swap agreements
|
|
Other assets
|
|
$
|
6.5
|
|
|
$
|
1.6
|
|
Liabilities
|
|
|
|
|
|
|
|
|
||
Foreign currency contracts
|
|
Accrued and other liabilities
|
|
$
|
33.3
|
|
|
$
|
4.2
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
||
Assets
|
|
|
|
|
|
|
|
|
||
Foreign currency contracts
|
|
Other assets
|
|
$
|
4.5
|
|
|
$
|
6.7
|
|
|
|
|
|
|
|
|
Gross Amounts
Not Offset in
the Consolidated
Balance Sheet
|
|
|
||||||||||||||
|
|
|
Gross Amounts
Offset in the
Consolidated
Balance Sheet
|
|
|
|
|
||||||||||||||||
|
|
|
Net Amounts
Presented in the
Consolidated
Balance Sheet
|
|
|
||||||||||||||||||
March 31, 2016
|
Gross
Amounts
|
|
Financial
Instruments
|
|
Cash
Collateral
Received
|
|
Net
Amount
|
||||||||||||||||
Derivative assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency contracts
|
$
|
8.4
|
|
|
$
|
—
|
|
|
$
|
8.4
|
|
|
$
|
(4.9
|
)
|
|
$
|
—
|
|
|
$
|
3.5
|
|
Interest rate swap agreements
|
$
|
6.5
|
|
|
$
|
—
|
|
|
$
|
6.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6.5
|
|
Derivative liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency contracts
|
$
|
33.3
|
|
|
$
|
—
|
|
|
$
|
33.3
|
|
|
$
|
(4.9
|
)
|
|
$
|
—
|
|
|
$
|
28.4
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Derivative assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency contracts
|
$
|
21.7
|
|
|
$
|
—
|
|
|
$
|
21.7
|
|
|
$
|
(4.0
|
)
|
|
$
|
—
|
|
|
$
|
17.7
|
|
Interest rate swap agreements
|
$
|
1.6
|
|
|
$
|
—
|
|
|
$
|
1.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1.6
|
|
Derivative liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency contracts
|
$
|
4.2
|
|
|
$
|
—
|
|
|
$
|
4.2
|
|
|
$
|
(4.0
|
)
|
|
$
|
—
|
|
|
$
|
0.2
|
|
|
|
Amount of Gain or (Loss)
Recognized in OCI
on Derivative
(Effective Portion)
|
|
|
|
Amount of Gain or (Loss)
Reclassified from
Accumulated OCI
into Income
|
||||||||||||
|
|
Three Months Ended
March 31, |
|
|
|
Three Months Ended
March 31, |
||||||||||||
|
|
Location of Gain or
(Loss) Reclassified from
Accumulated OCI
into Income
|
|
|||||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||||
Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency contracts
|
|
$
|
(21.0
|
)
|
|
$
|
36.3
|
|
|
Cost of sales
|
|
$
|
11.4
|
|
|
$
|
10.5
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net investment hedges
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency contracts
|
|
$
|
(12.3
|
)
|
|
$
|
—
|
|
|
Other expense, net
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Amount of Gain or (Loss)
Recognized in Income on
Derivative
|
||||||
|
|
|
|
Three Months Ended
March 31, |
||||||
|
|
Location of Gain or (Loss)
Recognized in Income on
Derivative
|
|
|||||||
Fair value hedges
|
|
2016
|
|
2015
|
||||||
Interest rate swap agreements
|
|
Interest expense, net
|
|
$
|
4.9
|
|
|
$
|
4.5
|
|
|
Three Months Ended
March 31, |
||||||
|
2016
|
|
2015
|
||||
Cost of sales
|
$
|
2.0
|
|
|
$
|
1.8
|
|
Selling, general, and administrative expenses
|
9.7
|
|
|
9.6
|
|
||
Research and development expenses
|
2.6
|
|
|
2.2
|
|
||
Total stock-based compensation expense
|
$
|
14.3
|
|
|
$
|
13.6
|
|
Option Awards
|
Three Months Ended
March 31, |
||||||
|
2016
|
|
2015
|
||||
Average risk-free interest rate
|
1.1
|
%
|
|
1.5
|
%
|
||
Expected dividend yield
|
None
|
|
|
None
|
|
||
Expected volatility
|
29.7
|
%
|
|
30.5
|
%
|
||
Expected term (years)
|
4.7
|
|
|
4.7
|
|
||
Fair value, per option
|
$
|
24.28
|
|
|
$
|
19.20
|
|
ESPP
|
Three Months Ended
March 31, |
||||||
|
2016
|
|
2015
|
||||
Average risk-free interest rate
|
0.3
|
%
|
|
0.2
|
%
|
||
Expected dividend yield
|
None
|
|
|
None
|
|
||
Expected volatility
|
26.5
|
%
|
|
28.1
|
%
|
||
Expected term (years)
|
0.6
|
|
|
0.6
|
|
||
Fair value, per share
|
$
|
18.17
|
|
|
$
|
14.97
|
|
|
Foreign
Currency
Translation
Adjustments
|
|
Unrealized Gain (Loss) on Cash Flow Hedges
|
|
Unrealized (Loss) Gain on Available-for-sale Investments
|
|
Unrealized
Pension
Costs
|
|
Total
Accumulated
Other
Comprehensive
Loss
|
||||||||||
December 31, 2015
|
$
|
(181.5
|
)
|
|
$
|
11.8
|
|
|
$
|
(1.5
|
)
|
|
$
|
(11.4
|
)
|
|
$
|
(182.6
|
)
|
Other comprehensive gain (loss) before reclassifications
|
21.6
|
|
|
(21.0
|
)
|
|
1.7
|
|
|
—
|
|
|
2.3
|
|
|||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
(11.4
|
)
|
|
0.3
|
|
|
—
|
|
|
(11.1
|
)
|
|||||
Deferred income tax benefit
|
6.0
|
|
|
12.8
|
|
|
—
|
|
|
—
|
|
|
18.8
|
|
|||||
March 31, 2016
|
$
|
(153.9
|
)
|
|
$
|
(7.8
|
)
|
|
$
|
0.5
|
|
|
$
|
(11.4
|
)
|
|
$
|
(172.6
|
)
|
|
Three Months Ended
March 31, |
|
|
||||||
|
Affected Line on Consolidated Condensed
Statements of Operations
|
||||||||
Details about Accumulated Other
Comprehensive Loss Components
|
2016
|
|
2015
|
|
|||||
Gain (loss) on cash flow hedges
|
$
|
11.4
|
|
|
$
|
10.5
|
|
|
Cost of sales
|
|
(4.4
|
)
|
|
(3.8
|
)
|
|
Provision for income taxes
|
||
|
$
|
7.0
|
|
|
$
|
6.7
|
|
|
Net of tax
|
(Loss) gain on available-for-sale investments
|
$
|
(0.3
|
)
|
|
$
|
(0.2
|
)
|
|
Other expense, net
|
|
—
|
|
|
—
|
|
|
Provision for income taxes
|
||
|
$
|
(0.3
|
)
|
|
$
|
(0.2
|
)
|
|
Net of tax
|
|
Three Months Ended
March 31, |
||||||
|
2016
|
|
2015
|
||||
Basic:
|
|
|
|
|
|
||
Net income
|
$
|
143.0
|
|
|
$
|
123.4
|
|
Weighted-average shares outstanding
|
213.1
|
|
|
215.5
|
|
||
Basic earnings per share
|
$
|
0.67
|
|
|
$
|
0.57
|
|
Diluted:
|
|
|
|
|
|
||
Net income
|
$
|
143.0
|
|
|
$
|
123.4
|
|
Weighted-average shares outstanding
|
213.1
|
|
|
215.5
|
|
||
Dilutive effect of stock plans
|
4.7
|
|
|
5.1
|
|
||
Dilutive weighted-average shares outstanding
|
217.8
|
|
|
220.6
|
|
||
Diluted earnings per share
|
$
|
0.66
|
|
|
$
|
0.56
|
|
|
Three Months Ended
March 31, |
||||||
|
2016
|
|
2015
|
||||
Segment Net Sales
|
|
|
|
|
|
||
United States
|
$
|
375.6
|
|
|
$
|
283.5
|
|
Europe
|
187.1
|
|
|
216.5
|
|
||
Japan
|
63.8
|
|
|
68.7
|
|
||
Rest of World
|
71.5
|
|
|
71.3
|
|
||
Total segment net sales
|
$
|
698.0
|
|
|
$
|
640.0
|
|
Segment Pre-tax Income
|
|
|
|
|
|
||
United States
|
$
|
241.6
|
|
|
$
|
167.4
|
|
Europe
|
94.7
|
|
|
107.9
|
|
||
Japan
|
29.5
|
|
|
31.4
|
|
||
Rest of World
|
17.9
|
|
|
16.8
|
|
||
Total segment pre-tax income
|
$
|
383.7
|
|
|
$
|
323.5
|
|
|
Three Months Ended
March 31, |
||||||
|
2016
|
|
2015
|
||||
Net Sales Reconciliation
|
|
|
|
|
|
||
Segment net sales
|
$
|
698.0
|
|
|
$
|
640.0
|
|
Foreign currency
|
(0.7
|
)
|
|
(49.7
|
)
|
||
Consolidated net sales
|
$
|
697.3
|
|
|
$
|
590.3
|
|
Pre-tax Income Reconciliation
|
|
|
|
|
|
||
Segment pre-tax income
|
$
|
383.7
|
|
|
$
|
323.5
|
|
Unallocated amounts:
|
|
|
|
|
|
||
Corporate items
|
(195.2
|
)
|
|
(156.8
|
)
|
||
Intellectual property litigation expenses
|
(12.2
|
)
|
|
(0.3
|
)
|
||
Interest expense, net
|
(2.4
|
)
|
|
(2.4
|
)
|
||
Foreign currency
|
9.4
|
|
|
(1.5
|
)
|
||
Consolidated pre-tax income
|
$
|
183.3
|
|
|
$
|
162.5
|
|
|
Three Months Ended
March 31, |
||||||
|
2016
|
|
2015
|
||||
|
|
|
|
||||
Net Sales by Geographic Area
|
|
|
|
|
|
||
United States
|
$
|
375.6
|
|
|
$
|
283.5
|
|
Europe
|
188.5
|
|
|
185.3
|
|
||
Japan
|
66.6
|
|
|
58.1
|
|
||
Rest of World
|
66.6
|
|
|
63.4
|
|
||
|
$
|
697.3
|
|
|
$
|
590.3
|
|
Net Sales by Major Product and Service Area
|
|
|
|
|
|
||
Transcatheter Heart Valve Therapy
|
$
|
367.8
|
|
|
$
|
268.5
|
|
Surgical Heart Valve Therapy
|
195.9
|
|
|
196.9
|
|
||
Critical Care
|
133.6
|
|
|
124.9
|
|
||
|
$
|
697.3
|
|
|
$
|
590.3
|
|
|
March 31, 2016
|
|
December 31, 2015
|
||||
|
(in millions)
|
||||||
Long-lived Tangible Assets by Geographic Area
|
|
|
|
|
|
||
United States
|
$
|
489.9
|
|
|
$
|
473.6
|
|
Europe
|
34.3
|
|
|
36.0
|
|
||
Japan
|
8.7
|
|
|
8.1
|
|
||
Rest of World
|
95.5
|
|
|
96.0
|
|
||
|
$
|
628.4
|
|
|
$
|
613.7
|
|
|
Three Months Ended
March 31, |
|
|||||||||
|
2016
|
|
2015
|
|
Change
|
|
|||||
Net sales
|
$
|
697.3
|
|
|
$
|
590.3
|
|
|
18.1
|
%
|
|
Gross profit as a percentage of net sales
|
74.1
|
%
|
|
77.0
|
%
|
|
(2.9
|
)
|
pts.
|
||
Net income
|
$
|
143.0
|
|
|
$
|
123.4
|
|
|
15.9
|
%
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
||
Basic
|
$
|
0.67
|
|
|
$
|
0.57
|
|
|
17.5
|
%
|
|
Diluted
|
$
|
0.66
|
|
|
$
|
0.56
|
|
|
17.9
|
%
|
|
|
Three Months Ended
March 31, |
|
|
|
|
|||||||||
|
|
|
Percent Change
|
|||||||||||
|
2016
|
|
2015
|
|
Change
|
|
||||||||
United States
|
$
|
375.6
|
|
|
$
|
283.5
|
|
|
$
|
92.1
|
|
|
32.5
|
%
|
International
|
321.7
|
|
|
306.8
|
|
|
14.9
|
|
|
4.9
|
%
|
|||
Total net sales
|
$
|
697.3
|
|
|
$
|
590.3
|
|
|
$
|
107.0
|
|
|
18.1
|
%
|
|
Three Months Ended
March 31, |
|
|
|
|
|||||||||
|
|
|
Percent Change
|
|||||||||||
|
2016
|
|
2015
|
|
Change
|
|
||||||||
Transcatheter Heart Valve Therapy
|
$
|
367.8
|
|
|
$
|
268.5
|
|
|
$
|
99.3
|
|
|
37.0
|
%
|
Surgical Heart Valve Therapy
|
195.9
|
|
|
196.9
|
|
|
(1.0
|
)
|
|
(0.5
|
)%
|
|||
Critical Care
|
133.6
|
|
|
124.9
|
|
|
8.7
|
|
|
7.0
|
%
|
|||
Total net sales
|
$
|
697.3
|
|
|
$
|
590.3
|
|
|
$
|
107.0
|
|
|
18.1
|
%
|
•
|
the
Edwards SAPIEN 3
valve, driven by its launch in July 2015;
|
•
|
lower sales of the
Edwards SAPIEN XT
valve as customers converted to
Edwards SAPIEN 3
.
|
•
|
the
Edwards SAPIEN 3
valve, driven primarily by its launch in Europe in January 2014; and
|
•
|
the
Edwards SAPIEN XT
valve, driven primarily by its launch in Japan in October 2013;
|
•
|
lower sales of the
Edwards SAPIEN XT
transcatheter heart valve in Europe as customers converted to
Edwards SAPIEN 3
; and
|
•
|
foreign currency exchange rate fluctuations, which decreased net sales for the
three months ended March 31, 2016
by
$3.8 million
due primarily to the weakening of the Euro against the United States dollar.
|
•
|
foreign currency exchange rate fluctuations, which decreased net sales by
$2.8 million
due primarily to the weakening of various currencies against the United States dollar, primarily the Euro, partially offset by the strengthening of the Japanese yen against the United States dollar; and
|
•
|
cardiac surgery systems, primarily lower sales of specialty cannula products in Europe and Japan;
|
•
|
higher sales of surgical heart valve products, driven by pericardial aortic tissue valves, primarily in the United States, Rest of World, and Europe.
|
•
|
higher sales of enhanced surgical recovery products in the United States and Europe, and core hemodynamic products in the United States and Rest of World;
|
•
|
foreign currency exchange rate fluctuations, which decreased net sales by
$2.4 million
due primarily to the weakening of various currencies against the United States dollar, primarily the Euro, partially offset by the strengthening of the Japanese yen against the United States dollar.
|
|
Three Months Ended
March 31, |
|
|||||||
|
2016
|
|
2015
|
|
Change
|
|
|||
Gross profit as a percentage of net sales
|
74.1
|
%
|
|
77.0
|
%
|
|
(2.9
|
)
|
pts.
|
•
|
a 3.8 percentage point decrease due to the impact of foreign currency exchange rate fluctuations, including the settlement of foreign currency hedging contracts;
|
•
|
a 0.9 percentage point increase in the United States due to an improved product mix, driven by THV products.
|
|
Three Months Ended
March 31, |
|
||||||||||
|
2016
|
|
2015
|
|
Change
|
|
||||||
SG&A expenses
|
$
|
212.7
|
|
|
$
|
202.5
|
|
|
$
|
10.2
|
|
|
SG&A expenses as a percentage of net sales
|
30.5
|
%
|
|
34.3
|
%
|
|
(3.8
|
)
|
pts.
|
|
Three Months Ended
March 31, |
|
|
||||||||||
|
2016
|
|
2015
|
|
Change
|
|
|
||||||
R&D expenses
|
$
|
102.4
|
|
|
$
|
86.4
|
|
|
$
|
16.0
|
|
|
|
R&D expenses as a percentage of net sales
|
14.7
|
%
|
|
14.6
|
%
|
|
0.1
|
|
|
pts.
|
|
Three Months Ended
March 31, |
||||||
|
2016
|
|
2015
|
||||
Charitable foundation contribution
|
$
|
5.0
|
|
|
$
|
—
|
|
(Gain) loss on investments
|
(0.7
|
)
|
|
1.4
|
|
||
Foreign exchange gains, net
|
(0.4
|
)
|
|
(0.9
|
)
|
||
Other
|
0.1
|
|
|
(0.3
|
)
|
||
Other expense, net
|
$
|
4.0
|
|
|
$
|
0.2
|
|
Period
|
|
|
|
Total Number
of Shares
(or Units)
Purchased (a)
|
|
Average
Price Paid
per Share
(or Unit)
|
|
Total Number of
Shares (or Units)
Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum Number
(or Approximate
Dollar Value) of
Shares that
May Yet Be
Purchased
Under the Plans
or Programs
(in millions) (b)
|
|
||||||
January 1, 2016 through January 31, 2016
|
|
887,900
|
|
|
$
|
77.45
|
|
|
887,900
|
|
|
$
|
608.8
|
|
|
||
February 1, 2016 through February 29, 2016
|
|
3,296,648
|
|
|
83.48
|
|
|
3,279,111
|
|
|
277.5
|
|
|
||||
March 1, 2016 through March 31, 2016
|
|
—
|
|
|
—
|
|
|
—
|
|
|
277.5
|
|
|
||||
Total
|
|
4,184,548
|
|
|
82.20
|
|
|
4,167,011
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
The difference between the total number of shares (or units) purchased and the total number of shares (or units) purchased as part of publicly announced plans or programs is due to shares withheld by us to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees.
|
(b)
|
On July 10, 2014, the Board of Directors approved a stock repurchase program authorizing us to purchase on the open market, including pursuant to a Rule 10b5-1 plan and in privately negotiated transactions, up to $750.0 million of our common stock.
|
|
|
EDWARDS LIFESCIENCES CORPORATION
|
|
|
|
(Registrant)
|
|
Date:
|
April 28, 2016
|
By:
|
/s/ SCOTT B. ULLEM
|
|
|
|
Scott B. Ullem
Chief Financial Officer
(Principal Financial Officer)
|
Date:
|
April 28, 2016
|
By:
|
/s/ ROBERT W.A. SELLERS
|
|
|
|
Robert W.A. Sellers
Corporate Controller
(Principal Accounting Officer)
|
Exhibit No.
|
|
Description
|
|
|
*10.1
|
|
|
Edwards Lifesciences Corporation Nonemployee Directors Stock Incentive Program, as amended and restated as of February 25, 2016
|
|
*10.2
|
|
|
Edwards Lifesciences Corporation 401(k) Savings and Investment Plan, restated effective January 1, 2016
|
|
31.1
|
|
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31.2
|
|
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32
|
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
101
|
|
|
The following financial statements from Edwards Lifesciences' Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Condensed Balance Sheets, (ii) the Consolidated Condensed Statements of Operations, (iii) the Consolidated Condensed Statements of Comprehensive Income, (iv) the Consolidated Condensed Statements of Cash Flows, and (v) Notes to Consolidated Condensed Financial Statements
|
|
|
|
|
|
|
* Represents management contract or compensatory plan
|
Article 1.
|
Establishment, Objectives, and Duration
|
1
|
Article 2.
|
Definitions
|
2
|
Article 3.
|
Administration
|
4
|
Article 4.
|
Eligibility and Participation
|
5
|
Article 5.
|
Shares Subject to the Program
|
5
|
Article 6.
|
Stock Options
|
7
|
Article 7.
|
Stock Issuances
|
9
|
Article 8.
|
Restricted Stock
|
9
|
Article 9.
|
Restricted Stock Units
|
10
|
Article 10.
|
Stock Appreciation Rights
|
12
|
Article 11.
|
Automatic Awards to Nonemployee Directors
|
12
|
Article 12.
|
Beneficiary Designation
|
15
|
Article 13.
|
Deferrals
|
15
|
Article 14.
|
Rights of Participants
|
15
|
Article 15.
|
Change in Control
|
16
|
Article 16.
|
Amendment, Modification, and Termination
|
16
|
Article 17.
|
Compliance with Applicable Law and Withholding
|
17
|
Article 18.
|
Indemnification
|
18
|
Article 19.
|
Successors
|
18
|
Article 20.
|
Legal Construction
|
18
|
Article 1.
|
Establishment, Objectives, and Duration
|
1.1.
|
Establishment of the Program.
Edwards Lifesciences Corporation, a Delaware corporation (hereinafter referred to as the “Company”), hereby amends and restates the Nonemployee Directors Stock Incentive Program formerly known as the Edwards Lifesciences Corporation Nonemployee Directors and Consultants Stock Incentive Program (hereinafter, as amended and restated, referred to as the “Program”), as set forth in this document, effective as of February 25, 2016. The Program was previously amended and restated in March 2002, November 2002, May 2003, February 19, 2004, March 4, 2005, May 2007, November 13, 2008, February 11, 2010, November 9, 2011, and May 14, 2013. Prior to the amendment and restatement on March 4, 2005, consultants were eligible to participate in the Program. The Program permits the grant of Nonqualified Stock Options, Stock Issuances, Restricted Stock, Restricted Stock Units and Stock Appreciation Rights.
|
1.2.
|
Objectives of the Program.
The objectives of the Program are to optimize the profitability and growth of the Company through long-term incentives which are consistent with the Company’s goals and which link the personal interests of Participants to those of the Company’s stockholders. The Program is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Participants who make significant contributions to the Company’s success and to allow Participants to share in the success of the Company.
|
1.3.
|
Duration of the Program.
The Program commenced on the Effective Date, as described in Section 1.1 hereof, and shall remain in effect, subject to the right of the Board to amend or terminate the Program at any time pursuant to Article 16 hereof, until all Shares subject to it shall have been purchased or acquired according to the Program’s provisions. However, in no event may an Award be granted under the Program on or after April 1, 2020.
|
Article 2.
|
Definitions
|
2.1.
|
“Annual Retainer”
means the fixed annual fee of a Nonemployee Director in effect on the first day of the year in which such Annual Retainer is payable for services to be rendered as a Nonemployee Director of the Company. The Annual Retainer does not include meeting or chairmanship fees.
|
2.2.
|
“Award”
means, individually or collectively, a grant under this Program of Nonqualified Stock Options, Stock Issuances, Restricted Stock, Restricted Stock Units, or Stock Appreciation Rights.
|
2.3.
|
“Award Agreement”
means an agreement entered into by the Company and each Participant setting forth the terms and provisions applicable to Awards granted under this Program.
|
2.4.
|
“Board”
or
“Board of Directors”
means the Board of Directors of the Company.
|
2.5.
|
“Change in Control”
of the Company shall mean the occurrence of any one of the following events:
|
(a)
|
Any “Person”, as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, and any trustee or other fiduciary holding securities under an employee benefit plan of the Company or such proportionately owned corporation), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company’s then outstanding securities; or
|
(b)
|
During any period of not more than twenty-four (24) months, individuals who at the beginning of such period constitute the Board of Directors of the Company, and any new director (other than a director designated by a Person
who has entered into an agreement with the Company to effect a transaction described in Sections 2.5(a), 2.5(c), or 2.5(d) of this Section 2.5) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; or
|
(c)
|
The consummation of a merger or consolidation of the Company with any other entity, other than: (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than sixty percent (60%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person acquires more than thirty percent (30%) of the combined voting power of the Company’s then outstanding securities; or
|
(d)
|
The Company’s stockholders approve a plan of complete liquidation or dissolution of the Company, or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets (or any transaction having a similar effect.
|
2.6.
|
“Code”
means the Internal Revenue Code of 1986, as amended from time to time.
|
2.7.
|
“Committee”
means the Compensation and Governance Committee and any successor thereto or any other committee appointed by the Board to administer Awards to Participants, as specified in Article 3 herein.
|
2.8.
|
“Company”
means Edwards Lifesciences Corporation, a Delaware corporation, and any successor thereto as provided in Article 19 herein.
|
2.9.
|
“Disability”
means the inability of the Participant to attend any meetings of the Board or a Committee thereof for a period of twenty-six (26) weeks by reason of a medically determinable physical or mental impairment or the resignation or replacement of the Participant as a member of the Board by reason of such impairment.
|
2.10.
|
“Effective Date”
shall have the meaning ascribed to such term in Section 1.1 hereof.
|
2.11.
|
“Employee”
means an employee of the Company or of a Subsidiary of the Company.
|
2.12.
|
“Exchange Act”
means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
|
2.13.
|
“Fair Market Value”
means, at any date, the closing sale price on the principal securities exchange on which the Shares are traded on the last previous day on which a sale was reported.
|
2.14.
|
“Nonemployee Director”
means a member of the Company’s Board who is not an Employee of the Company.
|
2.15.
|
“Nonqualified Stock Option”
or
“Option”
means an option to purchase Shares granted under Article 6 or Article 11 herein and which is not intended to meet the requirements of Code Section 422.
|
2.16.
|
“Option Price”
means the price at which a Share may be purchased by a Participant pursuant to an Option.
|
2.17.
|
“Participant”
means a Nonemployee Director who has been selected to receive an Award or who has outstanding an Award granted under the Program.
|
2.18.
|
“Period of Restriction”
means the period during which the transfer of Shares of Restricted Stock is limited in some way (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, in its discretion), and the Shares are subject to a substantial risk of forfeiture, as provided in Article 8 herein.
|
2.19.
|
“Restricted Stock”
means an Award granted to a Participant pursuant to Article 8 herein.
|
2.20.
|
“Restricted Stock Unit
” means an Award granted to a Participant pursuant to Article 9 herein.
|
2.21.
|
“Shares”
means the shares of common stock of the Company.
|
2.22.
|
“Stock Appreciation Right”
means an Award granted to a Participant pursuant to Article 10 herein.
|
2.23.
|
“Stock Issuance”
means an Award granted to a Participant pursuant to Article 7 herein.
|
2.24.
|
“Subsidiary”
means any business, whether or not incorporated, in which the Company beneficially owns, directly or indirectly through another entity or entities, securities or interests representing more than fifty percent (50%) of the combined voting power of the voting securities or voting interests of such business.
|
Article 3.
|
Administration
|
3.1.
|
General.
The Program shall be administered by the Compensation and Governance Committee of the Board, or by any other Committee appointed by the Board for such purpose. Any Committee administering the Program shall be comprised entirely of directors. The members of the Committee shall be appointed in accordance with the bylaws of the Company and the charter of such Committee. Members of the Committee may participate in the
|
3.2.
|
Authority of the Committee.
Except as limited by law or by the Certificate of Incorporation or Bylaws of the Company, and subject to the provisions of the Program, the Committee shall have the authority to: (a) interpret the provisions of the Program, and prescribe, amend, and rescind rules and procedures relating to the Program; (b) grant Awards under the Program, in such forms and amounts and subject to such terms and conditions as it deems appropriate, including, without limitation, Awards which are made in combination with or in tandem with other Awards (whether or not contemporaneously granted) or compensation or in lieu of current or deferred compensation; (c) subject to Article 16, modify the terms of, cancel and reissue, or repurchase outstanding Awards; (d) prescribe the form of agreement, certificate or other instrument evidencing any Award under the Program; (e) correct any defect or omission and reconcile any inconsistency in the Program or in any Award hereunder; (f) design Awards to satisfy requirements to make such Awards tax-advantaged to Participants in any jurisdiction or for any other reason that the Company desires; and (g) make all other determinations and take all other actions as it deems necessary or desirable for the administration of the Program; provided, however, that except for adjustments made pursuant to Section 5.4, no outstanding Option will be amended or cancelled in connection with any program that is considered a repricing of the Option under the rules of the principal securities exchange on which the Shares are traded without stockholder approval. The determination of the Committee on matters within its authority shall be conclusive and binding on the Company and all other persons. The Committee shall comply with all applicable laws in administering the Plan
.
If and to the extent permitted by law (and subject to Section 3.1 herein), the Committee may delegate its authority as identified herein.
|
3.3.
|
Decisions Binding.
All determinations and decisions made by the Committee pursuant to the provisions of the Program and all related orders and resolutions of the Board shall be final, conclusive and binding on all persons, including the Company, its stockholders, directors, Participants, and their estates and beneficiaries.
|
Article 4.
|
Eligibility and Participation
|
4.1.
|
Eligibility.
Persons eligible to participate in this Program shall be all Nonemployee Directors.
|
4.2.
|
Actual Participation.
Subject to the provisions of the Program, the Committee may, from time to time, select from all eligible Nonemployee
|
Article 5.
|
Shares Subject to the Program
|
5.1.
|
Number of Shares Available for Grants.
Subject to adjustment as provided in Section 5.4 herein, the number of Shares hereby reserved for delivery to Participants under the Program shall be two million eight hundred thousand (2,800,000) Shares. Subject to the restrictions for Nonemployee Directors set forth in Article 11, the Committee shall determine the appropriate methodology for calculating the number of Shares issued pursuant to the Program.
|
5.2.
|
Type of Shares.
Shares issued under the Program in connection with
Awards
may be authorized and unissued Shares or issued Shares held as treasury Shares.
|
5.3.
|
Reuse of Shares.
|
(a)
|
General.
In the event of the expiration or termination (by reason of forfeiture, expiration, cancellation, surrender or otherwise) of any Award under the Program, that number of Shares that was subject to the Award but not delivered shall again be available as Awards under the Program.
|
(b)
|
Restricted Stock.
In the event that Shares are delivered under the Program as Restricted Stock and are thereafter forfeited or reacquired by the Company pursuant to rights reserved upon the grant thereof, such forfeited or reacquired Shares shall again be available as Awards under the Program.
|
(c)
|
Stock Appreciation Rights.
Upon exercise of any Stock Appreciation Right, the Share reserve under Section 5.1 shall be reduced by the gross number of Shares as to which such Stock Appreciation Right is exercised.
|
5.4.
|
Adjustments in Authorized Shares.
In the event of any change in corporate capitalization, such as a stock split, or a corporate transaction, such as any merger, consolidation, separation, including a spin-off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Code Section 368) or any partial or complete liquidation of the Company, such adjustment shall be made in the number and class of Shares which may be delivered under Section 5.1, in the number and class of and/or price of Shares subject to outstanding Awards granted under the Program and in the number and/or class of Shares subject to Awards to be granted to Nonemployee Directors under Article 11, as shall be determined to be appropriate and equitable by the Board, in its sole discretion, to prevent dilution or enlargement of rights;
|
Article 6.
|
Stock Options
|
6.1.
|
Grant of Options.
|
(a)
|
Subject to the terms and provisions of the Program, Options may be granted in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee.
|
(b)
|
If all or any portion of the exercise price or taxes incurred in connection with the exercise are paid by delivery (or, in the case of payment of taxes, by withholding of Shares) of other Shares of the Company, a Participant’s Options may provide for the grant of replacement Options. All Options under the Program shall be granted in the form of nonqualified stock options as no Option under the Program may be granted in the form of an incentive stock option as defined under the provisions of Code Section 422.
|
6.2.
|
Award Agreement.
Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine.
|
6.3.
|
Option Price.
The Option Price for each grant of an Option under this Program shall be at least equal to one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted.
|
6.4.
|
Duration of Options.
Unless the Committee determines otherwise, the term of each Option shall expire on the seventh (7
th
) anniversary date of its grant, subject to such provisions for earlier expiration as the Committee may specify in accordance with Section 6.8 (relating to termination of directorship) or otherwise.
|
6.5.
|
Exercise of Options.
Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant.
|
6.6.
|
Payment.
Options granted under this Article 6 shall be exercised by the delivery of a written notice of exercise (or such other form of notice as the Company may specify) to the Company, setting forth the number of Shares with respect to which the Option is to be exercised, or compliance with such procedures as the Company may establish for notifying the Company, either directly or through an on-line internet transaction with a brokerage firm
|
6.7.
|
Restrictions on Share Transferability.
The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.
|
6.8.
|
Termination of Directorship.
Each Participant’s Option Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s service to the Company as a Nonemployee Director. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination.
|
6.9.
|
Nontransferability of Options.
Except as otherwise provided in a Participant’s Award Agreement, no Option granted under this Article 6 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement, all Options granted to a Participant under this Article 6 shall be exercisable during his or her lifetime only by such Participant.
|
6.10.
|
Substitution of Cash.
Unless otherwise provided in a Participant’s Award Agreement, and notwithstanding any provision in the Program to the contrary (including but not limited to Section 16.3), in the event of a Change in Control in which the Company’s stockholders holding Shares receive consideration other than shares of common stock that are registered under Section 12 of the Exchange Act, the Committee shall have the authority to require that any outstanding Option be surrendered to the Company by a Participant for cancellation by the Company, with the Participant receiving in exchange a cash payment from the Company within ten (10) days of the Change in Control. Such cash payment shall be equal to the number of Shares under Option, multiplied by the excess, if any, of the greater of (i) the highest per Share price offered to stockholders in any transaction whereby the Change in Control takes place, or (ii) the Fair Market Value of a Share on the date the Change in Control occurs, over the Option Price.
|
Article 7.
|
Stock Issuances
|
7.1.
|
Stock Issuance Awards.
Subject to the terms and provisions of the Program, the Committee may issue Shares as fully vested shares (“Stock Issuances”) in such number and upon such terms as shall be determined by the Committee.
|
7.2.
|
Consideration.
A Stock Issuance may be awarded in consideration for cash, past services rendered to the Company or an affiliate or for such other consideration as determined by the Committee.
|
Article 8.
|
Restricted Stock
|
8.1.
|
Restricted Stock Awards.
Subject to the terms and provisions of the Program, the Committee may issue Shares subject to retention and transfer restrictions (“Restricted Stock”) as shall be determined by the Committee.
|
8.2.
|
Restricted Stock Award Agreement.
Each Restricted Stock grant shall be evidenced by a Restricted Stock Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock granted, and such other provisions as the Committee shall determine.
|
8.3.
|
Restriction on Transferability.
Except as provided in this Article 8, the Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Restricted Stock Award Agreement, or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Restricted Stock Award Agreement. All rights with respect to the Restricted Stock granted to a Participant under the Program shall be available during his or her lifetime only to such Participant.
|
8.4.
|
Other Restrictions.
The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Program as it may deem advisable including, without limitation, any or all of the following:
|
(a)
|
A required period of service with the Company, as determined by the Committee, prior to the vesting of Shares of Restricted Stock.
|
(b)
|
A requirement that Participants forfeit (or in the case of Shares sold to a Participant, resell to the Company at his or her cost) all or a part of Shares of Restricted Stock in the event of termination of his or her service as a Nonemployee Director during the Period of Restriction.
|
(c)
|
A prohibition against such Participants’ dissemination of any secret or confidential information belonging to the Company, or the solicitation by Participants of the Company’s Employees for employment by another entity.
|
8.5.
|
Voting Rights.
Unless the Committee determines otherwise, Participants holding Shares of Restricted Stock issued hereunder shall be entitled to exercise full voting rights with respect to those Shares during the Period of Restriction.
|
8.6.
|
Dividends and Other Distributions.
Unless the Committee determines otherwise, during the Period of Restriction, Participants holding Shares of Restricted Stock issued hereunder shall be entitled to regular cash dividends paid with respect to such Shares. The Committee may apply any restrictions to the dividends that the Committee deems appropriate.
|
8.7.
|
Termination of Directorship.
Each Restricted Stock Award Agreement shall set forth the extent to which the Participant shall have the right to vest in previously unvested Shares of Restricted Stock following termination of the Participant’s service to the Company as a Nonemployee Director. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need
|
Article 9.
|
Restricted Stock Units
|
9.1.
|
Restricted Stock Units Awards.
Subject to the terms and conditions of the Program, the Committee may issue restricted stock units (“Restricted Stock Units”) which entitle the Participant to receive the Shares underlying those units following the lapse of specified restrictions (whether based on the achievement of designated performance goals or the satisfaction of specified services or upon the expiration of a designated time period following the vesting of the units).
|
9.2.
|
Restricted Stock Units Award Agreement.
Each Restricted Stock Units award shall be evidenced by a Restricted Stock Units Award Agreement that shall specify the vesting restrictions, the number of Shares subject to the Restricted Stock Units award, and such other provisions as the Committee shall determine.
|
9.3.
|
Restrictions.
The Committee shall impose such other conditions and/or restrictions on the issuance of any Shares under the Restricted Stock Units granted pursuant to the Program as it may deem advisable including, without limitation, any or all of the following:
|
(a)
|
A required period of service with the Company, as determined by the Committee, prior to the issuance of Shares under the Restricted Stock Units award.
|
(b)
|
A requirement that the Restricted Stock Units award be forfeited in whole or in part in the event of termination of the Participant’s services as a Nonemployee Director during the vesting period.
|
(c)
|
A prohibition against such Participants’ dissemination of any secret or confidential information belonging to the Company, or the solicitation by Participants of the Company’s Employees for employment by another entity.
|
9.4.
|
Stockholder Rights.
Participants holding Restricted Stock Units issued hereunder shall not have any rights with respect to Shares subject to the award until the award vests and the Shares are issued hereunder. However, dividend-equivalent units may be paid or credited, either in cash, in actual Shares, or in additional Restricted Stock Units, on outstanding Restricted Stock Units awards, subject to such terms and conditions as the Committee may deem appropriate.
|
9.5.
|
Termination of Directorship.
Each Restricted Stock Units Award Agreement shall set forth the extent to which the Participant shall have the right to vest in previously unvested Shares subject to the Restricted Stock Units award following termination of the Participant’s service to the Company as a Nonemployee Director. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Restricted Stock Unit awards issued pursuant to the Program, and may reflect distinctions based on the reasons for termination.
|
Article 10.
|
Stock Appreciation Rights
|
10.1.
|
Stock Appreciation Rights Awards.
Subject to the terms and conditions of the Program, the Committee may issue a Stock Appreciation Rights award which shall entitle the Participant to receive upon exercise a payment in cash or Shares underlying the exercised award equal to the excess (if any) of (a) the Fair Market Value of the Shares on the date of exercise over (b) the aggregate base price in effect for such Shares. A Stock Appreciation Right shall become exercisable during such times and subject to such conditions as shall be determined by the Committee, in its sole discretion.
|
10.2.
|
Stock Appreciation Rights Agreement
. Each Stock Appreciation Rights award shall be evidenced by a Stock Appreciation Rights Award Agreement that shall specify the vesting restriction, the number of Shares subject to the award and such additional terms and conditions as the Committee shall determine.
|
10.3.
|
Base Price.
The base price for each grant of a Stock Appreciation Right under this Program shall be at least equal to one hundred percent (100%) of the Fair Market Value of a Share on the date the award is granted.
|
10.4.
|
Nontransferability of Stock Appreciation Rights.
Except as otherwise provided in a Participant’s Award Agreement, no Stock Appreciation Right granted under this Article 10 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement, all Stock Appreciation Rights granted to a Participant under this Article 10 shall be exercisable during his or her lifetime only by such Participant.
|
Article 11.
|
Automatic Awards to Nonemployee Directors
|
11.1.
|
Initial Awards.
|
(a)
|
Unless otherwise determined by the Committee, each Nonemployee Director who is first elected to the Board shall be granted, on the date of such election, (i) Restricted Stock Units for the number of Shares
|
(b)
|
Each Initial Award shall vest in a series of three (3) successive equal annual installments upon the Participant’s completion of each year of Board service over the three (3)-year period measured from the grant date (or such longer period as determined by the Committee).
|
(c)
|
Notwithstanding any other provision of the Program to the contrary, the Shares acquired under an Initial Award granted after May 14, 2013 (net of any Shares sold to cover the exercise price and applicable taxes due in connection with the exercise or settlement of the award) may not be sold, transferred or otherwise disposed of prior to the Participant’s cessation of Board service.
|
(d)
|
All additional terms of an Initial Award will be as set forth in Section 9, herein, or as set forth in the specific Award Agreement governing such award. Each Initial Award shall become fully-vested in the event of the Participant’s death or Disability.
|
11.2.
|
Annual Awards.
|
(a)
|
Unless otherwise determined by the Committee, each Nonemployee Director shall receive annually, effective as of the day following each annual meeting of the Company’s stockholders an award as follows:
|
(i)
|
An Option for up to forty thousand (40,000) Shares, or
|
(ii)
|
A Restricted Stock Units award for up to sixteen thousand (16,000) Shares, or
|
(iii)
|
A combination of an Option and Restricted Stock Units award, provided that in no event may the total value of the Option and Restricted Stock Units award subject to such combined award exceed two hundred thousand dollars ($200,000). The Committee shall have the sole discretion to determine the amount and type of award for each year within the foregoing limitations. For such purposes, the value of the Annual Award shall be calculated as follows: (A) the value of
|
(b)
|
Each Annual Award granted prior to 2012 shall vest in a series of three (3) successive equal annual installments upon the Participant’s completion of each year of Board service over the three (3)-year period measured from the award date (or such longer period as determined by the Committee). Each Annual Award granted after 2011 and before 2015 shall vest upon the Participant’s completion of one (1) year of Board service measured from the award date (or such longer period as determined by the Committee). Each Annual Award granted after 2014 shall vest upon the first to occur of (i) the Participant’s completion of one (1) year of Board service measured from the award date or (ii) the next annual meeting of the Company’s stockholders that occurs after the calendar year in which the Annual Award is granted (or such longer period as determined by the Committee). Each Annual Award shall become fully vested in the event of the Participant’s death or Disability.
|
(c)
|
Notwithstanding any other provision of the Program to the contrary, the Shares acquired under an Annual Award granted after 2011 (net of any Shares sold to cover the exercise price and applicable taxes due in connection with the exercise or settlement of the award) may not be sold, transferred or otherwise disposed of prior to the Participant’s cessation of Board service.
|
(d)
|
All additional terms of an Annual Award will be as set forth in Articles 6 and 9 herein, or as set forth in the specific Award Agreement governing such award.
|
11.3.
|
Annual Retainer Election.
|
(a)
|
Subject to the terms and provisions of the Program and any other restrictions set out by the Committee in its sole discretion, the Committee may permit each Nonemployee Director to elect to receive all or a portion of his or her Annual Retainer in the form of Options or Stock Issuances to be issued as of the first day on which such Annual Retainer is otherwise due and payable (the “Conversion Date”) and using the Fair Market Value of a Share as of the Conversion Date as the Option Price of the Options.
|
(b)
|
If conversion elections are permitted by the Committee, each irrevocable election shall be made in accordance with such rules as the Committee may determine in its sole discretion which shall be consistent with the requirements of Code Section 409A and the Treasury Regulations and rulings promulgated thereunder. Except as may otherwise be determined by the Committee, in the event of a Participant’s election to receive an Option in lieu of his Annual Retainer, the number of shares subject to the Option shall be determined by dividing that portion of the Annual Retainer to be paid in the form of the Option by the Fair Market Value of a Share on the Conversion Date and multiplying the quotient by four (4). In the event of a Participant’s election to receive Shares in lieu of an Annual Retainer, the number of such Shares shall be determined by dividing that portion of the Annual Retainer to be paid in the form of Shares by the Fair Market Value of a Share on the Conversion Date. In the event the preceding formula would result in a fractional Share being issued or subject to an Option, the number of Shares subject to the issuance or Option shall be rounded up to the nearest whole Share.
|
(c)
|
Any portion of a Nonemployee Director’s Annual Retainer for which an election has not been made pursuant to this Section 11.3, shall be paid in cash to such Nonemployee Director at such time or times as payments thereof are customarily made by the Company.
|
(d)
|
All additional terms of an Award received as a result of the election described herein will be as set-forth in Sections 6 and 7, herein, or as set forth in the specific Award Agreement governing such Award.
|
Article 12.
|
Beneficiary Designation
|
Article 13.
|
Deferrals
|
Article 14.
|
Rights of Participants
|
14.1.
|
Directorship.
Nothing in the Program or any Award Agreement shall interfere with or limit in any way the right of the Company to terminate at any time any Participant’s service to the Company as a Nonemployee Director, nor confer upon any Participant any right to continue in the service of the Company.
|
14.2.
|
Participation.
No Nonemployee Director shall have the right to be selected to receive an Award under this Program, or, having been so selected, to be selected to receive a future Award.
|
Article 15.
|
Change in Control
|
(a)
|
Any and all Options granted hereunder shall become immediately exercisable, and shall terminate upon the earlier of (i) the third anniversary of the Participant’s date of termination of service or (ii) expiration of the Option term.
|
(b)
|
Any restriction periods and restrictions imposed on Awards shall lapse.
|
Article 16.
|
Amendment, Modification, and Termination
|
16.1.
|
Amendment, Modification, and Termination.
Subject to the terms of the Program including Sections 16.2 and 16.3, the Board may at any time and from time to time, alter, amend, suspend or terminate the Program in whole or in part. However, stockholder approval shall be required for any amendment of the Program that (a) materially increases the number of Shares available for issuance under the Program (other than pursuant to Article 5.4), (b) expands the type of awards available under the Program, (c) materially expands the class of participants eligible to receive Awards under the Program, (d) materially extends the term of the Program, (e) materially changes the method of determining the Option Price under the Program or (f) deletes or limits any provision of the Program prohibiting the repricing of Options. The Committee may amend Awards previously granted under the Program.
|
16.2.
|
Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.
The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of
|
16.3.
|
Awards Previously Granted.
Notwithstanding any provision of the Program or of any Award Agreement to the contrary (but subject to Section 6.10), no termination, amendment, or modification of the Program or amendment of an Award previously granted under the Program shall adversely affect in any material way any Award previously granted under the Program, without the express consent of the Participant holding such Award.
|
Article 17.
|
Compliance with Applicable Law and Withholding
|
17.1.
|
General.
The granting of Awards and the issuance of Shares under the Program 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. Notwithstanding anything to the contrary in the Program or any Award Agreement, the following shall apply:
|
(a)
|
The Company shall have no obligation to issue any Shares under the Program if such issuance would violate any applicable law or any applicable regulation or requirement of any securities exchange or similar entity.
|
(b)
|
Prior to the issuance of any Shares under the Program, the Company may require a written statement that the recipient is acquiring the Shares for investment and not for the purpose or with the intention of distributing the Shares and that the recipient will not dispose of them in violation of the registration requirements of the Securities Act of 1933.
|
(c)
|
With respect to any Participant who is subject to Section 16(a) of the Exchange Act, the Committee may, at any time, add such conditions and limitations to Award or payment under the Program or implement procedures for the administration of the Program which it deems necessary or desirable to comply with the requirements of Rule 16b-3 of the Exchange Act.
|
(d)
|
If, at any time, the Company, determines that the listing, registration, or qualification (or any updating of any such document) of any Award, or the Shares issuable pursuant thereto, is necessary on any securities exchange or under any federal or state securities or blue sky law, or that the consent or approval of any governmental regulatory
|
17.2.
|
Securities Law Compliance.
Transactions under this Program are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the Program or action by the Committee or the Board fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Board.
|
17.3.
|
Tax Withholding.
The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, domestic and foreign taxes, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Program.
|
17.4.
|
Share Withholding.
Awards payable in Shares may provide that with respect to withholding required upon any taxable event arising thereunder, Participants may elect to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares to satisfy their withholding tax obligations; provided that Participants may only elect to have Shares withheld having a Fair Market Value on the date the tax is to be determined equal to or less than the minimum withholding tax which could be imposed on the transaction. All elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations, including prior Committee approval, that the Committee, in its sole discretion, deems appropriate.
|
Article 18.
|
Indemnification
|
Article 19.
|
Successors
|
Article 20.
|
Legal Construction
|
20.1.
|
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.
|
20.2.
|
Severability.
In the event any provision of the Program shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Program, and the Program shall be construed and enforced as if the illegal or invalid provision had not been included.
|
20.3.
|
Governing Law.
To the extent not preempted by federal law, the Program, and all Award or other agreements hereunder, shall be construed in accordance with and governed by the laws of the state of Delaware without giving effect to principles of conflicts of laws.
|
ARTICLE I
|
INTRODUCTION
|
1
|
1.1
|
The Plan
|
1
|
1.2
|
Effective Date
|
1
|
1.3
|
Plan Objectives
|
1
|
1.4
|
Supplements and Appendices
|
1
|
ARTICLE II
|
DEFINITIONS
|
1
|
2.1
|
“Accounting Date”
|
1
|
2.2
|
“Accounts” or “Account Balances”
|
1
|
2.3
|
“Actual Deferral Percentage”
|
2
|
2.4
|
“Administrative & Investment Committee”
|
2
|
2.5
|
“Base Pay”
|
2
|
2.6
|
“Baxter Common Stock”
|
3
|
2.7
|
“Beneficiary” or “Beneficiaries”
|
3
|
2.8
|
“Board of Directors”
|
3
|
2.9
|
“Code”
|
3
|
2.10
|
“Commonly Controlled Entity”
|
3
|
2.11
|
“Company”
|
3
|
2.12
|
“Company Common Stock”
|
3
|
2.13
|
“Compensation”
|
3
|
2.14
|
“Disability”
|
7
|
2.15
|
“Effective Date”
|
7
|
2.16
|
“Eligible Employee”
|
7
|
2.17
|
“Employee”
|
8
|
2.18
|
“Employer”
|
8
|
2.19
|
“Employment Date”
|
9
|
2.20
|
“Entry Date”
|
9
|
2.21
|
“ERISA”
|
9
|
2.22
|
“Forfeiture”
|
9
|
2.23
|
“Highly Compensated Employee”
|
9
|
2.24
|
“Hour of Service”
|
9
|
|
i
|
WEST\253921653.3
|
2.25
|
“Investment Manager”
|
11
|
2.26
|
“Matching Contribution Percentage”
|
11
|
2.27
|
“Maternity/Paternity Absence”
|
11
|
2.28
|
“Normal Retirement Date”
|
12
|
2.29
|
“One-Year Break In Service”
|
12
|
2.30
|
“Participant”
|
12
|
2.31
|
“Part-Time Employee”
|
12
|
2.32
|
“Plan”
|
12
|
2.33
|
“Plan Year”
|
12
|
2.34
|
“Prior Plan”
|
12
|
2.35
|
“Prior Plan Participant”
|
13
|
2.36
|
“Roth Contributions/Roth Elective Deferrals”.
|
13
|
2.37
|
“Spouse”
|
13
|
2.38
|
“Termination of Employment” or “Severance of Employment”
|
13
|
2.39
|
“Trust”
|
13
|
2.40
|
“Trust Agreement”
|
13
|
2.41
|
“Trust Fund”
|
13
|
2.42
|
“Trustee”
|
13
|
2.43
|
“Year of Vesting Service” or “Vesting Service”
|
14
|
ARTICLE III
|
PARTICIPATION
|
14
|
3.1
|
Participation
|
14
|
3.2
|
Cessation of Participation
|
14
|
3.3
|
Reemployment
|
14
|
3.4
|
Transfer of Employment
|
15
|
3.5
|
Reemployment of Veterans
|
15
|
ARTICLE IV
|
CONTRIBUTIONS
|
17
|
4.1
|
Contributions
|
17
|
4.2
|
Certification of Employer Contributions
|
18
|
4.3
|
Contribution Limitations
|
18
|
4.4
|
Annual Addition
|
19
|
|
ii
|
WEST\253921653.3
|
ARTICLE V
|
PARTICIPANT CONTRIBUTIONS/CONTRIBUTION LIMITATIONS
|
20
|
5.1
|
Pay Deferral Contributions
|
20
|
5.2
|
Change in Rate of Pay Deferral Contributions/Reemployment
|
20
|
5.3
|
Annual Limitations on Pay Deferral Contributions
|
21
|
5.4
|
General Limitations on Pay Deferral Contributions
|
21
|
5.5
|
Nondiscrimination Rules Applicable to Pay Deferral and Matching Contributions
|
22
|
5.6
|
Rollover Contributions
|
26
|
ARTICLE VI
|
INVESTMENTS AND PLAN ACCOUNTING
|
27
|
6.1
|
Participant Account Balance
|
27
|
6.2
|
Investment of Accounts
|
29
|
6.3
|
Investment Funds
|
29
|
6.4
|
Investment Elections
|
30
|
6.5
|
Information Provided Under ERISA Section 404(c)
|
33
|
6.6
|
Investment Fund Accounting
|
34
|
6.7
|
Expenses
|
36
|
6.8
|
Accounting Dates
|
36
|
6.9
|
Crediting Employer Contributions
|
36
|
6.10
|
Crediting Pay Deferral Contributions
|
36
|
6.11
|
Adjustment of Account Balances
|
37
|
ARTICLE VII
|
DISTRIBUTION OF ACCOUNT BALANCES
|
37
|
7.1
|
Retirement, Disability or Death
|
37
|
7.2
|
Resignation or Dismissal
|
38
|
7.3
|
Special Vesting Rules Upon Sale of Business
|
38
|
7.4
|
Forfeitures
|
39
|
7.5
|
Benefit Commencement Date
|
39
|
7.6
|
Methods of Benefit Payment
|
43
|
7.7
|
Direct Rollovers
|
44
|
7.8
|
Qualified Reservist Distributions
|
46
|
7.9
|
Maximum Installment Period
|
46
|
|
iii
|
WEST\253921653.3
|
7.10
|
Minimum Rate of Installment Payments
|
47
|
7.11
|
Surviving Spouse or Designated Beneficiaries
|
48
|
7.12
|
Missing Beneficiaries of Deceased or Missing Participants
|
48
|
7.13
|
Incapacitated Participants or Beneficiaries
|
49
|
7.14
|
Reemployment after Distributions Commence
|
49
|
7.15
|
Erroneous Payments
|
49
|
7.16
|
Finality of Distributions
|
49
|
ARTICLE VIII
|
WITHDRAWALS AND LOANS
|
49
|
8.1
|
Withdrawals
|
49
|
8.2
|
Loans to Participants
|
54
|
8.3
|
No Representation Regarding Tax Effect of Withdrawals or Loans
|
58
|
ARTICLE IX
|
PLAN COMMITTEES
|
58
|
9.1
|
Membership of Administrative & Investment Committees
|
58
|
9.2
|
Administrative & Investment Committee Powers and Duties
|
58
|
9.3
|
Administrative & Investment Committee Powers and Duties
|
60
|
9.4
|
Conflicts of Interest
|
61
|
9.5
|
Compensation; Reimbursement
|
61
|
9.6
|
Standard of Care
|
61
|
9.7
|
Action by Committees
|
61
|
9.8
|
Resignation or Removal of Committee Member
|
62
|
9.9
|
Uniform Application of Rules by Administrative & Investment Committee
|
62
|
9.10
|
Claims Procedure
|
62
|
9.11
|
Investments in Company Common Stock
|
63
|
ARTICLE X
|
AMENDMENT, TERMINATION OR PLAN MERGER
|
64
|
10.1
|
Amendment
|
64
|
10.2
|
Plan Termination
|
64
|
10.3
|
Continuation by a Successor or Purchaser
|
65
|
10.4
|
Plan Merger or Consolidation
|
65
|
10.5
|
Notice to Participants of Amendments Terminations or Plan Mergers
|
65
|
10.6
|
Vesting and Distribution on Termination
|
65
|
|
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ARTICLE XI
|
GENERAL PROVISIONS
|
66
|
11.1
|
No Employment Guarantee
|
66
|
11.2
|
Nonalienation of Plan Benefits
|
66
|
11.3
|
Action by an Employer
|
66
|
11.4
|
Applicable Law
|
67
|
11.5
|
Participant Litigation
|
67
|
11.6
|
Participant and Beneficiary Duties
|
67
|
11.7
|
Individual Account Statements
|
67
|
11.8
|
Gender and Number
|
67
|
11.9
|
Adequacy of Evidence
|
67
|
11.10
|
Notice to Participants and Beneficiaries
|
67
|
11.11
|
Waiver of Notice
|
68
|
11.12
|
Successors
|
68
|
11.13
|
Severability
|
68
|
11.14
|
Nonreversion
|
68
|
11.15
|
Qualification of Plan and Trust
|
68
|
11.16
|
Certain Indemnification
|
68
|
11.17
|
Voice Response Unit Deemed Written Consent
|
69
|
11.18
|
Effective January 1, 2002
|
69
|
ARTICLE XII
|
SPECIAL TOP-HEAVY RULES
|
69
|
12.1
|
Application
|
69
|
12.2
|
Special Terms
|
69
|
12.3
|
Vested Percentage
|
72
|
12.4
|
Minimum Contribution
|
72
|
12.5
|
Termination of Top-Heavy Status
|
72
|
ARTICLE XIII
|
ADOPTION AND WITHDRAWAL FROM PLAN
|
73
|
13.1
|
Procedure for Adoption
|
73
|
13.2
|
Procedure for Withdrawal
|
73
|
13.3
|
Adoption of Plan by Unrelated Employers
|
74
|
|
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WEST\253921653.3
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Date:
|
April 28, 2016
|
By:
|
/s/ MICHAEL A. MUSSALLEM
|
|
|
|
Michael A. Mussallem
Chairman of the Board and
Chief Executive Officer
|
Date:
|
April 28, 2016
|
By:
|
/s/ SCOTT B. ULLEM
|
|
|
|
Scott B. Ullem
Chief Financial Officer
|
April 28, 2016
|
/s/ MICHAEL A. MUSSALLEM
|
|
Michael A. Mussallem
Chairman of the Board and
Chief Executive Officer
|
April 28, 2016
|
/s/ SCOTT B. ULLEM
|
|
Scott B. Ullem
Chief Financial Officer
|