UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 23, 2016
Sprouts Farmers Market, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
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001-36029 |
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32-0331600 |
(State or other jurisdiction of incorporation or organization) |
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(Commission File Number) |
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(I.R.S. Employer Identification No.) |
5455 E. High Street, Suite 111
Phoenix, Arizona 85054
(Address of principal executive offices and zip code)
(480) 814-8016
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(e) On August 6, 2015, the Board of Directors of Sprouts Farmers Market, Inc. (the “Company”) appointed Amin N. Maredia as Chief Executive Officer and James L. Nielsen as President and Chief Operating Officer. In connection with such appointments, the Compensation Committee of the Board of Directors approved a grant of stock options to purchase 1,200,000 and 500,000 shares of the Company’s common stock at an exercise price of $20.98 per share to Messrs. Maredia and Nielsen, respectively (the “August 2015 Options”) pursuant to the Company’s 2013 Incentive Plan (the “Plan”). The vesting schedule of the August 2015 Options was over 12 quarters through June 30, 2018. The August 2015 Options, taken together with other options granted under the Plan to Messrs. Maredia and Nielsen during 2015, exceeded the limit of 500,000 shares which may be granted pursuant to stock options and stock appreciation rights per calendar year to each participant under the Plan by 733,439 shares in the case of Mr. Maredia and 33,439 shares in the case of Mr. Nielsen (the “Excess Options”). Accordingly, the Company has determined, and Messrs. Maredia and Nielsen have acknowledged, that the grants of the Excess Options were null and void.
The Compensation Committee has reaffirmed, in its business judgment, that the August 2015 Options, including the Excess Options, were an integral part of Messrs. Maredia and Nielsen’s respective compensation packages awarded in connection with their appointments and were appropriate and aligned with the interests of the Company’s stockholders. Therefore, in order to satisfy the original intent with respect to these individuals’ compensation, on May 23, 2016, the Compensation Committee granted to Messrs. Maredia and Nielsen under the Plan options to purchase 386,496 and 33,439 shares of the Company’s common stock at an exercise price of $24.48 per share, respectively, and 215,251 and 2,601 shares of restricted common stock, respectively.
The options and shares of restricted stock granted to Mr. Maredia shall vest on a quarterly basis over a seven quarter period, beginning on December 31, 2016, and the options and shares of restricted stock granted to Mr. Nielsen shall vest on June 30, 2018. In addition, in order to better align the compensation packages of Messrs. Maredia and Nielsen with the original intent at the time of the August 2015 compensation decisions, the Compensation Committee amended the vesting schedule of the August 2015 Options (excluding, for the avoidance of doubt, the Excess Options) to reflect, as closely as practicable, the intended vesting terms of the August 2015 Options, so that as of May 23, 2016, (1) with respect to Mr. Maredia, 300,000 of the August 2015 Options shall be fully vested, 100,000 of the August 2015 Options vest on June 30, 2016, and the remaining 66,561 of the August 2015 Options vest on September 30, 2016; and (2) with respect to Mr. Nielsen, 125,000 of the August 2015 Options shall be fully vested, 41,666 of the August 2015 Options shall vest on the last day of each of the next eight quarters beginning with June 30, 2016, and the remaining unvested 8,233 August 2015 Options shall vest on June 30, 2018.
Each individual has entered into an agreement with the Company with respect to his options and restricted stock. The form of stock option agreement is filed as Exhibit 10.1 to this Current Report on Form 8-K, and the form of restricted share award agreement is filed as Exhibit 10.2 to this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit
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Description |
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10.1 |
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Form of Stock Option Agreement |
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10.2 |
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Form of Restricted Share Award Agreement |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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SPROUTS FARMERS MARKET, INC. |
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Date: May 25, 2016 |
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By: |
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/s/ Brandon F. Lombardi |
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Name: |
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Brandon F. Lombardi |
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Title: |
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Chief Legal Officer and Corporate Secretary |
EXHIBIT INDEX
Exhibit
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Description |
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10.1 |
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Form of Stock Option Agreement |
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10.2 |
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Form of Restricted Share Award Agreement |
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Exhibit 10.1
SPROUTS FARMERS MARKET, INC.
Stock Option Agreement
Cover Sheet
Sprouts Farmers Market, Inc., a company organized under the laws of the State of Delaware (“Company”), hereby grants an option to acquire its Shares (the “Option”) to the individual named below. The terms and conditions of the Option are set forth in this cover sheet (the “Cover Sheet”), in the attached Stock Option Agreement (the “Agreement”) and in the Sprouts Farmers Market, Inc. 2013 Incentive Plan (the “Plan”). All capitalized terms used but not defined in this Cover Sheet and the attached Stock Option Agreement will have the meanings ascribed to such terms in the Plan.
Granted to: |
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Grant Date: |
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May 23, 2016 |
Shares subject to the Option: |
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Exercise Price per Share: |
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$24.48 |
Expiration Date: |
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August 11, 2022 |
Vesting Schedule: |
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By signing this Cover Sheet, you agree to all of the terms and conditions described in this Cover Sheet, in the Agreement and in the Plan. In addition, by signing this Cover Sheet, you hereby acknowledge and agree that with respect to the stock option granted to you on August 11, 2015, the number of Shares subject to such option could not, pursuant the Plan, have exceeded 466,561, and any action by the Company purporting to grant to you options for Shares in excess of that amount was void ab initio, and all documentation related to that grant is deemed to be modified such that such option shall relate to 466,561 Shares.
By signing this Cover Sheet, you and the Company further acknowledge and agree that the vesting schedule applicable to the stock option granted to you on August 11, 2015 to purchase 466,561 Shares is hereby amended so that . The agreement, including the applicable cover sheet, evidencing such option are hereby amended to reflect the terms set forth in this paragraph.
If you do not sign and return this Cover Sheet within 60 days of the Grant Date, the Company will have the right to rescind this award.
Signature: |
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Date: |
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SPROUTS FARMERS MARKET, INC. |
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By: |
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Name: |
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Title: |
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SPROUTS FARMERS MARKET, INC.
2013 INCENTIVE PLAN
STOCK OPTION AGREEMENT
Nonstatutory Stock Option |
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This Option is not intended to be an incentive stock option under section 422 of the Internal Revenue Code and will be interpreted accordingly. |
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Vesting |
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Your right to exercise this Option vests at the times and in the manner as shown on the Cover Sheet.
This Option will cease vesting as of the date your employment with the Company and its Affiliates has terminated for any reason. |
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Termination |
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Should your employment with the Company terminate for any reason except pursuant to a Change of Control as described below, the portion of your Option that is not then vested will immediately terminate, and, except as provided below, the portion that is then vested will terminate at the close of business at the Company’s registered office on the 90th day after your termination date. Your Option will expire in any event at the close of business at the Company’s registered office on the Expiration Date set forth on the Cover Sheet.
The grant of the Option does not confer upon you any right to continued employment with the Company or interfere with the Company’s right to terminate your employment at any time. |
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Death |
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If your employment terminates because of your death, your right to purchase vested Shares under this Option will expire at the close of business at the Company’s registered office on the date that is six months and one day after the date of death (or on the Expiration Date set forth on the Cover Sheet, if earlier). During that period, your estate or heirs may exercise this Option. |
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Disability |
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If your employment terminates because of a disability which qualifies you for disability benefits under the Company’s long term disability plan, then your right to purchase vested Shares under this Option will expire at the close of business at the Company’s registered office on the date that is six months and one day after your termination date (or on the Expiration Date set forth on the Cover Sheet, if earlier). |
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Termination for Cause; Specified Conduct |
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If your employment is terminated for Cause (as defined in Exhibit A) or following any termination of your employment you engage in Specified Conduct (as defined in Exhibit A), the Option, whether or not vested, will immediately terminate. |
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Transfer of Option |
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Prior to your death, only you may exercise this Option. You cannot transfer or assign this Option. For instance, you may not sell this Option or use it as security for a loan. If you attempt to do any of these things, this Option will immediately become invalid. You may, however, dispose of this Option in your will.
Regardless of any marital property settlement agreement, the Company or a securities broker, as applicable, is not obligated to honor a Notice of Exercise from your former spouse, nor is the Company or the securities broker obligated to recognize your former spouse’s interest in your Option in any other way. |
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Stockholder Rights |
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You, or your estate or heirs, have no rights as a stockholder of the Company with respect to the Shares subject to the Option until a proper Notice of Exercise has been submitted and the exercise price and withholding taxes have been tendered. No adjustments are made for dividends or other rights if the applicable record date occurs before a proper Notice of Exercise has been submitted and the exercise price has been tendered, except as described in the Plan. |
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Applicable Law |
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This Agreement will be interpreted and enforced under the laws of the State of Delaware. |
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The text of the Plan and any amendments thereto are incorporated in this Agreement by reference.
This Agreement, the Cover Sheet and the Plan constitute the entire understanding between you and the Company regarding this Option. Any prior agreements, commitments or negotiations concerning this Option are superseded. |
By signing the Cover Sheet of this Agreement, you agree to all of the terms and conditions described in the Cover Sheet, above and in the Plan and evidence your acceptance of the powers of the Committee of the Board of Directors of the Company that administers the Plan.
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Exhibit A
Certain Definitions
“Affiliate” means, when used with reference to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with, or owns greater than fifty percent (50%) of the voting power in the specified Person (the term “control” for this purpose shall mean the ability, whether by the ownership of shares or other equity interest, by contract or otherwise, to elect a majority of the directors of a corporation, independently to select the managing partner of a partnership or the managing member or the majority of the managers, as applicable, of a limited liability company, or otherwise to have the power independently to remove and then select a majority of those Persons exercising governing authority over an entity, and control shall be conclusively presumed in the case of the direct or indirect ownership of fifty percent (50%) or more of the voting equity interests in the specified Person).
“Cause” shall have the meaning ascribed thereto in any effective employment agreement between you and the Company or its Affiliates, or if no employment agreement is in effect that contains a definition of cause, then Cause shall mean that you have (i) committed a felony or a crime involving moral turpitude, (ii) committed any act of gross negligence or fraud, (iii) failed, refused or neglected to substantially perform your duties (other than by reason of a physical or mental impairment) or to implement the reasonable directives of the Company (which, if deemed curable in the discretion of the Committee, is not cured within 30 days after notice thereof to you by the Committee), (iv) materially violated any policy of the Company (which, if deemed curable in the discretion of the Committee, is not cured within 30 days after notice thereof to you by the Committee), or (v) engaged in conduct that is materially injurious to the Company, monetarily or otherwise.
“Change in Control” shall mean:
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any event occurs the result of which is that any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act, becomes the “beneficial owner”, as defined in Rules l3d-3 and l3d-5 under the Exchange Act directly or indirectly, of more than 50% of the voting stock of the Company or any successor company thereto, including, without limitation, through a merger or consolidation or purchase of voting stock of the Company; provided that the transfer of 100% of the voting stock of the Company to a Person that has an ownership structure identical to that of the Company prior to such transfer, such that the Company becomes a wholly owned subsidiary of such Person, shall not be treated as a Change in Control; |
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during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board, together with any new directors whose election by such Board or whose nomination for election by the stockholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board then in office; |
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the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of the Company and its consolidated subsidiaries taken as a whole to any Person or group of related Persons; or |
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the adoption of a plan relating to the liquidation or dissolution of the Company. |
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
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“Good Reason” shall have the meaning ascribed thereto in any effective employment agreement between you and the Company or its Affiliates, or if no employment agreement is in effect that contains a definition of good reason, then Good Reason shall mean that the Company or its Affiliates (i) has required that you relocate to a principal place of employment that is more than 50 miles from your then-current principal place of employment; (ii) has reduced, or has notified you of its intent to reduce, your base salary by more than 10%, unless such reduction is agreed to by you or is involuntarily imposed upon all other employees of the Company who are similarly situated to you; or (iii) without your consent, materially diminishes your authority or responsibilities; provided, however, that in the event you believe any of the forgoing conditions exist that constitute Good Reason, prior to Good Reason being established, you will first provide notice to the Company and give the Company a reasonable opportunity (not to exceed thirty (30) calendar days) to cure the condition you contend establishes Good Reason.
“Person” means and includes any individual, partnership, joint venture, corporation, limited liability company, estate, trust, or other entity.
“Specified Conduct” means, if you are party to an employment agreement that contains post-termination restrictive covenants, a breach of any such covenant, or if you are not party to an employment agreement that contains post-termination restrictive covenants, your (i) unauthorized disclosure of confidential information relating to the Company or its Affiliates, (ii) engaging, directly or indirectly, as an employee, partner, consultant, director, stockholder (other than as a passive investor in not more than 5% of the shares of any publicly traded class of securities of any business), owner, or agent in any business that is competitive with the businesses conducted by the Company and its Affiliates at the time of termination of your employment, (iii) soliciting or inducing, directly or indirectly, any former, present or prospective customer or client of the Company or its Affiliates to purchase any services or products offered by the Company or its Affiliates from any Person other than the Company or its Affiliates, or (iv) hiring, directly or indirectly, any individual who was an employee of the Company or its Affiliates within the six month period prior to termination of your employment, or soliciting or inducing, directly or indirectly, any such individual to terminate his or her employment with the Company or its Affiliates.
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Exhibit 10.2
SPROUTS FARMERS MARKET, INC.
RESTRICTED Share award Agreement
Cover Sheet
Sprouts Farmers Market, Inc., a company incorporated under the laws of the State of Delaware (“Company”), hereby grants an award of restricted shares (“Restricted Shares”) to the individual named below. The terms and conditions of the Restricted Shares are set forth in this cover sheet (“Cover Sheet”), in the attached Restricted Share Award Agreement (the “Agreement”) and in the Sprouts Farmers Market, Inc. 2013 Incentive Plan (the “Plan”). All capitalized terms used but not defined in this Cover Sheet and the Agreement will have the meanings ascribed to such terms in the Plan.
By signing this Cover Sheet, you agree to all of the terms and conditions described in this Cover Sheet, in the Agreement and in the Plan.
If you do not sign and return this Cover Sheet and the attached Irrevocable Standing Order to Sell Shares within 60 days of the Grant Date, the Company will have the right to rescind this award.
Signature: |
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Date: |
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SPROUTS FARMERS MARKET, INC. |
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By: |
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Name: |
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Title: |
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2013 INCENTIVE PLAN
RESTRICTED Share AWARD AGREEMENT
Right to Shares |
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The Restricted Shares are subject to the vesting conditions described below. Upon vesting, all restrictions on the Restricted Shares shall lapse. |
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Vesting |
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The Restricted Shares issued to you will vest in accordance with the schedule set forth in the Cover Sheet.
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Termination; Specified Conduct |
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Should your employment with the Company and its Affiliates terminate for any reason or if you engage in Specified Conduct (as defined in Exhibit A) prior to a vesting date, you shall forfeit all rights to any Restricted Shares which have not vested as of such vesting date. Such Restricted Shares shall be returned to the Company automatically and for no consideration. |
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Change in Control |
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Notwithstanding the foregoing:
(A) if there occurs a Change in Control (as defined in Exhibit A), and this award does not continue or is not assumed by an acquiror, then any Restricted Shares which have not vested as of the Change in Control will become fully vested immediately prior to the Change in Control, and all applicable restrictions shall lapse;
(B) if there occurs a Change in Control, and this award continues or is assumed by an acquiror, and your employment is terminated by the Company or an acquiror without Cause (as defined in Exhibit A) or by you for Good Reason (as defined in Exhibit A), in each case within 24 months following the Change in Control, then any Restricted Shares at the time of such termination shall become fully vested and all restrictions shall lapse.
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Stockholder Rights; Dividends |
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You shall have the rights as a stockholder in respect of the Restricted Shares, subject to the restrictions set forth in this Agreement (including, without limitation, transfer restrictions and forfeiture during the vesting period); provided that, you shall not have any rights to dividends on the Restricted Shares until the date on which the Restricted Shares vest; provided further that, on such date, you will receive all dividends that were paid on such Restricted Shares during the period of restriction. |
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Applicable Law |
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This Agreement will be interpreted and enforced under the laws of the State of Delaware. |
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The text of the Plan and any amendments thereto are incorporated in this Agreement by reference.
This Agreement, the Cover Sheet and the Plan constitute the entire understanding between you and the Company regarding the Restricted Shares. Any prior agreements, commitments or negotiations concerning the Restricted Shares are superseded. |
By signing the Cover Sheet of this Agreement, you agree to all of the terms and conditions described above and in the Plan and evidence your acceptance of the powers of the Committee of the Board of Directors of the Company that administers the Plan.
Exhibit A
Certain Definitions
“Affiliate” means, when used with reference to any Person, any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with, or owns greater than fifty percent (50%) of the voting power in, the specified Person (the term “control” for this purpose shall mean the ability, whether by the ownership of shares or other equity interest, by contract or otherwise, to elect a majority of the directors of a corporation, independently to select the managing partner of a partnership or the managing member or the majority of the managers, as applicable, of a limited liability company, or otherwise to have the power independently to remove and then select a majority of those Persons exercising governing authority over an entity, and control shall be conclusively presumed in the case of the direct or indirect ownership of fifty percent (50%) or more of the voting equity interests in the specified Person).
“Cause” shall have the meaning ascribed thereto in any effective employment agreement between you and the Company or its Affiliates, or if no employment agreement is in effect that contains a definition of cause, then Cause shall mean that you have (i) committed a felony or a crime involving moral turpitude, (ii) committed any act of gross negligence or fraud, (iii) failed, refused or neglected to substantially perform your duties (other than by reason of a physical or mental impairment) or to implement the reasonable directives of the Company (which, if deemed curable in the discretion of the Committee, is not cured within 30 days after notice thereof to you by the Committee), (iv) materially violated any policy of the Company (which, if deemed curable in the discretion of the Committee, is not cured within 30 days after notice thereof to you by the Committee), or (v) engaged in conduct that is materially injurious to the Company, monetarily or otherwise.
“Change in Control” shall mean:
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any event occurs the result of which is that any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act, becomes the “beneficial owner”, as defined in Rules l3d-3 and l3d-5 under the Exchange Act directly or indirectly, of more than 50% of the voting stock of the Company or any successor company thereto, including, without limitation, through a merger or consolidation or purchase of voting stock of the Company; provided that the transfer of 100% of the voting stock of the Company to a Person that has an ownership structure identical to that of the Company prior to such transfer, such that the Company becomes a wholly owned subsidiary of such Person, shall not be treated as a Change in Control; |
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during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board, together with any new directors whose election by such Board or whose nomination for election by the stockholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board then in office; |
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the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions other than a merger or consolidation, of all or substantially all of the assets of the Company and its consolidated subsidiaries taken as a whole to any Person or group of related Persons; or |
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the adoption of a plan relating to the liquidation or dissolution of the Company. |
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Good Reason” shall have the meaning ascribed thereto in any effective employment agreement between you and the Company or its Affiliates, or if no employment agreement is in effect that contains a definition of good reason, then Good Reason shall mean that the Company or its Affiliates (i) has required that you relocate to a principal place of employment that is more than 50 miles from your then-current principal place of employment; (ii) has reduced, or has notified you of its intent to reduce, your base salary by more than 10%, unless such reduction is agreed to by you or is involuntarily imposed upon all other employees of the Company who are similarly situated to you; or (iii) without your consent, materially diminishes your authority or responsibilities; provided, however , that in the event you believe any of the forgoing conditions exist that constitute Good Reason, prior to Good Reason being established, you will first provide notice to the Company and give the Company a reasonable opportunity (not to exceed thirty (30) calendar days) to cure the condition you contend establishes Good Reason.
“Person” means and includes any individual, partnership, joint venture, corporation, limited liability company, estate, trust, or other entity.
“Specified Conduct” means, if you are party to an employment agreement that contains post-termination restrictive covenants, a breach of any such covenant, or if you are not party to an employment agreement that contains post-termination restrictive covenants, your (i) unauthorized disclosure of confidential information relating to the Company or its Affiliates, (ii) engaging, directly or indirectly, as an employee, partner, consultant, director, stockholder (other than as a passive investor in not more than 5% of the shares of any publicly traded class of securities of any business), owner, or agent in any business that is competitive with the businesses conducted by the Company and its Affiliates at the time of termination of your employment, (iii) soliciting or inducing, directly or indirectly, any former, present or prospective customer or client of the Company or its Affiliates to purchase any services or products offered by the Company or its Affiliates from any Person other than the Company or its Affiliates, or (iv) hiring, directly or indirectly, any individual who was an employee of the Company or its Affiliates within the six month period prior to termination of your employment, or soliciting or inducing, directly or indirectly, any such individual to terminate his or her employment with the Company or its Affiliates.
IRREVOCABLE STANDING ORDER TO SELL SHARES
I have been granted an award in respect of Restricted Shares (“Restricted Shares”) by Sprouts Farmers Market, Inc. (the “Company”), which is evidenced by a restricted share award agreement between me and the Company (the “Agreement,” copy attached). Provided that I remain employed by the Company on the applicable vesting date, the shares vest according to the provisions of the Agreement.
I understand that on the Grant Date (as defined in the Agreement), the Restricted Shares will be deposited into my account at E*Trade (the “Broker”) and that on the applicable vesting date, I will recognize taxable ordinary income as a result. Pursuant to the terms of the Agreement and as a condition of my receipt of the Shares, I understand and agree that, on the vesting date, I must sell a number of shares sufficient to satisfy all withholding taxes applicable to that ordinary income. Therefore, I hereby direct the Broker to sell, at the market price and on the vesting date (or the first business day thereafter if the vesting date should fall on a day when the market is closed), the number of Shares that the Company informs the Broker is sufficient to satisfy the applicable withholding taxes, which shall be calculated based on the closing price of the Company’s ordinary shares on the last trading day before the vesting date. I understand that the Broker will remit the proceeds to the Company for payment of the withholding taxes.
I understand and agree that by signing below, I am making an Irrevocable Standing Order to Sell Shares which will remain in effect until the vesting date. I also agree that this Irrevocable Standing Order to Sell Shares is in addition to and subject to the terms and conditions of any existing Account Agreement that I have with the Broker.
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Signature |
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Print Name |